business development plan for portable stone crushing plant
TRANSCRIPT
ContentsExecutive Summery.......................................................................................................1
Chapter One...................................................................................................................3
Company Overview.......................................................................................................3
1.1 Introduction..........................................................................................................3
1.2 Vision, Mission, Objectives and Values..............................................................3
1.2.1 Vision............................................................................................................3
1.2.2 Mission..........................................................................................................3
1.2.3 Objectives......................................................................................................4
1.2.4 Value Proposition..........................................................................................4
Chapter Two...................................................................................................................5
Assessment of Business Environment............................................................................5
2.1 Political Environment...........................................................................................5
2.2 Economic Environment........................................................................................6
2.3 Socio-Cultural Environment................................................................................6
2.4 Technological Environment.................................................................................8
2.5 Legal Environment...............................................................................................8
2.6 Environment and Health Issues............................................................................9
Chapter Three...............................................................................................................10
Product Description......................................................................................................10
3.1 Product Introduction...........................................................................................10
3.2 Product Properties..............................................................................................10
Chapter Four.................................................................................................................11
Market Description.......................................................................................................11
4.1 Overall Market...................................................................................................11
4.2 Target Market.....................................................................................................11
4.3 The Customer.....................................................................................................12
4.4 Key Success Factor............................................................................................12
Chapter Five.................................................................................................................13
Competition..................................................................................................................13
5.1 The Competitor..................................................................................................13
5.2 Competitor Analysis...........................................................................................13
5.3 Estimated Market Share.....................................................................................15
Chapter Six...................................................................................................................16
Company Strategy........................................................................................................16
6.1 Market Segment.................................................................................................16
6.2 Key Competitive Factors....................................................................................16
Chapter Seven..............................................................................................................17
Production and Operation Plan....................................................................................17
7.1 6.1 Pre Operation Activities...............................................................................17
7.2 Locational Plan...................................................................................................17
7.3 Product Design...................................................................................................17
7.4 Production Process.............................................................................................18
7.5 Resource Requirements......................................................................................19
7.5.1 Equipment and Machinery..........................................................................19
7.5.2 Raw Materials.............................................................................................19
7.5.3 Human Resource.........................................................................................19
7.6 Quality Assurance..............................................................................................19
7.7 Repair and Maintenance.....................................................................................19
7.8 Human Resource Policies...................................................................................20
7.8.1 Compensation..............................................................................................20
7.8.2 Leaves and Holidays...................................................................................20
7.9 Planned Capacity and Utilization.......................................................................20
7.10 Sales Forecasts.................................................................................................21
Chapter Eight...............................................................................................................22
Marketing Plan.............................................................................................................22
8.1 Overall Concept and Orientation........................................................................22
8.2 Marketing Strategy.............................................................................................22
8.2.1 Price.............................................................................................................22
8.2.2 Promotion....................................................................................................22
8.2.3 Place............................................................................................................23
8.2.4 Products.......................................................................................................23
8.3 Marketing Budget...............................................................................................23
Chapter Nine................................................................................................................24
Financial Plan...............................................................................................................24
9.1 Fixed Capital Requirement.................................................................................24
9.2 Working Capital Estimation...............................................................................24
9.3 Projected Balance Sheet.....................................................................................24
9.4 Projected Income Statement...............................................................................24
9.5 Projected Cash Flows.........................................................................................24
9.6 Break Even Analysis..........................................................................................24
9.7 Payback Period...................................................................................................24
9.8 Net Present Value...............................................................................................24
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9.9 Internal Rate of Return.......................................................................................24
9.7 Key Financial Ratios..........................................................................................25
Chapter Ten..................................................................................................................26
Organization and Management....................................................................................26
10.1 Organization Structure.....................................................................................26
10.2 Responsibility and Qualification of Managerial Personnel..............................26
10.3 Equity Position.................................................................................................27
10.4 Deal Structure...................................................................................................27
Chapter Eleven.............................................................................................................28
Critical Risks and Contingencies.................................................................................28
11.1Internal..............................................................................................................28
11.2 External............................................................................................................28
Annexures....................................................................................................................29
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Executive SummeryThis business plan has been prepared on the behalf of BR Aggregate Industries Pvt.
Ltd. The company has proposed to install and operate portable stone crushing plant in
Mid-Western Terai region of Nepal. Main objective of the company is producing and
supplying high quality stone aggregates. The products include concrete aggregates,
stone chips and stone dust. The company will operate portable stone crushing plants
of capacity of crushing 200 ton raw stone per hour.
The market of the products is government funded infrastructure projects, land
development and town planning projects and residential and commercial building
construction projects of Banke and Bardia districts. The company has assumed 67
percent of market share in this segment. Production process is simple ant it includes
primary crushing, secondary crushing and sieving by using vibrating screen.
Marketing strategy will be focused on the niche market of infrastructure development
projects.
Projected financial statement shows that the project is most feasible and will have
high return on investment. The project highlights are as follows.
Project Highlights
Rs in 000’s
Total Project Cost 80,606Fixed Capital Investment 73,710Working Capital Investment 6,896Long Term Loan 36,855Short Term Loan 3,448Project Payback Period 2 years 3 monthInternal Rate of Return 72.40%Net Present Value @ 12% 165,473First Dividend 15% in year 2Loan Grace period 6 monthsEstimated Interest RatesLong Term Loans 13%Short Term Loans 11%Weighted Average Cost of Capital 17.53%Break Even Point 8.18%
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Chapter One
Company Overview
1.1 IntroductionBheri Rapti Aggregate Industries Private Limited (BRAI Pvt. Ltd.) is going to register
with the Company Registrar's Office (CRO), Tripureshwor in February 2012. After
registration in CRO, the company will be registered with Department of Industries
(DOI) and go to Department of Mining (DOM) to get the permission for stone
mining.
The head office of the company will be at Karkando, Surkhet Road, Nepalgunj. The
company will have Rs. 400 million-share capital. All promoters will contribute
equally on share capital. The main business of the company is production and
marketing of high quality stone aggregates for construction purposes. To achieve its
business objective, the company has purposed to establish a portable stone crushing
plant in Mid-Western Terai Region of Nepal.
The promoters of the company are Mr. Piyoosh Paudel, Mr. Shiva Raj Khanal, Mr.
Padam Raj Joshi and Mr. Ganesh Karki. Mr. Paudel is a MBA graduate and has more
than 5 years' experience in the field of project management. Mr. Khanal is a civil
engineer and managing director of his own construction company. Mr. Joshi is a
supplier of stone, sand and gravel and Mr. Karki is a chairperson of Mid-Western
Truck and Transportation Businessman's Organization.
1.2 Vision, Mission, Objectives and Values
1.2.1 VisionThe company has clear picture of the business in future. The vision statement of the
company is:
"We will be a leading construction aggregate producer and
distributor in Mid-Western and Far-Western Nepal."
1.2.2 MissionThe company wants to enter the aggregate business market with a fundamental
purpose. The mission statement of the company is:
"To contribute to infrastructure development by producing
high quality stone aggregate, generate employment
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opportunities to the Mid Western and Far Western Terai
region of Nepal, minimize the adverse environmental
impacts by using high standard technology during mining
and crushing of stone and become a stakeholder of nation
building."
1.2.3 Objectives
The objectives of the company are: Produce high quality aggregate for construction works
Generate employment opportunities at local level
Minimize adverse environmental impacts by using high standard technology
Increase wealth on share holders' equity
1.2.4 Value PropositionCustomer satisfaction is the motto of the company and company's products will be
positioned on customers mind as good quality construction aggregates. The value
proposition of company's product is to distinguish within the industry will be:
"BR aggregates are quality construction materials and it delivers at construction site"
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Chapter Two
Assessment of Business Environment
2.1 Political EnvironmentPolitical system has changed from constitutional monarchy to democratic republic in
Nepal. Peace, progress and prosperity are the aspiration of the people. Economic
development is the only means to achieve progress of the country. Political leaders,
industrialists, planners and policy makers all advocate need for economic
development. An infrastructure development is crucial for nation development. Nepal
Government is committed for the development of physical facilities and
infrastructures and planned several infrastructure development projects.
The political environment of the country is transitional, unstable and fragile. The
country is in the process of preparing new constitution but conflict among major
parties has delayed the process. Delayed in constitution preparation, unstable and
fragile political scenario will affect the implementation of infrastructure development
projects.
Further, strike and movements are common political problems faced by the country.
There is a general trend of politicization of normal issues by different political groups
for their stakes. Such types of activities always create problems to flourish the
business environment of the country.
There seem some positive trends in political environments. All the stakeholders of the
state have realized to create favorable business environment. Major political parties
committed to liberal economic policy.
Political environment of the country will have severe impacts on the company's
business. Political conflicts, strike and political movements will adversely affect the
policy execution. Investment on construction industry will be low and it will decrease
the demand of construction materials.
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2.2 Economic EnvironmentEconomic environment is the most important factor that to affect business. Good
economic environment creates many opportunities to flourish the business. Nepal
Government has been trying to make the economic environment favorable to the
business organization.
The economic activities in developing countries like Nepal mostly depend on
government budget in developing countries like Nepal. Government expenditure on
infrastructure constructions and development activities boost up economic
environment. However, the present trend of government expenditure is very low in
these activities and even planned budget also not expended.
The monetary policy and fiscal policy are inefficient to address the inflation rate,
exchange rate and unemployment rate. Inflation rate based on average consumer price
change percent is 9.25% in 2010, which is very high. Fixed exchange rate with Indian
Currency directly affects the inflation and interest rate of the country. The financial
market does not follow the discipline of the market and there more gaps between
saving and lending interest rates appears.
Unemployment rate is very high in the country. The labor force is going to foreign
countries for employment. In this condition, the good economic environment provides
cheap labor force and investment activities create employment opportunities in the
country.
Economic expansion and higher economic growth will have positive effect on
construction industry and thus will increase the demand of construction aggregates.
Whereas economic contraction and recession will adversely affect the construction
industry and thus demand of construction aggregate will decrease.
2.3 Socio-Cultural EnvironmentSocio-cultural environment also directly affects the business. The socio-cultural
environment covers population, pressure groups, social classes, lifestyle, attitudes,
religion, education, language, etc. According to preliminary repost of population
census 2011, total population of the country is 26,620,809 among them 12,927,431
male and 13,693,378 are female. The population growth rate is 1.4 percent. The Terai
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belt constitutes highest proportion of the population followed by Hill and Mountain
belt. More than half of the total population of the country (50.2 per cent) lives in
Terai.
Pressure groups conduct different activities for the interest of group or society. Such
activities affect business organizations. Consumer's association, Civil Society, Human
Rights Organization, Women Association, Environment Protection Forum, Children
Right Forum etc. are pressure groups. As these pressure groups are working in Nepal,
they affect business organizations.
Nepalese society can be classified in three classes such as high class, middle class,
and lower class. Their purchasing power, lifestyle, tendency, interest, behavior, etc.
differ in different class of people. Social change causes change in the lifestyle of
people. Life style of people is expressed through their activities, talks, behavior, etc.
The life style of Nepalese people is changing. Change in such things also affects
business organizations.
The other important element of socio-cultural environment is attitude towards time,
work, and change. People's attitude is affected by education, language, culture, and
belief. Looking as whole, the attitude of Nepalese people towards time, work, and
changes is not satisfactory. Works are not taken as duty and morality. Tendency to
accept new changes in management and technology has not been developed. The
Nepalese give importance to traditional concepts.
The other important element of socio-cultural environment is language. Like cultural
and ethnic diversity, there are several languages in the country. It is the strongest
media for communication. It directly affects business organizations. The other
important element of socio-cultural environment is education. Only 53.75% people
are literate in Nepal. It adversely affects the business organization.
Socio-cultural environment also affects the business of the company. The pressure
groups will raise the environmental degradation and pollution issues during project
implementation.
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2.4 Technological EnvironmentThis is the age of new technology. Development of technology positively affects
industrial development. In Nepal, mostly labor-oriented technology is in use.
However, this technology is slowly changing to capital-oriented technology.
The other important element of technological environment is research and
development. The country is very poor in research and development. The business
organizations are also affected by the ability of a nation’s scientific research and
development.
Nepal lags behind in the sector of science and technology. A country should be
economically sound for the development in science and technology sector. Since
Nepal is economically weak, development of science and technology is impossible for
the country. Hence, Nepal has adopted the policy for the transfer of new technology.
As the company will use modern crushing equipment and machinery, technology will
not have any effect on the business. However, availability of work force operating the
equipment will be the constraints for the company.
2.5 Legal EnvironmentLegal environment of the country provides bases for regulation of business
organization. Favorable legal provisions positively and unfavorable legal provisions
adversely affects the business environment. Legal provisions of the country are very
favorable for business environment but producers and formalities are very complex.
Company Act, Private Firm Registration Act, Partnership Act provide the necessary
legal provisions to register of business organization in Nepal. Public limited
companies and private limited companies are registered under Company Act. The sole
proprietorship firms are registered under Private Firm Registration Act. The
partnership firms are registered under Partnership Act. Other acts that influence the
business environments are Nepal Mining Act, Environment Protection Act, Bonus
Act, Forest Act, National Park and Wildlife Conservation Act, Income Tax Act, Value
Added Tax Act, Patent Design and Trademark Act, Labor Act, Industrial Business
Act etc.
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Regarding the legal provisions of the country, the company needs to register with
Company Registrar's Office. After registration in Company Registrar's Office, it will
have registration with Department of Industries. The company need's approval for
mining from Department of Mining and Geology. The company needs to register at
Inland Revenue Office and get Permanent Account Number(PAN) for tax purpose.
2.6 Environment and Health IssuesThere are 69 different Acts that address environmental and consumer protection
issues in the country. These Acts directly or indirectly provide the basis for regulating
and enforcing various environmental protection measures, and for safeguarding the
interest of general consumers. Each of the Acts is supplemented by corresponding
regulations. Most of the existing laws and regulations are heavily orientated towards
"command and control" measures with provisions for various penalties and
punishments.
Environment Protection Act is one of the most important Act, which provides
legislation framework, covers the essential aspects related to environmental
protection. The major features of the Act are:
Requirement for Initial Environmental Examination (IEE) study and
Environmental Impact Assessment (EIA) study
Inspections
Testing facilities
Establishment of a fund
Establishment of the necessary administrative mechanism
The company needs to prepare EIA study and approval it form Ministry of
Environment. Along with EIA report, the company will need to prepare mitigation
measures of environmental consequences. It will need to allocate budget for these
mitigation measure and administrative mechanism.
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Chapter Three
Product Description
3.1 Product IntroductionThe product offering from company is construction aggregate, chips and stone dust
(crushed sand). Aggregate is a component of
composite materials such as concrete and
asphalt and it serves as reinforcement to add
strength to the overall composite material.
Aggregate is also used as base material under
foundations, roads, airport and railroads to
provide stable foundation base. Aggregate is a
low-cost extender that binds with expensive
cement or asphalt to form concrete.
3.2 Product PropertiesShape of the aggregate is the most important properties because durability,
workability, shear resistance, tensile strength, stiffness, and fatigue response of
concrete and asphalt concrete is heavily depend on the shape of aggregate particles.
The company ensures granular and angular shape of the products and its chemical and
physical properties.
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Chapter Four
Market Description
4.1 Overall MarketThe market of the products is construction industry in Mid-Western Terai Region.
The demand of the products depends on construction activities. More investment in
construction industries more will be the demand of the products. Therefore, the
demand of products is derived based on investment on construction industry.
The overall market of the products in these region are export to India, government
funded road and bridge construction projects, land development and town-planning
projects, dam and hydropower constructions projects, residential and commercial
building construction projects, irrigation and canal construction projects etc. The
estimated market of the products in this region is as follow:
Table-1: Rough Estimate of the Overall Market
Market Segment Aggregate Demand
(in cubic feet)
Export to India per year 6,540,800.00
Burigaun-Telpani-Surkhet Road Constuction Project 7,250,000.00
Kothiyaghat Bridge Construction Project 210,000.00
Bridge Construction at Hulaki Sadak, Karnali 150,000.00
Veri-Babai Diversion Project 4,500,000.00
Land Development and Town Planning at Water Park, Nepalgunj 4,200,000.00
Land Development and Town Planning Kohalpur-Nepalgunj Corridor 3,500,000.00
Land Development and Town Planning Kohalpur-Bansgadi Corridor 1,250,000.00
Residential and Commercial Buildings (7,500 houses) 31,500,000.00
Total 59,100,800.00
Rough Estimate 1 Ton = 29.2 cubic feet
4.2 Target Market
The target markets of the products are government funded infrastructure construction
projects such as Bhurigaun-Telpani Road Construction Project, Kothiyaghat Bridge
Construction Project, Bridge Construction Project at Hulaki Sadak, Karnali, Veri-
Babai Diversion Project. Other potential target market of the products include land
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development and town planning project at Water Park, Nepalgunj and Kolpur-
Nepalgung Corridor and Kohalpur-Bansgadi Corridor. Likewise, residential and
commercial building builders are also target segment of the products.
4.3 The CustomerThe target customers of the products are infrastructure construction companies,
contractors and suppliers of these companies in Banke and Bardia districts. Other
target customers are land developers, residential and commercial buildings builders.
4.4 Key Success FactorThe products possess all the attributes of high quality construction aggregate. Key
success factor of the products are:
The market of the products is demand driven. Investment in construction
industry will increase the demand of the products.
The company is offering high quality products crushed from high quality raw
materials at prevailing market price.
Our Competitor's product are very low in the quality and the availability of
that product The products currently in use are inferior quality. Natural,
unprocessed aggregates (gravel) are in use.
Customer may prefer the products because they are getting high quality
products at same price.
Promoters are from related fields. Their experience will be the strength of
marketing of products.
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Chapter Five
Competition
5.1 The CompetitorMajor competitors of the company are stone crushing industries, natural aggregate
suppliers and hand crushed stone suppliers. The major competitors include:
I. Existing stone crushing industries: The existing stone crushing may be the
direct competitors of the company. There are nine stone crushing industries at
present. All these crushing industries are export based and located near the
Indo-Nepal boarder. The running industries are:
a. Jay Ma Laxmi Roda Udhyog
b. Bheri Roda Udhyog
c. Himal Crusher
d. Nepalgunj Stone
e. Jay Bhole Baba Roda Udhyog
f. Jay Bageshwori Roda
g. Banke-Bardia Roda Udhyog
h. Shyam Roda Udhyog
i. Mahakali Roda Udhyog
II. Natural aggregate suppliers from rivers: There are individual suppliers of
natural aggregates from rivers. These suppliers collect gravel and sand from
the riverbank and stockpile near roadside. They supply these products as order
received.
III. Hand crushing aggregate suppliers: Labor-intensive hand crushing
aggregate suppliers are also supplying the products in the market. These
suppliers collect stones from riverbank and stock near the road. Daily wages
labors crush these stones.
5.2 Competitor AnalysisThe competitor analysis assists to identify possible strengths and weakness of the
competitor in the market. Potential strengths and weaknesses of company's
competitors are:
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I. Existing Stone Crushing Industries:
Strengths:
Access on raw materials
Established supply chain
Better knowledge about the market
Established network in Indian Market
Weakness
Traditional crushing equipment
High operational cost
Far from mining site and cost of raw material is high due to transportation of
raw materials from mining site to factory.
Creating pollution and wastes in urban areas
II. Natural Aggregate Suppliers
Strengths:
Individuals from local communities
Low investment and high return
Have greater access with residential building constructing individuals
Low price
Weaknesses
Unorganized and family form of business
Unprocessed and low quality products
III. Hand Crushed Aggregate Suppliers
Strengths
Individuals from local communities
Small business unit with low investment
Better quality than natural aggregate
Weaknesses
Labor intensive
Limited supply capacity
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5.3 Estimated Market ShareCrushed aggregate is short supply in the area. Low quality natural gravel and hand-
crushed aggregates are in use for construction purposes. The existing crushing
industries are exporting their products in the Indian market for better price. Rough
estimate during market analysis shows that implementation of infrastructure
construction projects; land development and town planning projects and residential
and commercial building construction projects will create 52,560,000 cubic feet
aggregate demand excluding Indian market. This plan has estimated 67 percent
market share of company's products.
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Chapter Six
Company Strategy
6.1 Market SegmentThe main objective of the company is to supply construction aggregates within the
country. The company looks at the future market opportunities of the products. The
company's marketing strategies will focus on government funded infrastructure
construction projects, land development and town planning projects and residential
and commercial building construction projects in Banke and Bardia districts. The
company will also expand its market in this segment in Dang, Kailali and Surkhet
districts also. The company chooses this segment of market because:
There are several infrastructure development projects undergoing
Infrastructure development is very poor in this region and future policy of the
government focus on several infrastructure developments.
There are several land development and town planning projects undergoing at
local level in Kohalpur-Nepalgunj corridor and Kohalpur-Bansgadi corridor.
People's awareness about high quality construction material including
aggregates has increased.
The existing capacity of running industries cannot meet the growing future
demand.
The existing industries are focusing on export to Indian market.
There are no organized suppliers in this segment
6.2 Key Competitive FactorsThe competitive factors in the industry are assess on mining sites, labor availability,
location, relation with local communities, environmental impacts, relationship with
buyers and contractors etc. The company will have following competitive factors in
this industry market:
The company is the first to introduce portable stone crushing plant in this area.
Promoters are from the local community
No any substitute of the product at present in country
Cheap and easily available labor force
Good relationship with local contractors
Minimum environmental impacts of the plant
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Chapter Seven
Production and Operation Plan
7.1 6.1 Pre Operation ActivitiesThe company has to do various activities before operation starts. Following are to be
undertaken before going to operations. Current status and estimated time frame has
been mentioned in the following table.
Table-1: Pre operating activities
Activity Estimated Time
Company Registration 1 week
Registration in Department of Industries 1week
Registration in Inland Revenue Office 1 week
Environmental Assessment Impact (EIA) Study 8 weeks
Application for loan and approval 4 weeks
Opening the letter of credit for equipment 1 weeks
Site preparation 3 weeks
Arrival of machine at custom point 6 weeks
Installation of machine at site 2 weeks
Trail production 1 weeks
7.2 Locational PlanThe equipment and machine is portable and used for mobile crushing. The location is
near the riverbank where primary raw material stones and gravel available. Major
riverbanks where mining and crushing will be done are Rapti, Babai, Bheri, Karnali
and Ourahi. There river systems are rich with high quality igneous, granite and
sandstone.
Main purpose of installation of a portable plant is to move to another appropriate
place for mining the stone and gravel. Use of portable crushing equipment reduces the
cost of transportation of raw materials and reduces the accumulation of waste in
specific area.
7.3 Product DesignThe products of the company are construction aggregates including aggregates, stone
chips and stone dust (crushed sand). Aggregates are the most commonly used
construction materials. Aggregates are normally hard and granular materials, which
are suitable for use either on their own or with the additions of cement, lime or
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bituminous binder in construction. Design of aggregates include crushing of raw stone
to produce the products. The product features include
Aggregate 10mm-40mm
Stone Chips 5mm -10mm
Stone Dust below 5mm
7.4 Production ProcessThe stone crushing process is relatively simple. The production line includes three
process system; primary crushing process, secondary crushing process and screening
process. The whole pant consist of Jaw Crusher for rough crushing, Cone Crusher for
secondary crushing, Vibrating Feeder, Circular Vibrating Screen and Belt Conveyer.
Combining three processes is a complete stone crushing production line.
Firstly, the raw material are crushed initially crushed by Jaw Crusher. The roughly
crushed materials are transported into the Cone Crusher through Belt Conveyer for
fine crushing. The fine crushed material get into vibrating screen to be divided into
three types: aggregates, chips and dust. The bigger size ones go back to cone crusher
again.
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7.5 Resource Requirements
7.5.1 Equipment and MachineryThe equipment and machinery required for portable stone crushing plant include
Trailer, vibrating feeder, jaw crusher, cone crusher, circular vibrating screen, belt
conveyer, steel structure and electric control box. The supplier of the equipment and
machinery is SHANGHAI SHIBANG MACHINERY CO. LTD., China. The detail
feature of the equipment and machinery has been attached in annexure. Besides
crushing plant, dumper tucks and excavators will be required for mining and loading.
A 50 KVA Diesel Generator will be required for the supply of electricity.
7.5.2 Raw MaterialsStone, rock and gravel are the basic raw materials used for processing. The raw
materials are easily available in the banks of Rapti, Babai, Bheri, Karnali and Ourahi
rivers. The cost associated with the raw material is local taxes levied by the District
Development Committee (DDC), Village Development Committee (VDC) and Forest
User Groups of mining site.
7.5.3 Human ResourceThe human resources required for the company include managerial personnel,
supervisors and assistant and direct labor. The managerial personnel include
Managing Director, Operations Manager, Finance and Admin Manager, Engineering
Manager. About the responsibility, qualifications and experience of managerial
personnel has been explained in organization and management chapter. Assistant
employee will be shift supervisor, operators, marketing supervisor, accountant, office
assistant, maintenance staffs, drivers and peons.
7.6 Quality AssuranceThe quality of aggregate depends on raw materials used for crushing, size and shape
of the products. The raw materials used for crushing will be granite, igneous and
sandstone. The size and shape of the product will be managed through automated
circular vibrating screen. Other quality issues are not so important of these products.
7.7 Repair and MaintenanceThe stone crushing equipment and machinery need reasonable maintenance and right
operations in order to prolong the service life. A repair and maintenance will be made
for the smooth operation of crushing plant. The plan will include daily maintenance,
repair and check, minor repairs and major repairs as follow.
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a. Daily check and maintenance
b. Minor repairs: The cycle of minor repair is 1 to 3 months. During this period
following repairs will be done:
Checking the crusher's adjusting devices
high-speed discharging mouth clearance
transmission parts
lubrication system and replace the wear lining board and lubricating
oil
c. Major repairs: The cycle of major repair is 1 to 2 years. During major repair
following repair will be done:
Thrust board replacement
Inspection and repair bearings
The company will recruit a team of engineers and mechanics for regular maintenance
and repair of the equipment and stock necessary parts and lubricating oil.
7.8 Human Resource PoliciesThe company will follow appropriate human resources policies to retain and motivate
employee.
7.8.1 CompensationThe compensation scheme of the company will be basic salary plus performance
incentives. The performance incentives will depends on sales revenue incensement.
The company will also provide bonus from profit as per Labor Act. The working hour
is 8 hours and more than 8 hours work, the company will provide overtime payments.
Retirement fund will created on the basis of equal contribution from employee and the
company.
7.8.2 Leaves and HolidaysThe company will follow provisions of holidays based on government rule. Besides
government holidays, the company will provide 15 days home leave, 10 days sick
leave and 6 days casual leave. These leaves will be paid leave.
7.9 Planned Capacity and UtilizationThe planned crushing capacity of the equipment is 200 MT of raw stone per hour. The
machine will be operational at an average of 12 hours per day. The company
estimates that the capacity of the plant will be utilized at 50% in first year, 60% in
second year and 70% onwards from the third year of its installation. However, the
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company can operate at a higher capacity to overcome any demand situation. Further,
any extra capacity or new unit can be added based on demand situation in country.
7.10 Sales ForecastsSales forecast has been made based on production capacity utilization, as the
company has estimated that demand is not bottleneck for sales.
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Chapter Eight
Marketing Plan
8.1 Overall Concept and OrientationThe company is going to offer construction aggregate in Mid-Western Terai region of
the country. Company's main objective is to produce and supply construction
aggregate to infrastructure construction projects, land development and town planning
projects and residential and commercial building construction projects. This is the
focus market of the company.
The rough estimate of market size in this segment is 52,560,000 cubic feet excluding
Indian market. The company estimates market share of this segment will be 67
percent. The company has planned to establish portable stone crushing plant of 200
MT per hour capacity in this area. The company assumes the capacity utilization is
50% in first year, 60% in second year and 70% after third year.
8.2 Marketing Strategy
8.2.1 PriceThe pricing strategy of company will be prevailing market price for crushed
aggregates. Current market price for crushed aggregate is as follows:
Table -2: Selling price of the finished product
Name of Product Selling price per cubic feet
Aggregate 10mm-40mm Rs. 42.00
Stone Chips 5mm-10mm Rs. 35.00
Stone Dust below 5mm Rs. 25.00
Considering present inflation rate, the company assumes price of the products will be
increased by 10 present each year.
8.2.2 PromotionPromotion of the products will not need advertising activities because the market is
demand driven. For promotion, the company will provide discounts and credit
facilities to bulk buyers. Relationship with key buyers is the most important
marketing strategy in this market. Necessary budget will be allocated to establish
relationship with major buyer's on the heading of guest entertainments.
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8.2.3 PlaceThe market of the product is Banke and Bardia districts of Mid-Western Terai region
of Nepal. The market will be expanded to Dang, Surkhet and Kailali districts based
on demand situation.
8.2.4 ProductsThe products offering from the company are high quality construction aggregates. The
products are concrete aggregate (10mm-40mm), stone chips (5mm-10mm) and stone
dust (below 5mm).
8.3 Marketing BudgetThe market of the product is demand driven. No expenses will be required for
advertising and promotional activities. The marketing expenses will be discounts
given to major buyers. Other marketing expenses will occur to establish harmonious
relationship with major stakeholders and buyers. This expense will cover guest
entertainment, gifts and donations.
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Chapter Nine
Financial Plan
9.1 Financial AssumptionsThe financial plan has been prepared based on certain assumptions. These
assumptions are as follows:
Sales revenue has been calculated based on prevailing market price of the
products. Assumption has been made price of the products will be increased
by 10 percent.
In the first year, 50 percent capacity of the plant will be utilized. In the second
year, the plant will be operated at 60 percent capacity and then after at 70
percent capacity will be utilized.
Interest on long term loan will be 13 percent and short term loan will be 11
percent.
Depreciation on fixed assets has been provided based on Income Tax Act,
2058.
Applicable income tax will be 25 percent on profit after interest bonus
expenses.
Accounts receivable will be collected within 25 days and accounts payable
will be within 35 days.
9.3 Projected Balance Sheet The projected balance sheet of the company will be as follow
9.4 Projected Income Statement
Projected income statement has been attached with the report.
9.5 Projected Cash FlowsProjected cash flows has been attached with the report.
9.6 Break Even Analysis
The breakeven point for the project at the conditions assumed and estimated comes
out to be 8.18% of capacity. The sensitivity tests were made by increasing the cost of
inputs by 15% and by reducing the revenue by 15%, the breakeven point was 8.59%
and 10.38% respectively. The company proposes to utilize the capacity by minimum
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of 50% from the initial stage of the project; this shows that the company will
definitely achieve its objective even at worse conditions.
9.7 Payback Period
The project has payback period 2 years and 3 months.
9.8 Net Present Value
Net present value of project calculated at zero salvage value after the end of five years
at a discount rate of 12% is Rs 165,473,000.00, which is highly positive which
suggests that the project is highly feasible. (Please refer annexure XIII).
9.9 Internal Rate of Return
The internal rate of return of the project calculated on the basis of the project life of 5
years is 72.40%. This shows that the return from the project is very promising. The
detailed calculation has been annexed (please refer annexure XIII ).
9.7 Key Financial RatiosKey financial ratios of has been calculated for the project. All the ratios show that the
project is most feasible. Detailed calculation has been given in annex-XIV.
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Chapter Ten
Organization and Management
10.1 Organization StructureThe company will have departmental organizational structure. There will marketing,
finance, engineering and operations department in the structure. On the top of these
department, there will be a managing director will be the responsible to achieve the
organizational goals and overall performance of the company. Mr. Piyoosh Paudel
will be the managing director of the company. Figure below shows the organizational
structure of the company.
10.2 Responsibility and Qualification of Managerial PersonnelA. Managing Director:
Key Responsibilities:
Responsible for the overall performance of the company
Supervision of works of all departments
Coordinate with all departments
Establish networks with different stakeholders of the company
B. Operations Manager
Key Responsibilities:
Supervise the operations activities
Prepare operations action plan
Monitoring of operations activities
Reporting to managing director
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Marketing Assistants
Maintenance Staffs
Accountant Office Assistant Driver Peon
Shift Supervisors Operators Drivers
Marketing Manager
Engineering Manager
Finance and Admin Manager
Operations Manager
Managing Director
Qualifications:
Bachelor's Degree
At least 5 years' experience in related field
C. Finance and Admin Manager
Responsibilities:
Financial plan preparation
Internal accounting and record keeping
Budgeting and resource allocation
Reporting to managing to manager
Qualifications:
Bachelor's Degree in finance and accountancy
At least 5 years' experience in related field
D. Engineering manager
Responsibilities:
Repair and maintenance plan preparation
Daily inspection and maintenance of equipment and machinery
Scheduled repair and maintenance of equipment and machinery
Qualification:
B. E. in mechanical engineering
At least 3 years' experience in related field
10.3 Equity PositionThe company will begin with 400,000 equity shares of capital. The shares will be
distributed to the promoters in an amount of 100,000 each at a par value of Rs 100.00
per share.
10.4 Deal StructureThe promoters of the company will be four individuals who will start the business.
Ownership will be divided equally, based on an equal contribution of capital to the
business.
Promoter Capital Contribution No. of Shares Percentage
Mr. Mani Ram Paudel Rs.10,000,000.00 100,000 25 %
Mr. Padam Raj Joshi Rs.10,000,000.00 100,000 25 %
Mr. Shiva Raj Khanal Rs.10,000,000.00 100,000 25 %
Mr. Ganesh Karki Rs.10,000,000.00 100,000 25 %
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Chapter Eleven
Critical Risks and Contingencies
The planned business is highly profit and has high return on investment. When the
return is high, the risk on investment is also high. There exist several risks and
contingencies within the company and outside the company. The company has
identified following weakness and risks within organization and in the environment.
11.1Internal Availability of experienced managerial personnel hamper to execute the
business
Conflicts among promoters may arise during operation period and it will
adversely affect
11.2 External Present political scenario may affect the execution of government policies. It
will affect the construction industry and thus the business of the organization.
If economic recession prolongs for long time, it will affect the construction
industry and demand of the products will be decreased
The pressure group may raise the issue of environmental degradation and it
will affect the smooth operation of business.
Ministry of Environment may not approve EIA report and thus the company
will not get permission of mining from department of Mining and Geology. In
such situation, company will not be able to execute the project.
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Annexures
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