M/S SRIKANTH TRADERS

Peragalapudi.
_________

PROJECT REPORT
July 15, 2008 M/S SRIKANTH TRADERS, PERAGALAPUDI.

SYNOPSIS

1. Line of activity : Rice milling (Job works)

2. Promoter : Smt V. Padmarani,

W/O Sri B. Dasu,
Chukkapalli vari palem village,
Peragalapudi Post,
Duggirala mandal,
Guntur District.
Mobile: 99635 15538.

3. Name of the unit : M/S Srikanth Traders

4. Proposed location : S. No. 19 B,

Peragalapudi village,
Duggirala mandal,
Guntur District.

5. Installed capacity : 2 Tons per hour

6. Project cost : Rs 21.50 Lakh

7. Means of finance
a) Promoter’s contribution : Rs 3.50 Lakh
b) Loan from APSFC : Rs 18.00 Lakh

8. Investment subsidy from

Govt. of A.P. : Rs 7.000 Lakh

9. Promoter’s margin : 16.27 %

10. Employment potential : 7

11. Rate of interest : 14.5 % p. a.

12. Repayment : 60 monthly instalments

@ Rs 42,351/-

13. Debt - equity ratio : 1.800

14. Debt service coverage ratio : 1.633

15. Breakeven point : 27.68 %

2
July 15, 2008 M/S SRIKANTH TRADERS, PERAGALAPUDI.

1. INTRODUCTION

India is the second largest producer of rice in the world with an annual production of

more than 120 million tonnes. Paddy occupies the first place both in area and

production in India. Rice is the staple food for 65% of the population in India. It is

the largest consumed calorie source among the food grains.

Andhra Pradesh is the third largest producer of paddy in the country. India is also

one of the leading exporters of rice in the world market. Indian rice has become

highly competitive and has been identified as one of the major commodities for

export. This provides us with ample opportunity for development of rice based value

added products for earning more foreign exchange.

Paddy or rice grain consists of husk and brown rice. Brown rice, in turn, contains

bran which comprises the outer layer and the edible portion. Rice milling is removal

or separation of husk and bran to obtain the edible portion for consumption.

Processing of rice bran for oil extraction is also an important agro processing activity

for value addition, income and employment generation.

3
July 15, 2008 M/S SRIKANTH TRADERS, PERAGALAPUDI.

2. THE FIRM

The proposed unit is to be established as a sole proprietary concern in the name of

M/S Srikanth Traders with its works to be located in Peragalapudi village of

Duggirala mandal in Guntur district.

3. PROMOTER

Smt V. Padmarani is the promoter of the proposed unit. Aged about 40 years, she

has graduated in Agricultural Sciences and has got sound business acumen. Her

husband, Sri V. Dasu, is a Postgraduate and has fair knowledge of the production

process. He has been in the business field for the past five years and has got wide

contacts in and around Duggirala mandal. Moreover, he is dynamic, can work

vigorously to attract new works and can run the unit successfully.

4. MARKET POTENTIAL

Rice is the staple food diet in most parts of India and Andhra Pradesh. The proposed

location of the present unit, Peragalapudi is in the midst of paddy cultivation area.

Paddy is the most important agricultural commodity in and around Duggirala

mandal. The mill acts as a service unit for custom milling. Wide range of contacts

for the promoter’s family in and around Peragalapudi village can attract good

4
July 15, 2008 M/S SRIKANTH TRADERS, PERAGALAPUDI.

proportion of service milling business. Moreover, The by-product, Rice bran is a

source of valuable edible oil.

5. MANUFACTURING PROCESS

Paddy in its raw form cannot be consumed by human beings. It needs to be suitably

processed for obtaining rice. Rice milling is the process which helps in removal of

hulls and barns from paddy grains to produce polished rice. Rice forms the basic

primary processed product obtained from paddy and this is further processed for

obtaining various secondary and tertiary products.

The basic rice milling process consists of:

1. Pre cleaning: Removing all impurities and unfilled grains from paddy

2. De-stoning: Separating small stones from paddy

3. Husking: Removing husk from paddy

4. Husk aspiration: Separating the husk from brown rice / un husked paddy

5. Paddy separation: Separating the un husked paddy from brown rice

6. Whitening: Removing all or part of the bran layer and germ from
brown rice

7. Polishing: Improving the appearance of milled rice by removing the

remaining bran particles and by polishing the exterior of
the milled kernel

5
July 15, 2008 M/S SRIKANTH TRADERS, PERAGALAPUDI.

8. Length Grading: Separating small and large broken rice from head rice

9. Blending: Mixing head rice with predetermined amount of broken

rice, as required by the customer

10. Weighing &

bagging: Preparing the milled rice for transport to the customer

6. POLLUTION CONTROL

There is no major pollution problem associated with this industry except for disposal

of waste which should be managed appropriately. The unit is proposed to be set up

in a non residential area. The entrepreneur is advised to take consent for

establishment and operation from the Pollution Control Board.

7. ENERGY CONSERVATION

Only electricity is used as the source of energy. General precautions for saving

electricity are required to be followed by the unit by adopting energy conservation

techniques. This will conserve power and save considerable expenditure for the

promoter but also serves the interest of the nation as a whole.

6
July 15, 2008 M/S SRIKANTH TRADERS, PERAGALAPUDI.

RAW PADDY

PRE CLEANING

DE STONING

HUSKING

HUSK ASPIRATION

PADDY
SEPARATION

WHITENING

POLISHING

LENGTH
GRADING

BLENDING

Mixing

WEIGHING
& BAGGING

Flow chart of the process

7
July 15, 2008 M/S SRIKANTH TRADERS, PERAGALAPUDI.

8. PRODUCTION CAPACITY

Product : Rice milling

Installed capacity : 2 MT per hour

Workers : 10

Working days : 300 p. a. (1 shift)

Motive Power : 55.20 KW

Capacity utilization

1st year 45% : 2160 MT

2nd year 50% : 2640 MT

3rd year 55% : 3120 MT

4th year 60% : 3660 MT

5th year 65% : 4080 MT

8
July 15, 2008 M/S SRIKANTH TRADERS, PERAGALAPUDI.

9. PROJECT COMPONENTS

a) Land : About 20 Cents

b) Civil works : Cleaning unit

Drier and necessary supporting structures such as
blower system etc.
Milling section
Machine rooms
Office room
Toilet
Miscellaneous space
Boundary wall and gate

c) Machinery : Paddy stone pre-cleaner with dust blower

Rubber roller Sheller
Husk aspirator
Paddy separator--4trays
Rice whitener
Bran processing system
Rice sieve aspirator
Modified double elevators--3 no &
Electricals (AC-3 phase induction
motors for each machine, DOL starters, control
panel, internal wiring and lighting)

e) Other Equipment : Fixtures, steel ladders and platforms for cleaning

of machines, fire fighting arrangements etc.
Deep tube well and pump
Generator
Office furniture etc.

f) Man power : Manager / Entrepreneur 1 no

Supervisor 1 no
Skilled workers 2 no
Unskilled workers 2 no
Watchman 1 no

9
July 15, 2008 M/S SRIKANTH TRADERS, PERAGALAPUDI.

g) Utilities

i) Electricity : Estimated power load from grid is 74 HP

ii) Water : Water is required for domestic consumption

purpose only. A deep tube well is proposed to be
dug up in the premises to meet the requirement
of water.

10. APPROVALS REQUIRED

1. Entrepreneur’s memorandum Part-1 from DIC

2. Approval from Gram Panchayat
3. Power connection from AP TRANS Co
4. Acknowledgement from APPCB
5. Licence from Factories Department

10
July 15, 2008 M/S SRIKANTH TRADERS, PERAGALAPUDI.

11. TENTATIVE IMPLEMENTATION SCHEDULE

a) Filing Entrepreneur’s memorandum Part-1

with District Industries Centre & 7 days
b) Submitting application for financial assistance
to APSFC

c) Sanction of loan from APSFC 30 days

d) Getting necessary approvals through 45 days

single window scheme of
Govt. of AP

e) Arrangement 10 days
of margin money

f) Release of loan 10 days

g) Development of site &

construction of building 45 days

h) Purchasing machinery and installation 30 days

i) Trial production in 7th month

11
July 15, 2008 M/S SRIKANTH TRADERS, PERAGALAPUDI.

12. FINANCIAL ASPECTS

I) FIXED CAPITAL

a. Land & Building

S
Description Value in Rs. Lakh
No
1 Land 20 cents 1.000

2 Civil works 8.000

Total 9.000

b. Machinery & equipment

S No Description Value in Rs. Lakh

1 Machinery 8.100

Electrical accessories like induction

2 0.400
motors, starters, control panel,
internal wiring & lighting
3 Freight, taxes, erection and 0.500
commissioning charges
Total 9.000

12
July 15, 2008 M/S SRIKANTH TRADERS, PERAGALAPUDI.

c. Other fixed assets

S Value Rs
Description
No Lakh

1 Cost of office furniture & accessories 0.100

2 Security deposit to Transco etc 1.500

Cost of deep bore well, pump, pipelines &

3 0.750
overhead water tank
Preliminary & preoperative expenses including project
4 preparation, technical consultancy, contingencies & miscellaneous 0.150
expenses

Total 2.500

Total Fixed Capital : 20.500

(a + b + c)

II) RECURRING EXPENDITURE PER ANNUM

a. Personnel

S No Designation No Salary p.m Rs Amount Rs Lakh

1 Manager 1 4000 0.480
2 Supervisor 1 3000 0.360
3 Skilled workers 2 2500 0.600
4 Unskilled workers 2 1000 0.240
5 Watchman 1 1000 0.120
Total 7 - 1.800

13
July 15, 2008 M/S SRIKANTH TRADERS, PERAGALAPUDI.

b. Utilities

Utilities Amount Rs Lakh

Power charges 4.969

74x0.746x8x300 KW Hr x 3.75

c. Other contingent expenses

S No Description Amount
Rs Lakh
1 Interest on loan 2.585

2 Depreciation 1.250

3 Insurance @ 3% 0.495

4 Repairs & maintenance 0.100

5 Telephone 0.036

6 Publicity 0.050

7 Miscellaneous expenses 0.100

Total 4.616

Total recurring expenditure Rs. 11.194 Lakh

(a + b + c)

Working capital for 1 month Rs. 0.933 Lakh

Say Rs. 1.000 Lakh

14
July 15, 2008 M/S SRIKANTH TRADERS, PERAGALAPUDI.

13. COST OF PROJECT

S No Description Rs. Lakh

1 Land 1.000

2 Civil works 8.000

3 Plant & Machinery 9.000

4 Other Fixed Assets 2.500

5 Working capital 1.000

Total project cost 21.500

14. MEANS OF FINANCE

S No Description Rs. Lakh

1 Total project cost 21.500

2 Equity 3.500

3 Debt 18.000

15
July 15, 2008 M/S SRIKANTH TRADERS, PERAGALAPUDI.

15. INCENTIVES FROM GOVERNMENT

Government of Andhra Pradesh, vide its GO no 267 dtd 06-10-2007 has extended

the certain subsidies/concessions to Scheduled caste entrepreneurs under Industrial

Investment Promotion Policy 2005-2010.

a) 100% reimbursement of stamp duty and transfer duty paid by the

industry on purchase or lease of land/shed/buildings meant

for industrial use.

b) 100% reimbursement of stamp duty and transfer duty paid by the

industry on financial deeds and mortgages etc.

c) 35% subsidy on fixed capital investment to men and

40% to women entrepreneurs up to a maximum of Rs 50 Lakh

d) Reimbursement of power cost @ Rs 1/- per unit consumed for 5 financial

years.

e) 50% reimbursement of sales tax paid in a financial year for 5 financial years.

f) 5% interest subsidy on the interest paid over and above prime lending rate

(PLR) will be given on the term loan and working capital loans taken by new

Tiny/SSI industrial units subject to a maximum of Rs5.00 Lakh per

year for a period of 5 years for SC entrepreneurs

g) 50% subsidy on expenses incurred for quality certification limited to Rs. 1.00

Lakh.

16
July 15, 2008 M/S SRIKANTH TRADERS, PERAGALAPUDI.

The promoter of the proposed project being an SC entrepreneur will be greatly

benefited by the above incentives of the Government.

Total fixed capital investment of the project Rs. 17.500 Lakh

Investment subsidy @ 40% Rs. 7.000 Lakh

Estimated power cost reimbursement Rs. 1.320 Lakh p.a

These incentives definitely go a long way in reducing the debt component of the

project to 51.16 % of the total project cost. Moreover, the investment subsidy shall

be released as soon as the term loan is disbursed and all these subsidies shall be

credited to the loan account of the unit.

17
July 15, 2008 M/S SRIKANTH TRADERS, PERAGALAPUDI.

16. DEPRECIATION STATEMENT

a) Building

Value Depreciation Insurance

Period
Rs. Lakh @ 5 % Rs. Lakh @ 3 % Rs. Lakh
At start 8.000 0.400 0.240

End of 1st year 7.600 0.380 0.228

End of 2nd year 7.220 0.361 0.217

End of 3rd year 6.859 0.343 0.206

End of 4th year 6.516 0.326 0.196

End of 5th year 6.190 - -

b) Machinery

Value Depreciation Insurance

Period
Rs. Lakh @ 10 % Rs. Lakh @ 3 % Rs. Lakh
At start 8.500 0.850 0.255

End of 1st year 7.650 0.765 0.230

End of 2nd year 6.885 0.689 0.207

End of 3rd year 6.196 0.620 0.186

End of 4th year 5.576 0.558 0.168

End of 5th year 5.018 - -

18
July 15, 2008 M/S SRIKANTH TRADERS, PERAGALAPUDI.

17. REPAYMENT SCHEDULE

Term loan : 18.000 Lakh

Rate of interest : 14.5 %
Repayment period : 5 Years
Repayment mode : Monthly

Beginning Ending
Month Payment Principal Interest
Balance Balance

1 1800000 42351 20601 21750 1779399

2 1779399 42351 20850 21501 1758549
3 1758549 42351 21102 21249 1737447
4 1737447 42351 21357 20994 1716091
5 1716091 42351 21615 20736 1694476
6 1694476 42351 21876 20475 1672600
7 1672600 42351 22140 20211 1650460
8 1650460 42351 22408 19943 1628052
9 1628052 42351 22679 19672 1605373
10 1605373 42351 22953 19398 1582421
11 1582421 42351 23230 19121 1559191
12 1559191 42351 23511 18840 1535680
13 1535680 42351 23795 18556 1511885
14 1511885 42351 24082 18269 1487803
15 1487803 42351 24373 17978 1463429
16 1463429 42351 24668 17683 1438762
17 1438762 42351 24966 17385 1413796
18 1413796 42351 25268 17083 1388528
19 1388528 42351 25573 16778 1362955
20 1362955 42351 25882 16469 1337074
21 1337074 42351 26195 16156 1310879
22 1310879 42351 26511 15840 1284368
23 1284368 42351 26831 15519 1257536
24 1257536 42351 27156 15195 1230381
25 1230381 42351 27484 14867 1202897
26 1202897 42351 27816 14535 1175081
27 1175081 42351 28152 14199 1146929
28 1146929 42351 28492 13859 1118437
29 1118437 42351 28836 13514 1089600
30 1089600 42351 29185 13166 1060415
31 1060415 42351 29538 12813 1030878
32 1030878 42351 29894 12456 1000983

19
July 15, 2008 M/S SRIKANTH TRADERS, PERAGALAPUDI.

33 1000983 42351 30256 12095 970728

34 970728 42351 30621 11730 940106
35 940106 42351 30991 11360 909115
36 909115 42351 31366 10985 877749
37 877749 42351 31745 10606 846005
38 846005 42351 32128 10223 813876
39 813876 42351 32517 9834 781360
40 781360 42351 32909 9441 748450
41 748450 42351 33307 9044 715143
42 715143 42351 33710 8641 681434
43 681434 42351 34117 8234 647317
44 647317 42351 34529 7822 612787
45 612787 42351 34946 7405 577841
46 577841 42351 35369 6982 542472
47 542472 42351 35796 6555 506676
48 506676 42351 36229 6122 470448
49 470448 42351 36666 5685 433781
50 433781 42351 37109 5242 396672
51 396672 42351 37558 4793 359114
52 359114 42351 38012 4339 321103
53 321103 42351 38471 3880 282632
54 282632 42351 38936 3415 243696
55 243696 42351 39406 2945 204290
56 204290 42351 39882 2469 164407
57 164407 42351 40364 1987 124043
58 124043 42351 40852 1499 83191
59 83191 42351 41346 1005 41845
60 41845 42351 41845 506 0

20
July 15, 2008 M/S SRIKANTH TRADERS, PERAGALAPUDI.

18. PROJECTED PROFIT & LOSS ACCOUNT STATEMENT

RECEIPTS

S 1st 2nd 3rd 4th 5th

Particulars
No year year year year year
Installed capacity
1 4800 4800 4800 4800 4800
in MT
2 Operating capacity % 45 55 65 75 85

3 Service in MT 2160 2640 3120 3600 4080

Service charge per MT in
4 0.005 0.005 0.005 0.005 0.005
Rs. Lakh
Revenue from sale of rice
5 4.000 5.000 6.000 7.000 8.000
bran and husk Rs. Lakh
5 Total income 14.800 18.200 21.600 25.000 28.400

EXPENDITURE & PROFIT

S 1st 2nd 3rd 4th 5th

Particulars
No year year year year year
1 Utilities 4.969 5.963 7.156 8.587 10.304
2 Interest 2.439 2.030 1.556 1.100 0.378
3 Salaries & wages 1.800 2.160 2.592 3.111 3.734
4 Depreciation 1.250 1.115 1.050 0.963 0.884
5 Insurance 0.495 0.458 0.424 0.392 0.364
6 Maintenance 0.100 0.200 0.300 0.400 0.500
7 Misc expenses 0.100 0.200 0.300 0.400 0.500
8 Publicity 0.005 0.005 0.005 0.005 0.005
9 Telephone 0.036 0.060 0.072 0.096 0.120
Total
10 11.194 12.191 13.455 15.054 16.789
expenditure
11 Gross profit 3.606 6.009 8.145 10.018 11.611
12 Tax provision 0.210 0.450 0.660 0.850 1.000
Net profit 3.396 5.559 7.485 9.168 10.611

21
July 15, 2008 M/S SRIKANTH TRADERS, PERAGALAPUDI.

19. PROJECTED CASHFLOW STATEMENT

S Source of 1st 2nd 3rd 4th 5th

Start
No funds year year year year year
1 Opening
- - 2.212 6.238 11.861 18.747
balance
2 Capital 3.500 - - - - -
3 Term loan 18.000 - - - - -
4 Sales revenue - 14.800 18.200 21.600 25.000 28.400
5 Total 21.500 14.800 20.412 27.838 36.861 47.147

Application
S No Start 1st year 2nd year 3rd year 4th year 5th year
of funds
Land,
Building,
1 17.500 - - - - -
Plant &
machinery
Initial
2 working 1.000 - - - - -
capital
Salaries &
3 - 1.800 2.160 2.592 3.111 3.734
wages
4 Utilities - 4.969 5.963 7.156 8.587 10.304
5 Maintenance - 0.100 0.200 0.300 0.400 0.500
6 Insurance - 0.495 0.458 0.424 0.392 0.364
Loan
7 - 2.644 3.053 3.527 4.074 4.705
repayment
8 Interest - 2.439 2.030 1.556 1.010 0.378
Misc &
9 other 3.000 0.141 0.310 0.422 0.546 0.670
expenses
Total
10 21.500 12.588 14.174 15.977 18.144 20.655
expenditure
Cash on
11 - 2.212 6.238 11.861 18.747 26.492
hand

22
July 15, 2008 M/S SRIKANTH TRADERS, PERAGALAPUDI.

20. DEBT SERVICE COVERAGE RATIO

Particulars 1st year 2nd year 3rd year 4th year 5th year

Net profit
3.396 5.559 7.485 9.168 10.611
Add:
1.250 1.115 1.050 0.963 0.884
depreciation
Total cash
4.646 6.674 8.535 10.131 11.495
accruals
Term loan
2.644 3.053 3.527 4.073 4.705
instalment
Interest
2.439 2.030 1.556 1.010 0.378
Total Repayment
5.083 5.083 5.083 5.083 5.083
obligation
Debt service
0.914 1.313 1.679 1.993 2.262
coverage ratio

Minimum debt service coverage ratio 0.914

Maximum debt service coverage ratio 2.262

Average debt service coverage ratio 1.633

21. DEBT – EQUITY RATIO

S Item Start 1st 2nd 3rd 4th 5th

No year year year year year
1 Term loan 18.000 15.356 12.303 8.776 4.703 -

2 Equity 3.500 6.806 12.365 19.850 29.018 39.629

3 Debt equity 5.143 2.256 0.995 0.442 0.162 -

ratio

Average Debt Equity ratio 1.800

23
July 15, 2008 M/S SRIKANTH TRADERS, PERAGALAPUDI.

22. BREAKEVEN ANALYSIS

A. Sales revenue = Rs. 27.838 Lakh

B. Expenses

Fixed cost Rs. Variable cost Rs.

S No Particulars
Lakh Lakh
1 Salaries & wages 1.383 1.209
2 Utilities 1.074 6.082
3 Maintenance - 0.300
4 Depreciation 1.050 -
5 Insurance 0.424 -
6 Interest on term loan 1.556 -
7 Interest on working capital loan - 0
8 Miscellaneous expenses - 0.422
Total 5.487 8.013

(For calculating breakeven point 3rd year of operations is considered)

Fixed cost
Breakeven point = ____________________________ X 100

Sales revenue – Variable cost

= 27.68 %

Breakeven sales = Rs. 7.705 Lakh

******

24