COMPREHENSIVE PROJECT REPORT

ON

“AGARBATTI INDUSTRY”

Submitted for evaluation

At

The Faculty of Management StudiesMody Institute of Technology & Science,

Laxmangarh (Sikar)(Deemed university u/s 3 of the UGC Act, 1956)

SUBMITTED BY:

NEHA VERMA

Enrollment No.:- 080050

MBA- Semester IV

AUTHENTICATION CERTIFICATE

“To Whom It May Concern”

This is to certify that the comprehensive project report on “AGARBATTI INDUSTRY” is a bonafide work carried out by me.

The matter embodied in the comprehensive project report has not been submitted earlier for award of any degree or diploma to the best of my knowledge and belief.

Signature of the Promoter

Name of the Promoter

Date

FACULTY GUIDE’S CERTIFICATE

“To Whom It May Concern”

This is to certify that the Comprehensive project report on “AGARBATTI INDUSTRY” submitted by Neha Verma is a bonafide work carried out by her, under my guidance.

The matter embodies in this comprehensive project report has not been submitted earlier for award of any degree or diploma to the best of my knowledge and belief.

Signature of the Promoter Signature of the guide

Name of the Promoter Name of Faculty Guide

Date

ACKNOWLEDGEMENT

I would like to express my deepest gratitude to all the people, who have helped me in the successful completion of the detailed project report.

I pay my heartiest thanks to Mr. Vishal Vyas, faculty FMS for his focused guidance and strong support, without which I would not have been able to accomplish the project successfully.

It is indeed my pleasure and privilege to thank all the manufacturers, dealers and the retailers for helping me in revealing me the facts and figures about the Agarbatti Industry. I also extend my thanks to them for helping me in doing the market survey and filling in the true details in the questionnaires.

I am thankful to my Dean, Mr. Saroj Dutta and also owe sincere gratitude towards him for giving me a chance to exploit my ability under his able guidance.

Last but not the least; I extend my special thanks to all mighty and my parents for this great success.

EXECUTIVE SUMMARY

It has been a good learning experience to do the detailed project reports on

setting up of the Agarbatti industry in the RIICO industrial area, Jaipur as a

part of my MBA program. The study has been made an attempt to gain

better understanding about how actually the manufacturing plant is set up.

Under this, at first I generated the product idea of Agarbatti Industry. The

main objective of the project is to the study the feasibility analysis of the

Agarbatti Industry.

Then the market analysis was done through the survey in form of

questionnaires and interviews of the, wholesalers and retailers. After this the

demand analysis was done by using the statistical techniques. With this the

demand estimation, the technical analysis was done.

After completing the technical analysis, the financial analysis was done to

check the financial feasibility of the project.

On the whole it was a wonderful experience & a great learning opportunity.

The complete project added to my theoretical knowledge.

TABLE OF CONTENTS

1.) Promoter’s Idea

2.) Firm And Promoters3.) Industry Scenario4.) Introduction5.) PORTER’S Five Force 6.) SWOT Analysis of AGARBATTI INDUSTRY

7.) Market Analysisa. Geographical Areab. Objective of the surveyc. Methodology Adoptedd. Interpretations of questionnaire for wholesalerse. Interpretations of questionnaire for retailers

8.) Demand Analysisa. Demand Estimationb. Supply Estimationc. Demand-Supply Gap Estimationd. Marketing channele. Marketing Strategies

9.) Technical Analysisa. Manufacturing Processb. Process Flow Diagramc. Selection of locationd. Plant and Machinery Requirede. Raw Material Requiredf. Manpower Requirement

10.) Financial Analysisa. Cost of the project & Means of Financeb. Basic Assumptions underlying Financial Projections

11.) Bibliography

PROMOTER’S IDEA

The idea of Agarbatti Manufacturing is my own and reasons for choosing this are as follows

1. The growth rate of this industry is high i.e. 10%.

2. Consumption of Agarbatti is more.

3. New entrants can easily establish themselves in the market

because the % of unorganised sector is high.

Thus, taking all of the above factors into account the idea of Agarbatti

Manufacturing industry was generated.

FIRM AND PROMOTERS

Firm:- The firm will be a proprietorship firm and will function from Jaipur under the concerned person’s name.

Location:-RIICO Jaipur.

Promoter:-Decision for entrepreneurship is always promoted by 5 major reasons. They are:-

Personal Characteristics

Personal Environment

Personal Goals

Business Environment Idea

Decision to Behave Entrepreneurially

Moreover, it is a Idea/Innovation that leads towards Entrepreneurship i.e.; idea comes first and entrepreneurship follows afterwards.

INDUSTRY SCENARIO

Industrial development in India has occurred mostly to meet increasing urban

consumer needs and to support the growth of the vital agricultural sector. The

traditional home based enterprises have also been simultaneously experiencing

steady growth, primarily because of the influence of market forces and also because

of multiplier effects. Cottage industries have slowly changed to rural cottage or

semi-urban micro-enterprises with limited assistance from government. Agarbatti

making is one such industry. It has responded well to increased demand for its

products both in rural and urban areas, mainly because of the continued availability

of cheap labour force dominated by women and children. At the same time, greater

advertising costs and quality improvement have pushed up the prices.

INTRODUCTION

Agarbatti (incense sticks) form part and parcel of the traditional Hindu practice of

offering prayers in temples and other places of worship. In modern days, perfumed

sticks are also used in houses and in other public places as air-fresheners and/or

mosquito repellents. The demand for agarbatti is increasing both in the domestic and

export markets because of the improvement in quality and increase in the types of

products. India is the largest producer of agarbatti in the world.

HistoryThe origin of agarbatti-making as a cottage industry can be traced to Thanjavur

region of TamilNadu from where it spread to the neighbouring state of Karnataka,

which currently is the largest producer in India, and to a lesser extent to Andhra

Pradesh, Gujarat and Bihar. Besides providing employment to unskilled women and

children, in recent years, agarbatti has increasingly become a significant foreign

exchange earner for the country. Under the liberal economic policies of the

Government, the agarbatti industry has potential to expand its global market.

INDIAN SCENARIO

Agarbatti industry is gradually developing a wider base. Of the total domestic sales

of Rs 7.1 billion (approx. US$ 198 million) in 1989/90, South India accounted for

35%, West 30%, North 18% and East 17%. Almost two-thirds of consumption took

place in rural areas (61.23%). The poor (low-income group) purchases about 46% of

the value of the agarbatti compared with the higher income customers who buy 54%.

However, categorizing purchases into five income classes shows an inverse

relationship between income and the purchase of agarbatti. The factors influencing

purchasing decisions are: the quality, brand name preference and cost.

Rising demand for the products and earning of hard currency has led the agarbatti

industry to orient itself increasingly towards exports. Total exports have increased

by 266%, from Rs 1.5 billion (approx. US$ 42 million) in 1989-90 to Rs 4 billion

(approx. US$ ll2 million) in 1993-94. More than 800 registered and 3000

unregistered units currently exist in the country and only up to 10% of these, mostly

in Karnataka, are engaged in export trade.

CHARACTERISTICS

The agarbatti industry in India operates in the informal sector. The enterprises are

located both in rural and urban areas. The labour force engaged is largely

unorganized, although some workers, especially those working for large

establishments and particularly in Bangalore, receive some of the social security

benefits enjoyed by their counterparts in organized private undertakings.

Manufacturing is done on a piece-meal basis, with individual families being

contracted to assemble agarbatti sticks being the most common mode.

RAW MATERIALS AND SOURCES

The major raw materials used in the agarbatti industry are:

Bamboo sticks

wood charcoal

processed perfumes

jigat powder (an adhesive-like substance made from powdered bark

of the Maclilus makarantha tree)

These are collected through contract labour system, which is widespread in the

unorganized sector and leads to wide differences in wages because of the differences

in minimum wage that exist among different states. Moreover, since families are

contracted and agarbatti workers in these families are mostly women, some child

labour input occurs, mainly to assist the family business.

Bamboo is the preferred species for making sticks, but timber from several other

species are used as substitute. In 1989-90, the preparation of the sticks alone

involved about 30 million workdays. "Rolling" the sticks to glue on the incense

paste and incorporate charcoal powder (the end-product of rolling is "non-masala"

sticks) also employs a large labour force. The raw materials - sticks, paste and

charcoal - are provided by entrepreneurs and the rolling is done largely at

home. Rolled sticks are purchased in units of 1000.

Addition of the incense, to make "masala" agarbatties is usually done in factories

owned by microenterprises. The ratio of labour is approximately 80% home based to

20% factory based. Home based labourers are linked to factories through local

business units.

Finished agarbattis are packed in paper or cardboard tubes. Usually paper from

printing presses or cardboard is supplied to labourers under tie-up arrangements to

produce the requisite packaging.

Previously, bamboo required for making the sticks was available from the Western

Ghats. Currently, most of it comes from North-East India. MacliIus makarantha, the

source for Jigat is rapidly decreasing in South India (where main manufacturing sites

of agarbattis are located) and is increasingly being obtained from the northern states

such as Uttar Pradesh. Charcoal is largely from Prosopis juliflora, which mostly

comes from Tamil Nadu.

The cost of these basic ingredients and the labour to produce the raw agarbattis

accounts for only 10% of the cost of finished agarbattis. Three times that cost represents

the perfumery ingredients of which two-thirds are imported. The various blending and

individual ingredients are generally treated as "trade secrets".

PRODUCTION AND CONSUMPTION PATTERNS

A market survey by the National Council of Applied Economic Research (NCAER)

put the total quantity of agarbatti produced in the country at 147 billion sticks,

valued at around Rs. 7 billion (US$ 196 million) (NCAER 1990). The distribution of

the consumption is skewed in favour of the lower income group, which earns less

than Rs 25,000 (US$ 700) per year but consumes a little over two-thirds of the

production. The highest income group, with above Rs, 56,000 (US$1,570) of annual

income, purchases only 3% of the production.

COST STRUCTURE

There are two stages involved in the production of agarbatti. One stage involves the

production of non-perfumed (non-masala) agarbatti, and the second entails the

production of perfumed (masala) agarbatti. The costs of production can also be

disaggregated by these two stages as labour costs are significantly different in these

two stages.

Non-perfumed agarbattis are generally produced at home through the family

contract system and take up to 80% of the total labour required; its share in the total

production cost, however, is about 10% in preparing raw agarbattis. The addition of

perfumes is carried out in factories and takes about 20% of the total workdays

required for the production and, along with packaging, accounts for about 60% of

the production cost. Another 20% of the cost is incurred in marketing.

EMPLOYMENT SPECTRUM

Agarbatti manufacturing is classified as a small-scale industry. Although there are

bureaucratic hurdles that investors have to go through - such, as the procedures for

getting licenses and tax benefits - the low capital requirement and simple technology

that characterize this industry make it easy to establish units in rural or semi-urban

areas. It is a highly labour-intensive industry and is estimated to be directly engaging

about 500,000 people, mostly women and children.

The packaging and processing are particularly suitable to women and unemployed in

both rural and urban areas since these provide opportunities for labourers seeking

self-employment and piece-meal work. While adult labourers earn Rs 70 - l00/day,

children earn Rs 30 to 50/day depending on the time spent and their efficiency.

MAJOR PROBLEMS FACED BY THE INDUSTRY

Demand for agarbatti sticks is continuously increasing both in domestic and export

sectors. With the gradual abolition of license and permit systems under the new

economic liberalization policy of the state and central governments, the future

prospect for growth and diversification of the industry looks bright. According to a

rough estimate, the US market alone is worth $200 million.

The problems and constraints faced by the industry are related to the following:

1. Raw materials

2. Institutional and policy aspects

3. Advertising and marketing costs

1. RAW MATERIAL

Raw materials are getting scarce and distances involved in transportation are

increasing, thus raising the total cost of production. Currently, bamboo comes

mostly from North-East India and as a result, the wholesale and retail prices of

bamboo culms are rising. Similarly jigat and charcoal are becoming scantier, and

hence costlier, as traditional and local sources are fast drying up.

2. INSTITUTIONAL AND POLICY ASPECTS 

Policy issues

Taxes on manufacturing establishments are arbitrary, and small manufacturers are

frequently harassed and penalized by the authorities. Taxation is done on an ad hoc

basis: not only is there a sales tax on the finished product, but most of the raw

materials are also taxed. The burden of taxation is more telling in the case of

perfumes, which are imported.

Labour shortage

Shortage of labour, specifically shortage of workers with experience in the industry,

is hampering further development of the agarbatti industry towards improved quality

and export growth.

Child labour

The issue of child labour in the industry needs to be firmly addressed. A large

number of children work full- or part-time in the industry to supplement their

family’s income. International opinion and norms strongly discourage international

trade in products manufactured using child labour.

3. ADVERTISING AND MARKETING COSTS

Agarbatti producers are getting lower returns on their investment owing to their

complete dependence on middlemen and wholesalers for marketing. Often 60-70%

of the total cost can be due to transportation, marketing and advertising, and retailers

are completely at the mercy of agents and wholesalers. Continuously increasing

transport costs are especially cutting into profit margins. Means of controlling such

costs are lacking because of the non-existence of cooperatives or an effective

association of the agarbatti manufacturers.

PORTER’S FIVE-FORCE MODEL

Rivalry among major competitors

Numerous competitors:

The competition is very high in the industry and many balanced competitors are present

in the industry. Because of which the industry concentration ratio is low.

The major players are: Cycle brand Mangaldeep Z-black Parnami Joie Danim

Price war is there among the competitors to attract customers. They market their

products, give emphasis on advertising, details of all the existing products are available

on their sites on internet even the details of upcoming products are also there.

Among the above given competitors Some brand is the leading one due to following

reasons:

High level of creativity

Stringent quality control

In-house blending

Continuous research and development

Exceptional goodwill generated among trade

Consistent emphasis on relationship building

Ethical practices

Industry growth :

The industry growth is high even the multinational companies are turning towards

this business seeing the demand of product (agarbattis) in domestic and international

market. As an example ITC forayed into agarbatti business.

Storage costs :

The product once produced is not difficult to store. The storage cost is not high as the

product is not vulnerable.

Switching cost :

There is no or very low switching cost which makes the competition more intense.

Bargaining power of suppliers

The natural materials are used in agarbatti making. There are numerous

suppliers of these raw materials so if the supplier charge high prices

company can switch over to other suppliers so the bargaining power of

suppliers is low.

Importance of industry: agarbatti industry is very important or can say

main customer for the suppliers of these raw materials.

The companies purchase the raw materials in bulk which increases the

importance of buyers as for these suppliers this industry is the main

customer of their raw materials.

The purchase of these raw materials represents the significant fraction of

the buyer’s cost as they are the main constituents of incense

stick(agarbatti). So the buyer’s are price sensitive.

These raw materials are undifferentiated and can be purchased easily from

other suppliers.

The buyers generally have the full information about demand, actual

market prices and suppliers cost. This make the buyer(agarbatti industry)

to ensure that it get the raw material in most favorable prices.

This clearly shows that the bargaining power of suppliers is low.

Bargaining power of buyers

In an organized sector the companies provide profit margins to their retailers these

margins are according to their cost of production some provide more margin and some

players provide less margin but this also differentiate their quality. For example Cycle

brand gives less margin to their retailers but they don’t compromise on quality which

differentiate their product and makes loyal customers.

In this industry there is no bargaining power of buyers.

Threat of substitutes

The substitutes of agarbatti are:

1- Dhoop, it is a very strong substitute of incense stick. In man temples dhoop is

used instead of agarbatti. Dhoop is also not a very costly product it prices more or

less same as agarbatti. So it is easy for it to replace agarbatti.

2- Air freshners, Room deodorizers, Coils, Magical charcoal tablets, Aroma candles.

As incense sticks are also used to fresh the air in rooms and other places, to avoid

mosquitoes at home etc for such purposes these substitutes can be used but they are

not very strong substitute of incense stick(agarbatti) because in worship and prayers

only agarbatti is used.

Threat of new entrants

It is a small scale industry, low investment is required, suppliers of raw materials are

easily accessible. There is no or very low switching cost.

There is a product differentiation in organized sector which forms only 20% of the

industry and rest is unorganized sector in which there no differentiation of the product

they are more or less similar.

The firms which are registered and work at some average level are taxable otherwise the

small players in the industry are non-taxable which makes the new entrants easier to

enter.

National and Multinational companies are also seeing the opportunities in the industry as

the demand of agarbattis are increasing in domestic and international market.

The Future

Customs in incense manufacture have changed little over the centuries except in the

range of fragrances offered. In ancient times, only naturally fragrant resins or woods

like sandalwood and patchouli were used for incense. Modern fragrance production

allows virtually any scent to be duplicated, and fragrances are available now that

couldn't be offered before. Examples include green tea, candy cane, blueberry,

pumpkin pie, and gingerbread incense.

The custom of use of incense is also likely to change in the future and in Western

culture. In India, two or three sticks of incense may be burned every day in a typical

home, while, in the United States, users of incense may only burn one stick a week.

Incense-makers hope the variety, effectiveness, and low cost of incense sticks will

make them more popular than air fresheners and room deodorizers made with

artificial perfumes. Also, the popularity of meditation and aromatherapy have

spurred incense sales among clients who want their rare moments of quiet and

relaxation to be healing and beautifully scented.

SWOT Analysis of Agarbatti Industry

STRENGTHS

Large & growing domestic Agarbatti market

Up to date research on New Fragrance

Low cost of raw material both wood and non-wood

WEAKNESS

Small industry structure

Low level of internalization of the industry

OPPORTUNITIES

Enormous domestic market potential

Low labor costs which allows cost effective sorting of imported mixed waste

Export potential

THREATS

Decline in quality due to environmental pressures

Short term planning for raw material

MARKET ANALYSIS

Geographical Area

Geographical area is Jaipur and Sikar as the product is to be launched in the RIICO,

Jaipur.

Objectives of Survey:

Demand analysis.

Demand estimation.

Forecasting demand.

Competitor’s details.

Source of Information Collection: Primary (Market Survey)

Methodology Adopted

1. Defining target population- Randomly almost all types of retailers and

wholeseller are covered.

2. Selecting the sample Convenience sampling

Considering the nature of all retailers in targeted belt as same of those covered for

survey in Jaipur and Sikar survey is done.

3. Sample Size: 50-Retailer , 11- wholesellers.

4. Research Tool: Questionnaire has been used as the research tool for the

study.In all two questionnaires are prepared. One for the retailers and another for

wholesalers. Developed questionnaire has both open and close ended questions .

Language used in the questionnaire is very simple and no jargons are used.

Questions are framed considering the need of information as previously mention

included.’

ANALYSIS OF THE QUESTIONNAIRES

WHOLESELLER

Q1: What is the ratio of sales?

a) Branded

b) Unbranded

Market Pattern

64%

36%

Branded Unbranded

Interpretation :

Unbranded player cover the large % of market. There is a less % of Branded player in the

market. Unbranded and local player cover the 64% market. So in this industry local

manufactures are the key player.

Q2: How much quantity you sell?a) Monthlyb) Weekly

Interpretation: After doing the market survey we found that they sold 80,000/ - packetsMonthly. Means they sold approx 5-6 kg .

Q3: Does co. provide any promotional scheme? a) Gifts b) Commission c) Discount d) Other

Company Trend

9%

9%

82%

0%

Gifts Commission Discount Other

Interpretation: The co. offers the discount scheme to wholeseller mostly, then they offer the commission to wholeseller.

Q4: What margin you get (in %) ---------- Margin1. Branded2. Unbranded

Interpretation:After doing the market survey we found that the wholeseller get the 10-20% margin on branded agarbatti and 8-5% margin on local agarbatti. Q5: Do you get any credit facility from manufacturer?

a) Yesb) No

Credit facility

100%

0%

Yes No

Interpretation: After doing the market survey we found that the maximum manufacturergive the credit facility to wholeseller of 7 days.

Q6: How often you order the stock? a )Monthly b )Weekely

91%

9%

Monthly

Weelky

Interpretation The wholeseller ordered the stock monthly to manufacturer in bulk.

RETAILER QUESTIONNAIRE

Q1: From which sources you purchase?a) Manufacturerb) Whole sellerc) Distributor

Interpretation

Out of 50 retailers 56% said that they purchase agarbatti from whole seller 30% told

that they purchase from Manufacturer and only 14% said they purchase from distributors.

Mean wholeseller plays the main role. This shows that maximum retailers prefer to buy

stock directly from the wholesalers .

Q2: From which place did you get the supply of agarbatti?a) From Rajasthanb) Out of Rajasthan

supply

64%

36%

Out of Rajasthan From rajasthan

Interpretation

In Jaipur and Sikar market the 62% supply of agarbatti is out of Rajasthan and 38%

market is covered by the manufacturer outside the Rajasthan. This shows that maximum

supply is done , out of Rajasthan.

Q3: Do you receive any credit facility from manufacturer or wholeseller?

Credit Facility

75%

20%

5%

7 days 15 days 30 days

Interpretation

75% retailers got the credit facility of 7 days, and 20% found the credit facility of 15 days

and 5% retailer 30 days. This shows that retailers get the credit facility of 7 days.

Q4: What promotion schemes are offered to you? a) Commission b) Gifts c) Discount

Schemes offered

18%

10%

72%

Comision

Gifts

Discount

Interpretation

Most of the retailers get the discount schemes from the wholeseller side and only 10%get

the gifts, like pen stationary and 18% get the commission.

Q5: How frequently you ordera) Weeklyb) Monthly

stock order

80%

20%

Weekly Monthly

Interpretation: The retailer ordered the stock from the wholesaler, weekly as per the

demand they purchased the stock .

Q6: What is the most preferred price range? a) Rs 5-10 b) Rs 10-15 c) Rs 15-20 d) more than 20

Price Preferred

24%

56%

16%

4%

Rs 5-10

Rs10-15

Rs 15-20

Rs 20 and above

Interpretation:

The most preferred price range is Rs 10-15,56% customer prefer the range between 10- 15.

Q7: What do customer look for while purchasing agarbatti? a) Price b) Brand c) Fragrance d) Packaging

0

2

4

6

8

10

12

14

16

18

20

Series1 9 12 9 20

Price Brand Packaging Fragrance

Interpretation As the survey conducted , I have asked the retailer to rate the customers

look most while purchasing agarbatti from them. So 20 retailer ranked 1st to

fragrance , 12 retailers ranked 2nd to brand , and 9 retailer ranked the 3rd both

price and packaging.

\

Q8: Customer purchase agarbatti? a) Monthly b) Weekly

Purchasing Pattern

80%

20%

Monthly

Weekly

Interpretation

Customer purchases the agarbatti from the retailer on monthly basis only 20%

customer purchase the agarbatti on weekly basis. This shows customer like to purchase

agarbatti monthly.

Q9: What margin you get?a) On Brandedb) On Unbranded

Interpretation

From the survey it was found that retailers get the 5-6% margin in branded agarbatti

and 10-20% margin in unbranded agarbatti.

Q10: Which fragrance of agarbatti is preferred most? a) Rose b) Chandanc) Kevara

d) Others

PREFFERED FRAGRANCE

60%

32%

2%

6%

Rose

Chandan

Kevara

Others

InterpretationMost of the retailer preferred rose agarbatti .it is most preferred by the customers, the

ratio is 60%.Then they purchase chandan agarbatti. Only 6%customer not think about the

fragrance at the purchasing time.

MARKETING CHANNEL

Most producers do not sell their goods directly to the final users; between them stands a

set of intermediaries performing a variety of functions. These intermediaries constitute a

marketing channel. The marketing channels just not only serve the markets but they also

make markets.

A new firm typically starts as a local operation selling in a limited market, using existing

intermediaries. Thus, the channel system evolves in response to local opportunities and

conditions.

Currently, the existing marketing channel of the Agarbatti manufactures is as follows:-

MARKETING STRATEGIES

In order to differentiate the product and capture the existing market and to develop strong

customer base, some strategic marketing plan is necessary to be designed and

implemented.

Various strategies that will be used being a new entrant are:-

Steady supply with timely delivery and good quality would be one of the strategic

strength of the marketing plan.

Discount scheme will be offered to the customer like “12 ka 13”.

I would like to capture the large no. of wholeseller , retailer becaue they are the

main intermediatiory.

Manufacturers

Wholesalers

End User

Retailers

Bulk discounts will also be given to the distributors on ordering the bulk order.

Various gifts like calendars, pens, folders, diaries and other utility gifts can be

given to the wholesaler on their anniversaries, birthdays and other occasions.

DEMAND ANALYSIS

After conducting the market survey in the form of questionnaire and interview of the

wholeseller, Retailers, the next step is to estimate the effective demand in the past and the

present.

As per the dealer’s survey, the demand of the agarbatti in Jaipur and Sikar is as follows:-

Total demand in Jaipur is : - 653199 Kg per month

Total demand in Sikar is : - 102066 Kg per month

Total demand 755265 Kg per month

The demand has been calculated on the basis of population of Jaipur and Sikar.

The urban Population of jaipur is 2592067 and Sikar is 472538

From this population the below poverty line was deducted and on the basis

of middle and upper middle class the monthly family consumption of Jaipur and sikar is

180 gm was estimated depending upon the family size of jaipur(6) and Sikar is (7)

Total Demand of Agarbatti is 755265 kg per yr.

SUPPLY ESTIMATION:

The supply has been estimated on the basis of responses of 50 retailers. And the total

no. of retailers estimated in Sikar is 650 and Jaipur is 2350. The total supply of agarbatti

is 139968 kg per yr.

Total Supply: 139968 kg per year

DEMAND -SUPPLY GAP ESTIMATION

Therefore the supply of Agarbatti is 139968 kg per yr from the retailer Survey .

So this demand-supply gap is:

= 755265 kg per yr – 139968 kg per yr

= 615297 kg per yr

There is a large gap between demand and supply and there are many local manufacturer

In jaipur there are approx 30 local manufacturer in jaipur and approx 10 manufacturer in

sikar . The % of each manufacturer is less.

Hence the proposed manufacturing unit would have the installed capacity of 14000 kg

per year and production capacity of 6152 kg per year.

TECHNICAL ANALYSIS OF AGARBATTI MANUFACTURING

The manufacturing process of agarbatti Manufacturing is as follows:

All the ingredients in powder form are mixed well in the proper proportion with water to

a semi solid paste. This paste is applied to bamboo sticks and rolled on wooden-planks

with hands uniformly. The raw sticks are then dried and packed in suitable bundles. For

manufacture of perfumed agarbattis the concentrated perfume is diluted first with white

oil or diethyl phthalate (Generally 1:3) and raw agarbattis are dipped suitably in dipping

trays. The perfumed batties are packed immediately in butter paper bags or

polypropylene bags and finally in printed cartons.

Proportion for making 1 kg incense stick

A. charcoal Powder 300gm

B. Jiget Powder 500 gm

C. Bamboo Stick 300 gm

D. Perfume 400ml

FLOW CHART OF MANUFACTURING PROCESS OF AGARBATTI

Charcoal powder + Jiget Powder mixed with water

Semi solid paste rolled on bamboo Stick

Keep masala sticks for dry

Dip masala stick into White oil

Dip these stick into perfume

Kept dipped stick to soak incense

Perfumed agarbatti obtained

Packaging

Transport

SELECTION OF LOCATION

The location of my project that I am going to select is in Rajasthan in Jaipur.

And the site will be in outskirts of Jaipur there is an industrial area the name is RIICO

industrial area in this place 35 plots are vacant and the rate of the plot is 1300/-per sq.mt.

. That’s why I’ll choose 139.4sq.mt. According to my plant capacity.

Land size for my project.

1. LAND

A piece of land 139.4 sq m 181226

at Riico Industrial Area @Rs 1300 per sq. m.

--------------

Total 1,81,226

--------------

2. BUILDING [ 139.4sq feet @ 301per sq m. ] 42,000

-------------- Total 42,000

Size of the room

Production room 9*8.16 = 73.4sq mtr.

Packaging Room 7*5 = 35 sq meter

Store room 5*5 = 25sq meter

Toilet 3*2 = 6sq meter

TOTAL 139.4 sq m

3. PLANT & MACHINERY

S.No. Description No. Values

1.Weighing balance 10 kg. Capacity

2 No. 2,000/-

2. Hand sieves 100 mesh 6 No. 300/-

3.Wooden Racks 8’ x 6’ x 2’

9 No. 6,750/-

4.Plastic trays 20 lit. Capacity

20 No. 1000/-

5.Aluminum trays for dipping

2 No. 1,600/-

6.Buckets for incense mixing

9 No. 2700/-

  Total   14350/-

RECURRING EXPENSES

(i) No. of working day in a year 360

(ii) No. of shifts in a day 1

(iii) No. of working hours in a shift 8

(iv) Employee Potentials 9

(v) Wastage of raw material 1%

COST OF PRODUCTION

RAW MATERIAL CONSUMPTION

Cost of 1 Kg Agarbatti

S. No. Raw Material Weight in gm. Cost in per kg Cost of 1 kg1. Charcoal Powder 300gm. 30/- 9.002. Jiget Powder 400 gm. 10/- 4.003. Bamboo Sticks 300 gm. 22/- 6.64. Perfumes 400 ml. 200/- 80.00  Total   Rs-100 per Kg

Yearly Production = 6152* 100 = Rs. 615200/-

POWER CONSUMPTION Monthly consumption is 500 unit

Therefore, yearly consumptions is.6000 unit

Commercial price for each unit is Rs 6

Fixed charges is 600(every month it will be included in the bill)

So, the yearly amount for electricity is Rs. 36000

ADMINISTRATIVE EXPENSES:

MANPOWER NO. REQUIRED WAGE/SALARY( per month in Rs.)

MANAGER 1 10000

SUPERVISOR 1 3000

Other Administrative Expenses

Stationary Expenses 500

Total 13500

Yearly Expense = 13500*12 = Rs.162000/-

SALARY & WAGES

Particulars Nos. Monthly Salary

Total Monthly

Yearly salary(Rs)

(Rs.) salary (Rs.)Unskilled worker 5 2400 12000 144000

Women for Rolling agarbatti(Machine Operator)

23 1200 27160 331200

TOTAL 475200/-

MISCELLANEOUS FIXED ASSETS

S.No. Item Quantity Price Total

1. Tubelight 5 240 1200

2. Fan 4 1190 4760

3. Bulb 2 15 30

4. Chair 3 900 2700

5. Rolling Chair 1 6000 6000

6. Table 1 1000 1000

Total 15660

Legal Environment

Licence is required in two basic perspectives:

Manufacturing licence( payable amount: Rs. 5000)

Procedure: STEP 1: Application STEP 2: Officer Will come for survey STEP 3: Cheking the various parameters STEP 4: Confirmation & licence

Sales licence( payable amount: Rs. 2000)

Process: STEP 1: Filling up the application STEP 2: Submitting the application to sales tax department STEP 3: Receiving the licence

FINANCIAL ANALYSIS

COST OF THE PROJECT

Particulars Rs.(in lakhs)

Land 181226

Building42000

Plant & Machinery14350

Miscellaneous Fixed Assets15660

Preliminary Expenses9698

Preoperative expenses16164

Contingency Margin16164

WC Margin28023

Total 323285

MEANS OF FINANCE

Particulars

Promoter’s Capital107762

Long/Medium Term loan from Banks215523

Total323285

ASSUMPTIONS UNDERLYING FINANCIAL PROJECTIONS

The profitability and other projections may be prepared on the basis of following

assumptions:-

1.) The company would work for 360 days per year on a 1 shift basis. .

2.) The expected capacity utilization will be 44% in first year, 48% in the second

year, and 53% for the third year and so on.

3.) The Sales realization will be Rs 2307000 in the first Year and this will increase

depending upon the increase in production per year

4.) The term loan will be repaid in 14 equal half-yearly installments, with the first

installment due at the end of the second operating year.

5.) The bank finance for working capital will cost 12% interest rate.

6.) The depreciation rates for company law purposes are as follows:-

Building :- 3.34%

Plant and Machinery :- 8%

Miscellaneous Fixed assets :- 5%

12.) The depreciation rates for the income tax purposes are as follows,

under the written down value method:-

Building :- 10%

Plant and Machinery and :- 33.33%

Miscellaneous Fixed assets

13.) The income tax rate applicable is 35%.

BIBLIOGRAPHY

Books referred

Chandra Prasanna, Project-Planning Analysis, Selection,

Financing, Implementation and Review, New Delhi, Tata

McGraw-Hill Publishing Company Limited, Sixth Edition 2006.

Websites referred

www.censusindia.com

www.economywatch.com

www.indiabudget.gov.nic

www.magicbricks.com

www.google.com