Project Feasibility Report

on

Johar Cashews

Submitted by

Amit Murmu

1

BBA/3519/07

Acknowledgement

My sincere thanks to our Teacher Mrs. Sraboni Dutta, Lecturer BIT Mesra Kolkata extension Centre for extending all the support and for her ideas and knowledge which acted as preliminary information for all the project work. She was always ready with answers to all my doubts.

Finally, I would thank my friends for their valuable suggestions and inputs that proved to be of invaluable assistance, and constantly motivated me to learn as much as possible.

Amit Murmu

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CONTENTS

PAGE NO. EXECUTIVE SUMMARY 4

COMPANY DETAILS 10

MARKETING PLAN 11

FINANCIAL PLAN 12

FEASIBILITY ANALYSIS 25

MARKET SURVEY ANALYSIS 26

INFERENCE 30

LIMITATIONS 30

FUTURE PLANS 31

BIBLIOGRAPHY 32

QUESTIONNAIRE 33

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Executive Summary

A) Profile -

Johar Cashews will be opened in Bahragora, East Singhbhoom ,Jharkhand .The main cashew processing unit will be in the outer non-residential part of the Bahragora whereas its cashew garden is already spread in Dubrajpur and Palsboni village over an area of 15 acres. The vision of the industry is to explore the opportunity in exports of cashew and its marketing within India. Our vision is to supply Premium quality of cashew to its customers and to constantly move up the value chain to cover all products related to cashew. We have got a state of the art manufacturing facility to process and grade cashews according to the customer specifications. And we follow strict quality standard to satisfy each and every customer.

B)Products:-

We source our cashew from the company owned gardens of Palasboni and Dubrajpur and the rest are imported from Dhalmungarh,Ghatshila,Chaibasa. Cashews are world famous for their large size and sweet taste. We produce 13 grades of cashew which are:-

W-180

White wholes-180: giant cashews with a count of 170-180 no. per pound

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W-210

White wholes-210:jumbo cashews with a count of 200-210 no. per

pound

W-240

White wholes-240: larger than ordinary size and tastier too with a count 220-240 no. per pound

W-320

White wholes-320: common premium cashew with a count 310-320 no. per pound

SW

Scorched white : slightly dark yellowish colour

SSW

Scorched and Shriveled wholes

JH

Jumbo halves: splits of cashew which are very large in size

JB

Jumbo Butts : Large butts of cashew

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Splits

Halves of cashew which are as tasty as the whole ones

K

One fourth piece of cashew

LWP

Large white pieces of cashew used for garnishing purpose

SWP

Small white Pieces

BB

Baby Bits used in ice creams , confectionaries

C) Brief Overview of the Market:

Cashew processing is a very competitive but also a potentially lucrative activity that can and should be exploited by more small-scale processors. Cashew kernels are a high value luxury commodity with sales

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growing steadily at an annual rate of seven percent, with every expectation that the market will remain strong.

India is the second largest producer of raw cashew in the world. Vietnam tops global production with 6.37 lakh ton followed by India (4.6 lakh ton), Nigeria (1.86 lakh), Brazil (1.78 lakh) and Tanzania (1.23 lakh). Today, India is the largest producer and exporter of cashew kernels in the world. Nearly 50 per cent of the world export of cashew kernels is from here. India is the third largest consumer in the world next to the US and EU, with over 20 percent of global consumption share. India exports 106,200 tons (68 percent of processed kernels) to over 60 countries, generating Rs. 900 crores equivalent of foreign exchange. United States, the United Kingdom, Japan, Netherlands, Australia, Canada, Germany, Hong Kong, Singapore, New Zealand and the Middle East countries belong to the long list of India's cashew importers. Indian cashew's good quality, taste and appearance are factors that differentiate it from the rest of the world.

D) SWOT Analysis:

Strength

There are Very few Processing units in Eastern India.

No local competitor.

Domestic Markets in Jharkhand, Orissa, Bihar, West Bengal are easily accessible.

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Clearance from CEPC (Cashew Export Promotion Council) has already opened market for foreign buyers.

Weakness

All ready existing big south Indian cashew units e.g Vittal Cashew Industries, Saima agro industries, Najeem Cashew industries.

Competitive Price.

Orders may come from very faraway places, which would increase our delivery charges.Initially, getting foreign customers would be difficult.

Opportunities

The Domestic Market as well as the International Market is big.

The Eastern domestic market Can be easily captured as The other biggies have priced cashew at high rate.

The Cashew Board of India and Cashew Export Promotion Council of India Extends it full support small processing units of cashew for its growth.

Threats

Seeing our reduced rates, other competitors might also do the same.Lured by the profitability, other players might also join this business.

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The foreign market is already dominated South Indian Biggies so it will be difficult to make own place.The Cashew production also depends upon the weather conditions adverse weather condition may affects the availability of raw cashew.Since cashew is a costly dry fruit it is difficult to attract mid pocket buyers.

Company Details

Name: Johar Cashews

Address: Plot no-24/2, Bahragora High School Road

Bahragora-832101

Contact No: 09006282900, 0993266780

Email:joharcashew@yahoo.com

Partners:

Mr. Sona Ram Murmu:-legal owner of cashew gardens in Palasboni and Dubrajpur also he is the key promoter of the company.

Key responsibilities:

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providing the raw cashews from his gardens

Mr. Amit Murmu:- Johar Cashews Sole Head

Key responsibilities:

Coordinating with the workers.

Arranging other suppliers for raw cashews.

Arranging retail buyers and foreign buyers.

Finding new opportunities for cashew business.

MARKETING PLAN

The main aim of the company would be to target the retail buyers(outlets) as well the domestic and International Market . Market for cashews is gradually increasing whereas its supply is limited. Demand for cashews is increasing and there are fluctuations in prices according to the market supplies.

Several marketing techniques will be utilized and incorporated by the firm, of which some are discussed below:-

(A) Offering lucrative whole sale rate to retailers: Cashew already being a costly dry fruit its reduce rates will definitely attract buyers.

(B) Attractive packaging: Vacuumed sealed packs with attractive packets or boxes,pet jars attract buyers.

(C) Targeting domestic local market customers : In the local shops and grossary people also seek quality cashews for consumption.

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(D) Special offers for foreign biggies: Special discounts and offers for cashew buyers across the borders

(E) Quality Standards: Providing quality kernels maintaining all the standards of FPO.

FINANCIAL PLAN

Land and Building

A plot of land of around 1200 sq.mtrs. with built-up area of 1000 sq.mtrs. will be sufficient. Main processing area would require around 55-60 sq.mtrs. whereas storage and packing rooms would occupy balance area. The total cost of building is estimated to be Rs. 2.25 lacs whereas that of land around Rs.75, 000/-.

Plant and Machinery

This is a seasonal business and the factory would work for about 200 days every year. Keeping in mind the availability of raw materials and market prospects, processing capacity of 50 tonnes per season is suggested. This would require following equipments:

ITEM Qty. Price(Rs)

Electricity-Operated Boiler

1 90,000

Tray-drier-24 Trays

1 60,000

Cutters 10 10,000

Weighing Scales 2 15,000

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Automatic Sealing Machines

2 10,000

Total 1,85,000

Miscellaneous Assets

Some other assets like furniture & fixtures, fruit crates, SS utensils, storage racks, working tables etc. shall be required for which a provision of Rs. 60,000/- is made.

Utilities

Total power requirement will be 20 HP whereas water required for washing of cashew fruits and sanitation and potable purposes will be 700-800 ltrs. per day. Per season cost at 100% utilisation is likely to be Rs. 60,000/-.

Raw and Packing Materials

The only raw material required will be cashew fruits. They are already being grown in companies Garden around 15 acres. Reportedly, around 10000 acres of private land is under cashew cultivation in East Singbhum district and the state government as well as NABARD are encouraging cashew plantation. Hence, obtaining around 50 tonnes of cashew fruits per season even at 100% capacity utilisation will not pose any problem. Packing materials like polythene bags and second-hand corrugated boxes shall be available locally.

MANPOWER REQUIREMENTS

Particulars Nos. Monthly Total

12

Salary(Rs) Monthly Salary(Rs)

Skilled Worker

2 2,250 4,500

Helpers 4 1,250 5,000

SalesMan 1 2,500 2,500

12,000

TENTATIVE IMPLEMENTATION SCHEDULE

Activity Period(in months)

Application and Sanction of loan

2

Site selection and Commencement of Civil work

1

Completion of civil work and placement of orders of machinery

4

Erection, installation and trial runs

1

DETAILS OF THE PROPOSED PROJECT

Land and Building

Particulars Area(sq.Mts) Cost(Rs.)

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Land 1200 75,000

Building 1000 2,25,000

Total 3,00,000

Plant and Machinery

As explained earlier, the total expenditure under this head is expected to be Rs. 1.85 lacs.

Miscellaneous Assets

A provision of Rs. 0.60 lac is enough as explained earlier.

Preliminary & Pre-operative Expenses

There will be many pre-production expenses like establishment, legal & administrative charges, travelling, interest during implementation, trial run expenses and so on. A provision of Rs. 50,000/- is made towards them

Working Capital Requirement

The plant is expected to operate at 60% in the first year for which following working funds will be needed:

Particulars Period Margin Total(Rs. In Lakhs)

Bank(Rs. In Lakhs)

Promoter

(Rs in Lakhs)

Stock of ½ 30% 0.45 0.32 0.13

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Raw Materials

Month

Stock of Finished Goods

½ Month

25% 0.55 0.42 0.13

Receivables

½ Month

25% 0.75 0.56 0.19

Working Expenses

1 Month

100% 0.20 -- 0.20

Total 1.95 1.30 0.65

Cost of the Project and Means of Financing

Cost of Project:

Item Amount( Rs in lakhs)

Building 3.00

Machinery 1.85

Miscellaneous Assets 0.60

P & P Expences 0.50

Contingencies @ 10% on Building and Machinery

0.50

Working Capital Margin 0.65

Total 7.10

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Means of Finance:

Promoter’s Contribution 2.00

Term Loan From Bank/FI 5.10

Total 7.10

Debt Equity Ratio 2.55:1

Promoter’s Contribution 28%

Financial assistance in the form of grant will be available from the Ministry of Food Processing Industries, Govt. of India, towards expenditure on technical civil works and plant and machinery for the project subjected to certain terms and conditions.

PROFITABILITY CALCULATIONS

Production Capacity and Build-up

As against the processing capacity of 50 tonnes, the actual utilisation in the first year will be 60% and second year onwards it will be 75%

Sales Revenue at 100%

Product Qty (Tons’) Selling Price Sales(Rs in Lakhs)

Processed Cashew

15 1,85,000 27.75

Cashew 25 5000 1.25

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shells

Total 29.00

Raw and Packing Materials Required at 100%

Product Qty(tons) Rate per Ton Value(Rs in lakhs)

Raw Cashew 50 35,000 17.50

Packing Material

-- -- 0.50

Total 18.00

Utilities

As spelt out earlier, per season expenses at 100% will be Rs.60, 000/-.

Interest

Interest on term loan of Rs. 5.10 lacs is computed @ 12% per annum assuming repayment in 4 years including a moratorium period of 1 year. Interest on working capital funds from bank is calculated @ 14%. per annum.

Depreciation

It is calculated on WDV basis @ 10% on building and 20% on machinery and other assets.

PROJECTED PROFITABILITY

(Rs. in lakhs)

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No.

Particulars 1st Year 2nd Year

A Installed Capacity ----- 50 Tons --- --50Tons-

Capacity Utilisation 60% 75%

Sales Realisation 17.40 21.75

B Cost of Production

Raw Materials 10.80 13.50

Utilities 0.36 0.45

Salaries 0.96 1.10

Stores & Spares 0.24 0.36

Repairs & Maintenance

0.42 0.54

Selling Expenses 0.72 0.96

Administrative Expenses

0.36 0.48

Total(Rs im Lakhs) 13.86 17.39

C Profit before Interest & Depreciation

3.54 4.36

Interest on Term Loan 0.55 0.37

Interest on Working Capital

0.18 0.23

Depreciation 0.73 0.60

Net Profit 2.08 3.16

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Income-tax @ 20% 0.41 0.62

Profit after Tax 1.67 2.54

Cash Accruals 2.40 3.14

Term Loan Repayment -- 1.55

BREAK-EVEN ANALYSIS (Rs in Lakhs)

No Particulars Amount

[A] Sales 17.40

[B] Variable Costs

Raw and Packing Materials

10.80

Utilities (60%) 0.22

Salaries (65%) 0.64

Stores & Spares 0.24

Selling Expenses (70%)

0.50

Admen Expenses (50%)

0.18

Interest on WC 0.18 12.76

[C] Contribution [A] - [B]

4.64

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[D]

Fixed Cost 2.56

[E] Break-Even Point [D]÷[C]

55%

(A) LEVERAGES

Financial Leverage

= EBIT/EBT

= 2.81 ÷ 2.08

= 1.35

Operating Leverage

= Contribution/EBT

= 4.64 ÷ 2.08

= 2.23

Degree of Total Leverage

= FL/OL

= 1.35 ÷ 2.23

= 0.61

(B)Debt Service Coverage Ratio (DSCR)

Particulars 1stYr 2ndYr 3rdYr 4th Yr

Cash Accruals

2.40 3.14 2.82 2.48

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Interest on TL

0.55 0.37 0.18 0.07

Total [A] 2.95 3.51 3.00 2.55

Interest on TL

0.55 0.37 0.18 0.07

Repayment of TL

-- 1.55 1.55 1.50

Total [B] 0.55 1.92 1.73 1.57

DSCR [A]÷ [B]

5.36 1.83 1.73 1.62

Average DSCR ---------------------- 2.64 ---------------------

(C)Internal rate of return(IRR)

Cost of the project is Rs. 7.10 lacs.

(Rs. in lacs)

Year Cash

Accruals

16% 18% 20% 24% 28% 32%

1 2.40 2.07 2.03 2.00 1.93

1.87

1.82

2 3.14 2.33 2.25 2.18 2.04 1.92

1.80

3 2.82 1.81 1.72 1.63 1.48 1.35 1.23

4 2.48 1.37 1.28 1.20 1.05 0.93 0.82

5 2.05 0.98 0.90 0.82 0.70 0.60 0.51

12.89 8.56 8.18 7.83 7.20 6.67 6.18

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The IRR is around 24%.

FEASIBILITY ANALYSIS

By feasibility analysis we mean appraising the project. Project appraisal is critical as it calls for a multi dimensional analysis of the project.

In our case the feasibility pertains to commercial feasibility, financial feasibility and social cost benefit feasibility.

COMMERCIAL FEASIBILITY

The survivability, sustainability and profitability of any venture depend on its commercial success. The various parameters that commercial feasibility are:

A) Demand of the product: Cashews are high value dry fruits with retail price ranging from Rs. 200/- to Rs. 325/- per kg. Their shelf-life is 4 to 6 months if processed properly or else they develop fungus or taste bitter. They are used in many sweet preparations, certain farsan items, dessert preparations and ice-creams. They are also used as table enriches in some exclusive restaurants and star hotels. Due to their high price, their regular domestic use is limited to few elite families. Our aim would be to provide cashew at less rate then other south Indian competitors.

B) Supply: The Cashew production also depends upon the agronomic conditions it may affects the availability of raw cashew and hence can affect the market price and demand.

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C) Competitive Edge: There are very few local competitors to face in the eastern region. So the company can get good exposure over the eastern zone market.

FINANCIAL FEASIBILITY

Financial assistance in the form of grant will be available from the Ministry of Food Processing Industries, Govt. of India, towards expenditure on technical civil works and plant and machinery. The company is liable for the repayment of loan in 4 years including moratorium period of 1yr.

SOCIAL COST BENEFIT ANALYSIS Social responsibility today is an inevitable parameter that governs any business parlance. Any industry whether big or small, of whatever scale it may be, owes to the society. Johar Cashews will bring new job opportunities for rural peoples & farmers, although at a very-very small scale. It will also help in streamlining supply chain and cashew enterprise development in that region thus also beneficial for the environment.

Market Survey

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Consumer Analysis through Questionnaire Method –

1) .Do You eat cashews daily?

a) Yes

b) No

Total=100

Option (a)=

30%

Option (b)=

70%

Tnterpretation: Cashew being costly middle class people don’t consume it daily.

2. Do you prefer to buy cashew from retail outlet or grossary shop?

a) Retail outlet

b) Grossary shop

Total=100

Option (a)=48%

Option (b)=52%

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Interpretation: Cashew market is more strong in local shops than in retail outlets

3. Do you prefer to buy packet cashew or loose ones?

a) Packet

b) Loose

Total=100

Option (a)=40%

Option (b)=60%

4.What are the main difficulties you face while purchasing cashews?

a) Priceb) Non-availabilityc) Quality

total=100

option option option

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a b c

69% 9% 47%

Interpretation: People are more price conscious in case of cashew then quality.

5. Do you go on brands while purchasing cashews?

a) No

b) Yes

Total=100

Option (a)=70%

Option (b)=30%

Interpretation: People only prefer cashews which they get in good condition while purchasing.

6. Are you well aware of quality grades of cashew?

a) Yes

b) No

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Total=100

Option (a)=20%

Option (b)=80%

Interpretation: people usually identify cashews by their size but are aware of its quality types.

7. What type of cashews you prefer to eat?

a) Table Cashew

b) Roasted salted cashew

Total=100

Option (a)=70%

Option (b)=30%

Interpretation: Table cashews are still very popular.

8. Do you no any brands of cashew? If write their names…

Vital cashews, Najeem Cashews, Ajanta cashews

Interpretation: Thes are south Indian biggies already have made their name in cashew market

INFERENCE

Customers are more price conscious .

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Customers are not aware of cashew grades but they go on the size of nuts if they have to choose quality.

Cashew buyers are more in domestic local markets then retail outlets.

LIMITATIONS

Both national and international prices for cashew nuts depict a wide range of variability.

The pricing of raw nuts also hinge on the trade-off between exporting or processing the nuts locally.

quality control for kernels has not yet been well coordinated

and neither are there stringent requirements for packaging

finished products except when one sells in local

supermarkets or overseas markets.

FUTURE PLANS

Open new processing units in Chaibasa,

Dhalmungarh, Ghatshila.

Diversification of cashew products into CNSL

(cashew nut shell liquid), Cashew feni & roasted

salted cashews.

Purchase and takeover cashew gardens to full fill

the raw material requirement of the company.

Increase the scale of operations and hire new

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people.

BIBLIOGRAPHY

1. Desai, Vasant (2002), “Dynamics of Entrepreneurial Development and management” (4th edition) ,Mumbai- Himalaya Publishing House.

2.www.google.com

3.www.cashewindia.com

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Questionaire

1. Do You eat cashews daily?

c) Yes

d) No

2. Do you prefer to buy cashew from retail outlet or grossary shop?

a) Retail outlet

b) Grossary shop

3. Do you prefer to buy packet cashew or loose ones?

a) Packet

b) Loose

4.What are the main difficulties you face while purchasing cashews?

a) Price

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b) Non-availabilityc) Quality

5. Do you go on brands while purchasing cashews?

a) No

b) Yes

6. Are you well aware of quality grades of cashew?

a) Yes

b) No

7. What type of cashews you prefer to eat?

a) Table Cashew

b) Roasted salted cashew

8. Do you no any brands of cashew? If write their names…

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