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

1

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

2

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%

3

4

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"

6

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.

7

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

8

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.

9

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.

10

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

13

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.

14

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:

15

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

16

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.

17

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

19

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.

20

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.

21

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

22

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.

23

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.

24

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

26

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

31