Prakriti Colors

8/3/2019 Prakriti Colors

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Prakriti Colors

-Group 4Aditi Jaisinghani

Madhura Bakre

Mayank Gupta

Mohd. Shoeb AbbasNitika Gupta

Pranay Dangi

Soumit Kundu

Sumit Jain


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Introduction

We propose to set up a company engaged in production and supplyof Natural Food Colors.

Management Vision:To provide high quality natural food colors tothe consumers through constant marketing efforts, end to end

servicing and efforts to improve efficiencies of the production and

resources We plan to set up a unit in Chinchwad MIDC

A brief on management 3 directors

Name of thedirectors

Mr. Sunil Joshi Mrs. AmritaJoshi

Mr. DarshanParekh

Qualification Msc chemistry Bcom- accountancy IT engineer

Experience 10 years experience of

working in food colors

manufacturing unit

- 15 years experience of

working in

multinational company.

Shareholding in the

company 40% 20% 40%


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The Hierarchy

3 DIRECTORS

FINANCIAL

MANAGER

1

ACCOUNTANT

2

ADMINISTRATIONSTAFF

PRODUCTION

MANAGER

2 PRODUCTIONENGINEERS

2 CHEMICALENGINEERS

3 CHEMISTS

16 LABOURERS

SALES

MANAGER

4

MARKETINGOFFICERS

8

BACK OFFICE STAFF


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Plant layout and details


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Details of machineryProjected Cost of Plant and Machinery

Particulars Quantity INR in Lakhs Total Cost

Shredding Machine 1 25.4 25.4

Pulping Machine 2 14.9 29.8

Spray Dryer 2 31.7 63.4

Sieving Machine 1 15.8 15.8

Blending Machine 1 19.0 19.0

Glass line Reactors 4 14.9 59.5

Chilled water plant 1 23.5 23.5

Stainless steel reaction vessels 1 16.1 16.1

Filters 1 15.4 15.4

De-mineralised water plant 1 19.2 19.2

DG set for Stand by power 1 27.8 27.8

Total Cost 223.8 315.0


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Why Natural food colors?

Our product is a part of food processing industry which has doneexceedingly well in the recent times. It is growing at a rate of 10% p.a.

The natural food colors industry is growing at a rate of 15-20% perannum.

The reason why the natural food colors industry is growing at a faster

pace than the food processing industry is because more and morecompanies are shifting from the synthetic food colors to natural foodcolors.

2005

20100%

10%

20%

30%

40%

bakeryproducts ready meals snacks and

soft drinksothers

dairy

16%

6.50%

28.30%

36.90%

8.70%

17.10%

7.70%

29.60%38.10%

11.10%

Switch to natural food ingredients

2005

2010


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Use of natural food colors

Beetroot: The color of beetroot is water soluble and has limited stability when exposed

to light, heat and oxygen. It is particularly suited to frozen, dried and short shelf-life

products, such as ice creams and yoghurt. Red color may also be used in lipsticks,

textile clothes etc.

Turmeric: Turmeric is a well known spice, used widely in cookery. Its pigment,

curcumin, is oil soluble and tends to fade in light, but has good heat stability. It gives a

lemon yellow shade in food systems. Its applications include pickles, soups and

confectionery. It is also used in hatchery and pharmaceuticals.

Marigold: Marigold is a commonly available flower. Its pigment has got a good stability

and gives a dark yellow color. Commonly used in confectionery, bakery products, baby

products etc

Spinach: It is a green, oil soluble color. Its pigment, chlorophyllins are water soluble

and relatively stable when exposed to heat and light. Uses include sugar confectionery


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Economic conditions of theindustry The food processing industry is employment intensive and creates 1.8 jobs

directly and 6.4 jobs indirectly across the supply chain for every Rs. 1 million

invested. The growth is also inevitable with rising incomes, favorable

demographic transition and changing consumption patterns.

At the same time there are also a few constraints in the food processing sector

due a key issue like affordability- because of cost and quality of farm produce,

infrastructure, credit, processing, packaging and fragmented supply chain

In order to overcome these constraints and explore the above opportunities the

government has initiated several steps such as:

-No industrial license required for the food processing except alcoholic beveragesand items reserved for SSI

-Custom duty reduced from 7.5% to 5% on food processing machinery

-Application of Hazard Analysis and Critical Control Points (HACCP) at various

stages


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Application of Porters 5 forces model

Industrycompetitor

s

Potentialentrants

Buyers

Substitutes

Suppliers

Bargainingpower of the

buyers

Threat of

substitutes-

synthetic

food colors

Threat ofnew

entrants

Bargaining

power of the

suppliers


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Process-High Pressure- Supercritical/ Sub criticalExtraction:

Washing ofvegetables/flowers

Shredding

Pulping

Spray Drying

Sieving

Blending

Sieving

Extracted color

Packaging


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Demand and supply


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FINANCIALS

Proposed Cost of ProjectParticulars INR in Lakhs

Building 240

Plant and Machinery 315

Miscellaneous Expenditure 35

Preliminary & Pre-operative Expenditure 80

Provision for contingencies 70

Fixed Assets 740

Working capital 60

Estimated Block Capital Cost of Project 800

Means of Finance

Total Debt 500

Promoters contribution 300

Total Means of Finance 800


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CAPITAL STRUCTURE

The D/E ratio comes out to be 1.67:1. This is above thebenchmark level of 1.33.

All the expenses after the operation of the project has startedwill be funded by the cash flows generated by the project, asthe projected cash flows from the project are very high and

project will generate profit from first year onwards.

FROM AMOUNT (Rs. In

lakhs)

Debt 500

Equity 300

Total 800


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COST OF CAPITAL

Cost of Debt: 13.75% (Base Rate + Spread)

Cost of Equity: 15.00% (Food Color Industry

Average)

WACC = 13.75%*0.625 + 15%*0.375 =

14.29%


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Year 2012-13 2013-14

2014-

15 2015-16

2016-

17

Breakeven 0.32 0.31 0.29 0.26 0.22

Average Breakeven point=28%

Since we are growing at 7%, 9%, 11% and 13 % as we have assumed our firms

growth rate, our demand is increasing thus our sales. This employ that in the

first year we are achieving break even at 32%, as sales grow our breakeven point

is going down and our average breakeven point is at 28% and we achieve this

after second year of operations.

BREAKEVEN POINT


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IRR,NPV

The IRR of our company is 32 %.

The Cost of Capital of our company is14.29%. This implies that IRR is much

greater than the Cost of Capital whichmeans that the project is highlyprofitable.

The NPV of our company is 642.05lakhs for the next 8 years which a bigpositive value.


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Profit margin in each color

Srno. Color name

RMcost(per kg)

manufacturingcost

Selling, Distribution,

Admin &Other Expenses

margin(15%)

1

MARIGOLD

EXTRACT 342 243 180 135

2

BEET ROOT

EXTRACT 228 162 120 90

3

SPINACH

EXTRACT 152 108 80 60

4

TURMERIC

COLOR LIQUID 304 216 160 120

TOTAL (monthly) 1026 729 540 405

YEARLY

selling

cost (per

kg)

total

production(kg) rm + m c Admin total sales

Yearly

Sales profits

Yearly

profit

900 5400 3159000

97200

0 4860000 58320000 729000 8748000

600 3600 1404000

43200

0 2160000 25920000 324000 3888000

400 1800 468000

14400

0 720000 8640000 108000 1296000

800 7200 3744000

115200

0 5760000 69120000 864000 1036800027000 202500


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PROFIT LOSS statement

Years 2012-13 2013-14 2014-15 2015-16 2016-17

INCOMESales 1620.00 1733.40 1889.41 2097.24 2369.88

Other Income

Increase /(Decrease) in Stock

TOTAL A 1620.00 1733.40 1889.41 2097.24 2369.88

EXPENDITURE

Manufacturing and Operating Expenses 1053.00 1126.71 1228.11 1363.21 1540.42

adminitrativeexpenses & Selling and Distribution

Expenses 324.00 346.68 377.88 419.45 473.98

TOTAL B 1377.00 1473.39 1606.00 1782.65 2014.40

PROFIT BEFORE DEPRECIATION (A - B) 243.00 260.01 283.41 314.59 355.48

Depreciation 59.20 59.20 59.20 59.20 59.20

amortisation 8.00 8.00 8.00 8.00 8.00

PROFIT BEFORE INTEREST AND TAXATION 175.80 192.81 216.21 247.39 288.28

Interest 67.00 64.00 59.00 55.00 49.00

PBT 108.80 128.81 157.21 192.39 239.28

Taxation 32.70 38.70 47.22 57.78 71.84

PAT 76.10 90.11 109.99 134.61 167.44

PROFIT LOSS STATEMENT


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Coverage Ratios


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DSCR

The minimum DSCR for the project is 1.31 which is in the firstyear and the average DSCR is 1.60. This DSCR means thaton an average, the project will generate 60% more revenuethan required to cover its debt payments which is above thebenchmark level of 1.50.

AVERAGE DSCR-1.59970476

Years 2012-13 2013-14 2014-15 2015-16 2016-17

D S C R 1.318177653 1.415530934 1.55899664 1.747705643 2.01063309


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Years 2012-13 2013-14 2014-15 2015-16 2016-17 2017-2018 2018-2019

LLCR

-1.01 -0.71 -0.38 0.03 0.55 1.30 2.66

This table indicates that after a few years the company will have

sufficient money available for debt repayment to pay their

balance senior debt.

LLCR


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Years 2012-13 2013-14 2014-15 2015-16 2016-17 2017-2018 2018-2019

ICR3 4 4 6 8 10 14

This table implies that we have a very high interest coverage

ratio right from the beginning. This also implies that there is a

high probability that we will not be unable to pay.

ICR

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