Project Feasibility Report on Johar CashewsSubmitted 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 2 CONTENTS PAGE NO. EXECUTIVE SUMMARY COMPANY DETAILS MARKETING PLAN FINANCIAL PLAN FEASIBILITY ANALYSIS MARKET SURVEY ANALYSIS INFERENCE LIMITATIONS FUTURE PLANS BIBLIOGRAPHY QUESTIONNAIRE 4 10 11 12 25 26 30 30 31 32 33 3 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. Cashews are world famous 4 . 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.Chaibasa. East Singhbhoom .Ghatshila.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. B)Products:We source our cashew from the company owned gardens of Palasboni and Dubrajpur and the rest are imported from Dhalmungarh.Jharkhand .Executive Summary A)ProfileJohar Cashews will be opened in Bahragora. per W-180 pound White wholes-210:jumbo cashews with a count of 200-210 no. We produce 13 grades of cashew which are:- White wholes-180: giant cashews with a count of 170-180 no. per pound Scorched white : slightly dark yellowish colour SW Scorched and Shriveled wholes SSW 5 . per pound White wholes-320: common premium cashew with a count W-320 310-320 no.for their large size and sweet taste. per W-210 pound White wholes-240: larger than ordinary size and tastier too W-240 with a count 220-240 no. confectionaries BB 6 .Jumbo halves: splits of cashew which are very large in size JH Jumbo Butts : Large butts of cashew JB Halves of cashew which are as tasty as the whole ones Splits One fourth piece of cashew K Large white pieces of cashew used for garnishing purpose LWP Small white Pieces SWP Baby Bits used in ice creams . New Zealand and the Middle East countries belong to the long list of India's cashew importers. Singapore. Hong Kong.6 lakh ton). Nigeria (1.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. Today.78 lakh) and Tanzania (1. Netherlands. with over 20 percent of global consumption share. Canada. India is the largest producer and exporter of cashew kernels in the world. Australia. India is the second largest producer of raw cashew in the world. Cashew kernels are a high value luxury commodity with sales growing steadily at an annual rate of seven percent.86 lakh). 900 crores equivalent of foreign exchange. Germany.37 lakh ton followed by India (4. Nearly 50 per cent of the world export of cashew kernels is from here. Indian cashew's good quality. Brazil (1. Vietnam tops global production with 6. the United Kingdom. 7 . taste and appearance are factors that differentiate it from the rest of the world.200 tons (68 percent of processed kernels) to over 60 countries. India exports 106.23 lakh). United States. Japan. generating Rs. with every expectation that the market will remain strong. India is the third largest consumer in the world next to the US and EU. • Opportunities 8 . getting foreign customers would be difficult. • Domestic Markets in Jharkhand. • No local competitor. which would increase our delivery charges. • Weakness • All ready existing big south Indian cashew units e. Orissa. • Competitive Price. West Bengal are easily accessible. Orders may come from very faraway places. • Initially. Clearance from CEPC (Cashew Export Promotion Council) has already opened market for foreign buyers. Bihar. Najeem Cashew industries. Saima agro industries.g Vittal Cashew Industries.D) SWOT Analysis: Strength • There are Very few Processing units in Eastern India. • The Cashew production also depends upon the weather conditions adverse weather condition may affects the availability of raw cashew. other competitors might also do the same. • The foreign market is already dominated South Indian Biggies so it will be difficult to make own place. 9 . • The Eastern domestic market Can be easily captured as The other biggies have priced cashew at high rate. Threats • Seeing our reduced rates. other players might also join this business. • Since cashew is a costly dry fruit it is difficult to attract mid pocket buyers.• The Domestic Market as well as the International Market is big. • The Cashew Board of India and Cashew Export Promotion Council of India Extends it full support small processing units of cashew for its growth. • Lured by the profitability. 0993266780 Email:joharcashew@yahoo. Key responsibilities: providing the raw cashews from his gardens Mr. Sona Ram Murmu:-legal owner of cashew gardens in Palasboni and Dubrajpur also he is the key promoter of the company.Johar Cashews Sole Head Key responsibilities: Coordinating with the workers. Amit Murmu:. Bahragora High School Road Bahragora-832101 Contact No: 09006282900. Finding new opportunities for cashew business. Arranging other suppliers for raw cashews.com Partners: Mr.Company Details Name: Johar Cashews Address: Plot no-24/2. Arranging retail buyers and foreign buyers. 10 . (B) Attractive packaging: Vacuumed sealed packs with attractive packets or boxes. 11 . 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. (C) Targeting domestic local market customers: In the local shops and grossary people also seek quality cashews for consumption. Several marketing techniques will be utilized and incorporated by the firm. (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.MARKETING PLAN The main aim of the company would be to target the retail buyers(outlets) as well the domestic and International Market .pet jars attract buyers. 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. with built-up area of 1000 sq. The total cost of building is estimated to be Rs. Keeping in mind the availability of raw materials and market prospects. Plant and Machinery This is a seasonal business and the factory would work for about 200 days every year. 2.FINANCIAL PLAN Land and Building A plot of land of around 1200 sq. 1 1 Price(Rs) 90.000 60. will be sufficient.mtrs. This would require following equipments: ITEM ElectricityOperated Boiler Tray-drier-24 Trays Cutters Weighing Scales Automatic Sealing 10 2 2 10.000 .000 15.mtrs.000 12 Qty. Main processing area would require around 55-60 sq.mtrs. processing capacity of 50 tonnes per season is suggested. 000/-.000 10.25 lacs whereas that of land around Rs.75. whereas storage and packing rooms would occupy balance area. 60. MANPOWER REQUIREMENTS 13 . 60. Raw and Packing Materials The only raw material required will be cashew fruits. Reportedly. obtaining around 50 tonnes of cashew fruits per season even at 100% capacity utilisation will not pose any problem. Per season cost at 100% utilisation is likely to be Rs. SS utensils.000/. fruit crates.85. Packing materials like polythene bags and second-hand corrugated boxes shall be available locally. storage racks. They are already being grown in companies Garden around 15 acres. working tables etc. shall be required for which a provision of Rs. 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. 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.000 Miscellaneous Assets Some other assets like furniture & fixtures. Hence.is made.000/-. per day.Machines Total 1. 000 TENTATIVE IMPLEMENTATION SCHEDULE Activity Application and Sanction of loan Site selection and Commencement of Civil work Completion of civil work and placement of orders of machinery Erection. 2 4 1 Monthly Salary(Rs) 2.250 2.250 1. installation and trial runs 1 4 1 Period(in months) 2 DETAILS OF THE PROPOSED PROJECT Land and Building 14 .Particulars Skilled Worker Helpers SalesMan Nos.500 Total Monthly Salary(Rs) 4.500 12.000 2.500 5. interest during implementation. 0.000 2. 50.85 lacs.Mts) 1200 1000 Total Cost(Rs. Miscellaneous Assets A provision of Rs.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 Bank(Rs. In Lakhs) In Lakhs) (Rs in 15 .Particulars Land Building Area(sq.00. 1. trial run expenses and so on.25. Promoter .) 75. legal & administrative charges. the total expenditure under this head is expected to be Rs. A provision of Rs.60 lac is enough as explained earlier.000/. Preliminary & Pre-operative Expenses There will be many pre-production expenses like establishment. travelling.000 3.000 Plant and Machinery As explained earlier. 50 0.50 16 .20 -0.30 0.32 0.45 0.Lakhs) Stock of Raw Materials Stock of Finished Goods Receivable s Working Expenses ½ Month 1 Month Total 1.00 1.60 0.13 ½ Month 30% 0.20 25% 0.55 0.13 Cost of the Project and Means of Financing Cost of Project: Item Building Machinery Miscellaneous Assets P & P Expences Contingencies @ 10% on Building and Machinery Amount( Rs in lakhs) 3.56 0.65 100% 0.95 1.85 0.75 0.19 ½ Month 25% 0.42 0. 00 5.65 7. 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 17 .10 2.Working Capital Margin Total 0.55:1 28% Financial assistance in the form of grant will be available from the Ministry of Food Processing Industries.10 Means of Finance: Promoter’s Contribution Term Loan From Bank/FI Total Debt Equity Ratio Promoter’s Contribution 2.10 7. of India. Govt. 000/-.75 Raw and Packing Materials Required at 100% Product Raw Cashew Packing Material Total Utilities As spelt out earlier.00 .60. the actual utilisation in the first year will be 60% and second year onwards it will be 75% Sales Revenue at 100% Product Processed Cashew Cashew shells 25 5000 Total 1.00 Qty (Tons’) 15 Selling Price 1.000 -- Value(Rs in lakhs) 17.50 0.25 29.000 Sales(Rs in Lakhs) 27. 18 Qty(tons) 50 -- Rate per Ton 35.85.As against the processing capacity of 50 tonnes. per season expenses at 100% will be Rs.50 18. 36 0.45 1.40 2nd Year --50Tons75% 21.24 0. PROJECTED PROFITABILITY (Rs.42 0. 5.50 Tons --60% 17.80 0.36 0.50 0. Interest on working capital funds from bank is calculated @ 14%.72 13.96 0.10 0. per annum. A Installed Capacity Capacity Utilisation Sales Realisation B Cost of Production Raw Materials Utilities Salaries Stores & Spares Repairs & Maintenance Selling Expenses 10.96 19 1st Year ----.75 . in lakhs) No Particulars .Interest Interest on term loan of Rs.54 0.10 lacs is computed @ 12% per annum assuming repayment in 4 years including a moratorium period of 1 year. Depreciation It is calculated on WDV basis @ 10% on building and 20% on machinery and other assets. 16 0.54 3.62 2.39 4.60 3.36 13.18 0.14 1.54 0.23 0.08 0.55 BREAK-EVEN ANALYSIS (Rs in Lakhs) No [A ] [B] Variable Costs 20 Particulars Sales Amount 17.73 2.67 2.41 1.Administrative Expenses Total(Rs im Lakhs) C Profit before Interest & Depreciation Interest on Term Loan Interest on Working Capital Depreciation Net Profit Income-tax @ 20% Profit after Tax Cash Accruals Term Loan Repayment 0.86 3.37 0.40 .48 17.55 0.40 -- 0.36 0. Raw and Packing Materials Utilities (60%) Salaries (65%) Stores & Spares Selling Expenses (70%) Admen Expenses (50%) Interest on WC [C] Contribution [A] [B] [D] Fixed Cost [E] Break-Even Point [D]÷[C] 10.76 4.81 ÷ 2.22 0.18 12.64 0.56 55% (A) LEVERAGES Financial Leverage = EBIT/EBT = 2.50 0.24 0.08 = 1.18 0.35 21 .80 0.64 2. 64 ÷ 2.73 4th Yr 2.36 2ndYr 3.82 0.18 1.35 ÷ 2.00 0.51 0.37 1.37 3.07 1.07 2.Operating Leverage = Contribution/EBT = 4.92 1.23 Degree of Total Leverage = FL/OL = 1.55 1.55 0.73 1.55 1.61 (B)Debt Service Coverage Ratio (DSCR) Particulars Cash Accruals Interest on TL Total [A] Interest on TL Repayment of TL Total [B] DSCR [A]÷ [B] 22 1stYr 2.50 1.55 2.23 = 0.48 0.83 3rdYr 2.08 = 2.95 0.57 1.14 0.55 5.55 -0.62 .18 3.40 0. 20 1. financial feasibility and social cost benefit feasibility.89 2.10 lacs.70 7.63 1.56 2.28 0.67 1.18 16% 18% 20% 24% 28% 32% (Rs.07 2. in lacs) The IRR is around 24%.81 1.14 2.35 0.23 0.48 1.93 2.64 --------------------- (C)Internal rate of return(IRR) Cost of the project is Rs. 7.03 2.05 12. FEASIBILITY ANALYSIS By feasibility analysis we mean appraising the project.72 1.87 1.82 1.20 0.51 6.93 0.48 2. Project appraisal is critical as it calls for a multi dimensional analysis of the project. 23 .25 1.82 2.2.98 8.82 0.18 2.80 1.18 1.33 1.92 1.37 0. Year Cash Accruals 1 2 3 4 5 2.Average DSCR ---------------------.83 1.05 0.40 3. In our case the feasibility pertains to commercial feasibility.60 6.00 2.04 1.90 8.82 7. towards expenditure on technical civil works and plant and machinery. They are used in many sweet preparations. Their shelf-life is 4 to 6 months if processed properly or else they develop fungus or taste bitter. of India. The various parameters that commercial feasibility are: A)Demand of the product: Cashews are high value dry fruits with retail price ranging from Rs. FINANCIAL FEASIBILITY Financial assistance in the form of grant will be available from the Ministry of Food Processing Industries. The company is liable for the repayment of loan in 4 years including moratorium period of 1yr. Govt.to Rs. 24 . 200/. They are also used as table enriches in some exclusive restaurants and star hotels. their regular domestic use is limited to few elite families. 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. dessert preparations and ice-creams. Our aim would be to provide cashew at less rate then other south Indian competitors.per kg. So the company can get good exposure over the eastern zone market. 325/. Due to their high price. sustainability and profitability of any venture depend on its commercial success. C) Competitive Edge: There are very few local competitors to face in the eastern region. certain farsan items.COMMERCIAL FEASIBILITY The survivability. Market Survey Consumer Analysis through Questionnaire Method – 1) . of whatever scale it may be. It will also help in streamlining supply chain and cashew enterprise development in that region thus also beneficial for the environment. owes to the society.SOCIAL COST BENEFIT ANALYSIS Social responsibility today is an inevitable parameter that governs any business parlance. although at a very-very small scale. Any industry whether big or small. Johar Cashews will bring new job opportunities for rural peoples & farmers.Do You eat cashews daily? a) Yes b) No Total=100 25 . 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% 52 51 50 49 48 47 46 R eta il outlet Gros s a rys hop Ca s hew Interpretation: Cashew market is more strong in local shops than in retail outlets 26 . 2.Option (a)= 30% Option (b)= 70% yes N o Tnterpretation: Cashew being costly middle class people don’t consume it daily. What are the main difficulties you face while purchasing cashews? a) b) c) Price Non-availability Quality total=100 option a 69% option b 9% option c 47% 27 .3. Do you prefer to buy packet cashew or loose ones? a) Packet b) Loose Total=100 Option (a)=40% Option (b)=60% 60 50 40 30 20 10 0 Pa ck et Loos e Ca s hew 4. Do you go on brands while purchasing cashews? a) No b) Yes Total=100 Option (a)=70% Option (b)=30% 70 60 50 40 30 20 10 0 No Yes Purcha s e on bra nd Interpretation: People only prefer cashews which they get in good condition while purchasing.Interpretation: People are more price conscious in case of cashew then quality. 6. 5. Are you well aware of quality grades of cashew? a) Yes b) No Total=100 Option (a)=20% Option (b)=80% 28 . 80% 70% 60% 50% 40% 30% 20% 10% 0% Yes N o Awa re ofqua lity Interpretation: people usually identify cashews by their size but are aware of its quality types. Najeem Cashews. 7. Ajanta cashews Interpretation: Thes are south Indian biggies already have made their name in cashew market INFERENCE • Customers are more price conscious . Do you no any brands of cashew? If write their names… Vital cashews. 29 . 8. 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. FUTURE PLANS • Open new processing units in Chaibasa. Cashew feni & roasted salted cashews. • Cashew buyers are more in domestic local markets then retail outlets. Ghatshila.• Customers are not aware of cashew grades but they go on the size of nuts if they have to choose quality. • Purchase and takeover cashew gardens to full fill the raw material requirement of the company. • Diversification of cashew products into CNSL (cashew nut shell liquid). 30 . • The pricing of raw nuts also hinge on the tradeoff between exporting or processing the nuts locally. LIMITATIONS • Both national and international prices for cashew nuts depict a wide range of variability. Dhalmungarh. • quality control for kernels has not yet been wellcoordinated and neither are there stringent requirements for packaging finished products except when one sells inlocal supermarkets or overseas markets. com 31 . 2. Desai. Vasant (2002).google. BIBLIOGRAPHY 1.MumbaiHimalaya Publishing House.• Increase the scale of operations and hire new people. www. “Dynamics of Entrepreneurial Development and management” (4th edition) . cashewindia.com Questionaire 1.3. Do You eat cashews daily? c) Yes d) No 2. www. Do you prefer to buy cashew from retail outlet or grossary shop? a) Retail outlet 32 . What type of cashews you prefer to eat? a) Table Cashew b) Roasted salted cashew 8.What are the main difficulties you face while purchasing cashews? a) Price b) Non-availability c) Quality 5. Do you go on brands while purchasing cashews? a) No b) Yes 6. Do you no any brands of cashew? If write their names… ------------------------------------------------------------------------------------------------------------------- 33 .b) Grossary shop 3. Do you prefer to buy packet cashew or loose ones? a) Packet b) Loose 4. Are you well aware of quality grades of cashew? a) Yes b) No 7. 34 .