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

2
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

3
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
4
for their large size and sweet taste. We produce 13 grades
of cashew which are:-

White wholes-180: giant cashews

with a count of 170-180 no. per
pound
W-180

White wholes-210:jumbo cashews

with a count of 200-210 no. per

W-210 pound

White wholes-240: larger than

ordinary size and tastier too
with a count 220-240 no. per
W-240
pound

White wholes-320: common

premium cashew with a count
310-320 no. per pound
W-320

Scorched white : slightly dark

yellowish colour

SW

Scorched and Shriveled wholes

SSW

5
 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

Large white pieces of cashew

used for garnishing purpose

LWP

Small white Pieces

SWP

Baby Bits used in ice

creams , confectionaries

BB

6
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 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.

7
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.

• 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

8
• 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.
• 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.

9
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:

 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.

10
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.

(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.

11
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- 1 90,000
Operated Boiler

Tray-drier-24 1 60,000
Trays

Cutters 10 10,000

Weighing Scales 2 15,000

Automatic Sealing 2 10,000

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Machines

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
13
Particulars Nos. Monthly Total Monthly
Salary(Rs) Salary(Rs)

Skilled 2 2,250 4,500

Worker

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 2

loan

Site selection and 1

Commencement of Civil work

Completion of civil work and 4

placement of orders of
machinery

Erection, installation and 1

trial runs

DETAILS OF THE PROPOSED PROJECT

Land and Building

14
Particulars Area(sq.Mts) Cost(Rs.)

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 Bank(Rs. Promoter

. In In
(Rs in
Lakhs) Lakhs)

15
 Lakhs)

Stock of ½ 30% 0.45 0.32 0.13

Raw Month
Materials

Stock of ½ 25% 0.55 0.42 0.13

Finished Month
Goods

Receivable ½ 25% 0.75 0.56 0.19

s Month

Working 1 100% 0.20 -- 0.20

Expenses Month

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 0.50

Building and Machinery

16
Working Capital Margin 0.65

Total 7.10

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

17
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 15 1,85,000 27.75

Cashew

Cashew shells 25 5000 1.25

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 -- -- 0.50
Material

Total 18.00

Utilities

As spelt out earlier, per season expenses at 100% will be

Rs.60, 000/-.

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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)

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

19
 Administrative 0.36 0.48
Expenses

Total(Rs im Lakhs) 13.86 17.39

C Profit before Interest 3.54 4.36

& Depreciation

Interest on Term Loan 0.55 0.37

Interest on Working 0.18 0.23

Capital

Depreciation 0.73 0.60

Net Profit 2.08 3.16

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

20
 Raw and Packing 10.80
Materials

Utilities (60%) 0.22

Salaries (65%) 0.64

Stores & Spares 0.24

Selling Expenses 0.50

(70%)

Admen Expenses 0.18

(50%)

Interest on WC 0.18 12.76

[C] Contribution [A] - 4.64

[B]

[D] Fixed Cost 2.56

[E] Break-Even Point 55%

[D]÷[C]

(A) LEVERAGES

Financial Leverage

= EBIT/EBT

= 2.81 ÷ 2.08

= 1.35

21
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

Interest on 0.55 0.37 0.18 0.07

TL

Total [A] 2.95 3.51 3.00 2.55

Interest on 0.55 0.37 0.18 0.07

TL

Repayment of -- 1.55 1.55 1.50

TL

Total [B] 0.55 1.92 1.73 1.57

DSCR [A]÷ 5.36 1.83 1.73 1.62

[B]

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

(C)Internal rate of return(IRR)

Cost of the project is Rs. 7.10 (Rs. in lacs)

lacs.

Year Cash 16% 18% 20% 24% 28% 32%

Accruals

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

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.

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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.
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.

24
 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

Consumer Analysis through Questionnaire Method –

1) .Do You eat cashews daily?

a) Yes

b) No

Total=100

25
 Option (a)= Option (b)=

30% 70%

yes
No

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%

52
51
50
49
Cashew
48
47
46
Retail outlet Grossaryshop

Interpretation: Cashew market is more strong in local

shops than in retail outlets

26
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
Cashew
20
10
0
Packet Loose

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

a) Price
b) Non-availability
c) Quality
total=100

option a option b option c

69% 9% 47%

27
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%

70
60
50
40
Purchase on
30
brand
20
10
0
No Yes

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

Total=100

Option (a)=20% Option (b)=80%

28
 80%
70%
60%
50%
40%
Aware ofquality
30%
20%
10%
0%
Yes No

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 .

29
 • 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 wellcoordinated and
neither are there stringent requirements for packaging finished
products except when one sells inlocal 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.

30
• Increase the scale of operations and hire new people.

BIBLIOGRAPHY

1. Desai, Vasant (2002), “Dynamics of Entrepreneurial

Development and management” (4th edition) ,Mumbai-
Himalaya Publishing House.

2. www.google.com

31
 3. www.cashewindia.com

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

32
 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
b) Non-availability
c) 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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