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Project Report For Battery
Project Report For Battery
OF
PREPARED BY
CA SUBHASH CHANDRA
CHARTERED ACCOUNTANT
DELHI
V. FINANCIAL STUDIES
5.1 Total Investment 29
5.2 Sources of Financing 30
5.3 Annual Operating Cost & Exp 32
5.4 Financial Evaluation 33
5.5 Profitability Ratios 36
5.6 Conclusions 36
Lists of Annexure
1. Financial Structure
6. Sales Revenue
8. Trading Account
PROJECT HIGHLIGHTS
5. Market : Domestic
6. Manpower : 171
a. Direct : 134
b. Indirect : 37
CHAPTER I
INTRODUCTION
.1 This project study report of Dry Cell Batteries plant has been for M/S Bhagawati Carbide
Industries Private Limited for setting up such a plant in Tankeshwari VDC, District
Morang Biratnagar.
1.1 The proposed project would produce 60 thousand pieces of Dry cell batteries per day. The
project has planned to produce 18000 thousand pieces of dry cell battery at 100 percent
capacity utilization throughout the year. The total operating days would be 300 per
annum on three shift basis per day.
1.2 The promoters of the project are Mr. Shashi Kant Agrawal, Mr. Sumit Agrawal and Mr.
Prushtam Khetan. Mr. Agrawal is a leading industrialist of Nepal and associated with
textile mills, Iron and Steel Industries, Spinning Mills, Plastic Industries, Sugar
Industries, Garment and Carpet Industries besides some other trade and business. On the
other hand, Mr. Khetan is associated with Export and Import Business Including Other
trading transactions.
1.3 Presently there are two Dry Cell manufacturing industries operating in Nepal known as
Nepal Battery Company and Golden Battery Industries Pvt. Ltd with rated capacity of 16
Million and 10 Million pieces respectively. However, the total production of these
industries are 12665 thousand pieces in 2006/2007 and 18925 thousand pieces in
2007/2008.
1.4 The total project cost has been amounted to Rs.63979 thousand of which fixed assets
investment would comprise of Rs.51365 thousand and working capital Rs.12614
thousand. The loan component in the fixed assets would stand Rs.30819 thousand and in
initial working capital Rs.7568 thousand whereas owner’s equity would be Rs.20546
thousand and Rs.5045 thousand respectively.
1.5 The main raw materials required in the course of production are Black Carbon, EMD,
NMD.IND, Zinc Chloride, Carbon Rod, Zinc Clot, Steel Cap, Metal Jacket, Metal Top
and bottom. AMM. Chloride, Kraft Paper, H.P.Wax, Plastic Top, Gray Board and mill
board. The total Raw Material would be imported from India and third countries. The
cots price of total raw materials has been estimated at Rs.68833 thousand.
1.6 The total manpower required are 190 Nos. out of which direct and indirect labour amounted
at 153 and 37 persons respectively. The total salaries and wages have been estimated at
Rs.2895 thousand per annum.
1.7 The proposed project would require various plant and machineries like Hot Setting and
cooking unit, top washer blanking and sealing unit, capping and buffing unit, mix and
electrolyte mixer, white mix starry, capping and buffing unit, battery assembly line, paper
department body forming machine, extrusion press machine and edge trimming machine
etc. The whole plant and Machinery would be imported from India except body forming
machine, Extrusion press machine and edge trimming would be imported from third
countries. The total cots of the Plant and Machinery has been estimated at Rs.26862
thousand including custom duty, transportation, clearing and forwarding charges, letter of
credit and industrial electrification.
1.8 The project would be implemented during the period of 12 months starting from opening of
letter of credit in the first month to finally commencing the commercial production in the
12th month. The project implementation work would be look after by an experienced
Chemist, Chief Engineer, Mechanical Engineer, Electrical Engineer, Finance Chief and
other supporting personnel and staffs. This group will work in the close supervision with
the Board of Directors.
1.9 The average Ex- Factory selling price of battery has been estimated at Rs.5.975 per piece.
The annual sales revenue of the project would be estimated at Rs.61304 thousand in the
first year of production and Rs.107550 thousand in the sixth year.
1.10 The financial evaluation shows that the break even point at 43.1 percent and value added at
32.7 percent at 100 percent capacity utilization. The pay back period of the total fixed
assets investment as been estimated at 3 years and 11 months. The projection of cash
flow shows positive returns of Rs.1071 thousand right fro the first year of operation. The
net present value at 18 percent discount rate would amount at Rs.35880 thousand and
internal rate of return at 34.64. The profit and loss statement demonstrates the net profit
of Rs.4034 thousand in the first which would reach to Rs.19562 thousand in the fifth year
of operation. The projected balance sheet reflects the position of assets Rs.60700
thousand at the end of the first year which will gradually increase to Rs.158211 thousand
at the end of the tenth year.
1.11 The analysis of financial evaluation shows this project is commercially and financially
viable. Therefore, it is recommended for promotion.
CHAPTER –II
MARKET
a) R20 or UM-1 or D Size for amps, radios, tape recorders, toys etc.
b) R14 or UM-2 or C Size for lamps, radios, tape recorders, clocks and
power miniature equipments.
c) R6 or UM-3 or AA size for lamps, radios, cameras, calculators,
hearing aids and other miniature equipments.
Table 2.1
The above figure revels that the production of dry cell batteries has been on an increasing
trend with estimated average annual growth rate of 8.83 percent over the period to
2002/03 to 2007/08.
Import is other important source of supply of dry cell batteries in Nepal. The import tales
place mainly from China, India, South Korea, and Singapore. The total imports of all
types of batteries including electrical accumulators were amounted to Rs.93.8 million in
2006/07 of which primary cells batteries alone represented for about 90 percent.
Note- 2 Report on electrical goods and accessories sub sector study (Phase-I) Vol. II
2005, ISC, Kathmandu and KICONS, India.
I. The dry cell batteries are mainly used for transistors, cassette radio, Tape
reorders and torch lights. The demand assessment has entirely been based on
the consumption for these equipments.
II. The consumption norm of batteries for above equipments based on the
household survey undertaken in the course of the study mentioned above,
were estimated at 16.0 Pcs for transistor sets, 27.68 Pcs for cassette radio,
15.56 Pcs for tape recorder and 14.17 Pcs for torch lights.
III. The number of equipment owned as a percentage of total household in 2001
-02 were estimated at 18.86 percent, 1.23 percent, 0.628 percent and 16.40
percent for transistors sets, cassette radios, tape recorders, and torches
respectively. As for the demand growth of the equipments is concerned, the
study had assumed the rate of annual growth of 15 percent each for transistors
sets, Cassette radios and tape recorders and 10 percent for torches for the
period 2002/ 03 to 2006/07.
To estimate the present level of consumption of the dry cell batteries, the
following assumptions have been made.
a. The consumption norm of dry cell batteries for
applications under construction remains unchanged at least for
project period.
b. The rate of annual growth in demand for equipments
under construction would remain same as of the period 2002/03 to
2007/08.
c. The sum of the product of the consumption norms by
equipment and corresponding population or stock of the
equipments provide an indication of the magnitude of the total
consumption of dry cell batteries in the country.
d. In view of the past trend of production and import of
dry cell batteries, the future growth in demand for dry cell batteries
would be around at least 7.5 percent annual.
Table 2.2
Table 2.3
In Million Pcs
Year 2006/07 2007/08 2008/09
The above table indicates that the demand for dry cell batteries will grow from
46.83 million Pcs in 2006/07 to 54.12 million Pcs in 2008/09. As against this
growth in consumption demand, the existing two manufacturers of dry cell
batteries have the capacity to supply 26 million Pcs of dry cell batteries. The
domestic supply represent 55.6 percent of the total consumption demand for dry
cell batteries in 2006/07 and 48.04 percent.
Table 2.4
Retail Price of different types of dry cell batteries
Brand and size specifications Price Range / Pair
Eveready (Nepalese) R20 –D 18
Lark (Chinese) R-20 –D 15
Seagull ( Chinese) R14 –D 14
Swan ( Chinese) UM -2C 12
Maxwell (Japanese) R6 / AA 12
National Hyder ( Japanese) UM-3 / AA/ R6 16
HW (Hongkng) UM-3 / AA 14
Tiger (Nepalese) R-20 / D 17
The retail price of different brand of R20 and R14 sized dry cell batteries are
within the ranges of Rs.14 to 18 per pair and that R6 (UM-3 or AA sized ) of
brands other than Eveready in the range of Rs.12 to 16 per pair. The margin to
revels varies between 10 -15 percent.
CHAPTER -IV
RAW MATERIAL
Table 4.1
Direct Raw Material Cost Per 1000 Pcs of Batteries
Material UOM Usage for Paper ORD. Batteries Usage for Leak Proof Batteries
Carbon Black Kgs 2.956 349.79 2.956 295.00
E.M.D Kgs 2.479 197.83 7.437 595.00
N.M.D IND. Kgs 22.130 343.00 17.172 267.00
AMM. Chloride Kgs 7.160 93.87 7.160 94.00
Zinc Chloride Kgs 8.130 143.09 8.130 143.00
Mercuric Chloride Kgs 0.014 7.84 0.014 8.00
Gum Karya Kgs 0.129 6.82 0.129 7.00
Zinc Oxide Kgs 0.232 17.31 0.420 32.00
Asphalt Kgs 2.575 32.96 2.575 33.00
Carbon Rod Kgs 1030 165.00 1030 165.00
Tissue Paper Kgs 0.043 17.20 0.043 18.00
Kraft Paper Kgs 3.240 77.76 3.840 155.00
Poly Kraft Paper Kgs - - -
Gray Board 300 Gram Kgs 2.160 51.84 2.160 52.00
Mill Board 500 Gram Kgs 2.160 51.84 2.160 52.00
Label Metal Jacket Pcs 1030 82.40 1030 580.00
Metal Bottom Pcs - 1030 185.00
Metal Top Pcs - 1030 206.00
Brass / Steel Cap Pcs 1030 136.78 - -
Plastic Top Pcs 1030 82.50 - -
Glue Kgs 0.205 15.50 0.205 16.00
Zinc Calot Kgs 16.872 1217.49 16.872 1218.00
Wheat Flour Kgs 0.430 4.13 0.430 4.13
Corn Starch Kgs 1.205 19.28 1.205 20.00
H.P.Wax Kgs 1.030 40.51 1.030 41.00
3103.00 4134.00
4.2 Utilities
4.2.1 Requirement of Power
The total power required for proposed project has been estimated at 220 KW which be
produce from national Grid. The total consumption of power would be 8,91,000 units per annum
at 60 % capacity utilization. The fixed charges and the unit costs of power would stand Rs.238
thousand and 3118 thousand respectively.
4.2.2 The requirement of packaging materials has been estimated at Rs.200 per 1000 Pcs of batteries.
The total cost of packaging materials has been estimated to Rs.3600 Thousand Per annum.
4.2.3 The tentative cots of lubricants, oils, greases, fuel, water etc has been estimated at Rs. 240
thousand per annum.
4.2.4 A lump sum amount of Rs.100 thousand has been estimated as miscellaneous expenses on raw
materials.
CHAPTER -V
FINANCIAL EVALUATION
Table 5.1
Statement of sources of financing in the Project
Rs.in’000
Description Owner’s Equity Bank Loan Total
Land and Land Development 1872 2808 4680
Building and Civil Construction 4780 7170 11950
Plant , Machinery and Auxiliary Equipments 10745 16117 26862
Transport Vehicles 320 480 800
Furniture, Fixtures and Office Equipments 280 420 700
Preliminary and Pre-Operative Expenses 1721 2582 4303
Sub- Total 19718 29577 49295
Capitalized Interest - 2070 2070
Total Cost of the Project – Phase 19718 31647 51365
Working Capital Initial 5201 7801 13002
Total Project Costs 24919 39448 64367
Interest capitalization of long term loan is estimated for six months only.
The long term loans (Project Loan) will be repaid with in five years (semi- annual basis) at 14
percent interest. The grace period shall be one year.
The Minimum working capital required in the initial year of operation would amount to Rs.13002
thousand of which short term loan from commercial bank would comprise of 60 percent and
promoter’s equity’s of 40 percent. The interest rate on short term would be at 15 percent.
5.4.10 CONCLUSION
The detail of financial analysis shows that the project contemplated production
program and financial plan of the proposed dry cell batteries plant is commercially
viable. Therefore, its promotion is recommended.