WATCHEX – CUSTOMIZED WATCHES

A PROJECT REPORT

Submitted by
MOHAMMED SHAREEF
ARAVIND MA
ANOOP O
ANANTHU RAJ
ARJUN SAJEEV

In partial fulfillment for the award of the degree of

B.TECH DEGREE

IN
MECHANICAL ENGINEERING
AT

SCHOOL OF ENGINEERING
COCHIN UNIVERSITY OF
SCIENCE AND TECHNOLOGY
COCHIN
OCTOBER 2018

1
WATCHEX – CUSTOMIZED WATCHES
A PROJECT REPORT

Submitted by
MOHAMMED SHAREEF
ARAVIND MA
ANOOP O
ANANTHU RAJ
ARJUN SAJEEV

In partial fulfillment for the award of the degree of

B.TECH DEGREE

IN
MECHANICAL ENGINEERING
AT

SCHOOL OF ENGINEERING
COCHIN UNIVERSITY OF
SCIENCE AND TECHNOLOGY
COCHIN
OCTOBER 2018

2
 ACKNOWLEDGEMENT

It is our proud privilege to release the feelings of my gratitude to several person who helped us
directly or indirectly to complete this project and we would not forget to thank them.

A special thanks to our final year project coordinator Mr. Hredesh T, who help stimulating
suggestions and encouragement, helped us to co-ordinate our project especially writing the
report. We acknowledge with thanks the kind of patronage, loving inspiration and timely
guidance, which we have received.

We owe our deep gratitude to our project guide, who took keen interest on our project work and
guided us all along, till the completion of our project work by providing all the necessary
information for developing a good system.

We would never forget to remember each and every one for their encouragement and more over
for their timely support and guidance till the completion of project work.

We heartily thank all our friends who have more or less contributed during the project work. We
will be always indebted to them.

Also we would like to extend our sincere esteem to all teaching staff of mechanical engineering
department who helped us in successful completion of our project. The study has indeed helped
us to explore more knowledge avenues related to the topic and we’re sure it will help us in the
future.

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 TABLE OF CONTENTS

CHAPTER NO. TITLE PAGE NO.

ACKNOWLEDGEMENT 3

1. CHAPTER 1:
1.1 SCOPE 5
1.2 PRODUCT 6
1.3 PROCESS
1.4 MARKETABILITY
1.5 LOCATION 7
1.6 FINANCIAL SOURCES
8

2. CHAPTER 2:
2.1 COSTING AND BREAK EVEN ANALYSIS 15
2.2 …………..

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CHAPTER 1:
1.1 Scope

Even though the technology got updated in every second people are using watches. They feel it
more comfortable, fashionable etc. Some of them thinks it as a part of the body. The recent
surveys conducted on south Indian people is very interesting. The people are getting addicted to
fashionable gadgets, especially which are available on the internet.

So every person is trying to be different in all aspects. About 10% of the women of Kerala are
making their own dresses, rings, ear rings etc. The parts and tools are available on the market.
The customer needs a platform to takeout their creativity. In western countries it is very common
that self designing of their clothes.

A customer who is always searching for more creative and variety of product will surely come to
us. The online market is becoming more reliable for the customer.

1.2 Product

The industry we have selected is a customized watch making online company in the brand name
Watchex. As a first phase we are aiming to manufacture ordinary watches and as a second phase
to smart watches in the future.
A user friendly website and a mobile application in both iOS and Android is used as a user to
company interface. Watches are manufactured for men, women and kids sections. In each section
there will be different price ranges. Within each price range a specific set of parts will be
available and the user can scroll through these and combine these parts to buy a unique watch
that matches the customer’s style quotient. User can select the base/background, type of needles,
style and font of digits, material and colour of strap, shape had size of watch etc. from a
predefined set of parts. By combining these the user can get a unique watch. Since this is an
online store the selection process is very less time consuming. There is no middleman in the
business and thus the price of the product can be reduced upto a limit. The product is available in
economic, premium and luxury class thus this reach all classes of financial group in the society.
There will be an option provided for the user to suggest new design and the R&D team will look
into it. Each product is handmade by trained professionals and individually examined with care.
There is no need of huge storage unit for the completed product since it is made only after the

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users order is received and as soon as the product is made it is shipped through courier services.
Only storage required is for storing the parts or raw materials. Thus by reducing the conventional
costs associated in a watch making company we can provide the watches in low cost compared
to other watch companies in India. Watchex will bring a revolutionary change in the watch
industry in India.

1.3 Process

● The company has an online interface where different sets of parts are put in display for
the users.
● Watches are manufactured for men, women and kids and the spares are made available in
different sections in the company website.
● There will be different price ranges in each section. The user may select the parts from
these sections according to his style.
● After the user have selected all the parts according to his liking, we combine these parts
and produce a unique watch for the user.
● The product is shipped to the user through courier services.
● User can provide suggestions or new designs and the R&D team of the company will
look into it.
1.4 Marketability

The watch industry has evolved immensely over the years with changing demands, significance
and roles. Brands have been investing in understanding and deciphering these changes to provide
better options to a generation that demands a combination of both style and technology. What
our company focuses on the first phase is the fashion and style related section of this industry.
Due to innovative technology, the acceptance among the Indian consumers has risen
dramatically and will continue to do so as now the demand has shifted from normal watches to
smart watches. But, what is giving a new shape to this already talked about the sector is
technological advancement that the brands are adopting today to bring a change in a consumer’s
life. We are also trying to bring a new change in the industry by adding watches to customer’s
style quotient. By the second phase expansion we are planning to bring smart watches also to the

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market, but for the first phase and to build a brand name in the market, it will be only focused on
usual watches.

The watch industry has realized the power of combining the technology and fashion together.
While traditionally the consumer focus was on men, but now it is expanding and appealing to
women as well. They are now focusing on products that are being designed for women who
don’t want to have to decide between jewelry and gadget. Since our customer can select the parts
gender wise it will be easier to customize the watches for both men and women.

According to Ken Research in India, the mass segment of watches contributes the highest to the
market in terms of volume. On the other hand, in terms of value, each of the mass and the mid-
price segments contribute about 37 per cent-38 per cent to the total wristwatch market in India.
The rest is contributed by the premium segment, which constitutes around 25 per cent of the
wristwatch industry in India. As the size of the population with high disposable income has
increased significantly over the past years, the demand for luxury goods has substantially
increased in the country. The premium segment wristwatch market in India can be further
subdivided into three price categories. In value terms, the affordable luxury wristwatch segment
has the highest market share of about 44 per cent in the premium wristwatch market in India. The
main consumers of this segment of watches are the rising urban population with higher spending
capacity. Our product will be made in such a way that it can be viable to each of the above
mentioned categories. By selecting different materials or parts the price range varies accordingly.
Different types of watches will have different price ranges, so that our product can occupy every
category in the market. To provide a lifestyle offering, the brand shouldn’t compromise on its
functionality and features for the sake of being cutting-edge. The idea is to identify the right
opportunity and the balance to make the offering a desirable one.

1.5 Location

Location for an industry is selected on the basis of different factors. By choosing a proper
location we can reduce different costs affecting the business. The location should be ideal in both
economic and social factors. The availability of raw materials, storage facilities, nearness to
market, availability of utilities like electricity, water connection etc.., transportation facilities

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etc... are few of those economic factors which directly affect the functioning of an industry.
Governmental policies, local support etc. belong to the social factors too. Therefore selection of
a location is a very important step in the business.

The above mentioned factors were analyzed while the study for selecting a proper location for
our business. The location was finalized to be Coimbatore, Tamil Nadu. The availability of raw
material was not a major issue since that need to be imported and only factor affecting was the
transportation. Since Coimbatore is well connected with roads and railway lines it was apt for
transportation. The availability of infrastructure was also sufficient in the location. Medical and
educational facilities is easily accessible in the township so that employees would be satisfied.
As a first phase we are planning to hit the markets in Ernakulum, Chennai, Coimbatore,
Thiruvananthapuram etc..., all these markets are nearby to the location. The storage unit
requirement is comparatively small since product is made on the basis of user requirement. Even
though storage facility and future expansion space is made available near the current location.
The labour is sufficiently available from the locality itself and because of that local support was
ensured. Tamil Nadu government promotes start up initiatives and as a result there would be less
constraints from the government side. The rent for the godown and warehouse is comparatively
less in the region. The location is thus selected based on these factors.

Besides the industry for production and packaging, an office is also necessary for all the
networking operations. There is need for setting up an office with necessary computers and
server systems. The location decided for this is Infopark, Kakkanad, Kochi. An office building
was rented for the purpose of all technology related needs. Kochi was selected since it is a hub of
technological innovations and start-ups. Infopark provides support to IT related business firms
too. By setting up the office in Kochi, there will be financial help from Kerala start-up mission
and Kerala government too. Since Kochi is a digital hub it will be easier to recruit people from
that area itself. All kinds of utilities are easily available and thus it is a perfect location to set-up
the office.

1.6 Sources of Finance

A growing economy needs the support of a financial structure which is responsive to the needs of

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development. All the financial needs of a business may be grouped into the following three
categories:

Short -term finance: Funds required for periods less than one year. Usually required to meet
variable, seasonal or temporary working capital requirements.

Medium-term finance: Funds required for period of 1to 5 years. Required for permanent working
capital, small expansions, replacements, modifications, etc.

Long- term finance: Funds required for period exceeding 5 years. Required for procuring fixed
assets, for establishment of new business.

CLASSIFICATON OF FINANCIAL SOURCES

There are mainly two ways of classifying various financial sources:

1.based on basic sources
2.based on maturity of repayment period

Based on basic sources:

a) Internal Sources:

1. Paid up capital: ordinary shares, preference shares, deferred shares, and

fortified shares

2. Reserve Surplus: capital reserves, development rebate reserves and others.

b) External sources:

1: Borrowings: from banks, from term-lending institutions like IDBI, IFCI, ICICI, Industrial
development corporations etc.

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2: Trade clues and other liabilities

3: Miscellaneous

Based on maturity of payment:

1. Long term: it includes share capital or equity shares, preference shares, retained earnings,
debentures or bonds of different types, loans from financial institutions etc.

2. Medium term: it consists of public deposits for a duration of three years, medium term loans
from commercial banks, foreign currency bonds etc.

3.Short term: Trade credit, fixed deposits for a period of one year or less comes under this
category.

INSTITUTIONAL FINANCE

1. For consultancy, research and development, feasibility study etc.

2. For purchase of land, developing the area, construction of factory premises,
developing other basic infrastructure, purchase of machinery and its installations.
3. To purchase raw of materials for its manufacturing process, spares and spare
parts of its machinery.
4. To hold the stock in process but also finished goods pending sale.
5. For marketing positioning, export and further for modernization and expansion
of the unit.

DIFFERENT TYPES OF FINANCIAL INSTITUTIONS

1. Industrial Finance Corporation of India (IFCI): Established in 1948 under an act of

parliament. On May 21,1993 it was transformed into a corporation to provide greater

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 flexibility.
2. National Bank For Agriculture And Rural Development (NABARD): It came into existence
on July 12, 1982.
3. Small Industries Development Bank Of India (SIDBI) : it was established to serve the
current and emerging needs of the small scale industries in the country.
4. Life Insurance Corporation Of India (LIC) : Set up under the LIC Act in 1956, as a wholly
owned Corporation of the Government of India.

WORKING CAPITAL

Working Capital : current assets – current liabilities.

Working capital ratio = current assets/ current liabilities

The working capital plays the same role in business as that of the heart in a human body.
Working capital funds are generated and these funds are circulated in the business. As and when
this circulation stops, the business becomes lifeless.

Types of Working Capital

Working Capital is broadly classified into two, namely permanent working capital and variable
working capital.
1. Permanent or Fixed working Capital: Minimum amount of working capital required to ensure
effective utilization of fixed assets and support the normal operation of the business. It is again
divided into two,
a) initial working capital: It is the working capital with which the project is commenced.
b) regular working capital: It is the minimum amount of the liquid capital to keep up the
circulating capital from cash to inventories, to receivables and back again cash

2. Variable Working Capital: This is the additional capital needed to meet the seasonal and

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 special needs. It is again divided into two:
a) Seasonal working capital: it refers to the additional working capital needed during the busy
seasons.
b) Special working capital: it may be required to carry on some special sales campaign or
financing slow moving stocks or financing a period of strike or lockout.

Working Capital Management

Company’s managerial accounting strategy designed to monitor and utilize the two components
of working capital, current assets and current liabilities.

Effective financial management is based on three factors:

1. Analysis of past performance.
2. Planning for future activities.
3. Control of current Activity.

Theory of Working Capital Management

The interaction between current assets and current liabilities is, therefore, the main theme of the
theory of working capital management. Working capital management is concerned with the
problem that arises in attempting to manage the current assets, the current liabilities and the
interrelationship that exist between them. The goal of working capital management is to
manage a firm's current assets and current liabilities in such a way that a satisfactory level of
working capital is maintained.

Concept of Working Capital management

There are two concepts of working capital management. They are as follows:
1.Quantitative (Gross concept): The amount of working capital refers to the total of current
assets, i.e. WC = CA.

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2.Qualitative (Net Concept): The amount of working capital refers to excess of current assets
over current liabilities. WC = CA - CL.

Current Assets includes:

1. Cash and bank balance creditors.

2. Inventories: raw materials work in progress and finished goods.
3. Spare parts.
4. Account receivables.
5. Bill receivables.
6. Accrued Income.

Current Liabilities includes:

1. Bank Overdraft
2.Creditors.
3.Outstanding Expenses.
4.Bills payable.
5. Short term loans.

Different Types Of Working Capital Management:

1. Inventory Management: Process of ordering, storing and using a company's inventory:

such as raw materials, components and finished products.
2. Receivables Management: Debt owned by the customer to the firm resulting from sale of
goods and services in the ordinary course of business.
3. Cash Management: Process of collecting and managing cash as well as using it for short
term investment.

Data Analysis of the Project

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Working Capital management involves deciding upon the amount and composition of current
asset and how to finance the asset. This decision involves tradeoff between risk and profitability.
Working Capital Balances are measured from the financial dates of the company’s balance sheet.
A study of the causes for changes of working capital that take place in the balance from time to
time is necessary. These changes can be measured in rupee amount and also in percentage by
comparing current assets, current liabilities and working capital over the given period.

The important tools of Working Capital are,

I. Ratio Analysis of Working Capital.
II. Funds Flow Analysis of Working Capital.
III. Working Capital Budget.

Funds Flow Analysis of Working Capital

It is an effective management tool to study how funds have been produced for a business and
how they have been employed. This technique helps to analyze change in working capital
components between two data. The comparison of current asset and current liability at the
beginning and at the end of specific period show changes in such type of current assets and
resources from which Working Capital has been obtained funds flow statement contributes
materially to the financial aspects.

The working capital budget is an important phase of overall financing budgeting. This budgeting
should be distinguished from a cash budget that is designed to measure all the financial
repayment of loans, term loan and similar item. On the other hand, working capital repayment
and assure that they are duly provided for. The objective of that budget is to secure an effective
utility of investment.

Significance of Working Capital Management

Working capital funds are regarded as the life blood of a business firm. A firm can exist and
survive without making profit but cannot survive without working capital funds.

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If a firm is not earning profit it may be termed as 'sick', but not having working capital may
cause its bankruptcy working capital in order to survive. Thus, each firm must decide how to
balance the amount of working capital it holds, against the risk of failure.
There are many aspects of working capital management which make it an important function of
the finance manager. In fact we need to know when to look for working capital funds, how to use
them and how measure, plan and control them.
A substantial portion of total investment is invested in current assets. Level of current assets and
current liabilities will change quickly with the variation in sales. Though fixed assets investment
and long-term borrowing will also response to the changes in sales, but its response will be weak.

Factors Influencing Working Capital Requirement

1. Nature of Business—Trading and industrial concerns require more funds for working capital.
Concerns engaged in public utility services need less working capital.

2. Conditions of Supply -If the supply of inventory is prompt and adequate, less funds will be
needed. But, if the supply is seasonal or unpredictable, more funds will be invested in inventory.

3. Production Policy- In case of seasonal fluctuations in sales, production will fluctuate

accordingly and ultimately requirement of working capital will also fluctuate.

4. Seasonal Operations- It is not always possible to shift the burden of production and sale to
slack period.

5. Credit Availability- If credit facility is available from banks and suppliers on

favorable terms and conditions, less working capital will be needed.

6. Credit Policy of Enterprises- In some enterprises most of the sale is at cash and even it is
received in advance while, in other sales is at credit and payments are received only after a
month or two.

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7. Growth and Expansion- The need of working capital is increasing with the growth and
expansion of an enterprise.

8. Price Level change- With the increase in price level more and more working capital will be
needed for the same magnitude of current assets.

9. Circulation of Working Capital- Less working capital will be needed with the increase in
circulation of working capital and vice-versa.

10. Volume of Sale- This is directly indicated with working capital requirement, with the
increase in sales more working capital is needed for finished goods and debtors.

11. Liquidity and Profitability- There is a negative relationship between liquidity and
profitability. When working capital in relation to sales is increased it will reduce risk and
profitability on one side and will increase liquidity on the other side.

12. Management Ability- Proper co-ordination in production and distribution of goods may
reduce the requirement of working capital, as minimum funds will be invested in absolute
inventory, non-recoverable debts, etc.

13. External Environment- With development of financial institutions, means of communication,

transport facility, etc., needs of working capital is reduced because it can be available as and
when needed.

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CHAPTER 2:

COSTING AND BREAK EVEN ANALYSIS

Let us assume capacity = 40000 pieces

Selling price = ₹ 200 / piece

FINANCIAL ASPECTS

FIXED CAPITAL

1.LAND AND BUILDINGS :

a) Main building were computers and server are placed.

b) Warehouse for storing parts.

(Say rent of building & warehouse : ₹50,000 per month)

2.MACHINERY & EQUIPMENTS:

Sl No. Description Quantity Rate Amount

1. P.C & Accessories 10 ₹ 30,000 ₹ 3,00,000

2. Server for storing 1 ₹ 1,00,000 ₹ 1,00,000

information

3. Conveyors / Transportation 4 ₹2,500 ₹ 10,000

Facilities inside warehouse

TOTAL ₹ 4,10,000

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WORKING CAPITAL

1.SALARIES & WAGES

Sl no. Description Quantity Rate Amount

1. Supervisor 2 ₹ 10,000 ₹ 20,000

2. Skilled workers 10 ₹ 5,000 ₹ 50,000

3. Trainee 30 ₹ 2,000 ₹ 60,000

4. Customer care 10 ₹ 2,000 ₹ 20,000

Total ₹ 1,50,000

2.RAW MATERIALS

Sl. No Description Quantity Amount

1. Dismantled parts of items ( 10,000 ₹ 1,00,000

Watches )

2. Packaging material 5,000 ₹ 20,000

3.UTILITIES

Sl No. Description Amount

1. Powerer ₹50,000

2. Generator ₹ 75,000

3. Total ₹ 1,25,000

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4. OTHER EXPENSES

Sl no. Description Cost

1. Transportation facilities
from warehouse to courier
₹40,000/month
house

TOTAL WORKING CAPITAL

Sl No Description Amount

1. Rent ₹ 50,000

2. Salaries and wages ₹ 1,50,000

3. Raw materials ₹ 1,50,000

4. Utilities ₹ 1,25,000

5. Other expenses ₹ 40,000

6. Total ₹ 5,15,000

PROJECT COST

Sl. No Description Amount

1. Preliminary expense ₹ 4,000

2. Fixed capital ₹ 5,15,000

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3. Working capital ₹ 4,40,000

4. Total ₹ 9,59,000

MEANS OF FINANCE

Sl Description Percentage Amount

No.

1. Promoter contribution 15% ₹ 1,43,850

2. Subsidy 20% ₹ 1,91,800

3. Loan 65% ₹ 5,75,400

4. Total ₹ 9,59,000

COST OF PRODUCTION PER ANNUM

Sl Description Amount
No.

1. Total Working Capital ₹ 61,80,000

2. Depreciation @15 % ₹ 77,250

3. Total ₹ 62,57,250

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•Let us sell one watch at a rate of 200 Rupees per piece.
•So total turnover per annum = 40000 x 200 = ₹ 80,00,000
•NET PROFIT = TURNOVER –COST PER ANNUM
= ₹ 80,00,000 - ₹ 62,57,250 = ₹ 17,42,750.
Amount of Watches to be sold to break-even point = ₹ 9,59,000 / ( ₹ 17,42,750÷40,000)

= 22,011

If the sale amount exceeds 22,011 pieces , the industry will become in profit condition.

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References

1. India Watch Industry Outlook to 2018 - Premium Segment and Online Retail to Lead the
Growth, Ken Research.

http://m.kenresearch.com/consumer-products-and-retail/luxury-goods/india-watch-market-
research-report/419-95.html

2. Jain, P.C., Handbook for New Entrepreneur, Oxford University Press, 2003.

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