DETAILED PROJECT REPORT

of M/s Prem Footwear Private limited

Proposal for setting up a manufacturing unit of footwear in Dhanbad, Jharkhand

PREM FOOTWEAR (P) LTD.

16/1B Kustia Road, Kolkata-700039, West Bengal
Website: www.premindia.com
Contact No. 9830224700
November 2016
Hewlett-Packard
[Pick the date]
Detailed Project Report M/s Prem Footwear Private Limited

CONTENTS
S.No. Particulars Page No.
1. Executive Summary 4-7
2. About the company and promoter’s profile 8-11
 About the company
 About the promoters
 Product Line
 Capital Structure
 About the PREM Group
 Details of associate concerns
 Conclusion
3. About The proposed project 12
4. Technical Feasibility 13-20
 Location of the project
 About the footwear industry
 Raw Material Procurement & Storage
 Installed Capacity
 Manufacturing Process
 Utilities
 Power
 Water
 Manpower
 Status on various permissions / sanctions / approvals
5. Cost of Project & Means of Finance 21-25
 Cost of Project & Means of Finance
 Land
 Site Development, Building & Civil Expenses
 Plant & Machinery
 Miscellaneous Fixed Assets
 Preliminary & Pre-Operative expenses
 Contingencies
 Margin for working capital
 Means of Finance
 Equity Contribution
 Term Loan
 Draw Down Schedule
 Proposed Repayment Schedule
6. Financial Projections 26-30
 Financial Assumption for Project
 Key Financial Rations
 Key components for Financial Appraisal:
 DSCR Calculation
 Internal Rate of Return
 Payback Period

Page | 2
Detailed Project Report M/s Prem Footwear Private Limited

 Sensitivity Analysis
 Other Financial indicators

Page | 3
Detailed Project Report M/s Prem Footwear Private Limited

Chapter 1: Executive Summary

PROJECT HIGHLIGHTS:
A) General

Name M/s Prem Footwear Private Limited

Constitution Private Ltd Company
Date of June 04, 2008
Incorporation
CIN No. U19200WB2008PTC126404
PAN No AAECP7005M
Name of the 1. Mr. Arjun Bahri Dhawan
Directors 2. Mr. Akshay Bahri
Registered Office 16/1B Kustia Road, Kolkata-700039 West Bengal
Nature of Activity Manufactures & Suppliers of footwear in a multiple combination
of natural rubber, Ethylene Vinyl Acetate (EVA), Styrene
Butadiene Rubber (S.B.R.), Thermo Plastics, Impact Modifiers,
Polyolefin’s& Polyvinyl Chloride (PVC).
Existing Factory Kolkata: Unit 1 - 40 Topsia Road Kolkata 700039
address Unit 2 - 2 New Tangra Road Kolkata 700046
Delhi: KH/1143 Rithala, Rohini. Delhi 110085
Proposed Project Setting up a footwear manufacturing unit at Plot No.C-
33/3B(P) Kandra Industrial Area, Govindpur/Dhanbad
Size of Unit Small Scale Industry
Products & its Products Installed capacity
installed capacity (in Pairs per annum)
Hawai Slippers 1800000.00
Components & footwear 720000.00
PVC footwear 240000.00
Shoes 720000.00
Total 3480000.00
Raw Materials Hawai Slippers PVC Slipper, DIP Shoes,
Shoes and Sandals and
Components Slippers
Rubber, EVA,
LDPE, Exact Resin Resin

Page | 4
Detailed Project Report M/s Prem Footwear Private Limited

Calcium DOP DOP

Zinc Oxide Stablizer Stablizer
Steric Acid Pigment Colour Pigment Colour
Blowing Agent Calcium and others Calcium and others
Crunch Reclaim
Curing Agents
Pigment colour
Cost of Project Sl. No Particulars Amt
(Rs in Lacs.)
1 Land 25.00
2 Buildings & Civil Works 135.00
3 Plant & Machinery 176.00
4 Miscellaneous Fixed Assets 35.25
5 Pre-operative expenses 13.19
6 Provision for Contingencies 6.93
7 Working Capital Margin 107.61
Total 498.98

Means of Finance
Sl. No Particulars Amt
(Rs in Lacs.)
1 Equity Share Capital
For Capex 141.36
For Working Capital 107.61
248.98
2 Term Loan 250.00
Total 498.98
Facilities
Requested Sl. No Particulars Amt
(Rs in Lacs.)
1 Term Loan 250.00
2 Working Capital 310.00
Total Requirement 560.00
Estimated July 2017
Commercial
Operation Date
(DCCO)

Page | 5
Detailed Project Report M/s Prem Footwear Private Limited

B) Key observations :

Company M/s Prem Footwear Private Private Limited has been promoted by
Mr. Arjun Bahri Dhawan and Mr. Akshay Bahri of the PREM
Overview
Group. The company manufactures footwear in a multiple
combination of Natural Rubber, Ethylene Vinyl Acetate (EVA),
Styrene Butadiene Rubber (S.B.R.), Thermo Plastics, Impact
Modifiers, Polyolefin’s& Polyvinyl Chloride (PVC). It has an in-
house footwear design team, dedicated to creating new designs &
models to keep up with the market demand. It is globally known
through its brand name “SPICE”. The tag line of the company is
“WALK STRAIGHT FEEL GREAT”.

The company presently proposes to set up a footwear

manufacturing unit at Plot No.C-33/3B(P) Kandra Industrial Area,
Govindpur/Dhanbad. The project cost envisaged is Rs. 498.98
Lakhs which shall be met by way of Term Loan to the tune of Rs.
250.00 Lakhs and the balance by promoters’ in the form of equity
and quasi equity.
Financial IRR: 37.48%
Indicators DE Ratio: 2.25
DSCR(Average) : 3.41

Page | 6
 Detailed Project Report M/s Prem Footwear Private Limited

Financial Year 2017-18 2018-19 2019-20 2020-21 2021-22

Months of 9 12 12 12 12
Observations production
Capacity 50% 60% 70% 80% 90%
Turnover 910.65 1653.18 1933.38 2213.58 2493.78
PBT 66.45 178.04 261.59 336.60 406.88
PBT/Income (%) 7.30% 10.77% 13.53% 15.21% 16.32%
PAT 47.49 120.50 179.14 231.62 280.65
PAT/Sales 5.22% 7.29% 9.27% 10.46% 11.25%
Cash Accruals 90.19 170.02 220.17 265.76 309.16
PBIT 118.95 244.44 320.65 386.60 447.50
PBDIT 142.38 272.10 340.96 397.85 449.38
NWC 147.81 257.83 372.99 528.75 762.91
Current Ratio
(X) 1.40 1.66 1.89 2.31 3.19
TNW 296.47 416.97 596.11 827.73 1108.38
TOL/TNW (X) 1.93 1.28 0.80 0.49 0.31
Gross block 391.36 391.36 391.36 391.36 391.36
Net block 348.66 299.15 258.12 223.98 195.47
Interest Outgo 23.44 27.66 20.31 11.25 1.88
ROCE (%) -
EBIT/BS TOTAL 13.71% 25.72% 29.83% 31.39% 30.70%
RONW (%) -
PAT/NW 16.02% 28.90% 30.05% 27.98% 25.32%
EBITDA
/Income (%) 15.64% 16.46% 17.64% 17.97% 18.02%
Interest cover
(EBIT/Interest) 0.13 0.15 0.17 0.17 0.18
Operating Profit
% 17.75% 17.78% 18.71% 19.01% 19.09%
Net Profit % 5.22% 7.29% 9.27% 10.46% 11.25%
Conclusion PFPL is technically competent to manufacture products envisaged in the
financial proposal.
Considering the parameters of appraisal of project, given financials
shows viability of the project. The proposal may be considered as
technically feasible and financially/economically viable and may be
considered as fair banking risk.

Page | 7
 Detailed Project Report M/s Prem Footwear Private Limited

Chapter 2: About the Company and Promoter’s Profile

2.1. About the Company

M/s Prem Footwear Private Limited, (PFPL) a private limited company incorporated
on June 04, 2008 with the Registrar of Companies, West Bengal vide Registration
No U19200WB2008PTC126404 with the object of manufacturing footwear is
promoted by the PREM Group. Since its incorporation in the year 2008, the company
is engaged in manufacturing of footwear.
In a short span of time, the company has established its brand name “SPICE’ all over
India, United Kingdom and other European countries.
The promoters of the company are now planning to set up an Anchor Unit in the
state of Jharkhand and provide skills training program therein to promote the
handicraft industry of Jharkhand. It further wants to expand its existing business of
manufacturing and marketing footwear under their exclusive Brand "SPICE" in the
State of Jharkhand.
The Company is governed by the Board of Directors comprising of:
1. Mr. Arjun Bahri Dhawan
2. Mr. Akshay Bahri
The promoters of the Company belong to business families. The promoters of the
Company have appointed themselves on the board of the Company for overall
management of the Company.

2.2. About the promoters

A brief about the promoter / director of the Company is as under:

A) Mr. Arjun Bahri Dhawan – Promoter & Director

A gold medalist in Cost Accountancy, Chartered Financial Analyst and a Master in

Finance by qualification, Mr. Arjun Bahri Dhawan is having an experience of almost a
decade in the footwear industry. He completed his graduation from St. Xaviers
College, Kolkata in the year 2007 and joined the family business in the year 2008.

Date Of Birth 04/02/1986

DIN No. 02077988
Father’s Name Mr. Akshay Bahri
Mother's Name Mrs Geeta Bahri
Address 22A, Gorachand Road Flat -3A Kolkata
700014
PAN No. AJLPB9227G
Education B.Com.

Page | 8
 Detailed Project Report M/s Prem Footwear Private Limited

Additional
Qualification Masters in Finance

B) Mr. Akshay Bahri – Promoter & Director

Aged about 56 years, Mr. Akshay Bahri is the father of Mr. Arjun Bahri. He is a
science graduate from St. Xaviers College, Kolkata and diploma in Rubber
Technology. He is also a director of M/s South Asia Rubber & Polymers Park, a
section 25 companyformed under a turnkey project of All India Rubber Industries
Association for setting up a rubber park at Domjur, Howrah for reallocating the
Rubber manufacturing units of its members.

Date Of Birth 24/02/1960

DIN No. 02078046
Father’s Name Shri Premraj Bahri
Mother's Name Late SMT. Swaranlata Bahri
Address 22A, Gorachand Road Flat -3A Kolkata
700014
PAN No. AEDPB8670C
Education B.SC.
Additional
Qualification Rubber Technologist

2.3. Product line of PFPL:

The company manufactures footwear for all men, women and kids. The various
types of footwear manufactured are:

Women Kids Men

 Ballets Flat  Ballets Flat  Clogs

 Clogs  Clogs  Flip-Flops
 Flip-Flops  Floaters  Loafers
 Loafers  Sandals  Sandals
 Walker  Shoes  Shoes
 Wedges  Slip On  Slip On
 Orthopedic Footwear  Walker  Walker
 Plush Shoe  Pathani

Page | 9
 Detailed Project Report M/s Prem Footwear Private Limited

2.4. Production facilities

The company has manufacturing facilities at:

 Kolkata: Unit 1 - 40 Topsia Road Kolkata 700039

Unit 2 - 2 New Tangra Road Kolkata 700046
 Delhi: KH/1143 Rithala, Rohini. Delhi 110085.

The proposed footwear manufacturing unit is situated at Plot No.C-33/3B(P) Kandra

Industrial Area, Govindpur/Dhanbad

2.5. Capital Structure

The Authorized Share Capital of PFPL as on 31.03.2016 consists of Equity Shares
of Rs. 25.00 Lakhs. The details of authorized and paid-up share capital of the
company as on March 31, 2016 are as under:

Authorized & Paid-up Share Capital of JBPPL

Authorized Capital Paid-up Capital

Particulars No. of Value in No. of Value in
Shares Rs. Lakhs Shares Rs. Lakhs
Equity Share of
2,50,000 25.00 47,580 4.76
Rs.10.00 each
Total 2,50,000 25.00 47,580 4.76

2.6. About the PREM Group

The history of the Prem group goes back to the early Indian Independence days.
Post independence, Shri Prem Raj Bahri (father of Mr. Akshay Bahri) started his
footwear business as an entrepreneurial venture. After concentrating on their
business of foot wear for a long stretch they gradually grew and diversified into
various other projects, one of them being industrial chemical(s) through a partnership
firm M/s Prem Chemicals. Due to the rigorous quality control, the Prem group has
been able to build up a trustworthy reputation amongst its customers and create
customer loyalty for its footwear brand “SPICE” all over India and UK. Recently, they
have also set up a manufacturing unit in Bangladesh.

2.7. Details of the associate concerns

 M/s Prem Chemicals

M/s Prem Chemicals is a partnership firm of Mr. Prem Raj Bahri& Mr. Gaurav Bahri

Page | 10
 Detailed Project Report M/s Prem Footwear Private Limited

Dhawan which provides Industrial Chemical to industries like Rubber, Plastic, Paints,
Leather and Paper. It imports polymers, chemicals and additives and are Sole
Selling agents of many reputed organizations.

 M/s Prem Retail

M/s Prem Retail is the proprietorship firm of Mrs. Geeta Bahri (mother of Mr. Arjun
Bahri Dhawan) It is involved in retailing of foot wears through major hyper markets,
life style malls and e-commerce websites. It is also setting upexclusive retail stores in
the country under the brand name “SPICE” with franchise support. Five stores have
already been set up. One in the State of Jharkhand Ozone Mall Dhanbad and others
in R-Mall Mulund, Junction Mall –Durgapur, City Center Puruliya, East Delhi Mall

 M/s Prem Footwear Limited (United Kingdom)

This is a UK Based company (company number 08768100) incorporated on 8 th of
November, 2013 having its registered office and Warehouse at Unit10 St Mary's
Works, 115, Burnmoor Street, Leicester, LE2 7JLUnited Kingdom. It is involved in
Wholesale & online Retail of Footwear.

 M/s Prem Footwear Limited ( Bangladesh)

This is a Joint Venture company incorporated on 8th of February, 2016 having its
registered office in Dhaka, Bangladesh. It is 100% export oriented EVA and PVC
Slipper manufacturing unitwhere the share of PREM group is 50%. The factory is
situated at Nowadda, Paschimdi, Keraigonkj, Dhaka

2.8. Conclusion
 The Promoters of M/s. PFPL have got sufficient experience in the field of
manufacturing footwear.
 The company has created customer loyalty for its footwear brand “SPICE” all
over India and UK.
 The promoters are resourceful and have good business acumen to run the
business.
 The promoters of PFPL are in the industry for more than a decade.

Page | 11
 Detailed Project Report M/s Prem Footwear Private Limited

Chapter 3: About the proposed project

The company proposes to set up a manufacturing unit of footwear in Jharkhand

having installed capacity of 34.80 Lacs pair of footwear per annum. The types of
footwear to be manufactured are:
 Hawai Slippers
 PVC Footwear
 Components and footwear
 Shoes
The proposed factory will be equipped with modern machinery and will provide direct
employment opportunity to around 158 employees. It may also be noted that the
supply of components will give rise to indirect employment to 240 people in the
handicraft industry in the following manner:
240 People indirect employment X 10 pairs per day manufacturing = 2,400 pairs per
day X 300 days = 7,20,000 pairs p.a. of components
The cost of the project will be Rs 498.98 Lacs which is proposed to be financed by
promoter’s contribution of Rs.248.98 Lacs and Term Loan of Rs. 250.00 Lacs.

The promoters are planning to have the following operations in the State of
Jharkhand:
 Manufacturing and Marketing their products under their exclusive Brand "SPICE"
for the State of Jharkhand.
 Provide support and handholding to various Firms/ Cooperatives/ Self Help
Groups in all the Five Divisions of the state of Jharkhand by providing
Technology Transfer, Supplying Basic Raw materials and Components.
 The promoters also plan to bridge the skill gap by conducting Skill Development
Training Programmes in Jharkhand which shall further promote the Handicraft
Industry to Manufacture World Class quality Footwear.

Page | 12
 Detailed Project Report M/s Prem Footwear Private Limited

Chapter 4: Technical Feasibility

4.1. Location of the project

The proposed site location situated at Plot No.C-33/3B(P) Kandra Industrial Area,
Govindpur/Dhanbad. The area of the land is 33,541 sq. ft..
The Company will purchase the land from the Government of Jharkhand at a sale
price of Rs. 25.00 Lacs.
Following are the distinct advantages of the location:
The plant being situated in the industrial area has got all the advantages of a
developed industrial town with cosmopolitan culture including infrastructural and
educational facilities available locally. Consequently technical, commercial, skilled &
unskilled workforce is available
Being located in the industrial area, related raw material and technical services are
easily accessible with proximity to roads (highways) and railway stations. It lies on
Grand Trunk Road leading to Howrah (Kolkata) in the East and Banaras in the West
which further leads to Delhi.

4.2. About the Footwear Industry

Industry Scenario
Indian footwear industry holds a crucial place in the Indian economy for its potential
for employment, especially for weaker sections, and for supporting economy through
its foreign exchange earnings. India is the second largest global producer of footwear
after China, accounting for 9% of the global annual production of 22 billion pair as
compared to China’s share of more than 60%. India annually produces ~2.1 billion
pair of which, 90% are consumed internally while remaining are exported primarily to
European nations. Due to this, India’s share in the global export market of US $ 120
billion is a paltry 1.9% in value terms making it much lower than China’s share of
40%.
India’s annual footwear consumption of 2.1 billion pair is the third largest globally after
China and USA and has recorded a healthy growth over the past decade driven by
rise in income levels, higher disposable income, growing fashion consciousness, and
increasing discretionary spending. The same has also led to a change in perception
of the footwear industry from a basic need based industry to a fashion and style
industry. However, the average per capita footwear consumption in India continues to
be low at 1.66 pair per annum in comparison to the global average consumption of 3
pair per annum and developed countries average of 6-7 pair per annum. This gap

Page | 13
 Detailed Project Report M/s Prem Footwear Private Limited

coupled with increasing disposable income, rising middle class and changing
consumer preferences provide a tremendous opportunity for the Indian footwear
market to grow at a rapid pace going forward.
In value terms, Indian footwear sector is estimated at Rs. 50,000 crores which
includes domestic market of Rs. 32,000 crores and export market of Rs. 18,000
crores. Despite just 10% share of exports in India’s total production volumes, its share
is almost one third in value terms due to higher Average Selling Price (ASP) of Rs.
800 per pair for exported footwear as compared to ASP of Rs. 160 per pair for
footwear consumed in the domestic market. The sharp variation is on account of
higher share of leather footwear (80%) in the total exports as compared to around
20% share in the domestic consumption.

Indian Footwear Market

The Indian footwear industry is highly fragmented with almost 15000 small and
medium enterprises operating largely in the unorganized segment and limited
presence of organized segment. The competitive intensity is high between the two
segments and currently, both are estimated to have an equal share of the overall
domestic market in value terms. Though, unorganized segment dominates the market
in sales volumes due to its presence majorly in the low cost rubber/ plastic footwear.
Unorganized sector gains its prominence in the Indian context due to its price-
competitive products which are more suitable and attractive to the price conscious
Indian consumer. Their products are cheaper due to involvement of cheap household
labour, avoidance of tax &labour laws and majorly because of limited investment in
assets. Further, with almost 2/3rd of India’s population covered under the food
security bill which aims to provide daily nutrition needs to an individual at subsidized
prices, such category of population presents a huge market for the unorganized
sector to cater to. Nevertheless, with increasing brand consciousness amongst Indian
consumers, influx of large number of global brands and increasing penetration in Tier
– II and III cities by the organized footwear companies, organised players’ market
share has made significant gains in the recent past and it continues to be on an
uptrend.
India exports largely leather footwear to its main trading partners which include United
Kingdom, Germany, USA, Italy and France. The major dominance is of the European
continent whose share is almost 75% in India’s total exports. This is in contrast to
other major exporters like China, Indonesia and Vietnam which export non leather
footwear mainly to USA. The footwear exports from India have grown at a CAGR of
~14% in dollar terms and by 20% in Indian Rupee (INR) during the five year period
ending March 2015 backed by growing demand from European nations and
increasing focus of main importing countries to shift sourcing from China to other low

Page | 14
 Detailed Project Report M/s Prem Footwear Private Limited

cost producing countries. Besides this, the ASP for exported footwear has also been
on an uptrend with rising raw material prices and favourable foreign currency
movements during this period. In absolute terms, footwear exports from India have
risen from Rs. 71.5 billion in FY10 to Rs. 180.0 billion in FY15.
The strength of India in the leather footwear sector originates from its large reserves
of bovine population, strong network of tanneries, skilled and low cost manpower, and
a well-established presence in export markets. However, India has been unable to
optimally utilize its resources evident from the low recovery rate of the livestock, use
of outdated technology by most tanneries and footwear manufacturers, weak footwear
components industry and limited presence of large scale manufacturing units. These
factors along with steep transaction cost of doing business in India and high
inflationary trends since the past few years have reduced India’s cost competitive
advantage against the other low cost footwear producing countries like China,
Vietnam, Myanmar, Indonesia etc.
Nevertheless, the footwear industry has witnessed healthy growth in export earnings
in the recent past and remains amongst the top ten foreign exchange earners for the
country. In addition to this, the industry has been providing large employment
opportunities, especially for the weaker sections of the Indian society. Direct and
indirect employment in Indian footwear industry is estimated at around 1.1 million
people. Acknowledging the importance of footwear industry, the Indian government
has taken various measures and initiatives in order to support its growth, which has
led to structural changes in the footwear industry. However, for the footwear sector to
grow rapidly going forward and compete aggressively with the other low cost
producing nations, strong push is required in various aspects including favorable
policies which would help in rationalizing tax structure, providing infrastructural
support in capacity building, reducing transaction costs and increasing the availability
of skilled labour in the country.

4.3. Raw Material Procurement & Storage

The various raw materials required are EVA / PVC / PU, rubber, chemicals and
packaging material.
 EVA / PVC / PU shall be imported from South East Asian Manufacturing
companies (Example Dow, Samsung; LG; TPC)
 Rubber shall be purchased from Agartalla, Kerala and Bangladesh.
 Chemicals from Either Delhi or West Bengal.
 Packaging Materials are available locally.

Raw Material Consumption / Cost per item

Page | 15
 Detailed Project Report M/s Prem Footwear Private Limited

For PVC Slipper, Shoes and Components

Material (a) Rate (b) Kg ( c) Amount
Resin 85 100 8,500
DOP 105 60 6,300
Stablizer 270 1 270
Pigment Colour 500 4 2,000
Calcium and others 15 5 75
Total 170 17,145
Average rate of compound per
Kg 100.85

For Hawai Slippers

(a) Rate/Kg (b) PHR ( c) Amt
Rubber, EVA, LDPE, Exact 130 100 13,000
Calcium 15 50 750
Zinc Oxide 90 2 180
Steric Acid 75 1 75
Blowing Agent 280 8 2,240
Crunch Reclaim 2 50 100
Curing Agents 300 3 900
Pigment colour 600 1 600
Total 215 17,845

Rate/Kg
Average Rate per Kg ( c / b) 83.00
Normal Loss 2% 1.69
Cost of Compound per Kg 84.69

For DIP Shoes, Sandals and Slippers

Material (a) Rate (b) Kg ( c) Amount

Resin 85 100 8,500
DOP 105 60 6,300
Stablizer 270 1 270
Pigment Colour 500 4 2,000
Calcium and others 15 5 75
Total 170 17,145
Average rate per Kg ( c / b
) 100.85

Page | 16
 Detailed Project Report M/s Prem Footwear Private Limited

4.4. Installed Capacity:

The product mix and installed capacity of the plant based on 300 working days is as
follows:
Products Installed capacity p.a
Hawai Slippers 1800000.00
Components & footwear 720000.00
PVC footwear 240000.00
Shoes 720000.00
Total 3480000.00

4.5. Manufacturing Process

Page | 17
Detailed Project Report M/s Prem Footwear Private Limited

Page | 18
 Detailed Project Report M/s Prem Footwear Private Limited

4.6. Utilities
 Power
The power requirement of the unit will be 200 KVA. The Company has made
provision for one DG set of 125 KVA for emergency.

 Water
The water requirement will be around 150 litres per day for which the company
proposes to dig its own well.

 Manpower:
The company proposes to employ technically qualified people with sufficient
experience in this line of manufacturing at different levels in organizational
hierarchy as given below:

A. Salaried Employees
Office: No. of employees
Manager 1
Accounts and Finance 2
PRO 1
Peon 2
Electrician 1
Sweeper 2
Security 4
Gardener 1
Driver 2
Total staff for Office: 16

Warehouse Supervisor:
Dispatch 1
Receipt 1
Total staff for Warehouse: 2

Production Department:
Production Manager 2
Marketing Manager 2
Total staff for Production: 4

Total no of salaried employees (A) 22

Page | 19
 Detailed Project Report M/s Prem Footwear Private Limited

B. Labour requirement
Skilled Labour 42
Semi-Skilled Labour 42
Unskilled Labour 52
Total no. of labours required (B) 136

Total direct employees required (A+B) 158

4.7. Status on various permissions / sanctions / approvals –

As per the information provided by the company, the statuses of the approvals
are as follows:
Approvals Current Status
PAN No Obtained
Sanction plan for factory building & other To be obtained
civil structures
Power application for power connection To be applied for
VAT / Sales Tax Registration To be applied for

Excise Registration To be applied for

Service Tax Registration To be applied for

Trade License To be applied for

NOC from Pollution Control Board To be applied for

Professional Tax (as per the state law of To be applied for

Jharkand)

Page | 20
 Detailed Project Report M/s Prem Footwear Private Limited

Chapter 5: Cost of the Project & Means of Finance

5.1 Cost of Project & Means of Finance-

(Amt Rs in lacs)
Cost of Project Amt Means of Finance Amt
Land 25.00 Promoter’s Contribution 248.98
Buildings & Civil Works 135.00
Plant & Machinery 176.00 Term Loan 250.00
Miscellaneous Fixed Assets 35.25
Pre-operative expenses 13.19
Provision for Contingencies 6.93
Working Capital Margin 107.61
Total 498.98 Total 498.98

5.1.1 Land
Plant is proposed to be located at Plot No.C-33/3B(P) Kandra Industrial Area,
Govindpur/Dhanbad. The land will be purchased from Government of Jharkhand at a
purchase price of Rs. 18.25 Lacs and Rs. 6.75 Lacs shall be spent on the land for
development.

5.1.2 Building & Civil Expenses

Particulars Rs in Lacs
Civil Construction cost 135.00
Total 135.00

The total Land area is 33541 sq. ft. which would comprise of the following:
Particulars Area (in sq. ft.)
Factory Shed 20,000
Godown 5,000
Office 2,000
Guard Room 500
Others 541
Open Space 5500
Total 33,541

5.1.3 Plant and Machinery

The company proposes to procure the machineries from Indian suppliers. List of
machineries to be procured are:
Hawai Slipper
Sl. Particulars Total

Page | 21
 Detailed Project Report M/s Prem Footwear Private Limited

No. Amounts (Rs.

In lacs)
1 Kneader of 40 kgs capacity 12.00
(Production 2 tonnes per day per machine)
Rs 12 lacs
2 3 no of mixing Mills (14X36) each 36.00
(Production 2 tonnes per day per machine)
3 no(s) of Hydraulic Sheet Press - (20 X 30) Rs 5 lacs
3 (4 day lite) each 15.00
(Production 300 sheets per day per press)
Rs 1 lacs
4 4 no(s) of Cutting Presses each 4.00
Rs 8 lacs
5 2 no(s) of Horizontal for PVC straps each 16.00
6 Hydraulic Press for Rubber Straps 4.00
7 Knife and other tools 1.00
8 Compressor 1.00
9 Cooling Plant 1.00

A. Total for Hawaii 90.00

PVC Slippers, Shoes & Components (Air

Blown)
Total
Sl. Amounts (Rs.
No. Particulars In lacs)
2 no(s) of Rotary Machine Presses - 24
1 station
(Capacity 2000 prs) 54.00
- Single Colour (Rs in lacs) 21.00
- Double Colour (Rs in lacs) 33.00
2 Chiller Plant, Mixer, Cutter and other tools 5.00

B. Total for PVC Slippers/Shoes 59.00

DIP for Shoes, sandals and slippers

Total
Sl. Amounts (Rs.
No. Particulars In lacs)
Rs 4.50 lacs
1 4 no(s) of Vertical Machine - Single Station each 18.00
(Production 800 prs/machine)
2 Compressor, Mixer, Cutter and other tools 4.00
3 Stitching and other Machines 5.00

Page | 22
 Detailed Project Report M/s Prem Footwear Private Limited

C. Total for DIP 27.00

Total Plant & Machineries (A+B+C) 176.00

5.1.4 Miscellaneous Fixed Assets

Miscellaneous Fixed Assets includes Generator, Commercial vehicle, motor cars,
Furniture Fixture, office equipment etc amounting to Rs. 35.25 Lakhs as follows:

Miscellaneous Fixed Assets Rs. in Lacs

1 Generator 10.00
2 Conveyor, tables and other support systems 12.00
3 Commercial vehicle 10.00
4 Motor Vehicle 1.25
5 Other miscellaneous assets 2.00

Total 35.25

5.1.5 Preliminary and Pre-operative expenses: Rs 13.19 lakhs

Preoperative expenditure of Rs 13.19 lakhs has been estimated taking into account
the cost of consultancy charges, travelling, & interest during construction period etc.
Break up furnished is as under:
Sl.No Particulars Rs. in lacs
1 Interest during construction period 10.94
2 Travelling, lodging and boarding charges & Inspection etc. 1.00
3 Stationary, Courier, Telephone etc. 0.25
4 Project Consultants charges 1.00
Total 13.19
Note: The Term Loan disbursement is expected to be in January 2017 and project
completion has been considered at June with commercial operations commencing
from July 2017. Hence, interest up to June 2017 has been considered as IDC.
Interest rate has been estimated for the project is 12.50% on Term Loan and Interest
during construction for the period is worked out to the tune of Rs10.94 Lakhs. The
IDC has been capitalized in the hard cost. Interest after commencement shall be
booked to profit and loss account.

5.1.6 Contingency:
Contingency at 2% of the total hard cost towards buildings, plant and machinery and
Miscellaneous Fixed assets has been assumed. Hence, to account for any

Page | 23
 Detailed Project Report M/s Prem Footwear Private Limited

unforeseen escalation in prices etc., a contingency of Rs. 6.93 Lakhs is estimated.

The details are as under:
Provision For Contingency @ 2%
Sl.No Particulars Rs. in lacs

1 Building & civil works 2.70

2 Plant & Machinery 3.52
3 Misc Fixed Assets 0.71
Total 6.93

5.1.7 Margin money for Working Capital:

The working capital requirement of the project for the FY 2017-18 (9 months
operation) is as under:
Particulars Rs. in Lacs
Stock of Raw Material 62.33
Stock of Finished Goods 121.72
Debtors 242.84
Total Current Assets 448.67
Less: Sundry Creditors (Trade) 9.27

Net Working Capital 417.61

Margin@25% 106.72

5.2 Means of Finance:

The Project is to be funded from equity contribution and term loan from Banks with
Debt Equity ratio of 2.25:1 ratio. The proposed means of finance for the project is as
under:
(Rs in Lacs)
Means of Finance Amount
Equity Contribution 248.98
Secured Loan From Banks 250.00
Total 498.98

5.2.1 Equity Contribution:

The company proposes to pool in the required promoter’s contribution in the form of
equity and unsecured loan (quasi equity) from their friends, family & relatives.

5.2.2 Term loan

Page | 24
 Detailed Project Report M/s Prem Footwear Private Limited

The Company is proposing the term loan of Rs.250.00 @ 12.50% from bank. First
disbursement is proposed to commence from the 4th quarter of FY 2016-17.
Moratorium period is assumed to 6 months from the date of 1st disbursement for
construction period and 9 months from the date of commencement of commercial
production. Therefore repayment will start from the 1st quarter of 2018-19 which will
last till the 3rd quarter of FY 2021-22
Loan Repayment shall be done in 15 structured quarterly installments commencing
from April 2018 and ending on December 2021.

5.2.3 Draw Down Schedule

The Company has proposes the drawdown in phase manner. The proposed draw
down schedule is given in as below:
Period of Draw Down Total Amount
(Rs in Lacs)
Quarter ending March 2017 100.00
Quarter ending June 2017 150.00
Total 250.00

5.2.4 Proposed Repayment Schedule

Schedule date of Completion of Project June 2017

Commercial operation Date July 2017
Implementation Period in Months 6 months
Repayment Period (in Quarters) 15 Quarters
Installment Staring Quarter April 2018
Last Installment December 2021
Door to Door Tenor 5 years

Financial Year Ending Quarter Amount

(Rs in Lacs)
2018-19 4 50.00
2019-20 4 60.00
2020-21 4 80.00
2021-22 3 60.00
Total Rs 15 250.00

Page | 25
 Detailed Project Report M/s Prem Footwear Private Limited

Chapter 6: Financial Projections

6.1. Financial Assumption for Project

Projections are made on the basis of assumptions given below-

 With introduction of initial capital all requisite assets are placed in proper place
and company will start manufacturing footwear as per demand as per
implementation schedule.
 Plant will operate for 300 days in year.
 On the basis of technical specifications of plant supplier, PFPL has arrived raw
material consumption, manufacturing expenses vis-à-vis quantitative proportions.
These specifications and quantitative proportions have been assumed in
financials and profitability statement is been prepared.
 Depreciation has been calculated as per rates prescribed under Companies Act
2013 and Income tax Act, as per the schedule enclosed in financial statements. It
is presumed that the same rates will continue during the currency of the project.
 Tax rate is considered @ 30.90 % and assumed to remain constant during the
project period.
 No inflation has been considered in Sales price every year.
 Financials prepared (based on the above assumptions) are enclosed herewith in
financials section.
 Brief of other assumptions is given as follows:
a) Commencement of Commercial Production July 2017
b) No of days in production during the year 300.00 Days
c) Installed Capacity Rs. 34.80 Lacs pairs p.a
d) Sale Price of the Finished Products
Hawai Slipper Rs. 75.00 Per pair
Components & footwear Rs. 40.00 Per pair
PVC footwear Rs. 110.00 Per pair
Shoes Rs. 125.00 Per pair
e) Rate of Interest
i) Term Loan 12.50% Per Annum
On Working
ii) Capital 12.50% Per Annum

Page | 26
 Detailed Project Report M/s Prem Footwear Private Limited

f) Provision for Contingencies 2%

g) Capacity Utilisation
Months of
Year Operation Percentage
2017-18 9.00 50%
2018-19 12.00 60%
2019-20 12.00 70%
2020-21 12.00 80%
2021-22 12.00 90%

h) Power requirements 200 KVA

In the 1st
i) Repairs & Maintenance Exp Rs. 1.20 Lacs year
( This will be increased by 5% every year
keeping in mind the wear and tear of
machineries)

Other Manufacturing
j) Overheads

Selling of Sales
i) Expenses 2.50% Value
ii) Travelling & Conveyance Rs 15000.00 per month
Box, Packaging, Barcoding, Carton and
iii) Delivery cost Rs. 12.00 Per pair
iv) Postage and telephone Rs 10000.00 per month
of Sales
v) Other administrative expenses 2.00% Value
Wastage and rejects as percentage of of
vi) variable cost 2.00% Production
In the 1st
vii) Insurance Rs. 2.00 Lacs year
( This will be increased proportionately to
the increase in production)

k) Working Capital Holding Level(In Days)

Page | 27
 Detailed Project Report M/s Prem Footwear Private Limited

Day's of
Particulars Holding Margin
Stock of Finished Goods 30.00 25.00%
Stock of Raw Material 30.00 25.00%
Debtors 60.00 25.00%
Creditors 7.00
m) Moratorium Period has been considered as 15 months. This comprises of 6 months
after first disbursement i.e 4 quarter of F.Y 2016-17 and 9 months from the date of
commencement of commercial production i.e July 2017
n) Repayment has been envisaged to be made in 15 quarterly installments
commencing from 4th quarter of financial year 2017-18 and ending in 3rd quarter of
financial year 2021-22. The repayment has been proposed in bulleted pattern
thereby minimising the financial pressure in the initial years.
o) Door to door tenor of the loan is 5.00 years.
p) The selling price of the finished goods and few items of raw materials are subject to
levy of Excise Duty, VAT & CST. However the implication of tax other than income
tax has not been considered in the financial projections and net prices have been
considered in the assumption.
Financial projections based on the above assumptions are attached along with this
report under Annexure “Financials Projection”.

6.2. Key Financial Ratios

Year 2017-18 2018-19 2019-20 2020-21 2021-22
Months of production 9 12 12 12 12
Capacity 50% 60% 70% 80% 90%
Turnover 910.65 1653.18 1933.38 2213.58 2493.78
PBT 66.45 178.04 261.59 336.60 406.88
PBT/Income (%) 7.30% 10.77% 13.53% 15.21% 16.32%
PAT 47.49 120.50 179.14 231.62 280.65
PAT/Sales 5.22% 7.29% 9.27% 10.46% 11.25%
Cash Accruals 90.19 170.02 220.17 265.76 309.16
PBIT 118.95 244.44 320.65 386.60 447.50
PBDIT 142.38 272.10 340.96 397.85 449.38
NWC 147.81 257.83 372.99 528.75 762.91
Current Ratio (X) 1.40 1.66 1.89 2.31 3.19
TNW 296.47 416.97 596.11 827.73 1108.38
TOL/TNW (X) 1.93 1.28 0.80 0.49 0.31
Gross block 391.36 391.36 391.36 391.36 391.36

Page | 28
 Detailed Project Report M/s Prem Footwear Private Limited

Net block 348.66 299.15 258.12 223.98 195.47

Interest Outgo 23.44 27.66 20.31 11.25 1.88
ROCE (%) - EBIT/BS TOTAL 13.71% 25.72% 29.83% 31.39% 30.70%
RONW (%) - PAT/NW 16.02% 28.90% 30.05% 27.98% 25.32%
EBITDA /Income (%) 15.64% 16.46% 17.64% 17.97% 18.02%
Interest cover (EBIT/Interest) 0.13 0.15 0.17 0.17 0.18
Operating Profit % 17.75% 17.78% 18.71% 19.01% 19.09%
Net Profit % 5.22% 7.29% 9.27% 10.46% 11.25%

6.3. Financial Appraisal of the company with the following key components:

6.3.1. DSCR calculation

DSCR is ratio of cash generation to repayment obligation. It is ability of organization
to service its debts obligations. Standard ratio is 1.5 i.e. every organization borrowing
funds should have at least cash generation 1.5 times than its repayment obligations.
Particulars 2017-18 2018-19 2019-20 2020-21 2021-22 TOTAL
Amount Available
Profit After Tax 47.49 120.50 179.14 231.62 280.65 859.40
Depreciation 42.70 49.52 41.03 34.14 28.51 195.89
Interest on Term Loan 23.44 27.66 20.31 11.25 1.88 84.53
Total 113.63 197.67 240.48 277.01 311.03 1139.83
Amount to be
Serviced
Repayment of Term
Loan 0.00 50.00 60.00 80.00 60.00 250.00
Interest on term loan 23.44 27.66 20.31 11.25 1.88 84.53
Total 23.44 77.66 80.31 91.25 61.88 334.53
Debt Service
Coverage Ratio 4.85 2.55 2.99 3.04 5.03 3.41
Min DSCR 2.55
Max DSCR 4.85
Avg DSCR 3.41

As per the above calculation, Company’s weighted average DSCR 3.41 is above the
standard DSCR 1.5. It indicates that, company will generate sufficient cash surplus
to repay obligation towards the financial debt.

6.3.2. Internal rate of return

Page | 29
 Detailed Project Report M/s Prem Footwear Private Limited

Internal rate of return is defined as minimum acceptable required rate return to be

earned on investment. Generally, Project is acceptable only if IRR of project is above
the borrowing cost of the loan. For the said project, IRR is 37.48% as company as
whole.
For the Year ended on
2017-18 2018-19 2019-20 2020-21 2021-22
31st March,
Cash Profit/ Loss 90.19 170.02 220.17 265.76 309.16
Project Cost 391.36 0.00 0.00 0.00 0.00 0.00
Salvage Value 0.00 0.00 0.00 0.00 0.00 67.62
Net Cashflows (391.36) 90.19 170.02 220.17 265.76 376.77
IRR 37.48%

6.3.3. Payback Period

2017-18 2018-19 2019-20 2020-21 2021-22
Year 1 Year 2 Year 3 Year 4 Year 5
Total Project Cost 391.36
PAT 47.49 120.50 179.14 231.62 280.65
Depreciation 42.70 49.52 41.03 34.14 28.51
Interest on Unsecured Loans 0.00 0.00 0.00 0.00 1.00
Cash Inflow 90.19 170.02 220.17 265.76 310.16
Cumulative Cash Inflow 90.19 260.21 480.38 746.14 1056.30
Pay Back Period 2.60 Years

6.3.4. Sensitivity Analysis

A sensitivity analysis was carried out to assess the impact of the following scenarios
on the major financial parameters. The summary of sensitivity analysis is provided in
the following:
Particulars Min.DSCR Avg. DSCR Max DSCR
Base Case 2.55 3.41 4.85
Reduction in Selling Price by 5% 1.81 2.66 3.63
Increase in Raw material price by 5% 2.25 3.21 4.41
Reduction in Selling Price by 5% and 1.51 2.17 3.01
Increase in Raw material price by 5%

6.3.5. Other Financial Indicators

Detailed calculations of profitability, cash flow, balance sheet, ratios etc. are annexed
in the financials.

Page | 30