1.

EXECUTIVE SUMMARY

Milk is a universal drink and milk products are widely accepted necessary food products. The
milk processing industry in India is expected to expand at a compound annual growth rate
(CAGR) of ~14.8% between FY 2018 and FY 2023 and will reach INR 2,458.7 Bn in FY 2023.
Being one of the primary dairy consumables in India, the increase demand for milk in the
country is owed to the increasing population. Apart from milk, the revenue of the Indian dairy
and milk processing industry is generated from several value-added products such as butter,
curd, paneer, ghee, whey, flavored milk, ultra-high temperature (UHT) milk, cheese, and yogurt.
During the period FY 2018 to FY 2023, the market size of butter is expected to grow by 14.5%,
curd by 14.4%, paneer by 14.1%, and ghee by 14.1%, among others.
The organized dairy sector (both cooperatives and private) is presently handles about 15
percent
of total milk production in the country. Thus, it indicates, there is a wide scope for processing of
milk and manufacture of milk products for domestic consumption as well as export. Additionally,
the growing population, urbanization and huge public expenditure created job and market
opportunity for development of the dairy sector. Moreover, the government and legal support
structure very favorable to new entrants into business to setup dairy farming and milk
processing to produce different types of milk products. These facts provide the new
opportunities and success paths to the aspiring milk processing producers to set up new
production plants (to produce milk products that have an extended shelf life) in enabling the
sustainable growth demands.

The processing capacity of the facility under discussion is assumed to be 10,000 liters per day
of raw milk into four product categories: Pasteurized milk, Butter, Ghee and Curd. Pasteurized
milk has a good market in India and can be improved upon. The four products will generally do
well locally. Total land area required is about 2 acres of land, out of which 1/3 of the land is for
built-up area of the plant. The land, construction cost of buildings and civil works would be
estimated as INR 88 lakhs. The cost plant and machinery for 10,000 LPD capacity would be
estimated as INR 182 lakhs. The total investment requirement is estimated at approximately
INR 376 lakhs. The plant will create direct permanent employment for 22 individuals and
provide steady and secure income for about 50-75 dairy producers (out-growers). The projected
gross profit before tax would be INR 38, 311, 342 lakhs for 1st, 2nd, and 3rd years, respectively.

There are certain risks which are identified in the section 8.0 such as economic downturn, raw
material price fluctuations, maintenance on plant equipment etc., however those risks can easily
mitigate by adopting good practices, marketing strategies outlined in marketing plan, and good
management practices.

The project is financially viable. The project NPV & BCR shows that its acceptability and
Profitability. Thus, investing on dairy processing in is a profitable business for the
investors
2. INTRODUCTION

India is endowed with a largest livestock population in the world having a total bovine population
of 325 million compared to the world's total bovine population of 1475 million. It accounts for
57.3% of the world’s buffalo population and 14.7% of the cattle population. As per 20thLivestock
Census, 2019 the country has 33.06 million cross bred cattle, 199.07 million indigenous cattle
and 110 million buffaloes. The cross bred cattle are predominant in Tamil Nadu, Maharashtra,
West Bengal, Karnataka, Andhra Pradesh, Uttar Pradesh and Bihar, while buffaloes are very
common in Uttar Pradesh, Rajasthan, Andhra Pradesh, Madhya Pradesh, Gujarat, Punjab,
Haryana and Bihar.

There has been a major improvement in milk production, which increased from 55 million tons in
1991 to 188 million tons during 2018-19. Uttar Pradesh, Punjab, Madhya Pradesh, Rajasthan,
Maharashtra, Gujarat, Andhra Pradesh, Haryana, Tamil Nadu and Bihar contributed to the
extent of 80 percent of the total milk production in the country. The per capita availability of the
milk has reached a level of 397 grams per day during the year 2018-19, which is more than the
world average of 350 grams per day. Most of the milk in the country is produced by small,
marginal farmers and landless laborers. Every year there is increase in milk production about
6% national wide and therefore there is a strong potential for dairy processing industries.

Recognizing the importance of the sector, several key initiatives were taken by the Govt. in the
past ranging from Operation Flood (OF) program, Intensive Dairy Development Program
(IDDP), Strengthening infrastructure for Clean Milk Production, Assistance to Cooperatives,
Venture Capital Fund (VCF) for Dairy, Dairy Entrepreneurship Development Scheme etc. there
are several government initiative plans and funding schemes available throughout the nation to
focus on sustainable milk production against to demand. As the raw milk is perishable and does
not have much shelf life, therefore, there is strong potential opportunities for setting up of new
milk processing facilities

During the period in 2017-18, India's milk and milk product exports were recorded at 54,828
metric tons, The ministry attributed the growth to exports in skimmed milk powder that grew by
292% during the period, as compared to the same period last fiscal year, while products such
as butter, ghee, cheese, cream, and curd too recorded a huge growth. Turkey, UAE, Egypt,
Bangladesh, and Bhutan were the major destinations for India’s dairy exports.

2.1 OBJECTIVES OF THE PROJECT

The objective of the Gumma’s Milk Processing and Products is as follows.

 To enrich the quality of milk and sustainable growth

 To avoid the economic losses to farmers by procuring the milk in right time from them
  To manufacture various value-added milk products as per market demand
 To provide quality products at competitive prices to the consumers.

2.2 SCOPE OF THE PROJECT

The scope of the project is limited to Milk processing plant and products. It does not cover any
Bulk chilling plants, Animal husbandry etc. This project exclusively discusses about the 10,000
liter per day milk processing and products plant.

2.3 GEOGRAPHICAL POTENTIAL FOR THE INVESTMENT

The project is intended to build in the surroundings of Markapur, Prakasam (District), Andhra
Pradesh. The current population of Markapur revenue division is about 2.0 Lakh and the
required milk would be 82,000 liters per day. However, the current cattle and buffalo population
producing about 40,000 liters per day. Despite the cattle population increase every year by 6%,
still there is clear two-fold requirement of milk to meet the demand. There is strong demand for
quality milk and its products such as Ghee, Butter and Curd as the people’s habits are obvious
towards those products. Additionally, the increase of quality of life, urbanization, and more
employment opportunities creates more demand to these dairy products. Therefore, there is a
strong potential for any new entrant in dairy processing industry to become successful and
project is profitable to the investors.
Furthermore, Markapur is ecologically suitable where there is enough manpower, potential of
good market, well connected road and rail transportation and suitable climatic condition to
produce good quality and quantity products. Milk production is given priority over other livestock
production systems due to ecological conditions (rainfall, temperature, and soil types are
conducive to forage production) and the population pressure that favor commercial dairy
production and milk prices.
3. COMPANY INFORMATION

Company will be registered in the name of “GUMMA’S MILK PROCESSING AND PRODUCTS”
under the Private Limited company, with its registered office at Rayavram, Markapur (Mandal),
Prakasam (District), Andhra Pradesh, India-52337.

The company will be engaged in the production & sales of Milk, Flavored Milk, Butter, Cheese,
Ghee, Curd etc. The company also involved in other activities like-supply chain management
and milk and products distribution as well.

3.1 PROMOTERS INFORMATION

1. Mr. Gangadhara Raju Gumma

Rayavram, Markapur (Mandal),
Prakasam (District), Andhra Pradesh, India-52337.
Mobile: +91-9247230531
E-mail: raju.gumma@outlook.com

2. Mr. Raghavendra Gumma

Rayavram, Markapur (Mandal),
Prakasam (District), Andhra Pradesh, India-52337.
Mobile: +91-7875446324
E-mail: raghavendra.gumma@outlook.com

3. Mrs. Jhansirani Gumma

Rayavram, Markapur (Mandal),
Prakasam (District), Andhra Pradesh, India-52337.
Mobile: +91-9247230531
E-mail: jhansigangadhar@gmail.com

4. Mrs. Joshna Gumma

Rayavram, Markapur (Mandal),
Prakasam (District), Andhra Pradesh, India-52337.
Mobile: +91-7666874768
E-mail: joshnagumma@outlook.com

3.2 VISION & MISSION

Vision

 To be a leading and reputed brand name in the Market.

 Be a highly effective, accurate, and fast-moving organization.
 Manufacturing of High Quality Un-Adulterated Milk & Dairy Products.
  Fulfilling the dietary nutritional requirements.
 Enhancing the rural economy by helping farmers and milk producers to boost animal
productivity.
 Constant innovation in milk and milk products
 Adaptation of smart and advanced technologies for sustainable growth.
 Be a responsible company that values sustainability

Mission
“To develop, produce, and market a broad range of reliable, natural, and nutritious dairy
products that contributes to the well-being and vitality of life of customers and to guarantee that
all products are delivered to customers with best quality.”

3.3 CORE VALUES

We also have a set of core values that guide our behavior, underpin our operational activity and
focus us as an organization.  They include:

 Leadership – We lead by committing to continuous personal and organizational

development.
 Trust - We create, build and maintain trust by being honest, open and transparent.
 Respect – We listen, accept differences and work together.
 Integrity – We are consistent in our actions and values.
 Teamwork– We help each other succeed through collaboration.
 Fairness - We ensure equitable application of rules and benefits.
 Accountability – We hold ourselves and each other responsible for delivering results.

3.4 APPROVALS & PERMISSIONS

The unit based on its location must obtain various approvals and permissions from statutory
agencies. An indicative list of approvals and permissions required are as under:

 MMPO registration with Commissioner, Dairy Development, concerned state or

relevant authority under Food Safety and Standards Act.
 NOC from fire services Department.
 Approval of plan by gram panchayat/municipality
 Clearance from Pollution Control Board.
 Registration with District Industries Centre or small industries department.
 License from Factory inspector for installation of boiler

3.5 EXPANSION PLANS:

 After 3~4 years from start of the project, second train with same capacity will be added
to the plant.
 During the second phase, ice cream plant will be established.
 Cheese and Milk Powder plant also will be added in the next phase.
4. SWOT ANALYSIS

The dairy industry has its own strengths and weaknesses to build on present scenario for future
growth. Strengths and weaknesses are the internalities of the present situation of dairy industry
within the country. Opportunities and threats are the externalities of the future situation, not only
within the country, but also expected from outside the borders. The analysis attempts to identify
the strengths to meet the opportunities and the threats of the future and weaknesses are going
to be challenged or shown up by these threats and opportunities. The following are the
summary of strengths, weaknesses, opportunities and threats in milk processing industry.

Strengths Weakness

 Largest milk producer in the world
 Fast growing economy
 Huge demand for variety of milk
products
 Processed milk can have better shelf
life rather than raw milk
 Processed milk and milk products less
prone to adulteration and bacterial
growth.
 Maintaining the same taste
(throughout the year) in processed
milk and milk products.
 Annual highest milk production growth
 Emerging competent regulatory
system and authority
 New Food safety and standard law
 Trained S&T human resource
 Research and Educational Institutes
 'Strong successful cooperative
movement', parts of India
Opportunities
 Poor practices in Milk marketing and
distribution
 Low milk productivity
 Weak organized retailing and
established cold chain
 Poor raw milk quality impacts product
quality
 Milk waste handling system
 Poor / less automation adopted in the
milk processing industry.
 Poor veterinary services
 Lack of data on dairy sector
 Large unorganized dairy sector
 Lack of Good dairy practices
 Weak financial services
 Low dairy plants efficiency
 Inappropriate milk collection system in
certain areas
Threats

 Increasing quantity of available milk  Huge competition among dairy

for processing. players.
 Constantly rising milk prices,  Food safety such as adulteration in
increasing demand of milk and milk raw milk.
products, increasing population and  Unhygienic practices by farmers at
increasing incomes and changing farm
lifestyles of consumers.  Uncontrolled use of antibiotics and
 Spread of Information and medicines on milch animals.
Communication Technology (ICT) in  Unfriendly WTO regime and Imports
 the country is favorable for any from other countries.
business in the present era.  Drought and flood.
 Scope of Entrepreneurship in area of  Vagaries of climate can create
dairy farming, TIDP (Traditional Indian fluctuations in milk production.
Dairy products) and other.  Global warming.
 Fast growing economy  Entry of Foreign dairy players.
 Awareness for Ghee usage in cooking
(Especially Northern part of India)
 Extensive usage of Curd in South part
of India.
 Export demand for Buter and Cheese
products globally.
 Diversification
 Large rural market
 Large market and investment
opportunity.
 More number of adult consumers,
 Untapped indigenous milk products
market.
 Low cost human resource and
employment generation.

Overall, the swot analysis shows that the ‘strengths’ and ‘opportunities’ far outweigh
‘weaknesses’ and ‘threats. Strengths and opportunities are fundamental, and weaknesses and
threats are transitory.
5. MARKET SECTOR ANALYSIS AND PLAN

5.1 INDIA’s MARKET SUMMAY AND FUTURE POTENTIAL

India is the world’s largest producer of dairy products by volume, accounting for more than 13%
of world’s total milk production, and it also has the world’s largest dairy herd. This is because
India has 75 million dairy farms, about half of all dairy farms in the world. India has an edge over
many developed countries also because its cost of production is lowest in the world and hence it
enjoys a comparative advantage in the production of milk. The only problem with India is high
cost of conversion to dairy products. It might be due to lack of scale at both production and
processing level. However, India has merely managed to capture only 1% of global dairy trade
despite being the largest milk producer. However, India is a net exporter of all the dairy products
except Lactose and Lactose syrups.

Indian dairy market is amongst the largest and fastest growing market in the world. India has
been able to maintain its position in milk production during the past 18 years. Milk production
recorded about 4% CAGR during the last five years. Strong farm gate prices and rising
domestic demand for value added dairy products are the major factors providing impetus to a
steady increase in milk production. The major factor for the growth of the liquid milk market
in India is the rapidly rising population due to which the consumption levels of liquid milk have
witnessed a significant growth. Increasing incomes, large vegetarian population, rising
standards of living and health consciousness among the consumers have also pushed the
growth of the market in a positive direction. Most of the market is currently accounted by the
unorganized sector. Growth rates of the organized sector, however, is faster than the
unorganized sector. The market is further expected to reach a value of nearly INR 8657 Billion
by 2023, growing at a CAGR of 15.7% during 2018-2023. The country has experienced
noteworthy improvement in the per capita availability of milk over the last five years. The below
trend and able summarize the per capita milk consumption pattern of India and state of Andhra
Pradesh. [Note: P---Projected]
 Milk Consumption per capita ,[g/day] Milk Consumption pattern-Years
980
880
780
680
580
480
380
280
180
2 3 4 5 6 7 8 9 0 1 2 3 4 5 6 7 8 9 P P P P P P
00 00 00 00 00 00 00 00 01 01 01 01 01 01 01 01 01 01 0 1 2 3 4 5
1 -2 2-2 3-2 4-2 5-2 6-2 7-2 8-2 9- 2 0- 2 1-2 2- 2 3- 2 4- 2 5- 2 6- 2 7- 2 8- 2 202 202 202 202 202 202
0 0 0 0 0 0 0 0 0 1 1 1 1 1 1 1 1 1 9- 0- 1- 2- 3- 4-
20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 01 02 02 02 02 02
2 2 2 2 2 2

Year

All India Andhra Pradesh

2003- 2004- 2005- 2006- 2007- 2008- 2009- 2010- 2011- 2012- 2013- 2014- 2015- 2016- 2017- 2018-
State / UT 2001-2002 2002-2003
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
All India 225 230 231 233 241 251 260 266 273 281 290 299 307 322 337 355 375 394
Andhra Pradesh 209 231 238 250 260 268 298 316 342 364 391 409 413 436 475 522 574 623
Arunachal Pradesh 105 112 109 114 113 114 73 55 59 63 44 49 93 98 105 109 111 112
Assam 70 71 71 72 72 71 70 70 69 71 70 69 69 70 70 71 71 71
Bihar 88 92 100 147 154 163 170 172 175 184 175 188 195 208 219 228 239 251
Chhattisgarh 105 103 102 103 103 102 103 106 110 117 120 127 130 130 133 141 149 157
Goa 91 91 93 110 105 104 102 99 96 93 113 92 98 94 74 68 70 71
Gujarat 317 321 330 344 349 372 385 402 418 435 445 476 506 527 545 563 592 626
Haryana 645 647 643 631 628 624 621 644 662 679 720 767 800 839 877 930 1005 1087
Himachal Pradesh 341 339 337 378 373 393 420 424 397 446 447 460 461 466 505 521 542 565

Jammu & Kashmir 367 365 363 364 353 348 372 378 379 378 352 316 302 352 395 400 401 401
Jharkhand 96 94 92 127 126 130 132 132 130 136 145 146 146 147 152 157 165 177
Karnataka 249 229 190 194 197 199 203 215 226 237 244 262 272 276 282 291 313 344
Kerala 234 203 173 169 171 174 183 197 201 210 223 216 203 206 200 189 192 189
Madhya Pradesh 240 236 233 233 262 260 264 271 278 287 308 327 349 386 428 468 505 538
Maharashtra 172 172 172 176 178 181 184 188 190 197 206 213 219 228 239 243 256 266
Manipur 86 85 85 90 92 91 91 90 88 88 80 80 80 80 76 75 77 80
Meghalaya 78 78 78 81 82 81 83 83 83 83 74 83 84 84 83 83 83 84
Mizoram 43 45 44 46 43 46 47 47 29 31 35 36 40 53 57 62 63 64
Nagaland 78 78 83 90 96 86 58 67 96 93 108 94 95 88 89 91 84 81
Orissa 69 68 71 92 95 100 113 110 112 113 112 114 122 124 124 128 132 145
Punjab 892 895 898 917 943 957 956 955 944 937 945 961 980 1003 1032 1075 1120 1181
Rajasthan 376 368 371 376 387 449 486 501 509 538 539 555 572 655 704 785 834 870
Sikkim 187 222 231 221 232 231 195 194 200 194 202 186 200 215 282 228 244 251
Tamilnadu 219 198 198 204 231 263 272 274 278 278 265 541 280 282 283 294 300 322
Tripura 77 66 68 70 70 71 72 74 77 80 83 88 95 103 109 114 123 129
Uttar Pradesh 241 245 250 254 262 267 274 278 283 289 310 312 318 326 335 348 359 371
Uttarakhand 344 339 365 364 361 357 354 351 387 383 384 403 418 416 434 440 447 455
West Bengal 120 120 120 124 126 127 129 131 133 137 140 145 145 145 145 148 153 158
A&N Islands 177 195 183 165 135 148 146 154 137 142 187 131 84 90 87 89 92 96
Chandigarh 131 127 127 115 116 112 106 101 95 87 117 103 101 97 93 76 86 90
Dadra & Nagar
100 97 95 45 53 50 94 91 86 83 89 101 98 74 72 62 62 62
Haveli
Daman & Diu 17 17 16 10 11 12 15 15 15 14 11 13 10 10 10 5 9 11
Delhi 58 57 56 54 54 48 73 72 72 72 82 41 39 37 36 35 35 35
Lakshadweep 90 87 43 45 64 79 79 84 84 71 9 82 219 147 113 110 120 119
Pondicherry 104 101 107 108 108 110 108 101 96 94 99 113 111 110 108 107 106 106
Source : Department of Animal Husbandry, Dairying & Fisheries, Ministry of Agriculture and Farmers Welfare, GoI

Apart from milk, the revenue of the Indian dairy and milk processing industry is generated from
several value-added products such as butter, curd, paneer, ghee, whey, flavored milk, ultra-high
temperature (UHT) milk, cheese, and yogurt. During the period FY 2016 to FY 2020, the market
size of butter is expected to grow by 14.5%, curd by 14.4%, paneer by 14.1%, and ghee by
14.1%, among others. The typical India’s milk product mix as shown below.
 India's Milk Product
Percentage
Mix
Fluid Milk 46
Ghee 27.5
Butter 6.5
Curd 7
Khoa 6.5
Milk Powders 3.5
Panner 2
Ice cream and other 1

The unorganized sector comprising of small farmers and cooperatives contribute primarily to the
dairy market. Over the last few years, the organized sector has been catching up rapidly by
offering customized products to the end consumers, thereby causing a rise in the organized
market share. But dairy products industry continues to face challenges from lack of quality and
low productivity as a result of large part of the market being unorganized. The Indian dairy
market is now witnessing the entry of many foreign players. This can be observed with the
increasing presence of companies in emerging yogurt segment such as Red Mango, Coco
berry, Kiwi Kiss and Yogurberry, etc. Among dairy products, Amul and Mother Dairy are the two
largest companies in the Indian dairy market.

Though India is the largest milk producing country, milk yield in the country is still very less as
compared to other top milk producing countries like USA, Germany, France and New Zealand.
High milk production in India is attributed to large population of cattle rather than good milk
yields. Moreover, milk processing capacity in the country has increased over the years due to
increase in demand of good quality, hygienic and packaged milk and milk products. Of the total
milk processed in the country, 65% to 70% is sold as liquid milk. The rest is processed into dairy
products like cheese, butter, ghee, ice cream, curd etc. The consumption pattern of dairy
products in India is quite unique as compared to some of the western countries. Consumption is
primarily skewed towards traditional products; however, westernized products are gradually
gaining momentum in the urban areas. Interestingly, buffalo milk accounts for the largest share
of the total milk produced in the country. Since the pricing of milk is based on the fat content,
buffalo milk offers higher profit margins as compared to cow milk as it contains higher fat.

India’s Share in the Global Production and

Consumption of Dairy Products

Production Consumption
Year
[Percent] [Percent]

2010 17.61 18.85

2011 18.22 19.60
2012 18.42 19.71
2013 18.59 19.83
2014 19.00 20.49
2015 19.33 21.02
 2016 19.76 21.56
2017 20.22 22.09
2018 20.64 22.59
2019 20.88 22.85
2020 21.24 23.31
2021 P 21.60 23.76
2022 P 21.96 24.22
2023 P 22.32 24.67
2024 P 22.68 25.13
2025 P 23.04 25.58
Note
P Projected

India's Share in global Production and Consumption

26.00

25.00

24.00

23.00

22.00
Pecentage

21.00

20.00

19.00

18.00

17.00

16.00

15.00
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
P P P P P
Production Consumption
[Percent]Year [Percent]

5.2 INDIA’s TRADE ANALYSIS OF MILK AND MILK PRODUCTS

Despite having the world’s largest milk production, India is a very minor player in the
international market. This is due to the direct consumption of liquid milk by the producer
households as well as the demand for processed dairy products that has increased with the
growth of income levels, which have left little dairy surpluses for export. Nevertheless, India
consistently exports specialty products such as casein for food processing or pharmaceuticals.
The major export destinations for the Indian dairy products are Bangladesh, Middle East, US
and Egypt.

In terms of products, skim milk powder, Casein and ghee are the most important product
exported from India followed by butter and whole milk powder. Most of these exports go to
regional milk deficient nations including Pakistan, Bangladesh, Afghanistan, Nepal, Bhutan, and
the United Arab Emirates. India also exports small volumes of casein to the United States,
Europe, and other countries. However, India’s dairy imports can be irregular. In addition to skim
milk powder, butterfat (including ghee and butter oil), and lactose, India also imports small
volumes of whey products, cheese, and ice cream. The country applies tariff rate quotas to skim
milk powder and butter oil. In addition, the county has restrictive import regulations, including
import permits, that eliminate US exports from entering the country, and it placed a ban on
Chinese milk and dairy product imports. The government is taking several initiatives and
introducing yearly plans in order to boost the dairy market. However, the dairy sector is still
encountering problems such as non-availability of fodder and low yield of cattle. The following
table and trend show the India’s export and import trade over the years.

Export Import
Year [Thousand [Thousand
Tons] Tons]
2010 51.94 121.03
2011 17.68 178.95
2012 51.15 89.50
2013 149.12 73.10
2014 80.92 76.16
2015 33.94 78.37
2016 20.84 81.25
2017 23.65 83.25
2018 21.14 87.11
2019 26.69 60.56
2020 22.00 53.33
2021 P 17.32 46.10
2022 P 12.63 38.86
2023 P 7.95 31.63
 India's Trade Analysis
195.00
175.00
155.00
135.00
Thousand Tonnes

115.00
95.00
75.00
55.00
35.00
15.00
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
P P P P P

Year

Export Import
[Thousand Tonnes] [Thousand Tonnes]

5.2.1 GHEE MARKET ANALYSIS

Ghee is a type of clarified butter obtained after the separation of milk solids and water from
butter. The elimination of milk solids and water provides ghee with a higher smoke point which
makes it suitable for cooking at high temperatures. At present, ghee is witnessing an escalation
in demand across India on account of an increase in disposable incomes which has enabled
consumers from lower income groups to afford it. Besides, as ghee does not require
refrigeration and is shelf stable, it is preferred over its alternatives such as butter. Apart from
this, a rise in the number of restaurants offering traditional Indian food is also giving a boost to
the overall consumption of ghee. Moreover, numerous doctors in the country recommend
moderate consumption of ghee daily as it helps in reducing inflammation, building strong bones
and improving digestion. However, widespread adulteration of ghee, especially with refined and
hydrogenated vegetable oils, is hindering the market growth in India. Despite this obstacle, the
ghee market in India is expected to reach a value of INR 4,653 Billion by 2024, at a projected
CAGR of 14.1% during 2019-2024.

5.2.2 CURD MARKET ANALYSIS

In India, about 7 % of the total annual milk production is utilized for making dahi for direct
consumption. Fermented milk products such as dahi (curd), Lassi (sweetened yoghurt drink) /
chhach (buttermilk) and shrikhand (drained curd added with sugar and flavoring) prominently in
people's diet. Dahi is an age-old indigenous fermented milk of India and has managed its
popularity in Indian diet despite changing lifestyles and food habits. According to FICCI (2008)
report, the estimated market size for Dahi (in both organized and unorganized) sector is Rs. 160
billion. Methods for commercial production of dahi have been standardized by several dairy
plants in India. The industry continuously looks for improvement and strives for use of latest
technologies. Even though India has the highest cattle population and the world's highest milk
production, its share in fermented milk and probiotic is negligible. A huge potential exists, and
the Indian probiotic market presents a thriving scenario soon. Increasing awareness and rural
penetration of products can prove to be a winning proposal. Excellent growth opportunities exist
for domestic and foreign companies to take advantage of the prevailing situation in dahi, health
and wellness markets in India.

5.2.3 BUTTER MARKET ANALYSIS

The table butter market in India grew at a CAGR of around 19% during 2011-2018. Table butter
is made by churning fresh/fermented cream or milk to separate the butterfat from the buttermilk
Table butter is one of the most consumed dairy products and is used as a basic ingredient in the
food industry. It also represents one of the fastest growing food segments in India. The major
factors which have contributed to the growth of the market include population growth, rising
urbanization rates as well as the western influence on the traditional methods of cooking.
According to a recent report from IMARC Group, the Indian table butter market is further
expected to exhibit a strong growth during 2019-2024. India’s trade analysis for various
products over the course of years described as below.

India's Trade analysis for Milk Products

Butter Ghee Milk Powder
Export Import Export Import Export Import
Year
[Thousand [Thousand [Thousand [Thousan [Thousan [Thousan
Tons] Tons] Tons] d Tons] d Tons] d Tons]
2016 7.6 0.97 4.77 1.31 14.48 78.97
2017 7.59 0.94 4.84 1.29 10.22 81.03
2018 6.44 1.04 4.5 1.39 10.2 84.69
2019 6.08 1.053 4.435 1.41 7.34 87.24
2020 5.5 1.088 4.3 1.45 5.2 90.1
2021
4.92 1.123 4.165 1.49 3.06 92.96
P
2022
4.34 1.158 4.03 1.53 0.92 95.82
P
2023
3.76 1.193 3.895 1.57 -1.22 98.68
P
Note  
P Projected
 Butter Trade Analysis

8
Million Tons

0
2016 2017 2018 2019 2020 2021 2022 2023
P P P
Year

Butter Export Butter Import

[Thousand Tons] [Thousand Tons]

Ghee Trade Analysis

5
Million Tons

4
3
2
1
0
2016 2017 2018 2019 2020 2021 P 2022 P 2023 P

Year

Butter Export Butter Import

[Thousand Tons] [Thousand Tons]

Milk Powder Trade Analysis

Million Tons

100
50
0
2016 2017 2018 2019 2020 2021 2022 2023
-50 P P P

Year

Butter Export Butter Import

[Thousand Tons] [Thousand Tons]

5.3 OPPORTUNITY RATIONALE

Currently, there are 678 registered dairy processing units processing 12–15%, or 26.63 tons, of
the milk produced in the country each year. Of the total units registered under the MMPO, 403
are private dairies processing around 11.83 tons per year, whereas 212 cooperative dairies
process 10.36 tons per year. The remaining 63 government plants process 4.44 tons per year.
These dairy plants are registered in the different states of India. There is immense scope to
increase the processing capacity and direct a greater share of milk and milk products through
the formal channel. Moreover, there is no milk processing facility in the intended location
i.e. Markapur division

The large population growth, the improvement of quality of life, affordability and increased
employment opportunities creates a strong demand for quality milk and milk products across
India over the years. To meet the demand by taking account of perishability nature of raw milk
and challenging logistics issues for raw milk, there is a huge demand for processing milk across
the Nation. Additionally, the demand for milk products is growing exponentially. There is a huge
demand for traditional milk products such as ghee, curd etc. in conjunction with western milk
products for instances Flavored milk, flavored yogurt derivatives and ice creams.

Though India is exporting certain milk products to other countries on regular basis, however, the
export is not significant when compared to the quantum of milk products importing to India.
Moreover, certain milk products got large popularity base across global market. Therefore,
there is strong market base locally and globally for India’s processed milk and milk
products. Given the scenario demand, any venture started in this sector can become profitable
venture provided that maintaining good manufacturing practices and good quality products.

5.4 KEY PLAYERS

Over the years, brands created by cooperatives have become synonymous with quality and
value. Brands like Amul (GCMMF), Vijaya (AP), Verka (Punjab), Saras (Rajasthan). Nandini
(Karnataka), Milma (Kerala) and Gokul (Kolhapur) are among those that have earned customer
confidence.

Some of the major Dairy Cooperative Federations across India include:

 Andhra Pradesh Dairy Development Cooperative Federation Ltd (APDDCF)

 Bihar State Cooperative Milk Producers' Federation Ltd (COMPFED)
 Gujarat Cooperative Milk Marketing Federation Ltd (GCMMF)
 Haryana Dairy Development Cooperative Federation Ltd. (HDDCF)
 Himachal Pradesh State Cooperative Milk Producers' Federation Ltd (HPSCMPF)
 Karnataka Cooperative Milk Producers' Federation Ltd (KMF)
 Kerala State Cooperative Milk Marketing Federation Ltd (KCMMF)
 Madhya Pradesh State Cooperative Dairy Federation Ltd (MPCDF)
 Maharashtra Rajya Sahakari Maryadit Dugdh Mahasangh (Mahasangh)
 Orissa State Cooperative Milk Producers' Federation Ltd (OMFED)
 Pradeshik Cooperative Dairy Federation Ltd (UP) (PCDF)
 Punjab State Cooperative Milk Producers' Federation Ltd (MILKFED)
 Rajasthan Cooperative Dairy Federation Ltd (RCDF)
 Tamilnadu Cooperative Milk Producers' Federation Ltd (TCMPF)
 West Bengal Cooperative Milk Producers' Federation Ltd. (WBCMPF)

Existing Milk processing and Milk products key players in Andhra Pradesh
  Tirumala Milk
 Heritage Foods
 Dodla Dairy
 Visakha Dairy
 Nandi Dairy
 Sangam Dairy

5.5 MARKETING PLAN AND STRATEGIES

The principal raw material is milk. Primarily, the milk is procured from the pre-agreement agents
or bulk chilling plants. However, based on the requirement, small portion of the milk will be
procured from the farmers as well. We have a clear define scope for the transportation of raw
milk as it is the responsibility of agents or bulk chilling plant vendors. The processed milk and
milk products are distributed to various retailers, supermarkets, to our own outlet and home
delivery distributors through the chilled transportation system to maintain the product quality and
durability.

5.5.1 Marketing Objectives

 Supply quality products and increase sales.

 Create the brand value.
 Increase in financial sales volume.
 Increase market share by effectively penetrating the market.
 Increase customer relationship.

5.5.2 Marketing Plan

Basically, we have adopted the following marketing technique to sell our products.

 Processing plant Consumer

 Processing plant Retailer Consumer

Our plan to sell the target market is through our own outlet distribution i.e. personal selling
(Point of sale merchandising) and supplying to retailers, supermarkets and external agents.
With this approach we can easily increase the local, rural, semi urban and urban customer base
there by increase in sales volume and brand value.

We would like to establish our brand Gumma’s value and penetrate the market by above stated
mechanism. Additionally, it also gives us an opportunity to serve the communities and people
with quality food within the affordable cost.

5.5.3 Marketing Strategy

A marketing strategy is a set of long-term decisions on how to meet the needs of existing and
potential customers of the company using its internal resources and external capabilities. The
purpose of developing the strategy is to determine the main priorities and proportions of the
company's development, considering the material sources of its provision and market demand.
Base Marketing Strategy

 Increase and maintain the market share of milk products – this can be achieved by a
combination of competitive pricing strategies, advertising, and sales promotion.
 Secures a dominant growth in the local market.
 Establish a mature market by driving out competitors, which would require a much more
aggressive promotional campaign, supported by a pricing strategy designed to make the
market unattractive for competitors.
 Increases usage by existing target markets.

Market Expansion Strategy

Our marketing expansion strategy is described as below.

 Phase1: In his phase our target is attract all the demographics in the ranges of 5-65
years old exclusively in Markapur division.

 Phase2: Expand the business service area to entire district of Prakasam.

 Phase3: During this phase expand to neighboring districts such as Kurnool, Guntur,
Nellore etc. Additionally, the milk processing plant will have new portfolio of Ice cream
plant. The strong focus will be on Young adults for Ice cream products.

 Phase 4: Expanded to different states of India especially strong customer network to

South India. During this phase, Milk Powder plant is added to the processing plant along
with required scale up.

 Phase5: Establish the business network to overseas and Indian subcontinent countries
as well. More focused approach to Milk Powder, Ice cream, Butter, Cheese and Ghee.

5.5.4 Pricing and Promotional Strategy

5.5.4.1 Product
The focus of Gumma’s Milk Products is mainly on milk and milk derivatives. The products that
are being produced are different types milk products such as Standard Milk, Ghee, Butter and
Curd (Dahi).

5.5.4.2 Place
Gumma’s Milk Products are planned to sell through the own outlet, retailers, supermarkets and
home delivery. During the starting phase, the sales place is exclusively limited to Markapur
division. Later stages as the expansion grows the locations will add accordingly.

5.5.4.3 Pricing Strategies

The pricing for Gumma’s Milk Products (GMP)will be decided based on the market orientation.
This type of strategy would be getting a price based upon analysis and research compiled from
the target market. This means that GMP will set prices depending on the results from the market
research. For instance, if the competitors are pricing their products at a lower price, then
Gumma’s should put a price below the price of the competitors to attract more consumers.
According to Porter’s generic strategies, GMP would fall under the cost leadership model, which
means the company delivers a good quality product at a lower price than the competitors.
Another way of positioning GMP pricing would be a penetrated pricing, which means GMP will
be the low-priced within the market but offers a great deal of value. The current prices for GMP
are about 5-10% lower than the current market value with great deal of quality and value
nutrition to customers. Refer to techno economic parameters for pricing details.

5.5.4.4 Promotional Strategies

To support the personal selling approach, we will promote through internet marketing in order to
introduce products and meet the marketing objectives of boosting the company’s awareness.

Local marketing
The following routes are well versed for local market and advertising.
 Local TV ads
 Wall posters
 Paper posters
 Big Hoardings
 Various promotional activities (such as sponsoring certain games during festive
seasons)
 Strong mouth publicity

Internet Marketing
Internet Marketing can provide significant benefits to an organization by providing a reach,
range, and scale. The convergence of technology has also driven an increase in the number of
devices organizations can leverage to reach their target market. The first and most obvious
advantage of a business website is the potential for reaching a wider audience. The Internet is
used by millions of people and all of them are looking for something. So, taking the business
online will potentially allow to take advantage of the growth and expand its business. The
website will be well structured for customer to be provided with necessary information about the
company. Also, there will be a catalogue of the product range on the website. For business
customers there will be an option of ordering products on the website and detailed contact
information of the sales department (telephone, email and address).

APP Marketing
This is similar lines of website purchase. However, application is developed and advertised the
app to get awareness amongst the people. The advertisement might include locally through wall
posters, cable network ad, various promotional outlets, exhibitions and strong mouth publicity.
The app is mainly focused to increase the online sales and subscriptions which has great reach
in terms of volume.

Social Media Marketing

Facebook and Twitter are the social media platforms most used for marketing. Facebook offers
the option of creating a fan page for a company or product, while Twitter makes use of a
limitation of 140-character posts that users follow. Blogs are online journals written by users,
which can be influential in spreading news and information. YouTube is a repository for
podcasts and videos, with a viewership of millions around the globe. Some sites offer display
advertising options, but the majority are simply a method of sharing information with others. The
most visible advantage of social media advertising is that it is very cost-effective, some sites
such, as Facebook, Twitter, and YouTube, are free of charge.
E-Mail Marketing
To stay constantly in the memories of our customers, our team will be sending promotional
information to customers through emails with the purpose of enhancing relationship and to
encourage customer loyalty. In the e-mails, the sales team will inform our customers about new
insights, promotions, and developments within GMP.

Sampling
GMP will introduce its new product range by sampling. The purpose of a free sample is to
acquaint the consumer with a new product. It is like the concept of a test drive, where the 39
customers can try out a product before purchasing it. Sampling of GMP products at selected
supermarkets will provide an opportunity for prospective customers to become aware of the
product and to taste the great flavors.

6. PROJECT DETAILS
The milk processing plant capacity is 10,000 liters per day, first year is operated for 6 months as
the construction, commissioning and available for operation takes another 6 months. The
operating capacity of the plant would be 70%, 90% and 95% capacity on first, second and third
year, respectively. From 4th year onwards the plant run with full capacity i.e. 10,000 liters per
day.

The plant location is at Markapur rural area, Prakasam District and Andhra Pradesh. The
estimated area required for the plant would be about 2 acres land with the built-up area to total
area should be normally around 1:3. The entire project site will be developed as per industry
standards and regulation requirement such as drainage, internal roads for vehicle mobility etc.

6.1 ESSENTIAL FACILITIES

The milk processing plant shall have the following essential facilities.

Essential facilities for Milk processing plant

Process Area Area /Purpose Description
Consisting of can conveyor, can washer,
Raw Milk Reception Dock (RMRD)
weighing balance, dump tank etc.
 Cream separator, chiller, homogenizer,
Processing Hall pasteurizer and other related machinery are
installed.
Storage area Milk storage tanks.
Equipment’s for Products such as Ghee, Buter,
Products manufacturing area
Curd
Packing area Packing of liquid milk and other products.
Keeping the milk and milk products before
Cold storage
sending to market.
Quality Control Laboratory Testing the quality of milk and milk products.
Installing boiler, generator set, water treatment
Utilities area
plant, maintenance and store area for spares.
Treating the dairy effluents before releasing to
Wastewater treatment plant area the
fields.
Quarters and office area For all the essential staff.
Vehicle parking area Milk procurement and distribution vehicles.
Providing veterinary service, supply of feed,
Input supply area
fodder seeds, etc.

6.2 Plant and Machinery

The section wise equipment required, their specifications and quantity for 10,000 liters capacity
milk processing plant are given below.

Qty
S.No Description [Number
]
I RECEPTION SECTION.  
1 Can Roller Conveyor. 3mtrs.  
2 Can Tip Bar. 1
3 Electronic Weigh scale S.S. Weigh Bowl 500 L. 1
4 S.S. Dump Tank - 1000 Ltrs. 1
5 Disc Filter. 1
6 Can Drip Saver suitable for 6 cans. 1
7 S.S. Can Scrubber. (40 Ltrs.) 1
8 S.S. Milk Pump. -1.5 H.P. 1
Set of Lab Equipment’s. 1 Set. (including milkoscan /
milkotester / Density meter / Cryoscope / Emulsion
9 1set
quality analyzer / HPLC etc. and the associated glass
ware 1 set
II PROCESS SECTION.  
1 S.S. Balance tank with Float. 100 Ltrs 1
 2 S.S. Milk Pump 2 H.P. 1
3 S.S. Milk Chiller, Cap. 3KLPH. (Make GEA) 1
4 S.S. Flow Control Valve. Manual. 1
5 Milk Pasteurizer - 2.5 KLPH. 1
6 S.S. Simplex Filter. 1
7 S.S. Holding Coil for 16 secs. 1
8 Flow Diversion Valve. Manual. 1
9 S.S. Remote Control Panel. 1
10 Interconnecting S.S. Pipeline & valves. 1 set
11 Cream Separator. Cap 500 Ltrs/ Hr. 1
12 Cream tank - 1 KL 1
13 Ghee Boiler - 250 Ltrs 1
14 Ghee Balance Tank & Pump 1 set
15 Ghee settling tank - 250 Ltrs 1
16 Milk Boiler for curd --500 Ltrs 1
17 Curd Balance tank & Pump 1
18 Cured Settling tank --500 Ltrs 1
19 CIP unit 1 set
III STORAGE & PACKING SECTION.  
1 H.M.S. T-M, S. Outter 5KL, Single Comp. 1
2 H.M.S.T-M.S. Outter 10K1, Double Comp. 1
3 S.S. Milk Pump, -1.0 H.P. 1
4 Pouch Packing Machine,5000 PPH, 2
5 S.S. Overhead Tank cap. 200ltrs. (lnsu) 1
6 Interconnecting SS Pipes and valves 1-set
7 Spare S.S. Pump for Tanker Filling  
8 G.l. Pipeline & controls, Driers for Air 1 set
9 Stabilizer for Packing Machine. 1
IV REFRIGERATION SECTION. 1 set
V UTILITIES  
1 Hot water generator. Cap. 50,000Kcal Hr. Wood Fired. 1
2 Chimney 3 Mtrs high above. 1
3 Makeup WaterTank & Valves. (FRP - 200ltr) 1
4 Water Softener Suitable Duty 1
5 G.l. Pipeline, valves & water Pump. 1
VI ELECTRICALS.  
1 MCCB Panel for above equipments. 1
2 All Cables, armored, flexible & others 1 set
3 Generator 63 KVA  
VII ERECTION &'COMMISSIONING 1Job.
6.3 Manufacturing Process

The milk will be taken directly from the milking collection centers to a cooling tank for temporary
storage and processed immediately. After cream separation process, the milk is filtered and
sealed with plastic bags or bottled and distributed to the market. Pasteurized milk would be
packed into 1 liter and 2-liter plastic containers. Ghee and butter would be packed into 250 and
500gram paper packages. Curd will be packed in to 250g, 500g and 1 kg packets or plastic
containers for distribution. Whole milk is partially or totally separated to produce standardized
whole milk with 3% milk fat.

The manufacturing process for milk and milk products for the 10,000 LPD plant are depicted as
below.

Raw Material (Milk)

Dump Tank

Filtration

Cooling & Storage

Preheating

Standardisation

Liuid Milk Cream Cream

Homogenisation Butter Ghee

Pasteurisation Packing Packing

Culture
Dahi tank
Packing Storage Storage

Packing Storage Distribution Distribution

Storage Distribution

Dsitribution
6.3 Infrastructural Facilities for Raw Material and Utilities

The principal raw material is milk. The milk is procured from the surrounding areas of Markapur
revenue division and further extended to entire Prakasam and neighboring districts as plant will
undergo different capacity expansion phases. Primarily, the milk is procured from the pre-
agreement agents or bulk chilling plants. However, based on the requirement, small portion of
the milk will be procured from the farmers as well. We have a clear define scope for the
transportation of raw milk as it is the responsibility of agents or bulk chilling plant vendors.

Additionally, small quantities of coagulation enzymes and salt are also required for the
production process. The raw (whole) cow milk and salt are available locally while the
coagulation enzymes must be imported. The auxiliary materials required for the envisaged plant
comprise packing materials like plastic bags, glycine paper and carton box. The plastic bags
and carton boxes can be acquired from the local market while the glycine paper has to be
imported.

The requirement of utilities for the milk processing plant is depicted as below.

Power
Power is one of the essential utilities as it is required for running equipments and machinery.
Typically, a 3-phase electricity supply is required for milk processing plants. The power
requirement depends upon the load to be connected. The necessary approval from SEB should
be obtained for connection. A, standby generators may be considered for connecting the
essential sections.

Water
A milk processing plant requires the water in the ratio of 2:1 (2 liters of water for 1 liter of milk
processed) for cleaning of equipments, cold storage and drinking purposes. Water is taken from
the well-established local pond and from the borewell drilled in the process plant premises.
(Approval from municipality shall be obtained for the pond water usage and other water
sources)

Steam
The steam required for the processes should be obtained from the boiler that installed in the
plant premises. The estimated steam requirement would be 1500 kg of steam per day. The
type of boiler could be coal/oil/gas fired / electric boiler. This will be finalized during the front-end
design phase of the project.

Fuel
The fuel is need for various processing operations. The type of fuel will depend upon the type of
boiler used for steam generation. It is therefore necessary to assess the requirement of
LDO/coal/gas and ascertain the easy availability before purchase of boiler.

Compressed Air
It will be required for various pneumatic operations flow control operations as well as for
Cleaning / leak test purposes. The total requirement of compressed air would be estimated as
150 SCF.

Vehicles
The vehicles required for procurement and distribution of milk depends on the quantity of milk to
be handled. Generally, insulated vehicles will be required to transport chilled milk and reefer
vans for transport of finished products like curd, butter, ice cream, cheese, etc.

Other Services
A maintenance workshop is an integral part of milk processing for carrying out repairs and
maintenance of equipment.

6.4 Manpower

For a plant with capacity of 10000 LPD the manpower required is described as below

Manpower Requirement

Salary /Wages
S. Numbe
Particulars Per
No r Per Year
Month
1 Plant Manager 1 ₹ 50,000 ₹ 600,000
2 Plant Operator 1 ₹ 25,000 ₹ 300,000
3 Field / Marketing supervisors 2 ₹ 20,000 ₹ 480,000
4 Processing supervisors 1 ₹ 20,000 ₹ 240,000
5 Mechanics 2 ₹ 15,000 ₹ 360,000
6 Driver 1 ₹ 10,000 ₹ 120,000
7 Watchman 2 ₹ 10,000 ₹ 240,000
8 Administrative/ Accounts staff 2 ₹ 15,000 ₹ 360,000
9 Laboratory staff 2 ₹ 15,000 ₹ 360,000
10 Dairy labor 8 ₹ 10,000 ₹ 960,000
  Total Manpower & Wages 22   ₹ 4,020,000

6.5 Environmental Aspects and Pollution Control

The process involved is milk pasteurization and processing of milk into milk and products such
as curd, butter and ghee. The milk processing plants must be hygienically designed and easily
cleaned to prevent contamination of products by insects, birds, rodents or microorganisms. The
dairy products plant does not have any pollutant emitted from the production process, except
the washing water, which must be connected to appropriate sewerage line to get rid of. Thus,
the envisaged project is environment friendly.

The effluent will be in the form of washed water and milk solids apart from the detergents and
sanitizers used in the plant. There are no hazardous effluents generated from a milk processing
plant. However, effluent water is treated in ETF for treating the effluents before discharging for
proper disposal. The final effluent should meet the requirements of Pollution Control Board and
is necessary to get clearance from them. The treated water can be utilized for irrigation or
creating a biotic zone where plants can be grown in and around the dairy plant.

6.6 Products Specification

The final products are standard milk, Ghee, Curd (Dahi) and Butter. The milk and milk products
specifications are given as below.
Milk
Specification
Parameter Value

Milk Fat 3%
SNF 9%

Urea, max 700 ppm

Ghee Specification
Parameter Ghee

Moisture, maximum, %, (m/m) 0.5

Butyro-refractometer Reading at 40 C 40.72

Reichert Meissl Value, minimum 40.2

FFA as Oleic Acid, maximum, % 3
Peroxide Value (Milli-equivalent of Oxygen/Kg
–
fat), maximum
Baudouin Test Negative

Butter Product Specification

White butter/
Parameter Table butter
Cooking butter
Moisture, maximum,
16 –
%, (m/m)
Milk fat, minimum,
80 76
%, (m/m)
Milk solids-not-fat,
2 –
maximum, %, (m/m)
Common salt,
maximum, %, 3 –
(m/m)
 Dahi Specification
Dahi (Curd) Lactic acid bacteria
Symbiotic cultures of Streptococcus
Yoghurt thermophilus and Lactobacillus
delbrueckii sub sp. bulgaricus

Cultures of Streptococcus thermophilus

Alternate Culture
and Lactobacillus species

Acidophilus Lactobacillus acidophilus.

Microorganisms
constituting the 107 cfu /g
starter culture
Minimum milk
2.9 % (m/m)
protein content
Minimum titrable
0.45% (m/m as lactic acid)
acidity

6.7 Schedule of Implementation

Generally, it takes about 4 to 6 months period for getting the DPR, obtaining loan sanctions,
approval of plans, finalizing the suppliers and construction of various civil structures and
installation of plant and machinery. Hence, during first year of operations, only six months
of milk procurement can be assumed.
7. PROJECT FINANCIAL PLAN

7.1 CAPITAL COST OF PROJECT

Broadly the capital cost includes the cost of land, development of land, fencing, internal roads,
civil works (Plant building, office, quarters etc.), plant and machinery, preliminary and
preoperative expenses, margin money for working capital, etc. The project cost of 10,000 LPD
milk processing and defined products plant is illustrated as below.

Capital Cost Summary

S. Cost
Component
No [Lakhs]
1 Land and Site Development ₹ 22
2 Civil Works ₹ 61
3 Plant & Machinery ₹ 182
4 Misc. Fixed Assets ₹ 34
5 Vehicles ₹ 10
6 Preliminary & Pre-Operative Expenses ₹ 35
7 Contingency @ 5% ₹ 17
8 Margin For working capital ₹ 15
  Total ₹ 376
 Capital Cost for Milk Processing Capacity 10,000 LPD

Land and Site Development Civil Works

Plant & Machinery Misc. Fixed Assets
Vehicles Preliminary & Pre-Operative Expenses
Contingency @ 5% Margin For working capital

7.2 ECONOMICS OF THE PROJECT

The project economic parameters at a glance for the 10000 LPD milk processing unit is
described as below.

Based on the various techno-economic parameters, the economics of the project has been
computed till the repayment of bank loan. The items of income include sale of liquid milk and
milk products. while the expenditure includes the cost of raw material, transportation and
commission, power, fuel, packing distribution, wages and salary, repairs and maintenance,
insurance, advertisement and other overheads. The income as well as expenditure for each
year has been estimated and then it should be subjected to cash flow analysis. Additionally, 5%
& 2% increment on expenditure and income is taken in to account each year. For the Gumma’s
milk processing and products plant of 10000 liters per day, the relevant techno-economic
parameters are furnished as shown in below table.

Table II - Project at glance for 10,000 LPD Milk Processing Plant

[Lakhs]
1 Land requirement 2 acres
2 Milk handling capacity 10000 liters/day
3 Products to be manufactured Milk, Ghee, Butter and Dahi
4 Market Domestic
5 Cost of the Project ₹ 376
6 Bank loan ₹ 282
7 Margin money (down payment) ₹ 94
8 Financial Viability (at 15% DF)  
  BCR 1.14
  NPW ₹ 1,315
  IRR 117%
9 Repayment 7 years with one-year Grace period

Table III - Techno Economic Parameters

Parameter Particulars
Capacity of the unit 10,000 Liters per day
70% in first year, 90% for second year,
95% from third year and 100% thereafter
Capacity utilization onwards
180 days in first year and 365 days from second
No of days working year onwards
Average procurement price of milk ₹ 50
per litre (6% fat)
Average Sale price of products  
Milk per liter (3% fat) ₹ 55
Butter per kg (40% Fat) ₹ 450
Ghee per kg ₹ 450
Dahi per kg ₹ 50
Commission and Transportation ₹ 2.00
charges per liter
Power and fuel per liter ₹ 1.00
Packing material per liter ₹ 1.20
Chemicals & detergents per liter ₹ 0.35
Repairs and maintenance 5% of cost of plant and machinery
2 % of cost of plant and machinery & Civil
Insurance structures
 Milk distribution cost per liter ₹ 1.75
Commission to Agents on milk ₹ 1.75
marketed per liter
Advertisement and Sales promotion ₹ 0.30
per liter of milk
Procurement and processing losses 0.5% of milk procured
Product mix  
Milk 100% of milk processed
Butter Obtained from excess fat in the milk processed
Ghee From the cream obtained
Dahi From the milk obtained
10% for civil structures and 15% for plant and
Depreciation machinery
13.5% p.a for working capital and 14% p.a for
Rate of interest term loan

7.3 FINANCIAL ANALYSIS

Based on the assumptions listed out in Techno Economic parameters on input and output
parameters, an Income Expenditure statement (Cash Flow Statement) has been prepared and
is presented as below.

The financial indicators such as Net Present Worth (NPW), Benefit Cost Ratio (BCR), Internal
Rate of Return (IRR) etc., analyzed by discounting cash flow @15% discounting rate are
described in the following table.

Table - Income Projections

[Lakhs]
Yearly Projections
S.No Particulars Units
I Year II Year III Year IV Year V Year
1 Installed Capacity liters/day 10,000 10,000 10,000 10,000 10,000
2 Milk Procured liters/day 7000 9000 9500 10000 10000
3 Milk Processed liters/day 6965 8955 9453 9950 9950
4 Sales Per day
Milk (3% fat) liters/day 3204 4119 4348 4577 4577
Butter liters/day 244 313 331 348 348
Ghee kg/day 139 179 189 199 199
Dahi kg/day 3140 4037 4261 4485 4485
5 Income Per day (Rs/liter or kg)
Milk (3% fat) ₹ 55 ₹ 1.76 ₹ 2.29 ₹ 2.42 ₹ 2.54 ₹ 2.54
Butter ₹ 450 ₹ 1.10 ₹ 1.42 ₹ 1.50 ₹ 1.58 ₹ 1.58
Ghee ₹ 450 ₹ 0.63 ₹ 0.81 ₹ 0.86 ₹ 0.90 ₹ 0.90
Dahi ₹ 50 ₹ 1.57 ₹ 2.04 ₹ 2.15 ₹ 2.27 ₹ 2.27
6 Total income per day ₹5 ₹7 ₹7 ₹7 ₹7
7 Income per year (I year 180 days only) ₹ 910 ₹ 2,396 ₹ 2,530 ₹ 2,663 ₹ 2,663
Income per year Cr ₹ 9.10 ₹ 23.96 ₹ 25.30 ₹ 26.63 ₹ 26.63
 Income, [Cr] Income-Yearly Projections

V Year
₹ 30.00
IV Year
₹ 25.00
₹ 20.00 III Year
₹ 15.00
II Year
₹ 10.00
₹ 5.00
I Year

YEAR
₹ 0.00
1

Table V–Expenditure Projections

Years [Lakhs]
Particulars
I II III IV V
Procurement cost of milk ₹ 630 ₹ 1,675 ₹ 1,768 ₹ 1,862 ₹ 1,862
Commission and Transportation
₹ 25 ₹ 67 ₹ 71 ₹ 74 ₹ 74
charges
Power and fuel ₹ 13 ₹ 34 ₹ 35 ₹ 37 ₹ 37
Packing material ₹ 15 ₹ 40 ₹ 42 ₹ 45 ₹ 45
Chemicals & detergents ₹4 ₹ 12 ₹ 12 ₹ 13 ₹ 13
Salaries and wages ₹ 40 ₹ 42 ₹ 44 ₹ 47 ₹ 49
Repairs and maintenance ₹9 ₹9 ₹9 ₹ 10 ₹ 10
Insurance ₹5 ₹5 ₹5 ₹5 ₹5
Milk distribution cost ₹ 22 ₹ 59 ₹ 62 ₹ 65 ₹ 65
Commission to Agents on milk
₹ 22 ₹ 59 ₹ 62 ₹ 65 ₹ 65
marketed
Advertisement and sales promotion ₹4 ₹ 10 ₹ 11 ₹ 11 ₹ 11
Interest on Working Capital ₹ 6.00 ₹ 5.51 ₹ 4.95 ₹ 4.30 ₹ 3.56
Total Operational Cost for Milk
Plant ₹ 795 ₹ 2,017 ₹ 2,128 ₹ 2,238 ₹ 2,240
(180 days in first year) [ Lakhs]
Total Operational Cost for Milk Plant
₹ 7.95 ₹ 20.17 ₹ 21.28 ₹ 22.38 ₹ 22.40
(180 days in first year) [ Cr]
 Expenditure -Yearly Projections

₹ 25.00

₹ 20.00
Expenditure, [Cr]

₹ 15.00

₹ 10.00

₹ 5.00

₹ 0.00
I II III IV V

Year

Table - Calculation of NPW, BCR & IRR

[Lakhs
]
Particulars / Year I II III IV V VI VII VIII IX
A. Costs                  
₹
1. Capital costs ₹0 ₹0 ₹0 ₹0 ₹0 ₹0 ₹0 ₹0
376
₹ ₹ ₹ ₹ ₹ ₹ ₹ ₹ ₹
2. Recurring costs
795 2,017 2,128 2,238 2,240 2,285 2,330 2,377 2,425
₹ ₹ ₹ ₹ ₹ ₹ ₹ ₹ ₹
Total Cost
1,172 2,017 2,128 2,238 2,240 2,285 2,330 2,377 2,425
B. Income Benefits
                 
₹ ₹ ₹ ₹ ₹ ₹ ₹ ₹ ₹
a. Milk plant
910 2,396 2,530 2,663 2,663 2,689 2,716 2,743 2,771
b. Depreciation value of
₹0 ₹0 ₹0 ₹0 ₹0 ₹0 ₹0 ₹0 ₹0
assets
₹ ₹ ₹ ₹ ₹ ₹ ₹ ₹ ₹
C. Total Benefits
910 2,396 2,530 2,663 2,663 2,689 2,716 2,743 2,771
-₹ ₹ ₹
Net Benefits ₹ 425 ₹ 423 ₹ 405 ₹ 386 ₹ 366 ₹ 346
262 379 402
Discount Factor @15% 0.87 0.76 0.66 0.57 0.50 0.43 0.38 0.33 0.28
₹ ₹ ₹ ₹ ₹
Discount costs@15% ₹ 988 ₹ 876 ₹ 777 ₹ 689
1,019 1,525 1,399 1,280 1,114
 ₹ ₹ ₹ ₹ ₹ ₹ ₹
Discounted Benefits @15% ₹ 897 ₹ 788
791 1,812 1,663 1,522 1,324 1,163 1,021
Discount Rate 15%
   
Net Present Worth (NPW) 1315
 
Benefit Cost Ratio (BCR) 1.14
Internal Rate of Return 117
(IRR) %

Table Financial Indicators Analysis

Standards /
S. No Financial Indicators Value
Norms
1 Net Present Worth (NPW) 1315 Should be +ve
2 Benefit Cost Ratio (BCR) 1.14 >1.0
3 Internal Rate of Return (IRR) 117% >15%
4 Debt Service Coverage Ratio 4.11 >1.50

7.4 WORKING CAPITAL

Working capital is the most crucial input for viability of any milk processing unit. These days,
banks are free to finance working capital based on actual need of the project. A provision of
adequate working capital needs to be considered by the financing banks. The banks provide
Cash Credit Limit, commonly known as CC limit to the projects for meeting their day to day
expenses. The different components of working capital are work-in-process, finished goods,
sundry debtors and sundry creditors. The assessment of working capital for the processing plant
is presented in below table.

Table – Working Capital Calculation

[Lakhs]
S.N Unit Period Years [Lakhs]
Particulars
o cost days I II III IV V
₹ ₹
1 Stock in progress ₹ 50 1 ₹ 3.50 ₹ 4.50 ₹ 5.00
4.75 5.00
₹ ₹
2 Packing material ₹1 30 ₹ 2.52 ₹ 3.35 ₹ 3.72
3.54 3.72
₹ ₹
3 Chemicals and detergents ₹0 30 ₹ 0.74 ₹ 0.98 ₹ 1.09
1.03 1.09
₹ ₹
4 Stores, spaces and fuel   30 ₹ 0.05 ₹ 0.05 ₹ 0.06
0.06 0.06
5 Finished goods              
  Milk (3%) ₹ 55 1 ₹ 1.76 ₹2 ₹2 ₹3 ₹3
  Butter ₹ 450 15 ₹ 16 ₹ 21 ₹ 23 ₹ 24 ₹ 24
  Ghee ₹ 450 15 ₹9 ₹ 12 ₹ 13 ₹ 14 ₹ 14
  Dahi ₹ 50 10 ₹ 16 ₹ 20 ₹ 22 ₹ 23 ₹ 23
6 Receivables   7 ₹ 35 ₹ 46 ₹ 49 ₹ 51 ₹ 51
   Total (1to 6)     ₹ 86 ₹ 111 ₹ 117 ₹ 123 ₹ 123
Less Sundry creditors
    7 ₹ 25 ₹ 32 ₹ 33 ₹ 35 ₹ 35
(days)
Total working capital
      ₹ 61 ₹ 80 ₹ 84 ₹ 88 ₹ 88
required
  Margin money @25%   25% ₹ 15 ₹ 20 ₹ 21 ₹ 22 ₹ 22
  Bank cash credit   75% ₹ 46 ₹ 60 ₹ 63 ₹ 66 ₹ 66

7.5 DEPRECIATION SCHEDULE

There are two different methods for assessment of depreciation on fixed assets namely Written
Down Value Method (WDV) and Straight-Line Method (SLM). These methods are used
invariably to submit the returns to Registrar of Companies & Income Tax Authorities. For this
project, we have followed WDV method for computation of depreciation in the present model
and the schedule of depreciation is presented in below schedule.

Table VI - Depreciation Schedule

Total
Assets
Written down value method, [Lakhs]
Depreciati
on value
Year
Misc.
Civil Depr. @ Plant & Depr. @ fixed Depr. @
Structures 10% p. a Machinery 15% p. a assets & 15% p. a
vehicles
1 ₹ 61 6.1 ₹ 182 27.3 ₹ 44 6.6 ₹ 40
2 ₹ 55 5.5 ₹ 155 23.2 ₹ 37 5.6 ₹ 34
3 ₹ 49 4.9 ₹ 131 19.7 ₹ 32 4.8 ₹ 29
4 ₹ 44 4.4 ₹ 112 16.8 ₹ 27 4.1 ₹ 25
5 ₹ 40 4.0 ₹ 95 14.3 ₹ 23 3.4 ₹ 22
6 ₹ 36 3.6 ₹ 81 12.1 ₹ 20 2.9 ₹ 19
7 ₹ 32 3.2 ₹ 69 10.3 ₹ 17 2.5 ₹ 16
8 ₹ 29 2.9 ₹ 58 8.8 ₹ 14 2.1 ₹ 14
9 ₹ 26 2.6 ₹ 50 7.4 ₹ 12 1.8 ₹ 12
10 ₹ 24 2.4 ₹ 42 6.3 ₹ 10 1.5 ₹ 10
7.6 REPAYMENT PERIOD AND DSCR

The repayment period has been drawn by considering net surplus available for repayment. The
bank loan with interest is repayable within 7 years with a grace period of one year. The details
are summarized in the following table. The debt service coverage ratio based on assumed
techno economic parameters is estimated to be 4.11.

Table VIII – Repayment Schedule

[Lakhs]
Gross
Outstanding Total EMI Principal Interes Gross income
Project Income
loan amount payable paid t paid available
Year before tax
[Lakhs] [Lakhs] [Lakhs] [Lakhs] [Lakhs]
[Lakhs]
1 ₹ 277.50 ₹ 57.83 ₹ 21.03 ₹ 36.80 ₹ 114.69 ₹ 56.86
2 ₹ 256.47 ₹ 57.83 ₹ 24.05 ₹ 33.78 ₹ 379.29 ₹ 321.47
3 ₹ 232.43 ₹ 57.83 ₹ 27.50 ₹ 30.32 ₹ 401.97 ₹ 344.15
4 ₹ 204.93 ₹ 57.83 ₹ 31.45 ₹ 26.37 ₹ 424.63 ₹ 366.80
5 ₹ 173.47 ₹ 57.83 ₹ 35.97 ₹ 21.85 ₹ 422.74 ₹ 364.91
6 ₹ 137.50 ₹ 57.83 ₹ 41.14 ₹ 16.69 ₹ 404.57 ₹ 346.74
7 ₹ 96.36 ₹ 57.83 ₹ 470.58 ₹ 10.78 ₹ 385.77 ₹ 327.94
8 -₹ 374.22 ₹ 57.83 ₹ 53.81 ₹ 4.02 ₹ 366.32 ₹ 308.49
Table – Cashflows and DSCR
[Lakhs]
Year [Lakhs]
Particulars
I II III IV V VI VII VIII
Gross Surplus ₹ 114.69 ₹ 379.29 ₹ 401.97 ₹ 424.63 ₹ 422.74 ₹ 404.57 ₹ 385.77 ₹ 366.32
Interest on Term Loan ₹ 36.80 ₹ 33.78 ₹ 30.32 ₹ 26.37 ₹ 21.85 ₹ 16.69 ₹ 10.78 ₹ 4.02
Depreciation ₹ 40.00 ₹ 34.31 ₹ 29.43 ₹ 25.27 ₹ 21.70 ₹ 18.64 ₹ 16.03 ₹ 13.79
Profit Before tax ₹ 37.89 ₹ 311.21 ₹ 342.22 ₹ 372.99 ₹ 379.19 ₹ 369.24 ₹ 358.96 ₹ 348.52
Income tax ₹ 11.37 ₹ 93.36 ₹ 102.66 ₹ 111.90 ₹ 113.76 ₹ 110.77 ₹ 107.69 ₹ 104.56
Profit after tax ₹ 26.52 ₹ 217.85 ₹ 239.55 ₹ 261.09 ₹ 265.43 ₹ 258.47 ₹ 251.28 ₹ 243.96
Cash accruals ₹ 103.32 ₹ 285.93 ₹ 299.31 ₹ 312.73 ₹ 308.98 ₹ 293.80 ₹ 278.08 ₹ 261.77
                 
Term loan Repayment                
Term loan outstanding at start ₹ 277.50 ₹ 256.47 ₹ 232.43 ₹ 204.93 ₹ 173.47 ₹ 137.50 ₹ 96.36 -₹ 374.22
Term loan Instalment ₹ 21.03 ₹ 24.05 ₹ 27.50 ₹ 31.45 ₹ 35.97 ₹ 41.14 ₹ 470.58 ₹ 53.81
Interest on Term loan ₹ 36.80 ₹ 33.78 ₹ 30.32 ₹ 26.37 ₹ 21.85 ₹ 16.69 ₹ 10.78 ₹ 4.02
Total Repayment ₹ 57.83 ₹ 57.83 ₹ 57.83 ₹ 57.83 ₹ 57.83 ₹ 57.83 ₹ 481.36 ₹ 57.83
Term loan outstanding at end ₹ 277.50 ₹ 256.47 ₹ 232.43 ₹ 204.93 ₹ 173.47 ₹ 137.50 ₹ 96.36 -₹ 374.22
                 
Debt Service Coverage Ratio 1.79 4.94 5.18 5.41 5.34 5.08 0.58 4.53
(DSCR)
Average DSCR 4.11  
 Gross and Net Profit
440
420
400
380
360
340
320
300
280
Profit, [Lakhs]

260
240
220
200
180
160
140
120
100
80
60
40
20
0
1 2 3 4 5 6 7 8

Year

Gross income available Gross Income before tax Net Profit

[Lakhs] [Lakhs]

7.7 GRANT & SUBSIDY

There are number of incentives available from Central & stat governments

Central Government

 Dairy Entrepreneurship Development Scheme by NABARD.

o Back ended capital subsidy @25% of the project cost for general category and
@33% for SC/ST farmers.
o Entrepreneur Contribution (Margin) for loans beyond Rs. 1 lakh - 10% of the
project cost
 10% incentives on export of Milk and Milk products (10% of total cost)
 GST reduction on Ghee and Butter (from 12% to 5%).
 GOI provides a subsidy of Rs 50 a liter for export of milk powder.
 Dairy Process and Infrastructure Development fund
 Various other incentives on Dairy development and Strat-ups.

Andhra Pradesh State Government

  Project capital cost subsidy program
 Interest subsidy program on fixed term loans
 Various incentives such as land conversion charges, electrical charges, stamp duties
etc.
 Transportation and export incentives.

Additionally, Ministry of Food Processing Industry, GOI is implementing a centrally sponsored

scheme for known as National Mission on Food Processing (NMFP) jointly with State
Governments. Subsidy is available under this scheme for various purposes under food
processing industries. GOI has appointed State Nodal Agencies for implementing this scheme
in different states. Furthermore, the subsidy may also be available under the credit linked
subsidy scheme "Integrated Scheme for Agriculture Marketing (erstwhile
Development/Strengthening of Agricultural Marketing Infrastructure, Grading and
Standardization) of GOI as per the scheme guidelines.
8. RISK ANALYSIS & PLAN

Every industrial project includes risks, which can be depended on external issues or company’s
abilities to manage or run the business. Before making investment decision, we must point out
all the known and foreseen risks and to eliminate as many of them as possible. Even if we make
the preparative works well, some things will remain uncertain or it is hard to forecast them. After
eliminating or deceasing possibilities of realization of risks, we will decide if we can live with the
remaining risks or we consider them too dangerous to continue the project.

8.1 LIST OF RISKS AND QUESTIONS TO BE ANALYZED

Below listed items can be considered as potential risks. All of them must be analyzed and each
risk should be minimized.

Table List of Risks and questions to be analyzed

Risk Raw material Technical process End Products

Can we finance the
investment.

Is the Company capable Can we keep the

Can we afford to keep
Financial to finance raw material Investment budget.
products in stock
flow
Can we bear possible
delay or stop of the
production process
Can we make end
Is the quality of raw milk Does the technology and
Technical products good enough
enough technical process work
for market
Can we get professional
labor.
Human Can we get salesman
 
resources for the products
Do we have the right
management
Restrictions

What kind of restrictions Permissions

Health, Safety What kind of restrictions there are for processing
and there are for storing of raw milk. Certificates
Environment raw milk
Permissions needed Analyzes

Authority control
 What if we cannot get Can our competitors Are there any other
Competitors milk (raw material) due to establish similar or better products similar or
competitors process better than ours
What is the public Any inconvenience to
Public opinion about
Public opinion opinion about the milk public due to our process –
our products
plant their possibility to act.
Can we get the machinery
in time
Time / Can we get enough raw Are we delivering
scheduling material in time intime
Is this the right time to
establish the factory

Can we get the price

budgeted – how does
the price effect to
Market How stable is the raw
  result.
(price/volume) material price
Is there market enough
for our products.

Is there enough raw How easily we can What is the volume of

material for growth. increase capacity. market.
Business
growth
Can we use other raw How easily we can Is there a market for
materials. establish new plants new products
What if legislation Are there any legal issues Are there any legal
Legal aspects concerning milk preventing milk processing issues limiting use milk
processing changes process and milk products

Importance and level of each risk will be evaluated numerically and most of the attention will be
paid to solve the most important issues.

8.2 RISK ANALYSIS

Next, we must analyze problems above – their probability and possible impact to success of
investment. We estimate the probability of current risk in scale 0 to 5 as follows.
Table Risk Rank Matrix

Risk Rank Risk Description

No risk at all – probability that this risk comes true is zero or it does not
0
affect to result of investment project at all
Only theoretical risk – generally this could happen, but probability is very,
1
very low and possible effect to project is barely noticeable
Low / Slight risk – probability is very low and/or possible effect in case risk
2
is realized is very limited
Moderate risk – probability is low and/or effect to project is moderate. This
3 risk realization will not cancel the project but effect to financial result or
timing.
Risk – this risk is reality and could come true and/or the effect of the
4 realized risk is remarkable. Risk coming true will affect seriously to financial
result, timing or status in market etc.
High risk – probability for this risk is remarkable and/or the result of the
5 realized risk is fatal for the project. Risks evaluated in this level shall be
carefully analyzed and possible effects and counteracts estimated.
Table Risk Analysis with Resolutions

Level
Section Problem/risk Short Analyze, solution of
Risk
Bulk Chilling vendors / Cooperative society agents should sign an Agreement for
Is the company capable
delivery of raw material to plant. Agreement should be valid until end of 2025. Raw
to finance raw material 2
material can theoretically be problem only after that. However, this item must be
flow?
agreed with raw material supplier.
Investment for the plant is approximately INR 375 Lakhs. It is essential that the whole
Can the Company financing is firmly agreed before investment decision. Certainly, lack of financing will
4
finance the project? stop the project. However, margin money required for the project will be arranged by
the founders and their investors.
Financial risks

Gumma's has received the technical quotes from the technical consultants and from
Can the company keep
Original Equipment Manufacturers (OEM). The rental/purchase agreement for the 1
in investment budget?
building should be done using Gumma's consultancy.
Salaries are the biggest expense item in operative budget, representing about 20 %
Can we bear possible of the costs. If the plant is idling 6 months with full personnel, the annual incomes are
delays or standing time decreased 50 % but the production is profitable. If any standing time will be longer 1
of production? than 2 months, it is possible to dismiss temporarily workers until problem is solved
and thus save in expenses.
The stock capacity is planned to keep one-month production in stock, capacity is
enough for that. According to preliminary agreements concerning sales of and
Can we afford to keep
products should be delivered weekly and invoiced monthly. Considering the EBIT >50 2
products in stock?
% company can bear stocking the goods a few months financially, but company’s
own stores are not enough.
     
Generally, raw milk is tested for quality check before it processes in the plant. If the
milk passes the quality checks then only the milk will go ahead for further processing,
Is the quality of raw
technology
Technical,

else raw milk will be returned to vendor without processing. Therefore, there is no 1
milk good enough?
processing of raw milk if the quality is not good. However, machinery is compatible
for all types of raw milk.
Does the technology Dairy processing technology is state of art technology and was using quite some time
0
and technical process from now. We are using only tested technology which is already in use at Gumma's
 premises. There are plenty of factories using similar technology from the suppliers we
work properly?
are using.
The technical collaboration consultant give guarantee for the products for two years
from inception of the project. However, there is less probable chance to affect the
Can we make end
product quality if you maintain the good practices in the process plant and quality of
products good enough 2
raw milk is good enough. Additionally, we check the product quality on regular basis
for the market?
before dispatching to markets. Therefore, if any quality deviation from the predefined
specification, the products will be discarded.
     
The availability of the labor is not a problem as the dairy processing plants are
Can we get operating quite some time now in the state of Andhra Pradesh. Moreover,
2
professional labor? mobilization of labor across the country becomes normal and easy, thanks for the
developed infrastructure. Therefore, getting labor is not a foreseen problem.

Management now is the one who will work out the plan. Key persons are experienced
Human Resources

Do we have the right

in business and international operations and they are dedicated to this business. This 3
management?
group also has very good experience of the technology and business.

Can we get salesmen

Good quality young manpower is available locally for salesman. 1
for the products?

     
What kind of
and Environment

Generally, there are no restrictions if they are properly stored and protected from
restrictions there are for 1
Health, Safety

spoiling its quality. It is highly recommended to keep the storage space at 40C.
storing of raw milk?
What kind of There are no restrictions if meets all the requirements set from authorities. We need
restrictions there are for to co-operate closely with Environmental authorities concerning effluent treatment 2
processing old milk and type of production
 Process requires food license from fssai, HSE certificate and permission. Most
Permissions needed probably we will hire an external consult for taking care of permissions required. That 2
is a time-taking easily the limits set by officials. Time may be the critical factor.

Restrictions

Permissions

Certificates
GMP will cooperate with professionals controlling quality, emissions and process. 1
Analyzes

Authority Control

     
What if we cannot get A binding contract concerning delivery of milk should be signed already in the
milk (raw material) due preliminary stage. This is an important matter and therefore alternative suppliers will 2
to competitors be named and the situation with them will be periodically checked.
Competitors

We will negotiate with machinery supplier about local exclusivity to use their
machinery. Also, we should guarantee the exclusivity to use the raw material in our
Can our competitors market area. After combining these two items, competitors may build similar plant
establish similar or using worse machinery, but they do not have opportunity to get the quality raw 2
better process material as well. Therefore, competitor’s sustainability in the market is big challenge
for them. Considering the sales of our products, there is enough market for all
players.
 Products made of milk are corresponding to ours, but technically we are at the same
Are there any other level and pricewise we can sell even cheaper if necessary. A big advantage is that
products similar or our products are derived from our own dairy farm milk which has got lot of good 2
better than ours quality and process the milk quickly within couple hours from the milking. Therefore, it
gives an opportunity to maintain the better quality from others.
     
What is the public This issue must be discussed with representatives of local community and make them
1
opinion about plant aware about noise and potential hazards.
The process involved is milk pasteurization and processing of milk into milk and
products such as curd, butter and ghee. The milk processing plants must be
hygienically designed and easily cleaned to prevent contamination of products by
Public opinion

Any inconvenience to
insects, birds, rodents or microorganisms. The dairy products plant does not have any
public due to our
pollutant emitted from the production process, except the washing water, which must 1
process – their
be connected to appropriate sewerage line to get rid of. Thus, the envisaged project
possibility to act?
is environment friendly.

Open informing and marketing are key factors for creating and keeping a “clean &
Public opinion about
green” image to our products. Public is always in favor of quality food production 1
our products?
facilities.
     
We have our own dairy farm to supply raw milk (half of the plant capacity). For the
remaining capacity, we must make long-term agreements with milk vendors /
Can we get enough raw
cooperative society agents for supply of raw milk. We have planned to build a store 2
material in time?
for 10,000 tons of milk so that we have always milk enough for process. Furthermore,
Time/scheduling

in future it is possible to import from other dairy farms as well.

Can we get the Delivery time for the main components is 2-3 months according to offer but we have
1
machinery in time? considered 4 months in our main schedule.
The current population of Markapur revenue division is about 2.0 Lakh and the
required milk would be 82,000 liters per day. However, the current cattle and buffalo
Is this the right time to population producing about 40,000 liters per day. Therefore, there is strong demand
0
establish the factory? for processed milk and milk products by considering the perishability nature of raw
milk. All the factors are now on our side – technology is state of art and developed,
long term location problem with bulk storage for milk, public opinion about facility,
 state policy and financial aid…All these factors support project now.
Our production is process type, so that it is possible to estimate rather accurately
Are we delivering end
monthly production and agree upon deliveries accordingly. We also will have one- 0
products in time?
month buffer stock at the plant to balance deliveries.
       
Our contract for milk delivery should guarantee the stabile milk price until year 2022.
How stabile is the raw
After that, the price shall be negotiated again. Different avenues will be explored to 2
material price
get the quality raw milk form the dairy farms across the state.
Market (price/volume)

Can we get the price

budgeted for end The price considered for the end products are based on market survey and we are
products – how does quoting 5-10% less than the existing market. Therefore, quality products with less 1
the price effect to cost from the existing market price always favorable to consumers.
result?
All the 4 products produced are commodities having already a very large market. We
Is there market enough will sign preliminary contract concerning sales. For starting the plant, at least 60% of
2
for our products? the revenues should be secured by preliminary agreements. Especial attention will be
paid to increase the value of carbon for suitable customer.
       
The quality of life, affordability, disposable income made people inclined towards
quality food such as processed milk and milk products by considering the perishability
Is there enough raw nature of raw milk. These facts made mushrooming of dairy farms especially in the
1
material for growth? state of Andhra Pradesh. Additionally, we wanted to double our dairy farm capacity
Business growth

each year. Therefore, availability of raw material for our expansion of milk plant is not
envisaged.
Can we use other raw Raw milk is the principal raw material. As said before availability of raw milk is not a
1
materials? foreseen problem.
How easily we can There is no technical, legal or management excuse preventing increase of capacity,
0
increase capacity? only question existing question is financing.
What is the volume of End products we produce are standard commodities having a huge market already in
market for end India. Certainly, products are coming into competed market, but they are very 1
products? competitive compared to existing products.
 Gumma's will invest into R&D and development in order to increase quality of
Is there a market for
products and develop new ones. We will follow Gumma's R&D innovations and 2
new products?
realize them if it can provide even better profitability for us.

       
Our way to provide quality food with affordable cost. Large population growth, quality
What if legislation
of life and disposable income made demand. We expect legislation to be changed
concerning milk 1
during next ten years, but it will be changed into more ecological direction providing
processing changes?
Legal aspects

even better position for us.

Are there any legal
There are no laws or other legal matters preventing milk processing if environmental
issues preventing milk 1
permission is correctly granted and observed.
process?
Are there any legal
issues limiting use of No, on the contrary. It is possible to gain tax discount for milk products. 0
milk products?
8.3 FINDINGS OF THE RISK ANALYSIS

Based on the risk evaluation, we have found out three most important risks which are needed to
analyze deeper. In the following sections risks related to financing, and management are
analyzed.

3.1.1 Risks on Financing

We are starting a new company without any remarkable funds or assets, so that both
establishment of the business and business growth shall be financed by funds coming outside
of the company. Company business will be on healthy basis and estimated profit (EBIT) is on
very good level. This provides possibility to pay the external loans back in rather short time
period.
Nevertheless, external funding is required in the beginning when the plant will be established.
Finding a competent partner(s) being able to fund the company is essential. Considering
business nature and profitability it should be possible – company will give a very good return for
invested money in rather short time.

3.1.2 Management Risks

Generally, any company is as good as its’ management. In case of new plant to be established
this is very true, since company is new, technology is new for the local management, customers
are new – everything is new. This means that all the procedures, documents, systems etc. shall
be established from scratch. Considering that at the same time production process shall be
founded, task waiting for management is huge. However, with vast local and international
experience of founders and co-founders in the chemical and food processing industry, hands on
experience of many big projects makes them easy sailing in handling this project.

Nevertheless, the management role will be shifted to the new company during the first months
of operation. According to our contract with technical consultant, during preliminary and
constructive phase of the project, we will receive all needed information and training in order to
run the milk plant. However, the importance of recruiting the best possible management cannot
be overestimated. Our main supplier’s, management team is experienced in milk processing
and certainly, most people in charge have experience in running equipments by themselves.

The management team will be modified according to the forecasted needs. In the very
beginning we will focus on the experience about financing, successful investment projects and
knowledge about reliability of milk processing. Later, the management will be more in the
operational side dealing every day with customers, personnel, suppliers, authorities etc.
9. CONCLUSION

It has been established that more than 80-85% of the milk produced in the country never
reaches the organized market where it is processed, sold and in the process, earns the
government revenue, create jobs and improve the general living standards of the population.
The India's urban large population growth, the improvement of quality of life, affordability and
increased employment opportunities creates a strong demand for quality milk and milk products
across India over the years. To meet the demand considering the perishability nature of raw
milk and challenging logistics issues for raw milk, there is a huge demand for processing milk
across the Nation.

Additionally, the demand for milk products is growing exponentially. There is a huge demand for
traditional milk products such as ghee, curd etc. in conjunction with western milk products for
instances Flavored milk, flavored yogurt derivatives and ice creams. Especially there is a strong
demand growth for processed milk and milk products in Markapur division (where the plant is
intended to build). During the first phase of the project mainly focused on India’s traditional milk
products such as Dahi, Ghee and standard milk. There is strong market potential for these
products, and we will establish different marketing techniques and strategies outlined in the
market plan to boost our sales and getting customer trust and confidence. though there are
certain identified risks, however those can be easily mitigated with right planning and good
management practices.

The project is viable with good projected profits, it will create new jobs and be an
addition to industrial development in the Indian economy. Chances of implementing the
project are high.

Our long term goal is to build the ecosystem that required for the milk processing and milk
products such as establishing the Dairy farm for continuous supply of raw milk without any
disruptions, setup of commercial scale bio gas plant using the food waste and manure from the
dairy animals for power production. Therefore, profitability, sustainability and reliability of our
long-term integrated business model makes our investors and us towards prosperous
development.