UNIVERSITY OF HARGEISA

Faculty Of Islamic Banking And Finance

Project Proposal

Topic ;- TEA PROCESSING

CLASS 4D
Group 2
1) MAHDI MUHUMED MAHAMUD
2) HAMZE JAMA SHARMARKE
3) AIDROUS YOUSOF ISMAIL
4) AYAN MAWLID AADAN
5) HIBO MAHAMED IBRAHIM

1|Page
 Date ;- 8/12/2020

Table of Contents page

SUMMARY....................................................................................................................................3
PRODUCT DESCRIPTION.....................................................................................................3
MARKET STUDY.....................................................................................................................3
TECHNOLOGICAL PROCESS..............................................................................................3
 Spreading the leaf on Withering Trough:.........................................................................4
 Withering:.........................................................................................................................4
 Rolling/Rotorvane:............................................................................................................4
 Operating on C.T.C Machines:.........................................................................................4
 Fermenting:.......................................................................................................................5
 Drying:..............................................................................................................................5
MANPOWER REQUIREMENT & COST.............................................................................5
POWER AND UTILITY...............................................................................................................6
INSTALLED CAPACITY........................................................................................................6
PROJECT COST ESTIMATES AND MEANS OF FINANCE................................................7
10.1. TOTAL PROJECT COST:..............................................................................................7
10.2. LAND, BUILDING AND CIVIL WORKS:...................................................................7
10.3. PLANT & MACHINERY:...............................................................................................7
10.4. WORKING CAPITAL ESTIMATES:...........................................................................8
10.5. MEANS OF FINANCE:...................................................................................................8
TOTAL = 700,000USD......................................................................................................8
10.6. DEBT-EQUITY RATIO:.................................................................................................8
FINANCIAL ANALYSIS.............................................................................................................9
COST AND PROFITABILITY ESTIMATES...........................................................................9
BREAK-EVEN ANALAYSIS.......................................................................................................9
INTERNAL RATE OF RETURN..............................................................................................10

2|Page
 SUMMARY

Somaliland government has planned to start planting tea. This is so because the country is one of
growing population and the demand for tea has increased which cause the country to produce tea.
Tea is a natural beverage brewed from the young leaves of an evergreen plant Camellia sinensis.
The main objective of such initiative is to productively utilize the abundantly available resources
of the local area and to enable uninterrupted supply of the products to market throughout the
year.
The total Project cost is estimated at 700,000 USD which includes margin money for working
capital @ 25%.

PRODUCT DESCRIPTION

 The proposed project is that of setting up of a Tea Processing unit at suitable location.
 The key products of the proposed project are as follows;
Processed CTC Black Tea (Shaah Madow).
 Mini tea processing factories would reduce difficulty of marketing green tea leaf. The
mini and micro factories will open up a huge chain of employment opportunities at the
garden level.
 The proposed project would procure the raw materials locally. After processing, the
products would be supplied to the market through distribution wholesaler, retailer
MARKET STUDY

 The Cottage made CTC Tea has great demand among the consumers due to its special
manufacturing process, which imparts its quality and aroma. Besides, cottage organic Tea
(CTC and Orthodox), Green-Tea also has great market potential. Therefore, few cottage tea
factory could be set up in concentrated tea growing areas that will have a steady market for
its products. Market Promotion plays a vital role for the generation of the potential
customers therefore, application of marketing strategies are recommended. Marketing plan of
the proposed project may include good quality maintenance, promotional campaign like
offering special discounts, referrals, advertisement and tying up with buying houses

3|Page
TECHNOLOGICAL PROCESS

The process of manufacturing CTC tea comprises of the following different process.

 Spreading the leaf on Withering Trough: The collected green Leaf is spread upon the
withering trough, while spreading due emphasis is laid upon to remove source and old
dried leaves so that it will help to minimize the presence of stalks and help in producing
fine tea.

 Withering: The process of withering involves partial removal of moisture from fresh leaf
and is carried out in order to condition the leaf physically for subsequent processing.
Besides, some chemical changes also take place during withering and these are
independent of the physical process. Thus, withering involves (a) Physical wither and (b)
Chemical wither. While the physical wither can be completed even in 3-4 hours, however
for completion of the chemical wither, a period of 12-16 hours is required as such the
withering trough can’t normally be used more than once a day. Withering is carried out
either by Natural Withering or by Trough withering system. The green leaves that are
spread upon the wire mess of withering trough are charged with cold and warm air
through an axial flow fan so that the moisture content is reduced to the desired level.
Generally the level of reduction in moisture depends upon the grades and quality of tea,
which is to be manufactured.

 Rolling/Rotor vane: The withered leaf are rolled to rupture the leaf cells and release of
enzymes and to give a twist to the leaf. It is achieved by processing withered leaf in Rotor
vane. During rolling operation chemical changes among the principal constituents of leaf
start as soon as the juice of leaf is squeezed out in contact with the air. The chemical
changes are caused by the enzyme present in the leaf. The enzyme brings about chemical
changes but it does not change itself. Generally, leaf is rolled in Rotor vane before send
to further processing.

 Operating on C.T.C Machines: After the leaves are rolled, they are put into the C.T.C
machine (i.e. cutting, tearing and curling machine). This machine cuts the leaf into
uniform size with maximum cell distortion leading to quicker and more even oxidation
during fermentation. The C.T.C machine is comprised of two rollers rotating in opposite
directions at the arranged speed. The speed of the two rollers are different, one of the
roller is fast rotating at a speed of around 675 revolutions per minute, whereas the slow
roller rotates at a speed of 60 to 73 revolutions per minute. Generally, a constant
clearance between the rollers is maintained. The roller segment is in sharp condition,
which cut the leaves three times. During the process it is specifically seen that leaf’s are
not heated as it destroys briskness and quality.

4|Page
  Fermenting: After processing in the C.T.C machine the leaf are fermented. Fermentation
of the tea leaf is a very important process in Tea manufacture for briskness, strength,
color and quality largely depend upon it. The duration of fermentation varies according to
rise and fall of temperature.

A temperature of 76’F to 78’F represents the ideal temperature of the fermenting room and
it takes roughly between 1 to 2 hours in the fermenting process. The leaf processed in
C.T.C is spread on the fermenting floor or fermenting bed of fermenting machine.
Generally, they are spread at a thickness of half an inch. Fermentation begins as soon as the
juice of the leaf come into contact with the air enzyme present in the leaf being about
chemical changes among the constituents of the leaf cell such as latechins (polypheno’s)
and caffeine. When the leaf become bright red in the fermenting room it is the best time to
transfer to the drying room for firing.

 Drying: After the requisite level of fermentation CTC leaf is transferred to the drying
room where the leaf is fed on the trays of mechanical dryers and fermented leaf is fired at
an inlet temperature of 200’F to 220’F to arrest fermentation process and to remove
additional moisture present. The exhaust temperature being 120’F to 135’F. The
thickness of spreading of CTC leaf being one fourth of inch. The fair revolution of the
quality drying machine should be 350 and the tray speed is 200. The final moisture
contained of the tea is kept at around 3%.

5.1.7. Sorting: The sorting process of the CTC leaf is very simple. At first tea is allowed to pass
through the sorter for separation of grades, during this process tea is also made free from
any foreign material, fiber and other proper grading which depend largely on size (granule)
of tea. After grading tea is packed in tea chest/jute bags of standard size and sent to the
auction Centre.
MANPOWER REQUIREMENT & COST
The salaries and wages of different types of manpower is projected as follows:

Salary/ Cost/
Particular of Employee Numbers Month annum
(Shiliin) (Shiliin)
Production Manager 1 15000 180000
Administrative Officer cum Accountant 1 10000 120000
Marketing and Sales Per personnel 4 10000 480000
Machine Operator/Skilled Works 4 6000 288000
Unskilled Workers 6 4500 324000
Expenses on salary in the 1st year (Shiliin) 1392000

5|Page
 Increase of 0.50% has been considered every subsequent year.

POWER AND UTILITY

A. Expenses on Power
Particular Quantit Power (Kw) Total (Kw)
y
Plant & Machinery (Total HP of 40) 1 29.84 29.84
General Lighting 40 0.10 4.00
Total power requirement/ day (Kw) 33.84

No. of h/ day 8
Nos. of days/annum 200
Annual power requirement (kwh) 54144
Rate per unit (Shiliin) 6
Expenses on power (Shiliin) 324864
B: Estimate of Utility
Expenses on Water/Fuel/Other Utilities (Shiliin) 120000
Expenses on Power & Utility at 100% capacity 444864
(Shiliin)

INSTALLED CAPACITY

In assessing the proposed plant capacity, due consideration has been given to technological and
financial fact, marketing considerations, availability of consumables, infrastructure facilities and
economic viability. The detailed requirement of the plant and machineries to achieve the plant
capacity is assessed by the unit technician. While arriving at the requirement of various type of
equipment and machinery required for the unit, due considerations has been given to the
following points.

a) Minimum Wastage
b) High Productivity
c) Maximum flexibility in operation
d) Adequate stock by provision wherever necessary

The installed production capacity of the unit per annum is as follows;

6|Page
 Processed CTC Tea - 100 Ton

For the purpose of carrying out this economic viability of the proposed project, it is
assumed that the plant will operate at following efficiencies during the 5(Five) year.

Year 01 02 03 04 05

Capacity 50% 60% 70% 70% 70%

Utilizatio
n

PROJECT COST ESTIMATES AND MEANS OF FINANCE

10.1. TOTAL PROJECT COST:

The Capital cost of the project has been estimated on the basis of installed capacity
assuming 200 working days per annum. The total cost of the Project including
margin for working capital has been estimated at 700000 USD

10.2. LAND, BUILDING AND CIVIL WORKS:

The approximate cost of civil works including Levelling, Building, Electrification, Water
Supply, Sanitation and Drainage etc will be 300000 USD

10.3. PLANT & MACHINERY:

The total cost of Plant & Machinery has been estimated at 90000 USD

PLANT EXPENDITURE:

The total cost on Plant expenditure includes admissible taxes, transportation,

insurance of the machineries and installation etc.

FIXED ASSET:

The cost of Misc. Fixed Assets has been estimated at around 310,000 USD . These
include cost of furniture and fixture’s and office equipment.

7|Page
PRELIMINARY & PRE-OPERATIVE EXPENDITURE:

An expenditure of 392,000 USD has been earmarked on this account.

CONTINGENCY AND ESCALATION:

This has been calculated @ 5% on Civil Work, Plant & Machinery and Misc. Fixed
Assets to provide safeguard against escalation of prices or any other unforeseen
expenditure. The total amount works out to 306,000 USD

10.4. WORKING CAPITAL ESTIMATES:

The details of the Working Capital requirements of the proposed unit. In arriving at
the working capital estimates, various components vis Administrative
Expenses/Consumables and Working Expenses have been taken on the basis of
usual norms. The Working Capital requirement is proposed to be met from project
margin money and cash credit loan borrowings from the financial institution.

10.5. MEANS OF FINANCE:

The Proposed Project Cost of 700,000 USD would be financed under MSME
development schemes of financial institutions/commercial banks, in the following
manner as shown below.

1. LOAN FROM BANK/FI @ 60% = 420,000USD

2. PROMOTESHILIIN CONSTRIBUTION @ 40% = 280,000USD

TOTAL = 700,000USD

10.6. DEBT-EQUITY RATIO:

Based on the above financing pattern, the Debt-Equity ratio of the Project is 1.5:1.

FINANCIAL ANALYSIS
COST AND PROFITABILITY ESTIMATES

8|Page
Particular Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 Yr 6
A. INCOME
Production Capacity (Ton/ annum) 100 100 100 100 100 100
Capacity utilisation 50% 60% 70% 70% 70% 70%
Production/ annum at capacity utilisation 50 60 70 70 70 70
Total income/ annum 65.00 78.00 91.00 91.00 91.00 91.00
B. OPERATING EXPENSES
Raw Materials 37.55 45.06 52.57 52.57 52.57 52.57
Power & Utility 2.22 2.67 3.11 3.11 3.11 3.11
Salary 13.92 13.99 14.06 14.13 14.20 14.27
Repair & Maintenance 0.90 0.92 0.94 0.95 0.97 0.99
Other Expenses 0.65 0.78 0.91 0.91 0.91 0.91
Total Operating Expenses 55.24 63.42 71.59 71.68 71.77 71.86
Operating profit 9.76 14.58 19.41 19.32 19.23 19.14

C. FINANCIAL EXPENSES
Depreciation 3.02 3.02 3.02 3.02 3.02 3.02
Interest on Term Loan 3.36 3.05 2.38 1.71 1.04 0.36
Interest on Working Capital Loan 0.63 0.72 0.82 0.82 0.82 0.82
Net Profit 2.75 7.79 13.20 13.78 14.36 14.94
Net Cash Accruals 5.77 10.81 16.21 16.80 17.38 17.96
Principal Repayment 0.00 8.40 8.40 8.40 8.40 8.40

BREAK-EVEN ANALAYSIS
Yea 1 2 3
r

A. Net sales 65.00 78.00 91.00

B. Variable cost
Raw Materials 37.55 45.06 52.57
Power & Utility 2.22 2.67 3.11
Other Expenses 0.65 0.78 0.91
Interest on Working Capital Loan 0.63 0.72 0.82
Total variable cost 41.05 49.23 57.41
C. Contribution (A-B) 23.95 28.77 33.59
D. Fixed & Semi-fixed Costs
Salary 13.92 13.99 14.06
Repair & maintenance 0.90 0.92 0.94
Interest on Term Loan 3.36 3.05 2.38
Depreciation 3.02 3.02 3.02
Total fixed cost 21.19 20.97 20.39
9|Page
 E. BREAKEVEN POINT 88.51% 72.91 60.71
% %
F. BEP at operating capacity 44.25% 43.75 42.50
% %
G. Cash BEP 37.96% 37.46 36.21
% %

INTERNAL RATE OF RETURN

Year 0 1 2 3 4 5 6
CASH OUTFLOW

Capital Expenditure 64.29 0.00 0.00 0.00 0.00 0.00 0.00

Working Capital 0.00 6.99 1.06 1.06 0.00 0.00 0.00
Total (A) 64.29 6.99 1.06 1.06 0.00 0.00 0.00

CASH INFLOW
Profit After Tax 2.75 7.79 13.20 13.78 14.36 14.94
Add: Depreciation 3.02 3.02 3.02 3.02 3.02 3.02
Add: Interest 3.36 3.05 2.38 1.71 1.04 0.36
Add: Salvage Value

Total (B) 0.00 9.13 13.86 18.59 18.50 18.41 18.32

NET FLOW (B-A) -64.29 2.14 12.80 17.54 18.50 18.41 18.32

IRR = 18%

10 | P a g e