Business Management HL Internal Assessment Research Proposal

Research Proposal: Would it be financially feasible for Stainlessinox international fzco.

to open a new factory in Khapoli, India?

Session: May 2020

Word count: 499

RESEARCH PROPOSAL

Research Question: Would it be financially feasible for Stainlessinox international fzco.

to open a new factory in Khapoli, India?

Rationale:

Stainlessinox international fzco. aims to expand and grow the company’s outreach in a

profitable way and be one of the leading shareholders, suppliers and exporters of the

company in India along with UAE.

During my first interaction with the CEO of the company, he stated that the company is

planning to construct a new factory in Khapoli, Mumbai given that India’s per capita

consumption of stainless steel touched a new peak of 2.5 kg in 2019, against 1.2 kg per

capita in 2010, registering a 100 per cent growth in barely eight years.1

This investigation will enable the company to get various aspects about the market of

India and why the area Khapoli has been chosen. Furthermore, how will this factory

affect this firm’s financial position, future-growth-and-development. Thus, accordingly

make an informed decision about the feasibility of expanding into the Indian market.

Key areas of the syllabus:

 1.5 External Environment

 3.1 Sources Of Finance

 3.4 Break-even Analysis

1
"India’s Per Capita Consumption of Stainless Steel Touches New Peak in 2019." The Economic Times, 18 Nov. 2019,
economictimes.indiatimes.com/industry/indl-goods/svs/steel/indias-per-capita-consumption-of-stainless-steel-
touches-new-peak-in-2019/articleshow/72109244.cms.

2
  3.8 Investment Appraisal

Theoretical Framework

 To estimate the financial risk involved in this investment and evaluate its

profitability, Investment appraisal and Break-even Analysis will be used.

 To understand the Indian Market through PEST analysis in order to examine

external factors that may influence the company’s stability and accordingly try to

enhance the company’s strengths and emphasize on the risks and recommend

ways to resolve them.

Methodology:

Primary Research:

Interviews:

 Production’s Manager: information about the products, need for improvements

and requirements of the factory in India.

 CEO: to understand the business and growth-related objectives of this

organization, and also to know why the area, Khapoli is being considered.

 Finance manager: to form the projected financial documents of this investment

and know about its sources of finance.

 Sales manager: to gain information regarding the potential demand in India and

prices used by competitors and effective sales and marketing strategies to face

them.

Secondary Research:

3
  Review the company’s Annual Reports and accounts to examine their current

financial position and if any apparent sales trends have happened over time.

 Check websites to obtain information regarding interest rates on investment, and

government laws and regulations about licences to set up a factory. Additionally,

to do competitor analysis.

 Online research about the economic, political and social conditions of India like

the rate of interests or G.S.T. on stainless steel.

Possible Problems Potential Solutions

Assumptions made for financial forecasts To take into account the external factors

may be inaccurate. which affect the forecast.

Hesitancy to share financial information Create and sign a confidentiality

agreement.

Questions asked during the interview are Ask both open and closed questions so

too limiting that direct and focussed answers can be

obtained.

Biased responses from interviewees Verify whether both the interviewee’s

answers and opinions correlate.

4
Unreliable collection of data (secondary) The secondary data must be an

established one or directly published by

the government. It should also be re-

checked using valid sources.

Action plan:

5
Words: 499

6
Business Management Internal Assessment HL

Research Question: Would it be financially feasible for Stainlessinox international

fzco. to open a new factory in Khapoli, India?

Session: May

Word count:

Executive Summary: 195

Main report: 1997

7
Letter Of Authentication:

8
Acknowledgements:

I would like to thank the entire team at Stainlessinox fzco., especially the director and

owner of the company, Mr. Hitesh Sanghvi, for his indispensable guidance with this

report. I would also like to extend my gratitude to the department managers of

Stainlessinox fzco. who took out time to take the interview. Lastly, I would like to thank

my teacher for her valuable assistance.

9
Table of Contents

Executive Summary……………………………………………………………………. 11

Introduction…………………………………………………………………………….... 12

Methodology…………………………………………………………………………….. 13

Main findings and Analysis..................................................................................... 14

Conclusion: ............................................................................................................ 25

Recommendations: ................................................................................................ 26

Limitations to research…………………………………………………………………...27

Bibliography ............................................................................................................29

Appendix ................................................................................................................ 31

10
Executive Summary:

The company’s chairman has expressed his scepticism about the growth prospects of

this company, as it was aiming to enter the global steel market and thus fulfil the

growing demand in India. The director was bothered about the lack of finance he could

enrol without comprising quality in order to expand. Hence, leading to the question:

"Would it be financially feasible for Stainlessinox international fzco. to open a new

factory in Khapoli, India?"

After I collected data through interviews and online research, I gained information which

suggested that Stainlessinox fzco. there is a high probability of making huge profits as

there is high return on investments, additionally, Khapoli has its advantages of efficient

labour and cheap land and even the market is competitive, the company can use pricing

strategies to gain a market share.

The conclusion suggests that the firm's optimal profitability and return on investment

ratios correlate with the opportunities to expand their market segment by accessing the

Indian market. Furthermore, they can increase low-cost revenue streams to strengthen

their market position. This justifies the construction of a new factory. However, further

market research to check the validity of the aforementioned recommendations is

suggested.

Word count: 195

11
Introduction

Stainlessinox international fzco. is a private limited company, founded in 2010 by its

chairman, Mr. Hitesh Sanghvi. The company is located in Jebel Ali Freezone, Dubai,

UAE. This company belonging to the secondary sector, manufactures and trades

stainless steel sheets, coils and plates which are further used for architectural and

industrial requirements. It’s vision statement “keeping our name synonymous with

growth, development and innovation” is the company’s current priority.

Growth rate of stainless steel demand in India is to the tune of 6-7 per cent CAGR2,

which is among the highest in the world, as stainless steel demand is directly linked to

the economic growth.3 Thus, this potential demand is a major motivating factor for this

company to expand.

However, opening a new factory in different country is risky and cannot guarantee

profitability and sustainability. Besides, investment cost is high. Ensuring that this

expansion is profitable, all factors affecting the growth and sales of this company in this

new market should be analyzed.

This report will be a feasibility study, highlighting the benefits and limitations of

expanding into the Indian market and overall predict the effectiveness of this factory on

the company’s financial performance. Hence, overall helping the CEO to answer:

2
Compound Annual Growth Rate
3
"India’s Per Capita Consumption of Stainless Steel Touches New Peak in 2019." The Economic Times,
18 Nov. 2019, economictimes.indiatimes.com/industry/indl-goods/svs/steel/indias-per-capita-consumption-of-
stainless-steel-touches-new-peak-in-2019/articleshow/72109244.cms.

12
Would it be financially feasible for Stainlessinox international fzco. to open a new

factory in Khapoli, India?

Methodology:

Primary sources:

Initially, interviews were taken with the internal stakeholders of this company. Starting

off with the CEO, I learned about the goals related to this project and why stainlessinox

fzco. is planning to expand in Khapoli.

Interviewing the finance head helped me gain information regarding the availability of

capital and it’s sources, ensuring that there is sufficient finance. It also enabled me to

estimate important documents like sales budget, P&L account, net cashflows, etc. which

would further help in break-even analysis and investment appraisal. Hence, ensuring

most cost-effective and practical decision-making with maximum accuracy.

Information about the requirements in constructing, maintaining this factory, and the

most appropriate marketing/sales strategies for this company, were obtained from the

productions and sales manager. This would help to estimate the overall investment cost

and estimate sales along with knowing qualitative factors (useful for PEST Analysis).

However, this method may not lead to a valid conclusion as the interviewees can be be

biased or hesitant to share information.

Secondary resources:

The information would contain the interest rates and government regulations about

G.S.T. and licences to set up a factory, useful for investment appraisal.

13
The company’s financial statements will aid in calculating the break-even point for the

company and figure out the-exact-sales-that-they-must-make-to-cover-their-cost-

completely.

The-secondary-data-might-not-be-reliable-as-it-may-contain-miscalculations-and-

assumptions

MAIN FINDINGS AND ANALYSIS

1.1-Continuous expansion in sales of stainlessinox fzco. in Dubai has led to the

company make expansion/growth its main priority.4

Given that, India is in relentless need of infrastructural development where steel

products are highly utilised5 indicating potential demand, besides the country being

cheap overall.

4
Refer to appendix 1
5
"India’s Need for Infrastructure Development." India Council on Competitiveness – CXOs, University Chancellors &
Civil Society Leaders Working to Ensure India's Prosperity…, compete.org.in/indias-need-for-infrastructure-
development/.

14
 6

Furthermore, the consistent progress of sales of the company in Dubai since nine years

has motivated the company to expand7, and move towards its visions besides

establishing a stronger brand identity and goodwill along with higher revenue.

(1.2)Why Khapoli8 -

 The factory(35,000sqft)will be constructed-in Khapoli with the main reason being

comparatively inexpensive land(2 acres) at INR2,00,00,000.9 Furthermore,

convenient transport links(freeways constructed)to raw material suppliers with

6
Refer to appendix 6
7
Refer to appendix 5
8
Refer to appendix 2
9
Refer to appendix 9

15
 uninterrupted supply, and efficient, cheap labour available when compared to

Dubai, makes this area suitable.10

 Using advanced machinery, the factory’s initial production capacity is

2000hectometres per year at 1,06,800INR per hectometre which is expected to

increase annually with additional capital/retained profits. However, the projected

sales budget shows 1300hectometres sales in the first year11.

BREAK-EVEN-ANALYSIS–

It is a management tool calculating the level of sales needed to cover all costs of

production. Thereafter, further sales generate a positive safety margin, and profits for

the business.12

The figures below are taken from the projected profit and loss account13:

10
Refer to appendix 2
11
Refer to appendix 3
12
Paul Hoang- Business Management Textbook IBID
13
Refer to appendix 7

16
  Contribution-per-unit=1,36,901-88,227.69=48,673.31INR

 Fixed cost=5,55,52,000INR

 BEQ=1,141.32hectometres

The above BEQ is estimated by the intersection of TR and TC illustrated in the Break-

even Chart. After expansion, the company is expected to sell approximately 100-120

hectometres per month initially with the quantity expected to rise with increased

17
marketing. Therefore, the company expects to break-even in the first two years which is

much earlier than when the company broke-even in Dubai.

However, additional costs of marketing, labour, transportation, materials may arise

considering the market situation which keeps on fluctuating, and may lead the company

into taking loans.14 Therefore, increasing the overall risk.

Overall, the money gained as profit can be re-invested back into the business to cover

the high costs which will rise eventually as the company starts selling into several

markets simultaneously. Thereby, initial sales,100-120hectometres per month sounds

feasible.

(1.3)Finance for the investment-The total investment cost:10,44,55,000INR.15

The net profit for the financial year 2018-19 was 17,84,75,600INR, and after providing

dividends, retained profit adds up to 9,71,00,000INR16 as summarized below by sales

expansion in Dubai over the years.

14
Refer to appendix 4
15
Refer to appendix 9
16
Refer to appendix 3

18
Additionally, few shareholders think of the idea as highly potential and are willing to

provide share capital of upto 5 crores17, hence, finance for capital is sufficient.

INVESTMENT APPRAISAL

To know the financial costs and benefits of an investment decision and assess its

viability, investment appraisal18 is an effective method.

Therefore, to find the payback period, i.e. the time required to recover the initial

investment cost19, the projected start-up cost and net cash-inflows will be utilised20.

Given, initial investment cost=10,44,55,000INR

17
Refer to appendix 3
18
Paul Hoang- Business Management Textbook IBID
19
"What is a Payback Period?" My Accounting Course, www.myaccountingcourse.com/accounting-
dictionary/payback-period.
20
Refer to appendix 9

19
The following table is formed with the help of the projected net cashflows(chart)21:

Therefore, the PBP happens in the 8th year(2027)

Shortfall(2026)=(10,44,55,000-9,76,00,022)=68,54,978 INR

21
Refer to appendix 8

20
Average monthly cashflow(2027)=(40080360÷12)=33,40,030 INR 174,918

HENCE, TOTAL-PBP = 8years, 2months & 2days.

The calculated PBP is a comparatively short period of time for a high investment of

10,44,55,000INR to return in today’s competitive business environment. Thereby,

making this project less risky. Although the current PBP is longer than what it was

calculated when this business was initiated in Dubai, because India is comparatively

cheaper. However, PBP does not consider profitability, because if there is a cash

crunch by the end of the PBP, the investment would be unwise. Furthermore, the-

simplicity-of-the-payback-period-analysis-falls-short-into-taking-account-the-complexity

of-cash-flows-that-can-occur-with-capital-investments. In-reality, capital-investments-

are-not-merely-a-matter-of-one-large-cash-outflow-followed-by steady-cash-inflows.

Additional cash outflows may be required over time, and inflows may fluctuate in

accordance with sales and revenues.

Calculating the average rate of return, the average profit on an investment project as a

percentage of the amount invested,for 10years(2020-29)22 :

If the investment was deposited in the Bank:

22
Paul Hoang Business Management Textbook IBID

21
ROI on savings=4% per-annum23

The ARR, giving a clear picture of profitability is more than thrice when used for

constructing the factory than to be saved in the bank evidently indicating that it is profitable

to invest. But firstly, a fair rate-of-return cannot be determined on the basis of ARR, it

depends on the management team to ensure that the projected figures are close to the

actual. Also, this method does not consider cash-inflows which are more significant than

the accounting profits.

Therefore, this method proves this investment to be financially favourable and in fact

beneficial for the growth of the company. However, this method fails to consider

the time value of money(TVM), where the value of money today is worth more than the

identical sum in the future due inflationary pressures24. Additionally, investment

decisions cannot be purely based on numerical calculations, considering qualitative

measures and external factors is essential to make effective decisions.

PEST-ANALYSIS

23
"Savings Account - Apply for Best Saving Bank Account Online 01 Apr 2020." Compare and Apply for Loans,
Credit Cards, Insurance in India, www.bankbazaar.com/savings-account.html.

24
"Limitations of Using a Payback Period for Analysis." Investopedia, 29 June 2015,
www.investopedia.com/ask/answers/062915/what-are-some-limitations-and-drawbacks-using-payback-period-
analysis.asp

22
 PEST analysis influences decision-making by examining the external opportunities and

threats due to Political,Economic,Social,andTechnological factors.25

Political

 There is high political interference in constructing the factory or hiring labourers.

The political parties compel businesses to employ more labour, and sign the

business contracts at a higher price. They manipulate businesses into spending

high regulation and compliance costs which reduces the company’s profits26, this

is a major threat to this company.

 The Indian government has announced that new start-up industries would have

to pay only 15% income tax27 instead of 30% in order to attract sunrise industries

and increase the overall economic development. Thereby, creating favorable

economic conditions which is an opportunity.

Economic

 The 18% GST28 is another threat as it increases further costs of the company.

25
"PEST Analysis." GroupMap - Collaborative Brainstorming and Decision Making, 27 Aug. 2017,
www.groupmap.com/map-templates/pest-analysis/.
26
Refer to appendix
27
"More Startups May Get Tax Exemptions." The Economic Times, 28 May 2019,
economictimes.indiatimes.com/small-biz/startups/newsbuzz/more-startups-may-get-tax-
exemptions/articleshow/69530999.cms?from=mdr.
28
"Understanding GST in India - 20 Common Questions Answered." ProfitBooks.net, 24 July 2017,
www.profitbooks.net/gst-india-overview/.

23
  Achieving 2.5 kg/capita consumption level in short span of time, India is now the

fastest growing market for stainless steel29. This is a major opportunity for the

company as with essential strategies and resources they can gain high

profitability.

 However, the threat of market prices continuously fluctuating30 can leave the

owners/managers uncertain about profits,costs.

Social

 A skilled workforce and very inexpensive labour can reduce the overall cost and

help in marketing, proving to be an opportunity31.

 Although, the competitive Indian market is a major threat as the company might

have to lower prices to increase demand.32

 Connections with the contractors, architects in India can help in planning the

marketing strategies 33and be a major opportunity for promoting the company.

Technological

29
"India’s Per Capita Consumption of Stainless Steel Touches New Peak in 2019." The Economic Times,
18 Nov. 2019, economictimes.indiatimes.com/industry/indl-goods/svs/steel/indias-per-capita-consumption-of-
stainless-steel-touches-new-peak-in-2019/articleshow/72109244.cms.

30
Refer to appendix 4
31
Refer to appendix 3
32
Refer to appendix 3
33
Refer to appendix 4

24
  The organization will need modern, efficient machinery, estimating to

9,00,00,000INR which is cheaper than what they had to pay in Dubai 34. This

overall becomes an opportunity for the company to take advantage of the cost-

effective machinery and hence maximize profits.

 However, the obsolete technology used in India can degrade the quality of the

products besides making the production process slower35 and proving to be a

threat.

Conclusion

Through the quantitative and qualitative data collected and analyzed through the PEST-

Analysis, Break-even-Analysis, and Investment-Appraisal, it is evident looking at the

overall situation of Stainlessinox international fzco. that it is not only financially feasible

to expand to the Indian market but could also prove to be highly profitable in the long

run.

If the risk is taken and estimations are more or less accurate, it can lead the company

into gaining high market share and the profits can be used to re-invest in the business

to cover high costs in future when the company increases production to fulfil demand in

several Indian markets, but they will simultaneously have to pay for the high taxation.

34
Refer to appendix 2 and 7
35
Refer to appendix 2

25
Furthermore, establishing a new market can reduce the effects of tight competition due

to oversaturation in existing markets(Dubai), making the business more secure, as

sales increase due to potential demand for steel, which is not easily prone to

fluctuations. With efficient technology and labour, the company can become a leading

manufacture and trader of stainless steel in India, along with Dubai.

Regardless, Stainlessinox’s decision to enter the Indian market may be problematic as

the domestic producers can make it very competitive leading to price wars. Also, since

the company does not currently have recognition, achieving economies of scale via

mass production would be difficult.

Recommendations

It is recommended that this investment should be financed, however, the following

factors should be taken into consideration.

1. Expansion can be very challenging initially.

Continuous research about the demands can enable the company to adapt to

India’s styles. Also, appropriate effective pricing, product, management strategies

should be used to enter the Indian market and attract customers initially.

2. The company might face high competition in the Indian market for stainless steel.

Price penetration strategies and ensuring high standards and consistent quality

of the product. This can be done by having quality checks at each step of the

production process and tracking mistakes for manufacturers involving statistical

26
 quality-control, which is setting a product's specifications and then sampling a

few units from the production line to see how closely they measure up to those

standards. However, the manufacturing process should be altered in case of high

variance.

3. The obsolete technology and machinery of India can degrade quality and slower

production.

Machinery-from-Dubai-can-be-imported-or-shipped-to-India. This-will-add-up-to-

the-initial-investment-costs-but-will-be-beneficial-in-the-long-run-as-the-

efficiency-will-be-maintained, and-eventually lead to economies-of-scale.

4. Marketing-and-management-should-be-efficient-to-ensure-the-BEQ-is-achieved-

on-time.

The-aim-should-be-to-reduce-the-cost-of-production. Initially, the-key-expenses-

should-be-noted-down-clearly. The-company-can-then-reduce-the-direct-

material-cost-by-buying-in-bulk. The-company-can-also-reduce-marketing-costs-

by using-E-commerce-which-reduces-printing-and-transportation costs-without-

compromising-informative-advertisements-and-the-other-objectives-to-be-met.

Limitations to research:

27
 1) The projected financial figures may not be completely accurate as it can

contain errors caused due to miscalculation or misconceptions about the

future economic status of the country or its demand for stainless steel.

2) The biased responses of the interviewees may hinder the validation of this

report. Furthermore, the hesitancy to share financial information and

misunderstanding the questions asked can cause additional problems.

Word count: 1997

28
Bibliography:

 "PEST Analysis." GroupMap - Collaborative Brainstorming and Decision Making,

27 Aug. 2017, www.groupmap.com/map-templates/pest-analysis/.

 "Understanding GST in India - 20 Common Questions

Answered." ProfitBooks.net, 24 July 2017, www.profitbooks.net/gst-india-

overview/.

 "India’s Per Capita Consumption of Stainless Steel Touches New Peak in

2019." The Economic Times, 18 Nov. 2019,

economictimes.indiatimes.com/industry/indl-goods/svs/steel/indias-per-capita-

consumption-of-stainless-steel-touches-new-peak-in-

2019/articleshow/72109244.cms.

 Paul Hoang- Business Management Textbook IBID

 "What is a Payback Period?" My Accounting Course,

www.myaccountingcourse.com/accounting-dictionary/payback-period.

 "More Startups May Get Tax Exemptions." The Economic Times, 28 May 2019,

economictimes.indiatimes.com/small-biz/startups/newsbuzz/more-startups-may-

get-tax-exemptions/articleshow/69530999.cms?from=mdr.

 "Savings Account - Apply for Best Saving Bank Account Online 01 Apr

2020." Compare and Apply for Loans, Credit Cards, Insurance in India,

www.bankbazaar.com/savings-account.html.

29
 "Limitations of Using a Payback Period for Analysis." Investopedia,

29 June 2015, www.investopedia.com/ask/answers/062915/what-are-some-

limitations-and-drawbacks-using-payback-period-analysis.asp

 "India’s Need for Infrastructure Development." India Council on Competitiveness

– CXOs, University Chancellors & Civil Society Leaders Working to Ensure

India's Prosperity…, compete.org.in/indias-need-for-infrastructure-development/.

30
Appendices

Appendix 1

Interview with the CEO

What is the type of business? What are the business aims, as in mission

and vision statements? What do you plan to achieve out of this business?

StainlessInox International FZCO, a profit-making private ltd. Company was

established in 2010 with the core focus of being one of the UAE’s leading

stockholders, suppliers and exporters of Stainless Steel Flat Products - Coils,

Sheets and Plates. Success of this company in Dubai has boosted its confidence

to further expand its market to india, hence profitable growth being the main aim

with our mission:

 Continually building our skills and knowledge to meet the growing and diverse

needs of customers.

 Ensuring that the products and solutions are purposefully engineered to suit

each customer with a focus on high service standards, on time deliveries and

competitive prices.

 Sustaining our reputation as a reliable and customer-oriented stainless steel

manufacturer and supplier in the market.

 Achieving profitable growth, operational and organizational excellence without

compromising from our values and business ethics.

And vision:

31
  Maintaining quality, integrity and high standard at all levels of operation.

 Keeping our name synonymous with growth, development and innovation.

How has the business progressed from the time you have opened until now?

The business initially started operating in 2010 and since then has been continuously

progressing with minor ups and downs due to changes in market demand and

competition. However, due to growing and favorable economic conditions the business

has become 10 times bigger in 2019 than it was in 2010.

What are your thoughts of opening factory/warehouse in Mumbai, india? What

made you consider it?

The main objective of stainless steel fzco. was to expand and in the most profitable

way. Hence after consultation with the marketing manager, India was the best option

because it is a developing country and requires high infrastructural and industrial

development, which in a way creates major demand for our products. Thus, this

company has a high potential to achieve success in india.

Appendix 2

32
Interview with the head of production

What do you have to say about the products and its relevance to growth of the

company?

Over the years, the company has exponentially grown by consistently enhancing its

product portfolio to Long Products - Angles, Bars and Channels, and process,

manufacture and supply of decorative stainless-steel finishes (sheets) for various

architectural applications. Furthermore the organisation has heavily invested in some of

the best equipment and machinery to carry out a wide range of metal services.

Will there be need for any changes/improvements in the quality of the product?

We have been continuously taking regular feedbacks from our customers regarding the

product and it’s quality, with the help of the sales department. Most of the buyers are

loyal to our brand, and insist consistent quality on regular basis being supplied to

them. However, there was a problem with the strength of the stainless steel which was

then solved by further improvements.

Do you think there is anything that can hinder production in India?

The advanced technology used for the products as in case of Dubai, cannot be used in

India which is rather backward in development. This can become a problem as the old,

obsolete machines can reduce the quality of the products, and also make the production

process slower.

33
What are the requirements of setting up this new factory?

The main requirement is land of 2 acres minimum on which a warehouse of 35000

square feet will be constructed. Then there will be additional requirement of machines

like brushing and mirror machine, pvc, cutting, bending, shearing, grooving, lasercut,

and waterjet machines and all these machines will be used for fabrication for projects

like airports, hotels, metro stations, convention centres, kitchen industry, lifts, designer

stores, etc and approximately 10 labourers making the product and the other 10

handling marketing, sales and other departments. This with additional resources,

retained profit and capital added every year will increase the company from initial

production capacity as 2000 meters per year to upto 8000 meters per year in the next

five years.

Appendix 3

Interview with the Head of finance

As the head of finance, to what extent do you think expanding into the Indian

market is going to be viable to the company?

There is a high potential for success of stainless steel fzco. in India considering the

market demand, but there is also high risks like firstly there is a very high investment

costing upto 16 crores INR, and moreover the market is quite competitive, with weak

technology used.

34
What are the sources from where this project is going to be financed?

This project’s main sources of finance are from the retained profits of the previous years

which was 9 crores INR and the additional capital will be provided by the shareholders

of this company.

What do you think are the major risks/problems that you might encounter during

this project?

The major problems can include high interference of the Indian government regarding

such projects in Mumbai. The interference happens in issues like setting up a

warehouse on the land, hiring labourers or buying scraps. (why)Even high taxes like

G.S.T. and license costs can increase the overall cost of production. (reducing

profitability)

Appendix 4

Interview with the Head of sales department

What makes you think that it can be profitable for the company to sell this

product in india? Mention the number of sales you expect initially.

Looking at the current sales and feedback from customers, and also considering the

product demand in India, the sales in the first few months are estimated to be 500-700

meters, which is initially a good start for stainless steel fzco.

35
Beind the head of sales department, what criteria do you think should be

considered before expanding into the Indian market?

Factors that could be considered are consistent and improving and unique designs, with

competitive prices that are affordable to Indians, hence they will be reduced as

compared to dubai. Afterall, customer preference should be given major priority.

Which marketing and sales strategies are going to be useful to you in order to

expand to the indian market?

We will try and contact all the familiar architects and contractors who will recommend us

to the buyers of our products, which is similar to what we do in Dubai. There is also an

advantage as we also have several Indian buyers in Dubai who can help us widen our

market in India.

Appendix 5

The below table demonstrates increase in sales (2010-19) taken from the documents of

the sales department.

Year Sales (meters)

36
 2010 532

2011 575.5

2012 693.2

2013 900.8

2014 2109

2015 4570.3

2016 6055.5

2017 6900

2018 6901.5

2019 7067.6

Appendix 6

The below table shows the sales budget forecasted, after the expansion of stainless

steel fzco. in Indian market, made with the help of head of the sales department.

Year Sales (meters)

2020 1300

2021 1346.9

2022 3332.5

2023 4005.9

37
 2024 6113

2025 7012

2026 7066.7

2027 7050.9

2028 7113.2

2029 7100

Appendix 7

Projected profit and loss account made, with the help of the finance manager.

Profit & loss a/c of stainless steel fzco. as on 31 st march for the year 2020-21

INR INR

Sales 17,79,72,500

Pvc 2,30,00,000

Aluminium oxide 22,68,000

Nitric acid 1,14,76,000

Spare parts 5,16,000

Gases 1,11,64,000

Woolfelt replacements 1,6,60,000

38
Wages 2,37,44,000

Power 3,18,68,000

Total cost of goods sold 11,46,96,000

Gross profit 6,32,76,500

Expenses

Salaries 2,95,28,000

Depreciation and 5,04,000

maintainence

Electricity 1,22,56,000

Insurance 3,84,000

Utilities 1,28,80,000

Total expenses 5,55,52,000

Profit before interest and 77,24,500

taxes

Interest(9%) 6,95,205

Profit after interest before tax 70,29,295

39
 Tax(G.S.T.) (18%) 12,65,273.1

Net profit (after interest and 57,64,021.9

tax)

Appendix 8

Project net cash inflow of stainless steel fzco. made with the help of the finance

manager.

Year Net cash inflow (INR)

2020 57,00,003

2021 61,43,912

2022 79,98,432

2023 95,82,885

2024 1,57,89,800

2025 1,99,95,990

2026 3,23,89,000

40
 2027 4,00,80,360

2028 5,91,00,454

2029 7,88,99,000

Appendix 9

The below table shows the prediction of new start-up/investment costs for stainless

steel fzco. for setting up a factory in India. (figures are rounded off as it is an estimation)

License Consultant 48,000

Legal & Permits Legal permits- company set-up 9,09,000

Insurance 3,20,000

Subtotal 4,77,000

Construction costs Land 2,00,00,000

Setting up the factory (materials & labour) 2,00,00,000

Subtotal 4,00,00,000

41
 Interior 19,80,000

Decoration 5,85,000

Bathrooms 2,72,000

Electricity, cabling and pipes 16,84,000

Air condition 99,000

Leasehold Ventillation 56,000

Requirements Fire system 6,82,000

Lighting system 1,93,000

Exterior 4,78,000

Subtotal 60,29,000

Chairs and stools 82,000

Furniture Tables 96,000

Shelves 52,000

Lamps 14,000

Subtotal 3,14,000

Brushing machines 90,30,000

Mirror machines 12,15,000

Machinery and Pvc equipments 13,79,000

equipments Cutting machines 32,09,000

(for the the product) Bending & shearing equipment 67,90,000

42
 Grooving machines 40,02,000

Lasercut machines 78,22,000

Waterjet machines 82,40,000

KW Power 89,99,000

Subtotal 5,06,86,000

Stationery 42,000

Machinery and Printing and computers 50,30,000

equipments POS systems 12,90,000

(for management and CCTV equipments 5,87,000

administration) Subtotal 69,49,000

TOTAL 10,44,55,000

43