Contents

Chapter 1: Background........................................................................................................4
1.1 Introduction................................................................................................................4
1.2 Company ownership..................................................................................................5
1.3 Location and premises...............................................................................................5
1.4 Startup summary........................................................................................................5
1.5 Vision.........................................................................................................................6
1.6 Mission statement......................................................................................................6
1.7 Objectives...................................................................................................................6
1.8 Legal framework........................................................................................................7
1.9 SWOT Analysis..........................................................................................................8
Chapter 2: Organization And Management Team.............................................................10
2.1. Management Summary...........................................................................................10
2.2. Organizational Structure.........................................................................................10
Chapter 3: Products and Services......................................................................................14
3.1. Product History.......................................................................................................14
3.2. Product Features......................................................................................................14
3.3. Production Flow Diagram of the unit.....................................................................15
3.4. Product Pricing........................................................................................................17
3.5. Competitive edge....................................................................................................17
3.6. Future Plans.............................................................................................................17
Chapter 4: Market and Competitions.................................................................................18
4.1. Industry and Business Outlook...............................................................................18
4.2. Growth Potentiality.................................................................................................19
4.3. Market Segmentation and Targeting.......................................................................19
4.4. Targeting..................................................................................................................21
4.5. Positioning..............................................................................................................21
4.6. Competition.............................................................................................................21
Chapter 5: Competitive Analysis.......................................................................................22
5.1. Porters Five Forces Model-Competitive Analysis.................................................22
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Chapter 6: Marketing And Sales Plan................................................................................23

6.1. Marketing mix.........................................................................................................23
Chapter 7: Financial Plan...................................................................................................25
7.1. Assumptions............................................................................................................25
7.2 Financial details of startup expenses........................................................................27
7.3 Projected Income Statement:...................................................................................28
7.4 Projected Balance Sheet:..........................................................................................28
7.5 Projected Cash flow Statement................................................................................28
7.7 NVP, IRR & MIRR:.................................................................................................31
7.8 Payback Period:........................................................................................................31
Chapter 8: Critical Risk and Contingencies.......................................................................32
8.1 Internal Risks:..........................................................................................................32
8.2 External Risks:.........................................................................................................33
Chapter 9: Future Plan and Exit Strategy..........................................................................34
9.1. Future Plan..............................................................................................................34
9.2. Exit Strategy............................................................................................................34
ANNEX.............................................................................................................................35
1. Capital Requirement..................................................................................................35
Capital Structure............................................................................................................36
Working Capital Structure..............................................................................................36
2 SAN Noodles Income Statement................................................................................37
3. SAN Noodles Balance Sheet as on Year End for 5 Years.........................................40
4. SAN Noodles Cash Flow Statement.........................................................................42
5. Ratio Summary........................................................................................................44
SCHEDULES....................................................................................................................45
1. Schedule For Sales Forecast......................................................................................45
2.Schedule For Direct Material......................................................................................45
3.Schedule for Direct Labor...........................................................................................46
Schedule for Inventory of Finished Goods....................................................................46
Inventory of Finished Goods in Units.......................................................................46
4. Inventory of Finished Goods in Rs........................................................................47
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5. Schedule for inventory of raw material......................................................................47

Inventory of Raw Material in Unit............................................................................47
6. Inventory of Raw Material In Rs...........................................................................48
7. Depreciation schedule................................................................................................49
8. Working Capital Loan Amortization Schedule..........................................................54
9. Term Loan Amortization Schedule........................................................................55
11. Schedule for Advertisement.....................................................................................58
12. Schedule for Account Receivable............................................................................59
13. Total Net Fixed Assets Schedule..............................................................................60
14. Schedule for Account Payable.................................................................................62
15. Retained Earnings Schedule.....................................................................................63

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Chapter 1: Background
1.1 Introduction
Nepal with a population of around 30 million possesses a huge FMCG industry (or Fast
Moving Consumer Goods industry), which amounts to more than a billion dollar. This
industry is believed to be growing at a very remarkable pace. While the overall economy
of Nepal is growing at the rate of 3% to 4%, the FMCG sector in the country is growing
at a high yearly rate of over 20 %. Therefore, Nepals FMCG industry is growing at a
very faster speed than the overall economy of the country.
Stick noodle is one of the fast growing FMCG industries in Nepal. Noodles originated in
northern China during the last half of the Han Dynasty (206 B.C.E.220 C.E.) when
large-scale wheat grinding became available, providing flour to make mian, mein, or mi,
the Chinese word for noodle. Nepal is the leader (1 st) in manufacturing noodles among
the SAARC countries. Nepal's instant noodles production began in the early 1980s when
Pokhara-based Gandaki Noodles stepped into a virgin market with Rara. It also launched
stick noodles in the market. Soon after that various small cottages industries jumped into
the stick noodles manufacturing business. Currently there are an ample number of small
medium enterprises as well as large enterprises manufacturing stick noodles within and
outside the Kathmandu valley.
SAN Noodles is a stick noodles manufacturing company dedicated in producing quality
products and making it available at affordable price. The unit will be located at Ramkot,
Sitapaila, Kathmandu. The major reason behind selection of this area as the industry set
up zone is; it being less populated with very few houses and absence of any other
industries in that periphery. Similarly, it is near to the Ringroad, making it easier in the
delivering as well as purchasing process. Our main product will be stick noodles. Fresh
noodles are an extruded product made of maida. They are long thread-like of 0.22 to 0.4
mm. thickness. This is an eatable food item under instant food products and very popular
now-a-days as break-fast food, lunch and dinner. It is one of the most conventional foods
available in the market.

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1.2 Company ownership

The company will be established as a Sole Proprietorship Business. The factory will be
operated under the supervision of Mr. Nirmal Pradhan, who has been associated with the
business for the past 10 years and has marketing experience. It will be owned and
managed by Ms. Rojina Shrestha, an MBA graduate with 5 years working experience
with Dabur Nepal.

1.3 Location and premises

The factory will be located at Ramkot, Sitapaila Kathmandu. The main reason behind
selection of this location is the area being less populated with very few residential houses,
and no other factory has been set up in that area. Similarly, there a small stream of
flowing water just below the factory set up area, which can be used for the factory
operation purposes. Despite the area being less populated the factory site is at a distance
of 1 Km. from Ringroad, this will make it easier for delivering and procurement process.

1.4 Startup summary

The total capital and working capital requirement for the factory set up is Rs. 60,75,000
and Rs. 21,64,040 respectively. 40% of the total requirement is financed by the equity i.e.
the owners contribution while the remaining 60% is financed by bank loan. The loan will
be taken from Himalyan Bank Ltd. and it will in two forms i.e. term loan and working
capital loan. The term loan will be taken @ 9.75% with amortization period of 5 years.
while the working capital loan will be taken @ 10.5% which will be paid within 1 year.
The start up expenses will include legal expenses, pre-operating salaries, office supplies,
purchase of machineries, and like.

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Start up capital

equity

loan

Fig. Start up investment requirement

1.5 Vision
Our vision is to become, The best packaged food company serving International
Standard Products for the utmost satisfaction of its valued customers. We also envision
expanding our business outside the national territory by exporting our products abroad.
Apart from business expansion product line expansion is also what we plan to achieve
(tomato ketchup, mayonnaise, soya sauce and flavored stick noodles).

1.6 Mission statement

Our Mission is to sustain growth by providing high product quality, encouraging
innovation, and providing excellent customer service to our customers.

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1.7 Objectives
We want to go forward, gaining strength in our particular markets and being good at what
we do in every respect. We see that the key is to stick to the basic and to provide premium
quality products tailored to meet the changing market needs. We see ourselves as
remaining in the Nepali foods market and providing other fantastic products in this
category. Our company philosophy is to respond quickly to the changing environment,
encourage learning and be flexible in adopting new technologies and technique in our
manufacturing process with particular emphasis on product quality and food safety.
The major objectives of SAN Noodles are listed in the points given below:
To manufacture high quality stick noodles and cater to the taste buds of the
customers.
To focus on improving the best product quality, safety of foods consumption, as

well as having environmental concerns.

To generate revenue and occupy substantial market share.
To ensure proper utilization of available resources.
To increase the sales by 5% in second year and by 18% thereafter.
To expand business outside the national territory.
To expand the product line and manufacture soya sauce, tomato ketchup, flavored
noodles and mayonnaise.

1.8 Legal framework

According to Section 3 of the Private Firm Registration Act, 2014, the sole proprietorship
business institution needs to be registered either in Department of Commerce (in case of
commerce related firm), Department of Cottage and Rural Industry in the case of cottage
and rural industry, and Department of Industry for any other industry.
SAN Noodles being a sole proprietorship firm operating under noodles industry will be
registered in Department of Industry. For the purpose of registration an application in the
prescribed legal format along with the prescribed official fee of Rs. 15,000 will be
submitted. The application will contain the following information:
i. The name of the Private Firm
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ii. The address of the Firm

iii. The objectives, functions and the particulars of goods or commodity to be transacted
by the private firm.
iv. The name and address of the owner, and the name of his/her father, mother and
grandfather, grandmother.
Certified copy of the Citizenship Certificate will be presented along with other essential
documents for the registration of the firm.
A private firms duration is three years after which the firm needs to be renewed. The
renewal fee of Rs. 2,300 will be paid.
Once the company is registered the next steps is to take PAN number that is Permanent
account number from Inland revenue Department which is situated at Lazimpat. For this
necessary documents are: Application form, Copy of the citizenship certificate of the
owner, Copy of the company/firm registration certificate, two passport size photo of the
owner, and Hand drawn sketch of the business location.
1.9 SWOT Analysis
The Strengths, Weaknesses, Opportunities, and Threats (SWOT) analysis guides us to
identify the positives and negatives inside and outside of our organization. Program
directors, policy groups and management teams can use this resource to help with both
strategic planning and decision-making. A SWOT analysis will provide perspective, and
reveal connections and areas for action.
Strength:

Experienced management team

Low cost of product
Higher understanding of target customers
Healthy relation with buyers and suppliers

Weakness:
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Low level of advertisement and promotional activities

No differentiation in flavor
Low distribution network compared to others
Low brand loyalty

Opportunity:

Growing package and canned food market

Diversification
Large domestic markets
Export markets

Threat:

High competition
Price wars with established brands
Low barriers to enter in the business
Less product mix unlike Maggi which has noodles, soup, pasta etc
Media generated news about health issues
Threat of substitutes

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Chapter 2: Organization And Management Team

2.1. Management Summary
The company will be owned and managed by Ms. Rojina Shrestha, an MBA graduate
with 5 years of working experience with Dabur Nepal. The factory will be operated under
the supervision of Mr. Nirmal Pradhan, an MBA graduate who have been associated with
the noodles industry for last 10 years and have marketing experience as well. The owner
will be managing and overseeing the entire business. She will be also have the final
authority of approval or decision making as well as will be responsible for strategic
planning of the entire firm. All the other departments of the firm will have to report to the
owner. Additional management personnel will be hired as the business grows in the near
future.

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2.2. Organizational Structure

Managing
Director

Factory
Superviso
r

Sales
Personnel

Male
Workers

Accounta
nt

Female
Workers

Reception
ist

Security
Guard

Driver

Office
helper

Fig. Organizational structure of SAN Noodles

Managing Director
Ms. Rojina Shrestha, an MBA graduate with 5 years of working experience with
Dabur Nepal will be designated the post of managing director. The managing
director is the person at the highest level of the organizational hierarchy. She will
be responsible for managing and overseeing the entire business. She will be also
have the final authority of approval or decision making as well as will be
responsible for strategic planning of the entire agency. All the other departments
of the agency would have to report to the Managing Director.
The other duties of the managing director are;

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Selecting, hiring and supervising the office staffs.

Maintaining long term and healthy relationship with the customer,

suppliers and the legal authorities.

Preparing the job description schedule and assigning duties and

responsibilities to the employees as per the post held by them.

Designing the workflow plan and schedules of the factory and supervising

the factory operations with the help of factory supervisor.

Preparing the marketing strategies.

Factory Supervisor
Mr. Nirmal Pradhan, an MBA graduate who have been associated with the
noodles industry for past 10 years and have marketing experience as well will be
holding the post of Factory Supervisor.
He will be responsible for;
Selecting and hiring the factory workers.
Guiding, supervising and proving training to the male and female workers.
Providing suggestions and guidance to the Managing Director in the

decision making process.

Proper maintenance of the factory machineries and equipments.
Guiding the sales personnel on how to deal with the wholesalers.
Motivating the workers to put in their best efforts.

Accountant
A person with at least Bachelors degree in the management field or at least
Intermediate degree with 2 years experience will be hired as an accountant.
S/he will be accountable for functions like;

Financial planning
Account keeping
Billing the clients
Making payments to the suppliers
Maintain the employee salary sheet
Preparation of financial statements of the agency
Inventory management

Sales Personnel
A person with at least +2 qualification and 1 year of experience in the related field
will be hired as the sales personnel. He will be responsible for delivering the

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Noodles to the customers and maintain the record of the sales he has made to the
particular customers i.e. mainly wholesalers.
Receptionist
The front desk officer is responsible for handling clients queries both over the
telephone and during personal visits. They are the first service personnel who
interact with the client and need to create a good impression in the clients.
The minimum qualification required for the post is at least +2 degree, fluency in
English and 1 year experience in the related field.
Office helper
An individual with minimum reading and writing skills and with a good
recommendation will be appointed as an office helpers. He/she will be
responsible for providing refreshments, buying stationaries and activities such as
cleaning, providing office supplies to the workforce from the store and monitoring
the stock of office supplies. He /she will also inform the accountant as soon as the
office supplies reaches the minimum level so that they can be timely reordered.
Driver
An individual with driving liscence and 3 years of driving experience will be
appointed as the driver. He will be working under the supervision and instruction
of the sales personnel. He will be responsible for delivering the goods.
Male and female factory workers
There will be 6 male workers and 3 female workers. They will be hired by the
factory supervisor on the basis of their experience, attitude and personal
background check. They will be working under the supervision of the Factory
Supervisor. Their main work will be manufacturing and packing the noodles.
Security Guard
He will be responsible maintain safety within the factory premises.

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Chapter 3: Products and Services

3.1. Product History
Noodles originated in northern China during the last half of the Han Dynasty (206
B.C.E.220 C.E.) when large-scale wheat grinding became available, providing flour to
make mian, mein, or mi, the Chinese word for noodle. Nepal is the leader (1 st) in
manufacturing noodles among the SAARC countries. Nepal's instant noodles production
began in the early 1980s when Pokhara-based Gandaki Noodles stepped into a virgin
market with Rara. It also launched stick noodles in the market. Soon after that various
small cottages industries jumped into the stick noodles manufacturing business. Currently
there are an ample number of small medium enterprises as well as large enterprises
manufacturing stick noodles within and outside the Kathmandu valley.

3.2. Product Features

SAN Noodles will be manufacturing Stick Noodles packaged in 1 Kg. packets. Stick
noodles are an extruded product made of maida. They are long thread-like of 0.22 to
0.4 mm. thickness. The quality of the manufactured noodles will be the major concern of
the business. For this purpose the factory supervisor will provide training to the factory
workers and audit the conditioning of the machineries on a timely basis. Similarly, the
workers will conduct their duties and operation under the control and guidance of the
factory supervisor.
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3.3. Production Flow Diagram of the unit

The production process has been listed in the points given below;

Flour storage
In this step the main raw material required for the manufacturing i.e flour will be
bought as per the requirement and staking of the flour will be done in a proper
manner in order to reduce any possible wastages.
Wooden pallets will be used under the flour sacks in order to avoid moisture
pickup.

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Dough making
Pulverizer (Mixer) will be used for mixing of flour, water and other ingredients.
Guargum, Sodium tri-poly phosphate, Potassium Carbonate, Sodium Chloride
will be used for improving the quality and Sodium Benzoate to extend the self
life. The usage of these ingredients will also help in minimization of wastages.

Sheeting and cutting

Sheeting and cutting will be performed with the help of cutting machine.
Grooved SS sheet will be provided over the wooden parts of table and machine to
avoid contact between dough and wood. This will enhance the hygiene level and
minimization scrapping waste.

Drying
Cold air drying in room with the help of a fan (at ~20oC) will be adopted. A
thermometer in side the room will be hanged for checking the temperature. This
will save time as well as minimize the space requirement for drying and
dependence on sunny days. Arrangement will be made for hot air drying, with the
help of hot air blower, (at ~30oC) in place of sun drying in the partitioned
(existing) room.
Polythene sheet will be spread under the hanging sticks during drying to avoid
contamination to recyclable waste.
Falls ceiling will be provided and cleaning schedule will be maintained at every
alternate day.

Weighing and packaging

The manufactured stick noodles will be weighed and packed by the factory
workers with the help of use of weighing machine and sealing machine.
The 1 kg packets will be then stacked inside the paper boxes and these boxes will
be delivered to the customers.

The production process mentioned will not only focus on producing the noodles, but also
will be assuring quality and hygiene. As in each step the maintaining quality and hygiene
will be a major concern of SAN Noodles.

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3.4. Product Pricing

The pricing of the product will be done on the basis of the cost involved in the
manufacturing process and certain percentage of margin will be added to the cost of
production to derive the selling price. The other factor that will be considered in the
pricing strategy is on the basis of prevailing market trend. Discount will be provided to
the wholesalers.

3.5. Competitive edge

Assurance of quality and hygiene in the production process will provide the competitive
edge to SAN Noodles. The location of the factory will be another competitive edge, as
the factory site is about a kilometer away from the Ringroad making it easier for delivery
and procurement process. Similarly, the absence of other similar industry in the area will
enhance the possibility to cover the local market.
Human resource is the major asset of any organization; they lead the organization to the
path of success and prosperity. Efficiency, experience and qualification of human
resource are the factors that provide an organization competitive advantage over its
competitors. Hence, the qualified and experienced workforce will provide the competitive
edge to SAN Noodles.

3.6. Future Plans

After 5 years of operation SAN Noodles plan to expand the market as well as the product
line. Since noodles is priority export potential agro product according to NTIS (Nepal
Trade Integration Strategy) we plan to expand our market beyond the national boundaries
by exporting the product. Expansion of product line is another goal. We plan to enhance
our product portfolio by manufacturing tomato ketchup, soya sauce, mayonnaise and
flavored noodles.

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Chapter 4: Market and Competitions

4.1. Industry and Business Outlook
Stick noodle is one of the fast growing FMCG industries in Nepal. Noodles originated in
northern China during the last half of the Han Dynasty (206 B.C.E.220 C.E.) when
large-scale wheat grinding became available, providing flour to make mian, mein, or mi,
the Chinese word for noodle. Nepal is the leader (1 st) in manufacturing noodles among
the SAARC countries. Nepal's instant noodles production began in the early 1980s when
Pokhara-based Gandaki Noodles stepped into a virgin market with Rara. It also launched
stick noodles in the market. Soon after that various small cottages industries jumped into
the stick noodles manufacturing business. Currently there are an ample number of small
medium enterprises as well as large enterprises manufacturing stick noodles within and
outside the Kathmandu valley.
The demand of stick noodles has been increasing rapidly in Nepal as the number of
restaurants, cafes and hotels are growing in a very fast pace. Whether it be small local
restaurant or big restaurants and cafes dishes made from stick noodles is available in
every menu. The dishes made from stick noodles vary from chowmine, spring roll,
thukpa, hakka noodles, Chinese chopsey, American chopsey, noodles salad, and many
more. It can be consumed for breakfast, lunch as well as dinner.
Apart from commercial use for restaurants and cafes, stick noodles is becoming famous
among the Nepalese families. As Nepalese today have become very busy, they do not
have time to cook full meal so they opt for noodles as it is healthy as well as people can
prepare the noodles as per their taste buds and preferences. Similarly it is cheaper than
other packaged food available in the market.
Stick noodles are suitable for vegetarian as well as non vegetarian. As people can add
vegetables and meat products to the noodles as per their preference and cook it in
breakfast, lunch and dinner. Because of this flexibility also stick noodles are becoming
famous in the Nepalese families.

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4.2. Growth Potentiality

Noodles and chowmein, a ready-to-eat food item is very popular in developed countries
and now it has created good market potential in our country also and is becoming a
popular item. The number of restaurants, cafes and hotel are increasing rapidly. With the
increase in their number the demand for stick noodles will increase, as different dishes
made from stick noodles are available in every menu of every big or small restaurants or
cafes or hotels.
Stick noodles are becoming famous among the Nepalese households as well. Due to their
busy lifestyle people are not being able to cook full meal everyday so they opt for stick
noodles. As stick noodles can be prepared as per the taste and preferences. It is suitable
for both vegetarian and non vegetarian. Other attractive feature of stick noodles is, it is
cheaper than other packaged food available in the market. Hence there certainly is growth
potential for the stick noodles in Nepalese market.
The factors governing its demand are:

Increasing population of the country.

Rapid industrialization in the country.
Increase in the purchasing capacity of the people.
Durability of the product.
Change in peoples eating habits especially the younger generation.
Convenience of preparation.
Flexibility in preparation as per the taste buds.

Keeping in view the above factors, the demand of this product is likely to increase
manifold in the coming years.

4.3. Market Segmentation and Targeting

According to a census conducted in 2011, Kathmandu metropolis alone has 2.5 million
inhabitants, and the agglomerate has a population of more than 3 million inhabitants. The
metropolitan city area is 50.67 square kilometres (19.56 sq mi) and has a population
density of 3000per km and 17000 per km square in city. There are more than 5 lakh
families residing in Kathmandu itself. The availability of infrastructural facilities in
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Kathmandu has attracted people outside the valley. This has made the city more
populated and the number of houses and building has increased rapidly. It is visible to us
that the in every house there is a small retail outlets selling wide range of products.
Similarly, the number of wholesalers is also increasing. With the increase in population in
the Kathmandu city people see scope in opening restaurants and cafes leading to rapid
increment in number of restaurants, cafes and hotels in the city.
The segmentation will be done on the basis of the type of business.
Wholesaler
The number of food wholesalers is increasing rapidly in the Kathmandu city. The
wholesalers will be the major segment for our business. As the wholesalers act as
means of reaching the retail outlets and ultimately the consumers.
Retailers
With the increase in population the number of houses in the Kathmandu city have
increased so has the number of small retail outlets selling food items. We see small
retail outlets in every nooks and corners. We can supply the stick noodles to these
retail outlets, however it will be a cumbersome process reaching and supplying the
products to these small shops.

Big restaurants

Restaurant business is booming in the city. Most of the big restaurants have various
dishes made from stick noodles in their menu. Bigger the restaurant more the number
of customer, more the requirement of raw materials i.e. stick noodles. This will
ultimately increase our sales.

Small restaurants

Small restaurants and cafes are mushrooming in the city. We can see these small cafes
and restaurants in every nooks and corners. One of the main dishes served in these
restaurants is Chowmine which is cooked from the stick noodles.

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4.4. Targeting
Of the above segmented market major focus will be on the segments; wholesalers and big
restaurants. The reason behind this decision is the number of wholesaler and big
restaurants will be lesser in comparison to retailers and small restaurants. However, the
sales revenue from these sections will be much higher as they will be purchasing in bulk
and supplying to the retailers.
The other reason is regarding the reach. Distributing our products to every small
restaurants and retailers in every nooks and corner will be a cumbersome process.

4.5. Positioning
Positioning is important for any business as it is the only tool that determines their image
as well as perception in the minds of their customers. SAN Noodles wants to position
itself as a noodle manufacturing company that strives to deliver quality product to
effectively meet the requirements of its target customers.
From the market research conducted the firms in noodles industry do not particularly do
advertisements and promotions. They supply the products as per the demand.
So SAN Noodles will be positioning its product as a quality product with the same price
as that of its competitors.
4.6. Competition
Stick noodles being an FMCG product and listed on the priority export potential product
by NTIS ( Nepal Trade Integration Strategy ) various cottage industries, small and
medium enterprises are attracted towards the noodles industry. Similarly, in noodles
industry the profit margin seems to be high. This has been another attractive feature. With
the growing interest and inclination towards the noodles industry the number of firms is
increasing. This has led to high competition.

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Chapter 5: Competitive Analysis

5.1. Porters Five Forces Model-Competitive Analysis
A well-used method of external analysis is Porter's Five Forces, a model
developed by Professor Michael Porter. Porter identified and demonstrated that
the state of competition for an organization is a composite of five competing
forces. These forces are:
Threat of new entrants: New entrants are always a powerful source of
competition. The new capacity and product range bring in throw up new
competition pressure. In opening up a stick noodles factory doesnt require
huge amount of capital hence anyone can enter this market after a thorough
study of market and trained staffs. Similarly, stick noodles being an FMCG
product and listed on the priority export potential product by NTIS ( Nepal
Trade Integration Strategy ) various cottage industries, small and medium
enterprises are attracted towards the noodles industry.
Bargaining power of customer: There are many competitors in market so the
bargaining power of customers will be high. The bargaining power can be
minimized by maintain good relationship with the wholesalers and big
restaurants and assuring quality products at the same price charged by the
competitors.
Bargaining power of supplier: The raw materials required for the production
of stick noodles items are supplied by many numbers of suppliers, thus this
makes the suppliers position weak. Hence there is low bargaining power of
suppliers.
Threat of substitute products: There are many substitute products for the
stick noodles. People can go for fast food or for packed and junk food. Hence
there is a threat of substitute product for our business.

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 Rivalry among current players: There are many competitors such as Tiger,
Pooja, Uttam and many more

Chapter 6: Marketing And Sales Plan

6.1. Marketing mix
Product
The core product of SAN Noodles is stick noodles. Fresh noodles are an extruded
product made of maida. They are long thread-like of 0.22 to 0.4 mm. thickness.
This is an eatable food item under instant food products and very popular now-adays as break-fast food, lunch and dinner. It is one of the most conventional foods
available in the market. The noodles will be available in 1 kg packet with expiry
date of 6 months from the date of manufacturing.
Price
The pricing of the product will be done on the basis of the cost involved in the
manufacturing process and certain percentage of margin will be added to the cost
of production to derive the selling price. The other factor that will be considered
in the pricing strategy is on the basis of prevailing market trend. Discount will be
provided to the wholesalers.
The selling price in the first year will be Rs. 55. and will increase by 5% every
year in order to cover the inflation i.e. increase in price of raw material.
Promotion
In the initial phase promotion will be done in order to create awareness regarding
the SAN Noodles. The same promotional methods are used for the 5 years

however, the purpose will be to retain the customers. Promotional techniques are:
Pamphlets and broachers will be distributed in various restaurants, shopping malls

and retail outlets as well as to the wholesalers.

We will open a stall within the premises of Bhatbhateni. We will change our

location every year. In the first year we will place our stall at Bhatbhateni, Naxal.
Providing discount to the customer will be another promotional strategy to

increase the sales volume and maintain good relationship with the customer.
Advertising our product on radio and ECS magazine.

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Promotional expense

Particulars

Year

Year

Year

Year

Year

5%

5%

5%

5%

4630.

4862.

Percent
increment
Advertisement
expenses

Pamplets

and

brochures
Stalls

in

4000
shopping 24000

centre
Discount

0
to 86336

customer (5%)

2.5

Advertisement

in 18000

Living
Advertisement
radio

Total

4200

4410

025

25200

2646

27783

29172

00

1.5

95185

1179

14612

18104

7.2

351

16

47

18900

1984

20837

21879

50

2.5

1.1

5512

57881

60775

via
50000

52500

.25

.31

1337

1449

1701

2009

2386

363

557

936

930

596

The discount to customer will be 5% of sales and it assumed that the promotional
expense will increase by 5% every year.
Place
Placing any product or service determines the visibility among the customers and even
the success of the product or service. No matter how good a product or service is, being
out of reach or in inconvenient position makes the customers switch to the competitors.

25 | P a g e

The factory will be located at Ramkot, Sitapaila, about a kilometer away from Ringroad.
The product will be distributed to the wholesalers from the factory site itself , the
wholesaler will sell the product to the retailers and from the retailers it will reach to the
ultimate consumers.
The company will itself distribute its product to the big restaurants.

Chapter 7: Financial Plan

7.1. Assumptions
Assumptions for the inventory
1. The inventory of finished goods for the first year has been taken as half month of
the total yearly production.
2. The remaining units of finished goods are sold. Of the total sales 80% is made on
cash and remaining on credit.
3. The inventory of raw material for the first year will be taken on the basis on raw
material required to maintain the level of inventory of finished goods.

Assumptions for Start Up Expenses;

1. Office supplies include stationeries, water jar, coffee making
machine, utensils, electric heater, door mats, stamp, etc.
2. The start-up expenses will be written off in 1 year.
Assumptions for Depreciation Schedule;
1. The will be no additions in the pool of assets for the first 5 years because the
factory will not operate in full capacity.
2. The machineries will be repaired once in 3 years and it will not be capitalized as
the expense incurred will not enhance the capacity of the machineries.
Assumptions for Loan Amortization Schedule
1. The term loan amount of Rs. 60,75,000 has been taken from Himalayan bank at
an annual rate of 9.75%.
26 | P a g e

2. The working capital loan amount of Rs. 60,75,000 has been taken from
Himalayan Bank at an annual rate of 10.5%.
3. The interest and principal is paid on quarterly basis.
4. Loan is taken as on 1/1/2015.
Assumptions For Salaries And Wages
1. Salaries will be given for 13 months i.e. including 1 month salary as Dashain
allowance.
2. Salaries and wages will increase by 5% in every 2 years, as the average rate of
inflation is 8% in the context of Nepal.
3. Number of male employees will increase by 2 in every 2 years, as we are looking
for increment in the production units over the years.
4. Number of female employees will increase by 1 in every 2 years.
Assumptions for Operating Expenses
1.
2.
3.
4.

Operating expenses increases by 5% every year.

Repair and maintenance of machineries will be incurred in every 3 years.
Start up expenses will be written off in 1 year.
Insurance expense will be taken as 1.5% of the total fixed assets value.

Assumptions for Advertisement Expenses

1. Advertisement expenses increase by 5% every year.
2. Stall will be placed in Bhatbhateni for a year @ Rs. 20,000 per month.
3. Salary to sales personnel increases by 5% every year.
Assumptions for Cost Of Sales
1. When the machinery operates in 100% capacity; the total production per month
will be 45,500 kg of finished goods, i.e. 546,000 kg of finished goods per year.
2. To operate at 100% capacity the number of male employees required is 10.
3. In the first year the company will operate at 60% capacity. Then the capacity will
increase by 20% after every 2 year.
4. The wages of the workers will increase by 5% after every 2 years.
Assumptions for Inventory Of Raw Material And Finished Goods

27 | P a g e

sacks of RM= 420 kgs of FG

1 sack = 50 kgs of RM

therefore, 360kgs of RM = 420 kgs of FG

1 kg of FG = 0.86 kgs of RM
50 kgs of RM= Rs. 1850
therefore, 0.86 kgs of RM= Rs. 31.82
1 kg of RM= Rs. 37

The cost of Raw material will increase by 5% every year.

Assumptions For Cash Collection From A/R And Cash Payment To A/P
1.
2.
3.
4.

Of the total sales 80% is made on cash and the remaining 20% is made on credit.
Of the credit sales all will be collected in the next year.
Of the total purchase 80% is made on cash and remaining 20% is made on credit.
Of the credit purchase all the payment will be made in the next year.

NOTES
1. Furniture and fixtures include tables, chairs, hanging sticks, paint brush for
cleaning the machine, broom and stationeries.
Tables= 10 * 20,000= 200,000
Chairs= 25* 5,000= 125,000
Paint brush= 20 * 200= 4,000
Broom = 20 * 50= 1,000
Stationeries= 5,000
Sofa = 65,000
TOTAL = Rs. 400,000

7.2 Financial details of startup expenses

SAN Noodles will be started with an initial investment of NRs. 6,075,000 out of which
40% i.e. NRs. 2,430,000 will be financed by equity and the remaining 60% i.e. NRs.
3,645,000 will be financed by a banks term loan. The loan will be taken from Himalayan
Bank Ltd at 9.75% interest rate.
The initial working capital requirement for the business is of NRs. 2,286,782; 60% of
which will be financed by working capital loan of NRs. 1,372,069 from Himalayan Bank
at 10.5% interest rate. The other start-up cost will amount to NRs. 85,000. It will consists
of different types of expenses like purchase of furniture, registration fees, pre operating
salaries, office supplies and others. The detail of the start-up expenses is shown in Annex
1.
28 | P a g e

7.3 Projected Income Statement:

Projected income statements is a summary of the operating activities of the business. It is
an important tool for planning future business operations. The projected income
statement of SAN Noodles shows appropriate profit for the periods of projection and the
trend of profit is increasing continuously throughout the projected period. The detail of
projected income statement of this institution is shown in Annex 2.

7.4 Projected Balance Sheet:

Projected balance sheet discloses a businesss assets, liabilities, and equity at a specific
point in time. The opening balance sheet of SAN Noodles shows NRs. 6,075,000.00 of
total assets with same level of liabilities and equity and the total balance at the end of
fifth year is NRs. 39,746,524.26. The overall pro forma balance sheet of SAN Noodles
for five years is disclosed in Annex 3.

7.5 Projected Cash flow Statement

Projected cash flow statement shows the total net cash inflow or outflow at a specific
point of time from operating, investing and financing activities. The projected cash flow
shows a balance of NRs. 4,537,521 at the first year and at the end of fifth year it is NRs.
27,372,846. The projected cash flow statement of SAN Noodles is disclosed in Annex 4.

7.6 Business Financial Ratios:

The financial ratios of the business indicate its liquidity, solvency and profitability of the
firm. Which is explained below and the detail is shown in the Annex 6

29 | P a g e

Liquidity Ratio:

Current Ratio:

The current ratio is a financial ratio that measures whether or not a firm has enough
resources to pay its debts over the next 12 months. It compares a firm's current assets to
its current liabilities. The current ratio started with 1.78 in the first year and increased to
4.34

within 5 years. It shows that SAN Noodles will be more capable in paying its

obligations.

Solvency Ratio:
It is a key metric used to measure an enterprise's ability to meet its debt and other
obligations. The solvency ratio indicates whether a company's cash flow is sufficient to
meet its short-term and long-term liabilities. Following ratios are calculated to identify
the solvency of the SAN Noodles:

Debt -to -equity ratio

It indicates what proportion of equity and debt the company is using to finance its assets.
It is calculated by dividing total liabilities from the total shareholders equity (total
liabilities total shareholder's equity). The debt to equity ratio in the first year is
2.28 which has decreased to 1.26 in the final year.

Time interest earned ratio

Times interest earned (TIE) ratio shows how many times the annual interest expenses are
covered by the net operating income (income before interest and tax) of the company. It
is calculated by dividing earnings before interest and tax by interest expenses [net income
+interest expenses+ Income tax expenses) Interest expenses]. This ratio has increased
from 12.32 to 246.08 during this projected five years. Indicating that the loan and interest
will be paid entirely from the operating profit.

Debt Service Coverage Ratio

30 | P a g e

It is calculated by dividing the cash flow from operation before interest and tax with
interest and principal payments (Cash flow from Operations before interest and tax
Interest and Principal Payment) which determines the ability of the company to pay its
interest and principal on loan. This ratio has also been increasing from 1.61 to 12.88
indicating high ability of the firms to pay the interest and principal.
Profitability Ratio
Profitability ratios measure a companys ability to generate earnings relative to sales,
assets and equity. These ratios assess the ability of a company to generate earnings,
profits and cash flows relative to relative to some metric, often the amount of money
invested. They highlight how effectively the profitability of a company is being managed.

Gross Profit Margin:

SAN Noodles has maintained its constant gross profit ratio throughout the period.

Net Profit Margin Ratio:

Initially, the profit margin is 21% which will increase to 27% in the final year of
prediction.

Return on asset ratio

Initially the return on asset ratio was 26 % which decreased to 23% in year three and then
it went up to 25% indicating a high return on assets.

Return on sales ratio

Same as the return on assets and net profit margin the in the initial year the return on
sales was 21% which increased to 27% in final year of projection.

Asset turnover ratio

It is an efficiency ratio which tells how successfully the company is using its assets to
generate revenue. During the first three years the asset turnover ratio has been
31 | P a g e

continuously decreasing from 1.26 to 1.10 after which in the final year it declined to 0.91.
Indicating the low use of companys available assets in the process of providing the
service.
7.7 NVP, IRR & MIRR:
NPV can be described as the difference amount between the sums of discounted: cash
inflows and cash outflows. It compares the present value of money today to the present
value of money in the future, taking inflation and returns into account. IRR is the
discount rate at which the present value of all future cash flow is equal to the initial
investment or in other words the rate at which an investment breaks even. The projected
NPV shows the total value of NRs. 44,446,973.50, IRR of 101% and MIRR of 72% the
calculation is shown in schedule 16.
7.8 Payback Period:
Payback period is the time in which the initial cash outflow of an investment is expected
to be recovered from the cash inflows generated by the investment. The pay-back period
of SAN Noodles is 1.506 years. The calculation of these periods is shown in the schedule
17.

32 | P a g e

Chapter 8: Critical Risk and Contingencies

Every business is exposed to various kinds of risks that may either have a direct or an
indirect influence upon its survival and success and SAN Noodles is no exception to that.
The probable risks for the firm are highlighted under two main categories as follows:

8.1 Internal Risks:

Technical problem can be a major internal risk, as in order to produce the goods
machineries and equipments play a vital role. Hence, in case it fails to work the
production process will be hampered to a great extent.

Risk associated with the Human Resource unavailability in the market and the
sustainability of the employee. SAN Noodles is totally dependent on the factory
workers. Hence, unavailability of labor in the market will be problematic.

Problem in operation of the factory can occur due to lack of communication

between the people at different positions or organizational hierarchy.

Problem in the implementation of Strategies.

Problem in delivering the goods to the customer on time.

The attitude of the employee can be a big problem. If the employees have
negative perception towards the owner or the immediate supervisor then
motivating the employees to give in their best effort will definitely be a problem.

Conflict between the members of the organization can hamper the working
environment and the productivity.

There may be coordination problem as people from diverse backgrounds have to

work together as a team.

Improper maintenance of accounting and financial records can create problem and

insolvency risk.
Lack of timely internal auditing.

33 | P a g e

Did you know that incentivising employees could prove to be a business risk, if
its not done correctly, fairly and appropriately? Therefore, if the right incentive
and reward schemes are not prepared for the business can be a problem.

8.2 External Risks:

The company may have to face the risk of having inactive clients in case of

liquidity crunch in the country.

The political uncertainty may hamper the companys revenue because of adverse

effects in the clients operations and revenue

Load shedding can be a major problem, as in every step of the production process

the factory requires electricity.

Unavailability of raw material in the market can create a problem.
Decrease in demand due to change in taste and preferences of the customer and

shutting down of the major customers can be another problem.

Availability of large number of substitutes in the market can be a risk to the

company.
Threat of new entrants to the industry.
Changes in the laws and policies relating to the industry can be a risk.

Chapter 9: Future Plan and Exit Strategy

9.1. Future Plan
After 5 years of operation SAN Noodles plan to expand the market as well as the product
line. Since a noodle is priority export potential agro product according to NTIS (Nepal
34 | P a g e

Trade Integration Strategy) we plan to expand our market beyond the national boundaries
by exporting the product.
Expansion of product line is another goal. We plan to enhance our product portfolio by
manufacturing tomato ketchup, soya sauce, mayonnaise and flavored noodles.

9.2. Exit Strategy

The degree of competition is high in Nepalese Noodles industry as there is sizeable
number of competing enterprises existing in the market. In this context, it would be wise
if SAN Noodles prepares itself if it is unable to survive successfully in the market by
planning an exit strategy beforehand.
The noodles factory will enter into different life cycle. In the long run, we may not
continue in the same business. The four stages of life cycle indicate to adopt a different
and appropriate business strategy. Thus after the maturity stage, the stage of decline
comes. Before making the business failure we should adopt another suitable strategy.
There are basically four exit strategies;

Merger and acquisition

Sell it to a friendly individual
Make it a cash cow
Liquidation and close

The strategies that SAN Noodles will adopt to exit the market will be to sell its entire
business to the interested party and use the sales proceeds to cover the loss faced by it.
Apart from this, it can also merge with other growing and successful advertising firm so
as to serve the market with a renewed brand name and goodwill.

ANNEX
1. Capital Requirement
Particulars
Fixed Assets

35 | P a g e

Unit

Rate (Rs.)

Amount (Rs.)

Land on lease

1,200,000

Building

Mixing machine

50,000

50,000

Dough making machine

80,000

240,000

Cutting machine

50,000

100,000

Motors

60,000

240,000

275

1,000

275,000

Packing machine

20,000

40,000

Generator

500,000

500,000

Vehicle

900,000

900,000

Computer

65,000

130,000

Iron pipes

Furniture & fixture

2,000,000

400,000

Total fixed assets

6,075,000

Working capital

2,286,782

Total

8,361,782

36 | P a g e

Capital Structure
Capital Structure

Amount (Rs.)

Equity (40%)

2,430,000

Loan (60%)

3,645,000

Total

6,075,000

Working Capital Structure

Particulars

Unit

Rate (Rs.)

Amount (Rs.)

Inventory of finished goods

13,650

35

476,593

Account recievables

62,790

55

3,453,450

264

37

9,768

Inventory of raw materials

less : Account Payables
Operating expenses for a mth
Total

2,086,800
433,771
2,286,782

Rs 1372069 i.e. 60% of the working capital will be taken as working capital loan from
Himalayan Bank Ltd.

37 | P a g e

2 SAN Noodles Income Statement

Sc
he
du
Particulars

le

Year 1

Year 2

17,267,2
Sales

50

Year 3

19,037,14
3

Year 4

23,587,0
20

Year 5

29,224,3
18

36,208,93
0

LESS: COGS
10,424,2
Direct material

32

10,945,44
4

1,014,0
Direct Labour

00

LESS: Ending inventory

476,5
5

93

Total COGS

39

3
6,305,6

GROSS PROFIT

11

78

83

1,750,76
7

18,295,1
26

8,697,8
37

1,491,87

1,491,8

14,889,1

7,024,67

01

01

1,863,22

2,277,6

2,277,6

12,012,47

00

64

21,117,86

1,419,6

423,5

423,56

10,961,6

02

00

16,089,8

1,419,6

476,59
4

of FG

21
1,014,00

ADD: Opening inventory

of FG

15,323,6

22,722,20
1

10,929,1
92

13,486,72
9

OPERATING
EXPENSES
60,0
Electricity

00

Telephone

and

communication

63,00
0

36,0
00

66,1
50

37,80
0

90

stationeries

38 | P a g e

72,93
0

41,6
75

43,75
8

30,0

of machinaries
supplies

58
39,6

Repair and maintenance

Office

69,4

00
and

24,0
00

25,20
0

26,4
60

27,7
83

29,17
2

216,0
Fuel expenses

00

226,80
0

60,0
Misccellaneous

00

Amortization of start up

40
63,00

250,0
47

66,1

262,54
9

69,4

72,93

50

58

85,0

expenses

00
3,0

Registeration renewal fee

00

3,00
0

228,7
Wastages

65

Packaging cost
Depreciation on Fixed

50

Insurance

00

71

83

1,182,01
6

366,9
08

121,5
00

459,62

927,0

436,5

121,50

88

93

3,00

350,1

908,8

522,61

121,5

00

64

3,0

334,8

668,30

629,2
6

00

00

3,0

239,18

655,2

assets

238,1

310,24
7

121,5
00

121,50
0

91,2
Interest on WC loan

08
334,0

Interest on term loan

Salaries

and

44

related

expenses

273,80
4

1,472,9
9

00

00

67

33

45

1,546,5

20,0

3,737,10

1,623,87
2

20,0
00

4,045,4
48

54,00
8

45

00

134,4

1,546,5

20,00

4,036,8
TOTAL

73
1,472,90

20,0
Road tax for vehicle

207,4

20,00
0

3,928,0
65

4,255,60
6

Sales and promotional

expenses
Advertiment

and

promotional expenses

1,337,3
10

63

1,449,55
7

156,0
Salary to Sales personnel

39 | P a g e

00

1,701,9
36

163,80
0

2,009,9
30

171,9
90

60,77
5

180,5
90

189,61
9

Total

sales

and

promotional expense

1,493,3
63

TOTAL OPERATING
EXPENSES

1,613,35
7

5,530,2
30

LESS:

Income

Tax

(25%)

Net Profit after tax

40 | P a g e

20
5,350,46

7
4,812,2

NET PROFIT

2,181,9

2,190,5
20

6,227,3
69

5,411,31

250,39
4

6,118,5
84

6,515,9

4,506,00
0

8,738,6

13,236,33

49

17

73

1203062.

1352828.

1628979.

2184668.

3309083.

125

25

198

204

708

3609186.

4058484.

4886937.

6554004.

9927251.

375

75

594

611

125

3. SAN Noodles Balance Sheet as on Year End for 5 Years

Sc
he
dul
ASSETS

Year 0

Year 1

Year 2

Year 3

Year 4

Year 5

Current assets
4,537
Cash and bank

,521

Account

10,3
31,489

3,280

recievables

11

,778

Inventory of FG

593

Inventory of RM

768

000

6,280

864,4

42
3,564

1,07

2,277,

1,327,
076

1,49
1,878

802,7
96

27,372,
846

1,087

601

0,513

19,63
5,182

77

9,

Preliminary

198
33

476,

expenses

13,074,

1,750,
767

1,66
3,257

5,486,
435

85,

Less: preliminary

(85,

expenses

000)

Total current

8,304,

assets

659

11,111
,845

17,019,0
73

23,861,
403

35,937,1
25

Fixed Assets
1,20
Land on lease

0,000

Total net fixed

assets

,000
4,87

12

Total

1,200

5,000

00,000
4,245

,750

fixed

TOTAL

6,075,00
0

CAPITAL &
EQUITY
Current
liabilities

41 | P a g e

13,750,409
.4

000

23,138

750

1,200,

3,7

5,445,

assets

ASSETS

1,2

,000
3,286,

554

4,92
3,138

1,200
000
2,919
,647

4,486,5
54

1,200,

2,609,
400

4,119,6
47

3,809,4
00

16,034,9
82

21,505,627

27,981,050

39,746,524.

13.
Account payable
Income

2,086,80

00

0.00

tax

2,191,
140.0

1,203,06

payable

2.13

3,220,97
5.80

1,352,
828.2

3,382,02
4.59

1,628,97
9.20

4,971,57
6.15

2,184,66
8.20

3,309,08
3.71

1,372,06
WC Loan

9.42

Total Current

4,661,931

liabilities

.55

Long

3,543,9
68.2

4,849,955.
00

5,566,692
.79

8,280,659.
86

term

liabilities
3,645,0
Term loan

8.0

00

3,049,29
1.55

2,393,
343.2

1,671,06
3.30

875,74
4.21

(0
.05)

Shareholder's
euity
2,430,0
Equity

00

2,430,00
0.00

2,430,
000.0

3,609,18
Retained earning

14

6.38

2,430,00
0.00

7,667,
671.1

2,430,00
0.00

12,554,60
8.72

2,430,00
0.00

19,108,6
13.33

29,035,86
4.45

Total
shareholder's

6,039,186

equity

.38
TOTAL

LIABILITIES

6,075,00
0

10,097,6
71

13,750,409
.4

14,984,608.
72

16,034,9
82

21,538,613
.33

21,505,627.
02

31,465,864.
45

27,981,050
.33

39,746,524.
26

4. SAN Noodles Cash Flow Statement

Schedul
Particular

Year 0

Year 1

Year 2

Year 3

Year 4

Year 5

A. Operating Activities
3,609,1
Net profit

42 | P a g e

86

4,058,
485

4,886,
938

6,554,
005

9,927,
251

629,25
Add: depreciation

522,6
13

436,5
83

366,9
08

310,2
47

85,00
Add: preliminary expenses written off

Add: provision for income tax

62

1,203,0

(Increase)/

decrease

in

Account

receivable

1,352,
828

(3,280,77
11

8)

2,944,
498

(9,76
(Increase)/ decrease in inventory RM

8)

Increase/

(decrease)

in

3)

13

00

40

Cash flow from operating activities

62)

3,846,16

(A)

86

89)

49

28)

1,589,
552

(1,628,9
79)

3,464,9
89

(258,8

161,0

(1,352,8

7,821,9

78)

24

836

(3,823,1

785,7

1,029,

(1,203,0
Payment of Tax

(860,4

(1,854,0

104,3

(255,9
90)

61)

38)

2,086,8

(206,6

(782,2

53,0

3,309,
084

10)

84)

29

Accounts

payable

97)

45)

2,184,
668

(528,1

(10,7

(476,59
(Increase/ decrease in Inventory of FG

1,628,
979

(2,184,6
68)

7,356,3
03

8,613,4
08

B. Investing Activities
Sale of equipment
(6,075,0
Purchase of fixed assets

00)

Purchase of Building/ Equipment

(85,00
Preliminary expenses

0)

Cash flow from Investing Activities

(6,075,00

(B)

0)

(85,000
)

(655,9

(722,2

(795,3

(875,7

C. Financing Activities
Capital

2430000

Term loan

3645000
(595,70

Repayment of term loan

Working capital loan

43 | P a g e

8)

48)
1,372,0

80)

19)

44)

69
(1,372,0
Repayment of working capital loan

Cash flow from Financing Activities

776,36

(C)
Net

6075000
Change

in

cash

and

Beginning

(2,028,01

and

0)

4,537,5

709
4,537,

Equivalent

4,537,52

Ending Cash and Cash Equivalent

489

10,331,4

6,560,
984

10,331,

521

89

98

7,737,
664

13,074,
198

13,074,1

(875,74
4)

2,742,

968

Cash

(795,31
9)

5,793,

21
Cash

(722,28

8)

Cash

Equivalent(A+B+C)
Add:

69)

19,635,
182

19,635,1
82

27,372,8
46

5. Ratio Summary
Particular

Year 1

Year 2

Year 3

Year 4

Year 5

LIQUIDITY ANALYSIS
3,642,727.
Working capital

93

7,567,876.
82

1.
Current Ratio

78

12,169,117.6
4

3
.14

18,294,710.6
9

3.
51

27,656,464.8
7

4.
29

4.
34

SOLVENCY ANALYSIS
2.
Debt-to-equity ratio

44 | P a g e

28

1
.59

1.
44

1.
30

1.
26

12.
Time interest earned ratio
Debt

32

76

Service Coverage

Ratio

20.

32.
41

1.

66.
00

10.

246.
08

5.

10.

12.

61

16

70

41

88

Gross Profit ratio

37%

37%

37%

37%

37%

Profit Margin

21%

21%

21%

22%

27%

PROFITABILITY
ANALYSIS

0.
Return On Assets Ratio

26

0
.25

23

0.
Return On Sales Ratio

21

.21

26

0.
22

0.
27

1.
10

0.
25

0.
21

.19

0.
23

1.
Assets Turnover Ratio

0.

1.
04

0.
91

SCHEDULES
1. Schedule For Sales Forecast
Particulars

Year 1

Percent change

Year 2

Year 3

Year 4

Year 5

5%

18%

18%

18%

313,95
Sales unit

0.00

329,64

388,98

459,00

541,62

7.50

4.05

1.18

1.39

5%

5%

5%

5%

Percent change in
SPPU
55.
SPPU (Rs.)

Total sales

45 | P a g e

00

57.
75

17,267,250.

60.
64

19,037,143.

63.
67

23,587,020.

66.
85

29,224,318.

36,208,930.

00

13

33

19

24

2.Schedule For Direct Material

Particulars

Year 1

Percent change

Year 2

Year 3

Year 4

Year 5

5%

5%

5%

5%

Cost of Raw material per

35.0815

38.6774

kg of Finished Goods(Rs.)

31.82

33.411

36.83563

Production units

327600

327600

436800

436800

546000

1042423

109454

153236

1608980

211178

44

21

65

Total

cost

of

raw

material

3.Schedule for Direct Labor

Particulars

Year 1

Year 2

Year 3

Year 4

Year 5

141960

141960

186322

Total cost (Rs.)

1014000

1014000

Production units

327600

327600

436800

436800

546000

3.09523

3.09523

3.25

3.25

3.4125

Direct labour cost/ unit (Rs.)

Schedule for Inventory of Finished Goods

Inventory of Finished Goods in Units
Particulars
Opening Inventory of FG

46 | P a g e

Year 1

Year 2
13,65

Year 3
11,60

Year 4
59,41

Year 5
37,21

0
327,60

Production units

Units of goods available for

sales

0
327,60

Ending Inventory of FG

459,00
1

541,62
1

59,41
8

583,21
7

388,98

11,60
3

496,21
8

546,00
0

448,40

329,64

13,65

436,80
0

341,25

436,80
0

327,60

313,95
Sales unit

37,21
7

41,59
6

4. Inventory of Finished Goods in Rs.

Particulars

Year 1

Year 2

Year 3

Year 4

Year 5

Total COP

35

37

38

40

42

13,6
Opening Inventory of FG

50

Total cost of opening inventory of

FG(Rs.)

93

50

Total cost of ending inventory of

FG (Rs.)

47 | P a g e

03
476,5

13,6
Ending Inventory of FG

11,6

93

423,5

11,6

476,5

1,491,8
78

37,2
17

2,277,6
01

17

01

18

37,2

2,277,6

59,4

423,5
64

18

64

03

59,4

41,5
96

1,491,8
78

1,750,7
67

5. Schedule for inventory of raw material

Inventory of Raw Material in Unit
Particulars

Year 1

Year 2

Year 3

Year 4

26
Opening inventory of RM

64

436,8

375,64

00

48

19,68

546,0

375,6

52

591,5
52

00

281,73

2
Ending inventory of RM

436,80
0

281,73

20

80

327,60

552,7

414,4

Raw material required for

production

395,32

32

00

282,26

38,8

394,8

327,60
Production

394,80

80

282,00

282,00
Available RM

19,6

28

282,00
Purchase of RM (kgs)

Year 5

469,5
60

38,8

121,9

32

92

Year 2

Year 3

Year 4

Year 5

5%

5%

5%

5%

6. Inventory of Raw Material In Rs.

Particulars

Year 1

Percent change
3
Cost of RM per kg (Rs.)

3
9

4
1

4
3

4
5

10,434,00
Total purchase (Rs.)

Total inventory of RM
(Rs.)

48 | P a g e

16,104,879

20,51

802,79

9,76

10,955,700

16,910,123

24,857,881

1,663,257

5,486,435

7. Depreciation schedule
Year 1

Rate
Particulars

Dep.

of

Closing
Opening Balance

Depreciation

Balance

Block-A
Building

5%

2,000,000

100,000

1,900,000

Block-B
Computer

25%

130,000

32,500

97,500

Furniture & fixture

25%

400,000

100,000

300,000

Total

530,000

Block-C
Vehicle

20%

900,000

180,000

720,000

Mixing machine

15%

50,000

7,500

42,500

Dough making machine

15%

240,000

36,000

204,000

Cutting machine

15%

100,000

15,000

85,000

Motors

15%

240,000

36,000

204,000

Iron pipes

15%

275,000

41,250

233,750

Packing machine

15%

40,000

6,000

34,000

Generator

15%

500,000

75,000

425,000

Block-D

49 | P a g e

Total

1,445,000

629,250

815,750

Year 2

Rate
Particulars

Dep.

of

Closing
Opening Balance

Depreciation

Balance

Block-A
Building

5%

1,900,000

95,000

1,805,000

Block-B
Computer

25%

97,500

24,375

73,125

Furniture & fixture

25%

300,000

75,000

225,000

Total

397,500

Block-C
Vehicle

20%

720,000

144,000

576,000

Mixing machine

15%

42,500

6,375

36,125

Dough making machine

15%

204,000

30,600

173,400

Cutting machine

15%

85,000

12,750

72,250

Motors

15%

204,000

30,600

173,400

Iron pipes

15%

233,750

35,063

198,688

Packing machine

15%

34,000

5,100

28,900

Generator

15%

425,000

63,750

361,250

Block-D

Total
Total depreciation

50 | P a g e

1,228,250
522,613

Year 3

Rate
Particulars

Dep.

of

Closing
Opening Balance

Depreciation

Balance

Block-A
Building

5%

1,805,000

90,250

1,714,750

Block-B
Computer

25%

73,125

18,281

54,844

Furniture & fixture

25%

225,000

56,250

168,750

298,125

74,531

223,594

20%

576,000

115,200

460,800

Mixing machine

15%

36,125

5,419

30,706

Dough making machine

15%

173,400

26,010

147,390

Cutting machine

15%

72,250

10,838

61,413

Motors

15%

173,400

26,010

147,390

Iron pipes

15%

198,688

29,803

168,884

Packing machine

15%

28,900

4,335

24,565

Generator

15%

361,250

54,188

307,063

1,044,013

156,602

887,411

Total
Block-C
Vehicle
Block-D

Total
Total depreciation

51 | P a g e

436,583

Year 4

Rate
Particulars

of

Dep.

Closing
Opening Balance

Depreciation

Balance

Block-A
Building

5%

1,714,750

85,738

1,629,013

Block-B
Computer

25%

54,844

13,711

41,133

Furniture & fixture

25%

168,750

42,188

126,563

223,594

55,898

167,695

20%

460,800

92,160

368,640

Mixing machine

15%

30,706

4,606

26,100

Dough making machine

15%

147,390

22,109

125,282

Cutting machine

15%

61,413

9,212

52,201

Motors

15%

147,390

22,109

125,282

Iron pipes

15%

168,884

25,333

143,552

Packing machine

15%

24,565

3,685

20,880

Generator

15%

307,063

46,059

261,003

887,411

133,112

754,299

Total
Block-C
Vehicle
Block-D

Total
Total deprecation

366,908

Year 5

Rate
Particulars

Dep.

of

Closing
Opening Balance

Depreciation

Balance

Block-A
Building

52 | P a g e

5%

1,629,013

81,451

1,547,562

Block-B
Computer

25%

41,133

10,283

30,850

Furniture & fixture

25%

126,563

31,641

94,922

167,695

41,924

125,771

20%

368,640

73,728

294,912

Mixing machine

15%

26,100

3,915

22,185

Dough making machine

15%

125,282

18,792

106,489

Cutting machine

15%

52,201

7,830

44,371

Motors

15%

125,282

18,792

106,489

Iron pipes

15%

143,552

21,533

122,019

Packing machine

15%

20,880

3,132

17,748

Generator

15%

261,003

39,150

221,853

754,299

113,145

641,154

Total
Block-C
Vehicle
Block-D

Total
Total depreciation

310,247

8. Working Capital Loan Amortization Schedule

S.N.

Payment

Beginning

date

balance

Principa
PMT

1,
1

42,095

372,069

365,81
9

1,
2

42,186

042,267

Interest
36,0
17

365,81
9

42,278

703,807

75

42,370
Total

53 | P a g e

356,462

57

63,3
76

3
56,462

81,8
51

356,46
2

91,2

17

03,807

36,0

347,34

9,3

interest

42,267

Cumulative

1,0

338,46

18,4

365,81
4

60

balance
329,80

27,3

365,81
3

Ending

91,2
0

1,372,06

08

08

54 | P a g e

9. Term Loan Amortization Schedule

S.N
.

Paymen
t date

Beginning
balance

4
1

2,095

645,000

2,186

2,278

2,370

203,641

232,43
8

Total

2
4

2,461

3,
049,292

4
6

2,552

891,180
4

2,644

729,214
4

2,736

14

232,43

478,843
2,563,3

01
169,95

62,480

408,370
2,729,2

165,91
66,525

80

232,43

2,

334,044

2,891,1

161,96
70,473

563,301

232,43

2,

92

158,11
74,326

3,049,2

232,43

2,

255,955

595,70
334,044

41

929,75

174,194
3,203,6

154,34
78,089

88,847

18

interest

3,354,3

150,67
81,761

Cumulative

3,501,4
09

232,43

3,

balance

147,09
85,347

Ending

143,59
88,847

354,318

232,43

3,

4
4

501,409

Interest

232,43

3,

4
3

PMT
3,

4
2

Principa

545,368
2,393,3

43

607,848

655,94
Total

273,804
4

2,826
1

55 | P a g e

54,094

43

49,747

99

720,280
1,858,2

08
187,14

45,294

666,186
2,040,8

182,69

232,43
8

2,219,2

178,34

232,43

1,
858,208

58,338

040,899

174,10

232,43

2,

4
3,101

219,243

3,009

232,43

2,

1
2

393,343

2,917

2,

770,027
1,671,0

63

815,321

722,28
Total
1
3

207,473
4

3,191
1

36,059

31,273

081,813

79

232,43

856,053
1,282,9

201,16

8
1,

57

232,43

282,979

3,466

1,479,3

196,37

8
1,

40,732
232,43

479,357

3,374

191,70

8
1,

232,43

671,063

3,282

1,

892,112
1,081,8

13

923,385

206,06

26,369

875,7
44

949,754

795,31
Total
1
7

4
3,556

1
8

875,744

3,647

16,201

10,930
232,43

971,100
448,4

15

987,301

221,50

226,907

52

232,43

664,6

216,23

448,415

3,831

21,346
232,43

211,09

664,652

3,739

232,43

134,433

5,53
1

226,9
07

998,231

(0)

1,003,762

226,90
7
875,74

Total

54,008

10. Salaries and Other Related Expenses Schedule

Salaries

and

related

expenses

No
.

Monthl
Rate

Year 1

Year 2

Percentage increment

Salary to supervisor

56 | P a g e

Year 4

5%
30,0

Owner's compensation

Year 3

00

30,0
00

20,0

390,
000

20,0

390,0
00

260,

5%
409,

500
260,0

Year 5

409,
500

273,

429,
975

273,

286,

00

00
10,0

Salary to driver

10,0

00

Salary to receptionist

12,0

00
8,0

Salary to security guard

Total

salaries

and

wages
Payroll

103,0

00

000

103,00

1,339,0

00

171,

800

990
109,

200

660
163,

109,

1,339,00

114,

200

800

00

988
109,

163,

104,0

214,

750
109,

156,0

325
204,

200

104,

00

00
taxes

000
8,0

00

00

143,

500
204,

104,0

650
136,

750

156,

00

136,

195,0
00

000

000

500

104,

00
12,0

130,0
00

000
8,0

00

000

195,

00
8,0

Salary to office helper

000
15,0

00

00
130,

00
15,0

Salary to accountant

000

114,

200

1,405,9

660

1,405,9

50

1,476,2

50

48

and

benefits
133,
Social security

10%

900

133,9
00

140,

140,

147,

595

595

625

Other employee benefit

programs

Total payroll taxes and

133,9

benefits
Total

00
salaries

and

133,90
0

1,472,9

related expenses

00

140,5

140,5

95
1,472,90

147,6

95

1,546,5

25

1,546,5

45

1,623,8

45

72

11. Schedule for Advertisement

Particulars

Year 1

Percent increment

Year 2

Year 3

Year 4

Year 5

5%

5%

5%

5%

Advertisement expenses
Pamplets and brochures

4,000

4,200

4,410

4,631

4,862

Stalls in shopping centre

240,000

252,000

264,600

277,830

291,722

Discount to customer (5%)

863,363

951,857

1,179,351

1,461,216

1,810,447

Advertisement in Living

180,000

189,000

198,450

208,373

218,791

57 | P a g e

Advertisement via radio

Total

58 | P a g e

50,000

52,500

55,125

57,881

60,775

1,337,363

1,449,557

1,701,936

2,009,930

2,386,596

12. Schedule for Account Receivable

Particulars

Year 1

Year 2

16,403,88
Total sales

18,085,28
6

13,123,11
Cash sales(80%)

Year 4

22,407,66

14,468,22

3,280,77
Credit sales (20%)

Year 3

27,763,10
2

17,926,13
5

3,617,05

Year 5

34,398,48
4

22,210,48
2

4,481,53

27,518,78
7

5,552,62

6,879,69

Collection from credit sales

same year (0%)

3,280,77
next year (100%)

Total collection from credit

sales

13,123,11
0

59 | P a g e

5,552,62
0

26,692,01
6

864,47
7

5,552,62

4,481,53

21,543,19

336,28
0

4,481,53

3,617,05

17,749,00

3,280,77
Ending balance of A/R

7
3,280,77

Total cash collection from

AR

3,617,05

33,071,40
7

1,071,08
7

1,327,07
6

13. Total Net Fixed Assets Schedule

Particulars

Year 0

Year 1

Year 2

Year 3

Year 4

Year 5

Block-A
2,000,00
Building

1,900,00
0

1,805,00
0

1,714,75
0

1,629,01
3

1,547,56
2

Block-B
130,00
Computer

97,50
0

400,00
Furniture & fixture

73,12
5

300,00
0

54,84
4

225,00
0

41,13
3

168,75
0

30,85
0

126,56
3

94,92
2

Block-C
900,00
Vehicle

720,00
0

576,00
0

460,80
0

368,64
0

294,91
2

Block-D
50,00
Mixing machine
Dough

making

machine

42,50
0

240,00
0

Iron pipes

0
40,00

Packing machine
Generator

60 | P a g e

8
34,00

0
500,00

0
425,00

143,55

24,56

122,01
9

20,88
0

307,06

106,48
9

5
361,25

44,37

125,28

168,88

28,90

106,48

52,20

147,39

198,68

22,18

125,28

61,41

173,40

233,75

26,10

147,39

72,25

204,00

275,00

30,70

173,40

85,00

240,00
Motors

5
204,00

100,00
Cutting machine

36,12

17,74
8

261,00

221,85

4,875,00
TOTAL

61 | P a g e

4,245,75
0

3,723,13
8

3,286,55
4

2,919,64
7

2,609,40
0

14. Schedule for Account Payable

Particulars

Year 1

Year 2

10,434,00
Total purchase

10,955,70
0

8,347,20
Cash purchase (80%)

Year 4

16,104,87

8,764,56

2,086,80
Credit purchase (20%)

Year 3

16,910,12
3

12,883,90
3

2,191,14

Year 5

24,857,88
1

13,528,09
8

3,220,97

19,886,30
5

3,382,02

4,971,57

Payment to credit purchase

same year (0%)

2,086,80
next year (100%)
Total

payment

to

credit

purchase

62 | P a g e

3,382,02
5

16,749,07
4

3,220,97
6

3,382,02

3,220,97

15,075,04

2,191,14
0

3,220,97

2,191,14

10,851,36

2,086,80
Ending balance of A/P

0
2,086,80

8,347,20
Total cash payment to AP

2,191,14

23,268,32
9

3,382,02
5

4,971,57
6

15. Retained Earnings Schedule

Particular

Year 1

Beginning Retained Earning

Year 2

Year 3

Year 4

Year 5

3,609,186

7,667,671

12,554,609

19,108,613

Add: Net income

3,609,186

4,058,485

4,886,938

6,554,005

9,927,251

Closing retained earning

3,609,186

7,667,671

12,554,609

19,108,613

29,035,864

16. Calculation of NPV, IRR & MIRR

Year
1

Cash flow

PVIF @
10%

Present value

4,537,520.97

0.9091

4,125,019.07

10,331,488.95

0.8264

8,538,420.62

13,074,198.29

0.7513

9,822,838.68

19,635,182.15

0.6830

27,372,846.22

0.6209

Less

13,411,093.61
16,996,383.89

Total Present Value(TPV)

52,893,755.87

Net Cash Outflow

8,446,782.37

Net Present Value

44,446,973.50

17. Calculation of Pay Back Period

Discounted payback period = minimum full year +(remaining amt to be
recovered/Discounted CFAT of recovery year)

Discounted payback

63 | P a g e

1.506 years