Prakriti Colors

-Group 4
Aditi Jaisinghani Madhura Bakre Mayank Gupta Mohd. Shoeb Abbas Nitika Gupta Pranay Dangi Soumit Kundu Sumit Jain

Introduction

We propose to set up a company engaged in production and supply of Natural Food Colors.

Management Vision:To provide high quality natural food colors to the consumers through constant marketing efforts, end to end servicing and efforts to improve efficiencies of the production and resources
We plan to set up a unit in Chinchwad MIDC Mr. Darshan Parekh
IT engineer 15 years experience of working in multinational company.

A brief on management 3 directors Name of the Mr. Sunil Joshi Mrs. Amrita directors Joshi

Qualification Experience Msc chemistry 10 years experience of working in food colors manufacturing unit Bcom- accountancy -

Shareholding in the company

40%

20%

40%

The Hierarchy
3 DIRECTORS

FINANCIAL MANAGER
1 ACCOUNTANT

PRODUCTION MANAGER
2 PRODUCTION ENGINEERS

SALES MANAGER
4 MARKETING OFFICERS

2 CHEMICAL ENGINEERS

2 ADMINISTRATION STAFF

3 CHEMISTS
8 BACK OFFICE STAFF

16 LABOURERS

Plant layout and details

Details of machinery
Projected Cost of Plant and Machinery
Particulars Shredding Machine Pulping Machine Spray Dryer Sieving Machine Blending Machine Glass line Reactors Chilled water plant Stainless steel reaction vessels Filters De-mineralised water plant DG set for Stand by power Total Cost Quantity 1 2 2 1 1 4 1 1 1 1 1 INR in Lakhs 25.4 14.9 31.7 15.8 19.0 14.9 23.5 16.1 15.4 19.2 27.8 223.8 Total Cost 25.4 29.8 63.4 15.8 19.0 59.5 23.5 16.1 15.4 19.2 27.8 315.0

Why Natural food colors?

Our product is a part of food processing industry which has done exceedingly well in the recent times. It is growing at a rate of 10% p.a.

The natural food colors industry is growing at a rate of 15-20% per annum.
The reason why the natural food colors industry is growing at a faster pace than the food processing industry is because more and more companies are shifting from the synthetic food colors to natural food colors.
Switch to natural food ingredients
40% 30% 17.10% 7.70% 16% 6.50% bakery products ready meals snacks and soft drinks 8.70% 2005 others dairy 28.30% 36.90% 11.10% 2005 2010 2010 38.10% 29.60%

20%
10% 0%

Use of natural food colors

Beetroot: The color of beetroot is water soluble and has limited stability when exposed to light, heat and oxygen. It is particularly suited to frozen, dried and short shelf-life products, such as ice creams and yoghurt. Red color may also be used in lipsticks, textile clothes etc.

Turmeric: Turmeric is a well known spice, used widely in cookery. Its pigment,

curcumin, is oil soluble and tends to fade in light, but has good heat stability. It gives a
lemon yellow shade in food systems. Its applications include pickles, soups and confectionery. It is also used in hatchery and pharmaceuticals.

Marigold: Marigold is a commonly available flower. Its pigment has got a good stability and gives a dark yellow color. Commonly used in confectionery, bakery products, baby products etc

Spinach: It is a green, oil soluble color. Its pigment, chlorophyllins are water soluble

and relatively stable when exposed to heat and light. Uses include sugar confectionery

Economic conditions of the industry

The food processing industry is employment intensive and creates 1.8 jobs directly and 6.4 jobs indirectly across the supply chain for every Rs. 1 million

invested. The growth is also inevitable with rising incomes, favorable

demographic transition and changing consumption patterns.

At the same time there are also a few constraints in the food processing sector due a key issue like affordability- because of cost and quality of farm produce,

infrastructure, credit, processing, packaging and fragmented supply chain

In order to overcome these constraints and explore the above opportunities the government has initiated several steps such as: -No industrial license required for the food processing except alcoholic beverages

and items reserved for SSI

-Custom duty reduced from 7.5% to 5% on food processing machinery -Application of Hazard Analysis and Critical Control Points (HACCP) at various stages

Application of Porters 5 forces model

Potential entrants
Threat of new entrants

Bargaining power of the suppliers

Supplier s

Industry competitor s

Buyers

Bargaining power of the buyers Threat of substitutessynthetic food colors

Substitutes

Process-High Pressure- Supercritical/ Sub critical Extraction:

Washing of vegetables/flowers

Shredding

Pulping

Spray Drying

Sieving

Blending

Sieving

Extracted color

Packaging

Demand and supply

FINANCIALS
Proposed Cost of Project Particulars INR in Lakhs

Building
Plant and Machinery Miscellaneous Expenditure Preliminary & Pre-operative Expenditure Provision for contingencies Fixed Assets Working capital Estimated Block Capital Cost of Project Means of Finance Total Debt Promoters contribution

240
315 35 80 70 740 60 800 500 300

Total Means of Finance

800

CAPITAL STRUCTURE

The D/E ratio comes out to be 1.67:1. This is above the benchmark level of 1.33. All the expenses after the operation of the project has started will be funded by the cash flows generated by the project, as the projected cash flows from the project are very high and project will generate profit from first year onwards.

FROM Debt Equity Total

AMOUNT lakhs) 500 300 800

(Rs.

In

COST OF CAPITAL
Cost of Debt: 13.75% (Base Rate + Spread) Cost of Equity: 15.00% (Food Color Industry Average)

WACC = 13.75%*0.625 + 15%*0.375 = 14.29%

BREAKEVEN POINT
Since we are growing at 7%, 9%, 11% and 13 % as we have assumed our firms growth rate, our demand is increasing thus our sales. This employ that in the first year we are achieving break even at 32%, as sales grow our breakeven point is going down and our average breakeven point is at 28% and we achieve this after second year of operations.

Year 2012-13 2013-14 Breakeve n 0.32 0.31

201415

2015-16

201617

0.29

0.26

0.22

Average Breakeven point=28%

IRR,NPV
The IRR of our company is 32 %. The Cost of Capital of our company is 14.29%. This implies that IRR is much greater than the Cost of Capital which means that the project is highly profitable. The NPV of our company is 642.05 lakhs for the next 8 years which a big positive value.

Profit margin in each color

Sr no. Color name MARIGOLD 1 EXTRACT BEET ROOT 2 EXTRACT SPINACH 3 EXTRACT TURMERIC 4 COLOR LIQUID selling TOTAL (monthly) cost (per total YEARLY kg) production(kg) 900 600 400 800 RM manufacturing cost(per kg) cost 342 228 152 304 1026 rm + m c 243 162 108 216 729 Selling, Distribution, Admin & Other Expenses 180 120 80 160 540 profits 729000 324000 108000 864000 202500 margin (15%) 135 90 60 120 405

5400 3159000 3600 1404000 1800 468000

7200 3744000

Yearly Admin total sales Sales 97200 0 4860000 58320000 43200 0 2160000 25920000 14400 0 720000 8640000 115200 0 5760000 69120000 27000

Yearly profit

8748000 3888000 1296000 10368000

PROFIT LOSS STATEMENT

PROFIT LOSS statement Years INCOME Sales Other Income Increase /(Decrease) in Stock TOTAL A EXPENDITURE Manufacturing and Operating Expenses adminitrativeexpenses & Selling and Distribution Expenses TOTAL B PROFIT BEFORE DEPRECIATION (A - B) Depreciation amortisation PROFIT BEFORE INTEREST AND TAXATION Interest PBT Taxation 2012-13 2013-14 2014-15 2015-16 2016-17 1620.00 1733.40 1889.41 2097.24 2369.88

1620.00 1733.40 1889.41 2097.24 2369.88

1053.00 1126.71 1228.11 1363.21 1540.42 324.00 346.68 377.88 419.45 473.98

1377.00 1473.39 1606.00 1782.65 2014.40 243.00 59.20 8.00 175.80 67.00 108.80 32.70 260.01 59.20 8.00 192.81 64.00 128.81 38.70 283.41 59.20 8.00 216.21 59.00 157.21 47.22 314.59 59.20 8.00 247.39 55.00 192.39 57.78 355.48 59.20 8.00 288.28 49.00 239.28 71.84

PAT

76.10

90.11

109.99

134.61

167.44

Coverage Ratios

DSCR

The minimum DSCR for the project is 1.31 which is in the first year and the average DSCR is 1.60. This DSCR means that on an average, the project will generate 60% more revenue than required to cover its debt payments which is above the benchmark level of 1.50.

AVERAGE DSCR-1.59970476

Years

2012-13

2013-14

2014-15

2015-16

2016-17

DSCR

1.318177653 1.415530934

1.55899664

1.747705643

2.01063309

LLCR

This table indicates that after a few years the company will have sufficient money available for debt repayment to pay their balance senior debt.

Years LLCR

2012-13 -1.01

2013-14 -0.71

2014-15 -0.38

2015-16 0.03

2016-17 0.55

2017-2018 1.30

2018-2019 2.66

ICR
This table implies that we have a very high interest coverage ratio right from the beginning. This also implies that there is a high probability that we will not be unable to pay.

Years ICR

2012-13

2013-14

2014-15

2015-16

2016-17

2017-2018

2018-2019

10

14