TABLE OF CONTENTS

Chapter No
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
Annex. No
I
II
III
IV
V
VI
VII
VII
IX
X
XI

Febin Lee & Co.

Description
Executive summary
Introduction
The promoters
The concept
Project location
The marketing aspects
The production aspects
Raw material and sources
Building
Machinery
Computer and equipments
Manpower
Implementation schedule
Environmental management
Working capital
Cost of project
Means of finance
Bank finance
Financial feasibility
Cash flow statement and balance sheet
Ratio analysis
Conclusion
Table
Annual sales turnover
Annual raw material cost
Repayment schedule of term loan
Computation of depreciation under SLM
Computation of depreciation under WDV
Computation of Income Tax
Projected profitability statement
Projected cash flow statement
Projected Balance Sheet
Debt Service Coverage Ratio
Computation of Break Even Point
Building cost estimate
Machinery quotation
Computer quotation
Location sketch

Page No.
2
3
4
5
5
7
9
10
10
14
18
19
23
25
25
26
28
29
29
30
31
31
Page No
33
34
35
36
37
38
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41
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43
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48
1

1. EXECUTIVE SUMMARY

Name of the Firm

M/s. Plumage Fabrics

Constitution

Registered Partnership Firm

Name of the Promoters

Mr. K.K. Abdul Latheef

Mr. A. Muhammed Sadique
Building No.IV/544,
Agriculture Co.Opp. Bank Building
Velloorkunnam, Market P.O.,
Muvattupuzha, Ernakulam,
Kerala 686 673

Registered Address

Proposed Project Location

Proposed Line of Activity
Project Consultant
Architect
Cost of Project

Means of Finance

Sy. No.741/3A
Punnoppady, Mudavoor P.O.,
Muvattupuzha, Ernakulam
Kerala 686 669
Manufacturing Ready Made Garments
CA. Febin Lee James
Febin Lee & Co., Chartered Accountants
Thodupuzha.
Mr. Sebastian Jose B. Arch, M. Arch.
M/s Silpi Architects, Thevera, Kochi - 13
Rs. 3,916. 04 Lakhs
Promoters Contribution

Rs. 1,415.38 Lakhs

Term Loan from Bank

Rs.1,455.66 lakhs

Working Capital Loan from Bank

Rs.1,045.00 Lakhs

Number of direct employment

1242 employees

Debt Service Coverage Ratio

1.76
Ready Market for the Finished Product (Ready Made
Garments)

Key advantage of the Project

Promoters Well Experienced in the Line of Business

Usage of Proven and Universally Accepted Latest
Technologies

Febin Lee & Co.

2. INTRODUCTION

Plumage Fabrics (PF) is a registered Partnership Concern formed

with the main objective to enter into the business of ready made
garment manufacturing with a plant capacity of thirty five thousand
garments per day per shift at Mulavoor village, Muvattupuzha in
Ernakulam district of Kerala. Muvattupuzha city being developing as
the ready made garment hub in the region with all modern
communication and transportation facilities has been selected as the
location for operation of the unit.
Plumage Fabrics was registered on 1st August, 2009. Since then it is conducting the market study,
planning the production process, and creating the project plan based on the experts advices and
industry dynamics to produce ready made garments at lower cost and in good quality to lead the
competitive market.
In its start up project Plumage Fabrics proposes to set up a factory having 54,835 Sq. Ft built up
area to accommodate 952 stitching and related machines and 1,242 employees with a well
structured marketing plan to market its products allover India and export to Middle East and to
European countries. Garments industries are much depends on the availability of trained labour
force for producing quality products. In order to retain the laour force Plumage Fabrics has planed
to construct a dormitory building near to the factory building with 41,860 Sq. Ft built up area. This
would substantially reduce the employee turnover of the organization and result in good quality
product at much lower cost.
The proposed facilities of the project are as summarized below:

Febin Lee & Co.

Factory Building

54,835 Sq. Ft.

Dormitory Building

41,860 Sq. Ft

Stitching and Other Machines

952 Nos.

Employees

1,242 Nos.
3

As the dressing habits of people and fashion trends are changing day by day, marketing of Plumage
Fabrics garments does not seem to posses any concern. Moreover not only benefits of lower
employee turnover and but also large scale production have been the encouraging factures for
Plumage Fabrics to set up the dormitory building for its employees.
In view of the above Plumage Fabrics has assigned M/s. Febin Lee & Co., Chartered Accounts to
critically examine all aspects and derive a Techno-Commercially feasible model for its proposed
project.

3. THE PROMOTERS

Mr. K.K. Abdul Latheef (Managing Partner): Mr. K.K. Abdul Latheef is a
graduate having twenty five years experience in business field. For the last
twenty years he is actively engaging in ready made garment manufacturing and
marketing field. At present he is successfully running a medium scale ready made
garment manufacturing unit at Koovalloor near Kothamangalam in Ernakulam
district of Kerala. The total investment in that unit is around fifty lakhs rupees with employee
strength of fifty workers. The out put of this unit is selling in the local market and in the export
market. The present exports are in small lots, even though he is getting bulk export orders, because
of lower production capacity of the unit. He is having a good knowledge in fabrics selection for the
readymade garments. Presently he purchases cloths directly from Ahamadabad, Mumbay, Surath,
Eroad, and Bangalore, the leading markets of cloths and garments in India. His experience in the
garment designing and stitching is an important aspect in the success of his present unit. He is also
experienced in labour management. The workers in his present unit are from Tripur, Assam and
Bengal, which reduces the labour cost of his products.
Under his management, the future of Plumage Fabrics is also seems to be bright. Presently he is
residing at Kallupurath House,

Koovalloor P.O.,

Kothamangalam,

Ernakulam district,

Kerala- 686 671

Febin Lee & Co.

Mr. A. Muhammed Sadique (Managing Partner): Mr. A. Muhammed Sadique

is graduate and having thirteen years experience in business field. Presently he is
running garment wholesale business at Muvattupuzha in Ernakulam district of
Kerala. He is having wide marketing networks all over Kerala with a number of
small, medium and large textiles outlets as his customers. Presently he is having
ten marketing staffs for selling his products. With his wide knowledge of market
and products, Plumage Fabrics will not face any difficulty to find market for its products. Presently
he is residing at Vaikkilazhikam (Siddikamanzil) house, Mulavoor P.O., Muvattupuzha, Ernakulam
district,

Kerala- 686 673.

4. THE CONCEPT

The promoters of Plumage Fabrics propose

to

start

manufacturing
Mudavoor

readymade
unit

P.O.,

at

garment

Punnoppady,

Muvattupuzha

in

Ernakulam district of Kerala state with

most modern machineries and facilities for
manufacturing ready made Shirts, Skirts,
New born baby dress and Undergarments
in the initial stage and in the next stage they will start manufacturing other readymade garments
like, Trousers, T shirts, Night wares, etc. The promoters propose to sell the products in local market
and in export market with here on marketing networks.

5. POJECT LOCATION

The project will be located in 2.10 acres of own land (Sy. No. Sy. No.741/3A of Mulavoor Village)
at Punnoppady, Muvattupuzha in Ernakulam district of Kerala which shall be sufficient enough to
house the Factory building and Dormitory building of the upcoming unit.
Febin Lee & Co.

The location is well connected through road network

with

MC

Road

connecting

Muvattupuzha

and

Perumbavoor, passing just 1 Km. away. The site is

about 3 Km from the Muvattupuzha city.
Source of water shall be from ground water through
well. The required quantity of power shall be drawn
from the 11KV power line which is available nearby.
The raw materials shall be received at the location by road through trucks. The products shall also
be dispatched by road. Export of products can be possible through Cochin International Airport,
which is just 45 Km. away from the unit and Cochin Ship Yard which is around 35 Km away from
the unit.
The factory layout has been developed looking into the placement of technological and service units
so that there is no interference, and the movement of men and material is easy and minimal.

PLUMAGE FABRICS

Febin Lee & Co.

DETAILS OF THE LOCATION

1

Location

Punnoppady

Sy. No.

741/3A of Mulavoor Village

Extent

2.10 Cents

Panchayath

Paipra

Ward No.

XVI

Village

Mulavoor

Block

Muvattupuzha

Taluk

Muvattupuzha

10

Road facility

By the side of Veettoor Pezhakkappilly road

Muvattupuzha -

11

Distance from the nearest town

:

3 K.M

Ernakulam

35 K.M.

Thodupuzha

20 K.M.

Kottayam

45 K.M.

Nedumbassery -

45 K.M.

6. THE MARKETING ASPECTS

GENERAL

Readymade garments are the choice of urban people. It is also gaining wider
acceptance in semi-urban and rural areas. The huge charges made by tailors
and delay in delivery have made people to switch over to readymade garments.
In domestic market and export market, it has made spectacular progress in the
Febin Lee & Co.

last decade. This industry is becoming very vibrant and lot of foreign investment pouring in this
industry because of low risk and high earning nature of this industry. As these products are fashion
oriented, entrepreneurs should always keep in mind the changing fashion styles. Considering its
advantageous position, it is assumed that there will be no constraint in marketing of readymade
garments.
The demand for ready made garments is increasing at around 18-20 % annually in the country. The
popularity of ready made garments is good among youth and fashion conscious public. The
domestic market and the export market are growing rapidly and the unit for manufacturing can be
run quite successfully if they can tap the market by giving good price and quality.
The manufacture and marketing of garments is one of the most basic and
most competitive industries in the world. Whereas the country of
manufacture has continually changed over the years as companies
sought to reduce costs, the marketing of garments has become a
very specialized activity due to changing national and fashion
trends within the buying nations. Not only do low costs need to be
maintained, but constantly changing market requirements also need to
be met.
India is the worlds second largest producer of textiles and garments after China. The textile and
garment industry in India is one of the oldest manufacturing sectors in the country and is currently
its largest. The textile and garment industry fulfils a pivotal role in the Indian economy. It is a major
foreign exchange earner and, after agriculture, it is the largest employer. Textiles and garments
accounted for about 14% of industrial production and 16% of export earnings of India.
Readymade Garments account for approximately 41% of the countrys total textiles exports. During
2007-08 the Readymade Garments exports have amounted to US$ 9.065 billion, recording an
increase of 9.46 % over the exports during 2006-2007. During the period of April-December 2008,
the Readymade Garments exports have amounted to US$ 6.8 billion, recording an increase of
5.97% over the exports during the corresponding period of 2007.
MARKETING
M/s. Plumage Fabrics proposes to set up a structured marketing division for marketing its
products. Customers of the unit include large textile shops and textile distributors. The unit plans to
Febin Lee & Co.

produce varies verities of products as per market requirement. The common products of the unit are
shirts, skirts, newborn baby garments and brassieres. Export of garment is also a field having
immense scope. It is therefore investigated that marketing of Plumage Fabrics garments would not
be difficult at all.

7. THE PRODUCTION ASPECTS

Procurement
Cutting and Stitching
Checking
Pressing
Packing

The ready made garment manufacturing process involves the following steps:
1. Procurement of Fabric: Dyed/ bleached/printed cotton/synthetic
fabrics as per demand are to be procured from the open market. The
fabric will be inspected by laying on the inspection table against
light before cutting so that unevenness in colour/ shade or any other
fault, if any visible in the fabric are eliminated. The quality of garments
mainly depends on quality of fabric used. Therefore, care must be taken while purchasing fabrics
to ensure good colour fastness properties, uniformity in shade etc.
2. Cutting and Stitching: The inspected fabric is placed on the plotter in
layers and then the different parts of the
respective garments are demarked by the
plotter as per the predefined patterns.
Cutting machines are used for cutting the
Febin Lee & Co.

fabrics. Stitching is carried out for individual portion of the garments by skilled workers with the
help of over lock, lock stitch machines etc.
3. Checking, Pressing and Packing: Final checking is done before pressing
and packing on the checking table so that any fault in the piece may be
removed and protruding threads eliminated. The individual pieces are pressed
by steam presses to remove any wrinkle marks and packed in the carton
boxes.

8. RAWMATERIAL AND SOURCES

The main raw material required for the unit are cloths, buttons,
elastics, hook etc. which is purchased directly from
Ahamadabad, Mumbay, Surath, Eroad, Tripur and Bangalore.
These raw materials are purchased in bulk quantities.

9. BUILDING

Civil Works: The civil work comprises of site preparation, design and construction of building
structures underground structures, foundation for structures, floors, underground drainage pipe
lines, roads, boundary walls, fencing etc. for the following major areas;

Factory building 54,835 Sq. Ft.

Dormitory building 41,860 Sq. Ft.

Febin Lee & Co.

10

Water supply facilities

Rain water harvesting facilities

Construction Futures: The factory building and Dormitory building are two independent
buildings. The factory building will have three floors (Ground + First + Second Floor) and the
dormitory building will have four floors (Basement + Ground + First + Second Floor). For both
buildings superstructures shall consists of RCC frames and filler brick walls.

Earth Works
The site leveling will have to be done in order to achieve required terraced level and also to
make the surface drainage effective. The terracing is aimed to be achieved by bringing red
earth from outside the site.

Foundation
Foundation of the buildings will be laid on isolated footings taken to a depth of 3 to 6 m
depending on technological requirement and soil characteristics.

Floors in Buildings
Floors in buildings shall be of either PCC or RCC according to
structural requirement.

Walls
All brick walls shall be constructed with best quality bricks to suit the
required thickness.

Columns and beams

All columns and beams shall be of reinforced concrete to suit technological requirement.

Roof
Both the building shall have RCC flat roof supported on RCC.

Wall finishing
Inside and outside surface of brick masonry walls shall be plastered smooth and finished
with putty finished emulsion. Exterior wall in the frond of the building shall be covered with
Structural Glazing.

Doors and windows

High quality aluminum doors and windows finished with glass will be provided for both the
building. The main outer doors will be covered with rolling shutters, rolling grills etc shall
be provided to suit requirement.

Febin Lee & Co.

11

Flooring
Generally RCC slabs shall be provided for floors. It will be finished with vitrified tiles or
ceramic tiles etc. as per technical requirement.

Sanitary installation
Generally white glazed earthen ware fittings of approved make will be used.

Power supply and Distribution: It is envisaged that electric power shall be drawn from nearest 11
KV line and step down to our requirement by installing a transformer in the factory premises. Silent
generators shall be installed for providing power
in case of KSEB power failure. Electrification
of the factory and dormitory building shall be
planed and executed as per standards prevailing
in the industry.
Electric Tower: There is a high tension electric
line passing through the proposed location and
one tower is located in the factory premises. As
per the agreement between KSEB and the Unit,
The unit has to construct retaining wall around
the tower as per the technical specification
provided by the KSEB. All construction
activities in the location will be as per the
guidelines provided by KSEB in this regard.
Furniture and Fittings: Furniture in the
factory and dormitory shall be of high quality
wood, steel, aluminum, etc. as per the technical
requirements.
Plumping: Plumping shall be done with top quality material as per technical requirements.
Lift: Two lifts shall be provided in each building.
Construction cost of the Buildings: The estimated construction cost of the buildings is given
bellow.
Febin Lee & Co.

12

BUILDING COST
Amount in
Rupees
Sl. No.
I

Description
Civil Work
1 Factory building

2
II

III

Amount

57,500,000

Dormitory building

36,800,000

Electrical Works
3 General electrical

94,300,000

16,900,000

Transformer

2,600,000

Generator

2,900,000

Electrical tower

2,000,000

Plumbing Works
7 General Plumbing

8
IV

Amount

24,400,000

8,900,000

S.T.P.

2,900,000

11,800,000

Furniture
9 Furniture ( Factory)

9,500,000

10

7,000,000

16,500,000

13,000,000

13,000,000

Furniture ( Dormitory)

Lift
Total

Febin Lee & Co.

160,000,000

13

10. MACHINERY

In order to compete with the existing competitive market condition the unit should
meet quality standards. This calls for adoption of high quality equipments. The promoters expect
that Rs. 415.16 Lakhs is to be spent for purchasing new machineries for the unit. The details of the
plant and machinery are given below.
MACHINERY AND EQUIPMENTS
Amount in
Rupees
Sl.
No.

Description

No.

Price Per
Unit

Total

Eastman 629(8") cutting machine

78,750

78,750

Eastman EC-45 round knife cutting machine

25

22,500

562,500

Eastman EC-700 band knife cutting machine

311,250

311,250

Juki DDL - 8300N single needle lockstitch

machine

700

19,375

13,562,500

Juki LH - 3528 two needle lockstitch machine

40

83,750

3,350,000

Juki LZ - 2284 zig zag sewing machine

40

189,062

7,562,480

Juki MO - 6716S DE4 - 40H five thread over

lock machine

20

51,250

1,025,000

Yamato - CF 2339 elastic attaching machine

50

98,750

4,937,500

Febin Lee & Co.

14

Yamato - CZ-6125-Y5DF four thread over lock

machine

10

40,625

406,250

10

Yamato - CF- 2300-156 M flat lock machine

10

59,687

596,870

11

Yamato - CF- 2303 flat lock for binding

operations

59,687

179,061

12

Gerber AE-SW pattern marker/ grading

machine

1,202,500

13

Juki LBH - 1790 Computerized button hole

machine

394,500

394,500

14

Juki LK-1903ASS Computerized button stitch

machine

311,500

311,500

15

Hashima HP - 450 Fusing press

168,750

168,750

16

Rotondi Steam iron, Table with boiler

40

82,500

17

Juki MS -1190 Speed off the arm machine

169,600

678,400

18

Juki LH-3568 Two needle lock stitch machine

114,500

458,000

19

Scissors

1500 300

VAT

3,300,000

450,000
1,980,355

Total

Febin Lee & Co.

1,202,500

41,516,166

15

Pictures of the required machineries are given bellow.

PATTERN MAKING

PATTERN MKER

CUTTING

CUTTING MACHINE

ROUND KNIFE
CUTTING MACHINE

BAND KNIFE
CUTTING MACHINE

SINGLE NEEDLE
STITCHING MACHINE

TWO NEEDLE LOCK

STITCH MACHINE

ZIG ZAG SEWING

MACHINE

FOUR THREAD OVERLOCK

MACHINE

FLATLOCK MACHINE

FLATLOCK FOR BINDING

FIVE THREAD OVERLOCK

MACHINE

TWO NEEDLE LOCK

STITCH MACHINE

ELASTIC ATTACHING
MACHINE

BUTTON HOLE MACHINE

STITCHING

SPEED OF THE ARM

MACHINE

BUTTON STITCH
MACHINE

FUSING PRESS

IRONING
Steam Iron with Boiler

Febin Lee & Co.

16

The above mentioned machineries shall be utilized for production in the following manner.
MACHINARY UTILISATION

Departments
Sl.No. Description

I
II
III
IV
V
VI
VII
VIII
IX
X
XI
XII
XIII
XIV

XV

Gerber AE-SW pattern

marker/ grading machine
Eastman 629(8") cutting
machine
Eastman EC-45 round knife
cutting machine
Eastman EC-700 band knife
cutting machine
Rotondi Steam iron, Table
with boiler
Juki DDL - 8300N single
needle lockstitch machine
Juki LH - 3528 two needle
lockstitch machine
Juki LZ - 2284 zig zag
sewing machine
Juki MO - 6716S DE4 - 40H
five thread over lock
machine
Yamato - CF 2339 elastic
attaching machine
Yamato - CZ-6125-Y5DF
four thread over lock
machine
Yamato - CF- 2300-156 M
flat lock machine
Yamato - CF- 2303 flat lock
for binding operations
Juki LBH - 1790
Computerized button hole
machine
Juki LK-1903ASS
Computerized button stitch
machine

Febin Lee & Co.

Total

Shirts

New
born
baby
dress

Brassieres

Common

Common

25

Common

Common

40

Common

Under
skirt

Quality
checking

700

100

400

200

40

30

35

40
20

10

50

50

10

10

10

10

1
17

Hashima HP - 450 Fusing

press
Juki MS -1190 Speed off the
arm machine
Juki LH-3568 Two needle
lock stitch machine
Scissors

XVI
XVII
XVIII
XIX

4
1500

160

33

642

265

400

11. COMPUTER AND EQUIPMENTS

Details of computer and equipments for the unit are given below.

COMPUTER AND EQUIPMENTS

Amount in Rupees
Sl.
No.
1

Description

No.

Price Per Unit

Total

Intel Duel Core computer

25,000

225,000

IBM server class computer

85,000

85,000

HP Laser printer

17,000

17,000

Cannon Laser printer

6,500

6,500

Online UPS and Battery

92,000

Network accessories

15,500
Total

Febin Lee & Co.

441,000

18

12. MANPOWER

The operation and maintenance need of the unit shall call for 1,242 employees. Department wise list
of employees, their expected remuneration and number of shift of work are given in the table given
below.
MANPOWER REQUIREMENT AND THEIR REMUNERATION
Amount in Rupees
Sl.
No.

Category

Number
of staff
per shift

Number
of Shifts

Salary
per
month

Annual
salary

Administration
1

General Manager

25,000

300,000

Assistant Manager

10,000

240,000

Executives
CAD Garment Pattern

7,000

168,000

Manager

15,000

180,000

Assistant Manager

7,000

168,000

Executives
Education

5,000

120,000

Manager

15,000

180,000

Assistant Manager

7,000

168,000

Executives
Electrical

5,000

120,000

10

Manager

8,000

96,000

11

Assistant Manager

6,000

144,000

Febin Lee & Co.

19

12

Executives
Engineering and Maintenance

5,000

240,000

13

Manager

8,000

96,000

14

Assistant Manager

6,000

144,000

5,000

240,000

15

Executives
Export and Import

16

Manager

15,000

180,000

17

Assistant Manager

7,000

168,000

18

Executives
Finance and Accounts

5,000

120,000

19

Manager

15,000

180,000

20

Assistant Manager

7,000

168,000

5,000

240,000

21

Executives
Fire and Safety

22

Manager

15,000

180,000

23

Assistant Manager

7,000

84,000

5,000

120,000

24

Executives
Human Resource and Payroll

25

Manager

15,000

180,000

26

Assistant Manager

7,000

168,000

27

Executives
Legal

5,000

240,000

28

Manager

15,000

180,000

29

Executives
Purchase

7,000

84,000

30

Manager

15,000

180,000

Febin Lee & Co.

20

31

Assistant Manager

7,000

420,000

32

Executives
Marketing

10

5,000

600,000

33

Manager

15,000

180,000

34

Assistant Manager

7,000

420,000

35

Executives
Planning

25

5,000

1,500,000

36

Manager

15,000

180,000

37

Assistant Manager

7,000

168,000

38

Executives
Production (Garments)

5,000

120,000

39

Manager

18,000

1,728,000

40

Assistant Manager/ Supervisor

13,000

2,496,000

950

5,000

114,000,000

41

Executives/ In charge
Quality Assurance

42

Manager

18,000

432,000

43

Assistant Manager

13,000

624,000

44

Executives/ In charge
Pressing

50

7,000

8,400,000

45

Manager

15,000

360,000

46

Assistant Manager

7,000

336,000

47

Executives/ In charge
Packing

37

5,000

4,440,000

48

Manager

15,000

360,000

49

Assistant Manager

7,000

336,000

50

Executives/ In charge

17

5,000

2,040,000

Febin Lee & Co.

21

Welfare
51

Manager

15,000

180,000

52

Assistant Manager

7,000

84,000

53

Executives
Canteen

5,000

120,000

54

Manager

15,000

180,000

55

Cook

10

7,000

1,680,000

56

Helpers
Dormitory

25

5,000

1,500,000

57

Manager

7,000

168,000

58

Assistant Manager

5,000

480,000

59

Security

7,000

840,000

60

Sweepers

10

5,000

600,000

61

Drivers

7,000

420,000

62

Gardner

5,000

180,000

TOTAL

1242

Add: Other benefits @5%

Annual salaries and wages (Rs. In Lakhs)

150,648,000
7,532,400

1,582

The above estimates have been based on production technology proposed, level of mechanization
and automation, number of operating shifts etc.
In all the departments there will be staffs in three layers, Managers, Assistant Managers,
Executives/ in charges. This system is proposed to be adopted in order to reduce the impact of

Febin Lee & Co.

22

labour turnover on the smooth functioning of the unit. If a manager resigns, an assistant manager
will be promoted as manager and if an assistant manager resigns, one of the executives will be
promoted as assistant manager in that department. Recruitment and training of executives/ in
charges /workers will be an ongoing procedure since the labour turnover in this segment is much
higher. Availability of good, skilled and experienced personnel does not seem to be big headache,
since accommodation facility will be provided in the factory premises itself for workers from
outside the location.

13. IMPLIMENTATION SCHEDULE

The time schedule for the implementation of the project is proposed

to be 12 months time from the Zero- date which has been
reckoned as Go-ahead for the project which was August 2009. The
project idea framed in August 2009 and the factory location was
identified in August itself. Building plan was finalized in September
2009. It is expected that approval from government agencies will be completed by the end of
November 2009. It may take another one month to arrange necessary bank finance for the project
and building construction can be started in the middle of December 2009. The construction of the
building will take four months to complete. Machinery erection, raw material purchase and
recruitment of staff will be done in the months of April, May and June of 2010. If the project
implementation activities are going as per the schedule, the trial run will be done at the beginning of
July 2010 and the commercial production will start by the end of July 2010.
Febin Lee & Co.

23

The proposed schedule is considered preliminarily at this stage, and may necessitate updating
during the detailed planning and implementation stages, based on updated volume of work, the
methods of operandi for the implementation etc.

It will be necessary to ensure selection of capable and reputed construction agencies and
mobilization of requisite resources of men, materials, and construction machinery as well as
construction and erection experts on modern and advance trends, to adhere to the proposed
schedule. It will also be necessary to ensure timely availability of the site infrastructure in time for
the work execution at site.

Febin Lee & Co.

24

14. ENVIRONMENTAL MANAGEMENT

Pollution: Normally the unit will not create any air pollution, noise
pollution, and water pollution, even though the unit will implement
all the guidelines issued by the government in this regard.
Waste material management: The various waste materials like
cutting waste, arising out of the production process will be collected
in a common area and sold out to outside parties. Other waste
materials, which cannot be sold out, are planned to be dumped in an environmental friendly manner
in a separate area.
Fire protection facilities: In order to combat any occurrence of fire in the premises, the unit plans
to adopt latest fire protection and extinguishing system as per the government guidelines.

15. WORKING CAPITAL

The requirement of working capital for the unit has been

computed on the basis of minimum level of inventories to be
maintained for input raw materials, provision for stock of work
in progress and finished goods as per the norms laid down for
similar units in the industry for smooth and uninterrupted operation of the unit. The details of
working capital requirement are given bellow.

Febin Lee & Co.

25

COMPUTATION OF WORKING CAPITAL

Rs.in Lakhs
Duration

Sl.
No.

Particulars

Raw material

II

Years

in Days

30

630

662

695

729

766

804

844

Packing materials

15

79

83

87

92

96

101

106

III

Work-in-progress

30

31

33

35

36

38

40

IV

Finished goods

152

157

165

173

181

190

199

Salaries and wages

30

158

166

174

183

192

202

212

VI

Receivables

15

558

586

616

646

679

713

748

1,608

1,685

1,769

1,857

1,950

2,047

2,150

1,608

77

84

97

102

Working capital
Increase in working
capital

88

93

16. COST OF PROJECT

The total project cost comes to Rs 3,916.04 lakhs detailed below.

Febin Lee & Co.

26

COST OF PROJECT
Rupees in Lakhs
Sl. No.

Description

Amount

Land

250.00

II

Building

III

Machinery and Equipments

IV

Computer and equipments

Working Capital

VI

Preoperative expenses and contingencies

1600.00
415.16
4.41
1607.69
38.77

Total

Preoperative
expenses and
contigencies, 39

3916.04

Land, 250

COST OF PROJECT

Working
Capital, 1608
Building, 1600

Computer and
equipments, 4

Febin Lee & Co.

Machinery and
Equipments, 41
5

27

17. MEANS OF FINACE

The total project cost of Rs. 3,916.04 lakhs is proposed to be financed as follows. The debt equity
ratio considered for the project is 1.77: 1
MEANS OF FINANCE
Rupees in Lakhs
Sl. No.

Description

Amount

Promoters Capital

1415.38

II

Term Loan from Bank

1455.66

III

Working Capital Loan from Bank

1045.00

Total

3916.04

MEANS OF FINANCE
Working Capital
Loan from
Bank, 1045

Promoters
Capital, 1415

Term Loan from

Bank, 1456

Febin Lee & Co.

28

18. BANK FINACE

The promoters expect that Bank will sanction Rs. 1455.66 Lakhs as term loan and Rs. 1445.00
Lakhs as working capital loan. Interest rate of the loan is worked out at 12.50% per annam
repayable with in seven years with a moratorium period of one year. The loan will be secured on the
movable and immovable assets of the unit.

19. FINANCIAL FEASIBILITY

A detailed projected profitability statement of the unit for the next seven years of operation is
attached as Annexure VII. The profit before tax is graphically shown below.

OPERATING PROFIT
P
.

1,000
800
600

B
.

400
200

YEAR

Febin Lee & Co.

29

The profitability statement has been worked out on the basis of the following assumptions.
1. It is expected that the unit will be open for 300 days in a year in double shift.
2. The calculation of annual sales turn over is worked out in Annexure I.
3. The expected annual raw material requirements are worked out in Annexure II.
4. Remuneration to staff has been increased by 5% every year to provide for annual increment.
5. Interest on loan is worked out @12.50% per annum. The repayment schedule of term loan is
given in Annexure III.
6. Depreciation has been worked out under SLM method and WDV method. Computation of
depreciation is given in Annexure IV& V respectively.
7. Income tax is computed as per the tax rates applicable to partnership firms. The details are given
in Annexure VI.
8. Carriage inward is estimated at 2% of raw material cost and carriage outward is estimated at 4%
of the sales turnover.
9. Costs of secondary packing materials are expected to be 1% of the sales price.
10. Selling and Administrative expenses are assumed to be 1.5% and 0.75% of the sales turnover.

20. CASH FLOW STATEMENT AND

BALANCE SHEET

Projected

Cash

Flow

statement

and Balance Sheet for a period of seven years based on

the above profitability statement are furnished as Annexure VIII & IX respectively.

Febin Lee & Co.

30

21. RATIO ANALYSIS

The calculation of Debt Service Coverage ratio and Breakeven Points are given in annexure X & XI
respectively.

DEBT SERVICE COVERAGE RATIO

2.5
1.76

1.92

2.11

2.32

1.5
1
0.5
0
Years
Year

22. CONCLUSSION

The various factors covering the projects scope and profitability have been discussed in the
preceding sections. The business will generate a profit after tax of Rs. 321 lakhs in the first year of
operation. The profit generation is adequate and also ensures reasonable return to the promoters.
The total cost of the project comes to Rs 3,916.04 lakhs of which Rs1,455.66 lakhs is expected to be
financed by Bank as term loan and Rs 1,045.00 lakhs as working capital loan.
Febin Lee & Co.

31

The unit will provide direct employment to 1,242 people and is eligible to get assistance from DIC.
The proposal is economically feasible and deserves support from the financial
institution.

Prepared by:

PLUMAGE FABRICS
Managing Partner

Febin Lee & Co.

Chartered Accountants

Thodupuzha
14/11/2009

Febin Lee & Co.

32

ANNEXURE - I
ANNUAL SALES TURNOVER

Sl.No.

Description

Shirts

New born
baby
dress

300

300

300

300

1,500

2,000

20,000

10,000

80%

80%

80%

80%

720,000

960,000

9,600,000

4,800,000

Brassieres Under skirt

Number of working days per

annam (Days)

II

Number of shifts per day

III

Production capacity per shift

(Number of garments)

IV

Capacity utilisation

Annual production (In Numbers)

(I X II X III X IV)

VI

Wastage @ 2% (Seconds sale)

(In Numbers) V X 2%

14,400

19,200

192,000

96,000

VII

Finished goods per annam ( In

numbers) V-VI

705,600

940,800

9,408,000

4,704,000

VIII

Average Sales price per unit

(Amount in Rs.)

500

25

40

75

IX

Annual sales turnover (Amount

in Rs.) (VII X VIII)

Average sales price per unit of

seconds (Amount in Rs.)

XI

Annual sales turnover of

seconds (Amount in Rs.) (VI X
X)

Total Sales Turnover per annam (Rs.

In Lakhs) (VII + X)

Febin Lee & Co.

352,800,000 23,520,000 376,320,000 352,800,000

250

13

20

38

3,600,000

240,000

3,840,000

3,600,000

11,167

33

ANNEXURE - II
ANNUAL RAWMATERIAL COST

Sl.No.

Description

Total number of garments

produced per annam

Shirts

New born
Brassieres Under skirt
baby dress

720,000

960,000

9,600,000

4,800,000

II

Average requirement of cloth

per unit (In meter)

1.40

0.50

0.20

1.25

III

Price per meter of cloth (In

Rupees)

150

15

45

45

IV

Cost of cloth per unit II X III

210.00

7.50

9.00

56.25

Purchase cost of cloth per annam

(In Rs. ) I X IC

VI

Average cost of elastic, buttons

etc per unit (In Rs.)

10.00

VII

Purchase cost of elastic, buttons

etc per annam (In Rs. ) I X VI

7,200,000

VIII

Average cost of primary packing

materials per unit (In Rs.)

40.00

1.00

1.00

0.50

IX

Purchase cost of primary

packing materials per annam (In
Rs. ) I X VIII

28,800,000

960,000

9,600,000

2,400,000

Total Sales Turnover per annam (Rs.

In Lakhs) VII + IX + XI

Febin Lee & Co.

151,200,000

7,200,000 86,400,000 270,000,000

4.00

5.00

3.00

3,840,000 48,000,000

14,400,000

6,300

34

ANNEXURE III
REPAYMENT SCHEDULE OF TERM LOAN
Rs. In
lakhs
Years
Particulars
1
Opening Balance

Principal Repayment

Interest Payment
Closing Balance

Febin Lee & Co.

1,456 1,456

1,213

970

728

485 243

243 243

243

243

243

243

182

167

136

106

76

45

15

1,456 1,213

970

728

485

243

35

ANNEXURE - IV
COMPUTATION OF DEPRECIATION UNDER STRAIGHT LINE METHOD
Rs.in Lakhs
Years
Particulars
1
2
3
4
5
6
7
Land
Opening balance
Depreciation
Closing balance
Building
Opening balance
Depreciation
Closing balance
Machinery and Equipments
Opening balance

250

250

250

250

250

250

250

250

250

250

250

250

250

250

1,600 1,440 1,280

1,120

960

800

640

160

160

160

160

160

1,440 1,280 1,120

960

800

640

480

160

160

415

374

332

291

249

208

166

42

42

42

42

42

42

42

374

332

291

249

208

166

125

Opening balance

Depreciation

Closing balance
Summary

2,270 2,068 1,866

1,664

Depreciation
Closing balance
Computer and Equipments

Opening balance
Depreciation
Closing balance

Febin Lee & Co.

202

202

202

202

2,068 1,866 1,664

1,462

1,462 1,260 1,058

202

202

202

1,260 1,058

856

36

ANNEXURE - V
COMPUTATION OF DEPRECIATION UNDER WDV METHOD
Rs.in Lakhs
Years
Particulars
1

250

250

250

250

250

250

250

250

250

250

250

250

250

250

Land
Opening balance
Depreciation
Closing balance
Building
Opening balance
Depreciation
Closing balance
Machinery and Equipments
Opening balance

1,600 1,520 1,444 1,372 1,303 1,238 1,176

80

76

72

69

65

62

59

1,520 1,444 1,372 1,303 1,238 1,176 1,117

415

353

300

255

217

184

157

62

53

45

38

33

28

23

353

300

255

217

184

157

133

Opening balance

Depreciation

Closing balance
Summary

Depreciation
Closing balance
Computer and Equipments

Opening balance
Depreciation
Closing balance

Febin Lee & Co.

2,270 2,125 1,995 1,877 1,770 1,672 1,583

145

130

118

107

98

90

82

2,125 1,995 1,877 1,770 1,672 1,583 1,500

37

ANNEXURE - VI
COMPUTATION OF INCOME TAX
Rs.in Lakhs
Years
Particulars
1

Net Profit as per Profit & Loss Account

490

685

775 868

964 1,064 1,175

Add: Depreciation under SLM

202

202

202 202

202

202

202

Less: Depreciation under WDV

145

130

118 107

98

90

82

Taxable Income

547

757

859 963 1,068 1,176 1,294

Income Tax

169

234

265 298

Febin Lee & Co.

330

363

400

38

ANNEXURE - VII
PROJECTED PROFITABILITY STATEMENT
Rs.in Lakhs
Years
Particulars
1

A. Income
Sales

11,167 11,726 12,312 12,927 13,574 14,252 14,965

Total - A
B. Manufacturing Cost

11,167 11,726 12,312 12,927 13,574 14,252 14,965

Raw materials

6,300

6,615

6,946

7,293

7,658

8,041

8,443

Salaries and wages

1,582

1,661

1,744

1,831

1,923

2,019

2,120

Packing materials (Secondary)

112

117

123

129

136

143

150

Carriage inwards

126

66

69

73

77

80

84

Electricity charges

168

106

111

116

122

128

135

Travelling expenses

558

586

616

646

679

713

748

56

59

62

65

68

71

75

202

202

202

202

202

202

202

Total - B
9,103
C. Selling and Distribution Expenses

9,412

Reparse and maintenance

Depreciation

9,872 10,356 10,863 11,396 11,956

Carriage outwards

447

469

492

517

543

570

599

Advertisement

558

586

616

646

679

713

748

Selling expenses

168

176

185

194

204

214

224

1,173

1,231

1,293

1,357

1,425

1,497

1,571

84

88

92

97

102

107

112

Total - C
D. Administrative Expenses
Insurance
Other administrative expenses
Febin Lee & Co.

39

Total - D
E. Financing charges

89

93

97

102

107

112

117

Interest on Term Loan

182

167

136

106

76

45

15

Interest on W. C. Loan

131

131

131

131

131

131

131

Total - E

313

297

267

237

206

176

146

F. Preoperative expenses written off

G. Grand Total - (B+C+D+E+F)

10,677 11,041 11,537 12,060 12,610 13,189 13,791

H. Operating Profit (A-F) (PBT)

490

685

775

868

964

1,064

1,175

I. Income Tax

169

234

265

298

330

363

400

J. Profit After Tax

321

451

509

570

634

700

775

K. Withdrawals

305

316

356

399

444

490

542

16

135

153

171

190

210

232

L. Retained Profit

Febin Lee & Co.

40

ANNEXURE - VIII
PROJECTED CASH FLOW STATEMENT
Rs.in Lakhs
Years
Particulars
1

Profit before tax

490

685

775

868

964

1,064

1,175

Depreciation

202

202

202

202

202

202

202

313

297

267

237

206

176

146

1,252

1,314

1,380

1,450

1,522

77

84

88

93

97

102

243

243

243

243

243

243

Income Tax

169

234

265

298

330

363

400

Interest on loan

313

297

267

237

206

176

146

Drawings

305

316

356

399

444

490

542

4,703 1,167

1,216

1,264

1,316

1,370

1,433

A. SOURCES

Preoperative expense written off

Interest on loan
Promoters capital

1,415

Term loan

1,456

Working Capital Loan

1,045

Total - A
B. APPLICATION

4,921 1,192

Fixed assets

2,270

Increase in Working Capital

1,608

Preoperative expenses
Repayment of Loan

Total - B
Opening balance

39

218

243

279

329

393

473

Difference

218

25

36

50

65

80

90

Closing balance

218

243

279

329

393

473

563

Febin Lee & Co.

41

ANNEXURE - IX
PROJECTED BALANCE SHEET
Rs.in Lakhs
Years
Particulars
1

Net block
B. Current Assets

2,068

1,866

1,664

1,462

1,260

1,058

856

Current assets

1,608

1,685

1,769

1,857

1,950

2,047

2,150

218

243

279

329

393

473

563

1,826

1,928

2,048

2,186

2,343

2,521

2,712

39

31

23

16

E. Net Current Assets (B+C-D)

1,864

1,959

2,071

2,202

2,351

2,521

2,712

F .NET OPERATING ASSETS

(A+E)

3,932

3,825

3,735

3,663

3,611

3,578

3,568

G. Term Loan

1,456

1,213

970

728

485

243

H. Working Capital Loan

1,045

1,045

1,045

1,045

1,045

1,045

1,045

I. NET WORTH (F-G-H)

Evidenced By;

1,431

1,567

1,719

1,891

2,081

2,291

2,523

Promoters Capital

1,415

1,415

1,415

1,415

1,415

1,415

1,415

16

151

304

475

665

875

1,108

1,431

1,567

1,719

1,891

2,081

2,291

2,523

A. Fixed Assets

Cash balance

C. Other Non Current Assets

Preliminary exp. To the extent of not
written off

D. Current Liabilities

Retained profit

TOTAL

Febin Lee & Co.

42

ANNEXURE- X
DEBT SERVICE COVERAGE RATIO
Rs.in Lakhs
Years
Particulars
1

Profit after tax

321

451

509

570

634

700

775

Add: Depreciation

202

202

202

202

202

202

202

Interest on loan

313

297

267

237

206

176

146

Total -A

836

950

978

1,009

1,042

1,078

1,122

313

297

267

237

206

176

146

243

243

243

243

243

243

313

540

510

479

449

419

388

1.76

1.92

2.11

2.32

2.58

2.89

Interest on loan
Repayment of Term Loan
Total - B

Debt service coverage ratio A/B

Febin Lee & Co.

43

ANNEXURE - XI
COMPUTATION OF BREAKEVENPOINT
Rs.in Lakhs
Particulars

Amount

A INCOME
B VARIABLE EXPENSES
Raw materials
Salaries and wages
Carriage inwards
Electricity charges
Packing materials (Secondary)
Travelling expenses
Reparse and maintenance
Carriage outwards
Selling expenses
Total - B
C FIXED EXPENSES
Insurance
Other administrative expenses
Depreciation
Advertisement
Interest on Loan
Total - C
Contribution (A-B)
P/V RATIO=Contribution/Sales

BREAKEVENPOINT=Fixed overhead/PV Ratio

Febin Lee & Co.

11,167

6,300
1,582
126
168
112
558
56
447
168
9,515

5
84
202
558
313
1,162
1,652
0.15

7,853

44

Febin Lee & Co.

45

Febin Lee & Co.

46

Febin Lee & Co.

47

Febin Lee & Co.

48

Febin Lee & Co.

49