BANKABLE PROJECT REPORT

ON
ROYAL PAPER BAGS

ACADEMIC YEAR-2011-13
SUBJECT-NEW ENTERPRISE MANAGEMENT

PREPARED BY:
NISHA K. JADAV (13)

GUIDED BY:
PROF. NARESH SHAH
PROF. MANSI R. RATHOD
CENTRE FOR MANAGEMENT STUDIES
DHARMSINH DESAI UNIVERSITY
NADIAD

PREFACE
India is very large country& the Indian economy is a developing economy at
present. So, each & every industry has great opportunities to achieve higher
growth with more market share. To get the benefit of population many overseas
companies come to India to get the benefit of higher potential market.
Looking at the Indian economic scenario, small & medium scale industries are
the tool for socio-economic growth & balanced structural development. The
contribution of SSI & MSI is 40% in the economic growth rate of country. In
present scenario, SSI & MSI is the pillar of Indian economy & they provide raw
materials to the large scale industries.
The healthy development of SSI & MSI has been effective approach to solve
human welfare problem of unemployment & would moreover provide a strong
base for a large sector of our economy. The main objective of getting started
with SSI OR MSI is that it can be started with less capital & it yield quickly
returned with less risk as compare to large scale.
Learning by doing is the hidden condition of management course. The
theoretical knowledge has its own limitation. So the preparation of bankable
project report plays a dominant role to develop the practical view point of
students & also making them aware about the problems, opportunities &
situation being faced by an entrepreneur. It is the modest way to develop
entrepreneurial skills, ability to get finance & aptitude.
In this regard we are glad to present my bankable project on royal paper bags.

DECLARATION
This Project Report entitled A Bankable Project Report on ROYAL paper bags
has been submitted to Dharmsinh Desai University, Nadiad in partial fulfillment
of M.B.A degree. Here, we undersigned that this project report has been
completed by us under the guidance of Prof. Naresh Shah and Prof. Mansi
Rathod.
Study of this report is entirely resulting of our own efforts and research and
original in nature. This project report is not submitted either in part or whole to
any other institute or university for any degree.
Nisha K. Jadav (13)
Madhavi K. Jadav

ACKNOWLEDGEMENT
No serious & lasting achievement of success one ever achieve without the help,
friendly guidance and co-operation of so many people
It is really matter of pleasure for me to prepare bankable project report at this
stage. The preparation of bankable project report provides enough practical
knowledge needed to set up new unit for filling the gap prevailing in the market.
This report is based on estimated data.
In particular we express my deep gratitude to Dr. Naresh Patel (HOD, Centre For
Management Studies Dharmsinh Desai University,NADIAD) and our respected
faculties Prof. Naresh Shah (Faculty CMS DDU) and Prof. Mansi Rathod (Faculty
CMS DDU)
Finally we would also like to thank to all those persons who have helped us
knowingly or unknowingly for the completion and taking interest in this report.
Thanking you.
Nisha K. Jadav
Madhavi K. Jadav

INTRODUCTION
The development and importance of small scale industries have increased
immensely in this era. Generally less capital is required for running small scale
business as compared to large scale organization.
Small scale industries play a key role in the industrialization of developing
countries. This is because they provide immediate large scale employment and
have a comparatively higher labor capital. They need lower investment, offer a
method of ensuring equitable distribution of national income and facilitate an
effective mobilization of resources of capital and skill which might otherwise
remained unutilized and they stimulate the growth of industries,
entrepreneurship and promote a more different pattern of ownership and
location.
Plastic, although considered as one of the greatest inventions by virtue of its use
in carrying things has become a major element in polluting the environment.
Kerala Government has imposed a ban on thin plastic carry bags and is likely to
extend it to all the plastic carry bags, since they are bound to create health
hazards. Eco-friendly paper carry bag is the only alternative and the Government
has started encouraging the setting up of paper bag making units. Since there is
lot of demand, paper bag making will certainly be a provider of self-employment.
So, we have prepared a Bankable Project Report on small scale industries for
manufacturing of friendly paper bags which is now a day have potential market
as customers are becoming aware about harm being made by plastic to the
environment & understand the usefulness of paper bags.

ORGANIZATION PROFILE:
Name of unit
Year of establishment
Registered office

Royal paper bags

2013
Plot no.773, GIDC methoda
Kalawad road,
Rajkot- 360005

Location of unit

Form of organization
Name of owner
Name of product
Size of unit
MSI registration no
Accounting year
Capacity
Cost of capital
Means of finance

Plot no.773, GIDC methoda

Kalawad road,
Rajkot- 360005
Partnership
Nisha jadav & madhavi jadav
ROYAL Paper bags
Medium scale unit
Applied for
April to march
Installed 100%
Utilized - 40%
13.18%
Own-40%
Borrowing-60%

PARTNERS PROFILE
PARTNER 1:
Name
Nature of work
Educational qualification
Age
Share in business

Nisha jadav
Finance & marketing department
MBA (fin)
21
50%

PARTNER 2:
Name
Nature of work
Educational qualification
Age
Share in business

Madhavi jadav
Production & personnel department
Engineer + MBA (marketing)
22
50%

PRODUCT DETAIL:
PRODUCT:
The product is the most tangible & important single component of the marketing
program. The product is bundle of all kind of satisfaction of the both material
and non material kinds with including physical object, design, brand, package,
label, price, services etc.
Here the product is paper bags which is unique in todays emerging market.
Now a day the awareness regarding environmental issues is increasing among
people which also affect their buying behavior. Plastic affects environment
adversely & also can not destroy. As compare to that paper bags are more
economic & cheap which shows the potential market for the product.

PRODUCTS FEATURE:

It is eco-friendly in nature as it can be easily destroyed & less harmful as

compare to plastic bags.
Considered as economic product due to less price.

PRODUCTS USAGE:
Paper bags are common packing material being used by bakers & confectioners,
Grocers, textiles, cloth merchant, dry cleaner, sweet shopkeeper, etc. due to law
price paper bags be used by hawkers & venders on the footpath for packing
fruits & vegetables. It is being used for packing of gift articles also.

BRAND NAME:

Royal paper bags

RAW MATERIAL:
The raw material being used in manufacturing paper bags are denoted below:

Paper rolls
Gum
Printing ink
Misc. chemicals
String

MACHINE:

Automatic paper bag machine

Stereo press
Stereo grinder
Roll Slitter motorized with 2 HP
Packing machine
Testing machine
Punching machine

PRODUCTION PROCESS:

RCS
PT
MPTP
UTEA
AHW
NTSC
(AG
CUTK
RIC
HII
RMG
NN
GG

TRAU EIWT N RT
RHI A N ER T G S OE
L I T H
H R O
P UU A T M P O A
G H
CN H K E M
I
ORA ILC N L H

EI N O G
SR U I I G N G
H E L P
&M E A T
I C A L
)D I NI N E G

MARKET POTENTIAL:
For any new product market analysis or to show the market potentiality is
essential. Market potential concerned with the buying behavior of customer
toward the product. To sustain in the market to know the consumers attitude
toward the product, its usefulness, & price plays crucial role.
The introduction of shopping complexes & consumer stores in the semi-urban &
rural areas are creating additional demand for portable bags, paper bags
manufacturer, therefore, may be taken up as a profitable manufacturing activity
in selected areas. Before some time people are using plastic bags because it
cannot be destroyed. So, now a day people are moving toward to use a paper
bags rather than plastic bags. So it is highly demanded and profitable product.

ECONOMIC ANALYSIS:
Every organization is part of society which provides finance; labor & means of
production to the firm, so its obligation of an organization to pay back to the
society. By establishing a medium scale enterprise we can create employment in
the labor market which improves standard of living. Though product is having
high ecological value it is comparatively cheap. The noticeable advantage to
society is it helps to generate self employment with less investment.

ECOLOGICAL ANALYSIS:
Ecological analysis is essential as the environment concerns are having high
significance. It is essential for the project like power plant & environment
polluting industries.
As plastic bags are harmful to society, paper is proved to be best substitute.
Producing paper bags can be restoration measure against plastic bags. So paper
bags are denoted as eco friendly product. The one of the major advantage
against plastic bags is it can easily recycle.

FINANCIAL ANALYSIS:
FIXED ASSETS
Particular
Land
Building
Machinery
Automatic machine
Stereo press
Stereo grinder
Roll slifter
Testing equipment
Punching machine

Square
meter
400
275
No.
3
2
2
1
1
1

Rate

Amount

1500
2000

6,00,000
5,50,000

5,00,000
2,50,000
3,50,000
2,50,000
80,000
50,000

15,00,000
5,00,000
7,00,000
2,50,000
80,000
50,000

Furniture & fixture

Computer
Telephone
Total

2,25,000
40,000
15,000
45,10,000

RAW MATERIAL:
Particular
Paper roll
Gum
Printing ink
Chemical
String
Total

Rate
Per kg
250
8
65(lit)
4(lit)
8

Usage
5000
10,500
6000
12,000
1250

Per year
Rate
12,50,000
84,000
3,90,000
48,000
10,000
17,82,000

SALARY:
Particular

Number

Rate

Total

Factory staff
Skilled
Unskilled
Manager
Technical supervisor
Clerk cum typist

4
6
2
1
1

2500
1500
15,000
2500
3000

10,000
9,000
30,000
2,500
3,000

Accountant
Peon cum watchman
Sales man
Total

1
1
10

3000
1500
2000

3,000
1,500
20,000
79,000

OTHER EXPENSES:
Particular
Electricity
Telephone exp.
Stationary
Repairs
Transport
Packing
Insurance
Advertisement
Total

Amount (monthly)
40,000
2,000
2,000
5,000
15,000
5,000
10,000
10,000
89,000

WORKING CAPITAL:
Particular
RM
Salary
Other expense

Amount
17,82,000
9,48,000
10,68,000
37,98,000

TOTAL INVESTMENT:
Particular
Fixed assets
Working capital
Total

Amount
45,10,000
37,98,000
83,08,000

SOURCE OF FINANCE:
Particular
Own
Borrowed
Long term loan (70%)
Borrowing for working capital (30%)
Total

Amount
33,23,200
49,84,800
34,89,360
14,95,440
83,08,000

COST OF CAPITAL:
Particular

Weight

Percentage

Own
Borrowed
Long term
On working capital
borrowing

40%
60%
70%
30%

10%
15%
16%

Term Loan repayment schedule:

Year
1
2
3
4
5

Amount
34,89,360
27,91,488
20,93,616
13,95,744
6,97,872

Installment
6,97,872
6,97,872
6,97,872
6,97,872
6,97,872

Interest
5,23,404
4,18,723
3,14,042
2,09,362
1,04,680

Principle
27,91,488
20,93,616
13,95,744
6,97,872
-------------

DEPRECIATION SCHEDULE:
Particular

Building

Machinery

Depreciation
rate
Total amount
Depreciation
1
2
3
4
5

10%

15%

Other
Fixed
assets
15%

5,50,000

30,80,000

2,80,000

55,000
49,500
44,550
40,095
36,085

4,62,000
3,92,700
3,33,795
2,83,726
2,41,167

42,000
35,700
30,345
25,794
21,925

Total

5,59,000
4,77,900
4,08,690
3,49,615
2,99,177

OPERATING STATEMENT:
Particular
Sales

1 year
40%
32,40,000

2 year
50%
40,50,000

3 year
60%
48,60,000

4 year
70%
56,70,000

5 year
80%
64,80,000

Less:
Raw material
electricity
Wages
Depreciation
Interest on wc
Interest
on
term
loan
Administration
&
selling
expenses
Total
Operating profit
Less:
Tax(35%)
Net profit

7,21,800
16,000
3,79,200
5,59,000
2,39,270
5,23,404

8,91,000
20,000
4,74,000
4,77,900
2,39,270
4,18,723

10,69,200
24,000
5,68,800
4,08,690
2,39,270
3,14,042

12,47,400
28,000
6,63,600
3,49,615
2,39,270
2,09,362

14,25,600
32,000
7,58,400
2,99,177
2,39,270
1,04,680

2,35,200

2,94,000

3,52,800

4,11,600

4,70,400

26,73,874
5,66,126
1,98,146

28,14,893
12,35,107
4,32,287

29,76,802
18,83,198
6,59,128

31,48,847
25,21,153
8,82,403

33,29,527
31,50,473
11,02,668

3,67,980

8,02,820

12,24,070

16,38,750

20,47,805

CASH FLOW STATEMENT:

Particular
Opening
balance
Receipts:
Equity
Term loan
Credit
available
PBT
Depreciati
on
Bank limit
To
tal
Payment:
Fixed
assets
Current
assets
Repaymen
t
of
term loan
Tax
To
tal
Closing

Initial
Year
---------33,23,20
0
34,89,36
0

68,12,56
0
45,10,00
0

1 year
40%
23,02,56
0

2 year
50%
17,77,10
8

3 year
60%
17,97,45
6

4 year
70%
21,69,84
4

5 year
80%
28,97,83
7

2,50,000
5,66,126
5,59,000
14,95,44
0

62,500
12,35,10
7
4,77,900

62,500
18,83,19
8
4,08,690

62,500
25,21,15
3
3,49,615

62,500
31,50,47
3
2,99,177

51,73,12
6

35,52,61
5

41,51,84
4

51,03,11
2

64,09,98
7

25,00,00
0
6,97,872

6,25,000
6,97,872

6,25,000
6,97,872

6,25,000
6,97,872

6,25,000
6,97,872

4,32,287

6,59,128

8,82,403

11,02,66
8

17,55,15
9
17,97,45

19,82,00
0
21,69,84

22,05,27
5
28,97,83

24,25,54
0
39,84,44

1,98,146

45,10,00
0
23,02,56

33,96,01
8
17,77,10

balance

BALANCE SHEET:
Particular

1 year
40%

2 year
50%

3 year
60%

4 year
70%

5 year
80%

33,23,200
27,91,488

33,23,20
0
20,93,61
6

33,23,20
0
13,95,74
4

33,23,20
0
6,97,872

33,23,20
0
----------

Liabilities:
Own capital
Term loan
Loan
for
working
capital
Net profit
Credit
available

14,95,440
3,67,980
2,50,000

82,28,108

14,95,44
0
11,70,80
0
3,12,500
83,95,55
6

14,95,44
0
23,94,87
0
3,75,000
89,84,25
4

6,00,000
4,45,500
22,25,30
0
2,02,300
31,25,00

6,00,000
4,00,950
18,91,50
5
1,71,955
37,50,00

14,95,44
0
40,33,62
0
4,37,500
9987,632

14,95,44
0
60,81,42
5
5,00,000
11400065

6,00,000
3,60,855
16,07,78
0
1,46,162
43,75,00

6,00,000
3,24,770
13,66,61
0
1,24,238
50,00,00

Assets:
Land
Building
machinery
Other
fixed
assets
Current

6,00,000
4,95,000
26,18,000
2,38,000
25,00,000
17,77,108

assets
Cash balance

82,28,108

0
17,97,45
6

0
21,69,84
4

0
28,97,83
7

0
39,84,44
7

83,95,55
6

89,84,25
4

9987632

11400065

RATIOS:

DEBT SERVICE COVERAGE RATIO: = (NET PROFIT +DEPRECIATION +

INTEREST ON TERM LOAN)/ (TERM LOAN INSTALLMENT+ INTEREST ON
TERM LOAN)

Particular
Net profit
Depreciation
Interest on term
loan
Total

1 year
40%
3,67,980
5,59,000

2 year
50%
8,02,820
4,77,900

3 year
60%
12,24,070
4,08,690

4 year
70%
16,38,750
3,49,615

5 year
80%
20,47,805
2,99,177

5,23,404
14,50,384

4,18,723
1699443

3,14,042
19,46,802

2,09,362
21,97,727

1,04,680
24,51,662

Term
loan
installment
Interest on term
loan
Total

6,97,872

6,97,872

6,97,872

6,97,872

6,97,872

5,23,404
12,21,276

4,18,723
11,16,595

3,14,042
10,11,914

2,09,362
9,07,234

1,04,680
8,02,552

Ratio

1.19

1.52

1.92

2.42

3.05

AVERAGE DEBT SERVICE COVERAGE RATIO: 2.02

CONCLUTION:
Thus from this project report it can be concluded that there is a good scope for
setting up medium scale unit for manufacturing paper bags. But it has to be kept
in mind there is the area of Survival for Fittest. Thus one who works hard can
only succeed, besides many benefits are available to small scale unit. Thus if it is
used properly the result would be optimum. It can also be concluded that
increase in environmental awareness will result in high potential market for the
product.