Business Plan on Distilled Water Manufacturing and Packaging

Prepared by SeshaRaja.V (19) ISBE Sravan kumar (15) IIPM Saravanan.S (15) ISBE PGP/SS/10-12/Finance

IIPM IIPM Tower, 145 Marshalls Road, Egmore, Chennai- 600008.

Executive Summary This proposed project presents an investment opportunity for establishing a bottled water plant for providing pure drinking water. The proposed product line will consist of bottles of 0.25 to 20 liters. The market for mineral water has been showing a mushroom growth trend over the last few years. The last three years have shown more growth and the market have been estimated to grow 70 million liters and the per capita consumption is 0.5 liter. The annual growth rate for bottled water is 55%. Moreover, the bottled / mineral water has been emerging as a daily preference of the elite class. The project can bottle 51000 liters of water per day i.e. 60% of the plants actual capacity during the initial phase of production; the size of bottles will be .25 Lt and 20 Lt in the name of PYAAAS to make the water convenient and attractive to end users. Therefore the 60% of production capacity would provide a sale of about rupees 99388800/- and also the project is expected to break even within 5 years i.e. exactly in 4 years and 3 months. Also as a part of our management ethics the company also cares for the welfare of its employees by various policies and is also has ESOP.

Table of Contents
PAGE S NO CONTENTS 1 Executive Summary 2 Introduction 3 Vision and Mission Statements of the business 4 Marketing Plans 5 Financial Plans 6 HR Plans 7 Project Report for bank 8 Projection after 3,5,10 and 20 years including financials 9 Exit Plans 10 Conclusion 11 Bibliography NO 2 4 7 7 11 20 21 21 23 23 24

INTRODUCTION It is needless to mention that water, a compound of Hydrogen and Oxygen is a precious natural gift which is very essential for survival of mankind including animals. The water used for potable purposes should be free from Undesirable impurities. The water

available from untreated sources such as Well, Boreholes and Spring is generally not hygienic and safe for drinking. Thus it is desirable and necessary to purify the water and supply under hygienic conditions for human drinking purpose. As the name implies, the mineral water is the purified water fortified with requisite amounts of minerals such as Barium, Iron, Manganese, etc. which can be absorbed by human body. It is either obtained from natural resources like spring and drilled wells or it is fortified artificially by blending and treating with mineral salts. The mineral water shall be manufactured and packed under hygienic conditions in properly washed and cleaned bottles in sterilized conditions. TECHNICAL ASPECTS Processing and Bottling Raw water to be processed is collected in tanks. A known quantity is pumped into the above tank where the water is dozed with alum for coagulation with heavy metals or insoluble matters. The water after coagulation is allowed to settle for an hour. The impurities may b e removed by Reverse Osmosis techniques also. The supernatant water is taken to the chlorination tank where primary disinfection is brought about by bubbling chlorine gas. The water is then passed through sand filters for trapping of un-dissolved impurities. The water after sand filtration is passed through Carbon filters for removal of odour, color and also for dechlorination. It is then passed through series of micro fillers comprising 5 micron, 1 micron and 0.4 micron filter followed by ultraviolet disinfection system for terminal disinfection. Packing is done in PET bottles of 1 litre capacity through an automatic rinsing, filling, and capping machine fitted with an Ozone generator. The bottles after capping are shrink wrapped (Optional) and packed in corrugated boxes of one dozen each.

PROCESS FLOW

Raw water from Source Raw Water Storage Raw Water Lifting Pump Sand Filter Activated Carbon Filter

Base Exchange Softener

Ultraviolet Disinfection Micro Filteration System High Pressure Pump System Desalting Mixing Storage of Treated Water Polishing Filteration UV Disinfection System Filling, Sealing & Capping M/C

Quality Control and Standards The plain drinking water has to be bottled in pet bottle as per IS Specifications (IS

:14543 : 1998 :Packaged Drinking Water and IS:13428 : 1998 : Packaged Mineral Water). The details of the specification can be obtained from Bureau of Indian Standard, Manak Bhawan, 9, Bahadur Shah Zafar Marg, New Delhi 110002.

Mission Contribute to make the best product for consumers. Build the positive image about distilled water. Provide excellent services to consumers. And to produce the best quality bottled drinking water. Vision Strive to grow and increases the market continuously contributes to make healthier consumers. To become a market leader & to make every consumer to consume our brand. Marketing Plans Introduction

PACKAGED DRINKING WATER INDUSTRY Rs.1500 crore packaged water industry The industry which is growing at the rate 55% per annum Estimated to grow around Rs.1800 crore by 2012 Approximate 20% brands in organized market & around 80% Local Brands

Segmentation Geographic - City Size: - Mostly Major Cities & Sub Metros Climate:- Hot & Humid

Psychographic Lifestyle:- Travel Freak Personality:- Health Conscious

Demographic Family Size:- Mostly Individual & Sometimes Families Corporate

Behavioral Benefit:- Thirst & Quality

Brand Loyalty:- Split Loyal

Targeting Targets middle segment people Price of the Bottle is such that can be affordable to the all segments Company planning to target more towards lower segment

Positioning Top of mind of consumers when it comes to mineral water

Product A range of products that suits all the occasion For daily traveling consumption (250ml packets, 250ml & 500ml bottles) For Long traveling consumption (2 & 1 Ltr) For Office, Home, Marriage or Meeting use (5 & 20 Ltr. Returnable packs Price Comparative Pricing Competitive Pricing Product line pricing 250ml Rs.3 500ml - Rs.5 1ltr 2ltr - Rs.10 - Rs.15

20ltr - Rs.30

Place The plant can be located at any suitable place where availability of clean water, power, PET bottles and market access is ensured. Intensive Distribution A fleet of 10 vehicles.

 Promotion

Retail outlets across the city.

Advertising Campaign Bill boards across the city and Advertising Boards in front of retail shops

Physical evidence Attractive bottle design and pure water are the physical evidences People Factory Manager Production Manager/Chemist Supervisory staff Office Assistant Skilled workers Unskilled workers SWOT Analysis Strengths Generic name for packaged drinking water. Can be spelled by common man also. Its so important in bottled water. Focus on safety. Growing market. Quoting a lower price to the target customers. -6 -6 -6 -6 -30 -20

10

Weakness New entrant in the market

Opportunities Can enter in the market of juices & beverages Can enter in the market of water purifier Can tab the maximum rural market of the country Tie-up with railway canteen, stalls & marriage contractors.

Threats From the players like bisleri, Kinley, Aquafina, Himalaya Bailley, & Other local & rural products New enters in the market like Amul If government ban on plastic use then company will be in trouble

FINANCIAL STUDY PROJECT COST THE PROJECT INVOLVES MACHINERY FOR

PURIFYING WATER BOTTLE MANUFACTURING. BOTTLING PURIFIED WATER. LABELLING

CAPACITY
11

The plant is being designed for minimum economically viable capacity, such that the capital outlay is optimized. The capacity of the various units are as under: Purification: 1000 liters / hour i.e. 8000 liters / 8 hour shift.

- Bottle Manufacturing: 550 Bottles per hour per machine. 2 nos. machines will give 1100 bottles per hour i.e. 8800 bottles per 8 hour shift.

Bottling: 24 Bottles per minute of 1000 ml. i.e. 1440 Bottles / hour i.e. 11520 - Bottles per 8 hour shift.

- Labeling: Heat Shrink Tunnel would handle 1000 Bottles per hour. All the 4 capacities have been nearly matched - for any adjustments some of the machines can be run for longer duration.

BASIS & PRESUMPTIONS This project has been drawn on the basis of following presumptions. Working hours : 8 per shift Number of shift/day: 3 Number of Working days: 300 per annum Working efficiency: 75% Total period for achieving from maximum capacity utilization: Third year the date of

12

commencement of production. Rate of Interest : 15% per annum of Capital MACHINES / EQUIPMENT OFFERED

Purification Section: Flow rate : 1000 lit / hour Raw water quality (assumed) : 1000 ppm as TDS Description Alum dozer 3 lit/hr dosage 2 nos. pump (1W+1S) (SS) Activated Carbon Filter Flow Rate : 2000 lit/hr. MOC : SS 304 Pressure Sand Filter Flow Rate : 2000 lit/hr. MOC : SS 304 Softener Reverse Osmosis System Permeate Flow : 500 lit/hr. Consist of : 5 Micron Filter SS-304 PP H.P. Pump with 3 HP Motor Membrane - 4 nos. Pressure Vessel (SS-316) - 4 nos. Instruments & panel Ozone Generator 1 1 1 1 Quantity 1 1 1

13

Capacity - 1 gm/hr. Ozone Dissolution Col. MOC : SS-316 Flow Rate : 1000 lit/hr. UV Disinfectant Flow Rate : 1000 lit/hr. Storage tank for Pure Water Capacity : 1000 ltr. SS-316 Total Cost 1543500/1 1

Bottle Manufacturing Section: To achieve 1100 nos. bottles per hour production. Description Stretch Blowing Machine: upto 2 ltr. Capacity (Preform Manual Loading Machine from Conveyor to Stretch Blowing Machine) - 2 cavity bottle upto 2 ltr. (Neck dia upto 46 mm) - Hydro-pneumatic locking system - With Infrared heating system conveyor and separate Control Panel with Microprocessor. - Production : 550 Bottle / Hour - Model No. TPD 2000 Refrigeration Unit : (Chiller) Cooling Capacity : 1 Ton; (Standard Make) 2 Quantity 2

14

Air Compressor : with after cooler and moisture separator Mould sets: Double Cavity 1.5 ltr. Round shape mould in aluminium Double Cavity 1 ltr. Round shape mould in aluminium Double Cavity 500 ml. Round shape mould in aluminium Approx. Spares for 1 Year Total Cost 1777500/-

It is possible that the air compressor be bought locally. We are in a position to offer automatic molding machines also. However that would result in higher investment hence is not recommended at the initial stages.

Bottling Section : This section receives the empty bottles, rinses them, fills and caps them. Description Stainless Steel Conveyor: Made of S.S, 8 meter long for conveying of empty washed bottles onto the filling machine. The different operations like rinsing, filling, capping are done on the conveyor. Electrical Details: 0.5 H.P. with variable speed drive.. Rinsing, Filling, Capping: This machine is designed to fill 24 bottles per
15

Quantity 1

minute for 1 ltr bottle & is capable to fill 500 ml, 1000 ml, 1500 ml bottles. Machine speed is depended on the volume to be filled. The bottles are holded in groups of 6 & moved on the conveyor together. These grouped bottles are rinsed by means of spraying pressurized water inside the bottle. After Rincing the bottles are again placed on the conveyor & are loaded on the filling & capping machine one by one. Filling & capping takes place by indexing mechanism. There are total 8 indexes. Change parts for 500 ml and 1500 ml 1 set each Spare for item 2 for 2 years 1 set each

Total cost 1237500/-

LABELLING & PACKING SECTION:

Description Shrink Tunnel: This is fitted on the online conveyor to shrink labels and neck sleeves. The labels & neck sleeves are to be manually inserted on the bottle. Machine will be provided with suitable capacity Heaters, Blower, Reduction Gear Box and Electric Motor, complete in all respects ready to use. Printing Machine ( for mfg. Date & batch nos.) Semiautomatic machine is proposed.

Quantity 1

16

This is a table top coding machine with a printing area of 35 mm x 25 mm & capable of printing 3 variable line message on labels or caps.

Total cost 180000/-

TOTAL COST OF THE MACHINERY OFFERED = 4738500/- (for setting up one plant)

FIXED COST The fixed cost is expected to be as described below in INR. Land & building Machinery & Equipment (4 plants) Furniture & Fixture Office Vehicles Office Equipment Cost of boring for water Pre-operating Cost Total Costs 18954000 750000 3000000 200000 520000 1500000 54924000 30000000

Raw Materials per month

17

Raw Material plastics to manufacture and also to reuse bottle @ 1.90 for 1 liter bottle with cap Chemicals and Reagents etc Corrugated boxes, strip, tap etc Total

Amount

1689600 1000000 800000 3489600

Salaries & Remunerations per month No. of staff Designation 4 factory manager 2 clerk/typist 5 store cum purchase officer 2 Accountant 5 Sweeper 10 skilled workers like chemist production manager etc 20 unskilled workers remuneration for promoters 4 equity Total 25000 100000 377000 3500 70000 Amount/Staff 10000 3500 3500 7500 1500 12000 Amount 40000 7000 17500 15000 7500 120000

18

Working capital for 1 month Raw materials salaries & remunerations electricity bill & others Total 3489600 377000 500000 4366600

(An working capital of is said to be maintained initially 13099800/- for the first three months)

Total Capital Investment fixed assets working capital for 3 months Total 54924000 13099800 68023800

Equity of capital investment is 40%=27209520/Debt raised through loan from external sources is 60%=40814280/ROI
Year Cash Flow Cum CF

(13,856,092)

(13,856,092)

2 3

5,373,138 9,844,091

(8,482,954) 1,361,137

19

4 5

14,770,890 19,569,351

16,132,027 35,701,377

Break Even takes occurs during 4 years 3 months. ROI=total profit-investment/investment =31.2% Cost of borrowing the loan is 15%.

HR PLANS The company recognizes that the employees are the core and heart of our business so as to make our employees feel happy at all points of time and to make them feel that its their company we plan to initiate various measures few of those which shall be implemented from the word go of our company are as follows 1) All Employees of all positions shall have same uniforms. 2) Holiday Trips shall be initiated (One day Trip every 6 months or yearly once) 3) Tax Planned salary structures 4) All Employees shall be covered under Gratuity Act 5) Children education Allowance & Hostel Allowance of Rs 400/- PM (For Each Child) 6) Gratuity shall be paid to employees who are in employment for more than five years in our company the schedule of calculation for payment of gratuity is given below: Sl.No Particulars Amount
20

Salary Means Last Drawn Completed month Salary for Gratuity Calculation

I Ii

Basic Salary Dearness Allowance Total

XXX XXX XXX

Gratuity Calculation 15/26 X last drawn salary X No of completed years of service or part thereof in excess of Six Months Subject to a Maximum of Rs 10,00,000/Grand Total XXXX XXX

7) Pension schemes shall be initiated 8) In Exception to the above there shall be various on work facilities they are a. Medical Facilities b. Personal Accident Policy c. Conveyance allowances d. Tea or Snacks e. Periodicals and Journals 9) PF shall be contributed to employees at 12% of their salary (Eligible Employees) 10) ESI shall be paid to employees @4.75%(Eligible Employees) 11) For Employees above Floor Lever shall be eligible for Voluntary Retirement Compensation (Eligible for employees who have been in the organization for more than 10 years) 12) After 2 years of start of operations the company would announce 1% of their profits as ESOP.

Report to the Bank The total capital investment required is 68023800/-.

21

The debt raised through loan i.e. 60% of total capital is 40814280/- @ 15% interest. The break even takes place in 4years and 3 months with a Return on Investment of 31.2%.

The following projected balance sheet would clearly represent about the financial performance of the company over a period. PYAAAS water Private Limited Projected Balance Sheet as on 31.03.2013 31.03.2014 31.03.2015 31.03.2016 31.03.2017 Particulars (1) A LIABILITIES (2) Projections (3) (4) (5)

Equity Share Capital 27,209,520 27,209,520 27,209,520 27,209,520 27,209,520

Reserves & Surplus

(19,856,092) 429,978

5,395,247

10,766,930 15,965,787

Loans

32,640,000

24,480,000 16,320,000 8,160,000

Current Liabilities

20,938,172

5,718,942

6,617,329

7,907,061

10,181,822

Total Liabilities

60,931,600

57,838,440 55,542,096 54,043,511 53,357,129

22

B ASSETS

Fixed Assets

49,431,600

44,488,440 40,039,596 36,035,636 32,432,073

Current Assets

9,000,000

10,350,000 11,902,500 13,687,875 15,741,056

Cash & Bank Balances 2,500,000 3,000,000 3,600,000 4,320,000 5,184,000

Total Assets

60,931,600

57,838,440 55,542,096 54,043,511 53,357,129

Exit Plans If at all the project does not succeed then the following exit plans are practiced Fixed assets such as land & building can be sold at an appreciated price. Machineries can be sold at a scrap value. The inventories that are being stored in the warehouses can also be sold to other manufacturers for a discount price. Or even the equity raised can be sold to others or transfer of ownership. Using the amount collected from sale of above assets the debt that has been acquired can be repaid. Conclusion Therefore it is found that the distilled water market is steadily growing every year and the demand for water in the country can never decrease as it a basic necessity.
23

Therefore we believe that our project would be an success. And with our management practice we could easily become market leader within a time span of 10 years. Thereby we intend to start this project which has an profitability of 31.2% in order to satisfy the needs of the customers.

Bibliography Websites http://www.aquatech.com/casestudy/%2321%20Tenaska%20Cleburne%20(IC)_200701 02132255.pdf http://www.infoplease.com/cig/science-fair-projects/does-ph-water-affect-growth-beanplants.html http://www.sciencemadesimple.com/environmental_projects.html http://www.pdfarticles.com/topic/distilled+water+plant+project+report.html http://www.mineralwaterplant.com/mineral-water-autoturnkey-project.html http://www.builditsolar.com/Projects/Water/Water.htm http://www.alibaba.com/countrysearch/IN/distilled-water-plant.html

24

http://www.tradeindia.com/buyoffer/2401533/Distilled-Water-Plant.html http://www.askme.com/mumbai/distilled-water-plant/listings http://trade.indiamart.com/details.mp?offer=2476562395 http://meters.tradeindia.com/Exporters_Suppliers/Exporter20508.347624/DistilledWater-Plant.html http://www.aquachemsystems.com/services http://allahabad.quikr.com/distilled-water-plant-equipment-ElectronicsTechnology/distilled-water-plant-equipment/x18222212656 http://www.sureshtraders.com/distillation-plant.htm http://www.mapsofindia.com/sponsors/engineering-services/ro-di-water-system-india/ Books 1. The Business of Water: A Concise Overview of Challenges and Opportunities in the water market By Steve Maxwell page no 10. 2. Technology of bottled water By Dorothy A. G. Senior page no 160.

25