DETAILED FEASIBILITY ANALYSIS OF SCHOOL BAGS & UNIFORMS · The project envisage detailed...

DETAILED FEASIBILITY ANALYSIS OF SCHOOL BAGS & UNIFORMS

Part III

For DEPARTMENT OF INDUSTRIES MINISTRY OF ECONOMIC AFFAIRS ROYAL GOVERNMENT OF BHUTAN

By IDRG CONSULTANCY SERVICES

In Association with Sherpa Consultancy February, 2009

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CONTENTS CHAPTER 1 – PROJECT AT A GLANCE…………………………………………….3 CHAPTER 2 – JUSTIFICATION OF THE PROJECT………………………………..6 CHAPTER 3 – MARKET ANALYSIS…………………………………………………..8 CHAPTER 4 – RESOURCES…………………………………………………………20 CHAPTER 5 – THE PLANT……………………………………………………………24 CHAPTER 6 – PLANT LOCATION AND INFRASTRUCTURE……………………33 CHAPTER 7 – ENVIRONMENTAL ASPECT………………………………………..35 CHAPTER 8 – PROJECT IMPLEMENTATION……………………………………..37 CHAPTER 9 – COST PRESENTATION……………………………………………...39 CHAPTER 10 – FINANCIAL ANALYSIS………………………………………………45 CHAPTER 11 – ECONOMIC ANALYSIS……………………………………………..59 ANNEXURES…………………………………………………………………………….61 Annexure 1 – List of machine suppliers Annexure 2 – List of raw material suppliers Annexure 3 - List of lab testing equipment suppliers



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CHAPTER 1 - PROJECT AT A GLANCE

1. Project concept – Detailed feasibility analysis of school bags and uniforms. The project envisages the manufacture of school bags and air bags in various sizes and designs and school uniforms as well as readymade garments.

2. Location - Thimphu, Chhukka, Trashigang, Samdrup, Paro and Monggar

happen to be the main education centres in terms of enrollment till higher secondary. As the students happen to be the target customers, it would be quite logical to locate the unit near to these education centres. Besides, as the unit would also be manufacturing air bags and readymade garments, the vicinity to trade centres would be an added advantage. Keeping in view, various other parameters, these sites have been short listed in the order of preference.

Location Overall rating Thimphu 42 Paro 40 Chhukka 40 Trashigang 35 Monggar 35 Samdrup 35 3. Markets - The detailed study of school supplies scenario has revealed that

there is enough demand of school bags and school uniforms to justify the setting up of an integrated manufacturing unit for these two products. The current demand level for school bags is around 1,60,000 nos while the demand of uniforms is around 90,000 sets of uniforms. In addition to this, there is a substantial market demand for air bags and readymade garments which could be easily manufactured in the proposed unit. Presently, there are no manufacturing units for school bags and uniforms. The demand is being met through imports. There being sufficient demand, both in school supplies sector as well as in open market and there being no indigenous production, the proposed unit is expected to have bright prospects for capturing a substantial share of domestic market. Besides, the unit could also explore the possibilities for export to neighboring markets.

4. Annual Production capacity recommended - School bags – 1,00,000 pieces per annum Sets of uniform – 1,20,000 pieces per annum



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5. Land and building requirement Plot area 1500 sq. mts

Built up area 300 sq. mts Industrial shed 950 sq. mts

6. Power 45 KWH requirement 7. Main machinery For bag section Industrial sewing machine – semi-automatic Heavy duty craftsman sewing machine Tape braiding machine For Uniform section Cloth cutting machine Single needle sewing machine – universal Over lock safety stitching machine Button holing machine Button stitching machine 8. Man power Managerial and office staff – 7 requirement Production supervisor – 2 Cutting master – 2 Tailoring staff for bag section – 35 Tailoring staff for uniform section – 90 Unskilled workers with helpers – 70 9. Total project cost Rs. 163.82 lacs 10. Project implementation period 10 months 11. Means of Debt - Rs. 114.67 lacs (70%) finance Equity - Rs. 49.14 lacs (30%)

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12. Break up of Machinery - Rs. 36.11 lacs cost of project Construction cost - Rs. 51.25 lacs Misc. fixed assets - Rs. 3.00 lacs Pre-operative exp. - Rs. 5.00 lacs Training expenses - Rs. 0.36 lacs Interest - Rs. 11.49 lacs Working capital - Rs. 56.61 lacs Total - Rs. 163.82 lacs 13. Annual sales Rs. 7.2 crores turnover 14. Financial IRR – 36% on investment analysis IRR – 56% on equity NPV – Rs. 206.75 lacs (discount rate of 12%) Pay back period – 2 years 6 months Project break-even – 69%





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CHAPTER 2 – JUSTIFICATION OF THE PROJECT

2.1 Project Concept The project envisage detailed feasibility analysis for setting up a manufacturing unit in Bhutan for school bags and school uniforms mainly to cater the domestic demand in school supplies sector.

2.2 Project Justification As mentioned in part 1 of the report, with the rapid increase in urban population and growing level of per-capita income, the education sector is undergoing a perceptible change. More and more schools with modern system of education both in the Govt. sector as well as in private sector are being set up. Consequently there has been a change in the demand pattern both in terms of quality and quantity of the various inputs required for efficiently running the school system. School bags & school uniform happen to be the most important items required by the students mainly in urban and semi urban areas. Along with exercise books, school bags and uniform constitute the major segment of school supplies which are mostly purchased by the students and their parents from the market. One or the other type of bag is required by each and every student for carrying the books, notebooks and other articles required for study in the school. In view of the growing syllabus at every stage of schooling and consequent increase in number of books and exercise note books and other items which a student is required to carry every day to school, bags with specific designs are made in durable materials to with stand the requisite load and handling conditions. At present, there are no manufacturing facilities for the production of school bags in Bhutan and the requirement is being met through imports from India, Thailand and other countries. Similarly, the various schools prescribe the design, fabric and shade of the uniform for their students as a part of school discipline. The system of specifying uniform is more prevalent in urban schools. Invariably, the schools prescribe the type of fabric and the shade / colour of the uniform and many a times, the uniform of the student is identifiable with the school. In Bhutan, there are no industrial units manufacturing school uniforms and these are either being got fabricated from tailoring shops or procured from adjacent markets in India. This project has been drawn for the manufacture of schools bags and uniforms. The proposed unit will have two separate departments, the first for the production of school bags and the second for the production of the uniforms. As there are no industrial units manufacturing these items, there exists a good potential for establishment of setting up of such manufacturing facilities in Bhutan. The proposed industrial unit would





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be equipped with the machines and equipment for the production of bags and uniforms and besides meeting the requirement of school bags and uniforms, this unit can also manufacture and supply air bags and other readymade garments for meeting the general market requirement. To begin with Thimphu or Paro would be ideal location for this unit as they constitute the major markets both for school supplies was well as for general market supplies. As would be seen from the part 1 of the report, the current demand level for school bags and school uniforms is sufficient to justify the setting up of a manufacturing unit in Bhutan. Besides, there exists substantial market demand for air bags and readymade garments specially children garments which could also be manufactured in the proposed unit. The project concept is to setup an integrated unit having two production sections, the first one for the manufacture of bags and the second for the manufacture of garments. The demand for both these items is likely to grow at a very fast pace keeping in view the future economic growth in Bhutan leading to higher purchase power and the consequent preference for readymade garments and bags, it is considered that there is sufficient justification for setting up such an unit in Bhutan. The details of the products, products range, quality parameters, manufacturing technologies, machines and equipment and financial implications have been dealt with in subsequent chapters of this report.





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CHAPTER 3 – MARKET ANALYSIS 3.1 Demand and supply scenario The demand level for various types of uniforms and school bags have earlier been estimated as has 90,000 sets of uniform and around 1,60,000 set of school bags per annum. Besides, uniforms and school bags, with the machines and equipment proposed to be installed in the unit, it would be possible to manufacture ready made garments and air travel bags also. Some or the other type of uniform is required by each and every school going children. However, the schools in urban areas are more specific in the matter of uniforms. Presently, these uniforms are either being got stitched from tailoring shops or procured from adjoining markets. There exists a good scope for setting up an organized unit for the manufacture of uniforms suiting to the requirement of various schools. It would be desirable for the manufacturing unit to develop an organic linkage with the schools with a view to manufacture and supply uniforms as per their specifications and designs. The project has been designed to produce various types of garments. In addition to, school uniforms, the unit could also manufacture the uniforms and dresses for police personnel, defence personnel, hospital staff viz doctors and nurses. Besides, there is a huge potential for production of ready made garments specially children garments to cater to the open market requirements. The part capacity of the uniform manufacturing department of the unit could well be utilized for the production of children garments. As the unit is proposed to be setup in the vicinity of capital city, the trade distribution channels in Thimphu could well be utilized for marketing of the ready made garments all over Bhutan. Similarly, each and every student needs a school bag for carrying the books, exercise books, etc. to the school. The maximum life of a school bag is 1 year and invariably while graduating to next standard, the children buy a new school bag and a demand becomes a recurring demand. Presently, the entire demand of school bags is being met through imports from India and other countries. Similarly, the demand of air travel bags is also being met through imports. A wide variety of air travel bags in varying price range are available in the market and the proposed unit need to adopt the designs and patterns as per products being currently sold in the market. 3.2 Competitive Advantages

In view of the above, the unit is expected to have bright prospects for capturing a substantial share of market both in the school bags, air travel bags, school uniforms and ready made garments. The competitive advantage factors of the indigenously produced uniforms and garments which would provide them an edge over the competitors mostly imported products can be listed as under: -

Facility of introducing the product with locally acceptable fabrics, designs

and patterns resulting in higher acceptability in the market.





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Possibilities of producing bags with school logos, popular local slogans, ethnic designs resulting in better marketability.

Better inventory control management, the production can be planned as per demand.

Direct purchase of raw materials from wholesale trade channels at the most competitive rates leading to lower input cost.

Lower input cost in terms of power, transport and labour. Possibilities of introducing new products and new designs as per local

requirement. Quality control can be enforced starting from the raw material stage to

finished production and possibilities of adopting ISO 9000. Value addition on raw materials leading to savings in foreign exchange. Possibilities of introducing quality garments based on local handloom

fabric specially for high end market like Khadi Garments in India. In view of all these competitive advantage factors, it is envisaged that the unit

would be able to produce bags, uniforms and garments of acceptable quality at a relatively lower cost and thus, shall have an edge over the other competitors.

3.3 Marketing Strategy Presently, most of the school bags and air travel bags are being imported in Bhutan. As regards, school uniforms and readymade garments, there are no organized production units and the requirement is being met either through imports or through local tailoring shops. There are no government purchases and all these products are required to be sold in open market. Accordingly, the following marketing strategies could be adopted by the unit. Marketing through trade channels viz by appointing whole-sellers in major cities

or through direct sales to stationery shops. Dedicated production with logo and monogram etc of the schools and institutions

specially for school bags and school uniforms and sales through these schools and institutions.

Contract with concerned hospital authorities for producing doctor’s apparels, dress for nursing staff and gowns for patients.

Display of products specially readymade garments at main shopping centres and local fairs.

The proposed unit needs to mainly focus on school supply sector and market their products through school students in major educational centres. The unit needs to identify departmental stores and shops which could function as the retail outlets for selling uniforms and bags manufactured by the unit. The unit also needs to develop an organic linkage with main schools and produce the uniforms as per their specifications and designs in the identified shades of fabric. The possibilities of manufacturing the bags in classical Bhutanese designs need to be explored and this could help higher level of acceptance of the bags manufactured by the unit. In case of air bags and readymade garments, these need to be fabricated as per market requirement based on feedback





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available from the leading readymade garment stores and shops selling luggage goods. Besides, the possibilities of exports to adjoining areas of India viz. north-eastern region could also be explored. The possibilities of exporting the product to other neighboring markets also need to be looked into. Besides, the possibilities of exports especially in case of air travel bags to adjoining market could also be explored for achieving better economics of production and improving profitability. 3.4 Product range and target markets The project envisages setting of a unit for the production of two distinct products viz school bags and school uniforms. The proposed unit shall comprise of following two manufacturing departments: 3.4.1 Bag manufacturing Departments: This department would be equipped with the facilities for the production of bags mainly in nylon fabric or canvas fabric. The main product would be the school bags in various sizes and designs. The manufacturing facilities of this section are also proposed to be utilized for the production of air bags for supply to the general market. Thus following would be the two main products:

- School bags in various sizes and designs.

- Air bags in various sizes and designs.





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3.4.2 Garments manufacturing department: This department shall have manufacturing facilities for the production of ready made garments. The main focus shall be on the production of school uniforms as per fabric type and design prescribed by the schools. The remaining capacity of this department is proposed to be utilized for the production of ready made garment especially children garments for supply to general market. This department shall be manufacturing the following products:

- School Uniforms as per school specifications.

- Ready made garments mainly for children in various colours and designs as per market demand.





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The project is being recommended mainly to create manufacturing facilities to meet the demand of school bags and uniforms in school supplies sector. Major centres of education viz Thimphu, Chukka, Paro, Trashigang, Samatse and Samdrup would be the major target markets wherein the number of students is sufficiently higher. Besides, the major cities would be the target markets for air bags and readymade garments. 3.5 Design and Quality Standards 3.5.1 School Bags The school bags are used by school children of various age groups and the requirement of filling space for books in a bag varies according to the standard in which a child is studying. Accordingly, the school bags are manufactured in various sizes and designs. Bureau of Indian Standard (BIS) has specified the following sizes and types of school bags:

- Small size school bag with side strap. - Small size school bag with back strap - Medium size school bag with side strap - Medium size school bag with back strap - Large size school bag with side strap and - Large size school bag with back strap





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All school bags are to be provided with a patch pocket in front, piping all round the edges and buckles with straps for closure. The school bags may be provided with side strap or back strap or both if the both strap are required by the market. A handle may also be provided if the same is required by the trade channels and market. According to BIS specifications, the shape and dimensions of three sizes of school bags viz. small, medium and large would be as shown below:

The length of the side strap of the bag is made adjustable by means of a buckle as shown in figure above. The length shall be adjustable between 260 mm to 960 mm. The lengths of the back strap for small, medium and large size of bags are specified as 430 mm, 455 mm and 470 mm respectively.

In addition to above shapes and dimensions, the school bags could be

manufactured in other shapes and dimensions also as per market demand and customers requirement. BIS has also specified the following design, workmanship and finishing parameters for school bags:

The school bag shall be made from three pieces of material i.e., front, back with

top flap and gusset. The specification and details of fabric are given in the next chapter.

The front portion shall be provided with a patch pocket for small articles for use in

school as shown in above. The bag may also be provided with tow patch pockets in the front portion. The shape of the pocket or pockets should be such as to provide sufficient space for keeping lunch-box, pencil box, instrument box etc. This may be done with or without gusset.

Size A B C D E F

Small 330 230 90 140 130 65 Medium 360 260 110 140 130 65 Large 380 280 140 140 180 65

All dimensions in millimeters





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The bag shall be provided with minimum 10 mm wide piping at the pocket, top edges and the sides as shown in fig. above. The piping shall be of the materials specified in the next chapter.

The school bag shall be assembled ‘lock stitch’ or ‘chain stitch’ regulated to give

6 to 8 stitches per 25 mm. All ends shall be securely fastened off and loose threads properly trimmed.

Two buckles with straps shall be provided in the bag for closure as shown in Fig.

above. A handle may also be provided if required by the purchaser or the market. The bag shall be neatly finished with straight and parallel rows of stitching, where

required. The ends of buckle loops, side, back and buckle straps shall be properly tacked

with the rows of stitches as shown in Fig. above.

Bureau of Indian Standard (BIS) has also specified quality parameters and tests to be carried out on to finished school bags so as to ensure the proper performance of the bags. These tests includes drop test and handle snatch test. Drop Test: The school bag shall be fully loaded with books or any other suitable material, weighing 6 kg in case of ‘small’, 8 kg in case of ‘medium’ and 10 kg in case of ‘large’ size school bags. After filling the specified weight, the bags shall be close, buckles fastened and hung on pegs at the wall, with the help of either the side strap or the back straps. The distance between the floor and the peg shall be 1.5 meter in case of side strap and 1.0 meter in case of back strap. The bags shall then be suddenly dropped and this operation shall be repeated 10 times. During or after the test the stitches shall not open, the straps and buckles shall not give way or come off the stitched tacks. Handle Snatch Test: the school bag shall be securely fixed in an inverted position as a rigid support, leaving the strap free for applying the load. The strap shall be suitably harnessed to distribute the load applied over the entire middle portion. A load of 50 N (5 kg) shall be applied suddenly to the strap for a period of 30 seconds. This operation shall be repeated 10 times. The weight may be applied either by means of spring balance or weights, suitably placed on a stirrup. During or after the test, the strap shall not have snapped, loosened or come off the stitching.

Each bag is required to be legibly marked with the following:

- Manufacturers name or registered trade mark - Size





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3.5.2 Air travel bags Air travel bags are extensively used while traveling for carrying the clothes and various other items of requirement. These are needed by every household and happen to be mass consumption product. Air travel bags widely differ in design, shape, colour and size from one manufacturer to another. Even for a particular shape and size, the quality of the material viz. fabric and fittings and the workmanship may be different resulting in large variation in selling prices.

Air travel bags are manufactured in various materials viz. leather, leather cloth, cotton canvas, coated nylon fabrics and in various designs and shape. However, keeping in view the utility criterion and performance requirements for air travel bags following typical design with essential components has been recommend by BIS.

Pocket

Handle

Fastener

Lock

Piping

Main Components





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BIS has also prescribed standard dimension for above mentioned design of the air travel bag which are given below:

However, as mentioned above the air travel bags are manufactured and marketed in a large number of shapes and designs with varying storage space, number of inner and outer pockets including those exclusive designs in which storage space could increased or reduced with the help of slide fastener mechanism. Some of quality and workmanship parameters and other specifications requirement as prescribed by BIS for air travel bags are as given below. Irrespective of shape and design of the air travel bags, adherence to these quality specifications shall ensure the proper performance and durability of the bag while in use by the customers. The handles with its fittings and attachments shall be strong and shall not yield

under normal usage. The handles shall be reinforced with vulcanized fibre strip inside and riveted. The handles shall be centrally located on longer sides. The clearance between the body of the bag and the inner face of the handles shall be adequate to facilitate easy gripping when lifted.

Boss (feet) shall be provided to avoid ground contact. Certain other provisions such as inside compartments, front pocket and

alternative arrangements may also be provided as agreed to between the purchaser and the supplier.

The locking device shall be fixed to the end of the tab of fastener and one of the

lateral sides of the bag. The locking device shall be easily accessible to operate. The stitches shall be strong and uniform. The stitches shall be lock stitch with 28

to 32 numbers per decimeter and of even tension. The stitch ends shall be secured either by knotting the thread or back stitching or by an additional row of stitch.

All loose ends of the threads shall be trimmed off. The seams shall be uniform,

continuous and straight.

Dimension in millimeter





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The fasteners used for the outside closure of the bag shall be of heavy quality and for inside compartments, pockets, etc, shall be of medium or light quality.

The air travel bags shall be provided with piping all round the outer edges. The

core shall be spiral spring and covered with leather cloth or plastic piping. The lock flap shall be single piece sewn to the lateral sides of the bag. The flap

shall have sufficient size to accommodate components of the lock. The steel components shall be plated chromium over nickel conforming to

standard specifications. The air travel bags shall be soundly constructed and finished smooth without any

sharp edges or constructional defects. There shall not be any loose thread or uneven seams.

In respect of appearance, general workmanship and finish the air travel bag shall

conform to the sample previously approved by the purchaser.

BIS has also prescribed the following performance test for air travel bags:

Handle Snatch Test: The air travel bag shall be securely fixed in an inverted position on a rigid support, leading the handle free for applying the load. The handle shall be suitably harnessed to distribute the load applied over the entire handle. A load of 100 N (10 kgf) shall be applied suddenly to the handle and repeated 10 times.

The weight may be applied either by means of spring balance or weights, suitably placed on a stirrup. During or after the test, the handle shall not have snapped or shall not have loosened in its fittings.

Drop Test: The air travel bag shall be filled with cloths or other suitable materials to the total contents to weight 50 + 2.5 N (5 + 0.25 kgf). The bag shall be locked after filling the specified weight. The air bag shall be dropped from a height of 1 m on a wooden floor or board for 10 times. The bag shall not be damaged or get splits. During or after the test the contents shall not show out. 3.6 School Uniform

School uniform or ready made garments comprises of a wide variety of garments in different fabrics, colours, design and shapes. As the uniforms are required to be made in the specified shade and texture of a given fabric as per given design in the various sizes, required for various age groups of children, no general quality specification could be prescribed. However as the fabrication of uniforms involves a number of stages of manufacturing, BIS has prescribed a list of factors and precautions which need to be





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adhered to at the various stages of garment manufacturing from design to packaging to ensure the final quality of the garment uniform. These factors and precautions being specific to various stages of processes have been listed later while describing the various stages involved in the process of manufacture of the uniform.

Bureau of Indian Standards (BIS) have specified various factors and guidelines to ensure the proper quality of uniform and ready made garments. The main guidelines are as under: The design of the garments and the materials to be used in the manufacture of

garments should ensure the fitness for purpose and relate to the method of production. Materials and trimmings selected for production of garments should be compatible with each other.

The materials should be inspection for defects and variations, checked for

conformity to the related specification and properly labeled. While lay planning, following factors should be taken care of;

Correct positioning of pattern pieces on fabric grain; Inclusion of all required pattern pieces; Matching of checks and stripes; Correct positioning of pattern pieces for pile fabrics or one side fabrics; No overlapping of pattern pieces; Availability of sufficient space between parts for accurate cutting; Correct identification of all pieces by size, style etc; Accurate marking; Inclusion and correct positioning of all notches and drill marks; and Fully marking of parts within defined lay width.

While cutting, the knife profile and cutting speeds should be checked.

Cleanliness and safety aspects should be ensured during cutting. In production department the equipment, operations and materials which require

adequate attention for proper make-up and pressing of garments are given below: Sewing machines, cleanliness and settings; Needles size, type and condition; Stitch density and thread tension; Sewing thread material, count, colour and shade;

The following aspects of garments should be checked at the final stage.

Correct dimensions; Seam pucker, seam allowance and sewing faults; Garment symmetry; Pressing/ fusing defects; Cleanliness;





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Loose threads; Correct matching of fabric and trimmings; Shade variation; Correct fitting and alignment of closures; and; Correct placing of labels.





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CHAPTER 4 - RESOURCES 4.1 Main Resources The main resources required for the project include the following.

- Land and building - Plant and machinery - Different type of fabrics for bags and uniforms - Consumables viz sewing thread, fasteners, buttons, vellcrows, tapes,

buckles, hooks, etc. - Power - Skilled and non-skilled workers

It has been envisaged in the project the land for the project would be available on lease basis from Government of Bhutan and the building as per requirement has to be constructed for the two production department. The plant and machinery has to be imported as per details given in the project. There is a requirement of cutting masters and tailoring staff both for bag section as well as uniform section of the project. In the initial phase, the some experts viz cutting masters and tailoring staff has to be brought from India who in turn would be able to train the local staff over a period of time. The production supervisors also initially have to be employed from outside so as to maintain the quality standard of the product. The experts from the machine suppliers could also help in training the local staff on operations of machines, however, development of adequate skills for stitching quality garments is rather a time consuming process and the tailoring staff employed from outside would be a necessity in the initial phase. 4.2 Details of raw materials and consumables A). School bags & Air Travel bags: For the production of school bags and air travel bags following main raw materials would be required.

Nylon or canvas fabric - coated nylon fabric is the main raw material used for the construction of the body of the bag and pockets. The fabric could be either coated with PVC or polyurethane (PU). These are available in various deniers viz. 400 x 400, 600 x 400, 600 X 600, 1200 x 1200 and 1800 X 1800 in form of 50 meter rolls with width varying from 1.35 meter to 1.5 meters. Starch coated canvas fabric of 210 x 210 count is also used for the production of low price range school bags. The canvas fabric is available in the form of 35-45 meter rolls with around 90 cm width. Nylon Viscose tape - Tapes are used for side straps, back straps and piping. Nylon tapes are available in continuous rolls long with 2.5 cm to 4 cm width. The tape with 2.5





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cm width is used for piping and normally 4 cm width tape is used for construction of straps. Sewing thread - Three ply or four ply nylon thread is used. The cotton sewing thread variety no. 28 or polyester sewing thread variety no. 9 is also used. Buckles: Suitable metal buckles or plastic buckles are used. Vellcrow- Vellcrow strips are stitched on the body of bags as per design. Vellcrow is available in 2.5 cm or more width in the form of rolls measuring 20 meters. Slide Fasteners – Metal or nylon slide fasteners of good quality are fixed in the bag as per design. Locks: Steal or brass locks as per design are fixed in the bag. Foundation Material: Especially in case of air bags, plywood or card board or fibre board sheet is placed inside the bottom of the bag to provide strength to the base of the bag and avoid the chances of collapsing of the bottom part. Besides rivets and washers, boss (feet) to be placed at bottom, metal or plastic labels, screen and screen printing inks are also required as raw materials for the production of the bags. B). School uniforms and readymade garments Fabric, trims and embellishments, sewing thread, washing chemicals, packing materials would be the raw materials for the manufacture of school uniforms and readymade garments. The fabric happens to the major raw material in the production of uniforms & garments and the quality of garments in terms of its appearance and durability would much depend on the type of fabric used. The price range of the uniform and the garment would also depend on the type and quality of fabric used in the production process. Various type of fabrics are used for the garments, however, in the project, cotton fabric and blended fabric have been taken into consideration for the purpose of cost calculation.

As stated above, a large variety of fabric in cotton, synthetic and woolen materials in various shades, woven and printed designs are available in the market and these are invariably sold by their trade names, their intended use or finishes imparted to the fabric. Even in one type of fabric, there could be a number of varieties widely differing in prices. The selection of fabric would depend on the type of garments proposed to be manufactured and the estimated price range i.e. cost of production since fabric constitute the major part of the cost in the total cost of garment. These types of fabric also available in a wide range of prices. In the project, medium quality of these two fabrics has been taken into consideration with a view to produce uniforms at an affordable price to the students. Various other raw materials viz sewing thread, buttons, slide fasteners etc. are also required. The main raw materials are as under:





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Fabrics – The fabric could be either cotton, woolen, synthetic, cotton synthetic blends, woolen synthetic blends. The fabrics could be either be mill made or hand loom fabric. Normally for uniforms cotton, polyester cotton and polyester wool blends are recommended. Sewing thread - Both cotton and synthetic types of sewing threads are used for stitching of the uniform. Slide fasteners: Both metallic any nylon slide fasteners are used in uniforms. Nylon slide fasteners, now a days are more preferred. Buckles and hooks – Mostly metal buckles and hooks are used.

Buttons- Plastic button of requisite size are used. Besides depending on the type of garment and design, embroidery thread, elastic tapes, eyelets and hooks, metal and decorative buttons etc. may also be required. Majority of the raw materials and consumables are required to be imported either from India or any other neighboring country. 4.3 Comparative analysis of sources and prices of critical inputs & consumables As mentioned earlier, various raw materials required for manufacture of bags and uniforms include the following: - A). School bags / Air travel bags

Nylon fabric Nylon tapes Sewing thread Buckles Vellcrows Slide fasteners Locks Foundation materials

B). School uniforms / readymade garments

Fabric Sewing thread Slide fasteners Buckles hooks and buttons





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The main raw material for both the products is fabric which can be either imported or sourced from wholesale fabric dealers. Depending on the acceptability in the market, indigenously produced handloom fabric could also be used. The fittings and accessories can be sourced from specialized shops dealing in these products in the eastern region of India. 4.5 Recommended sources A list of raw material supplier has been given in the Annexure II. In case of large requirements of fabric for garments, this could be procured directly from the mills or through their wholesale dealers. 4.6 Annual requirement of raw materials The annual requirement of various raw materials along with their prices have been given in the chapter 9 relating to cost presentation.





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CHAPTER 5 – THE PLANT 5.1 Selection of technology Manufacture of school bags and uniforms essentially involves cutting and stitching of fabric industry. The main manufacturing operations include designing, pattern making, cutting, stitching and fixing of accessories. Depending on the type and size of the market, these operations are carried out either manually or with the use of semi-automatic machines or by using completely automatic machines. Sometimes, partly manual and partly semi-automatic machines operations are also employed. 5.1.1 Process Technologies used For the production of exercise books, normally following type of process technology are used Manual process wherein the fabric is cut manually and hand operated stitching

machine are used. Semi-automatic process using manual cutting and motorized stitching machines. Fabrication of garments is outsourced through vendors and the main unit carries

out only finishing operations. All manufacturing operations are carried out in the unit.

5.1.2 Factors influencing the choice of technology A number of factors need to be taken into considerations while deciding the choice in favour of a process technology. These factors mainly include Factor inputs. Market findings viz size of market and recurrence of repeat demand. Purchasing power of consumers and prevailing price spectrum. Future projections of market demand. Availability of skilled manpower and support facilities. Availability of infrastructure and transport facilities. Environmental considerations.

5.1.3 Technology recommended Manufacture of school bags and uniforms basically involves cutting and stitching of fabrics as per given size and designs. It is desirable to produce a sizable quantity of bags or garments to achieve the economy of production. The fabric and consumables are also purchased in bulk at competitive prices in variably directly manufacturing mills or wholesale traders to keep down the cost of inputs. The manufacturing process being essentially a fabrication process, the level of skills of the cutting and tailoring staff becomes a critical factor for production of quality goods. The unit has to keep a constant





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touch with the market trends in order to produce the quality and designs as per market requirement. The quality and performance of the tailoring machines also plays an important part in ensuring the quality of goods and accordingly, the machines selected in the project are of standard make with proven record of performance. There are two types of operations particularly in the case of garment manufacturing units in India. In the first type of operation, the manufacturing unit undertakes all the operations viz designing, cutting, stitching and finishing by themselves and outsource only a limited operation like embroidery, etc. In the second type of operation, the unit undertakes designing and finishing operations only in their premises and the cutting, stitching and fixing of buttons, etc is outsource from vendors. Keeping in view that the facility of vendor may not be available in Bhutan in the initial phase, it has been envisaged that entire operation of garments and bag manufacturing is undertaken by the unit in their premises.

5.2 Installed Capacity of Production The installed capacity of the unit based on single shift operation, and 300 working days in a year would be as under: - School bags - 1,00,000 pieces per annum Sets of uniform - 1,20,000 pieces per annum

Installed Capacity of Production

School bagsSchool uniforms

5.3 Details and specification of main machine and equipment A). For bag section 1. Industrial sewing machine, single needle, Semi automatic 2. Heavy duty craftsmen sewing machine 3. Tape braiding machine





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4. Cutting tables 5. Cutting tools viz knife cutter, Aluminium sheets, angle scales, Cutting strips, pattern sheets, etc. 6. Hand tools for button/revert fixing 7. Screen printing & label printing machine B). For uniform section 1. Power driven, cloth cutting machine 2. Single needle sewing machine premium quality, with foot and motor 3. Single needle sewing machine universal with foot & motor 4. Double needle over lock safety stitching machine with edge trimming 5. Button holing machine 6. Button stitching machine 7. Hot fusing press 8. Garment washing machine 9. Hydro extractor 10. Tumbler drier 11. Steam press, industrial 12. Cutting and press tables





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5.4 Process of manufacture 5.4.1 School bags and air travel bags

The manufacturing process for the production of school bags and air travel bags would involve the following stages. Design and pattern Making: The design features and size are either supplied by the purchaser or these are finalized by the manufacturing unit keeping in view the intended use, performance requirements and prices brackets. Once the design is finalized, the patterns are cut in pattern sheets for different components. Cutting of Components: The various components of bag viz bottom sides, top flaps, pocket etc are cut from the fabric with the help of pattern by using knife cutter. The requisite lengths of tapes for piping and straps are also cut. Stitching of bags: The various cut components in fabric are stitched as per design using industrial sewing machines. The tapes and pockets are also stitched as per design. While stitching the piping is also placed along the stitched length. The slide fasteners Vellcrow are also stitched in the bag as per design. Fixing of accessories: Various accessories viz buckles in metal or plastics, labels, washers, rivets, boss (feet), locks and bottom lining sheets are fixed in the bags. Marking, Screen printing and packaging - The requisite design, trade mark and other information is then printed or pasted in the form of labels in the bags. Each bag is placed in a polythene bags and then these are packed in card board cartons.





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The process flow chart for the production of school bags and air travel bags is as under: 5.4.2 School Uniform and Ready made garments The process flow chart for the production of school uniforms and ready made garments is as given below. The main process operations to be carried out in each section are also mentioned in the process flow chart.

Fabric & Raw Material Store

Designing and Pattern making

Cutting of fabric and tape as per designs & Pattern

Stitching of the bags

Fixing of accessories

Marking, Screen printing

Packaging





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Fabric Store Fabric and other accessories

Dying is out sourced, the fabric is sent for dying if needed

Designing & pattern Making

The patterns are cut as per design from the pattern sheet

Cutting Department

Layers of cloth are placed on cutting tables. Fabric is cut in to different components as per pattern Cut components are numbered. Before transferring cut components to production department, these will be tied in

the form of bundles, either garment piece wise or component wise.

Cutting table Cutting table Cutting table Cutting table

Production Department

Various components of uniform are stitched. Over lock stitching is also made simultaneously.

Stitching M/c Stitching M/c

Stitching M/c

Stitching M/c

Stitching M/c Stitching M/c

Stitching M/c

Stitching M/c

Button, buckle and hook fixing As per design the accessories are fixed to the uniform

Thread Cutting Thread ends are cut manually

Pressing –Steam press Table Table Table Table

Checking Finishing Department While checking if any defects are found

Either the defective part is changed or Garment is washed or dry cleaned

Packaging Department Uniform / Garments are packed in plastic bag and then packed in cartons





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As given in the process flow chart above the manufacturing of uniform and garment would involve the following process operations.

- Selection of material, designing & pattern cutting - Lay planning and cutting - Stitching of garment - Fixing of buttons - Thread cutting - Inspection and packaging

5.5 Production capacity The main machines in the project are sewing machine of various types. The capacity of the machines would depend on the type of garment or bag being produced and the skilled level of the machine operator. Keeping in view, the normal working, the production capacity has been calculated on 80% utilization of the machines. The production capacity has been calculated on single shift basis and 300 working days in a year. Based on these calculations, the production capacity works out as under: - School bags / air travel bags - 1,00,000 nos School uniforms sets - 1,20,000 nos 5.5 Technical know-how The technology involved in the production of school bags and school uniforms is relatively a simple technology and basically involves cutting of the fabric as per designs, stitching of the fabric and fitting of accessories. The suppliers of stitching machine provide assistance in proper operation of machine. In the initial phase, the experts in the field of cutting of fabric, stitching of fabric may need to be brought from India who could in turn train the local workers over a period of time. 5.6 Requirement of power and fuel It is estimated that 60 HP power connection would be required for the production unit including the power requirement for production machines and general purpose lighting. The cost of the power has been calculated on the basis of Re. 1.45 per unit. 5.7 Manpower requirement The production capacity and the financial projections are based on single shift operation. The manufacturing unit will have two production sections viz bag manufacturing section and garment manufacturing section. For single shift operation of the unit, 5 managerial and office staff, 2 marketing executive, 2 cutting masters, 2 production supervisors, 35 tailoring staff for bag section, 90 tailoring staff for uniform





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section and 70 unskilled workers would be required. In case the unit is required to be operated in more than one shift, additional staff would be required. In addition to this, there would be a requirement of contract workers during construction phase of the factory and installation of machinery and equipment. 5.8 Organization Flow Chart The organization chart for single shift operation would be as under:

Organization Chart

Manager (Overall head of the factory operations)

The project has a good employment potential for skilled and unskilled workers which would be employed in the production unit. Beside the project would generate employment potential in marketing & sales of its produce, transport of raw materials and finished products. The project would thus create opportunity both for direct & indirect employment.

Bag production Section

Production Supervisor – 1

Cutting master – 1

Tailoring Staff – 35 nos

Unskilled workers – 60 nos

Administration and accounts

Accounts and administration staff – 4 nos

Marketing Department

Marketing Executive – 2 nos

Uniform production

Section

Production Supervisor – 1

Cutting master – 1 no

Tailoring Staff – 90 nos

Unskilled workers – 10 nos





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5.9 Plant Layout





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CHAPTER 6 – PLANT LOCATION AND INFRASTRUCTURE

6.1 Potential Locations The project has been designed mainly to cater to the requirement of uniform and school bags for school children. Accordingly, vicinity to the centres of education and trade centres has to the essential pre-requisites for deciding the location of the unit, so that the products manufactured by the unit could be supplied to various locations in Bhutan through trade channels. As mentioned earlier also, Thimphu, Chhukka, Trashigang, Samdrup, Paro and Samatse happen to be the major education centre in terms of size of enrollment till higher secondary and the unit could be setup at one of these locations. The process of manufacture both in case of uniforms and school bags basically involves cutting and stitching of fabric and there are no solid, liquid or gaseous affluent generated in the manufacturing process. As such the unit could also be setup in the vicinity of the main city. The model of having the main processing unit and getting the fabrication done by the small fabrication units and vendors could also be adopted if the unit is near the main city.

= Education centres





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6.2 Selection of suitable locations In order to select the suitable location for the manufacturing plant, various parameters viz availability of land, environmental conditions, investments considerations, operational logistics, future development possibilities, socio-economic factors including availability of services viz road transport and communication facilities etc. have been taken into consideration for ranking the locations. The table below shows the ranking of locations: Ranking of possible locations based on various parameters

Weightage of location related parameters S.

No. Locations Land

Access conditions

Environmental Conditions

Socio economic factors

Investment Consideration

Operational Logistics

Future development possibilities

Overall Rating

1 Thimphu 7 7 7 7 7 7 42 2 Chukka 7 7 6 7 7 6 40 3 Trashigang 7 7 6 5 5 5 35 4 Samdrup 7 7 6 5 5 5 35 5 Paro 7 7 7 7 7 5 40 6 Samatse 7 7 6 5 5 5 35

It is accordingly suggested that the unit be located preferably at Thimphu, alternatively Paro or Chhukka. The requisite infrastructure viz land, power, road transport and communication facilities required for the proposed unit are available at these locations specially in Bjemina Industrial Estate. The project has been conceptualized in totality and all the manufacturing operations are proposed to be carried out in the unit itself. The project has an inbuilt provision for spare parts, components and tools and the cost for the same has been incorporated. There may be some requirement of minor mechanical or electric repairs which could be taken care of by the skilled workers of the unit. Alternatively, the assistance could be taken of from the existing mechanical and electrical repair workshops.

As the unit would also be producing ready made garments and air travel bags, which could be easily marketed through trade channels in the capital city, Thimphu would be a preferred location for setting up this unit.





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CHAPTER 7 – ENVIRONMENTAL IMPACT 7.1 Environmental aspect of manufacturing process The manufacturing process involved in the production of school uniform and school bags is basically a conversion process of fabric into garment or bag and the stitching is the main process involved in the production process. No gaseous and liquid affluent are generated in the process. Dying is the only process in the manufacturer of garment which has pollution anger, however, in the proposed project, setting up of a dying section has not been proposed. Some solid waste would be generated in the form of cuttings of the fabric which can be easily disposed off. The cotton fabric cuttings and cotton sewing threads are bio-degradable and would not pose any pollution hazard. In the bag manufacturing section, some waste of nylon fabric would be generated which could be easily disposed off. The waste generation could be minimized by using the method of economic cutting and the waste pieces could also be used for creating designs and pattern on the bags. 7.2 Waste generated and mitigation measures As stated above, the manufacturing process for school bags and school uniform is environment friendly and no toxic & hazardous waste would be generated. However, some waste in the form of fabric trimmings and cuttings would be generated during manufacturing process. Besides, there would be some waste of metal scrap, wooden scrap, broken bricks, stone aggregates, etc during construction phase of the project. The waste generated during construction phase is mainly used for earth filling & flooring. The details of the waste generated during construction phase and project operation phase along with mitigation measures are given below in subsequent paras. 7.2.1 Waste generated during construction phase The details of the waste generated during construction phase and the mitigation measures are as under: - S. No. Type of waste / scrap Quantity Mitigation measures Impact on

Environment 1. Metal scrap Around 2-3 %

of the steel used in construction

Sold to trade channels for reprocessing.

No adverse impact

2. Wooden scrap Around 5-7% of the wood used in construction.

Used as fuel. No adverse impact

3. Clay stones, mounds Depending upon on the topography of the construction site.

Used for earth filling. No adverse impact.





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4. Brick stone cement aggregate

5% of the quantity used

Used for flooring and earth filling.

No adverse impact

7.3 Waste generated during project operation phase The details of the waste generated during project operations and the methods of the disposal recommended are as under: - S. No. Type of waste Quantity Mitigation measures Impact on

environment 1. Liquid effluents

(Dying plant for the fabric has not been included in the project).

Nil Not applicable No adverse impact

2. Gaseous effluents Nil Not applicable No adverse impact

3. Solid effluents or waste

Cotton fabric and nylon fabric cuttings

Fabric cuttings are purchased by the trade for multiple use including stuffing or reprocessing in case of synthetics.

No adverse impact

As such, the manufacturing process is environment friendly and there is no adverse impact of the project on the environment.





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Chapter 8 – IMPLEMENTATION SCHEDULE 8.1 Implementation schedule - Table

Implementation Schedule for manufacture of Exercise Book Particular From To Total Weeks Arrangement of Funds through Bank/ Own 1 8 8 Procurement of Land 1 7 7 Procurement of Tech. know how/ transfer of technology 1 18 18 Finalization of Building Contracts 6 11 5 Placement of Orders for Building Material 7 14 7 Placement of Orders for Machinery 9 19 10 Construction of Manufacturing premises 13 37 24 Delivery of Machinery 27 37 10 Erection, Commissioning of Plant & Machinery & Utilities 37 41 4 Procurement of Raw Material and Trial Runs 39 43 4 Training for workers 42 43 1 Commercial Production 43 44 1





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8.2 Implementation Schedule - Graphic view

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44Arrangement of Funds through Bank/ Own

Procurement of Land

Procurement of Tech. know how/ transfer of technology

Finalization of Building Contracts

Placement of Orders for Building Material

Placement of Orders for Machinery

Construction of Manufacturing premises

Delivery of Machinery

Erection, Commissioning of Plant & Machinery & Utilities

Procurement of Raw Material and Trial Runs

Training for workers

Commercial Production

Manufacture of Exercise Books Week

Activity

Implementation Schedule





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CHAPTER 9 - COST PRESENTATION 9.1 Capital Cost 9.1.1 Cost of Land and Building A). Plot and built up area - Total land requirement - 1500 sq. mt. - Constructed area for godowns and offices - 300 sq. mt. - Industrial shed for installations of machines:

For bag manufacturing department - 250 sq. mt. For uniform manufacturing department - 700 sq. mt.

B). Cost of Construction - Office and godowns (300 X 6000) - Rs. 18,00,000/- - Industrial sheds (950 X 3500) - Rs. 33,25,000/- Total - Rs. 51,25,000/- C). Land on lease @ Rs. 10/sq mt per annum.

Cost of Land and Building

Office and godownIndustrial sheds

9.1.2 Cost of Machinery and Equipments A). For bag section 1. Industrial sewing machine, 1 No. Rs. 40,000/- Single needle, Semi automatic (M1) 2. Heavy duty craftsmen 30 Nos. Rs. 3,60,000/- Sewing machine (M2) 3. Tape braiding machine (M3) 3 Nos. Rs. 45,000/-





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4. Cutting tables (M4) 2 Nos. Rs. 20,000/- 5. Cutting tools viz knife cutter, LS Rs. 25,000/- Aluminium sheets, angle scales, Cutting strips, pattern sheets, etc. (M5) 6. Hand tools for button/revert fixing (M6) LS Rs. 10,000/- 7. Screen printing & label printing 1 each Rs. 25,000/- Machine (M7) Sub-Total Rs. 5,25,000/- B). For uniform section 1. Power driven, cloth cutting machine (M8) 1 No. Rs. 1,00,000/- 2. Single needle sewing machine 40 Nos. Rs. 8,00,000/- Premium quality, with foot and motor (M9) 3. Single needle sewing machine Universal with foot & motor (M10) 40 Nos Rs. 3,60,000/- 4. Double needle over lock, 2 Nos. Rs. 1,00,000/- Safety stitching machine With edge trimming (M11) 5. Button holing machine (M12) 1 No. Rs. 1,50,000/- 6. Button stitching machine (M13) 1 No. Rs. 80,000/- 7. Hot fusing press (M14) 1 No. Rs. 70,000/- 8. Garment washing machine (M15) 1 No. Rs. 1,50,000/- 9. Hydro extractor (M16) 1 No. Rs. 75000/- 10. Tumbler drier (M17) 1 No. Rs. 1,50,000/- 11. Steam press, industrial (M18) 5 Nos. Rs. 75,000/- 12. Cutting and press tables (M19) 8 Nos. Rs. 80,000/- Sub-total Rs. 21,90,000/- Total of (A) and (B) Rs. 27,15,000/-





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Cost of Machinery and Equipments

Bag sectionUniform section

Miscellaneous Fixed Assets - Rs. 3.00 lakhs Pre-operative expenses - Rs. 5.00 lakhs 9.2 Operating Costs

9.2.1 Cost of Raw materials A). For bag section (1 lac pieces) 1. PU coated, Nylon fabric 8 lac meters Rs. 68,00,000/- 600 * 600 denier, 54” width 2. Nylon tape in 2.5 cm and 3.75 cm width 6 lac meters Rs. 18,00,000/- 3. Buckle and hook sets 2 lac sets Rs. 20,00,000/- 4. Handles 1 lac pieces Rs. 15,00,000/- 5. Slider & triangles LS Rs. 10,00,000/- 6. Lining material LS Rs. 10,00,000/- 7. Sewing thread, rivets LS Rs. 10,00,000/- Printing, packing material Sub-total Rs. 1,51,00,000/- B). For uniforms section 1. Cotton fabric 1.8 lac meters Rs. 1,08,00,000/-





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2. Blended fabric 1 lac meters Rs. 1,50,00,000/- 3. Trims & Embellishment LS Rs. 18,00,000/- 4. Sewing thread, detergents LS Rs. 10,00,000/- And other consumable 5. Packaging material LS Rs. 5,00,000/- Sub-total Rs. 2,91,00,000/-

Cost of Raw Materials

Bag sectionUniform section

9.2.2 Salary and Wages Manager - 1 no - Rs. 25,000/- Production Supervisor - 2 Nos - Rs. 30,000/- Office staff & Marketing Executive - 6 Nos - Rs. 72,000/- Cutting master - 2 Nos - Rs. 20,000/- Tailoring staff for bag section - 35 Nos - Rs. 2,45,000/ Tailoring staff for uniform section - 90 Nos - Rs. 6,30,000/ Helpers for bag section - 60 Nos - Rs. 3,50,000/ Helpers for uniform section - 10 Nos - Rs. 50,000/- Annual salary and wages - Rs. 164.64 lacs





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Salary and Wages

ManagerProduction SupervisorsOffice and marketing staffCutting mastertailoring staff for bag sectiontailoring staff for uniform sectionhelpers for bag sectionhelpers for uniform section

9.2.3 Cost of Power and Fuel Power requirement for production machines - 32 KWH Power requirement for general purpose for lighting Of stores, offices and production unit - 16 KWH Total - 48 KWH

Annual cost of power – Rs. 1,25,280/-

Power Requirement

Power for production machinesPower for general purpose





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9.2.4 Annual Turnover 1 lac bags @ Rs. 280 per bag - Rs. 2,80,00,000/- 1.2 lac sets of uniform @ Rs. 400 per uniform - Rs. 4,80,00,000/- Total - Rs. 7,20,00,000/-

Annual Turnover

BagsUniform





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CHAPTER 10 – FINANCIAL ANALYSIS 10.1 Project Assumptions

Assumptions at a Glance S. No. Particulars Rate/Amount

1 Total Project Cost 163.82 2 Debt 70% 3 Equity 30% 4 Rate of Interest 12% 5 Depreciation (Building) SLM 10 yrs 6 Depreciation (Machinery) SLM 20 yrs 7 Tax 30% 8 Construction Cost (Building) per sq.m. 6000 9 Construction Cost (Shed) per sq.m. 3500

10 Repayment period of Debt 8 yrs 11 Moratorium period 1 yr. 12 Installed Capacity (Units in Thousands) 275 13 Capacity Utilization 80% 14 Working Capital Cycle 1 month

10.2 Total Project Cost

Total Project cost 1 Machinery 36.11 2 Construction Cost 51.25 3 Miscellaneous Fixed Assets 3.00 4 Pre operating Expenses 5.00 5 Training Expense 0.36 6 Interest 11.49 7 Working Capital 56.61 Total 163.82





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Break up of Total Project Cost

MachineryConstruction costMiscellanous fixed assetsPre operating expensesTraining expensesInterestWorking capital

10.3. Means of Finance

Debt 114.67 70% Equity 49.14 30% Total 163.82 100%

Break up of Means of Finance

DebtEquity

10.4. Investment on Machinery A). For bag section M1 40,000 M2 360,000 M3 45,000 M4 20,000 M5 25,000 M6 10,000





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M7 25,000 Sub Total 525,000 B). For uniform section M8 100,000 M9 800,000 M10 360,000 M11 100,000 M12 150,000 M13 80,000 M14 70,000 M15 150,000 M16 75,000 M17 150,000 M18 75,000 M19 80,000 Sub Total 2,190,000 Total 2,715,000

Add Packaging, Forwarding, Transport and Insurance @ 11% 298650

Add Installation, Erection and Commissioning @ 2% 54300 Add Duty and Taxes @ 10% 271500 Add Spare Parts @ 10% 271500 Total Cost 3,610,950

Break up of Investment on Machinery

Cost of machineryPackaging to InsuranceInstallation to CommissioningDuty and TaxesSpare parts

10.5. Cost of Construction Constructed Area (300 Sq. mtr. @ 6000per Sq. mtr.) 1800000 Shed (950 Sq. mtr. @ 3500 per Sq mtr.) 3325000





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Total 5125000

Break up of Cost of Construction

Constructed areaIndustrial shed





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10.6 Statement of Expenditure Expenses (in Rs.)

Salary and Wages

Type of Employees No. of Employees Per month Per Annum Total Manager 1 25000 300000 3 Product Supervisor 2 15000 180000 3.6 Office's Staffs and Marketing Executive 6 12000 144000 8.64 Cutting Master 2 10000 120000 2.4 Tailoring Staff for Bag section 35 7000 84000 29.4 Tailoring Staff for Uniform section 90 7000 84000 75.6 Helpers for bag section 60 5000 60000 36 Helpers for Uniform section 10 5000 60000 6 Total 164.64 Perks at 15% 24.70 Total 189.34 Training and Development Cost ( 1% of Machinery) 0.36 Power (60HP @ 0.75per hour, 80% utilization, 8hrs/day, 25days/month) Rate=1.45/unit 10440 1.25 Diesel, Water 5000 0.6 Selling Expenses ( Publicity and Marketing Expense) 5% of Sales 38 Total 64.91

10.7. Cost of Raw Materials Raw material cost (Rs.) A1 6,800,000 A2 1,800,000 A3 2,000,000 A4 1,500,000 A5 1,000,000 A6 1,000,000 A7 1,000,000 Sub-total 15,100,000 B1 10,800,000 B2 15,000,000 B3 1,800,000 B4 1,000,000 B5 500,000 Sub-total 29,100,000 Total 44,200,000





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10.8 Break up of cost of production

Particulars Amount (in lacs)

Raw Material & Consumables 442.00 Utilities & Fuel 1.85 Wages & Salaries 189.34 Indirect Expenses 66.05

Cost Breakup

Raw Material & ConsumablesUtilities & FuelesWages & SalariesIndirect Expenses

10.9 Annual Turnover Particulars Units Rate Total

Bags 100,000 280 28000000

Uniforms 120,000 400 48000000 Total 220,000 76000000





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Break up of Annual Turnover

BagsUniforms





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10.10 Income statement Operating years 1 2 3 4 5 6 7 8 9 10

CapacityInstalled Capacity (Units) 275000.00 275000.00 275000.00 275000.00 275000.00 275000.00 275000.00 275000.00 275000.00 275000.00Capacity Utilisation 80% 80% 80% 80% 80% 80% 80% 80% 80% 80%

PRODUCTION 220000 220000 220000 220000 220000 220000 220000 220000 220000 220000

Sales Revenue 760.00 760.00 760.00 760.00 760.00 760.00 760.00 760.00 760.00 760.00

Raw Material & Consumables 442.00 442.00 442.00 442.00 442.00 442.00 442.00 442.00 442.00 442.00Utilities & FuelesPower 1.25 1.25 1.25 1.25 1.25 1.25 1.25 1.25 1.25 1.25Water, Diesel, etc 0.60 0.60 0.60 0.60 0.60 0.60 0.60 0.60 0.60 0.60Sub Total 1.85 1.85 1.85 1.85 1.85 1.85 1.85 1.85 1.85 1.85Wages & Salaries 189.34 189.34 189.34 189.34 189.34 189.34 189.34 189.34 189.34 189.34

Factory Overheads 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00General Overheads 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00LeaseLand 0.12 0.12 0.12 0.12 0.12 0.12 0.12 0.12 0.12 0.12Estimated Cost of Production 641.31 641.31 641.31 641.31 641.31 641.31 641.31 641.31 641.31 641.31Selling Expenses 38.00 38.00 38.00 38.00 38.00 38.00 38.00 38.00 38.00 38.00Cost of Sales 679.31 679.31 679.31 679.31 679.31 679.31 679.31 679.31 679.31 679.31

EBITDA 80.69 80.69 80.69 80.69 80.69 80.69 80.69 80.69 80.69 80.69Interest 13.76 12.04 10.32 8.60 6.88 5.16 3.44 1.72 0.00 0.00Depreciation 6.17 6.17 6.17 6.17 6.17 6.17 6.17 6.17 6.17 6.17PBT 60.76 62.48 64.20 65.92 67.64 69.36 71.08 72.80 74.52 74.52Taxation 18.23 18.74 19.26 19.78 20.29 20.81 21.32 21.84 22.36 22.36PAT 42.53 43.73 44.94 46.14 47.35 48.55 49.75 50.96 52.16 52.16

Income Statement

It would be seen from table above that the PBT in the 1st year of operation in Rs. 60.76 lacs which works out to be 8% of the total sales. In the 10th year, the %age of PBT would be 10%. Similarly PAT in the 1st year is Rs. 42.53 lacs accounting for 6% of total turnover. PAT in 10th would rise to 7%. These figures could vary depending upon change in tax structure.





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10.11 Repayment and Interest schedule for Loans Repayment and Interest Schedule for Loans Operating Years 1 2 3 4 5 6 7 8 9 10 Rate of Interest 12% Loan (Outstanding) 114.67 100.34 86.00 71.67 57.34 43.00 28.67 14.33 0.00 0.00 Interest 13.76 12.04 10.32 8.60 6.88 5.16 3.44 1.72 0.00 0.00 Moratorium Repayment 14.33 14.33 14.33 14.33 14.33 14.33 14.33 14.33 0.00 0.00 Closing Balance 100.34 86.00 71.67 57.34 43.00 28.67 14.33 0.00 0.00 0.00

10.12 Depreciation Depreciation

Operating Years 1 2 3 4 5 6 7 8 9 10 Machinery @ 10% 3.61 3.61 3.61 3.61 3.61 3.61 3.61 3.61 3.61 3.61 Construction Cost @ 5% 2.56 2.56 2.56 2.56 2.56 2.56 2.56 2.56 2.56 2.56 Total 6.17 6.17 6.17 6.17 6.17 6.17 6.17 6.17 6.17 6.17





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10.13 Projected Fund flow statement

Construction Period1 1 2 3 4 5 6 7 8 9 10

SOURCES OF FUNDSEquity 49.14Debt 114.67PBDIT 80.69 80.69 80.69 80.69 80.69 80.69 80.69 80.69 80.69 80.69

Total Sources A 163.82 80.69 80.69 80.69 80.69 80.69 80.69 80.69 80.69 80.69 80.69

APPLICATION OF FUNDSFixed Assets Purchase 104.21Miscellaneous Fixed Assets 3.00Increase in Current Assets 56.61Repayment of Loan Payment 14.33 14.33 14.33 14.33 14.33 14.33 14.33 14.33 0.00 0.00 Payment of Interest on Term Loan 13.76 12.04 10.32 8.60 6.88 5.16 3.44 1.72 0.00 0.00Taxation 18.23 18.74 19.26 19.78 20.29 20.81 21.32 21.84 22.36 22.36

Total Application B 163.82 46.32 45.12 43.91 42.71 41.51 40.30 39.10 37.89 22.36 22.36

SURPLUS/(DEFICIT) A-B 0.00 34.37 35.57 36.78 37.98 39.19 40.39 41.59 42.80 58.34 58.34OPENING CASH & BANK BALANCES 0.00 34.37 69.94 106.72 144.70 183.89 224.28 265.87 308.67 367.01CLOSING CASH & BANK BALANCES 0.00 34.37 69.94 106.72 144.70 183.89 224.28 265.87 308.67 367.01 425.34

Years

Projected Funds Flow Statement

Operation period





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10.14 Projected Balance Sheet

Sn DescriptionConstruction Period Operati0on Period

1 1 2 3 4 5 6 7 8 9 10

1.1 Equity 49.14 49.14 49.14 49.14 49.14 49.14 49.14 49.14 49.14 49.14 49.141.2 General Reserves 42.53 86.26 131.20 177.34 224.69 273.24 323.00 373.95 426.12 478.281.3 Debt 114.67 100.34 86.00 71.67 57.34 43.00 28.67 14.33 0.00 0.00 0.00

Total Liabilities 163.82 192.01 221.41 252.02 283.82 316.84 351.05 386.47 423.10 475.26 527.422 Assets

2.1 Gross Fixed Assets 107.21 107.21 107.21 107.21 107.21 107.21 107.21 107.21 107.21 107.21 107.212.2 Accumulated Depreciation 6.17 12.35 18.52 24.69 30.87 37.04 43.21 49.39 55.56 61.732.3 Net Fixed Assets 107.21 101.03 94.86 88.69 82.51 76.34 70.17 63.99 57.82 51.65 45.472.4 Working Capital Assets 56.61 56.61 56.61 56.61 56.61 56.61 56.61 56.61 56.61 56.61 56.612.5 Cash & Bank Balances 0 34.37 69.94 106.72 144.70 183.89 224.28 265.87 308.67 367.01 425.34

Total Assets 163.82 192.01 221.41 252.02 283.82 316.84 351.05 386.47 423.10 475.26 527.42

Projected Balance Sheet





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10.15 Discounted Cash Flow Statement

Discounted Cash flow statement (Total Investment)

Construction PeriodYears t=0 t=1 1 2 3 4 5 6 7 8 9 10InflowsNet Cash Accruals After Interest & Tax 48.70 49.91 51.11 52.32 53.52 54.72 55.93 57.13 58.34 58.34Less: Change in Working Capital 0 0 0 0 0 0 0 0 0 0Add back financial Expenses 13.76 12.04 10.32 8.60 6.88 5.16 3.44 1.72 0.00 0.00Terminal value 290Total inflow 62.46 61.95 61.43 60.92 60.40 59.88 59.37 58.85 58.34 348.34OutflowsInvestment 107.21 56.61Bridge Loan 0 0Total outflow 107.21 56.61Net Cashflow -107.21 -56.61 62.46 61.95 61.43 60.92 60.40 59.88 59.37 58.85 58.34 348.34IRR on Investment (%) 32%NPV (12% Discount Rate) Rs. 206.75Pay Back Period 2 years 6 months

Discounted Cashflow Statement (Equity)

Years t=o t=1 1 2 3 4 5 6 7 8 9 10InflowsNet Cash Accruals After Interest & Tax 48.70 49.91 51.11 52.32 53.52 54.72 55.93 57.13 58.34 58.34Less: Change in Working Capital 0 0 0 0 0 0 0 0 0 0Less: Loan Repayment 14.33 14.33 14.33 14.33 14.33 14.33 14.33 14.33 0.00 0.00Terminal Value 191Total Inflow 34.37 35.57 36.78 37.98 39.19 40.39 41.59 42.80 58.34 249.34OutflowsEquity 32.16 16.98Total Outflow 32.16 16.98Net Cash Flow -32.16 -16.98 34.37 35.57 36.78 37.98 39.19 40.39 41.59 42.80 58.34 249.34IRR on Equity 56%

Operation Period

The IRR on investment is 32% which is quite a positive indication about the financial health of the project because the cost of borrowing is 12%. Similarly IRR on Equity is 56% which again is a positive indicator. The NPV @ of 12% on investment is Rs. 206.75 lacs which is quite good for any investment.





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10.16 Break Even Point and Sensitivity Analysis

Break Even Point And Senstivity Analysis

Normal Case1 Case2 Case3 Case4Variable Cost (Rs. Lacs)Raw material & Consumable Stores 442.00 486.20 442.00 442.00 486.20Utilities 1.85 2.04 1.85 1.85 2.04Total Variable Cost 443.85 488.24 443.85 443.85 488.24

Average Variable Cost (Rs. / Thousand Litres) 201.75 221.93 201.75 201.75 221.93Fixed Cost (Rs. Lacs)Wages & Salaries 189.34 189.34 208.27 189.34 198.80Repairs & Maintenance 5.00 5.00 5.50 5.00 5.25General Overheads 3.00 3.00 3.30 3.00 3.15Lease charges 0.12 0.12 0.13 0.12 0.13Financial Expenses 13.76 13.76 15.14 15.14 15.89Depreciation 6.17 6.17 6.79 6.79 7.13Total Fixed Cost (Rs. Lacs) 217.39 217.39 239.13 219.38 230.35Average Fixed Cost (Rs. per Thousands Litres) 1811.58 1811.58 1992.74 1828.20 1919.60Average Selling Price 345.45 345.45 345.45 345.45 328.18Project Break Even Point (t) 151277 175984 166405 152664 216791Project Break Even 69% 80% 76% 69% 99%Cash Break Even Point 146981 170987 161679 147939 210081Cash Break Even 67% 78% 73% 67% 95%

Case 1 - 10% Increase in Variable CostCase 2 - 10% Increase in fixed CostCase 3 - 10% Increase in Project CostCase 4 - 10% Increase in Variable Cost and Fixed Cost 5% Increase in Fixed Cost 5% Dcrease in Selling Price The project break even in normal case is 67% i.e. after achieving 67% of the Projected Turn Over the unit would be in be in the profit zone.





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10.17 Ratio Analysis

Ratio Analysis

1 Return on Assets 26%

2 Return on Equity 87%

3 Debt-Equity Ratio 2.33%

4 Interest coverage Ratio 6 10.18 Foreign exchange implications The foreign exchange requirement for the project would be only for the import of machines, equipments and accessories for a value of Rs. 30 lacs, during the setting up of the project. Approximately, Rs. 5 lacs worth of foreign exchange would be required for incidental expenses such as training, travel, etc. Additionally, there would be a requirement of Rs. 442 lacs per annum for the import of raw materials. Thus, the foreign exchange expenditures during first five years would be Rs. 2245 lacs. The foreign exchange saving in terms of import substitution would be around Rs. 3800 lacs during the first five years of operation of the project.





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CHAPTER 11 – ECONOMIC ANALYSIS 11.1 Economic Rate of Return (ERR) Economic Rate of Return is the interest rate at which the cost and benefits of a project, discounted over its life, and equal. ERR differs from Financial Rate of Return in that it takes into account the effects of factors such as Price Controls, Subsidies and Tax breaks from local government, to compute the actual cost of the project to the economy. The economic rate of return also includes indirect benefits to the economy that are likely to be ploughed back to the investors, people, government and other government or non-government agencies, over a longer period of time. 11.2 Relevance of ERR to the project This concept of ERR is more relevant for big projects involving large capital deployment. For small projects, like the project under consideration, there may not be significant difference between Financial Rate of Return and Economic Rate of Return, as, while formulating the project, factors like Price Controls, Subsidies and Tax breaks from local government and also socio-economic benefits, have not been taken into account. 11.3 Socio-economic impact of the project As state above, the concept of ERR is not quite relevant for this project and the impact of the proposed unit would not be quite significant on the overall economic scenario of Bhutan. However, over a long time horizon and setting up of a number of similar units would result into following socio-economic benefits for the country.

Indigenous production of school bags and uniforms would lead to self-reliance for these items in the field of school supplies. This would also insulate the school supplies from vagaries of external economies.

Local production of school bags and uniforms would lead to import substitution which would result in saving of foreign exchange. Setting up of more units to meet the requirement of school supplies would have a multiplier effect on foreign exchange saving.

There are possibilities of export of the school bags and uniforms to eastern and north-eastern parts of India and other neighboring markets. This would lead to earning to foreign exchange for the country.

There are not many medium and small scale units manufacturing units in Bhutan. Setting up of this unit would have a catalytic effect on growth of entrepreneurship in medium and small scale sector.

The setting up of the project would lead to generation of direct and indirect employment, both for skilled and unskilled workers which would





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result into economic upliftment of local population. This would also lead to upgradation of skills.

There are employment opportunities in the project for persons with managerial, technical, financial and marketing capabilities. The employment of such people in the local industry would provide them an option to have an employment in private sector in Bhutan and also reduce the migration of qualified manpower.

There would be revenue generation for the local government by way of excise, sales tax/VAT and income tax from the unit as well as from its promoters.

Finally, the project would lead to enhancement of economic activities in the field of construction, transport of raw materials and finished goods, marketing and trade, repairs and maintenance, etc.

It is important here to mention that above benefits can only be listed but these cannot be quantified based on a single unit with small investment. However, as mentioned above, if a number of such units in school supplies sector or any other sector of economy are setup, these would have a significant impact on overall economy of Bhutan.





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Annexure





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Annexure I

List of Machine Suppliers: 1. M/s Singer India Ltd. 3 Devika Towers 6 Nehru Place, New Delhi - 110019. Delhi India Tel. No. : 91-11-6446012 2. M/s Indl Machines Delhi Pvt Ltd E 1/23 B, Asaf Ali Road, Delhi, 110002 Tel: 91 11 23232211 3. M/s Dutta Industrial Sewing Machine Corporation 79A, Udyog Vihar-V, Gurgaon Dhundhahera, Gurgaon, Haryana 122002 Ph. 91 124 2451230 4. M/s Laxmi Traders 1635A /Lane No 14.5 Govind Puri, New Delhi, Delhi 110019 Tel; 91 11 26441329 5. M/s Ekta Sewing Machine 1634/14 Main Road Govind Puri, New Delhi, Delhi 110019 Tel: 91 11 20518770 6. M/s Friends Mechanical Works (India) B-92, Industrial Estate, Ludhiana - 141003, Punjab, India Phone : 91-161-2530045/2672811 7. M/s Kabir International G-3/34, Model Town-Iii, Delhi - 110009, India Phone : 91-11-27217835 8. M/s Daichi Overseas Pvt. Ltd. E-241, Focal Point, Ludhiana - 141010, Punjab, India Phone: 91-161-2674145/2671321 9. M/s Prima Sewing Machine 2662, Roshan Pura, Nai Sarak, Delhi - 110006, India Phone: 91-11-23264870





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10. M/s Deson Exports E-325a, Phase-Iv, Focal Point, Ludhiana - 141010, Punjab, India Phone: 91-161-5013898 11. M/s Jet Tech Private Limited

801, A-Wing, Alkapuri Arcade, R.C. Dutt Road, Vadodara - 390007, Gujarat, India Phone : 91-265-2338188 Fax : 91-265-2338145

12 M/s Jap Stretch Private Limited 22, Ballygunge Terrace, Kolkata - 700029, West Bengal, India Phone : 91-33-24611253

Fax : 91-33-24611253 13. M/s R. K. Sewing Machine

32, Raghukul Building, Bhawani Shankar Road, Near Kabutarkhana, Dadar (W), Mumbai - 400028, Maharashtra, India Phone : 91-22-66624599

Fax : 91-22-24158532 14. M/s Juki India Private Limited A-215/B, Okhla Industrial Area Phase-1, New Delhi 110020, India Tel : 91-11-28616097 Fax : 91-11-26819273 15. M/s Vishal Sewtech B-388, New Ashok Nagar, Opp. Eastend Public School, New Delhi - 110096, India Phone : 91-11-22716060





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Annexure II List of Raw Materials suppliers:

A. Heavy duty Nylon Fabric 1. M/s Sunwell Materials Technology Co., Ltd. No. 65, Peihui, Guei Village, Shui Shang Hsiang, Chiayi Hsien 608, Taiwan Tel; 886-5-2836233 2. M/s Sparsh Poly Chem Private Limited 1524, M. I. E., Part-B, Bahadurgadh, Haryana - 124 507, India Phone: + (91)-(127)-25948127 3. M/s Samsun Plastalloys F-27, DSIDC, Nangloi, New Delhi, Delhi - 110 041, India Phone: + (91)-9212760886 4. M/s Eros International (A division of Eros Group) 236/2, Gupta Road, Industrial Area-A, Ludhiana, Punjab - 141 003, India Phone: + (91)-(161)-5036464/3290760 5. M/s Balavigna Weaving Mills Private Limited 11/A1, Kasthuribai Road, Nagal Nagar, Dindigul, Tamil Nadu - 624 003, India Phone: + (91)-(451)-2401085 B. Cotton and Blended Fabric 1. M/s Clothes & Fabrics International 107 Niranjan, 99 Marine Drive, Mumbai, MH India 400002 2. M/s National Sewing Thread Company Ltd 11, Venugopala Pillai Road, Chidabaram, Chennau, Tamil Nadu, India 608601 Tel: 91-44-3291-0336 3. M/s Zibo Daranfang silk development co.,ltd No.1666 zhoulong road zhoucun zibo shandong china ZIBO, Shandong, China 255300





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Tel : 86-533-6868-387 4. M/s Tuhina Impex 132 Vidyut Nagar "C" Vaishali Nagar Jaipur, Rajasthan India 302021 Tel: 91-141-2353-479 5. M/s Polytex Linen Cotton Limited Block C,D,E, 20/F, Excelsior Building, 68-76 Sha Tsui Road, Tsuen Wan, N.T. N/A, N/A, Hong Kong 852 Tel: 852-2414-4263





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Annexure III List of lab testing equipment suppliers

1. M/s Imperial Lab Equipment Address: 109, Vardhman Plaza Tower, H-3, Netaji Subhash Place District Center, PitamPura, New Delhi, Delhi Phone(s): 91-11-65154406 / 42470203 Fax(s): 91-11-27352924

2. M/s Scientific Engineering Corp Address: 3280, Arya Pura Old Subzi Mandi, Delhi – 110007 Phone(s): 91-011-23829918 / 23823794 Mobile: 9811569035 Fax(s): 91-011-23829918 / 23823794

3. M/s Toshniwal Brother Pvt. Ltd. 388 Udyog Vihar Phase 3 Gurgaon – 122006 Haryana Ph +91-124-4003629 / 4003985 Fax no +91-124-4003986





DETAILED FEASIBILITY ANALYSIS OF SCHOOL BAGS & UNIFORMS · The project envisage detailed...

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