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PROJECT REPORT
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BUSINESS SCHOOL OF DELHI
PGDM III TRIMESTER FINANCIAL MANAGEMENT
ASSIGNMENT ON INTER COLLEGE
SUBMITTED TO: SUBMITTED BY:
Prof. Dr. Md. Athar Ali shankar kumar
dhiraj kumar
biswajit ray
pooja
mohit
Section (C)
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Table of Contents
Summary
1. INTRODUCTION
2. QUALITY POLICY MISSION AND VISION
3. SUMMARY
4. MARKET APPRAISAL
5. TECHNICAL APPRAISAL
6. FINANCIAL APPRAISAL
7. ECONOMIC APPRAISAL
8. RISK AND UNCERTAINTY
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FINANCIAL APPRAISAL
PROJECT TOTAL COST IS = 2 CRORE
1.Furnitures & fixture cost = 20 lakhs.
2.Plant & machinery= 120 lakhs
3.Operating cost = 45 lakhs.
4.Saving cost= 15 lakhs
Sources of funds :
EQUITY CAPITAL = 40 LAKHS
TERM LOAN = 40 LAKHS
Contribution= 120 LAKHS
Thegroup member are five andthey contributedequal some of amount of
capital.
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ARE ASFOLLOWS:
DHIRAJ KUMAR = 24 lakhs
SHANKAR KUMAR = 24 lakhs
BISWAJIT RAY = 24 lakhs
MOHIT = 24 lakhs
POOJA = 24 lakhs
The projectexpected life of 5 year.
y Depreciation on furniture @ 20%
y RE (Requiredreturn onequity) @ 20%
y RD (Return ondebt) @ 14%
y TAX rate @ 40%
WEIGHETED AVG COST OF CAPITAL
WACC = E\V *RE + D/V *RD
= ( 16000000*20/20000000) +( 4000000*14/20000000)
= 18.8 TAKE APROX 19%
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K= 19 %
Year 1st 2nd 3rd 4th 5th
Sales 180,00000 180,00000 180,00000 180,00000 180,00000
Less o.c. 140,00000 140,00000 140,00000 140,00000 140,00000
Less
dep.=28,00000
28,00000 28,00000 28,00000 28,00000 28,00000
PBT 1200000 1200000 1200000 1200000 1200000
Less TAX 4.8 LAKHS 4.8 LAKHS 4.8 LAKHS 4.8 LAKHS 4.8 LAKHS
PAT 7.2 LAKHS 7.2 LAKHS 7.2 LAKHS 7.2 LAKHS 7.2 LAKHS
ADD Dep. 28 LAKHS 28 LAKHS 28 LAKHS 28 LAKHS 28 LAKHS
Cash in flow 35.2
LAKHS
35.2 LAKHS 35.2 LAKHS 35.2 LAKHS 35.2 LAKHS
NPV= 140,00,000*PVFA(i=19%,n=5)
= 140,00,000*3.058
=4,28,12,000
Assumption:-
y The project ofthetransportis feasibleso the project
is accepted.
y The capital which weinvestin our projectitreturns
back in aprox: 4 year.
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YEAR 0 1 2 3 4 5 6 7
CASH FLOW 35.2
LAKHS
35.2
LAKHS
35.2
LAKHS
35.2
LAKHS
35.2
LAKHS
35.2
LAKHS
35.2
LAKHS
35.2
LAKHS
CUMMULATIVE
CASH FLOW(140LAKHS)
104.8
LAKHS
69.6
LAKHS
34.4
LAKHS
-.8
LAKHS
36
LAKHS
71.2
LAKHS
106.4
LAKHS
141.6
LAKHS
Payback period:
The project will generate cash flow of Rs 35, 20,000/-
in a year.
So thatin one month is Rs 2.9333333 LAKHS.
So the project will generate cash inflow aprox: 2
crorein 3year 9 month.
Payback period = Threeyear 9 month
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SANGAM DAIRYGOOD HEALTH (RICH LIFE)
INTRODUCTION
If you have love for animals such as cows and recognize their
money-making capabilities, then you can start a dairy farm
business. You can make money off milking cows and selling
them off to big dairy companies, or sell them off as your own
products if you can afford the processing equipment. There
fore we choose dairy firm for multiple purpose.
COWSCows are the core of your dairy farm business. They are the
animals that provide the milk that you will be selling off for
money, and they are also responsible for reproducing other
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cows that can grow your business. Obviously, the majority of
cows that you will rear in your farm should be females.
However, if you also wish to make off money selling cows to
slaughterhouses, you might want to retain a male and a few
females for breeding.
COWS FEEDS
we Feeds ,When you rear animals, you should also feed them.
Cows feed on a number of plants: grass, corn or grain, among
others. You can buy these feeds from third-party farmers or,
better yet, you can choose to grow them right next to your
dairy farm. You can save up that way, and you can also make
another business: selling off the feeds that you have extra from
feeding your cows. You can also grow corn for your own
consumption.
EQUIPMENT
Dairy farms are one of the more expensive businesses to
operate and start. So we need to have some elaborate
equipment in order to pull the business off properly. Some of
the more important dairy farm equipment includes:
TRACTOR
An important equipment for pulling machinery around. Most of
the other equipment cannot be operated without this.
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HAY BALER
Responsible for producing bale that is then fed to the cows .
Each round bale produced by this machine is enough to feed 25cows a day.
COMBINE
The machine used to harvest crops for feeding to the cows, or
for selling off. If you plan to grow your own cow feeds, you
would need this definitely.
STORAGE BUILDINGS
These buildings are useful for storing the feeds and the plants
that we grow in our farm. There are also specialized buildings
that are designed to store cows manure, as they are good
fertilizers for the crops.
MILKING EQUIPMENT
This will help make our life easier. Having automated milking
equipment in our dairy farm will help cut the time required for
us to produce milk from our cows, rather than doing it by hand.
QUALITY POLICY
Ensure that milk producers and farmers regularly and continue all
receive market prices by offering quality milk, milk products and other
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food products to consumers at competitive prices. To ensure this BSD
Dairy operates such that the farmer gets 85% of the total cost of sales.
MARKET SIZE & INVESTMENT: -As we all ready says that firstly our main target is to capture the main
market of a, in this way first we capture the metros customer & try to
attract them towards our product. For this we can invest 2 Cr. Rupees
to establish our industry and after that 1to 5 lakh Rupees. we can
invest to advertise our product because its very necessary to aware
the customer about our product & services, by this they attract to use
our services. To start the business we issue a share capital in the
market approx 80 LAKHS Rs. & some fund will be contribute by Five
partners of the industry and remaining will be taken through bank
loan.We must be selective and smart when seeking money for start
up our business or it could turn our dream business into a nightmare.
GROWTH: -
The sector, which was growing in the range of 20 to 25 per cent up
to the year 2007-08, has moved to a higher growth path of an
average rate of 55-60 per cent during the last two years.
MARKET APPRAISAL:-
We have been designed to provide an honest and realistic idea
of business value. The Benchmark Valuation does not purport
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to be the only method of valuation available, but its aim is to
provide a guideline for the owner(s) of a business to plan for
development or sale. Ultimately, the only way to ascertain the
value of a business is to sell it. Our Benchmark believes that the
following principle is the most appropriate technique for the
valuation of :-
VALUE = Goodwill (Maintainable Earnings x Benchmark
Capitalization Factor) + Adjusted Net Assets (Fixed Assets +
Stocks + Debtors Current Liabilities (excluding surplus cash,
pensions and property)) + Property at Current Value.
This report outlines how the goodwill is appraised, through
illustrating how the Benchmark Capitalization Factor is achieved
and what the level of maintainable earnings should be set at. It
also reveals how the net assets are calculated.
Approxsize ofthe market and projectshare of
the market.
Once the size of the market has been determined, thenext step is to define the target market. The target marketnarrows down the total market by concentrating on
segmentation factors that will determine the totaladdressable market -- the total number of users within thesphere of the business's influence. The segmentationfactors can be geographic, customer attributes, or product-oriented.
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For instance, if the distribution of our product is confined toa specific geographic area, then we would want to furtherdefine the target market to reflect the number of users or
sales of that product within that geographic segment.Once the target market has been detailed, it needs to befurther defined to determine the total feasible market. Thiscan be done in several ways, but most professionalplanners will delineate the feasible market byconcentrating on product segmentation factors that mayproduce gaps within the market. In the case of a
microbrewery that plans to brew a premium lager beer, thetotal feasible market could be defined by determining howmany drinkers of premium pilsner beers there are in thetarget market.
It is important to understand that the total feasible marketis the portion of the market that can be captured providedevery condition within the environment is perfect and there
is very little competition. In most industries this is simplynot the case. There are other factors that will affect theshare of the feasible market a business can reasonablyobtain. These factors are usually tied to the structure ofthe industry, the impact of competition, strategies formarket penetration and continued growth, and the amountof capital the business is willing to spend in order toincrease its market share.
Projecting Market Share
Arriving at a projection of the market share for a businessplan is very much a subjective estimate. It is based on not
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only an analysis of the market but on highly targeted andcompetitive distribution, pricing, and promotionalstrategies. For instance, even though there may be a
sizable number of milk users to form the total feasiblemarket, we need to be able to reach them through ourdistribution network at a price point that is competitive, andthen we have to let them know it's available and wherethey can buy it. How effectively we can achieve ourdistribution, pricing, and promotional goals determines theextent to which we are able to garner market share.
For a business plan, we must be able to estimate marketshare for the time period the plan will cover. In order to
project market share over the time frame of the businessplan, will need to consider two factors:
1. Industry growth which will increase the totalnumber of users.
This is determined by growth models as described in the
"Market Research" chapter. Most projections utilize aminimum of two growth models by defining differentindustry sales scenarios. The industry sales scenariosshould be based on leading indicators of industry saleswhich will most likely be industry sales, industry segmentsales, demographic data and historical precedence.
2. Conversion of users from the total feasible market.
This is based on sales similar to a product life cycle whereyou have five distinct stages: early pioneer users, earlyusers, early majority users, late majority users, and lateusers. Using conversion rates, market growth will continueto increase your market share during the period from early
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pioneers to early majority users, level off through latemajority users, and decline with late users.The strategy used to position a product is usually a result
of an analysis of our customers and competition.
Cost-plus pricing -- Used mainly used for manfg . cost-plus pricing assures that all costs, both fixed and variable,are covered and the desired profit percentage is attained.Demand pricing -- Used by companies that sell our
product through a variety of sources at differing prices
based on demand.
Competitive pricing -- Used by companies that are
entering a market where there is already an establishedprice and it is difficult to differentiate one product fromanother.
Markup pricing -- Used mainly by retailers, markuppricing is calculated by adding our desired profit to thecost of the product. Each method listed above has itsstrengths and weaknesses.
Distribution
Distribution includes the entire process of moving theproduct from the dairy to the end user. The type ofdistribution network you choose will depend upon theindustry and the size of the market. A good way to make
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our decision is to analyze our competitors to determine thechannels they are using, and then decide whether to usethe same type of channel or an alternative that may
provide us with a strategic advantage.Some of the more common distribution channels include:
Direct Sales -- The most effective distribution channel isto sell directly to the end user.
Wholesale Distributors -- Using this channel, amanufacturer sells to a wholesaler, who in turn sells it to a
retailer or other agent for further distribution through thechannel until it reaches the end user.
Brokers -- Third-party distributors who often buy directlyfrom the distributor or wholesaler and sell to retailers orend users.
Retail Distributors -- Distributing a product through thischannel is important if the end user of our product is the
general consuming public.
Promotion Plan
With a distribution strategy formed, we must develop apromotion plan. The promotion strategy in its most basicform is the controlled distribution of communicationdesigned to sell our product or service.
Advertising -- Includes the advertising budget, creativemessage(s), and at least the first quarter's mediaschedule.
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Packaging -- Provides a description of the packagingstrategy. If available, mockups of any labels, trademarksor service marks should be included.
Public relations -- A complete account of the publicitystrategy including a list of media that will be approachedas well as a schedule of planned events .
Sales promotions -- Establishes the strategies used to
support the sales message. This includes a description ofcollateral marketing material as well as a schedule ofplanned promotional activities such as special sales.
Personal sales -- An outline of the sales strategyincluding pricing procedures, returns and adjustment rules,sales presentation methods, lead generation, customerservice policies, salesperson compensation, andsalesperson market responsibilities
Sales Potential
Once the market has been researched and analyzed,conclusions need to be developed that will supply aquantitative outlook concerning the potential of thebusiness. The first financial projection within the businessplan must be formed utilizing the information drawn fromdefining the market, positioning the product, pricing,distribution, and strategies for sales. The sales or revenuemodel charts the potential for the product, as well as the
business, over a set period of time. Most business planswill project revenue for up to three years, although five-year projections are becoming increasingly popular amonglenders.
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When developing the revenue model for the businessplan, the equation used to project sales is fairly simple. Itconsists of the total number of customers and the average
revenue from each customer. In the equation, Trepresents the total number of people, A represents theaverage revenue per customer, and S represents thesales projection. The equation for projecting sales is:
T A = S
Using this equation, the annual sales for each yearprojected within the business plan can be developed. Of
course, there are other factors that you'll need to evaluatefrom the revenue model. Since the revenue model is atable illustrating the source for all income, every segmentof the target determine any differences, the variousstrategies utilized in order to sell the product have to beconsidered. As we've already mentioned, those strategiesinclude distribution, pricing, and promotion.
Post and present consumption trend and level
of export and import
This report covers all aspects of production,
consumption and exports of milk and dairy
products. Starting from an analysis of the
economic and social environment, the report looksat drivers and impediments of growth of dairy
sector in India. It gives statistics and insights into
domestic market dynamics of liquid milk, dairy fats
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(butter and ghee), curd, processed cheese, table
butter as well as for traditional Indian dairy
products like khoa, paneer, chhana etc. The report
has detailed country-wise export statistics for each
dairy product for the years 2004-05, 2005-06,
2006-07 and April-August 2007. The report has
forecast of production, consumption and exports
for years up to 2012. Contact details of all major
dairy companies are also included.
Structure of competition and price
elasticity and cross elasticity of demand
AS we know The Cross-Price Elasticity of Demand measures
the rate of response of quantity demanded of one good, due to a
price change of another good. If two goods are substitutes, we
should expect to see consumers purchase more of one good
when the price of its substitute increases. So from The Price
Elasticity of Demand we measures our rate of response of
quantity demanded due to a price change.
Consumer requirement and productionconstraint
Production milk is a moderate process that starts
by deciding how much milk of each type a packet
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to be launched in production must contain in order
to meet customer requirements. The total amount
of milk per packet is constant, and Two levels of
failure may arise during the manufacturing
process, namely 1) the ones that result in rejecting
a packet and, as a consequence, all the milk
contained in this wafer, and 2) the failures that
result in rejecting milk total packet. We know the
probability of a wafer to hole, as well as the
probability of a milk of any type to be rejected.
The goal is to minimize the number of wafers to
launch in production in order to meet the customer
requirements with a given probability. In this
paper, we propose an efficient heuristic algorithm
that leads to a near-optimal solution.
Technical appraisal
Basically we apply the three-tier cooperative structure.This structure consists of a Dairy Cooperative Society atthe village level affiliated to a Milk Union at the District
level which in turn is further federated into a MilkFederation at the State level. The above three-tierstructure was set-up in order to delegate the variousfunctions; milk collection is done at the Village DairySociety, Milk Procurement & Processing at the District Milk
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Union and Milk & Milk Products Marketing at the State MilkFederation. This helps in eliminating not only internalcompetition but also ensuring that economies of scale are
achieved. As the above structure was first evolved at Amulin Gujarat and thereafter replicated all
over the country under the Operation Flood Program, it isknown as the Amul Model or Anand Pattern of DairyCooperatives.
Responsible for Marketing of Milk & Milk ProductsResponsible for Procurement & Processing of MilkResponsible for Collection of Milk Responsible for MilkProduction
Village Dairy Cooperative Society (VDCS)
The milk producers of a village, having surplus milk afterown consumption, come together and form a Village DairyCooperative Society (VDCS). The Village DairyCooperative is the primary society under the three-tierstructure. It has membership of milk producers of thevillage and is governed by an elected ManagementCommittee consisting of 9 to 12 elected representatives ofthe milk producers based on the principle of one member,one vote. The village society further appoints a Secretary(a paid employee and member secretary of theManagement Committee) for management of the day-to-day functions. It also employs various people for assisting
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the Secretary in accomplishing his / her daily duties. Themain functions of the VDCS are as follows:
Collection of surplus milk from the milk producers of the
village & payment based on quality & quantity Providing support services to the members like
Veterinary First Aid, Artificial Insemination services,cattle-feed sales, mineral mixture sales, fodder & fodderseed sales, conducting training on Animal Husbandry &Dairying, etc.
Selling liquid milk for local consumers of the village
Supplying milk to the District Milk UnionThus, the VDCS in an independent entity managed locallyby the milk producers and assisted by the District MilkUnion.
District Cooperative Milk Producers Union (Milk Union)
The Village Societies of a District having surplus milk afterlocal sales come together and form a District Milk Union.The Milk Union is the second tier under the three-tierstructure. It has membership of Village Dairy Societies ofthe District and is governed by a Board of Directorsconsisting of 9 to 18 elected representatives of the VillageSocieties. The Milk Union further appoints a professionalManaging Director (paid employee and member secretaryof the Board) for management of the day-to-day functions.
It also employs various people for assisting the ManagingDirector in accomplishing his / her daily duties. The mainfunctions of the Milk Union are as follows:
Procurement of milk from the Village Dairy Societies ofthe District
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Arranging transportation of raw milk from the VDCS tothe Milk Union.
Providing input services to the producers like Veterinary
Care, Artificial Insemination services, cattle-feed sales,mineral mixture sales, fodder & fodder seed sales, etc.
Conducting training on Cooperative Development,Animal Husbandry & Dairying for milk producers andconducting specialised skill development & LeadershipDevelopment training for VDCS staff & ManagementCommittee members.
Providing management support to the VDCS along withregular supervision of its activities.
Establish Chilling Centres & Dairy Plants for processingthe milk received from the villages.
Selling liquid milk & milk products within the District
Process milk into various milk & milk products as per therequirement of State Marketing Federation.
Decide on the prices of milk to be paid to milk producers
as well on the prices of support services provided tomembers.
State Cooperative Milk Federation (Federation)
The Milk Unions of a State are federated into a StateCooperative Milk Federation. The Federation is the apextier under the three-tier structure. It has membership of allthe cooperative Milk Unions of the State and is governed
by a Board of Directors consisting of one electedrepresentative of each Milk Union. The State Federationfurther appoints a Managing Director for management ofthe day-to-day functions. It also employs various peoplefor assisting the Managing Director in accomplishing his
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daily duties. The main functions of the Federation are asfollows:
Marketing of milk & milk products processed /
manufactured by Milk Unions. Establish distribution network for marketing of milk &
milk products.
Arranging transportation of milk & milk products from theMilk Unions to the market.
Creating & maintaining a brand for marketing of milk &milk products (brand building).
Providing support services to the Milk Unions &members like Technical Inputs, management support &advisory services.
Pooling surplus milk from the Milk Unions and supplyingit to deficit Milk Unions.
Establish feeder-balancing Dairy Plants for processingthe surplus milk of the Milk Unions.
Decide on the prices of milk & milk products to be paidto Milk Unions.
Decide on the products to be manufactured at variousMilk Unions and capacity required for the same.
Conduct long-term Milk Production, Procurement &Processing as well as Marketing Planning.
Arranging Finance for the Milk Unions and providing
them technical know-how.
Designing & providing training on CooperativeDevelopment, Technical & Marketing functions.
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We the dairy industry in India and particularly in the State ofBIHAR
looks very different. India for one has emerged as the largest milk
producing country in the World.BIHAR has emerged as the mostGROWTH State in terms of milk and milk product production through
its cooperative dairy movement.