paper cup and plate business plan

1. PROJECT REPORT
1.0 Introduction:
This proposal evaluates the technical feasibility and financial viability in setting
up of a small-scale enterprise to do the activity on manufacturing and sale Paper cups and paper plates
in Eranakulam district and all over Kerala. Unit has been filed memorandum Part-1 with the district
Industries center, Kottayam and also obtained permission from Local body for the construction of
building and for the installation of plant and machinery.
2.0 Promoterand Management:
The ownership of the unit is as a proprietorship
concern by Smt. Manju .C Rajan, Maramala house, Kakkoor P.O, Eranakulam District.
She has been associated with this business and trade related activities for the past 5
years. The experience and the market contact that they received will help them in
establishing the proposed activity of manufacturing and marketing of paper cups and
paper plates in a successful manner.
3.0 Scheme (Reimbursement under CGTMSE)
This scheme intends to reimburse the one time
guarantee fee and annual service fee remitted by enterprise to avail collateral free loan
from financial institutions under Credit Guarantee Scheme of Credit Guarantee Fund
Trust for Micro and Small Enterprises (CGTMSE). This will increase the flow of credit
to MSME sector.
As per order No G.O (Rt) No.920/2011/ID , Dated 27/07/2011 ,
Thiruvananthapuram of Industries (B) Department , The state Government shall
reimburse to eligible to MSME’s the amount equivalent to the onetime Guarantee fee
and annual fee recovered from it by the credit lending institution while availing
collateral free loan under CGTMSE on or after 01.04.2011. The assistance for onetime
Guarantee fee shall be limited to a maximum of Rs 1.50 lakhs per enterprise . The
total annual service fee shall be limited to a maximum of Rs 75,000/-per enterprise.
4.0 Scope and Market Potential:
Paper cups and plates are made from mill board, grey board, kraft
paper, grease proof paper and other papers, printed and given the desired shape and are extensively
use. The disposable nature of these cups and plates not only obviates the need for washing and
cleaning but also save loses due to breakages that normally occur while using porcelain or glass wares.
Paper cups & plates find extensive usage for serving eatables in parties, functions, social gatherings,
etc., catering departments of railways, airlines and other establishments also amount for a major share
of the demand of cups and plates.
5.0 Manufacturing process:
Paper cups and plates are normally made as per the specifications of the
customer. The paper is first printed on a printing press, the printed part is then cut to size and given
shape by die cutting. The bottom part and upper part of the cup are then assembled to a cup shape in
screw press. For plates, the paper is cut to the required size of circles. The cut circles are pressed in a

2. screw press for obtaining desired design and shape. For wax coated cups & plates are put in wax
coating machine.
6.0 Location,Land and Building:
The unit is proposed to be located at Thirumarady panchayath in
Thirumarady Village. Building is available on rent and has been assigned in establishing the unit. But
it requires additional maintenance works The amount invested for civil work on construction of
building for office, common amenity, well etc is Rs 100000/-. The door number assigned to the unit is
10/492A.
7.0 Machinery & equipment:
Details are shown in the annexure. The plant and machinery proposed
to be installed in the unit are Indigenous and some of them are locally fabricated. Total
cost of machinery and equipment to be purchased is evaluated as Rs 917000/-
7.1 Installed capacity of production
The unit is proposed to be operated in 300 days per annum ( 25 days in a
month). As per the capacity of machinery to be installed and by considering production wastage the
monthly production is worked out in the fallowing table.
7.2 Capacity utilization:
It is proposed to utilise 70% of the installed capacity in the first year of operation and 75%,
80%, 85%, 90% in the consecutive years of operation. The sales realisation for first year of operation
is shown below. Paper plates are in two sizes( 8*12),(12*10 ) and sale rate is Rs 80 and 100 per
hundred paper plates and for paper cups, the sale is for hundred pieces is Rs 35/-
CAPACITY UTILISATION PER MONTH ( for 70% capacity utilisation)
Sl.No. Item Qty Unit
Sale Rate
per hundred Amount
1
Paper plates
8’*12 size 62500 Nos 80 50000
2
Paper plates
12’*10 size 90000 Nos 100 90000
3 Paper cups 1750000 Nos 35 612500
TOTAL 750000
8.0 Raw material Requirement:
All the raw materials required by the unit are available
throughout the year. The raw material can also be procured from the nearby districts
and from other states. The stock and procurement period proposed in this scheme is
for a period of 12 days. The details of requirement for 70% capacity utilisation in the
unit are tabulated as below.
REQUIREMENT OF RAW MATERIALS PER MONTH ( for 70% capacity utilisation)
Sl.No. Items Qty Unit Rate Total Amount

3. (including
VAT)
1
Tetra pack
paper(plates) 3 Ton 40000 124800.00
2
Paper (cups) 5
Ton
84000 420000.00
TOTAL
544800.00
SAY 545000
09.0 Man power requirement and other expenses:
Total manpower of the unit including the Workers is 9 numbers and the details
of manpower requirement, salary and other expenses per month are as follow.
Sl.No.
Designation /
Category No
Monthly
salary
Amount
Rs
1 Skilled workers 4 7000 28000
2 Helpers 3 5000 15000
3 Office assistant 2 6000 12000
Total 9 55000
OTHER EXPENSES PER MONTH
Sl.No. Item Amount
1
Power (electricity
charges) 10000
2 rent 2000
3 Printing & Stationery 2000
4 Travelling expenses 5000
5 Miscellaneous 5000
Total 24000
10.0 Working capital requirement:
Sl.No. particulars
Period in
Days 1 year 2 year 3 year 4 year 5 year
Capacity utilisation(%) 300 70 75 80 85 90
Sales 300 9000000 9642857 10285714 10928571 11571429
Cost of raw materials 300 6540000 7007143 7474286 7941429 8408571
Cost of production 300 7420700 7933587 8448029 8963030 9478746
A Current Assets
1
Stock of raw
materials (
day's consumption) 12 261600 280286 298971 317657 336343
2
Stock in
process (
day's cost of production) 3 74207 79336 84480 89630 94787
3
Stock of finished
goods (
day's cost of production)
2 49471 52891 56320 59754 63192

4. 4
Receivables( day's cost of
sales) 7 210000 225000 240000 255000 270000
Total(A) 595278 637512 679772 722041 764322
11.0 TotalCostof the Projectand Meansof Finance:
Sl.No
. Particulars
Amoun
t RS
Propose
d total
Loan
required
Margin
of the
promote
r
1
Land and Building ( rented)
0 0 0 0 0
2
Building and their civil
construction 100000 100000 100000 75000 25000
3
Machinery & Equipment(
proposed) 917000 917000 917000 733600 183400
4
Machinery &
Equipment(existing) 0 0 0 0 0
5
Electrification and machinery
installation cost 20000 20000 20000 16000 4000
6 Office Furniture 5000 5000 5000 4000 1000
7 Brochure, advt and web site 3000 3000 3000 2250 750
8
Prelim & Pre-operative
expenses 10000 10000 10000 7500 2500
9
Working Capital
Requirement 545000 545000 545000 381500 163500
160000
0 1600000
160000
0 1219850 380150
Means of finance
Sl.No. Particulars Amount RS
1 Term loan for building (75%) 75000
2
Term loan for machinery &
equipment, electrification,
advt, furniture and
preliminary expenses etc --- 763350
3
Margin money loan proposed
to be obtained from DIC 190075
4
Investment subsidy
assistance (15% of fixed
investment for women)
5 Working capital Loan 381500
6
own contribution (after
considering margin money
loan) 190075
Total 1600000

5. 12.0 Profitability analysis:
Detailed statement is given in annexure. Assumptions made for the calculation are as follows:
(a) Unit will function for 200 days per annum in single shift basis of 5 hours per day.
(b) Proposed to utilise 70% of the installed capacity in the first year of operation ,75%,
80% ,85% and 90% are in the consecutive years of operation.
(c) Interest on term loan and working capital loan is assumed @ 12 % and repairing and
maintenance as 5% of cost of fixed assets.
(d) Depreciation @ 5% of cost of building and 10% of the cost of machinery.
(e) Selling expense is considered as 5 % of total sales turn over. This includes the
advertisement and publicity charges
(f) Insurance expenses of building and machinery is calculated @ 1% of cost
(g) The cost of raw material and finished product is based on the present market rate.
Depreciation: Depreciation on Building, Machinery and Equipment are evaluated on WDV basis and
is tabulated as below
sl
No Particulars I year 2 year 3 year 4 year 5 year
1 Building 100000 95000 90250 85738 81451
Depreciation (A) 5000 4750 4513 4287 4073
WDV on Building 95000 90250 85738 81451 77378
2 Machinery and equipment 942000 847800 763020 686718 618046
Depreciation(B) 94200 84780 76302 68672 61805
WDV on Machinery and
equipment 847800 763020 686718 618046 556242
Total depreciation(A+B) 99200 89530 80815 72959 65877
SHEDULE OF IMPLIMENTATION
Acquisition of land Rented
Construction ofBuilding
Rented and maintenance will be completed after
disbursementofloan
Installation of plantand Machinery
Expected to be completed by
nonember 2011
Trial run
Expected to be completed by november 2011
Commercial Production December 2011
13.0 Conclusion:
The net profits after taxation in the first year of operation is estimated
as RS 1343741 /. The break-even point is 30 % of installed capacity. The
return on investment is obtained as 78 % in the 2nd year of operation. The cost of
production and profitability statement for the first 5 years, break-even analysis,
repayment schedule for term loan, cash flow statement and the projected balance
sheet are given in Annexure. Based on the analysis made above it is found that the
scheme is technically feasible and economically viable.

6. ANNEXURE 1
(as per quotation)
PLANT & MACHINERY
Sl.No. Item Nos Rate Rs Tax
Total
amount
1
Hydraulic paper cutting and
forming machine 1 140000 5600 145600
2 12” paper plate forming die and
cutting die with heater
accessories 1 18000 720 18270
3 10” paper plate forming die and
cutting die with heater
accessories 1 15000 600 15600
4
8” paper plate forming die and
cutting die with heater
accessories 1 12500 500 13000
5
6 “paper plate forming die and
cutting die with heater
accessories 1 9250 370 9620
6 Automatic paper cup forming
machine 1 700000 14000 714000
Total including VAT 894750
21790
916090
Say
917000
ANNEXURE 2
Profitability statement for 5 years of operation

7. Particulars 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 YEAR
No. of working days 300 300 300 300 300
No. of shifts 1 1 1 1 1
Installed capacity 12857143 12857143
1285714
3
1285714
3 12857143
Capacity utilisation 70 75 80 85 90
Production 9000000 9642857
1028571
4
1092857
1 11571429
A Sales 9000000 9642857
1028571
4
1092857
1 11571429
B Cost of Production
Raw materials 6540000 7007143 7474286 7941429 8408571
Wages 660000 707143 754286 801429 848571
Power, and Fuel
charges 120000 128571 137143 145714 154286
Repair & maintenance 1250 1000 1250 1250 1200
Insurance 250 200 250 250 240
Depreciation 99200 89530 80815 72959 65877
Total 7420700 7933587 8448029 8963030 9478746
C Gross operating profit 1579300 1709270 1837686 1965541 2092683
D
Admn. & Selling
expenses
1. Administrative
expenses 168000 180000 192000 204000 216000
2. Selling expenses 90000 96429 102857 109286 115714
E Financial expenses
1. Interest on term loan 0 0 0 0 0
2. Interest on WC loan 64855 75864 80893 85923 90954
3. Interest on MM loan 11405 11405 11405 11405 11405
F Total of D&E 334260 363697 387154 410613 434073
G Net operating profit 1245041 1345573 1450531 1554928 1658610
H tax to municipality 500 500 500 500 500
I Net profit 1244541 1345073 1450031 1554428 1658110
J Withdrawls
K Depreciation 99200 89530 80815 72959 65877
L Cash surplus 1343741 1434603 1530846 1627387 1723987

8. ANNEXURE-3
BREAK EVEN ANALYSIS
Particulars 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 YEAR
FIXED COST
Salaries 660000 707143 754286 801429 848571
Repair & Maintenance 1250 1000 1250 1250 1200
Insurance 250 200 250 250 240
Administrative expenses 168000 180000 192000 204000 216000
Depreciation 99200 89530 80815 72959 65877
Interest on MM loan 11405 11405 11405 11405 11405
Interest on Term loan 0 0 0 0 0
Total 940105 989277 1040005 1091292 1143293
VARIABLE
COST
Raw Materials 6540000 7007143 7474286 7941429 8408571
Power Charges 120000 128571 137143 145714 154286
Selling expenses 90000 96429 102857 109286 115714
Interest on WC loan 64855 75864 80893 85923 90954
Total 6814855 7308007 7795179 8282351 8769526
BEP in % of installed
capacity 30.12 31.78 33.41 35.05 36.72
BEP in % of capacity
utilization 43.02 42.37 41.76 41.24 40.80
Return on Investment 77.78 84.07 90.63 97.15 103.63
ANNEXURE-4
DEBT SERVICE COVERAGE RATIO (DSCR)
Particulars 1 Year 2 Year 3 Year 4 Year 5 Year
A Cash generated
1 Net Profit 1245041 1345573 1450531 1554928 1658610
2 Depreciation 99200 89530 80815 72959 65877
3 Interest on term loan 0 0 0 0 0
4 Interest on mm loan 11405 11405 11405 11405 11405
5 Interest on wc loan 64855 75864 80893 85923 90954
Total (A) 1420500 1522371 1623643 1725214 1826846
B Debt Service Requirement
1 Repayment of term loan 167670 167670 167670 167670 167670
2
Repayment of interest on term
loan 0 0 0 0 0
3
Repayment of interest on mm
loan 11405 11405 11405 11405 11405

9. Repayment of interest on wc
loan 64855 75864 80893 85923 90954
Total (B) 243930 254938 259967 264997 270029
C Debt service coverage ratio 5.82 5.97 6.25 6.51 6.77
Average DSCR 6.44
ANNEXURE-5
REPAYMENT OF TERM LOAN
Year Instalment Number Principal Inst. Amt
Interest
@16% Balance
repayment
per month
1 1 838350 41918 33534 796433 25151
2 796433 41918 31857 754515 24592
3 754515 41918 30181 712598 24033
4 712598 41918 28504 670680 23474
167670 0 55890
2 5 670680 41918 26827 628763 22915
6 628763 41918 25151 586845 22356
7 586845 41918 23474 544928 21797
8 544928 41918 21797 503010 21238
167670 0 55890
3 9 503010 41918 20120 461093 20679
10 461093 41918 18444 419175 20120
11 419175 41918 16767 377258 19562
12 377258 41918 15090 335340 19003
167670 0 55890
4 13 335340 41918 13414 293423 18444
14 293423 41918 11737 251505 17885
15 251505 41918 10060 209588 17326
16 209588 41918 8384 167670 16767
167670 0 55890
5 17 167670 41918 6707 125753 16208
18 125753 41918 5030 83835 15649
19 83835 41918 3353 41918 15090
20 41918 41918 1677 0 14531
REPAYMENT OF WORKING CAPITAL LOAN
1 Year 2 Year 3 Year 4 Year 5 Year
Total Working
capital 545000 637512 679772 722041 764322
Loan Amount 381500 446259 475840 505429 535025
Interest@17% 64855 75864 80893 85923 90954
REPAYMENT OF MARGIN MONEY LOAN
Year Principal Inst. Amt
Interest
@6% Balance

10. 1 190075 11405 190075
2 190075 11405 190075
3 190075 11405 190075
4 190075 11405 190075
5 190075 47519 11405 142556
6 142556 47519 8553 95038
7 95038 47519 5702 47519
8 47519 47519 2851 0
ANNEXURE- 6
CASH FLOW STATEMENT
A Source of Funds
Construction
period 1 year 2 year 3 year 4 year 5 year
1
Cash accruals(profit
before int&tax) 0 1321300 1432841 1542828 1652256 1760969
2
Increase in capital
equity 190075 0
3 Depreciation 99200 89530 80815 72959 65877
4 Investment allowance
5
Increase in long term
loan 838350 0
6 Increase in MM loan 190075 0
7
Increase in
unsecured loans
8 Increase in WC loan 0 381500 64759 29582 29588 29597
9
Sales of fixed
assets/invests 0 0 0 0 0 0
10
Others( investment
subsidy) 0 0 0 0 0 0
Total 1218500 1802000 1587130 1653225 1754803 1856442
B Disposition of Funds
Prelim & Pre-op
expenses 10000 0 0 0 0 0
Increase in capital
expenditure 1045000 0 0 0 0 0
Increase in current
assets 545000 92512 42260 42269 42281
Decrease in long term
loans 167670 167670 167670 167670 167670
Decrease in unsecured
loans
Decrease in MM loan 0 0 0 0 47519
Decrease in WC loan 0 0 0 0 0

11. Interest on term loan to
bank 0 0 0 0 0
Interest on WC loan 64855 75864 80893 85923 90954
Interest on MM loan 11405 11405 11405 11405 11405
Taxation 500 500 500 500 500
Divident on equity 0 0 0 0
Other expenses
Total 1055000 789430 347951 302727 307766 360329
C Opening balance 0 163500 1176071 2415250 3765747 5212784
D Net surplus 163500 1012571 1239179 1350498 1447036 1496114
E Closing balance 163500 1176071 2415250 3765747 5212784 6708897
ANNEXURE-7
PROJECTED BALANCE SHEET
A Liabilities
Construction
period 1 year 2 year 3 year 4 year 5 year
Equity share capital 190075 190075 190075 190075 190075 190075
Reserve & Surplus 0 1244541 2589613 4039644 5594073 7252182
Term loan 838350 670680 503010 335340 167670 0
Margin Money loan 190075 190075 190075 190075 190075 142556
Working capital loan 381500 446259 475840 505429 535025
Other
liabilities(towards
subsidy) 0 0 0 0 0 0
Total Liabilities 1218500 2676871 3919032 5230975 6647321 8119839
B Assets
Construction
period 1 year 2 year 3 year 4 year 5 year
Gross block 1045000 1045000 945800 856270 775456 702497
Depreciation 0 99200 89530 80815 72959 65877
Net block 1045000 945800 856270 775456 702497 636620
InvestmenT(Prilim.
Expences) 10000 10000 10000 10000 10000 10000
Current assets 545000 637512 679772 722041 764322

12. Reserved Stock
accumulated to be
added to current
assets
Cash and bank
balance 163500 1176071 2415250 3765747 5212784 6708897
Total Assets 1218500 2676871 3919032 5230975 6647321 8119839