JOWAR FLAKES

1.0 INTRODUCTION Jowar is a coarse grain and is difficult to pound. Therefore, it was not as popular as rice flakes. But with the advent of technology, it has now become possible to produce flakes from jowar as well. It is a very popular cereal especially in rural areas of western India. Jowar flakes have many applications. 2.0 PRODUCTS 2.1 Applications

Jowar flakes have several applications and they are very popular especially in Maharashtra. The preferred locations are Maharashtra, Madhya Pradesh or Karnataka. They are used for making deep fat fried products such as fried and seasoned mixtures or toasted and seasoned mixtures, energy food, upma, sweet/savoury pongal, sweet gravy, tamarind bhaat etc. 2.2 Availability of Technology & Compliances

CFTRI, Mysore, has developed the process to make jowar flakes. Compliance under the PFA Act is necessary. 3.0 MARKET POTENTIAL Jowar is a very popular foodgrain especially in rural and semi-urban areas as it is cheaper than wheat and paddy. Likewise, price of jowar flakes is less than rice flakes and hence poor section of the society prefers them. With so many applications, rural areas provide a thriving market. With proper distribution network, it is possible to penetrate the market. Retailing is not envisaged as it would need fairly large network.

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4.0

MANUFACTURING PROCESS Jowar grains are cleaned and soaked in hot water for around 10 hours. After that they are roasted and then rested to obtain wrinkle-free flakes. Grains are then polished and flaked and sifted. Finally, flakes are dried and packed. The yield is around 80% on clean jowar basis. The process flow chart is as under: Cleaning K Soaking K Roasting K Polishing K Flaking K Drying and Packing

5.0

CAPITAL INPUTS 5.1 Land & Building A readymade shed of around 100 sq.mtrs. may be bought which would cost around Rs. 2.00 lacs. 5.2 Machinery Monthly processing capacity of 30 tonnes would require following machines: Particulars Soaking Tanks Roaster of 250 kgs. Capacity Cone Polisher Flaker Sieves Drier with 48 Trays Baby boiler of 100 kgs. Capacity Weighing scales, stitching machines, fumigation equipment set etc. Qty 4 1 1 1 3 1 1 -Total

(Rs. in lacs) Amount 0.40 0.80 0.50 0.75 0.75 1.00 0.75 0.80 5.75

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5.3 lac. 5.4

Miscellaneous Assets

Other assets like furniture & fixtures, packing tables, plastic crates etc. would need Rs. 0.80

Utilities

Daily water requirement for process and sanitation and potable purposes would be around 6000 ltrs. whereas power requirement shall be 20 kw. Coal or LDO shall be needed for boiler. 5.5 Raw and Packing Materials

The only raw material shall be jowar grains. Maharashtra is a leading cultivator of jowar followed by MP and thus with proper prior arrangements, availability can be ensured. Jowar flakes shall be packed in printed polythene bags. 6.0 MANPOWER REQUIREMENTS Particulars Skilled Workers Semi-skilled Worker Helpers Salesman No 1 1 4 1 Monthly Salary (Rs.) 2,500 1,750 1,500 2,500 Total Total Monthly Salary (Rs.) 2,500 1,750 6,000 2,500 13,750

7.0

TENTATIVE IMPLEMENTATION SCHEDULE Activity Application and sanction of loan Site selection and commencement of civil work Completion of civil work and placement of orders for machinery Erection, installation and trial runs Period (in months) 1.5 0.5 1.5 0.5

8.0

DETAILS OF THE PROPOSED PROJECT 8.1 Land and Building A readymade shed of around 100 sq.mtrs. would cost around Rs.2.00 lacs as stated before. 8.2 Machinery

An estimated amount of Rs. 5.75 lacs shall be required to install required machinery. 8.3 Miscellaneous Assets

Other assets would need Rs. 80,000/- as explained earlier.

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8.4

Preliminary and Pre-Operative Expenses

A provision of Rs. 1.25 lacs would take care of pre-production expenses. 8.5 Working Capital Requirement (Rs. in lacs) Particulars Stock of Raw and Packing Materials Stock of Finished Goods Receivables Working Expenses Period Month Month Month 1 Month Margin 30% 25% 25% 100% Total Total 0.45 0.60 0.80 0.30 2.15 Bank 0.30 0.45 0.60 -1.35 Promoters 0.15 0.15 0.20 0.30 0.80

At 65% capacity utilisation in the first year, the working capital needs would be as under.

8.6

Cost of the Project and Means of Financing Items Building Plant and Machinery Miscellaneous Assets Preliminary and Pre-operative Expenses Contingencies @ 10% on building and machinery Working Capital Margin Total Means of Finance Promoter's Contribution Term Loan from Bank/FI Total Debt Equity Ratio Promoters Contribution

(Rs. in lacs) Amount 2.00 5.75 0.80 1.25 0.80 0.80 11.40

3.20 8.20 11.40 2.56 : 1 28%

Financial assistance in the form of grant is available from the Ministry of Food Processing Industries, Govt. of India, towards expenditure on technical civil works and plant and machinery for eligible projects subject to certain terms and conditions. 9.0 PROFITABILITY CALCULATIONS 9.1 Production Capacity and Build-up As against the rated capacity of 360 tonnes, actual utilisation in the first year is assumed to be 65% and thereafter it is limited to 80%.

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9.2

Sales Revenue at 100%

Considering selling price of Rs. 9500/ton; the annual income at 100% activity level for 290 tonnes shall be Rs. 27.55 lacs.

9.3

Raw and Packing Materials Required at 100% (Rs. in lacs)

Product Jowar Packing Material

Qty (Tonnes) 360 --

Rate/Ton (Rs) 3750 -Total

Value 13.57 1.25 14.82

9.4

Utilities

The annual expenditure on utilities at 100% shall be Rs.2.00 lacs.

9.5

Interest

Interest on term loan of Rs. 8.20 lacs is calculated @ 12% per annum assuming repayment in 5 years including a moratorium period of 1 year whereas on working capital from bank it is assumed to be 14% per annum.

9.6

Depreciation

It is calculated on WDV basis @ 10% on building and 15% on machinery.

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10.0

PROJECTED PROFITABILITY (Rs. in lacs) No A Particulars Installed Capacity Capacity Utilisation Sales Realisation B. Cost of Production Raw and Packing Materials Utilities Salaries Stores and Spares Repairs and Maintenance Selling Expenses Administrative Expenses Total C. Profit before Interest & Depreciation Interest on Term Loan Interest on Working Capital Depreciation Profit before Tax Income Tax @ 20% Profit after Tax Cash Accrual Repayment of Term Loan 9.63 1.20 1.53 0.30 0.36 0.60 0.48 14.10 3.80 0.98 0.19 1.06 1.57 0.31 1.26 2.32 -11.85 1.50 1.80 0.42 0.48 0.75 0.60 17.40 4.65 0.80 0.25 0.91 2.69 0.,53 2.16 3.07 2.05 1st Year 65% 17.90 2nd Year 80% 22.05 ----- 360 Tonnes ----

11.0

BREAK-EVEN POINT ANALYSIS No. A B Particulars Sales Variable Cost Raw and Packing Materials Utilities (70%) Salaries (70%) Stores and Spares Selling Expenses (70%) Administrative Expenses (50%) Interest on working capital C D. E. Contribution Fixed Cost Break Even Point (D C) 11.85 1.05 1.26 0.42 0.53 0.30 0.25

(Rs. in lacs) Amount 22.05

15.66 6.39 3.70 58%

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12.0

[A]

LEVERAGES

Financial leverage: = EBIT/EBT = 3.74 2.69 = 1.39

Operating Leverage = Contribution/EBT = 6.39 2.69 = 2.37

Degree of Total Leverage = FL/OL = 1.39 2.37 = 0.59

[B]

Debt Service Coverage Ratio (DSCR) (Rs. in lacs)

Particulars Cash Accruals Interest on Term Loan Total (A) Interest on Term Loan Repayment of Term Loan Total (B) DSCR (A) (B) Average

1st Yr 2.32 0.98 3.30 0.98 -0.98 3.35

2nd Yr 3.07 0.80 3.87 0.80 2.05 2.85 1.36

3rd Yr 3.30 0.55 3.85 0.55 2.05 2.60 1.48

4th Yr 3.58 0.30 3.88 0.30 2.05 2.35 1.65

5th Yr 3.84 0.18 4.02 0.18 2.05 2.23 1.87

-------------------------------- 1.94 -----------------------------

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[C]

Internal Rate of Return (IRR) Cost of the project is Rs. 11.40 lacs. (Rs. in lacs)

Year 1 2 3 4 5 6 7

Cash Accruals 2.32 3.07 3.30 3.58 3.84 4.29 4.48 24.88

16% 2.00 2.28 2.12 1.98 1.83 1.76 1.59 13.56

18% 1.97 2.20 2.01 1.85 1.68 1.59 1.41 12.71

20% 1.93 2.13 1.91 1.73 1.54 1.44 1.25 11.93

24% 1.87 2.00 1.73 1.51 1.31 1.18 0.99 10.59

The IRR is around 21%.

Some of the machinery suppliers are 1. 2. 3. Kalpana Boilers, 18 Kailash Park, LBS Marg, Ghatkopar (West), Mumbai 400 036 Raylons Metal Works, PB No 17426, JB Nagar, Andheri (E), Mumbai 400 059 Auric Techno Services Pvt Ltd, C-101, Shreenath Hermitage, Baner Road, Pune 411 008 Tel. No. : 25898072, 9113 Fax No. 25899113 4. 5. D.K. Bary & Co Pvt Ltd, 11/35, West Punjabi Bagh, New Delhi 110 026, Tel. No. : 25160363 Guru Nanak Engg. & Foundry Works, 166 Focal Point, Mehta Road, Amritsar 143 039 Tel. No. : 2583542, 2587943, Fax: 2587944

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