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Industries

March 2018

INTRODUCTION

1. PURPOSE OF THE DOCUMENT

The basic aim of this project report is to provide the basic information for setting up a Woven
Polypropylene Sacks Printing and Packaging Unit business. Woven Polypropylene Sacks
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Printing and Packaging Unit is a capital-oriented venture. The major cost of the project
includes acquisition of automated HDPE extrusion machinery, which is almost 78% of the
total project cost.
The output of this business is woven polypropylene sacks Bags and can be classified
in to two broad categories:
 Printing of plastic pouches, wrappers, Printed plastic carry bags and other printed
plastic prints.
 Packaging material includes packing material of all kinds like printed boxes, printed
Poly bags, Printed Plastics Bags and Other etc.

This particular pre-feasibility is regarding polypropylene sacks which come under

plastics sector. Before studying the whole document one must consider following
critical aspects, which forms the basis of any financing and investment decision.

2. CRUCIAL FACTORS & STEPS IN DECISIONMAKING FOR INVESTMENT

Before making any investment decision, it is advisable to evaluate the associated risk factors
by taking into consideration certain key elements. These include availability of resources,
academic knowledge, past experience and specific managerial and technical skill set. At
times evaluation and analysis of strengths, weaknesses, opportunities and threats (SWOT)
for a particular project serves the purpose of a basic tool in investment decision making. The
most critical factor in this project would be to generate sufficient demand. The
polypropylene sacks market is based on high volumes and low prices. If an agreement or a
contract with a few high volume buyers can be arranged the business is most likely to
succeed. In our case while doing the SWOT analysis for our project the basic strength of the
project is automated printing machinery which is used for manufacturing high volume of
Woven Polypropylene Sacks. Opportunities lies with our unit due to agreements and
arrangements with the top most rice mills flour mills of Bihar and from the first days of the
start of the unit we can’t fulfill the demand of the industry. The largest rice mill in the Bihar
is today is Patel Agri Rice Mill which has shown interest for the purchase of 30000 bags per
day.

This pre-feasibility study tries to capture all the important factors that can play an
instrumental role in the success of a project but all factors should be evaluated by the
investor for their own specific project design with its unique parameters.

3. Project Profile

3.1. Opportunity Rational

The importance of the printing and packaging sector is often under-estimated. Due to
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stability in economy in last few years, there has been a positive trend in all major business
sectors of the country. Print and packaging unit is gaining more and more attractions and
product is used by all major businesses.

Older packaging methods like multi-ply paper sacks, cotton bags, jute bags, etc had been
used to cart away agricultural produce and industrial products. Due to the inadequacy of
these packaging methods to withstand various atmospheric conditions, much of the produce
spoils to the financial loss and frustration of the farmers and producers. A heavy loss occurs
to the economy through the non-utilization of the available agro-based raw materials inputs,
great fluctuation in prices of food stuff and industrial products etc is the result.
Polypropylene sacks are suitable for almost all the products that have used paper sacks,
cotton bags, jute bags for packaging. These sacks are better suited for storage due to their
strength, durability and ability to withstand water and pests.

The use of polypropylene sacks is steadily increasing in the agricultural sector, with
increasing agricultural yields and related industries, the scope of the industry is increasing.
The industry has a high employment to capital ratio i.e. 5 persons per 10 tons of production.
The inputs required are also low, with one significant advantage being the Printing and Print
Packaging industry in India is growing, people are taking keen interest in this key industry
now. There are more than 36 printing institutes some of these giving even post-graduate
Education every
yearmore than 3500 new printing engineering graduates joins this industry,while still much m
oreget on the spot training in the print shops. Printing especially Packaging printing is nowone
of the fastest growing sectors in India. It is said that since 1989 the growth of the Printingcoup
led with Packaging Printing industry is over 14%.

The Indian packaging industry itself is growing at 14-15% annually. This growth rate is
expected to double in the next two years. The growth in the packaging industry in India is
mainly driven by the food and the pharmaceutical packaging sectors. The large and growing
Indian middle class, along with the growth in organized retailing in the country are fueling
growth in the packaging industry. Another factor, which has provided substantial stimulus to
the packaging machinery industry, is the rapid growth of exports, which requires superior
packaging standards for the international market. With this, the need for adopting better
packaging methods, materials and machinery to ensure quality has become very important
for Indian businesses.

3.2. Project Brief

Polypropylene woven sacks manufacturing units import polypropylene granules, convert it
into tape yarn and this tape yarn is woven on an automatic loom to produce polypropylene
cloth. The average weight of a bag is 65-100 grams as per the quality product required by the
client. Polypropylene sacks are used to store and transport industrial and agricultural
products like animal feeds, fertilizers, salt, cement, sugar, millet, dyes, pigments, maize,
sorghum, plastic granules, rice, flours, pulses, polymers etc. Polypropylene sacks are usually
suitable for packing most of the goods that have been traditionally packed in jute bags.

3.3. Regulations
A Printing and Packaging Unit will require:
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1. Factory registration under the factories act 1948.

2. Registration with income tax department and sales tax department.

The rate of goods and service tax applicable on printing supplies is 12 or 18 %, if supplies
are made to registered and non-registered businesses persons. After the applicability of GST
there is no such additional tax on sales and manufacturing of products. But ESIC and PF
would be applicable as per number of employed.
Income tax rate for the business will depend on the legal status of the firm, the prevailing rate of
income tax for partnership firm is 25 %.

3.4. Market Entry Timing

Various products and services have high dependence on their commercialization timing and delivery
to the customers. Example can be a school setup, sweater production, ice cream production etc. The
suitable timings for starting services of a school would be the month of March. Similarly, production
of cold drinks should be starting in spring or end of winter. In this case the project should be started in
the time of the products that will be targeted, for instance, if main customers are to be sugar mills or
the producers of other seasonal goods, then the project should be started in a time that coincides with
the requirement of the sacks so that the business starts off in an efficient manner. In our case there is
no targeted seasonal business we will generally supply the products to FMCG sector and rice mills
which require the woven sacks and wrappers 365 days around the clock in a year.

3.5. Proposed Business Legal Status.

Selection of the business status is totally dependent on the choice of the entrepreneur. Since the scope
of this project is relatively small or mid-size, the business shall be launched as a partnership firm with
relative ease.

3.6. Project Capacity and Rationale

The proposed unit has a capacity of manufacturing and printing of 75000 Bags per day in full
capacity and 500 Kg of Plastics per hour for pouches and wrappers with standalone HDPE
Extrusion printing machines. The proposed machines have ability to print plastics sheets of
6x3mm to 480x640mm dimensions.
The attainment of the project capacity will depend upon the factors like involvement of the
management to facilitate production, marketing, quality and design of the product, and the
skills and motivation of the labour force involved in the production of products. Over the
time there would be increase in production capacity once factory attain the saturation point.
Different sizes of sacks can be made to meet the demands of particular customers. For
instance, sacks of 2 kg, 10 kg, 25 Kg, 50 kg, 100 kg etc. are possible by carrying out the
required adjustment of the equipment.

3.7. Project Investment

Initial Financing Rs in Actuals
Debt 2,46,83,356.00
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Equity 77,94,744.00

3.8. Project Cost

The total project cost for setting up a Swastik Printing and Packaging Industry is calculated
to be Rs 3,24,78,100. This also includes working capital requirement of Rs 48,01,880 lakhs.

3.9. Product Mix

The product will be polypropylene sacks but the colors and printing will be according to the
requirement of the clients. The dimensions of the sacks can also be changed within the
operating range of the looms. The operating range is the minimum and maximum widths
between which the loom can operate. The width of the sacks will depend on the operating
range of the loom while the length can be changed at will since the sacks can be cut and
stitched according to requirements.
The proposed project with installed machinery has the capability to produce all the products
of HDPE woven sacks bags with difference shapes and size For the purpose of this feasibility
following products would be printed.
 Plastics Wrappers
 Plastic Sheets
 HDPE Woven Polypropylene Sacks Bags
 Plastic Printed Carry Bags
 Plastic Flour Mill Bags
 Plastic Pouch

3.10. Location

As the major customers of our proposed unit are industrial buyers, so the unit can be
established in any part of a city having well connected with link road and around the clock
availability of electricity and easy to commutable with city in our case it would be either in
Karmalichak or in Sampathchak area that would be suitable locations for setting up
proposed Unit.

3.11. Key Success Factors/Practical Tips for Success

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Critical success factor for Swastik Printing and Packaging Industries would be the
maintenance of product quality and standards since the core issue in packaging material is
that it should be effective in protecting the contents from the environment.

Strict quality control and following of the product specifications are key points for any
product. Securing a regular source of polypropylene granules will also be of advantage. In our
case from the first day we will take care of use of good and high quality of environment
friendly colors and granules for manufacturing

4. SECTOR & INDUSTRYANALYSIS

4.1 Sector Characteristic

Plastic industry is making significant contribution to the economic development and growth
of various key sectors in the country such as: Automotive, Construction, Electronics,
Healthcare, Textiles, and FMCG etc. Its demand has been growing rapidly at ~10% CAGR to
reach 10 MnTPA by FY13. India is currently net importer of PolyEthylene (PE), however
with the commissioning of IOCL plant at Panipat, the imports are expected to go down
significantly.
India’s demand for woven sacks made of high density polyethylene (HDPE)
or polypropylene (PP) may increase this harvest season with the proposed relaxation of
strict rules on raw materials used in food grains packaging.
The country’s Ministry of Textiles has recommended that the Jute Packaging Materials Act
(JPMA) of 1987 be loosened up on concerns over possible shortage of packaging materials
during the harvesting season called kharif, which will peak over the next two months, the
official from the ministry said.
The ministry has taken an ad hoc measure to place orders for 350,000 bales (1.06m tonnes) of
HDPE and PP woven sacks for the forthcoming crop, the official said.
Incremental demand for plastic woven sacks is estimated at 330,000 tonnes, based on
estimates from the Food Corporation of India (FCI), the sole government agency for
food grain procurement in the country.

5. Market Information
5.1 Market Potential
The market for plastic materials is growing rapidly due to varied and rising use of plastic
goods over recent years, substituting wood, tin, aluminum, glass, china clay, etc. Import of
polyethylene, polyester, polypropylene, polyvinyl chloride, acrylic polymer, polystyrene and
poly ether forms three fourths of the total imports. Polyethylene, the largest item, is mainly
imported as raw material in granular form, which is then converted into films, liners, bottles,
drums, household articles, toys and sporting goods. Imports of low density and high density
polyethylene and derivatives account for 23 percent of total imports.

In the early 1990’s, imports from the U.S. averaged around 8 percent of the total but have
gradually fallen in percentage. Imports from the United States include a wide spectrum of
products namely polyethylene, polyvinyl chloride, polyester, polypropylene, polyurethane,
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polyvinyl chloride, polyvinyl alcohol, silicone, and polymerization products in primary form.
Importers prefer cheaper goods and therefore procure substantially from Far Eastern countries
where the freight cost is lower and transportation time is less.

Other supplier countries are South Korea, Saudi Arabia, Thailand, Japan, Germany, Hungary,
China and Belgium, which dominate the import market because of lower prices, transport
costs and shipment time. Nevertheless, the respective share of each country has varied widely
between 1994 and 1996. For example, Market share of Hungary has fallen from 11.4 percent
to 3.2 percent. Similarly, share of Thailand has jumped from less than 1 percent to over 7
percent during this period.

5.2 Target Customers

The target customers will be any producers, distributors and manufacturers of agricultural
goods, industrial goods that can be packed in polypropylene sacks. Major target customers
can be the sugar, rice, wheat, cotton, fertilizer, chemicals and other industries. The production
line can be expanded further to cater to the cement industry as well but this will require some
expansion in the production line and additional machinery will be needed.

6. Production Process

6.1 Raw Material Required

The raw materials required are;
1. The polypropylene granules that are made into the tape yarn and then woven into the
Sacks.
2. Colors or dyes for giving the polypropylene sacks the required colors.

6.2 Product Mix Offered

The products offered will be the sacks of various sizes, fabric can also be made by slitting one
side of the woven fabric which is in the form of a tube. This fabric is used for packing
purposes in the textile industry and specially for export products. There is also a market for
polypropylene bags like shopping bags and luggage bags made from polypropylene which are
often used.

6.3 Production Process Flow

PP/ HDPE Resin Pigment and Additive

Flat Yarn Extruding Mixer

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Warp Yarn Package Weft Yarn Package

Creel Stand Shuttles

Cutting Machine Circular Looms Lamination Machine

Heat Cutting Heat Sealing

Tubular Woven Machine Machine

Sewing Auto Cutting Sewing Sewing Machine

Woven Net /Leno Bag Printing Machine Tarpaulio

Woven Bag
Laminated Woven Bag

6.4 Technology and Processes

6.4.1 The Polypropylene Tape Making Process

The polypropylene tapes are manufactured by slitting films of PP or HDPE which are
produced by blown extrusion technique. In this process, the granules of plastic are fed to the
extruder through the hopper. Molten plastics are extruded through circular die and the tube is
inflated by blowing with air to a desired diameter, and pulling it away with a pair of nip rolls.
The extruded PP film is then coded and the bubble is collapsed. The film thus formed is
then slit to desired width. These tapes are stretched in orientation water bath which is at
its boiling point. Alternatively, orientation can be carried out by using hot plate. The
HDPE/PP tape, after orientation, is stabilized and then wound on bobbins.

6.4.2 The Polypropylene Tape Making Process

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From bobbins carrying polypropylene yarn, fabric is made using warping and yarn winding
machine. The fabric is then woven on looms and finally cut to size and stitched to sacks of
required dimensions.

Whenever required, the sacks are screen-printed using specially prepared ink. In some cases,
laminated sacks are required and as such before stitching and printing the fabric has to be
laminated by extrusion coating of LDPE. Lamination should be done from outside.

6.4.3 Technology/Process Options

The technology is relatively uniform amongst suppliers of machinery. The granules are fed
into the extruder with the color granules and extruded into tape yarn which is then woven into
the fabric with circular looms which produces the fabric in the form of a tube.

6.5 Machinery Requirement

The types and number of different machines required for the proposed project are listed
below:

Type of Machinery Quantity Rs. Price Value in

Price (Rs.)
Per Unit
HDPE Extrusion
1 75,00,000 75,00,000 75,00,000
Machinery
Rotogravure Printing
1 32,00,000 32,00,000 32,00,000
Machine
Automatic Cutting &
1 20,00,000 20,00,000 20,00,000
Stitching Machine
Cooling Plant 1 7,50,000 7,50,000 7,50,000
Air Compressor
1 2,50,000 2,50,000 2,50,000
Machine
Other Machineries &
- 25,00,000 25,00,000 25,00,000
Installation Cost
Add: Gst on P&M 29,16,000
Total Capex Expenses on P&M 1,91,16,000.0
0

6.6 Machine Maintenance

Machinery will be set up and initial training conducted by technicians that the machinery
manufacturer will send to start off the plant. A machinery maintenance schedule will have to
be maintained by the maintenance and technical staff on a regular basis.

6.7 Machine Supplier

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Machinery suppliers are numerous and are located in New Delhi, Ahmedabad and across all
major cities in India. Agents of some machinery manufacturers are located in Patna also. The
machinery that we have considered is supplied by the Lohiya, Pelican industries and Ocean
Extrusions Pvt Ltd.

6.8 Product/Project Standards and Compliance Issues

As the time progresses compliance with quality, environment and social standards is
becoming integral factor for a business survival. These standards also effect choice of
supplier and contractor for any business inputs.

Most large buyers have specifications regarding the type of sacks that they need, the weight,
color and density of the sack’s weave are usually key issues. The coloring has to be used after
determining the end use of the sacks because certain types of dyes are unsuitable for use with
chemical compounds, and some types of dyes are unsuitable for exposure to sunlight.

7. LAND & BUILDING REQUIREMENT

7.1 Land Requirement

Land of approximately minimum 5500 square feet is required for the machinery and factory
shed alone and the whole project would require about 8500 square feet of space in total. Land
in the form of Grounds has been allocated for possible future extension in the project.

7.2 Covered Area Requirement

Covered area of the plant would have 1360 sq. feet for office space and storing raw material
and finished goods.

7.3 Construction Cost

The construction cost of the plant would be Rs. 70,65,250. This includes the construction of
the plant area as well as the office and warehouse.

7.4 Recommended Mode

The preferable mode of construction of Factory Shed would be to use the land of one of the
partner or make agreement for rented premises in Sampathchak or in any other area that
would be decided by all of the partners later, but our first priority would be Sampathchak
area.

7.5 Utilities Requirement

The major utility required is electricity as the machinery is run on electric motors. Water is
also required in a few stages of the production process but in small quantities.

8. Human Resource Requirement

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The plant would require 26 people in total out of which 4 people would be the administrative
and managerial staff and 22 would be the plant workers. The number of plant workers is
higher due to the 9 hour working of the plant.

Human Resource Requirements For Woven Polypropylene Sacks Unit

Sl.N Designation Number Rate Salary

o
(Rs./Month)
A. ADMINISTRATION :
Manager 1 25,000.00 25,000.00
Accountant 1 12,000.00 12,000.00
Office Assitant 1 10,000.00 10,000.00
Driver 1 8,000.00 8,000.00

Total of Administrative 4 55,000.00

Employee Exp

B. PRODUCTION :
Skilled 3 15,000.00 45,000.00
Prodcution Manager 1 25,000.00 25,000.00
Extruder operators 1 12,000.00 12,000.00
Winder Operators 2 10,000.00 20,000.00
Cutting machine Operator 2 10,000.00 20,000.00
Printing Supervisor 2 10,000.00 20,000.00
Stitcher 2 12,000.00 24,000.00
Electrician 1 10,000.00 10,000.00
Hydraulic Technician 1 10,000.00 10,000.00
Unskilled 5 8,000.00 40,000.00
Guard 2 10,000.00 20,000.00

Total of Production Employee 22 1,76,000.00

Exp

Total 26 2,31,000.00
Employee Benefits Exp 15% 34,650.00
Total salary per month 2,65,650.00

Annual salary for 31,87,800.00

Administrative Staffs

9. Financial Analysis
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9.1 Capital Costs

Project Cost and Source of ANNEXURE-X
Finance
(A) Capital Investment Amount (Rs.)

Land (Inclusive of 0.00

Developments)

Civil Work & other 70,65,250.0

Development 0

Machinery and Equipments 1,91,16,000.0

0

Preliminary And Pre-operative 2,94,500.0

Expenses 0

Total-Capital Costs -A 2,64,75,750.00

9.2 Working Capital

(B) Working Capital for plastic Working Capital for
Containers Woven
Polypropylene
Sacks

Raw Material for 30 Days. 49,80,000.00

Finished Goods for 7 Days 13,07,000.00
Sundry Debtors for on an
15,18,000.00
average 5 Days
Cash in Hand 5,00,000.00
Consumable for 1 month 30,000.00

Total Working Capital Required

83,35,000.00
(A)

Sundry Creditors for 10 Days 18,67,000.00

Salary for 1 month 2,65,650.00
Expenses and Other Exp
2,00,000.00
Payables

Total (B) - 23,32,650.00

Working Capital Gap - 60,02,350.00

Less : 20% Margin on Working -

12,00,470.00
Capital as Promoters Cont
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Bank Limit - 48,01,880.00

10. KEY ASSUMPTIONS

10.1 Revenue Assumptions

Revenue Assumptions
Sale price Per Unit 9.20
Sale price Growth Rate 10 % (Approx)
Production Capacity Utilization (In first year) 60 %
Production capacity utilization growth rate 10%
Maximum Capacity Utilization 90%

10.2 Raw Material

Polypropylene is the key variable in the expenses as it is imported and can fluctuate
widely in connection with the world oil prices. Currently the international market prices
are $1600-1600 per ton.

Expense Assumptions
Cost /ton 1575 $
Cost /ton 102000 Rs.
Cost per Kg 1.57 $
Cost per Kg 102 Rs.

10.3 Inventory Assumptions

Inventory Assumptions
Equipment spare part inventory 1.00 Months
Raw material inventory 1.0 Months
Finished goods inventory 7 Days

Pp Woven 1 Sided Bags

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Pp Woven 2 Sided Bags

Rotogravure Printing Press