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Potato & Banana Chips
Potato & Banana Chips
1.0 INTRODUCTION
Chips are the most popular variety of snacks on various occasions. Besides being salty, spicy
or flavoured, consumer preference is always for fresh quality. Potato and banana chips are
popular processed food items resulting in substantial value-addition.
2.0 PRODUCTS
2.1 Application
Chips are very popular amongst all age groups and they are made from various materials.
This industry is very large and is dominated mainly by local manufacturers. Easy
availability, freshness and competitive price are the main features. These products can be
manufactured in any part of the country but this note envisages Meghalaya as the location.
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3.2 Marketing Strategy
Competition from organised sector is increasing but local and small units have distinct
advantages in terms of less overheads and transportation costs, longer shelf life, quick access
to market and cost.
Slicing/ Cutting
Frying
Seasoning
Packaging
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5.2 Plant and Machinery
Following machinery shall be required to produce about 50 tonnes of chips every year with
working of two shifts and 300 working days.
5.4 Utilities
Power requirement shall be 10 HP and about 1500 ltrs. of water shall be required in
production process.
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7.0 TENTATIVE IMPLEMENTATION SCHEDULE
Activity Period (in months)
Application and sanction of loan 2
Site selection and commencement of civil work 1
Completion of civil work and placement of
orders for machinery 4
Erection, installation and trial runs 1
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8.6 Cost of the Project and Means of Financing (Rs. in lacs)
Item Amount
Land and Building 3.90
Plant and Machinery 2.05
Miscellaneous Assets 0.45
P&P Expenses 0.40
Contingencies @ 10% on Building and
P&M 0.60
Working Capital Margin 0.51
Total 7.91
Means of Finance
Promoters' Contribution 2.31
Loan from Bank/FI 5.60
Total 7.91
Debt Equity Ratio 2.42 : 1
Promoters' Contribution 30%
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.
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9.3 Raw and Packing Materials Required at 100%
In case of potato chips, process loss is 30% whereas in case of banana chips, it is 20%.
Accordingly the input costs have been worked out.
(Rs. in lacs)
Product Qty. Rate/Tone Total
(Tons) (Rs.)
Potatoes 44 8,000 3.52
Bananas 25 7,000 1.75
Hard Coke 15 1,000 0.15
Spices/Flavours, Salt, edible oil, etc. -- -- 1.40
Packing Materials -- -- 2.00
Total 8.82
9.4 Utilities
Annual power and water charges at 100% capacity level are assumed to be Rs. 60,000/-.
9.6 Interest
Interest on term loan finance of Rs.5.60 lacs has been calculated @ 12% per annum assuming
that the loan shall be repaid in 3 years including a moratorium period of 6 months. Interest
on bank finance for working capital is taken at 14% per annum.
9.7 Depreciation
It is calculated on WDV basis and rates assumed are 10% on building and 20% on plant and
machinery
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10.0 PROJECTED PROFITABILITY
(Rs. in lacs)
No. Particulars 1st Year 2nd Year
A Installed Capacity ---- 50 Tonnes ----
Capacity Utilisation 60% 75%
Sales Realisation 15.90 19.90
B Cost of Production
Raw and Packing Materials 5.30 6.60
Utilities 0.36 0.45
Salaries 1.38 1.55
Stores & Spares 0.18 0.24
Repairs & Maintenance 0.24 0.36
Selling and Distribution Expenses @ 25% of Sales 4.00 5.00
Administrative Expenses 0.36 0.48
Total 11.82 14.68
C Profit before Interest & Depreciation 4.08 5.22
Interest on Term Loan 0.54 0.30
Interest on Working Capital 0.13 0.17
Depreciation 0.82 0.68
Net Profit 2.59 4.07
Income-tax @ 20% 0.52 0.82
Profit after Tax 2.07 3.25
Cash Accruals 2.89 3.98
Repayment of Term Loan 1.00 2.00
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12.0 [A] LEVERAGES
Financial Leverage
= EBIT/EBT
= 3.26 ÷ 2.59
= 1.26
Operating Leverage
= Contribution/EBT
= 6.09 ÷ 2.59
= 2.35
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[C] Internal Rate of Return (IRR)
Cost of the project is Rs. 7.91 lacs.
(Rs. in lacs)
Year Cash 24% 28% 32%
Accruals
1 2.89 2.33 2.26 2.19
2 3.93 2.55 2.40 2.26
3 4.27 2.24 2.04 1.86
4 4.53 1.92 1.69 1.49
15.62 9.04 8.39 7.80
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