About the business

We want to start a business “ Abode Polymers ltd.” that is involved in the manufacturing of
cement sacks and bags used to package cement. The packaging industry and a host of other
industries are using Polypropylene (PP) to make a wide range of PP bags and packaging
material. It is a very solid and durable material. Therefore, the industries won’t have to worry
about the long term use of the materials or the bags if they are made using PP

PP/HDPE are becoming increasingly popular in India and have caught the eye of many end
users for their requirement of the packing material. These bags are used in packaging of
fertilizers, cement, pesticides, chemical, oil seed, food grains, dry materials etc. PP bags enjoy
a good market in India and will continue to do so in the coming years. Keeping in mind the rapid
growth in the infrastructure sector of the country we see a great potential to venture in this
market.

Mission

To deliver superior value to stakeholders on the four pillars of

● Sustainability
● Innovation
● Customer Centricity
● Team Empowerment

Vision

● Be the leaders in the industry.

Keys to Success

Our keys to success are:

● Excellent product and service that will build and maintain customer loyalty.
● A business location that will assure high company visibility and a high flow of customers.
● Proven management ability to successfully run a similar business.
● Our commitment to continuous improvement and total quality services.
Market Analysis

Urbanization and industrialization have been rising extensively over the years. With the growing
disposable income of individuals across the globe, urbanization is stated to grow
magnanimously in the near future. This aspect is leading to an increase in construction
activities. The rise in construction activities will result in the demand for cement. This eventually
will help the cement sacks market to propel the growth rate across the forecast period of 2020-
2030.

Cement sacks are used on a large scale in transporting cement from one place to another.
These sacks are made from various materials such as polypropylene, polyvinyl chloride, low-
density polyethylene, high-density polyethylene, plastic, other plastic, jute, bleached paper,
unbleached paper, and polystyrene.

On the basis of product type, the cement sacks market can be classified into valve sacks, sewn
open mouth, pinched bottom open mouth, and open mouth sacks. The sacks are designed in
accordance with various capacity levels such as less than 10 kg, 11 kg-30 kg, 31 kg-40 kg, and
above 40 kg.

Cement sacks provide robustness and good material handling during shipping and
transportation. This aspect invites extensive growth prospects for the cement sacks market.
These sacks are easy to manufacture and can be customized according to the requirement of a
specific client. They also act as moisture barriers and water barriers. These benefits bring
massive growth prospects for the cement sacks market.
Business Plan

Cement manufacturing company produces cement in its manufacturing plant located across the
country and its in dire need of cement bags/sacks that packages the cement. These cement
sacks are locally procured by all the top cement companies like Ultratech, Ramco, Shree
Cement, ACC etc.

According to some estimates, around 180-250 kg of coal and about 1.5 tonne of limestone is
required to produce a tonne of cement. Apart from the major raw material cost involved in
making the cement as discussed above, the company needs to procure cement sacks which
gets expensive.

We provide solutions to the cement company problem. Cement sacks are primarily made up of
three components namely: Virgin material, Masterbatch and UV Coating. There are two product
outcomes while recycling woven polypropylene cement sacks: 1) Recycled polymer
(polypropylene) and 2) Calcium Carbonate (CaCo3).

The lightweight laminated polypropylene bags manufactured by us offer an innovative and cost-
effective solution for the packaging of cement. These bags possess special lining that resist
humid conditions and helps in providing longer shelf life to the packed products. These bags are
high in strength with good tear resistance and can withstand rough handling while transportation

FINANCIAL PLAN

Revenue Model

We are a B2B business, whose revenue comes directly from the cement manufacturing
companies who purchase our cement bags for the packaging of their finished product. We have
estimated monthly the number of expected customers based on our survey and growing
awareness of fitness among the youth and others. We are expecting to serve customers by the
end of 12 months of our operation.

A revenue model projects a company’s sales by product line or customer over a 3-5 year period.
It tells us who will buy our product, how often will they buy it and at what price. By having a clear
revenue model, a business can focus on a target audience, fund development plans for a
product or service, establish marketing plans, begin a line of credit and raise capital

Scrap sales:

Scrap sales is predominantly used for selling scrap materials which are not part of standard
finished products of the company. i.e. the original Finished Product might be scrapped due to
damage or it could be some kind of machinery in the manufacturing unit that might be scrapped
or then sold etc.

The organisation then needs to sell off the scrap at a specially discounted rate, to recover some
value.The selling of scraps decreases the Storage costs and increases the Cost efficiency of the
Warehouse/Storage locations.

While the capacity utilisation value has been adjusted, estimation of scrap sales depicts a
constant quantity estimation of scrap metal at constant sell price of Rs26/MT. Thus the total
scrap plastic granules could be estimated around Rs 483.
Costing

Ø Project Cost

The funds required to perform a planned business endeavour, and are a key subject in project
budgeting and cost management. There are two key costs involved in our project cost
estimation. Direct and Indirect Costs. While direct costs, in this case, are raw materials costs,
labour cost and production equipment. Indirect costs include rent costs, administrative
employee wages, contract sign up expenses, technology for communication and so on.

In the case of our company, the key contributor to this cost is Land and Land development with
Rs 524 Lacs contributing to 41% of the total cost incurred. While Contingencies and preoperative
expenses have been allocated to the Fixed Assets (Please refer to Annexure 48 in the attached
excel sheet for assumptions taken during preparation of the project.)
 Ø Raw Material cost

The excerpt shown above explains the cost incurred as raw materials for manufacturing our key
product. It is expected that at a capacity utilisation of 65% the company is expected to incur a
total cost of Rs 618 Lacs for an annual requirement of 644 MT of granules The projected cost at
100% utilisation increases the cost by 54% with the cost of chemicals (CaCO3) to be a major
contributor of expenses.

While 80% of the total raw material requirement is Plastic Granules with a wattage of 2% plastic
scrap, the raw material cost is projected to be constant as Rs96000/MT.

Ø Labor cost
We can see from the above calculations that the total cost of labour per annum is Rs150 and
Total wages including Factory wage and salaries amounts to Rs 154.88.

Ø Fundraising

Assuming that normal production started in the year 2015, the two main means of finance are
Term loan and Promoter’s Contribution.
The Promoters contribution to the Total fundraised is 30% while the term loan 70% of the total
hard cost. The debt-equity ratio, in this case, is 2.33.
Ø Depreciation:

The monetary value of an asset decreases over time due to use, wear and tear or
obsolescence. This decrease is measured as depreciation.

This is useful for estimation of property value for taxation purposes like property tax etc. For
such assets like real estate, market and economic conditions are likely to be crucial such as in
cases of economic downturn. Companies are required to calculate depreciation as per
Companies Act as well as Income Tax Act. The methods and amount of depreciation differ
under both the statutes. Companies are required to maintain two types of depreciation
calculation – one for accounting purpose following Schedule II to the Companies Act, 2013 and
the other for taxation purpose according to the provisions of Sec. 32 of Income Tax Act, 1961.

Ø Financial Balance sheet projected

Our balance sheet is conservatively positioned. We have few fixed assets and almost all of our
assets are liquid.
ROCE is a useful measurement for comparing the relative profitability of companies.. ROCE
measures profitability after factoring in the amount of capital used. As year on year our ROCE is
decreasing it shows that we aren’t able to generate enough profits to reinvest back in the
company for the benefit of our shareholders. Current ratio- it reflects a company's ability to
generate enough cash to pay off all its debts once they become due. While the range of
acceptable current ratios varies depending on the specific industry type, a ratio between 1.5 and
3 is generally considered healthy. A ratio value lower than 1 may indicate liquidity problems for
the company, though the company may still not face an extreme crisis if it's able to secure other
forms of financing. A ratio over 3 may indicate that the company is not using its current assets
efficiently or is not managing its working capital properly.

Ø PL projected

A Profit-Loss statement is one of the three key financial statements for any business. To put it in
simple words - it calculates the profit or loss of the business for a time period. It summarizes the
revenue, costs and expenses incurred by the business in a specific period of time, especially a
fiscal quarter or year. A profit loss statement is synonymous with the income statement of the
business. The statement provides a record of whether or not a company has the ability to
generate profit by increasing revenue, reducing costs, or both. It is important to compare P&L
statements from different accounting periods, as the changes in revenues, operating costs, R&D
spending, and net earnings over time are more meaningful than the numbers themselves. For
example, a company's revenues may grow, but its expenses might grow at a faster rate.
Ø Cash flow projected

The net amount of cash and cash-equivalents that is being transferred in and out of business is
called cash flow. A company’s capability to create value for shareholders is determined by its
ability to generate positive cash flows. Positive cash flows indicate that a company is adding to
its cash reserves, which can be used by the company to reinvest in growth, settle future debt
payments or even pay out money to shareholders. Cash flows usually come in three forms:
operating, investing and financing. Operating cash flow is generated from all of the company's
main business activities. Investing cash flow includes flow from all of the investing activities of
the company like investing in another business or purchase of capital assets. Financing cash
flow includes the proceeds which are gained from issuing debt and equity as well as the
payments made by the company. Free cash flow is the cash generated by the company after
accounting the cash outflows that support operations and maintain assets of the company.

Despite a deficit in 3 consecutive years (that could be financed by guaranteed loans), we expect
a surplus of 211.12 in the fifth year which helps reduce the negative cash flows. While the
opening balance is projected to be Rs 556.96 Lacs, the surplus projected is found to be Rs
211.12 Lacs By the year 2024-25, we are projected to have a closing balance of Rs 345.84
Lacs.

Evaluation

Break-even point

For our break-even analysis, we assume running costs of approximately XXX per month, which
include payroll, utilities, insurance, rent and other fixed costs. We need to sell about 1,996 pies
for a minimum of $35,155 per month to break even, based on our assumptions. Since our
normal operating capacity is 300 pies per day (4,224 pies for $122,400 per month, as
explained in the sales forecast section), and the average projected sales of $72,000 per
month, or 176 pies per day (at only 58 per cent of normal operating capacity) are expected
to be much greater than the computed break-even point, we believe that our company is likely
to easily reach and maintain profitability. Our Company, Abode Polymers Ltd. is expected to
break even in the third month of operations

Net Present Value (NPV)

NPV = Present Values – Cost

Our NPV is 364.39. A positive NPV indicates that the projected earnings generated will
exceed the anticipated costs. This means that the company will be profitable.

IRR

It is the interest rate at which the net present value of all the cash flows (both positive and
negative) from a project or investment equals zero.

Internal rate of return is used to evaluate the attractiveness of a project or investment.

Scenario Analysis

Anything can happen in project management. The unexpected situations does not only catch
the project team off-guard but it also affects the entire project processes. The what-if scenario
analysis is a project management process that evaluates different scenarios to predict their
effects – both positive and negative – on the project objectives.

What-if Scenario Analysis?

This is one of the modeling techniques used in the Develop Schedule process. This analysis is
done to analyze the impacts of possible future events on the system performance by taking into
account several alternative outcomes, i.e., scenarios, and to present different options for future
development paths resulting in varying outcomes and corresponding implications.These
assessments can be used to examine the amount of risk present within a given investment as
related to a variety of potential events, ranging from highly probable to highly improbable.
Depending on the results of the analysis, an investor can determine if the level of risk present
falls within his comfort zone.

The analysis, as the name implies, asks the question “What if the situation represented by a
certain given scenario happens?”
Sensitivity analysis

Sensitivity analysis is a financial model that determines how target variables are affected based
on changes in other variables known as input variables. The objective is to identify the inputs
that have the most significant impact on the results of the model. This model is also referred to
as what-if or simulation analysis. By studying all the variables and the possible outcomes,
important decisions can be made about businesses, the economy, and about making
investments.