PAPER CONES

INTRODUCTION
Paper Cones are used in textile spinning mills for yarn winding. The sewing thread
which is filled in sewing machines is also wound on paper cones. Paper cones are
daily consumable items in yarn spinning industry as a regular packing material. The
cones are mainly used for packing 1 kg pack of the yarn. Smaller cones are used as
spools for winding sewing thread. Paper Cones are essential accessories of textile
and handloom industries.

PRODUCT USES & SPECIFICATIONS

Bureau of Indian Standards has prescribed specifications for paper cones under IS:
4888. The main uses are in textile mills.

MARKET POTENTIAL
India’s production of Cotton and synthetic yarn has been increasing year after year
as can be seen from the following figures.

Item Unit 05–06 06-07 07-08 08-09 09-10

Textile Mills
Spinning Mills (N0n-SSI) No. 1570 1608 1597 1653 1657
Composite Mills (Non- No. 210 200 176 177 177
SSI)
Total 1780 1808
Spindles (SSI + Non SSI) Million No 37.51 39.5 39.07 41.3 41.27
Rotors (SSI + Non SSI) Lakh No. 5.20 6.01 6.21 6.57 6.65
Looms (Organised Lakh No. 0.92 0.69 0.56 0.57 0.57
Sector)
Cotton Yarn Million Kg 2521 2823 2948 2898 2540
Other Spun Yarn Million Kg 937 989 1055 1016 1020
Manmade Filament Yarn Million Kg 1179 1370 1509 1416 1450
Cotton-Fabric Million 23873 26238 27196 26898 27000
Sr.Mtr.
Blended-Fabric Million 6298 6882 6888 6766 6800
Sr.Mtr.
The production and consumption is increasing. New targets are fixed as per new
Textile Policy. As a result of this, the consumption of cones which are used in
packing yarns is bound to increase further. It is expected that in next five years,
the textile industry can prosper and capture at least 15% of world market.

TECHNICAL ASPECTS
INSTALLED CAPACITY
The installed capacity of the proposed unit is about 75,00,000 pieces of Paper
Cones per annum. This based on a capacity of 25,000 cones per day. This is based
on single shift operation 300 days per annum.

PLANT & MACHINERY

The following machinery items are required to start a paper cone unit.
Sl. No Machinery Description Qty
1. Paper Cone pattern developing machine 1 No
2. Glueing machine 1 No
3. Paper cone winding machines 2 Nos
4. Paper cone top nosing and base cutting machine 1 No
5. Automatic Paper cone surface velveting machine 1 No
6. Glue preparation Machine 1 No

MANUFACTURING PROCESS
Paper Cones are made on automatic machines available. The reel of paper board is
fitted at one end and the paper web is threaded through the machine to the other
end and machine is operated. In the machine, paper is first embossed between two
rolls and edges ground to required angle. The shape is cut by knives and the end of
the piece automatically succeeds on to the winding spindle by vacuum. The paste is
applied as the spindle begins to rotate. As the cone is being wound both ends are
trimmed and finished cone is ejected out on the tray. The cones are dried and nose
made smooth on machine. They are then inspected and packed.
RAW MATERIALS
The raw materials for the manufacture of Paper Cones are Mill Board, Packing
materials, oil, waste, cloth and Starch.
The raw materials required to manufacture 75,00,000 cones per annum.

Raw materials Calculation:

Qty (Kgs) Rate (Rs.) Amount (Rs.)

Paper Board 150000 36 54.00

Starch 15000 6 0.90

Packing Materials 0.25

Total Raw Materials Cost Rs. 55.15
Cheapest Board is used for the purpose.

LAND AND BUILDING

Built up area-Sq. ft 5000
Rent p.m.-Rs 50000
Advance-10 months. Rs 500000

UTILITIES
Power:
The total power requirement of the unit is about 15 HP.
Water:
Water is required in the process for preparation of glue which is about 1000 litres
per day. Water is required for human consumption also.
Man Power Required
Accountant cum clerk 1 6000 6000.00
Supervisor 1 8000 8000.00
Manager 1 10000 10000.00
Skilled Worker 3 6000 18000.00
Helper 5 4000 20000.00
62000.00
Add Benefits 20% 12400.00
74400.00
Salaries 744000.00
Total Salaries per Annum (Rs. in lakhs) 8.93

IMPLEMENTATION SCHEDULE
If financing arrangements are made available, project can be implemented in 2
months period.

COST OF PRODUCTION & PROFITABILITY

Assumptions
Installed capacity 75,00,000 cones p.a. on single shifts basis.
Capacity utilisation Year-1 -60%
Year -2 -70%
Year-3 onwards- 80%
Selling price Rs. 1.30 per cone.
Raw materials Rs. 55.15 lakhs at 100% capacity utilisation.
Power Rs.1.42 lakhs at 100% utilisation.
Wages and salaries Rs.8.93 lakhs for the first year and it will be
increasing by 5% on every year.
Repairs and Maintenance Rs.0.45 lakh per annum with annual increase
of 5% on every year.
Depreciation Written down value method -15 % on
machinery
Selling general and Rs.4.20 lakhs for the first year and it will be
administrative expenses increasing by 5% on every year.
Interest on Term loan 12% per annum
Interest on working capital 12 % per annum
Income tax 33.22 % on profits
LIST OF MACHINERY SUPPLIERS
1. M/s. K.U. Sodalamuthu & Co. Pvt. Ltd., 428, Mettupalayam Road,
Coimbatore-641 043.
2. M/s. Indo Europa Trading Company, No.9, Dala Street, Mumbai 400 001.

RAW MATERIAL SUPPLIERS

1. Ashera Papers , Sathyamangalam, Erode District
2. Sri Venkateswara Paper Mills, Amaravathy, Ballarpur Industries Ltd.,
Willington Estate, No.2-B, C-In-C, Road, Chennai 600 105
Various other kraft paper Dealers and Mills

FINANCIAL ASPECTS

1. COST OF PROJECT Rs. lakhs

Land & Building-Rental Advance (5000 sq.ft) 5.00 Plant
& Machinery 17.25
Other Misc. Assets 1.00
Pre-Operative Expenses 0.50
Margin for Working Capital 2.21
25.96
2. MEANS OF FINANCE
Capital 12.96
Term Loan 13.00
25.96

3. COST OF PRODUCTION & PROFITABLITY STATEMENT

Rs. Lakhs
Year 1 2 3
Installed Capacity (No. of pieces) 7500000 7500000 7500000
Utilisation (%) 60% 70% 80%
Production/Sales 4500000 5250000 6000000
Selling Price Rs. 1.30
Sales Value (Rs. lakhs) 58.50 68.25 78.00
Raw Materials 33.09 38.61 44.12
Power 0.85 0.99 1.14
Wages & Salaries 8.93 9.37 9.84
Repairs & Maintenance 0.45 0.47 0.50
Depreciation 2.69 2.29 1.95
Cost of Production 46.01 51.74 57.55
Selling, Admn & General Expenses 4.20 4.41 4.63
Interest on Term Loan 1.54 1.26 0.91

Interest on Working Capital 0.93 0.93 0.93

Total 52.68 58.33 64.02

Profit Before Tax 5.82 9.92 13.98

Provision for Taxes 1.93 3.29 4.64
Profit After Tax 3.89 6.62 9.34
Add: Depreciation 2.69 2.29 1.95
Total Cash Accruals 6.58 8.91 11.29

4. PROFITABLITY RATIOS BASED ON 80%

Profit after tax 9.34

Sales 78.00
12%

Profit before Interest & Tax 15.82

Total Investment 33.73
47%

Profit after Tax 9.34

Promoters Capital 12.96
72%

5. CALCULATION OF BREAK EVEN LEVEL

FIXED EXPENSES
Power 1.14
Wages & Salaries 9.84
Repairs & Maintenance 0.50
Depreciation 1.95
Interest in Term Loan 0.91
Fixed Expenses (FE) 14.34
Profit before Tax (P) 13.98
BREAK-EVEN LEVEL FE X 80%

FE+P
BEP 41%