Model Detailed Project Report

OATS MAKING UNIT

Prepared by

National Institute of Food Technology

Entrepreneurship and Management(NIFTEM)
Plot No. 97, Sector 56, HSIIDC, Industrial Estate, Kundli,
Sonipat, Haryana 131028
Ministry of Food Processing Industries, Government of India
1. INTRODUCTION

OATS

Oats are a whole-grain food, known scientifically as Avena sativa. Oat

groats, the most intact and whole form of oats, take a long time to cook. For
this reason, most people prefer rolled, crushed or steel-cut oats. Instant
(quick) oats are the most highly processed variety. While they take the
shortest time to cook, the texture may be mushy. Oats are commonly eaten
for breakfast as oatmeal, which is made by boiling oats in water or milk.
Oatmeal is often referred to as porridge.

2. MARKET POTENTIAL:

The high nutritive content of oats is the major driver of the market.
Additionally, an increase in preference for healthy meals and demand for
convenience food is also driving the global oats market. Also, its added
functional properties enhance its usage by the consumers, it is witnessed to
be consumed majorly as a breakfast food. Moreover, the fast-paced lifestyle
led by the working population has catalyzed the demand for ready-to-eat oats
products. Also, the rising cultivation of oats has led to increased availability
of the product globally.

The organized breakfast cereal market in India is estimated at Rs 1,400

crore, with oats being the fastest-growing category, with around 30% value
share. It has grown at a rate in excess of 10% over the last five years.
Mirroring the trend, companies were quick to introduce oats variants, with
new launches growing by almost 74% over a five-year period

3. PRODUCT DESCRIPTION

3.1 Raw Material sources

Oat grain is the only ingredient in oatmeal. The seeds of the Avena grasses
are harvested in the fall. The thinner-skinned grains are preferable as they
have a high protein content without being overly starchy.

Average raw material (cost per KG): Rs. 70-80

3.2 MANUFACTURING PROCESS

Oats are a staple of the American diet found in oatmeal, bread, cereal,
granola, and many other foods, but there is complex process behind getting
the oats from the soil to the table. There are a variety of steps to transform
oats to oatmeal.

 Cleaning: Cleaning eliminates all unwanted materials from the oats. pass
under magnetic separators and through a rotating screen which removes
scraps, sticks, stones, corn, etc. Finally, oats go through aspiration and
a de-stoner extracting hulls, lighter, low grade, pebbles, and other grains.
 Hulling- After cleaning, oats must be de-hulled, as the hulls of oats are
indigestible. To remove the hull, rotating discs fling oats into rings that
cause the hull to fall off without damaging the rest of the oat. This
remaining oat is known as a groat.

 Kilning- The next stage of the process is drying or kilning. Due to the fat
content in , must be dried to achieve browning and desired tastes. The
oats are sent to long vertical cylinders where air and steam is injected to
increase temperature and moisture. While the moisture helps increase the
enzyme content, it’s bad for shelf stability and can ruin the product.
Radiant heating is used to remove this excess moisture. This step is
important for developing the oat’s nutty flavor, and it also kills any inactive
yeast or bacteria.

 Rolling or cutting- Standard oats are those that have been steel-cut. The
oats are run through a machine with razor-sharp knife blades. Quick-
cooking oats are rolled between cylinders to produce a flatter, lighter flake.
These processes are usually repeated several times to produce the type
of oat flake that is desired. In both processes, the hull is separated from
the grain. The hulls are sifted out and used for other purposes.

 Roasting- The hulled oats are then placed into a roaster where they are
toasted at a preset temperature for a pre-determined amount of time.

 Packaging- Pre-printed containers are filled with pre-measured amounts

of oatmeal. A lid is vacuum-packed onto the top of the container. The
containers are then loaded into cartons for shipment.
 Flow chart of Oats Processing

Non-digestible seeds

Cleaning

Dehulling

Kilning

Rolling & Cutting

Roasting

Packaging

4. PROJECT COMPONENTS

4.1 Land

Land required 3500-4000 square feet approx.

 Processing Plant Area = 1000 to 1500 Sq.ft [2 level construction]

 Warehouse (Raw Material + Finish Product) = [1500-2000 Sq.ft]

Approximate rent for the same is Rs.50000-60000 per month.

4.2 Plant & Machinery

S.N. Item Description Image

1 Destoner
 2 Dehulling

3 Vibro separator

4 Rolling/Cutting
Machine

Other Machines

Roasting Machine
1
 2 Packaging Machine:

3 Bucket elevator

Note: cost of the main machinery is approx. Rs. 15,00,000 and other
machinery is approx. 5,00,000 excluding GST and other transportation cost.

4.3 Misc. Assets

S.N. Item Description Rate

1 Electricity connection 50,000

2 Furniture and equipment’s 50,000

3 Storage tank etc. 20,000

4.4 Power Requirement

The borrower shall require power load of 50 HP which shall be applied with
Power Corporation. However, for standby power arrangement the borrower
shall also purchase DG Set.

4.5 Manpower Requirement

10-12 Manpower are required for the Oats Manufacturing unit.

Includes:

2-3 Skilled Labour

2-3 Unskilled Labour

3-4 Helper

1 Accountant

2 Administrative staff
5. FINANCIALS

5.1 Cost of Project

COST OF PROJECT
(in Lacs)

PARTICULARS Amount

Land & Building Owned/rented

Plant & Machinery 20.00
miscellaneous Assets 1.20
Working capital 11.11
Total 32.31

5.2 Means of Finance

MEANS OF FINANCE

PARTICULARS AMOUNT

Own Contribution (min 10%) 3.23

Subsidy @35%(Max. Rs 10 Lac) 7.42

Term Loan @ 55% 11.66

Working Capital (bank Finance) 10.00

Total 32.31
5.3 Projected Balance Sheet

(in Lacs)
PROJECTED BALANCE SHEET
PARTICULARS 1st year 2nd year 3rd year 4th year 5th year

Liabilities

Capital

opening balance 11.12 13.46 16.44 19.61

Add:- Own Capital 3.23

Add:- Retained Profit 1.47 4.84 8.98 13.17 17.61

Less:- Drawings 1.00 2.50 6.00 10.00 14.00

Subsidy/grant 7.42

Closing Balance 11.12 13.46 16.44 19.61 23.22

Term Loan 10.36 7.77 5.18 2.59 -

Working Capital Limit 10.00 10.00 10.00 10.00 10.00

Sundry Creditors 4.50 5.33 6.23 7.18 8.19

Provisions & Other Liab 0.30 0.38 0.45 0.54 0.65

TOTAL : 36.28 36.94 38.30 39.92 42.06

Assets

Fixed Assets ( Gross) 21.20 21.20 21.20 21.20 21.20

Gross Dep. 3.12 5.78 8.04 9.97 11.62

Net Fixed Assets 18.08 15.42 13.16 11.23 9.58

Current Assets

Sundry Debtors 4.18 5.09 5.94 6.84 7.85

Stock in Hand 11.94 14.10 16.38 18.83 21.44

Cash and Bank 2.09 2.33 2.82 3.02 3.19

TOTAL : 36.28 36.94 38.30 39.92 42.06

5.4 Projected Cash Flow
(in Lacs)
PROJECTED CASH FLOW STATEMENT
PARTICULARS 1st year 2nd year 3rd year 4th year 5th year

SOURCES OF FUND

Own Margin 3.23

Net Profit 1.47 4.84 9.44 14.78 20.38

Depreciation & Exp. W/off 3.12 2.66 2.26 1.93 1.64

Increase in Cash Credit 10.00 - - - -

Increase In Term Loan 11.66 - - - -

Increase in Creditors 4.50 0.83 0.89 0.95 1.01

Increase in Provisions & Oth lib 0.30 0.08 0.08 0.09 0.11

Subsidy/grant 7.42

TOTAL : 41.70 8.41 12.67 17.75 23.14

APPLICATION OF FUND

Increase in Fixed Assets 21.20

Increase in Stock 11.94 2.16 2.29 2.44 2.61

Increase in Debtors 4.18 0.92 0.85 0.90 1.01

Repayment of Term Loan 1.30 2.59 2.59 2.59 2.59

Drawings 1.00 2.50 6.00 10.00 14.00

Taxation - - 0.46 1.61 2.77

TOTAL : 39.61 8.17 12.19 17.55 22.97

Opening Cash & Bank Balance - 2.09 2.33 2.82 3.02

Add : Surplus 2.09 0.24 0.49 0.20 0.17

Closing Cash & Bank Balance 2.09 2.33 2.82 3.02 3.19
5.5 Projected Profitability
(in Lacs)
PROJECTED PROFITABILITY STATEMENT

PARTICULARS 1st year 2nd year 3rd year 4th year 5th year

Capacity Utilisation % 40% 45% 50% 55% 60%

SALES

Gross Sale

OATS 156.60 190.99 222.76 256.62 294.38

Total 156.60 190.99 222.76 256.62 294.38

COST OF SALES

Raw Material Consumed 90.00 106.65 124.50 143.55 163.80

Electricity Expenses 8.40 9.66 11.11 12.78 14.05

Depreciation 3.12 2.66 2.26 1.93 1.64

Wages & labour 10.20 11.22 12.34 13.58 14.93

Repair & maintenance 7.83 9.55 11.14 12.83 14.72

Packaging 7.05 8.59 10.02 11.55 13.25

Consumables 6.58 8.02 8.91 9.75 11.19

Cost of Production 133.17 156.35 180.29 205.96 233.58

Add: Opening Stock /WIP - 4.44 5.21 6.01 6.87

Less: Closing Stock /WIP 4.44 5.21 6.01 6.87 7.79

Cost of Sales 128.74 155.58 179.49 205.11 232.66

GROSS PROFIT 27.86 35.41 43.27 51.51 61.72

17.79% 18.54% 19.42% 20.07% 20.96%

Salary to Staff 9.12 10.03 11.04 12.14 13.35

Interest on Term Loan 1.15 1.01 0.72 0.44 0.15

Interest on working Capital 1.10 1.10 1.10 1.10 1.10

Rent 7.20 7.92 8.71 9.58 10.54

selling & adm exp 7.83 10.50 12.25 13.47 16.19

TOTAL 26.40 30.57 33.82 36.73 41.34

NET PROFIT 1.47 4.84 9.44 14.78 20.38

0.94% 2.54% 4.24% 5.76% 6.92%

Taxation 0.46 1.61 2.77

PROFIT (After Tax) 1.47 4.84 8.98 13.17 17.61

5.6 Production and Yield

COMPUTATION OF PRODUCTION OF OATS

Items to be Manufactured

OATS

Machine capacity Per hour 200 KG

Total working Hours 8

Machine capacity Per Day 1,600 KG

Operational capacity per day (taken) 1,000 KG

working days in a month 25 Days

working days per annum 300

machine capacity per annum 300000 KG

Production of OATS
Production Capacity KG
1st year 40% 120,000

2nd year 45% 135,000

3rd year 50% 150,000

4th year 55% 165,000

5th year 60% 180,000

Raw Material Cost

Year Capacity Rate Amount

Utilization (per KG) (Rs. in lacs)

1st year 40% 75.00 90.00

2nd year 45% 79.00 106.65

3rd year 50% 83.00 124.50

4th year 55% 87.00 143.55

5th year 60% 91.00 163.80

5.7 Sales Revenue

COMPUTATION OF SALE

Particulars 1st year 2nd year 3rd year 4th year 5th year
Op Stock - 4,000 4,500 5,000 5,500

Production 120,000 135,000 150,000 165,000 180,000

Less : Closing Stock 4,000 4,500 5,000 5,500 6,000
Net Sale 116,000 134,500 149,500 164,500 179,500
sale price per KG 135.00 142.00 149.00 156.00 164.00
Sales (in Lacs) 156.60 190.99 222.76 256.62 294.38
5.8 Working Capital Assessment
(in Lacs)
COMPUTATION OF CLOSING STOCK & WORKING CAPITAL
PARTICULARS 1st year 2nd year 3rd year 4th year 5th year

Finished Goods

4.44 5.21 6.01 6.87 7.79

Raw Material

7.50 8.89 10.38 11.96 13.65

Closing Stock 11.94 14.10 16.38 18.83 21.44

COMPUTATION OF WORKING CAPITAL REQUIREMENT

TRADITIONAL METHOD (in Lacs)

Particulars Amount Own Margin Bank Finance

Finished Goods & Raw Material 11.94

Less : Creditors 4.50

Paid stock 7.44 10% 0.74 90% 6.70

Sundry Debtors 4.18 10% 0.42 90% 3.76

11.62 1.16 10.45

MPBF 10.45

WORKING CAPITAL LIMIT DEMAND ( from Bank) 10.00

Working Capital Margin 1.11

5.9 Power, Salary & Wages Calculation

Utility Charges (per month)

Particulars value Description
Power connection required 35 KWH
consumption per day 280 units

Consumption per month 7,000 units

Rate per Unit 10 Rs.
power Bill per month 70,000 Rs.

BREAK UP OF LABOUR CHARGES

Particulars Wages No of Total

Rs. per Month Employees Salary

Skilled (in thousand rupees) 15,000 3 45,000

Unskilled (in thousand rupees) 10,000 4 40,000

Total salary per month 85,000

Total annual labour charges (in lacs) 10.20

BREAK UP OF Staff Salary CHARGES

Particulars Salary No of Total

Rs. per Month Employees Salary

helper 7,000 5 35,000

Admin Staff 12,000 2 24,000

Accountant 17,000 1 17,000

Total salary per month 76,000

Total annual Staff charges (in lacs) 9.12

5.10 Depreciation
(in Lacs)
COMPUTATION OF DEPRECIATION
Description Plant & Machinery Miss. Assets TOTAL

Rate of Depreciation 15.00% 10.00%

Opening Balance - - -

Addition 20.00 1.20 21.20

Total 20.00 1.20 21.20

Less : Depreciation 3.00 0.12 3.12

WDV at end of Year 17.00 1.08 18.08

Additions During The Year - - -

Total 17.00 1.08 18.08

Less : Depreciation 2.55 0.11 2.66

WDV at end of Year 14.45 0.97 15.42

Additions During The Year - - -

Total 14.45 0.97 15.42

Less : Depreciation 2.17 0.10 2.26

WDV at end of Year 12.28 0.87 13.16

Additions During The Year - - -

Total 12.28 0.87 13.16

Less : Depreciation 1.84 0.09 1.93

WDV at end of Year 10.44 0.79 11.23

Additions During The Year - - -

Total 10.44 0.79 11.23

Less : Depreciation 1.57 0.08 1.64

WDV at end of Year 8.87 0.71 9.58

5.11 Repayment schedule

REPAYMENT SCHEDULE OF TERM LOAN

Interest 11.00%
Closing
Year Particulars Amount Addition Total Interest Repayment Balance
ist Opening Balance
1st month - 11.66 11.66 - - 11.66
2nd month 11.66 - 11.66 0.11 - 11.66
3rd month 11.66 - 11.66 0.11 - 11.66
4th month 11.66 - 11.66 0.11 11.66
5th month 11.66 - 11.66 0.11 11.66
6th month 11.66 - 11.66 0.11 11.66
7th month 11.66 - 11.66 0.11 0.22 11.44
8th month 11.44 - 11.44 0.10 0.22 11.23
9th month 11.23 - 11.23 0.10 0.22 11.01
10th month 11.01 - 11.01 0.10 0.22 10.80
11th month 10.80 - 10.80 0.10 0.22 10.58
12th month 10.58 - 10.58 0.10 0.22 10.36
1.15 1.30
2nd Opening Balance
1st month 10.36 - 10.36 0.10 0.22 10.15
2nd month 10.15 - 10.15 0.09 0.22 9.93
3rd month 9.93 - 9.93 0.09 0.22 9.72
4th month 9.72 - 9.72 0.09 0.22 9.50
5th month 9.50 - 9.50 0.09 0.22 9.28
6th month 9.28 - 9.28 0.09 0.22 9.07
7th month 9.07 - 9.07 0.08 0.22 8.85
8th month 8.85 - 8.85 0.08 0.22 8.64
9th month 8.64 - 8.64 0.08 0.22 8.42
10th month 8.42 - 8.42 0.08 0.22 8.21
11th month 8.21 - 8.21 0.08 0.22 7.99
12th month 7.99 - 7.99 0.07 0.22 7.77
1.01 2.59
3rd Opening Balance
1st month 7.77 - 7.77 0.07 0.22 7.56
2nd month 7.56 - 7.56 0.07 0.22 7.34
3rd month 7.34 - 7.34 0.07 0.22 7.13
4th month 7.13 - 7.13 0.07 0.22 6.91
5th month 6.91 - 6.91 0.06 0.22 6.69
6th month 6.69 - 6.69 0.06 0.22 6.48
7th month 6.48 - 6.48 0.06 0.22 6.26
8th month 6.26 - 6.26 0.06 0.22 6.05
9th month 6.05 - 6.05 0.06 0.22 5.83
10th month 5.83 - 5.83 0.05 0.22 5.61
 11th month 5.61 - 5.61 0.05 0.22 5.40
12th month 5.40 - 5.40 0.05 0.22 5.18
0.72 2.59
4th Opening Balance
1st month 5.18 - 5.18 0.05 0.22 4.97
2nd month 4.97 - 4.97 0.05 0.22 4.75
3rd month 4.75 - 4.75 0.04 0.22 4.53
4th month 4.53 - 4.53 0.04 0.22 4.32
5th month 4.32 - 4.32 0.04 0.22 4.10
6th month 4.10 - 4.10 0.04 0.22 3.89
7th month 3.89 - 3.89 0.04 0.22 3.67
8th month 3.67 - 3.67 0.03 0.22 3.45
9th month 3.45 - 3.45 0.03 0.22 3.24
10th month 3.24 - 3.24 0.03 0.22 3.02
11th month 3.02 - 3.02 0.03 0.22 2.81
12th month 2.81 - 2.81 0.03 0.22 2.59
0.44 2.59
5th Opening Balance
1st month 2.59 - 2.59 0.02 0.22 2.38
2nd month 2.38 - 2.38 0.02 0.22 2.16
3rd month 2.16 - 2.16 0.02 0.22 1.94
4th month 1.94 - 1.94 0.02 0.22 1.73
5th month 1.73 - 1.73 0.02 0.22 1.51
6th month 1.51 - 1.51 0.01 0.22 1.30
7th month 1.30 - 1.30 0.01 0.22 1.08
8th month 1.08 - 1.08 0.01 0.22 0.86
9th month 0.86 - 0.86 0.01 0.22 0.65
10th month 0.65 - 0.65 0.01 0.22 0.43
11th month 0.43 - 0.43 0.00 0.22 0.22
12th month 0.22 - 0.22 0.00 0.22 -
0.15 2.59
DOOR TO DOOR 60 MONTHS
MORATORIUM PERIOD 6 MONTHS
REPAYMENT PERIOD 54 MONTHS
5.12 DSCR

CALCULATION OF D.S.C.R

PARTICULARS 1st year 2nd year 3rd year 4th year 5th year

CASH ACCRUALS 4.59 7.50 11.24 15.10 19.25

Interest on Term Loan 1.15 1.01 0.72 0.44 0.15
Total 5.73 8.51 11.97 15.53 19.41

REPAYMENT
Instalment of Term Loan 1.30 2.59 2.59 2.59 2.59
Interest on Term Loan 1.15 1.01 0.72 0.44 0.15

Total 2.44 3.60 3.32 3.03 2.75

DEBT SERVICE COVERAGE RATIO 2.35 2.36 3.61 5.13 7.07

AVERAGE D.S.C.R. 4.10

5.13 Break Even Point Analysis

BREAK EVEN POINT ANALYSIS

Year I II III IV V

Net Sales & Other Income 156.60 190.99 222.76 256.62 294.38

Less : Op. WIP Goods - 4.44 5.21 6.01 6.87

Add : Cl. WIP Goods 4.44 5.21 6.01 6.87 7.79

Total Sales 161.04 191.76 223.55 257.48 295.30

Variable & Semi Variable Exp.

Raw Material Consumed 90.00 106.65 124.50 143.55 163.80

Electricity Exp/Coal Consumption at 85% 7.14 8.21 9.44 10.86 11.94

Wages & Salary at 60% 11.59 12.75 14.03 15.43 16.97

Selling & adminstrative Expenses 80% 6.26 8.40 9.80 10.78 12.95

Interest on working Capital 1.10 1.10 1.10 1.10 1.10

Repair & maintenance 7.83 9.55 11.14 12.83 14.72

Packaging 7.05 8.59 10.02 11.55 13.25

Consumables 6.58 8.02 8.91 9.75 11.19

Total Variable & Semi Variable Exp 137.55 163.28 188.94 215.85 245.92

Contribution 23.49 28.48 34.61 41.63 49.38

Fixed & Semi Fixed Expenses

Electricity Exp/Coal Consumption at 15% 1.26 1.45 1.67 1.92 2.11

Wages & Salary at 40% 7.73 8.50 9.35 10.29 11.31

Interest on Term Loan 1.15 1.01 0.72 0.44 0.15

Depreciation 3.12 2.66 2.26 1.93 1.64

Selling & administrative Expenses 20% 1.57 2.10 2.45 2.69 3.24

Rent 7.20 7.92 8.71 9.58 10.54

Total Fixed Expenses 22.02 23.64 25.17 26.85 29.00

Capacity Utilization 40% 45% 50% 55% 60%

OPERATING PROFIT 1.47 4.84 9.44 14.78 20.38

BREAK EVEN POINT 37% 37% 36% 35% 35%

BREAK EVEN SALES 150.97 159.15 162.57 166.06 173.44

6. LICENSE & APPROVALS

 Obtain the GST registration.

 Additionally, obtain the Udyog Aadhar registration Number.
 Fire/pollution license as required.
 FSSAI License
 Choice of a Brand Name of the product and secure the name with
Trademark if required.

Implementation Schedule

S.N. Activity Time Required

(in Months)

1 Acquisition Of premises 1-2

2 Procurement & installation of Plant & Machinery 1-2

3 Arrangement of Finance 1-2

4 Requirement of required Manpower 1

Total time Required (some activities shall run 5-6 Months

concurrently)
7. ASSUMPTIONS

1. Operational Capacity of Oats is 1000 Kgs per day. First year, Capacity has
been taken @ 40%.

2. Working shift of 8 hours per day has been considered.

3. Raw Material stock is for 25 days and Finished goods Closing Stock has

been taken for 10 days.

4. Credit period to Sundry Debtors has been given for 8 days.

5. Credit period by the Sundry Creditors has been provided for158 days.

6. Depreciation and Income tax has been taken as per the Income tax Act,

1961.

7. Interest on working Capital Loan and Term loan has been taken at 11%.

8. Salary and wages rates are taken as per the Current Market Scenario.

9. Power Consumption has been taken at 35-40 KW.

10. Selling Prices & Raw material costing has been increased by 5% & 5%
respectively in the subsequent years.
 Limitations of the Model DPR and Guidelines for Entrepreneurs

Limitations of the Model DPR

i. This model DPR has provided only the basic standard components and methodology to be
adopted by an entrepreneur while submitting a proposal under the Formalization of Micro Food
Processing Enterprises Scheme of MoFPI.

ii. This is a model DPR made to provide general methodological structure not for specific
entrepreneur/crops/location. Therefore, information on the entrepreneur, forms and structure
(proprietorship/partnership/cooperative/ FPC/joint stock company) of his business, details of
proposed DPR, project location, raw material base/contract sourcing, entrepreneurs own SWOT
analysis, detailed market research, rationale of the project for specific location, community
advantage/benefit from the project, employment generation and many more detailed aspects not
included.

iii. The present DPR is based on certain assumptions on cost, prices, interest, capacity utilization,
output recovery rate and so on. However, these assumptions in reality may vary across places,
markets and situations; thus the resultant calculations will also change accordingly.