PAPAD & NAMKIN

1.0

INTRODUCTION
Papad and namkins are popular food items in Indian diet. Papad is essentially a thin
wafer-like product, circular in shape, rolled from dough made from flour of pulses with salt,
chilli and spices added to it. It is easy to digest and nutritious as well. There are many
farsan items popular throughout the country and minor changes are made in some
ingredients to suit the local tastes and preferences. Items like masala puffed rice, chevda,
fried peas, dal-muth, roasted masala peanuts etc. fall under the category of farsan. Papad is
eaten along with the main course as taste enricher, while farsan is a snack.

2.0

PRODUCT
2.1 Applications
Papad is prepared from flour of pulses and there are many varieties. Individual pulses or a
combination of different pulses to match the regional preferences are used. It is either fried
in edible oil or is roasted before serving. It is generally consumed along with the main course.
On the other hand, farsan is a spicy snack item and is consumed by people from all walks of
life across the board. These are very popular products and can be made anywhere in the
country.
2.2

Quality standards and compliances

Quality standards specified by BIS for papad are available vide IS 2639:1984. Certification
under PFA Act is compulsory.

161

3.0

MARKET POTENTIAL
3.1

Demand and Supply

Papad & namkin manufacturing is primarily confined to the unorganised sector. There are
some national brands like Lijjat, Leher, Haldiram etc. but their products are costly and thus
have limited market share. Bulk of the market is controlled by the local brands. Market for
these products is growing steadily and there are not much seasonal fluctuations.
3.2

Marketing Strategy

Pricing is a critical aspect to compete with established brands and the product has to be
pushed through with the help of retailers. A small delivery van is necessary. Requisite
changes in the ingredients have to be made in line with regional likings. Farsan items can be
sold in bulk packing of 2, 5 and 10 kgs. to the retailers who, in turn, would repack them in
suitable quantity and sell. This is a standard practice in this industry as retailers from
nearby centres prefer to buy them in bulk for selling in local market.
4.0

MANUFACTURING PROCESS
Papad can be manufactured from flour of different pulses and there could be combination of 2
or more pulses as well. Pulses, spices etc. are ground to prepare a homogenous mix. Adequate
quantity of water is added to flour of pulses, common salt, spices, chilli and sodium
bicarbonate and homogenous mixing is done to form dough. After about 30 minutes, small
balls weighing 8-10 grams are prepared and they are placed in papad making machine or
papad press wherein they are pressed and circular shaped papads are made as per the size of
moulds. Then they are sun-dried. A lot of 25 or 50 is then packed in printed polythene bags.
In case of namkins, majority of the operations are manual. Various ingredients are cleaned
and depending upon the item to be made, some of them are roasted and some are fried in
edible oil. All the ingredients are thoroughly mixed before packing in polythene bags. CFTRI,
Mysore, has successfully developed the papad making press.

5.0

CAPITAL INPUTS
5.1

Land and Building

A plot of land of around 200 sq.mtrs. with built-up area of 125 sq.mtrs. is adequate. Papad
manufacturing would require about 40 sq.mtrs. whereas farsan around 50 sq.mtrs. Balance
area can be utilised for storage and packing. Certain operations can be planned outside the
main building or on the terrace with asbestos roofing. Land may cost Rs. 60,000/- whereas
construction cost could be Rs.3.25 lacs.
5.2

Machinery

Before finalising the manufacturing capacity, a proper market assessment has to be made.
But keeping in mind the economic viability, papad making capacity of 60 tonnes with 250-270
working days and 2 shift working is suggested whereas farsan making capacity of 200 kgs.
per day with 340-350 working days every year is assumed.

162

This would call for following facilities.

Item

Qty.

Price (Rs.)

Grinder with electric motor with 20-25 Kgs/hour capacity

22,000

Mixer with electric motor with

4-5 kgs. per charge capacity

20,000

Pedal-operated Papad presses

15,000

Gas-fired Furnaces (Bhatti)

45,000

Stainless steel utensils, frying pans, steel trays etc

--

50,000

Weighing scales, heat sealing machine,

plastic trays and crates etc

--

35,000

Water Storage Tanks

10,000

Delivery Vehicle

1,25,000

Total

3,22,000

5.3

Miscellaneous Assets

Some other assets like aluminium top tables, furniture & fixtures, exhaust fans, storage racks
etc. shall be required for which a provision of Rs. 80,000/- is made.
5.4

Utilities

Power requirement shall be 7.5 HP. Water required for process and sanitation and potable
purposes will be around 1500 ltrs. every day. Around 5 LPG cylinders shall be required every
month.
5.5

Raw Materials

For papad making, the all-important raw material will be flour of different types of pulses
whereas in case of farsan it would depend upon the items selected after assessment of the
market. But the major items would be gram dal, peanuts, edible oil etc. Other items would be
salt, spices, citric acid, amchur etc. All the items would be available locally. Printed polythene
bags shall be required in different sizes and adequate arrangements need to be made.
6.0

MANPOWER REQUIREMENTS
Particulars

Nos.

Monthly
Salary (Rs.)

Total Monthly
Salary (Rs.)

Skilled Workers

2,250

9,000

Semi-skilled Workers

1,750

3,500

Helpers

1,250

5,000

Salesman

2,500

2,500

Driver-cum-Deliveryman

2,000

2,000

Total

22,000

163

7.0

TENTATIVE IMPLEMENTATION SCHEDULE

Activity

8.0

Period (in months)

Application and sanction of loan

Site selection and commencement of civil work

Completion of civil work and placement of

orders for machinery

Erection, installation and trial runs

DETAILS OF THE PROPOSED PROJECT

8.1

Land and Building

Particulars

Area (Sq.Mtrs)

Cost (Rs.)

Land

200

60,000

Building

125

3,25,000

Total

3,85,000

8.2

Machinery

A provision of Rs. 3.22 lacs is adequate as discussed earlier.

8.3

Miscellaneous Assets

As explained earlier, an amount of Rs. 80,000/- would be sufficient.

8.4

Preliminary & Pre-operative Expenses

There will be many pre-production expenses like registration, establishment &

administrative, market survey, interest during implementation period, travelling charges,
trial runs and so on. An amount of Rs. 70,000/- is earmarked towards them.
8.5

Working Capital Requirements

It is envisaged that the project would work at 60% in the first year for which the working
capital needs shall be as under:
(Rs. in lacs)
Particulars

Period

Margin

Total

Bank

Promoters

Stock of Raw Materials

Month

30%

0.85

0.60

0.25

Stock of Finished Goods

Month

25%

0.50

0.38

0.12

Receivables

Month

25%

1.36

1.02

0.34

Other Expenses

1 Month

100%

0.35

--

0.35

Total

3.06

2.00

1.06

164

8.6

Cost of the Project & Means of Financing

(Rs. in lacs)
Item

Amount

Land and Building

3.85

Machinery

3.22

Miscellaneous Assets

0.80

P&P Expenses

0.70

Contingencies @ 10% on Land and Building &

Plant & Machinery

0.71

Working Capital Margin

1.06

Total

10.34

Means of Finance
Promoters' Contribution

3.20

Term Loan from Bank/FI

7.14

Total

10.34

Debt Equity Ratio

2.23 : 1

Promoters' Contribution

31%

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.
9.0

PROFITABILITY CALCULATIONS
9.1

Production Capacity & Build-up

Capacity utilisation in the first year is expected to be 60% whereas second year onwards, it is
restricted to 75%.
9.2

Sales Revenue at 100%

(Rs. in lacs)

Product

Qty.
(Tonnes)

Price/Ton
(Rs.)

Sales Value

Papad

60

35,000

21.00

Farsan

70

50,000

35.00

Total

56.00

165

9.3

Raw and Packing Materials Required at 100%

(Rs. in lacs)

Product

Qty.
(Tonnes)

Price/Ton
(Rs.)

Value

58

16,000

9.28

--

--

0.60

Many items depending upon product mix

@ Rs.32,000/Ton of finished goods

--

--

22.40

Packing Materials

--

--

1.20

Total

33.48

[A] For Papad

Flour of Pulses
Edible Oil, salt, Spices, preservatives, etc.
[B] For Farsan

9.4

Utilities

Annual expenditure at 100% utilisation is likely to be Rs.70,000/-.

9.5

Selling Expenses

They are computed @ 17.5% of sales income every year which would take care of commission
of retailers, vehicle running and maintenance charges and advertisement in local media.
9.6

Interest

Interest on term loan of Rs. 7.14 lacs is calculated @ 12% per annum assuming complete
repayment in 4 years including a moratorium period of 1 year. Interest on bank loan for
working capital is computed @ 14%. per annum.
9.7

Depreciation

It is computed on WDV basis @ 10% on building and 20% on machinery and miscellaneous
assets.

166

10.0

PROJECTED PROFITABILITY
(Rs. in lacs)
No.

Particulars

Installed Capacity

1st Year

--- 130 Tonnes ---

Capacity Utilisation

60%

75%

33.60

42.00

20.09

25.11

Utilities

0.42

0.53

Salaries

2.64

3.00

Stores and Spares

0.15

0.21

Repairs & Maintenance

0.18

0.24

Selling Expenses @ 17.5%

5.88

7.35

Administrative Expenses

0.36

0.54

29.72

36.98

Profit before Interest & Depreciation

3.88

5.02

Interest on Term Loan

0.80

0.61

Interest on Working Capital

0.28

0.35

Depreciation

1.13

0.93

Profit before Tax

1.67

3.13

Income-tax @ 20%

0.32

0.63

Profit after Tax

1.35

2.50

Cash Accruals

2.48

3.43

--

2.25

Sales Realisation
B

Cost of Production
Raw and Packing Materials

Total
C

Repayment of Term Loan

11.0

2nd Year

BREAK-EVEN ANALYSIS

(Rs. in lacs)

No

Particulars

Amount

[A]

Sales

[B]

Variable Costs

33.60

Raw and Packing Materials

20.09

Utilities (70%)

0.29

Salaries (70%)

1.85

Stores & Spares

0.15

Selling Expenses (75%)

4.41

Admn Expenses (50%)

0.18

Interest on WC

0.28

27.25

[C]

Contribution [A] - [B]

6.35

[D]

Fixed Cost

3.98

[E]

Break-Even Point [D] [C]

62%

167

12.0

[A]

LEVERAGES

Financial Leverage
= EBIT/EBT
= 2.75 1.67
= 1.65

Operating Leverage
= Contribution/EBT
= 6.35 1.67
= 3.80

Degree of Total Leverage

= FL/OL
= 1.65 3.80
= 0.44

[B]

Debt Service Coverage Ratio (DSCR)

(Rs. in lacs)

Particulars

1st Yr

2nd Yr

3rd Yr

4th Yr

Cash Accruals

2.48

3.43

3.88

4.39

Interest on TL

0.80

0.61

0.33

0.15

Total [A]

3.28

4.04

4.21

4.54

Interest on TL

0.80

0.61

0.33

0.15

--

2.40

2.40

2.34

Total [B]

0.80

3.01

2.73

2.49

DSCR [A] [B]

4.10

1.34

1.54

1.82

Repayment of TL

Average DSCR

------------------------------- 2.20 ----------------------------

168

[C]

Internal Rate of Return (IRR)

Cost of the project is Rs. 10.34 lacs.

(Rs. in lacs)
Year

Cash
Accruals

16%

18%

20%

24%

2.48

2.14

2.10

2.07

2.00

3.43

2.55

2.46

2.38

2.23

3.88

2.49

2.36

2.25

2.03

4.39

2.42

2.27

2.12

1.86

4.86

2.31

2.12

1.95

1.66

19.04

11.91

11.31

10.77

9.78

The IRR is around 23%.

Some of the equipment and packing material suppliers are as under:

1.

Punjab Engg. Works, Ram Krishna Samadhi Rd, Kolkata

2.

S.R. Trading Co, Station Road, Patna

3.

A.M.S. Engg, Station Road, Patna

4.

Gaziabad Printing and Packing Inds. Pvt. Ltd., near DPS, Meerut Road, Gaziabad

169