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A Presentation on the Business Plan Final

A Presentation on the Business Plan Final


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Published by: Manoj Bhattarai on Apr 26, 2010
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29th December 2009

PRESENTERS: Manoj Bhattarai Mahesh Raj Nepal Maheshwor Thapa Nibedan Baral

The present demand of drugs and pharmaceuticals has reached beyond the worth of Rs. 6000 millions.  Study made by Department of Drug Administration (DDA) shows that the increment of drug consumption per year is about 27 percent.  At present the local pharmaceutical industries meet only about 14 percent of national demand 86 percent of the medicines are still imported from India and overseas countries.  There is every possibility of a number of pharmaceuticals to increase in the days to come.  Hard gelatin capsule shell for manufacturing capsule dosage form has been brought from abroad as none of the manufacturing industries exist in Nepal.  Hard gelatin capsule shell manufacturing industry can be one of the best options in the industrial sector. 

Vision Statements: VISION AND MISSION STATEMENTS ³Be the Global Leader for supply of superior quality two-piece hard Gelatin Capsules´.  Mission Statement: We take an immense pride in our worldwide reputation for quality and reliability in our area of expertise. By specializing in only one field pharmaceutical hard gelatin capsule production we can channel all of our resources and energies towards one goal of producing empty gelatin shells.

Competitive Advantage 
Quality products (capsule shell).  Skilled and experienced manpower.  Timely delivery of products.  Acceptance, investigation and complaint handling.  Supplement of products as per the demand.  Right location.

Business and industry profile
Company goals and objectives: 
    1. Goals The major goals of this project are to manufacture different sizes of hard gelatin capsule shells and to sale to the local market. In specific, this project has goals to: Help to extend the primary health care coverage in the country by giving emphasis in the manufacture of essential drug in capsule dosage forms. Create and provide employment for experts, technologists, skilled, semi-skilled and unskilled manpower. Substitute import of gelatin capsule shell. Bridge the gap between the demand and supply.

2. Objectives:  To increase the resource utilization to 100% in 3 years.  To recover the initial investment in 5 years.

Industry analysis 
1. Industry background and overview:  CAPS: The Shell Manufacturer has emerged into existence due an immense requirement of empty capsule shell manufacturing industry in Nepal.  2. Significant trends:  Currently no industries in Nepal that produces empty hard gelatin shell.  Empty shells are imported from India in bulk and only filling is done in Nepal.  No pharmaceutical companies are focused in producing empty gelatin shell despite only filling of the imported shell and marketing them. 

Growth rate 
The no. of pharmaceutical industries producing capsules is increasing at a good rate.  If high quality gelatin shells are provided consistently then it is not difficult to gain the faith of the domestic pharmaceutical industries. 

Key success factors in the industry 
Assurance of quality products (capsule shell). Skilled and experienced manpower. Timely delivery of products. Acceptance, investigation and correction of complaints from the market. Supplement of products as per demand. Honest staffs. Close management of wastes. Right location. Consistency. Provision of accepting defective products.

Outlook for the future 
Exporting the quality products and face the competition with other industries.  To supply the product to all the pharmaceutical companies of Nepal.


1. Cost Leadership: We cannot adopt this strategy because we cannot compete with the international companies in price as we don¶t manufacture in bulk. 2. Differentiation  We have aimed of being the best in providing the domestic companies.  We can be different from the Indian companies in following aspects:  Supplying products as per the requirement of the Pharmaceutical companies.  Compensation provisions in the case of return  Short lead time.  Emergency orders. 3. Focus: We concentrate on gaining the entire Nepalese market share.

Product or service features 

CAPS: The Shell manufacturer intends to sell the empty hard gelatin capsule shells to the Pharmaceutical companies. We are focused in providing high quality empty gelatin capsules as per the demands of Nepalese Pharmaceutical Companies. Hard gelatin capsule shells of 0 size made from cattle bone Color combinations available with all types of linear and circular printing facilities. Products confirm fully to all the GMP & International norms. Easy to disintegrate and release in gastric juice, compared to tablet and pill which can enhance biological utilization ratio. Capsule shells are supplied as per the demand, no compulsion of bulk purchase as done by the Indian suppliers.

The feature of our products is as follows 

Customer benefits

Description of production process
Gelatin Production 
On a commercial scale, gelatin is made from by-products of the meat and leather industry.  Recently, fish by-products have also been considered because they eliminate some of the religious obstacles surrounding gelatin consumption.  Gelatin is derived mainly from pork skins, pork and cattle bones, or split cattle hides.  The raw materials are prepared by treating bones and skins with acid and alkalis, which are employed to extract the dried collagen hydrolysate..  The intermolecular and intra-molecular bonds which stabilize insoluble collagen rendering it insoluble must be broken, and the hydrogen bonds which stabilize the collagen helix must also be broken.

Bone/ skin


Acid-Base Hydrolysis For type A: 24-28 hrs For type B: 1-1.5 months

Formation of collagen

Size reduction

Degreasing with hot water

Wash with hot water

Washing with cold water

Treat with dilute acid

Formation of gelatin

There are two types: Type A & type B Type A is obtained from acid hydrolysis of pork skin Type B is obtained from alkali hydrolysis of animal bones The physicochemical properties of gelatin are the bloom strength and viscosity Raw materials    
Colorants  Various soluble synthetic dyes (³coal tar dyes´) and insoluble pigments are used.  Not only play a role in identifying the product, but also may play a role in improving patient compliance E.g., white, analgesia; lavender, hallucinogenic effects; orange or yellow, stimulants and antidepressants. Opaquing agents  Titanium dioxide may be included to render the shell opaque. Opaque capsules may be employed to provide protection against light or to conceal the contents. Preservatives When preservatives are employed, parabens are often selected.

Capsule Manufacturing Process
1. Once raw materials have been received and released by Quality Control, the gelatin and hot demineralized water are mixed under vacuum in R&J Engineering's Stainless Steel Gelatin Melting System

2. After mixing in stainless steel receiving tanks, the gelatin solution is transferred to stainless steel feed tanks

3. Dyes, opacifants, and any needed water are added to the gelatin in the feed tanks to complete the gelatin preparation procedure. 4. From the feed tank, the gelatin is gravity fed to dipper section. Here, the capsules are moulded onto stainless steel Pin Bars which are dipped into the gelatin solution.

5. Once dipped, the Pin Bars rise to the upper deck allowing the cap and body to set on the Pins 6. The Pin Bars pass through the Drying System. Here gently moving air which is precisely controlled for volume, temperature, and humidity, removes the exact amount of moisture from the capsule halves.

7. Precision controls constantly monitor humidity, temperature, and gelatin viscosity throughout the production process 8. Once drying is complete, the Pin Bars enter the Table section which positions the capsule halves for stripping from the Pins in the Automatic section.

9. In the Automatic section, capsule halves are individually stripped from the Pins. 10. The cap and body lengths are precisely trimmed to a ±0.15 mm tolerance.

11. The capsule bodies and caps are joined automatically in the joiner blocks. 12. Finished capsules are pushed onto a conveyer belt which carries them out to a container.

13. Capsule quality is monitored throughout the production process including size, moisture content, single wall thickness, and color. 14. Capsules are sorted and visually inspected on specially designed R&J Inspection Stations. 15. Perfect capsules are imprinted with the client logo on high-speed capsule printing machines. Capsules are now ready to be sterilized and packaged.

S.No. Items A. CATTLE BONE B. REAGENTS: 1.Pharma grade sugar 2.Sorbitol 3.Propylene glycol 4.Soluble dyes/ pigment 5.Flavour(Different types) 6.Glycerine 7.Methyl Paraben 8.Propyl Paraben 9.Titanium dioxide 10.Others C. PACKAGING MATERIALS 1.Printed Aluminum foil (thin size) 2.Labeling Cartoon 3.Packaging cartoons 4.Printing Ink 5.Packing label, seal gum, ink etc. 6.Miscellaneous Qty (kgs) 2000 Rate/kg 4 Amount in Rs. 8000

90 72 72 54 72 90 72 72 126

32 42 80 1200 1200 190 400 600 350

2880 3024 5760 64800 86400 17100 28800 43200 44100 60000

260 120000 3600 50

200 2.20 6.00 1826.72

52000 264000 21600 91336 20000 15000




Marketing strategy

Target market 
Pharmaceutical industries of Nepal producing capsule dosage forms  Thirty eight Pharmaceutical companies of Nepal.

S.N. 1

Name of the company Asian Pharmaceuticals P. Ltd

Location Butwal

2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21

Arya Pharma Lab P. Ltd Amie Pharaceuticals Pvt. Ltd. Alive Pharmaceuticals Pvt. Ltd Alliance Pharmaceuticals Pvt. Ltd Amtech Med Pvt. Ltd Apex Pharmaceuticals Pvt. Ltd Birat Pharma Lab Pvt Curex Pharmaceuticals P. Ltd CTL Pharmaceutical P. Ltd Chemidrug Industries Private Limited Concept Pharmaceuticals (Nepal) Private Limited Deurali ±Janta Pharmaceutical Denium Laboratiories Private Limited Dingla Pharmaceuticals Pvt.Ltd. Elder Universal Pharmaceuticals (Nepal) Pvt. Ltd Everest Pharmaceuticals Private Limited Florid Laboratiories Private Limited G.D. Pharmaceutical P. Ltd Hukum Pharmaceuticals P.Ltd Lomus Pharmaceuticals P.Ltd

Birgunj Dhanusa . Sunsari Bara Morang Birgun Biratnagar Banepa Bhaktapur Kathmandu, Birgun Kathmandu Birgunj Biratnagar Rupandehi Kathmandu Lalitpur Birgunj Bhaktapur Kathmandu

22 23 24 25 26 27 28 29 30 31 32 33

Manoj Pharmaceutical Works Mark Formulations Pvt. Ltd. Nepal Pharmaceutical Laboratory Private Limited Omnica Laboratories Private Limited Pharmaceutical Company of Nepal Private Limited Pharmaco Industries Private Limited. Quest Pharmaceuticals Private Limited Nepal Drugs Limited Shiv Pharmaceuticals Laboratories Siddhartha Pharmaceuticals Pvt. Ltd. Simca Laboratories Private Limited S. R. Drugs Laboratories Pvt. Ltd.

Dharan Kathmandu Bara Bhaktapur Bara Kathmandu Bara Kathmandu Dharan Rupandehi Bhaktapur Satungal,


Sumy Pharmaceuticals P. Ltd



Time Pharmaceuticals Private Limited



Unique Pharmaceuticals Private Limited



Vijaydeep Laboratories P Ltd



Vijaydeep Pharmaceuticals P Ltd



National Health Care Private Limited


Customer motivation to buy
1.Less volume: less holding costs
Indian companies provide shell in greater than 10 lakhs units per order, but even for the known large industry of Nepal, the required quantity of empty shells for one batch is not more than 5 lakhs. so this causes major demerits like: 
  Stock increases causing large capital lockup Cost for storage increases Chance of damage or degradation of capsule shells

2.Timely available:
Indian suppliers are unable to supply emergency demand quickly. In such case, if there are domestic suppliers,then emergency demand can be met in time.

3.Compensation facilities:
Quality failure problems which the Indian companies are not willing to compensate for can be the motivational factor if we can provide compensation facilities.

Market size and trends 
Market size:
If we can address many of the problems faced by Nepalese industries, then our market can be all pharmaceutical industries of Nepal i.e.37 industries 

Market trend:
2 to 3 industries have been establishing within 10 to 15 yrs so our market is growing.

Advertising in TVs, Radios, and Newspapers: not effective
The major advertising media are:  Door to door.    Pharmaceutical journals e.g. DDA journals. Internet. Programs like promotional events, seminars etc.

Media cost:
Advertisement in journals: Exhibitions and Seminars: Internet: Others: 1,20,000/yr 2,20,000/yr 60,000/yr 1,00,000/yr

Frequency of usage: 
   Pharmaceutical journals: published every month Internet: regular basis Seminars: six months Door to door: regular basis.

Cost- plus pricing strategy 
Establishes a price composed of direct materials, direct labor, factory overhead, selling and administrative costs plus the desired profit margin  Cost stucture including fixed and variable costs: discussed in financial forecast.

Desired image in market:
Quality can¶t compromised with price so the company tries to make the customers satisfied in terms of service and convenience. Thus we desired our image as a ³company which provides high quality products at a price which the customers are willing to pay giving major emphasis on service and convenience´.

Comparison against competitor¶s prices 
The major competitors are Indian companies.e.g 
Sunil healthcare limited Bio-caps india ltd. Erawat pharma ltd. Saviour caps pvt. Ltd. Associated pharmaceuticals pvt.Ltd. 

Price of Imported: Rs 0.18/unit.  Price we set: Rs 0.2/unit.

Channels of distribution:
Manufacturer Customer

Locations and layouts

Birgu nj
Adarshnag ar

Parsa district Narayani Zone

Central development region


Demographic analysis of location vs target customers Adarshanar of Birgunj :selected as the right location because of the following reasons:  Most of the pharmaceutical industries are located nearby the Birgunj area.  Minimize transportation cost  Easy availability of raw materials and easy supply of finished goods.  Easy to fulfill the emergency demands.  Less incidence of damage of quality during transportation  Cheap land cost.

Traffic count:
The number of pharmaceutical industries in this location is dense.

Manufacturing costs:
Constructing building is the best option for us. Need about five ropanees of land that costs 50 lakhs and other facilities cost Rs. 1 crore.

Labor needs:
Laborers needed for our industry are available locally with low labour costs. Labour cost per person costs Rs. 500 per month.


Example of Materials and People Flow
Arrival of goods Entrance for visitors Entrance for workers Shipment of goods

QC Incoming goods Corridor Corridor Raw Materials & Packaging Weighing Storage

Offices Gowning

Canteen Shipping
Material flow


People flow



Finished Products Storage

Zone: clean

Zone: packaging

Machine Shop Corridor Waste Treatment

Zone controlled

Utilities and Services

Competitor Analysis
Existing competitors 

Competitor Analysis
large market area high quality less cost/unit high market share consistency

Long lead time no provision for compensation quality failure during supply No supply during emergencies no interaction with the Nepalese companies

Potential competitors 
New manufactures may enter the field once our business stars making profits.  Remedy: 
Contract supply arrangements with industries assuring supply of product of consistent quality. Offer packages like charging only for 8 units out of ten supplied.

Description of management team 
Administrative head (CEO) (M. Pharm & MBA with 10 years of experience) responsible for handling the overall institution and is at the highest level of authority.  Production manager: M. Pharm with 5 years experience in production  Quality control manager :M. Pharm with 5years experience in quality control  Marketing Manager: B. Pharm with experience in marketing  Chief Administrator: MBA/ MBS with 5 years experience

Description of management team 
Other members are:  Chief Accountant: BBA/ BBS  Pharmacist: B. Pharm.  Plant Engineer: Electrical or Mechanical engineer.  Store Keeper: Diploma in Pharmacy

Plan of Operation
A. Form of Ownership  A partnership firm  Partners (co-owners) share an equal amount of business¶s assets, liabilities and profit  Partners will share profit/loss equally Name:  Nibedan Baral  Manoj Bhattarai  Mahesh Raj Nepal  Maheshowor Thapa  Jayaram K.C. Owner¶s equity : 32.25% (2crores) LTL and LTL : 67.74% (4 crores and 20 lakhs )

Plan of Operation
B. Company Structure 
The organizational chart of the industry will be as in the chart given below.







C. Decision Making Authority  Equal authority to make decisions  In case of obligations an immediate meeting will be held  The decision is authorized to be valid if any three of the spokesperson in meeting agrees D. Compensation and Benefits Packages  Compensation packages for industries will be the returning of their sums and providing them with the new packages.  If any industries buy whole-sum quantities at a time then they will be provided with the special discounts.

Investment The total investment required to set up the proposed project is Rs. 613600000. The plant shall operate on single shift per day and 300 days per annum. The fixed assets investment is Rs. 4664600. 00 and the working capital is Rs.4993800 for the initial year of operation Projection Span The financial projection has been made for a period of 5 years. Construction Period Financial projection have been made assuming one year for construction period. Capacity Utilization The capacity utilization of the plant has been assumed to start from 80 percent in first year and annual increment at the rate of 10 percent for 2 subsequent years. Interest Rate Long-Term loan (NIDC Commercial Bank) 12% Short-Term loan for working capital commercial Bank 12% 




Depreciation The following rates have been taken into account for depreciation calculation: For building and civil works 5% For plant and machinery office equipment 10% For furniture and fixture 20% Vehicle 15% Income Tax A full exemption of tax is assumed for first five years of operation. Then tax payment is assumed at 50 percent of net profit. Insurance rate The insurance of fixed assets excluding land and pre-operation expenses is calculated at five percent. 


Financial Analysis and Its findings
Projected profit and loss The projected profit and loss statement shows the net operating profit after deducting all expenses including corporate taxes at various capacity of operations which shows highly satisfactory results. Cash flow Projection The internally generated funds are sufficient to meet the debt service obligation. Balance Sheet Analysis The projected balance sheet analysis indicates a satisfactory financial position of the company. Break ±Even Analysis The commercial break even of the project is at 26.33%. The project will start making profit if operated above commercial break-even point i.e. above 26.33%. 


Break ±Even Analysis  The commercial break even of the project is at 26.33%. The project will start making profit if operated above commercial break-even point i.e. above 26.33%. Pay Back Period  The Pay back period calculation shows that the project gets it investment after four years and four months approximately. Sensitivity analysis on BEP  Sensitivity analysis of BEP on the fluctuation on raw material cost and revenue shows that the project seems more sensitive on sales price. Conclusion  From the financial point of view the project is viable and merits investments

BREAK EVEN POINT (@ 100% Capacity Utilization)

Depreciation Interest on Long term Loan Insurance Office Overheads Fixed Electricity Charge Indirect Labour 2438 3600 680 610 225 2193.6

VARIABLE COST Material & Consumable Utilities Variable Overheads Direct Labor Repair and Maintenance Sales Promotional Expenses Interest on Short term Loan 978 735 150 835.2 355.6 500 1440


 Ratio of Variable cost to Total Sales = 4993800/42000000 =0.1189 Rs. 0.1189 out of every sales rupee is used to cover variable expenses Break Even Point = Total fixed cost Contribution margin expressed as % of sales 9746600 .8811 = 11061854.5 BEP (Sales) = Rs. 11061854.5 BEP (Units) = 55309272.5 = 

Break Even Selling Price = (Var. cost/unit*Total Sales) +Total Fixed Cost Total Sales = 9746600 + (0.02378*210000000) 210000000 = Rs. 0.07019238

Sales revenue 42000 Annual Operating Cost 14740.4 Fixed Cost Variable Cost Raw Material and input Cost 828 BEP = 9746.6*100 (42000-4993.8) =26.33 9746.6 4993.8

A. If 10% increase on the Raw Material Cost BEP = 9746.6*100] (42000-5077.6) 26.39


B. If 10% decrease on the Raw Material Cost BEP = 9746.6*100 (42000-4910.) = 26.27% 

C. If 10% decrease on sale price BEP = 9746.6*100 (37800-4993.8) = 29.70% 

D. If 10% increase on sale price BEP = 9746.6*100 (46200-4993.8) = 23.61%

Year 1. Loan at the beginning (L) 2. Repayment on annual basis ( R ) 3. Interest Payment @ 12% 4. Loan at the end of the year 5. Debit Servicing 1 2 3



30000 28000 24000 18000 8000 2000 4000 6000 10000 8000 3600 3369 2880 2160 960 28000 24000 18000 8000 0 5600 7369 8880 12160 8960

Operating Years Capacity Utilization Sales Revenue Less: Operating Cost Gross Op rating Profit Less: Maturities Profit Before Interest & Tax Interests Profit Before Tax Less: Tax 50% Profit After Tax Cumulative Saving 1 80% 33600 9700.4 23899.6 14000 9899.6 5040 4859.6 2429.8 2429.8 2429.8 2 90% 37800 9931.4 27868.6 16000 11868.6 4809 7059.6 3529.8 3529.8 5959.6 3 100% 42000 10420.4 31579.6 18000 13579.6 4320 9259.6 4629.8 4629.8 10589.4 4 100% 42000 11140.4 30859.6 22000 8859.6 3600 5259.6 2629.8 2629.8 13219.2 100% 42000 12340.4 29659.6 20000 9659.6 2400 7359.6 3629.8 3629.8 16849 5 100% 42000 13300.4 6 100% 42000 13300.4 7

28619.6 12000 16619.6 1440 15179.6 7589.8 7589.8 24438.8

28619.6 12000 16619.6 1440 15179.6 7589.8 7589.8 32028.6

Y rs C p it 0 tiliz tion 0 80 1 90 2 100 3 100 4 100 5 100 6

A CASH I FLOWS 1 E uit on . Fix d ss ts . or ing C pit l 2 Long t r Lo n 3 ort t r Lo n 4 ross p r ting rofit Tota I flows B CASH OUTFLOWS 1R p 2R p 3 Int r 4 Int r 5 or 6T x m nt of TL m nt of LTL st of TL st on LTL ing C pit l

17000 30000

0 3000 0 12000 23899.6 38899.6

0 3000 0 12000 27868.6 42868.6

0 3000 0 12000 31579.6 46579.6

0 3000 0 12000 30859.6 45859.6

0 3000 0 12000 28619.6 43619.6

0 3000 0 12000 28619.6 43619.6

47000 47000

0 12000 2000 1440 3600 14573 2429.8 47000 0 0 29842.8 2856.8 2856.8

0 12000 4000 1440 3369 14656.6 2529.8 34995.7 3873.2 6730

0 12000 6000 1440 2880 14740.4 4629.8 41690.2 4889.4 11619.4

0 12000 10000 1440 2160 14740.4 2629.8 39370.2 6489.4 18108.8

0 12000 8000 1440 960 14740.4 3629.8 38370.2 5249.4 23358.2

0 12000 0 1440 0 14740.4 7589.8 35770.2 7849.4 31207.6

C Total Outflows D t Cash flow

E Cumulativ Cash flows

Operati g Years 1 2 3 4 5 Ca acity Utili ation 80 90 100 100 100







1. Curre t Assets 2. A umulate Cas Bala ce 3. Net Fixe Assets

14000 2856.8 34952

16000 6730 32257.9

18000 11619.4 29951.06

22000 18108.8 27872.22

20000 23358.2 25995.00







1. Curre t ia ilities 2. ong Term oa 3. Owners Equity 4. Retai e Savi g

12000 2000 35379 2429.8

12000 4000 33028.3 5959.6

12000 6000 30981.06 10589.4

12000 10000 32761.82 13219.2

12000 8000 32504.2 16849


Operating Year a. b. c. d. Net Profit Maturities Financial Cost Profit (a-b-c)



3 31579.6 18000 4320 6259.6 12178.8 -26402.4

4 30859.6 22000 2520 2259.6 15518.4 --10884

5 29659.6 20000 2400 4259.6 18698 7814

23899.6 27868.6 14000 16000 5040 4809 1859.6 1859.6 -46360 4059.6 5919.2

Cumulative Profit Pay-Back Period

-44500.4 -38581.2

Years 1 2 3 4 5 6

Capacity Utilization 1 Debit Service Coverage a. Gross Operating Profit b. Maturities and Interest 2 Current Ratio a. Current Assets b. Current Liabilities 4 PAT / Sales a. Net Profit b. Sales Revenue

80% 1.087 20705.2 19040 1.166 14000 12000 2.47 832.6 33600

90% 1.172 24402.4 20809 1.33 16000 12000 4.75 1796.7 37800

100% 1.221 27259.6 22320 1.5 18000 12000 5.88 2469.8 42000

100% 1.064 27259.6 25600 1.83 22000 12000 1.97 829.8 42000

100% 1.216 27259.6 22400 1.667 20000 12000 5.78 2429.8 42000

100% 2.028 27259.6 13440

16.45 6909.8 42000

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