EXECUTIVE SUMMARY

It has been a good learning experience to do the detailed project report on setting up of the Handicraft industry in the RIICO industrial area, Jhunjhunu as a part of my MBA program. The study has been made an attempt to gain better understanding about how actually the manufacturing plant is set up. Under this, at first I generated the product idea of handicraft, matching with my profile. The main objective of the project is to the study the feasibility analysis of the handicraft manufacturing plant. After the idea generation, the industry analysis at both the global and domestic level was done to understand the market trends and other factors. Then the market analysis was done through the survey in form of questionnaires and interviews of the manufacturers. After this using the statistical techniques did the demand analysis. With this the demand estimation, the technical analysis was done. After completing the technical analysis, the financial analysis was done to check the financial feasibility of the project. It involved the preparation of cash flow statements, working capital requirement schedules, profitability statements and the balance sheets of 3 years. This provided the data for using the performance indicators and other capital budgeting techniques. Lastly, the risk analysis was done to estimate the risk involved in the project. On the whole it was a wonderful experience & a great learning opportunity. The complete project was an eye opener which added to my theoretical knowledge. There were times when I was disheartened & disappointed, but there were times when things went right & made me feel proud. Success does not come at once; one has to start right from the scratch & struggle his way through all hardships with courage & determination.

1

PROMOTER’S IDEA

The idea of handicraft manufacturing was conceived by looking the aptitude & qualifications of the conceiver (myself).

Qualifications:
- MBA in Marketing & HR - BCA Along with the above qualification belongingness to a Business, family will support my project. • The idea was generated as my Uncle is a manufacturer and exporter of wooden handicraft. So this project would provide me an in-depth knowledge to set up a handicraft-manufacturing mill in Jhunjhunu. • • The Indian Handicraft Industry is showing continuous growth rate of 15% every year. The profitability with which the current firms are running nationally as well as internationally is also one of the factors for conceiving the idea of handicraft manufacturing mill. Thus, taking all of the above factors into account the idea of setting up a handicraftmanufacturing mill was established.

2

FIRM AND PROMOTERS

Firm:
The firm namely Shekhawati Handicrafts, Jhunjhunu will be a sole proprietorship firm and will function from Jhunjhunu under the concerned person’s name (myself).

Promoter:
Decision for entrepreneurship is promoted by 5 major reasons. These are:

Personal Characteristics

Personal Environment

Personal Goals

Decision to Behave Entrepreneurially Business Environment

Idea

Moreover, it is an Idea/Innovation that leads towards Entrepreneurship i.e.; idea comes first and entrepreneurship follows afterwards.

3

HANDICRAFT

Introduction
Handicrafts are unique expressions and represent a culture, tradition and heritage of a country. The Handicraft Industry is one of the important productive sectors. Various attempts have been made to define this broad and diversified industry. The following definition strives to cover diversity and complexity of Handicraft Industry. Defining Handicrafts: Definition According to United Nations Educational, Scientific and Cultural

Organization/Information

Technology

Community

(UNESCO/ITC)

International

Symposium on “Crafts and the International Market: Trade and Customs Codification”, Manila, Philippines, October 1997: Handicrafts can be defined as products which are produced either completely by hand or with the help of tools. Mechanical tools may be used as long as the direct manual contribution of the artisan remains the most substantial component of the finished product. Handicrafts are made from raw materials and can be produced in unlimited numbers. Such products can be utilitarian, aesthetic, artistic, creative, culturally attached, decorative, functional, traditional, religiously and socially symbolic and significant. Definition according to Govt. of India: Handicraft can be defined, which is made by hand; should have some artistic value; they may or may not have functional utility.

Importance of Handicrafts:

The Cultural Importance: Handicrafts play very important role in representing the culture and traditions of any country or region. Handicrafts are a substantial medium to preserve of rich traditional art, heritage and culture, traditional skills and talents which are associated with people’s lifestyle and history.

The Economic Importance: Handicrafts are hugely important in terms of economic development. They provide ample opportunities for employment even with low capital investments and become a prominent medium for foreign earnings. 4

5 .

These countries are focusing on the development of handicraft industry. handicrafts are as high as the mechanized products in quality and volume. and there is huge market potential in all Indian cities and abroad. and are a major source of their foreign earnings. Handicraft industry is a major source of income for rural communities employing over six million artisans including a large number of women and people belonging to the weaker sections of the society. There has been consistent growth of 15% over few years and the industry has evolved as one of the major contributor for export and foreign revenue generation. The industry is spread all over the country mainly in rural and urban areas. The Indian handicrafts industry is highly labour intensive. For instance. history and traditions. During recent years. The 90-95% of the total industrial products of the world is produced in small workshops run by less than 100 people. India is one of the major producer and supplier of Handicrafts products in the world. has considered 84% of its industries as small and medium scale industries. India has been major producer and supplier of handicrafts products since very long time. Japan. In countries such as India and China. cottage based and decentralized industry. The Handicraft sector is highly creative sector and produces large variety of crafts products. in order to strengthen the economy. This industry is localized segment of the domestic and international market. In India the production of craft products are done on both large and small scale. The small-scale industries including handicrafts can play a major role in the development of the economy of both developed and the developing countries equally. but it has evolved as one of the major revenue generator over the years. Through this flexibility the demand and supply can be managed Hough Indian Handicraft industry is considered a cottage industry. the importance of handicrafts has been surged due to their cultural and financial values.Industry Analysis India is a country of rich culture. 6 . Before the industrial development. Because of low capital investment people can start their business on small scale. this art and industry was a potential economic advantage for the country. Most of the manufacturing units are located in rural and small towns. which is at the peak of the economic development.

there is need to have greater technological support and innovativeness with the uniqueness in industry. • According to the national census of handicrafts. reach of people belonging middle and lower middle class. 134129.2 millions. Major parts of industry operates in rural and semi urban areas throughout the country and has potential Indian and International market with around 67000 exporters to tap the market. which are beyond. Handicrafts industry is one of the important segments of decentralized sector in India. There is poor promotion for craft products in national market. quality and delivery for different segments. Key Facts of Indian Handicrafts Industry • India’s rich cultural diversity and heritage provides a unique and huge resource for developing craft products. • This Industry provides huge employment opportunities to artisans that include women and people belonging to backward and weaker society.1. some part of Indian market are still untapped and market is price sensitive. • Products are high priced in big and metro cities.Rs. • • • Craft producers have to compete on price. Industry’s share in India's exports:. There is lack of awareness about new traditions and among craftsmen and there is need of technological support and training. 213 Crores.2% The total exports of crafts items: . • • • • India’s contribution in world market is 1. To match the demand and supply with quality.51 % In spite of having diversified products. 7 . • • • The Indian Handicraft Industry is showing continuous growth rate of 15% every year.There is huge demand for the Indian Handicraft products in both national and international market. This is one of the major sources of income there. undertaken by the National Council for Applied Economic Research the value of handicrafts produced last year were of Rs 26.

Bronze Sculpture. Zari goods. There is large product variety and range is available because of diversified culture. 8 . Less interest of young people in craft industry. Embroidered and crocheted goods. Easy creation and development of production centres. Need low capital investment. It has strong. Diversified product range that service different market. Hand printed textiles. Wood ware. and handicrafts have various applications. Handicrafts products can be distinguished into following: Metal ware. It is the potential source of foreign revenue because of higher export. Paintings. Products are high value added. Leather Products and other (are u going to produce all these ) miscellaneous handicrafts. Imitation jewellery.Classification: Handicrafts industry comprises diversified products portfolio and there is large variety available in market. SWOT Analysis Strengths: • • • • • • • • • • • • • Large. Inadequate information of current market trends. Bamboo products. Unawareness about international requirements and market. Still confined to rural areas and small cities and untapped market. Earthenware. diversified and potential market. Weaknesses: • • • • • • • • Lack of infrastructure and communication facilities. Industry provides potential sources of employment. Carpets. Lack of skilled labour. Inadequate information of new technology. Low barriers of new entry. Lack of co-ordination between government bodies and private players. There is flexible production flexibility. Marble Sculpture. diversified and supportive retail infrastructure. Shawls. Jute products. Cheap labour rates that result to competitive price. There is no need for macro-investment.

South Africa. Developing fashion industry requires handicrafts products. Better Trade terms offered by competing countries. Limitations of Handicraft Industry • Inspite of having diversified products. Lack of Technological support and training. There is poor promotion for craft products in national market. Increased and better technological support and R and D facility in competing countries. quality and delivery for different segments. It is difficult to balance the cultural and commercial value of handicraft products. which are beyond the reach of people belonging middle and lower middle class. Britain. Inadequate supply chain management and distribution reduces the sector’s commercial viability and economic sustainability.• Lack of promotion of products. Products are high priced in big and metro cities. Quality products produced by competing countries like China. • • • • Threats: • • • • Competition in domestic market. some part of Indian market is still untapped and market is price sensitive. paper making etc. E-Commerce and Internet are emerged as promissory distribution channels to market and sell the craft products. Canada. 9 • • • • • • • • • . There is shortage of skilled craftsmen and labour to match the competition. There is lack of awareness about new traditions and among craftsmen. Opportunities: • Rising demand for handicraft products in developed countries such as USA. Germany. Italy etc. ceramics. France. Craft producers have to compete on price. Lack of Research and development for key handicraft sectors like. Real Estate that offers great requirements of handicrafts products. Development of sectors like Retail. Development of domestic and international tourism sector.

Promotion of Indian Tourism to attract the foreign customers. Craft Forums and advertisements. Through improving labour productivity in a high labour intensive and price competitive market. Possible Initiatives should be taken to overcome the limitations of industry • The primary objective is to create an environment that helps the industry to compete on the global basis. Inadequate material testing and performance measurement. product durability and reliability. Transportation infrastructure should be improved to access the untapped market that would be beneficial to reduce the transportation cost. Technological Development. There should be proper balance between cultural and commercial value of craft products to sustain business opportunities. There should be optimized distribution network and supply chain management. There are inadequate training centres to develop skilled craftsmen. To build the environment that will focus on: Wealth Creation. There should be market platform for craft producers belonging to rural areas to market their products. Inappropriate energy supplies to rural and sub-urban areas. Increased Private participation in industry. to enhance the sector performance. database. 10 • • • • • • • • • • • • • . Infrastructure Development. Training. Promoting Partnership and collaboration with private sector. Untapped and inaccessible market due to poor transportation infrastructure. and marketing and distribution solution. Development of electronic platform by using internet to provide information. There should be more trade shows to facilitate craft producers to access the market. Developing technologies to recycle natural resources to produce new products and ensure waste minimization. and Poverty Alleviation etc. More training centres should be opened to provide proper training to craft persons. • • Awareness should be increased among craftsmen and customers through Trade Events. Seminars.• • • • • Lack of ability to produce in large scale and create economies of scale. Promotion of cultural tradition and heritage.

or with the use of simple tools. Set the Costing and Pricing with Quality taken to be consideration Cost Effective Distribution Development using both Physical and Electronic Distribution Channels (Internet. 11 . e-Commerce) Both National and International Market Development for better Export and Foreign Revenue. Investment in fixed assets does not exceed Rs 60 lakhs. Hiring skilled manpower. provide training and awareness about latest technology and market trends. Indian wooden handicrafts reflect unmatched workmanship. • • • • • Wooden Handicraft Industrial Overview Wooden handicrafts are specialized skills passed on from one generation to the next. Value Addition Model The performance of Handicraft Industry can be improved and the greater value addition can be done by implementing following model: • • • • • Identify the Potential Market Making Effective Business Plan and Refinement in existing business Test Marketing to test the initial potential of new products in market Effective Operational and Technological Up gradation Hiring skilled manpower. fine designs. Cost Effective Production. provide training and awareness about latest technology and market trends and effective management. a small scale industry is defined as an industry that is: • • Not registered under the Factory Act. This makes India one of the chief exporters of wooden handicrafts in the world market. and subtle elegance. The term 'wooden handicrafts' refers to a wide range of wooden items carrying utilitarian and artistic value that are made by hand.• Through using low cost production methods the sustainability of small business can be improved. According to the classification of Indian industries. and Packaging. Maintain Quality Standards.

It represents the rich culture. Most of the part of industry operates in rural and semi urban areas throughout the country and have large and potential in Indian & International market. and form an important export commodity of India. sericulture. coir. Role in Indian Economy The wooden handicrafts industry plays an important role in the Indian economy. The Indian Handicraft Industry is showing continuous growth rate of 15% every year and it is one of the most important segment of decentralized sector in India. It employs about six million artisans. traditions and heritage. Wooden handicrafts fall in the category of small scale traditional industries. The wooden handicraft sector provides a high ratio of value addition. Indian wooden handicrafts are much sought after the world over. India’s rich cultural diversity and heritage provides a unique and huge resource for developing craft products. including people belonging to the weaker sections of society. Industry provides ample opportunities for employment to people belonging to backward and weaker classes of society. This industry requires low capital investment and other resources. and has emerged as one of the major sources of foreign exchange earnings for India. Indian Handicraft Industry provides wide range of products because of country’s diversified culture. khadi. Conclusion: The Indian Handicraft Industry stands a unique place among all other industries. The Indian wooden handicraft sector is the second largest employment provider (after agriculture). and handicrafts. It has shown continuous growth at the rate of 1520% over the years and contributes major role for export and foreign earnings. Traditional industries like handlooms. 12 . but it has shown promising growth and evolved as one of the major revenue generator over the years. However. There is huge demand of Indian Handicraft products in international market. Indian Handicraft Industry has the status of cottage industry in India. Although India's handicraft exports show a consistent increase of fifteen percent every year.Small scale industries are classified into two categories: • • Modern small scale industries like power looms etc. Women constitute a large section of the handicrafts industry. its share in the international market is not more than two percent. tradition and heritage of India.

Lack of Infrastructure & Technological support. Lack of awareness of international and new trends and Poor Promotional campaigns are a few drawbacks of industry which needs to be overcome.Low capital investment. Flexible Production are few important features of Indian Handicraft Industry. 13 . Cheap and skilled labour. It is estimated that Handicraft Industry in India is all set to grow with rapid rate in future and contribute its share towards economic development handsomely. Diversified product portfolio. However.

customer preferences and their satisfaction level. 14 . Research Instruments: Questionnaire (See Annexure I) was used to collect the data on both the sensitivity of demand and supply. Secondary data regarding world demand and supply positions.MARKET ANALYSIS Geographical Area Jhunjhunu (RIICO Industrial Area) Objective of the survey • • To know about the market potential for the handicraft To analyze the handicraft manufacturing. sampling plan was prepared. 2. • To find out the major players in the market Source of Information Primary (Market Survey) and Secondary data Methodology Adopted: Research plan was developed through conclusive research design using descriptive research analysis methods by survey as detailed below: Research Approach: 1. After deciding the research approach and instruments. its competition. Primary data for gathering information regarding manufacturing requirements and facilities available at Shekhawati region was collected by personal interview with different manufacturers selected on the basis of random sampling survey method. Indian Handicraft status and other relevant information were gathered from different websites. customer preferences and to know the market potential and future growth.

Information collected from Manufacturers Questionnaire wise Q.Sampling Procedure: Simple random sampling method was used for survey on representative basis.1 Variety of handicraft item you manufacture? (a) Chairs (b) Tables (c) Book shelves (d) Decorative items (e) All of the above Chairs Tables Book shelves Decorative items All of the above 0 0 0 2 18 15 . Sample Size: 20 handicraft units Contact Method: Personal interview with each of the manufacturer and raw material suppliers was conducted.

bookshelves etc. Gujarat All of the above Import from other countries 1 2 4 2 11 The raw material is acquired from all the places like Bihar . tables. Q. U.order point (a) Weekly 16 .2 From where you acquire the raw material for wooden handicraft? (a) Bihar (b) U.P.P.3 Your Re. . Gujarat etc.As the above analysis shows that 90% manufacturer are manufacturing all the major items like chairs. some part of raw is also available in Rajasthan. Q.P. (c) Gujarat (d) All of the above (e) Import from other countries. but the analysis shows that most the wood is purchased from U.P. if yes specify Bihar U.

Order size (a) 400 – 500 units (b) 500 – 700 units (c) 700 – 1000 units (d) 1000 and above 400-500 units 500-700 units 700-1000 units 2 15 2 17 . Q4.(b) Fortnightly (c) Monthly (d) As required Weekly Fortnightly Monthly As required 3 0 4 13 As the analysis shows that most of the manufacturers keep inventory as per the requirement.

Q.1000 units and above 1 As the above analysis shows that most of the manufacturer gets the avg. order 500-700 units per month. Who bears the transportation cost? (a) Supplier (b) Yourself Suppliers Yourself 4 16 18 .5. There are only 20% manufacturers who get the orders above 700 units per month or 1000 units per month.

An analysis show that mostly cases manufacturer bears the transportation cost.7 Which type of wood is more in demand in manufacturing? (a) Babul/Aakashiya (b) Shisham (c) Pine (d) Teak (e) Mango 19 . Q.6 Which type of handicraft item is more in demand? (a) Wooden (b) Glass made (c) Metal made Wooden Glass made Metal made 9 4 7 Wooden items are more in demand because 45% of respondent said that wooden item is more in demand. Q.

Babul Shisham Pine Teak Mango 7 9 1 1 2 In answer of this question 45% respondent said that shisham is more in demand after shisham. Q. babul made handicraft is more in demand.8 what level of Inventory you keep? (a) (b) (c) (d) 15 days 30 days 2 months 4 months 15 Days 30 Days 2 Months 4 Months 1 16 3 0 20 .

9 From where you get the skilled workers? (a) Saharanpur (b) Barmer (c) jaisalmer (d) Locally Saharanpur Barmer Jaisalmer Locally 4 1 1 14 21 . Some manufacturer also keep 2-month inventory. Q.The analysis shows that most of manufacturer keep 30 days inventory.

Q. Some part of labour comes from Saharanpur also.10 On which basis you appoint the workers? (a) Contractual basis (b) Monthly basis Contractual basis Monthly basis 14 6 22 .The analysis of this question shows that mostly skilled are locally available.

There are only few manufacturer who provide medical and canteen facility to their employees.11 What type of facility you provide to the worker to retain them? (a) Housing (b) Canteen (c) Bonus (d) Medical Housing Canteen Bonus Medical 5 1 12 2 In the answer of this question respondent said that they provide mainly bonus to their employees to retain them some manufacturer provide housing facility also to their workers.Most of manufacturer appoints workers on contractual basis. Q. Q.12 What mode of selling of handicraft you use? 23 .

As per analysis 85% respondents said that they are direct exporting their product.10% (c) 10% .15% (d) 15% .5% (b) 5% . Most of manufacturers go for direct export as per the data.20% 0% .(a) Through exhibition (b) Direct selling through retailer (c) Export Through Exhibition Direct Selling through Retailers Export 1 2 17 Mainly the mode of selling is through export. Q.5% 0 24 .13 How much margin you get while going for export? (a) 0% .

5% .15% 3 17 0 25 . 90% manufacturers are in favour of this. Only 10% said that they get only 10-15% profit margin if they go for export.14 How much margin you get while going for local selling? (a) 0%-5% (b) 5%-10% (c) 10%-15% (d) 15% -20% 0% .10% 10% .15% 15% .10% 10% .20% 0 2 18 If the manufacturer is going for export then the profit margin is 15-20% as per the analysis.5% 5% . Q.

As per the secondary data the demand of wooden handicraft is as follows: Total Demand in units = 9200000 units/year (on an average of all items listed below) Category wise demand of wooden handicraft: S. 00.000 4. the next step is to estimate the effective demand in the past and the present.000 5. 64.20% 0 If the manufacturer is going for local selling then they get 5-10% profit margin. 52.15% .000 11. No.000 units/year 26 . 84.000 11. Demand Analysis After conducting the market survey in the form of questionnaire and interview of the manufacturers. 40. 60.000 92. 04.000 24.000 18. 1 2 3 4 5 6 7 Items Chairs Dining tables Coffee tables Book shelves Sopha Bad Other decorative items Total export from India Item wise demand in unit/year 15. 96.

410 5. So the demand supply gap is: = 9200000-1900800 = 7299200 units/ year 27 .100 10.560units/month So annual demand of these 20 manufacturer is = 10560*12 = 126.800 units /year Demand-Supply Gap Estimation The demand of handicraft is 9200000 units/ year and the supply is 1900.800 units/ year.720 units/ year Total manufacturer of wooden handicraft in Shekhawati region = 300 Total supply = {300*126720}/ 20 = 1900.650 2.Supply: Area Sikar Jhunjhunu Jaipur Mundwa Manufacturer 1 5 10 4 Total supply by these 20 manufacturer Supply(units/month) 400 2.

The market is growing with a growth rate of 15 %. of shifts (In 8hrs/day) 1 1 1 1 1 1 1 Total Production (Units /year) 7200 7800 8400 9120 9840 10680 11640 2009 2010 2011 2012 2013 2014 2015 Marketing Channel Most producers do not sell their goods directly to the final users. The plant will run only in one shift. The marketing channels just not only serve the markets but they also make markets. These intermediaries constitute a marketing Manufacturers channel. These also decide my capacity as on the basis of the market demand my capacity will be 60% for 1st year & than will grow accordingly. The production and capacity related data will be: Year Operating capacity 60% 65% 70% 76% 82% 89% 97% No. this is the market for local brands. my product will replace 0. accordingly my production will be there. As 0. the existing marketing channel of the wooden handicraft manufacturers is as follows: Distributors 28 End Users . and Jammu & Kashmir. between them stands a set of intermediaries performing a variety of functions. On the basis of this survey.This gap is currently filled in by the manufacturers who are located outside Rajasthan which is fulfilled by nearby states like U.. Currently.082% of the total market is the potential market for my product.082% of the total demand.P. Demand Forecasting The information collected in market analysis is helpful in forecasting estimated demand for my product. Madras. So to fill this gap the handicraft manufacturing unit can be set up locally.

29 .

But in order to differentiate the product and capture the existing market and to develop strong customer base. Various strategies that will be used being a new entrant are:• Steady supply with timely delivery to fulfil the demand of the domestic area as well as outside area and good quality would be one of the strategic strength of the marketing plan. so as such the manufacturers incur no promotional expenditure. 30 . • So orders will also be taken online apart from fax and telephonically. • Besides from these efforts e-commerce is also a promotional tool for marketing of this product.Strategic Marketing Plan: Wooden handicraft is being an unbranded commodity. some strategic marketing plan is necessary to be designed and implemented. if the targets are achieved enormously. So I will do online selling also in order to promote my product. Sometimes they just increase the commissions or the margins of these. • Apart from good quality good designs are an important factor. These designs will be based on traditional pattern so that it can impress foreign customer.

• Raw wood available in the form of logs is cut into planks of desired thickness and length. Craftsmen inlay the wooden handicraft with metal. Chain saws are used to cut logs for large carvings. bone. Drills are primarily used to drill holes. The design is then carved into the wood with a carving tool. Let's take a peek at the actual process which goes into creating a piece of wooden handicraft. • 31 .Technical Analysis Process involve in manufacturing of wooden handicraft: A lot of skill and hard work goes into every piece of Indian wooden handicraft. and each handicraft is a masterpiece in its own right. Different pieces of carved wood are joined together to make complete. It mirrors Indian culture. enhancing the intricacies of the carved design. or wood which gives off a contrast effect. functional objects. Production Tools Indian craftsmen have a wide range of tools at their disposal. sawing. Some of them are as follows: • Saws: Powered by an electric motor. mixing paint etc. • • • • • • Production Time Wood carving is a time consuming process. and they are available with several attachments to perform sanding. A protective coating is applied with a suitable wood finish. depending on the stage of production. The time needed by Indian craftsmen to create carved wooden handicrafts may range anywhere from a week (for small items) to a few months (for large items which require elaborate carving techniques. Decorative patterns are first drawn on the wood with a pencil. The piece of wood is then seasoned to obtain a texture which is favourable for carving. Band saws are used to cut off scrap wood effortlessly.

They are used to make spherical. U-gouges have curved cutting edges which form a 'u' shape. They are used for outlining while carving intricate patterns. Wood-carving chisels have a sharp flat edge which is used to cut into the wood. • • • • Also known as parting tools. These tools are not specific and easily available at local market because it is manufactured locally. cylindrical or round objects.• Lathes are used to turn wood. Carving knives are also used to make the surface of the wood smooth. They are available in bent. and plates. Primarily used for whittling and chip carving. and spoon shapes. 1 1 9 5 5 2 1 3 1 1 Rate 200000 300000 30000 2500 7000 1500 25000 30000 3000 30000 Amount 200000 300000 270000 12500 35000 3000 25000 90000 3000 30000 968500 32 . They are handy while making vases. V-gouges are used to cut fine lines. and to round out the edges. Craftsmen use them to remove large pieces of unwanted wood. 1 2 3 4 5 6 7 8 9 10 Particulars Chemical treatment plant Seasoning plant Surface planner Grinder(small) Grinder(big) Driller Band show (aara machine) Gaze machine Ziksha machine Sanding machine Total: No. straight. hence the name. to define large shapes. No. Machinery Involved S. bowls.

800 6”*8” 48 200 Size 30”*60” 18”*20” 8”*10” 8”*10” Area 1800 360 80 80 Rate 200 200 200 200 Amount 3. No. Other necessary utilities used in plant are: ♦ Fans – 2 ♦ Tubelights-20 33 . these are available at competitive prices.000sq meters or 21529sq ft.60. Particulars Factory shed 2 stock room Guard room Power room Boundary wall Washroom 5 labour quarters Room Washrooms Office room Fire fitting Total 12”*10” 6”*8” 15”*12” 120 48 180 200 200 200 24000*5=120000 9600*5=48000 36000 39200 9. Location and site development  The area for setting up a handicraft manufacturing unit is decided after surveying all the potential areas.36. Therefore. Structure and Civil works: S. The rate of land is Rs 500sq meters (one side road plot). The location of plant will be in RIICO industrial area in Jhunjhunu district.000 72000 16000 16000 220000 9600 Utilities The important utility used in handicraft manufacturing is power. 1 2 3 4 5 6 7 8 9. 10. of area 2.These machines will be purchased from Ludhiana as many manufacturers are making these machines.

The highest demand is of shisham made wooden handicraft. This is made available by local wholesale timber merchant.18. The rates are Rs. U.500 Annually 60000 60000 54000*5 = 2.500 2. 30/sq ft.P. This is available in Gujarat. The rates of babool are Rs.000 45000*8 = 3. Teak: Rs. Labour Requirements Handicraft is a labour intensive product and it is all depend upon labour only and all kind of labour requirements are there like in this we need skilled . semi skilled and unskilled workers.) Per day 150 125 100 Per month 5000 5000 4500 3750 3.♦ Computer with laser printer ♦ Furniture comprise of – office table. 25 /sq ft.000 30.20 / sq ft Shisham: Most of wooden handicraft is made of shisham wood. & Bihar.000 30. 25 /sq ft Only Shisham will be used to manufacture wooden handicraft because it is more in demand and suitable for these type of handicrafts.70.000 9.000 36000*3 = 1.08. Materials Babool/Aakashiya: This is available in Rajasthan and some part of Gujarat.60. cello chairs. These are less demanded. Pine: Rs.000 2. So total requirements are as follows: Employees Production Supervisor Accountant Skilled Workers Semi skilled Workers Unskilled workers Peon Guard Total Number 1 1 5 8 3 1 1 20 Salary (Rs.000 34 . 80 /sq ft Mango: Rs.

Occasional bonus to skilled workers.  I will provide employment to their spouses based upon their ability.   Medical facility to all worker and employees. So I will give on time payments to retain my skilled worker.Strategy to appoint & retain employees  On time payment is a best retention strategy. 35 .  Housing facility: I will provide labour quarter to skilled worker who are not from local areas.

63. 36 .85.94. The installed capacity on this basis works out to 12000.71.30.90.) The construction period will last for one year.600 9.282 1.995 1.648 Cost in Rs 10.500 2.000 2.189 38.FINANCIAL ANALYSIS Cost of Project Particulars Land & Site development Building Plant & Machinery Other Fixed Assets Preoperative Expenses Preliminary Expenses Provision for Contingency WC Margin Total Means of Finance Particulars Promoter's Capital Long/ medium Term Loan from Banks Total Cost in Rs. 2.648 Basic Assumptions underlying Financial Projections The profitability and other projections may be prepared on the basis of following assumptions:1.800 9.95.445 38.) The company would work for 360 days per year on a 1 shift basis.85.203 25. 12.94.282 26.36.68.

16. The depreciation rates for company law purposes are as follows: Building Plant and Machinery Miscellaneous Fixed assets : 3. 15.) The current assets requirements are expected to be as follows:Raw materials Stock-in-process Finished goods Book debt : 30 days : 1 day : 4 day : 7 days 14.) The suppliers of raw material will provide trade credit for 15 days.) The bank finance for working capital will cost 12% interest rate.) The term loan will be repaid in 14 equal half-yearly instalments.) Wages and salaries are expected to be Rs 918000.3. 65% in the second year. 80I for 10 years from the initial year.34% : 8% : 5% 11.33% 12.) 9. The interest rate on the outstanding term loan will be 12%. 4. 5. 13.) The corporate tax rate is 30% p.) The company will start commercial production on July 1.) Factory overheads expenses will be Rs 32880 for the first year. 6. 37 .) Administration expenses will be Rs 360000 per annum. The income tax rate applicable is 30%. The expected capacity utilization will be 60% in first year. The depreciation rates for the income tax purposes are as follows. and 70% for the third year and so on. Further 10% of Gross Total income will be allowed as deduction for newly set up industrial undertaking under sec. of year 1.a. 7. 8.) The salvage value is assumed to be 5% of Fixed Assets. with the first instalment due at the end starting of first operating year. under the written down value method: Building : 10% Plant & Machinery & Miscellaneous Fixed assets: 33.

SALES FORECASTING Year Sales SALES FORECAST 2009 2010 3288000 3562000 2011 3836000 38 .

co.answers.htm 39 .com • www.ori.indianhandicraftexporter.in • www.wikipedia.in • www.nic.com • www.com • www.google.handicraftdpr.Bibliography • www.com • www.yahoo.

Annexure: 1 Questionnaire (Manufacturer) Name____________________________ Area of production_________________ Company name___________________ Year of Establishment___________________ 1) Variety of handicraft item you manufacture? a) Chairs b) Tables c) Decorative items d) Any other 2) From where you acquire the raw material for wooden handicraft? a) Bihar b) U.P. c) Gujarat d) Import from other countries 3) At what frequency do you order the raw material stock? a) Weekly b) Fortnightly 4) Order size a) 400-500 units b) 500-700 units c) 700-1000 units d) 1000 units and above c) Monthly d) As required 5) Who bears the transportation cost? a) Supplier b) Yourself 6) Which type of handicraft item is more in demand ? a) Wooden b) Glass made c) Metal made 7) Which type of wood is maximum in demand for manufacturing? 40 .

a) Babul/Aakashiya b) Shisham c) Pine 8) What level of Inventory you keep? a) 15 days b) 30 day d) Teak e) Mango c) 2 months d) 4 months 9) From where you get the skilled workers for the ornamental work? a) Saharanpur b) Barmer c) Jaisalmer d) Locally 10) On which basis you appoint the workers? a) Contractual b) Monthly basis 11) What type of facility you provide to the worker to retain them? a) Housing b) Canteen 12) c) Bonus d) Medical What mode of selling of handicraft you use? a) Through exhibition b) Direct selling through retailer c) Export 13) How much margin you get while going for export? a) 0%-5% b) 5%-10% c) 10%-15% d) 15% -20% 14) How much margin you get while going for local selling? a) 0%-5% b) 5%-10% c) 10%-15% d) 15% -20% 41 .

00 1.445 will be paid Interest for the 1st half year 155426 133222 111019 88815 66611 44408 22204 Interest for the 2nd half year 144324 122120 99917 77713 55509 33306 11102 Total interest for the term loan 299750 255342 210936 166528 122120 77714 33306 Annexure: 3 Working Capital Requirements Items Raw materials Stock in process Finished goods Book debts Total Current Assets Less: Margin for WC from long term sources (25% of RM CAs) Less: Trade credit for raw materials Bank finance for WC Norms in days 30.00 7. 90.00 42.Annexure: 2 Interest Term Loan 14 Equal Instalments @ 12% per annum Loan O/S Loan O/S at Loan O/S at Yea at the the end of 1st the end of 2nd r beginning half year half year 1 2590445 2405413 2220381 2 2220381 2035349 1850317 3 1850317 1665285 1480253 4 1480253 1295221 1110189 5 1110189 925157 740125 6 740125 555093 370061 7 370061 185029 0 Note: term loan of 25.00 4.00 1st year 62500 1837 14698 25722 104757 2nd year 67708 1990 15923 27866 113487 3rd year 72916 2143 17148 30009 122216 26189 62500 16068 1928 28371 67708 17408 2088 30554 72916 18746 2249 INTREST @ 12 % 42 .

Depreciation schedule for income tax purposes (WDV) Assets 1st yr 2nd yr 3rd yr Building 107335 96601 86941 Plant & machinery & Miscellaneous fixed assets (33. Asset Valuation for depreciation purpose Share of Share of Preoperative Contigency Basic cost cost margin 1063600 90435 64596 936800 79655 56896 968500 82349 58821 230000 3198900 19556 271995 13969 194282 Asset expenses Land Building Plant & machinery Miscellaneous fixed assets Total Total 1218631 1073351 2291982 263525 3665177 B.34% 40702 Plant & machinery 8% 85868 Miscellaneous fixed assets 5% 114599 Annual depreciation 16.Annexure: 4 Depreciation A. Depreciation schedule for company law purposes (SLM) Building 3.3%) Total 851750 959085 567862 664463 378593 465534 43 .34% 241169 C.

667 194282 1165670.50 2nd yr 12000 7812 65 3562000 1433120 812500 65000 520000 35620 444167 390000 54167 1684713 257430. Gross Profit Before interest E.93 3 3rd yr 12000 8476 70 3836000 1543360 875000 70000 560000 38360 478333 420000 58333 1814307 213185.33 3 194282 991832.50 241169 194282 1223419.50 787968. Total Financial Expenses *Interest on Term Loans *Interest on Bank Borrowings F. Provision for Tax K.000 255342 2088 241169 1186114. Retained Profit M .167 883279.500 883279. Admn & Selling Expenses *Admn Expenses *Selling Expenses D.933 241169 194282 1256721. Profit/ Loss Before Tax J.Add: *Depreciation *Preliminary Expenses W/O *N.933 821270. Profit After Tax L. Depreciation G. Net Cash Accruals 1st yr 12000 7200 60 3288000 1322880 750000 60000 480000 32880 410000 360000 50000 1555120 301678 299750 1928 241169 1012273 194282 817991 30022.167 241169 194282 1318730.333 170561.50 787968. Preliminary Expenses W/O I.Annexure: 5 Profitability Estimates (Estimates of Working Results) Installed Capacity Production Capacity Utilization A.167 44 . Cost of production *Raw Materials *Power *Wages & Salaries *Factory Overheads C.000 210936 2249 241169 1359952. Operating Profit H.667 282391.400 821270. Sales Realization B.

50 2nd yr 991832 241169 1233001 664463 568538 568538 170561.Annexure: 6 Tax Calculation 1st yr 817991 241169 1059160 959085 100075 100075 30022.50 2220381 16068 1365497.50 62500 5685131 2nd yr 1295203 1609238 1850317 17408 1555739 67708 6327918 3rd yr 1295203 2492517 1480253 18746 1745273 72916 7032005 3885661 3665177 3665177 241169 3424008 62500 1837 14698 25722 2059225 97141 5685131 3665177 482338 3182839 67708 1990 15923 27866 3031592 97141 6327918 3665177 723507 2941670 72916 2143 17148 30009 3968119 7032005 3665177 26189 194282 3885648 45 .40 3rd yr 1165670 241169 1406839 465534 941305 941305 282391.50 Profit/ Loss Before Tax Add: Depreciation for company law purposes Total Less: Depreciation for Tax purposes Gross Total Income Total Income Income Tax @ 30% of Total Income Annexure: 7 Projected Balance Sheet Construction Period End Liabilities Share Capital Reserve & Surplus *Term Loans * WC Adv Current Liabilities & Provisions * Trade Credit Total Assets Fixed Assets * Gross Block * Less: Accumulated Deprecition * Net FA Current Asset Loans & Adv * Raw Materials * Stock in Process * Finished Goods *Book Debts Cash & Bank Balances *Preliminary Expenses Total 1295203 2590445 1st yr 1295203 787968.

Annexure: 8 Projected Cash Flow Construction Period Sources of Funds Share Issue PBT with Interest Added Back Depreciation Preliminary Expenses W/O Increase in Secured Medium & Long term Borrowings Increase in Bank Borrowings for WC Increase in State Govt Special Incentive Loan Total (A) Disposition of Funds Capital Expenditure Increase in WC Preliminary Expenses Decrease in Secured Medium & Long term Borrowings Interest on Term Loan Interest in Bank Borrowings for WC Taxation Total (B) Opening Balance of Cash & Bank Net Surplus/ Deficit (A)(B) Closing Balance of Cash & Bank 1295203 1119669 241169 97141 2590445 16068 1340 1338 1249262 241169 97141 1378855 241169 1st yr 2nd yr 3rd yr 3885648 1474047 1588912 1621362 3665177 42257 194282 3522 4227 185032 299750 1928 30022.50 26189 26189 26189 2033036 2059225 185032 255342 2088 170561.50 558989.40 616545.50 3031592 936527 3968119 3859459 46 .50 684835.40 2059225 972367 3031592 185032 210936 2249 282391.

6 0 1436922.50 2nd yr 3562000 1877287 664463 2088 255342 762820 170561.40 592258.50 853196.60 3rd yr 3836000 2021693 465534.50 264334.50 3885648 1434594 1436922.Annexure: 9 Operating Cash flows A B C D Total funds Revenues Operating Costs Depreciation Interest on working capital E advance F Interest on term loan H Profit before tax I Tax J Profit after tax L Net salvage value of fixed assets M Net salvage value of current assets N Initial investment P Q R Operating cash flows Terminal cash flow Net cash flow 3885648 0 yr 3885648 1st yr 3288000 1732880 959085 1928 299750 294357 30022.000 2249 210936 1135588 282391.6 0 1467960 1434594 1467960 47 .

3321 4 Amount Amount 3562000 3836000 812500 2088 65000 54167 933755 875000 2249 70000 58333 1005582 1390919 1390919 2628245 2830418 48 .Annexure: 10 BREAK EVEN POINT FOR THE PROJECT A Sales Realisation B Variable Costs Raw Materials Interest On Working Capital Power & Water Selling & Distribution Expenses Total C Fixed Cost Wages And Salaries Repairs And Maintainance Depriciation Administrative Expenses Interest On Term Loan Total D Contribution(A-B) p/v ratio Break Even Point In Terms Of Volumes Of Sales Break Even Point In Terms Of Installed Capacity Amount 3288000 750000 1928 60000 50000 861928 480000 10000 241169 360000 299750 1390919 2426072 73.7856 4 1885081 57.

YEARS 2009 2010 2011 Fixed cost total cost Sales Realisation Break Even Point In Terms Of Volumes Of Sales 139091 9 225284 7 328800 0 188508 1 139091 9 23246 74 1390919 23965 01 356200 0 18850 81 3836000 18850 81 49 .

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