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Techno-Economic Feasibility report of

Medium Density Fibre Board

Mott MacDonald
Rushil Dcor Pvt Ltd.

1, Krinkal Apartment, Mahalaxmi Society, Paldi Ahmedabad Gujarat 380007

Techno-Economic Feasibility Report of Medium Density Fibre Board

January 2007

Mott MacDonald 501, Sakar II Ellisbridge Ahmedabad, Gujarat India 380001 Tel: +91-79-26575550

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Techno-Economic Feasibility report of


Medium Density Fibre Board

Mott MacDonald
Rushil Dcor Pvt Ltd.

P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/

Techno-Economic Feasibility report of


Medium Density Fibre Board

Mott MacDonald
Rushil Dcor Pvt Ltd.

Techno-Economic Feasibility Report of Medium Density Fibre Board

This document has been prepared for the titled project or named part thereof and should not be relied upon or used for any other project without an independent check being carried out as to its suitability and prior written authority of Mott MacDonald being obtained. Mott MacDonald accepts no responsibility or liability for the consequence of this document being used for a purpose other than the purposes for which it was commissioned. Any person using or relying on the document for such other purpose agrees, and will by such use or reliance be taken to confirm his agreement to indemnify Mott MacDonald for all loss or damage resulting therefrom. Mott MacDonald accepts no responsibility or liability for this document to any party other than the person by whom it was commissioned. To the extent that this report is based on information supplied by other parties, Mott MacDonald accepts no liability for any loss or damage suffered by the client, whether contractual or tortious, stemming from any conclusions based on data supplied by parties other than Mott MacDonald and used by Mott MacDonald in preparing this report.

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Techno-Economic Feasibility report of


Medium Density Fibre Board

Mott MacDonald
Rushil Dcor Pvt Ltd.

List of Contents
Executive Summary Chapters and Appendices 1 Introduction 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 2 Study Background Project Description Background of the Firm About the Promoters & Management Consultants Background The Scope of Work Approach and Methodology Caveats

Page

1 1 1 2 3 4 6 6 9 10 10 13 14 14 20 20 24 27 38 46 50 50 50 55 61 64 67

Product Description 2.1 2.2 2.3 2.4 Medium Density Fibreboard Prelam MDF Board Laminate Flooring Description of Substitutes

Market Study 3.1 3.2 3.3 3.4 3.5 Global Scenario for MDF Laminate Flooring Market Indian Market Indian Scenario on Furniture Other Relevant Issues

Raw Material Assessment 4.1 4.2 4.3 4.4 Raw material Types Cotton Production Cotton stalk Bagasse as Alternate Raw Material

Technological Aspects 5.2 Manufacturing Process of Prelam Boards:

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Techno-Economic Feasibility report of


Medium Density Fibre Board

Mott MacDonald
Rushil Dcor Pvt Ltd.

5.3 5.4 5.5 6

Manufacturing process of Laminated Flooring Location Aspects Machinery Details

67 68 71 77 77 79 82 82 85 88 88 92 93 97 101 101 102 103 104 105 106 107 108 109 110 111 113

Strategic Analysis of the Firm 6.1 6.2 SWOT Analysis Five-Force Model Analysis

Marketing Strategy 7.1 7.2 Present Marketing Set Up Formulation of Marketing Strategy

Financial Modelling & Analysis 8.1 8.2 8.3 8.4 8.5 8.6 Estimation of Capital Cost Means of Finance Assumptions Cash flows& Profitability Statement Financial Indicators- NPV, IRR, DSCR, Pay back Sensitivity Analysis

Conclusion and Recommendations Fixed Cost Allocation of Contingency and POP expenses Working Capital Statement Term Loan - Repayment & Interest Unsecured Loan - Interest SLM Depreciation WDV Depreciation

Appendix A: Appendix B: Appendix C: Appendix D: Appendix E: Appendix F:

Appendix G: Tax Statement Appendix H: Debt Service Coverage Ratio Appendix I: Appendix J: Pay Back Period & Internal Rate of Return Availability of Bagasse

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Techno-Economic Feasibility report of


Medium Density Fibre Board

Mott MacDonald
Rushil Dcor Pvt Ltd.

List of Figures Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure 1.1: Approach and Methodology 2.1: Substitutes of MDF 3.1: MDF Consumption in China 3.2: Global MDF Demand Supply Balance 3.3: Global Particleboard Demand Supply Balance 3.4: World Production of Laminate Flooring 3.5: Production of Laminate Flooring in Europe 3.6: Market Volumes of Laminate Flooring in North America 3.7: Market Volumes of Laminate Flooring in Asia Pacific 3.8: Furniture Productions in Billion Euros 3.9: Raw material used in furniture 3.10: Furniture Production Break up 3.11: Import Export of Furniture in India 3.12: Country wise break up of export of Indian furniture 3.13: Product wise break up of Indian furniture export 3.14: Country wise break up of imported furniture in India 3.15: Product wise break up of imported furniture in India 3.16: Break up of the round wood consumption in India 3.17: Imports of Veneer & plywood in India (In US $ 000) 3.18: Import of MDF/HDF & Particle Board in India (In US $ 000) 4.1: Cotton Production area and yields of India and U.S. 4.2: Indias Cotton Production and Production area 4.3: Indias Cotton Production Yield 4.4: Gujarats Cotton Production Yield 4.5: CCS Centre Mechanism 5.1: Techno Economic parameter for machinery selection 6.1: SWOT Analysis 6.2: Wood Products & competitors life cycles 6.3: Five Force Model 7.1: Present Marketing Set up 8 15 21 23 23 24 25 26 26 39 39 40 41 41 42 42 43 44 45 46 50 51 52 53 60 71 77 78 79 82

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Techno-Economic Feasibility report of


Medium Density Fibre Board

Mott MacDonald
Rushil Dcor Pvt Ltd.

List of Tables Table Table Table Table Table Table Table Table Table Table Table Table Table Table Table Table Table Table Table Table Table Table Table Table Table Table Table Table Table Table Table Table Table Table Table Table Table Table 2.1: Classification of Board based on Density 2.2: IS Specification of MDF Board 2.3: Wood& Agro-based products and their application 2.4: Characteristics comparison of different products 3.1: Region wise MDF production 3.2: Production and trade of MDF in the Middle East 3.3: Indian log production, imports & apparent consumption, 2003 3.4: Demand supply gap of wood 3.5: Indian imports of wood products, 2002 -2003 4.1: Cotton production 4.2: District wise cotton production in Gujarat 4.3: Cotton Productions in Surendranagar District 4.4: Cotton Production in different talukas of Surendranagar 4.5: CCS Centre locations 4.6: Sugarcane Productions in Gujarat 5.1: List of Imported Machinery 5.2: List of Indigenous Machinery 5.3: List of other plant and machinery 7.1: The present marketing zones of RDPL in India 7.2: The present marketing network of RDPL in world 8.1: Building and Civil Work 8.2: List of imported Machinery 8.3: List of Indigenous machinery 8.4: list of other plant and machinery 8.5: Preoperative and Preliminary cost break up 8.6: Inventory norms 8.7: Total Cost of Project 8.8: Means of finance 8.9: Capacity Utilisation in phase 1 8.10: Capacity Utilisation in phase 2 8.11: Operating norms for Fibre Board manufacturing 8.12: Operating norms for Prelam MDF Board manufacturing 8.13: Operating Norms for Laminated HDF Flooring Manufacturing 8.14: Repayment of Long Term Loan 8.15: Profitability Statement 8.16: Cash flow Statement 8.17: Financial Indicators 8.18: Sensitivity Analysis 10 11 17 18 20 22 43 44 44 52 54 55 58 59 62 72 72 72 83 84 88 89 89 90 91 91 92 92 93 93 95 95 95 96 97 99 101 101

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Techno-Economic Feasibility report of


Medium Density Fibre Board

Mott MacDonald
Rushil Dcor Pvt Ltd.

Executive Summary
Rushil Group (herein after referred to as client or RDPL) has a well established market in the decorative laminate business in India and abroad. They are planning to make forays into the manufacturing of MDF (Medium Density Fibreboard), laminate flooring and prelam boards. This related diversification drive not only offers synergy in operation but also provides a sea of opportunities in terms of value addition, import substitution, promotion of rural economy, preservation of forests and employment generation. Every year, MDF worth US$ 67.5 million are being imported to India which meets almost 75-80% of the total domestic demand. Based on market information, the market for MDF is growing at an impressive rate of 20-25% p.a. There are only two players in the domestic market that manufactures MDF. In the light of the above facts, Rushil can look forward to reap the benefits of early mover advantage. Further to this, a well-established distribution channel will help the firm to push their new products into the market in a cost effective way. Manufacturing MDF from cotton stalks will be the first of its kind in India that will offer cost advantages in terms of production. RDPL is planning to set up manufacturing unit at Surendranagar, which is famous for cotton cultivation. Also the surrounding areas are cotton-abundant. Alternatively, bagasse is being considered as the raw material for MDF production; which can be easily procured from South Gujarat and Saurashtra. The client also plans to grow ailanthus excelsa or other kind of soft wood tree near the factory premises in a vast expanse of land so that the wood from the same can be used as raw material for MDF. Ideally 850 to 870 saplings can be planted per acre of land and will be ready for felling in a span of 4 years. The typical yield is 100 tons per hectare. On an average, 1.55 tons of trees are needed to produce 1 cubic metre of MDF. The technology and major machinery will be sourced from Germany and China. Parameters such as contemporariness of technology, energy efficiency, post-sales customer support, scalability, etc had been taken into account while choosing the technology. The long-term relationship the client enjoys with many dealers in India and around the globe, especially in Europe can be leveraged further to sell/export the products from India. In this respect, the cost-competitiveness and the established brand equity will play a vital role. RDPL is envisaged to export nearly 60% of the product to favourable market
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Techno-Economic Feasibility report of


Medium Density Fibre Board

Mott MacDonald
Rushil Dcor Pvt Ltd.

destinations around the globe. The international marketing network of the RDPL is spread in 34 countries including Canada, USA, Venezuela, Europe, Far East countries, Australia, and Gulf countries with the strong brand name of Rushil Dcor.

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Techno-Economic Feasibility report of


Medium Density Fibre Board

Mott MacDonald
Rushil Dcor Pvt Ltd.

1
1.1

Introduction
Study Background

Since its inception in 1992, the Rushil Group of companies have created a niche for themselves in the laminates business in India. Being a visionary company, it has tapped the right opportunities so far in increasing the market share and the export volume, thereby increasing the profits for the firm. At the same time, they have been continuously innovating themselves in terms of product quality and services to the customers worldwide, creating value for its stakeholders. Indias impressive economic growth rate and the thrust on infrastructure development are potential growth drivers for the construction materials in general and laminate in particular. Rushil Group (herein after referred to as client or RDPL) is planning to make forays into the manufacturing of MDF (Medium Density Fibreboard), laminate flooring and prelam boards. This offers a sea of opportunities in terms of value addition, import substitution, promotion of rural economy, preservation of forests, employment generation, etc. In the clients endeavour for related diversification into MDF manufacturing, Mott MacDonald (herein after referred to as the consultant) would prepare a detailed technoeconomic feasibility report for the project. This study will focus on the issues of market demand, raw material sourcing, technology selection, supply chain management, means of finance, revenue modelling, risk management and strategy formulation. 1.2 Project Description

RDPL is planning to set up manufacturing unit of MDF and HDF board and their downstream products like Prelam MDF board and Laminated HDF flooring. The location identified for the project is Navalgarh village in Dhangadhra taluka of Surendranagar district. The land acquisition process is finalized and RDPL has purchased 67 acres of land. RDPL has also finalized major machinery suppliers and purchase order has been placed for MDF manufacturing plant, short cycle press, impregnation line and resin plant. By considering the expertise of manufacturing machinery, quality and price competitiveness, RDPL has selected foreign machinery suppliers for their requirement.
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Techno-Economic Feasibility report of


Medium Density Fibre Board

Mott MacDonald
Rushil Dcor Pvt Ltd.

The project will be implemented in two phases. In first phase, RDPL will manufacture laminated flooring with imported High Density Fibre (HDF) board and in the second phase, RDPL will manufacture Prelam MDF board and HDF laminated flooring with in-house manufactured MDF and HDF board. The first phase will commence from October 2007, while second phase is expected to be commissioned in October 2008. The project has certain advantages due to its location and raw material used for manufacturing Fibre board. The raw material selected for the project is agro waste like cotton stalk and bagasse. RDPL is also considering social forestry route to meet its future requirement of raw material. Due to the raw material selection, project come under the agro industry and become eligible to get incentives from the Government of Gujarat. 1.3 Background of the Firm

Rushil Group of companies commenced operations in 1992, when Indian laminate industry started serving to the global markets. Vir Laminate from the stable of Rushil Group is one of best known brand in the laminate space and the company is one of Indias leading decorative laminate manufacturing companies. Vir is a favourable brand for Indian architects and interior designers. A large number of private & public sector corporate companies spread across the length and breadth of the country are customers of the group. Rushil pioneered Indian laminate industry into export market through the adoption of the flexible global business practices that today enable the company to operate more efficiently and to produce more value to its stakeholders. With a well-known product brand Rushil dcor premium laminate, almost 34 countries are being served by our comprehensive range of products as well as services. The firm produces laminated sheets, prelam boards and door skins in their state-of-the-art facilities at Mansa of Gandinagar District. The plant is capable of churning out 4.8 million sheets per annum.
Milestones

1992 Rushil dcor Pvt. Ltd. (1st laminate manufacturing facility) established by Mr. Ghanshyam Thakkar & his son Mr. Krupesh Thakkar 1992 - annual turnover of Rs. 2.5 crores in the first year 1993 - 100% increase in sales compared to the previous year 1994 companys first export to Bangladesh
2

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Techno-Economic Feasibility report of


Medium Density Fibre Board

Mott MacDonald
Rushil Dcor Pvt Ltd.

1997 - Rushil International established for export business 1998 - Groups sales graph on the upswing by export & domestic sales 1999 - Mica Rushil Pvt. Ltd. (2nd laminate manufacturing facility) established. 2003 - Rushil H.P.L. (3rd laminate manufacturing facility) established. 2003 Production capacity of 300000 sheets per month. 2003 Companys export reached to 34 countries. 2004 Laxmi Pandit & Samir Khan as brand ambassadors. 2005 Erection of short cycle laminates plant (1st prelam manufacturing facility). 2005 - Production of Vir Prelam boards started. 2005 Sridevi as a brand ambassador for Vir Laminate. 2006 (4th laminate manufacturing facility) established. 2006 production capacity reaches 4,00,000 sheets per month 2007- 2nd manufacturing facility for prelam started (Vertex Laminate Private Ltd, Mumbai). 2007 Reorganisation of management structure

1.4

About the Promoters & Management

The promoters of the firm are Mr. Krupeshbhai G. Thakkar and Mr. Ghanshyam Thakkar who possess indomitable spirit of entrepreneurship. The former has nearly 20 years of experience in laminate manufacturing industry by working in areas of production, product and project development, exports and sales. Mr. Ghanshyam Thakkar is the founder of the company who has 46 years of experience in plywood trading and 20 years of experience in laminate manufacturing business. They are very upbeat about the laminate and flooring business and are ready to tap the huge potential in this segment that will come as a consequence of economic boom and the concomitant increased activities in infrastructure (construction of shopping malls, multiplex, IT parks, offices, etc). They have a highly competent and forward looking team of professionals manning different levels and functions. International Business Development is a thrust area that will help RDPL to tide over any slack in domestic demand that may arise in future. Similarly it has an

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Techno-Economic Feasibility report of


Medium Density Fibre Board

Mott MacDonald
Rushil Dcor Pvt Ltd.

IT-enabled office environment that continuously monitor the work flow in vital functions such as Accounting& Finance, Sales, Production, Purchase& Inventory, etc. The firm boasts of Sales& Marketing Offices spread throughout the country and an extremely networked trade set up that export products to 34 countries worldwide. The Organogram is given below:

Director

CEO

______________________________________________________________

Account

Costing

Finance

Export

Marketing & Sales

Project & Development

Production 1.5

HR

Purchase

IT

Consultants Background

Mott MacDonald Private Limited (IMM) is a leading multi-disciplinary management and engineering consultancy based in India, with offices nationwide. As part of the global Mott MacDonald Group headquartered in U.K., IMM is able to draw on world-class technical and managerial resources comprising over 5000 staff in more than 50 strategic centres world-wide. IMM is engaged in planning and development touching many aspects of everyday life from water, energy, industry, environment and transport to building, healthcare, tourism and social development. Across these sectors IMM works for national and local governments, public and private utilities, industrial and commercial companies, investors, developers, banks and financial institutions, international and bilateral funding agencies and private entrepreneurs. IMMs strengths enable our clients to realize their projects optimally from concept to commissioning. With 750 professionals, we

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Techno-Economic Feasibility report of


Medium Density Fibre Board

Mott MacDonald
Rushil Dcor Pvt Ltd.

take care of the entire process including providing advice on the best procurement route and the optimum approach for maintaining the project once it enters service. 1.5.1 (i) Services Management Consultancy

IMM provides business planning and project management for a wide spectrum of clients in industry, infrastructure and social development, including international development banks and funding agencies. DMM also help clients such as accountancy practices, financial institutions and industrial companies in making a realistic appraisal of their fixed assets, and in preparing for disinvestment, mergers or de-mergers, acquisitions, takeovers, insurance or liquidation, collaborations and joint ventures.

(ii)

Social Solutions

IMM has undertaken numerous studies and advisory roles for leading development banks and funding agencies. Projects range from implementing vital AIDS eradication programmes and pro-poor initiatives to studies for institutional strengthening, sector reform and impact evaluation. DMM also offers specialist expertise in assisting with public consultation.

(iii)

Engineering Services

IMMs range of engineering services enables clients to realise optimal implementation of projects. DMM takes care of every stage site evaluation, basic and detailed engineering, contract preparation, project management, procurement, equipment inspection and testing, site supervision and commissioning.

(iv)

Infrastructure

One of the key strengths of IMM lies in large-scale integrated urban infrastructure development, encompassing water supply, drainage, solid waste, roads, sanitation, and community buildings. Here our services range from planning and advisory assistance to detailed engineering and construction management.

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Techno-Economic Feasibility report of


Medium Density Fibre Board

Mott MacDonald
Rushil Dcor Pvt Ltd.

(v)

Industry

IMMs skills and experience have earned it a leading reputation especially in chemicals, textiles, oil and gas, agri& food processing and life sciences, as well as bulk drugs, pharmaceuticals and biotechnology. DMM is known particularly for its expertise in process engineering and licensing for speciality chemical production based on laboratory/pilot plant know-how developed by R&D centres.

(vi)

Buildings

IMMs business covers all sectors from commercial and leisure to industry, education and healthcare. DMM provides the full range of architectural, structural, mechanical and electrical design skills, along with planning and project management expertise. Building services are a special capability, notably building management systems, vertical transportation, telecommunications and security.

1.6

The Scope of Work

The scope of work (SOW) includes Assessment of raw material availability to ensure sustained operation of the plant. Market assessment to justify project rationale from the market point of view. Technology Evaluation. Plant location analysis. Assessment of project cost, operating cost and revenue estimates. Working out detailed financial analysis as desired by the financial institutions. Sensitivity analysis to identify factors crucial for the commercial viability of the project. 1.7 Approach and Methodology

The entire work (study) will be broken down into individual sets of mutually-exclusive and collectively-exhaustible issues addressing market demand, availability of raw material, technology, location aspects, economic and financial feasibility, etc. Market study will broadly cover the demand- supply scenario prevailing globally and locally for MDF, its competing products (substitutes), end use pattern, drivers that could spur the
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Techno-Economic Feasibility report of


Medium Density Fibre Board

Mott MacDonald
Rushil Dcor Pvt Ltd.

demand, etc. We would utilise our data bank and also refer to authentic and published materials/literature etc for the purpose of collecting information on industry structure, international demand-supply scenario, domestic and international prices and trends thereof, price elasticity, past imports and exports from India, destinations and prices etc. The availability and suitability of raw material (cotton stalk) for the production of MDF, the sourcing of the same and related logistic issues will be covered in the next section. Also contingency plans for alternative raw material (say, ailanthus and celsa) and the steps to ensure hassle-free availability of the same will also be discussed. Location Study will look into issues such as raw material availability, proximity to market, availability of power, water, etc; and a host of other relevant issues like land, labour, transportation, storage, etc. Technology will cover the brief description of the process along with features such as contemporariness of technology, local availability of plant and machinery, energy efficiency of the process, ease of operation, modularity, scalability and flexibility in technology/ operation, etc. The endeavour is to source the best available option in terms of reliability and superiority of technology / plant and machinery. The marketing strategy will look into the existing sales and marketing set up, need for reconfiguration if any, and addressing the issues holistically that goes beyond 4Ps. The detailed revenue modelling will cover the means of finance, optimal debt-equity structure, revenue streams, calculation of projected cash flows and the estimation of NPV, IRR and debt service coverage ratio. In addition, elaboration on certain strategic issues pertaining to the business will be provided. This will throw light into the competitive landscape, the forces that act within and outside, threats and opportunities, etc. Also specific strategies will be recommended to tide over the challenges and surge ahead successfully.

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Techno-Economic Feasibility report of


Medium Density Fibre Board

Mott MacDonald
Rushil Dcor Pvt Ltd.

Figure 1.1: Approach and Methodology

Market Study Demand vs. Supply Growth Drivers Substitutes End Uses

Marketing Strategy Existing Setup Distribution Channel 4Ps and Beyond

Raw Material Assessment Major Raw Material Procurement Contingency Options Other Issues

Revenue Models Means of Finance& Capital Structure Revenue Streams& Cash Flow Proj. Balance Sheet& Income Summary NPV, IRR, DSCR, etc.

Site Selection Proximity to RM/Market Availability of Water, Power, etc Logistics& Distribution Issues

Technological Aspects Track Record Ease of Operation Scalability/Modularity Energy Efficiency Flexible Line of Operation Strategic Insights 5-Force Analysis Competitive Strategy.

Source: MM Analysis

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Techno-Economic Feasibility report of


Medium Density Fibre Board

Mott MacDonald
Rushil Dcor Pvt Ltd.

1.8

Caveats

Since MDF market is a bit unorganised, it is very difficult to capture the exact under currents in the market. Also a lot of these activities are not properly recorded. This poses a lot of challenges for the consultant and the client alike. A judicious mix of desk research, filed visits, interviewing of key personnel in the MDF/ related business and using some clever conjectures based on our own experience was the method adopted to address this issue.

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Techno-Economic Feasibility report of


Medium Density Fibre Board

Mott MacDonald
Rushil Dcor Pvt Ltd.

2
2.1

Product Description
Medium Density Fibreboard

Fibreboards are classified into low density, medium density and high density fibreboards according to the density profile as shown below:

Table 2.1: Classification of Board based on Density Fibreboard LDF (Low Density Fibreboard) MDF (Medium Density Fibreboard) HDF (High Density Fibreboard) Typical Density Range (Kg/m3) 160-450 500-800 800& above

MDF is a panel product manufactured from lignocellulosic fibres combined with a synthetic resin or other binders. The specific gravity varies from 0.5 to 0.88. MDF has a homogeneous structure with no identifiable grain or no variations in surface hardness. It can easily be edge-machined to into many different profiles ready for subsequent direct finishing due to its relatively uniform thickness density profile. MDF has a good capacity to hold screws and nails on surfaces and edges. 2.1.1 Features of MDF

MDF is resistant to warping and compression. It has excellent screw-holding ability and edge-finishing characteristics. MDF is available in two grades, namely, interior grade and exterior grade and are available in thicknesses ranging from 4mm to 50mm.The IS specifications are reproduced below:

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Techno-Economic Feasibility report of


Medium Density Fibre Board

Mott MacDonald
Rushil Dcor Pvt Ltd.

Table 2.2: IS Specification of MDF Board Sr. No. 1 a) b) 2 3 4 Specifications Water Absorption After 2 hours soaking After 24 hours soaking Density Moisture Content Linear Expansion (24 Kg/m %
3

Unit

Interior Grade

Exterior Grade

9 18 500-900 5.15

6 12 500-900 5.15

hours soaking) a) General Absorption Thickness Length Width 5 Modulus of Rupture Upto 20mm >20mm 6 Tensile Strength Upto 20mm >20mm 7 Screw Strength Face Edge 8 Dimensional Tolerance Length Width Thickness Mm 3 3 0.3 1500 1250 1500 1250 Withdrawal N N/mm
2

% 7 0.4 0.4 N/mm2 28 25 28 25 4 0.3 0.3

0.7 0.6

0.8 0.7

MDF offers better quality than particle board. It has lower tendency compared to particle board for fibre pop which comes from larger particles in the surface that swell more than adjacent particles. Fibre pop occurs when the board is exposed to high humidity. MDF has better strength and stability than veneered particle board. The internal bond strength of MDF is about 50% higher than the corresponding value for veneered particle
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Techno-Economic Feasibility report of


Medium Density Fibre Board

Mott MacDonald
Rushil Dcor Pvt Ltd.

board. MDF with a highly homogeneous construction and uniform density gradient does not require a veneer overlay. The distinct advantages of MDF are outlined below: a) b) c) d) e) f) g) h) i) j) k) l) m) n) 2.1.2 It does not delaminate Excellent moulding abilities It can be joined, riveted, tongued and grooved. It can be calibrated and sanded on both sides. Lathe work can be done easily. It is free from overlays and gaps. It possesses homogeneous strength. It is free from knots and cracks. Humidity-resistant. It has low formaldehyde content. Very good screw-holding and edge-finishing properties. It needs no special tools or work methods. All kinds of paints, lacquers, stains and varnishes can be used on MDF. It is insect-resistant.

Applications

MDF is being used in residential, commercial buildings for partitions, panelling, false ceilings and furniture. Thin MDF has applications in beds, cabinets, chairs, panelling, drawer bottoms and centre panels in framed doors. It can also be used as skins for flush doors, partitioning, office screens, lightweight doors and exhibition paneling. Novel application avenues are in shoe making, motor vehicle interior parts, toys, printed circuit board production and blades for electric fans. Due to its excellent acoustic properties, MDF is also being successfully used in Hi-Fi equipment. Moisture-resistant varieties are being developed that can be used for exterior applications.

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Techno-Economic Feasibility report of


Medium Density Fibre Board

Mott MacDonald
Rushil Dcor Pvt Ltd.

Thick MDF boards can be used in buildings as columns and archways in place of solid wood where the warp resistance, torsional stability, screw holding strength and edge finishing characteristics are important. Thick MDF can be as a core substrate material for paneling with veneers, printed surfaces, vinyl and low pressure laminates due to its dimensional stability and smoothness. Thick MDF is also widely used as a base material for laminated and veneered wood products for flooring and wall paneling and for foil wrapped mouldings. It can also be used for a wide range of furniture such as tables, cabinets, windows, doors, frames, handicraft items, display or exhibition stands and signs, ceiling, toys, carving, partitions, maritime applications and educational equipment. The entire versatility of MDF is yet to be utilised in a host of applications. In short, the product has the potential to replace plastic, metals and wood in a wide variety of applications which is only limited by our imagination.

2.2

Prelam MDF Board

To improve the aesthetic look and applicability, laminate paper is applied or fixed on the fibre board with the help of a press. This board is known as pre laminated board or prelam board. The prelam board has more than one paper on its surface like base paper or balancing paper, decorative paper and other protective film. These papers help to improve resistance to abrasion, temperature and water. As the prelam board is an improved version of the MDF board, the specification of the Prelam board is completely depend on the properties of the MDF board. Prelam MDF board has certain distinct advantages, which are mentioned below: Resistance to steam and stains High abrasion resistance Better strength for durability Resistance to warping and sagging Surface counter balanced for greater stability Strong enough for load bearing applications Termite, fungus & borer proof Standard screw holding capacity

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Techno-Economic Feasibility report of


Medium Density Fibre Board

Mott MacDonald
Rushil Dcor Pvt Ltd.

Prelam MDF board used to manufacture the products mention below: 2.3 Cupboards, shutters & wardrobes. Shelves Table tops Cabinets Household & office furniture. Computer furniture. Panels in panel doors. Beaded doors. Partitions. Precautions Laminate Flooring

Laminate flooring is composed of several layers of impregnated paper and raw fibre board. Papers are forming the surface layer of a core layer which stabilizes the floor. Flooring is available in smaller size of planks. High density fibre board is preferred for core board of the flooring as it has to bear the load. The basic properties of the laminate flooring are depend on the properties of the HDF board and laminated papers. The flooring can withstand with the normal load and provide good aesthetic load. It is not 100 % water-proof and scratch-proof but by using high grade quality paper water absorption and scratch ability can be minimized to a great extent. Laminate flooring can withstand the temperature variation and can be installed on any flooring like wood, ceramic, concrete, particle board, vinyl, linoleum, etc. 2.4 Description of Substitutes

MDF closely competes with other product like plywood, hardboard, particle board and plastic panels in a variety of applications. Apart from these products, chemically treated wood, plantation timber, rubber wood, log wood and sawn wood find similar applications.

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Techno-Economic Feasibility report of


Medium Density Fibre Board

Mott MacDonald
Rushil Dcor Pvt Ltd.

Figure 2.1: Substitutes of MDF

Chosen Material

Wood or Wood Base

Agro Waste Base

Non Wood

Wood Based Panels

Timber Base Panels

Reconstd Wood Panels

Timber

Ply Wood

Block Board

Particles Board

MDF

Fibre Board

Steel / Aluminium
Source: MM analysis

Gypboard

PVC

Acrylic / Fibre glass etc.

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Techno-Economic Feasibility report of


Medium Density Fibre Board

Mott MacDonald
Rushil Dcor Pvt Ltd.

Table 2.3: Wood& Agro-based products and their application


Wood Product Major Uses Substitute (Wood& Types) Plywood& Veneer Construction-walls, doors, decorative panelling. Packagingcrates, boxes, tea chests. Furniture. Vehicles-boats, caravans. Misc.- Toys, etc. Sawn Wood Construction-flooring, walls, joinery, panelling& lining. Engineeringrailway sleepers, piling, wharves, bridges, mining timbers. Furniture Packaging-boxes, crates, pallets, etc. Vehicles Particle Board Construction-flooring, walls, under floor, panelling& building elements. Plywood, veneer, & sawn wood- packaging, construction& furniture. Fibreboard. MDF Furniture, packaging, construction (Flooring, walls, panelling, etc.)
Source: MM Analysis

Substitute waste (Non-wood Types)

Agro

Particle board Fibreboard Paper Overlaypanelling& packaging. Sawn wood.

Plastics (furniture& packaging). Fibreglass, concrete, polyester overlay.

Plywood, veneer, & MDFpanelling, furniture. Fibreboard-packaging Particle board.

Plastics (furniture& packaging). Paper & paperboard (packaging). Concrete, bricks, steel, aluminium.

Steel& aluminium (furniture); Plastics (furniture& packaging).

Plywood, veneer, particle board& sawn wood.

Steel& aluminium (furniture); Plastics (furniture& packaging).

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Techno-Economic Feasibility report of


Medium Density Fibre Board

Mott MacDonald
Rushil Dcor Pvt Ltd.

Table 2.4: Characteristics comparison of different products


Sr. No. Comparison characteristics

Plywood

Particle Board

MDF Totally borer proof, as only wood fibers are bonded together Highly suitable

Insects & Borers

Attracts borers

wood

Does not borers

attract

Machining, carving & post forming Density of the Board Edge cutting trimming &

Not Suitable

Suitable to a limited extent Low Suitable to a limited extent Low to Medium

3 4

Medium Suitable to a limited extent Medium

Medium and high Highly suitable

Nail & Screw holding capacity Board strength internal bond &

High

Medium Low due to wood layer bonding Not possible Not possible Medium Medium 100% wood

Medium

High

Structural strength

Low due to particle bonding Not possible Suitable to a limited extent Low Low Agrowaste/wood Boon for building material industry due to versatility of raw materials usage like agro waste & wood waste. Eco friendly product

High due bonding Excellent

to

fiber

8 9 10 11 12

Moulding Joining & riveting Surface finish Tensile strength Raw materials

Highly suitable Excellent High Agrowaste/wood Boon for building material industry due to versatility of raw materials usage like agro waste & wood waste. Eco friendly product Prelam boards,

13

Environmental aspects

Dangerous forest resources country

to of

14

Value added products

Plywood only
18

Prelam

boards,

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Techno-Economic Feasibility report of


Medium Density Fibre Board

Mott MacDonald
Rushil Dcor Pvt Ltd.

modular furniture

modular furniture, embossed doors, carved surface doors, painted boards G3 grade

15

Product Specification

G1 grade

G2 grade

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Techno-Economic Feasibility report of


Medium Density Fibre Board

Mott MacDonald
Rushil Dcor Pvt Ltd.

3
3.1

Market Study
Global Scenario for MDF

In 2005, the global MDF production reached about 41 million m3, compared to 39 million in 2004. Large scale production facilities are concentrated in Asia, Europe and North America. Table 3.1: Region wise MDF production Region Asia North America Europe Oceania (Australia and New Zealand) South America Total
Source: Food and Agriculture Organization (FAO) stats

Production (000 m3) 18936 5297.6 13300 1656 1758 40947.6

The table explains the regional production in 2005. China has grown to become a dominant producer (14.66 million m3), followed by Europe. Production in Europe rose to 13.3 million m3, showing a growth of 7% as compared to 2004. The total consumption also rose by 7.6% to 12 million m3. From 2004 to 2005, North American MDF production rose from 5.1 to 5.3 million m3, with 70% of the production concentrated in the United States. MDF production in the U.S. increased from 3.6 to 3.7 million m3, while the Canadian production increased from 1.5 to 1.6 million m3 in the above period. MDF imports to North America (procurement sources: Brazil, Argentina, Chile and Venezuela and Oceania) declined by 10% in 2005, to 1.7 million m3. MDF production in New Zealand increased to 861000 m3 in 2005. The country also has the highest per capita consumption of the product. MDF consumption since the past decade has well penetrated markets other than furniture industry. But, owing to an earlier establishment of particleboard as a product, its consumption in most countries was more than MDF before.

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Techno-Economic Feasibility report of


Medium Density Fibre Board

Mott MacDonald
Rushil Dcor Pvt Ltd.

In countries like Japan and Korea, manufacturers are replacing particleboard; particularly where MDF properties like smoothness of surface is required. This is expected to spread worldwide, as furniture manufacturers seek cost effective methods of production. However, with huge capacity inclusions in China, MDF consumption rose to 16 million m3, driven by furniture industry growth (2004), compared to particleboard consumption of 4 million m3. The figure below highlights the MDF consumption break up by segment in China: Figure 3.1: MDF Consumption in China

Other 10% Decoration 12%

Furniture 78%

Source: China Academy of Forestry, China Wood

Continued innovations to customers need and to solve their problems, and the development of Engineered Wood products lead to newer developments. Products like Sawn wood and plywood are well past their prime, owing to these reasons. Moreover, these products also compete with steel and other useful materials, widely used in construction industry and furniture. MDF Board Market in the Middle East The Middle East regions comprise of developing countries like Algeria, Bahrain, Egypt, Iran, etc. with growing young population, which point towards growing consumption of wood based panels.

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Techno-Economic Feasibility report of


Medium Density Fibre Board

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Rushil Dcor Pvt Ltd.

The major constraint to growth in MDF industry in the Middle East is the scarcity of raw material. Almost 70% of the total production in the region in 2005 (54000 m3) was from Iran. Trade statistics point towards the fact that majority of the consumption is met through imports. With growing demand of MDF in the region, the imports have risen from a mere 332,611 m3 in 2000 to about 2.2 million m3 in 2005. Table 3.2: Production and trade of MDF in the Middle East Year 2000 2001 2002 2003 2004 2005
Source: Dieffenbacher Report

Production (m3) 53000 14000 14000 14000 40300 54000

Import (m3) 279663 422631 566531 762661 1514209 2186581

Export (m3) 52 139 336 144 913 1000

As evident from trade statistics, the export potential to Middle East region appears to be worth exploring. Future Outlook The Commonwealth Scientific and Industrial Organization (Australia) predicts global MDF demand to increase by 10% till 2010. As per Jaakko Poyry Information Service, the demand for MDF in U.S., Europe, and Asian countries (mainly China and South Korea) is expected to exceed the supply, driven by its popularity in construction industry and furniture manufacturing in recent years. The figure below shows region wise forecast of MDF surplus/deficits:

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Techno-Economic Feasibility report of


Medium Density Fibre Board

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Rushil Dcor Pvt Ltd.

Figure 3.2: Global MDF Demand Supply Balance

Global MDF Demand-Supply Balance


2000 1500 1000 500 (1000 m 0 ) -500 -1000 -1500 -2000 -2500 -3000 -3500 1990 1995 2000 Years 2005 2010 (F) 2015 (F)
1990 1995 2000 2005 2010 (F) 2015 (F)

North America
3

Europe Asia Oceania South America Africa

Source: Jaakko Poyry Information Service

Figure 3.3: Global Particleboard Demand Supply Balance

Global Particleboard Demand-Supply Balance


2000 1000 0
1990 1995 2000 2005 2010 (F) 2015 (F)

-1000 (1000 m3) -2000 -3000 -4000 -5000 -6000 -7000 1990 1995 2000 Years 2005 2010 (F) 2015 (F)

North America Europe Asia Oceania South America Africa

As evident from the figure above, particleboard deficits are anticipated in Europe, whereas Asia, Oceania, South America are expected to have surplus capacities.
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Techno-Economic Feasibility report of


Medium Density Fibre Board

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Rushil Dcor Pvt Ltd.

Growth Drivers: The demand of MDF is expected to show an upward trend, considering the following macroeconomic factors: 1. Rapid economic growth at the world level (GDP growth rate - 4% till 2010). 2. Population growth and urbanization. 3. Trade and foreign investment deregulation. 4. Expanding wood processing capacity. 5. Anticipated growth in construction investment, furniture and decoration industry. 6. Increasing exterior use of wood based panels in European and American countries, attributing to the suitability of climatic factors. 3.2 Laminate Flooring Market

The global production of laminate flooring from year 1990 to 2005 is depicted below.

Figure 3.4: World Production of Laminate Flooring


900 800 700 600 500 400 300 200 100 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Production in million m Source: Munksjo Paper

The production of laminate flooring has steadily grown at a rate of 34.09 % CAGR in the last 15 years and has reached 815 million m2 in the year 2005. Europe is the major producer of laminate flooring in the world and is a net exporter for the last 15 years. Europe accounts for 65 % of total production of laminate flooring in the world (year 2005).
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Techno-Economic Feasibility report of


Medium Density Fibre Board

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Rushil Dcor Pvt Ltd.

The production of laminate flooring in Europe is mentioned in the figure below: Figure 3.5: Production of Laminate Flooring in Europe
600

500

400 in million m2

300

200

100

0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Production for Europe Production for Exports

Source: Munksjo Paper

Germany is the biggest producer of the laminate flooring and account for 28 to 33 % of world production of laminate flooring in last 5 years. Other leading laminate flooring manufacturing countries in Europe are France, Austria, Belgium, Poland, Switzerland, and Great Britain. In terms of import, North America is the leading continent to import the laminate flooring. With the import, production of laminate flooring in America has also risen in the last 10 years.

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Techno-Economic Feasibility report of


Medium Density Fibre Board

Mott MacDonald
Rushil Dcor Pvt Ltd.

Figure 3.6: Market Volumes of Laminate Flooring in North America


160 140 120
in m illion m 2

100 80 60 40 20 0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Import
Source: Munksjo Paper

Domestic Production

The production of laminate flooring in Asia is constantly rising for the last 10 years until it became net exporter in the year 2005. Figure 3.7: Market Volumes of Laminate Flooring in Asia Pacific
250

200 in m illion m 2

150

100

50

0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Domestic Production

Net Import

Net Export

Source: Munksjo Paper

The continuous increasing production of laminate flooring in China is the major reason behind the spurt in Asian production of laminate flooring. From 11 % of production share of total world production of laminate flooring in year 2001, China reached at 23 % of production share in the year 2005, which is next to Germany only.

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Techno-Economic Feasibility report of


Medium Density Fibre Board

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Rushil Dcor Pvt Ltd.

3.3

Indian Market

3.3.1

Market Survey

The market study was carried out in various segments which influence the demand for MDF. They were divided on the basis of similarity in response pattern and the factors affecting the demand for MDF. Competitors (including substitute products), institutional buyers, architects & interior decorators, industrial buyers & converters and wholesalers & distributors were contacted during the survey. Additionally, some actual users of MDF were also contacted. The study was conducted in Ahmedabad, Bangalore, Calcutta, Chennai, Delhi, Hyderabad, Jaipur and Kochi.

a)

Competitors:

They are the manufacturers of MDF and its substitutes. The substitutes are plywood, particle board, hard board, etc. The regional offices and head offices of these manufacturers were contacted during the survey. (b) Institutional Buyers:

They are the large buyers of MDF and its substitutes, with having fairly uniform application areas and the quantity used being substantial. For example CPWD, where the requirement is mainly of doors & windows but quantity being used is substantial. Large construction companies also fit into this category. These are bodies where procedures for introducing a new product are elaborate but volume of sales justifies it. (c) Architects & Interior Decorators:

This category represents the users of these products for a variety of applications. They are also the innovators in finding new application areas for various products. This segment do not form big market by them but help it grow. (d) Industrial Buyers / Converters:

This segment consists of the converters who use MDF and its substitutes for large scale manufacture of end use products. They may be T.V. cabinet makers, flush door and knocked down furniture makers etc. Users of this segment have specific requirement and use
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Techno-Economic Feasibility report of


Medium Density Fibre Board

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Rushil Dcor Pvt Ltd.

various substitute products according to the requirement of end product and the cost of alternative products.

(e)

Wholesalers / Distributors:

This is the most significant segment as they form a link between manufacturing company and the actual end users. They are the members of distribution channel for various substitute products (like plywood, particle boards etc.) and very often influence the end users decision. (f) End users:

They are both actual buyers and users of MDF. They have used MDF in a particular application and were contacted to know their views on MDF.

3.3.2 (i)

Summary of Findings Plywood and Block board Plywood and Block board collectively constitute a major segment of wood panel market. Plywood possesses good strength and mechanical properties, as well as firm, easy nailing/screwing ability has given the product very good market acceptance over the years. Small scale manufacturers in unorganised sector constitute the major chunk of the total plywood manufacturing. As these units do not pay any excise duty and evade other local taxes, they give a tough fight to organised sector plywood manufacturers. This industry uses premium timber log veneers as input, which is in short supply. Construction, furniture and packaging industries are the biggest end-users of this product. Plywood is considered first choice for the household furniture in India, but in foreign countries where ready made and flexible furniture demand is increased
28

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Medium Density Fibre Board

Mott MacDonald
Rushil Dcor Pvt Ltd.

in last decade, there preference gradually moves to other available alternate products. Plywood and Block board are available with phenol & urea formaldehyde bonding for exterior and internal application. Block boards are available in a density of 750 from 10 mm to 40mm. Plywood offers several superior properties like bending, termite resistance, ability to withstand varying conditions, etc. which makes it non-substitutable by other wood panel products for some applications. Most of the sale is on credit. The credit period varies between 30

900kg/m3 and thickness varies

60 days

Source: Capital Market

Manufacturer Greenply Industries (plywood/particle board) Kitply industries (plywood and boards) National Plywood Industries (plywood / block board) 4 mm basis Century ply boards (plywood)

Installed capacity 1,18,50,000 14,750,000 11,350,000 25200

Unit M3 M2 M2 M3

Marketing of these products is generally through the normal distribution channel of company -> wholesalers/stockists -> dealers -> consumer. However, sometimes the dealers purchase directly from the company.

Typically the Plywood is available in panel lengths of 5, 6, 7 & 8 ft., width of 3 and 4 ft. and thickness of 4, 6, 9 and 16 mm.

Fast moving size of Plywood and Block board is 8'x4'. Prices of plywood have moved upwards at a rate of 10-15% in the last few years. This can be primarily attributed to increased prices of raw materials.

Some plywood companies are also offering panel doors, flush doors, ceiling tiles and Plywood with very distinctive and unorthodox surface veneers.

Plywood shuttering is preferred over wooden or steel shuttering because it is lighter to handle, can be bent and finish is smooth, thus saving plastering cost.

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Techno-Economic Feasibility report of


Medium Density Fibre Board

Mott MacDonald
Rushil Dcor Pvt Ltd.

Particle Board The market size for PB in India is roughly US$110 million, with a year-on-year growth rate of 20%. Almost 90% of the demand is met by domestic production and the rest is imported. Imports are chiefly from Nepal, Bhutan and Sri Lanka. Particle boards are mainly used for partition/panelling and in the manufacture of doors (as inserts in frame) and rarely used for table tops. Ready made furniture manufacturer prefer particle board as main raw material. PB suffers from the poor edge machinability, poor tensile strength and poor screw/nail holding strength. A substantial portion of particle board (around 65%) being marketed is laminated and the remaining 35% are in the form of plain& veneer boards. Industry uses a variety of raw material for the manufacture of particle board, such as bagasse, wood chips, rice husk, etc. Wood accounts for 87% of the raw material used in the manufacture of PB. Standard sizes of particle board panels are 8' x 4', 9' x 4' & 10' x 4' and the thickness ranging from 9 mm to 35 mm. 12 mm thickness particle board is used as inserts in door frames, 18mm for modular furniture. The other sizes commonly used are 15 and 25 mm sheets. At present there are 15-16 players of particle board and the demand for the same is nearly 2.55 lakh tons per annum. Bhutan Board unit in Bhutan with an installed capacity of 21000 TPA has been performing at 70% capacity utilisation. The unit is located in Bhutan. It markets around 50% of its production in India. Novopan is the market leader of particle board followed by Bhutan Board. Novopan has two manufacturing units with capacities of 50,000 and 75,000 cubic m/year respectively. Ecoboard, Vision Boards, Aurobindo Laminates and Trimurti used to

manufacture particle board using bagasse as raw material. Nepal Boards, Bhutan Boards, Mysore Chip Boards, Uro, Decoboard (Bakelite
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Rushil Dcor Pvt Ltd.

Hylam) and Novopan manufactures PB from wood. Medium Density Fibre (MDF) Board MDF worth US$ 67.5 million are being imported to India every year that meets almost 75-80% of the total domestic demand. Based on market information, the market for MDF is growing at an impressive rate of 20-25% p.a. There are two manufacturers of MDF in India. These are Mangalam Timber Products Ltd. and Nuchem Ltd. The trade name of Mangalam's product is "DURA TUFF" and that of Nuchem Ltd. is "NUWUD". The plant capacity of Mangalam Timber is 57000 cubic m/year and that of Nuchem Ltd. is 60000 cubic m/year (45,000 MTPA). Duratuff is available in interior and exterior grade and also in pre-laminated form whereas NUWUD does not have pre laminated boards. Plywood is considered first choice for the household furniture in India, but in foreign countries where ready made and flexible furniture demand is increased in last decade, there preference gradually moves to other available alternate products. Pre-laminated boards of DURATUFF are preferred in the Southern and Western regions, whereas the plain boards are dominant in Northern India. MDF market in the Eastern region is negligible because of the easier & cheaper availability of non-teak wood. Greenply, one of the major players in plywood, particle board and decorative veneer board manufacturer, is also entering in MDF market with pre laminated boards, branded as Greenlam. Although Greenply not manufacturing MDF board at present, it purchases MDF from outside and get it laminated in its unit. Majority of sale is of 8 ft x 4 ft. panels and thickness prefer-red are 6, 12 and 18 mm. MDF initially was not accepted positively by traditional carpenter because of slightly different work practices requirement. However, at present the carpenters find it easy to work with MDF.

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Medium Density Fibre Board

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Rushil Dcor Pvt Ltd.

MDF manufacturers are trying to push the product directly to the institutional buyers who are the large consumers. Company plays a promotional role only. Manufacturers of MDF claimed that they are making exterior grade conforming to international MDF specifications. They use Phenol Formaldehyde resins for making exterior grade MDF.

MDF has been accepted by institutions like IOC, CPWD, DDA, HVDCO, IAAI, ITC Ltd., Ministry of External Affairs, State Housing Boards, State PWDs, Taj Group of Hotel, etc.

The major demand of MDF board in recent years created by the new emerged industries in India like software, BPO, retail and banking. Corporate sector prefers MDF because it provides good aesthetic look and fast erection of furniture in office.

Plywood is considered first choice for the household furniture in India, but gradually this preference is shifting towards ready made and flexible furniture, which is made up of MDF board. The furniture industry, valued at almost INR 30,000 crores, is expected to witness a robust growth in the wade of upswing of purchasing power of more than 400 million middle class populations.

The growth in furniture consumption has been attributed mainly to unprecedented growth witnessed in construction and residential real estate markets. The short term growth is anticipated at 7% - 8%.

Much of the domestic demand for furniture (65%) is from ten major cities viz. Mumbai, New Delhi, Bangalore, Chennai, Hyderabad, Ahmedabad, Pune, Surat, Kanpur and Jaipur.

With the rising income of middle class and willingness to change furniture often, will also perk up the demand for MDF board.

Poor awareness about MDF board has been a deterrent, but this can overcome by educating carpenters and the end user.

MDF is also being sold to original equipment manufacturers like Videocon, BPL & Philips. These companies use MDF in the manufacture of speaker cabinets.

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Rushil Dcor Pvt Ltd.

Nuchem has a variety of downstream products of MDF like doors, windows, mouldings, etc. These downstream products are manufactured by Nuchem on contractual basis.

However, most people related to MDF expect it to perform better in panels and doors compared to furniture. This is in contradiction with the international trend, where majority of MDF is being used in furniture making only.

Manufacturers are quite optimistic about increase in share of MDF in the total panel product markets and particularly plywood. Moreover, they expect it to perform same function of timber in the manufacture of doors. They expect a penetration level of over 30% of total panel product market in the future.

Others (Plastic Panels, Cement Bonded Particle Boards, etc.)

The plastic panels are made of PVC which is relatively costlier vis--vis the other panel products. Thus, the acceptance level is low.

Sintex, the largest manufacturer of PVC panels, are focussing on direct marketing to the end-users. Marketing through architects was not very successful because of their high price.

These panels look very attractive, but over a period they fade due to environmental effects.

Gujarat Synthwood claims to be making a scratch resistant product with integral skin and appearance similar to wood.

The plastic panels are not very strong, thus, not suitable for use in external uses like doors & windows.

Uses of plastic panels are limited to door & window frames, doors, windows and partitions in commercial buildings.

Because of excellent water resistance properties these panels surpass all the other similar products in performance. These products need no painting, polishing, varnishing etc. because they are pre-finished on both the surfaces.

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Rushil Dcor Pvt Ltd.

Doors of PVC panels do not find easy acceptance because of psychological preference for wooden door. Customer accepts frames and windows of material other than timber more readily but customers still prefer wood or something similar in appearance and texture.

The manufacturing companies have focussed on institutional markets where volume is high and product requirement is standardised.

Gujarat Synthwood is trying to promote the product in household and residential applications to expand the market. Because of its high price & preference for wood or something similar to wood for doors and windows the penetration of PVC panels in the total panel product market is quite low.

These products are also relatively new and are still trying to carve out a market niche for themselves.

The major manufacturers of PVC panels are Sintex, Uniplas, Gujarat Synthwood, Caprihans & Fixopan Industries. Jain Group manufactures polystyrene (trade name "TIMBRON") 'based panel products.

Cement bonded particle boards are mainly used for flooring, ceilings and partitions. The market for these is slowly developing. Cement bonded particleboard at present is manufactured by NCL Industries (Bison Panel) in India.

Laminated Flooring Laminated flooring is widely used in household, corporate offices, restaurant, hotels, and entertainment complexes. But still granite, marble, kota and ceramics are the most preferred flooring for house flooring market in India. Wooden flooring also getting acceptance slowly in Indian houses because of the availability of the laminated wooden flooring. Laminate floors are made up of a thin, transparent upper crust that is resistant to wear and tear, and of high density fibre board inside. Laminate floor cheaper than the real and hard wooden floor. Laminate floors available at Rs 200-300 per sq feet.

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Medium Density Fibre Board

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Rushil Dcor Pvt Ltd.

Laminated floor provides good aesthetic look. It is available in different colours and designs, which depends on the paper used in the surface of the wooden floor.

At present, demand of the wooden flooring in India is 90 % met by import only. More than 20 brands are selling in the Indian market presently. A large number of these are importers. Amongst the well-known brands, there are Pergo (a Swedish brand), Krono (a German brand), Eggar, Floormaster, etc.

Laminated floor can be installed on existing flooring of wood, ceramic, concrete, particle board, vinyl, linoleum, etc.

The surface layer of laminate flooring is hard, compact and autistatic, so dirt and dust do not adhere to it easily. It makes floor cleaning easy.

Laminate floor are less vulnerable than pure wooden flooring from water and dust, but they also require great care to maintain sustainable life. Due to improvement in technology, laminated flooring is available in market with the warranty up to 50 years.

Technology has change laminate flooring from glue joints to mechanical click joints; almost all laminate floors are glue-free today.

The Indian flooring market has witnessed a lot of changes in the last 50 years. From the traditional stone flooring, people have moved to granite, ceramic, marble and now its laminates flooring.

3.3.3 A

Institutional Buyers for MDF SHIPPING INDUSTRY

MDF / Particle board can be used in the manufacture of furniture in ships for which at present plywood is used. Currently marine plywood is used in this application. B. RAILWAYS

Research Design & Standards Organization (RDSO) is the research wing of Railways. They

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Rushil Dcor Pvt Ltd.

promote the use of newer materials in coach building. New class of material is tested and certified by them. This is communicated to all the nine zones of Railways so that field staff can use them. The two major coach factories namely Integral Coach Factory (ICF), Perambur and Railway Coach Factory (RCF), Kapurthala opined that approval of RDSO is needed for using any new material. At present MDF is not used in such building. c. (i) SURFACE TRANSPORT Presently wood, plywood and block board are being used in bus and truck body

building. (ii) Some bus/truck body manufacturers said that they do not know anything about MDF

and nobody has approached them for such a product. (iii) Gujarat State Road Transport Corporation tried MDF for passenger seats by

replacing plywood which was being used earlier. But the results of this experiment were not satisfactory. However, the trials are still on. D. (i) STATE AGENCIES Central Public Works Department (CPWD) is quite favourable to the product. Their

Technology Application & Development Cell (TADC) has approved the material and they are still conducting some tests on the product. For experimentation/trial purpose they have used it in some of the construction and are observing its performance. (ii) Main use for CPWD is in door shutters followed by windows and frames. But the

Department is quite stringent on the Boiling Water Proof (BWP) grade product. They would also prefer a pigmented exterior grade for easier identification. (iii) (iv) They find that exterior grade MDF is not easily available in the market Housing & Urban Development Corporation (HUDCO) another central government

body in housing is also giving MDF a trial by using it in some of the construction activity. HUDCO has used MDF in its Type IV flats at Khelgaon Marg, New Delhi for joinery and various interior

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E. (i)

PRIVATE BUILDERS Private Builders see a great possibility of MDF application in door shutters. For

frames, steel or aluminium is used and in windows steel, aluminium and PVC are preferred. Door shutters traditionally have been of wood and they would continue to be made up of similar material. (ii) (iii) Price-wise MDF is either on a bit higher side or equivalent to other material in their Users have found availability of MDF as a constraint. assessment. Points (ii) & (iii) are not weaknesses per se, but opportunities. RDPL can look forward to leveraging the advantages arising out of domestic production at economies of scale. 3.3.4 (i) (ii) Architects & Interior Decorators Positive attitude about the product is reflected by various architects & interior decorators contacted. MDF is recommended in the furniture which is painted for use. However, in the cases where polishing arid teak ply lamination is required, MDF is not preferred because of its poor adhesive properties compared to plywood and blockboard. (iii) Modular furniture is a new concept. It will be preferred by the people who want economical stuff but for the class which believes in exclusiveness it is a preferred material. (iv) (v) Short supply of MDF especially NUWUD has also been reported by few. MDF is preferred because of its appearance, price and versatility. Higher use of MDF and other panel products is reported in the western and southern India. (vi) According to majority of respondents in this category, MDF is a success abroad and in India direct marketing and promotion through architects is required. But carpenters or workmen need to be educated about the product for better penetration. (vii) Availability of larger sizes of MDF like 8'x6' (which is available in particle board) is desired by some interior decorators. (viii) Everybody agrees that price, performance and awareness about the product will influence the choice of customer and the penetration is expected to increase in the future to over 30 to 35% of the panel product market.

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3.3.5 (i) (ii) (iii)

Industrial Buyers/Converters Respondents of this group have been using plywood and particle board till now. As the modular furniture in India is not very popular, the use of MDF is very less. Until now furniture manufacturers have been using other panel products like plywood, blackboard etc. Although MDF is cheaper than plywood, most furniture makers have not given it a try as it, is a relatively new product. However, in places like Muzaffarnagar, U.P., which is known for its furniture made from Sheesham wood, demand for NUWUD based furniture, is picking up. Furniture (from NUWUD includes tables, chairs, cabinets, wardrobes, racks with very good design creativity.
0

Cost of MDF is less than sheesham and teak wood. (iv) Handrails and margins (mouldings) made from MDF in a wide variety of designs are gaining popularity. These are traditionally made from teak wood. A few furniture makers, who have replaced particle board with MDF find this uneconomical. However, the cost-benefit is not weighed in terms of MDF's durability, strength etc. (v) For simpler applications like TV trolleys, cabinets etc., particle board being a cheaper product, is preferred. Also acoustic properties of particle board fit into the requirement. (vi) (vii) In furniture making, requirement of moulded/carved edges can be easily met with MDF, but users have minor worries about screwing properties on the edges of MDF. MDF is being used by ancillary units of some audio/video electronic equipments manufacturing companies. Some of regular users have complained about poor availability, which is forcing them to use other panel products again. They make products on time bound order, so cannot afford to wait. 3.4 Indian Scenario on Furniture

The Indian furniture industry is fragmented and 85 % of the furniture produced is by handicraft. The contribution of the sector to the GDP is approximately 0.5 % only. The furniture production trend in India is depicted below:

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Figure 3.8: Furniture Productions in Billion Euros

2150 2100 2050 2000 1950 1900 1850 1800 1996 1997
2016 2067

2130

2026 1986 1913

1998

1999

2000

2001

Source: European Furniture Manufacturer Federation

The industry grew almost 3% per annum annual growth rate in year 1996 to 1999 and then slowed down by 10 % in year 1999. The slow down was the result of the cyclical situation of the economy. Furniture sector recovered from the 1999 crisis and attained a 3 % growth rate in the year 2000 and 2001. The wood-based furniture ruled the Indian furniture industry with 65 % share, while metal is accounted for 25% and plastic is accounted for 10 %.

Figure 3.9: Raw material used in furniture

10%

25%

Wood Metal Plastic 65%

Source: European Furniture Manufacturer Federation

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The household furniture is the major segment of the total furniture production, which accounts for 65% of the production value. Figure 3.10: Furniture Production Break up

15% 15%

29%

5% 8%
Upholstery Other Furniture

8%
Bedroom Furniture Corporate/Office

20%
Dining room Furniture Hotel/contract Kitchen Furniture

Source: European Furniture Manufacturer Federation

The household segment covers the upholstered furniture, bedroom, kitchen, and dining rooms furniture. The upholstered furniture accounts for the 30 %, bedroom 20 %, and kitchen and dining rooms furniture for the 7.5 % each. The second major segments in the furniture industry are corporate/office and hotel furniture with the share of 15 % each. Other furniture holds remaining 5 % share. The office furniture segment is the one that boasts the most important companies, both from the point of view of size and of the technological innovation of the production. Import Export The import and export of the furniture is given as exhibit below:

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Figure 3.11: Import Export of Furniture in India

160 140 in million Euros 120 100 80 60 40 20 0 1996 1997 1998 Import
Source: European Furniture Manufacturer Federation

1999 Export

2000

The exports of Indian furniture are ten times higher than imports of the furniture in India. The exports are more in the form of cheap varieties at affordable costs whereas the imports cater to the elite class who wants to own the best brands available in the market.

Export of Indian furniture

The United States is the biggest consumer of the Indian furniture outside India and accounts for 24% of total export of the Indian furniture. After US, United Kingdom and Germany are the biggest export destinations for the furniture with 14% share each. Figure 3.12: Country wise break up of export of Indian furniture

5% 15%

10%

24%

2% 2% 4% 5% 5% 14% 14%

United States Italy others

Germany Denmark Belgium

United kingdom Canada Netherlands

France Greece

Source: European Furniture Manufacturer Federation


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The indicative break up of export share of the furniture products is given below: Figure 3.13: Product wise break up of Indian furniture export

8% 1% 1% 4%

8%

5% 42%

31% Other Wooden Furniture Kitchen Furniture Other Metal Furniture Office Furniture Seating & Parts Bedrooms other Furniture & Parts Plastic Furniture

Source: European Furniture Manufacturer Federation

Import of the furniture

Indian consumer prefers stylish and western furniture. The biggest import source of furniture in India is Germany which account for the 16 % of total import of the furniture. Germany followed by the Italy with 12 % and Korea with 10 % of import share. Figure 3.14: Country wise break up of imported furniture in India

Germany

20%

3%

16%

Italy

12%

Korea United Kingdom United States

7% 9% 4% 5% 7% 7%

Irish Republic France Japan

10%

Poland others Switzerland

Source: European Furniture Manufacturer Federation

The indicative break up of import share of the furniture products is given below:

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Rushil Dcor Pvt Ltd.

Figure 3.15: Product wise break up of imported furniture in India

8% 11%

5%

38%

Seating & Parts Furniture Parts Plastic Furniture

3% 3% 3% 29%

Kitchen Furniture Bedrooms Other Wooden Furniture Office Furniture Other Metal Furniture

Source: European Furniture Manufacturer Federation

Indian wood scenario India meets its wood required by natural production, plantation and imports. Table 3.3: Indian log production, imports & apparent consumption, 2003 Logs Production - from natural forests - from plantations & homesteads Imports Total apparent consumption
Source: American Forest and Paper Association.

Volume(m3) 14,000,000 43,000,000 3,000,000 60,000,000

Due to stringent government rules and environmental concern, the availability of woods from the natural production is reduced in recent years considerably. The concept of social forestry and plantation is well developed in recent year and few wood panel and paper manufacturer have developed small forest to meet their own wood demand. Teak, Eucalyptus and rubber wood are the preferred trees for social forestry. demand of the wood is satisfied by the import of the wood logs. The indicative break up of the round wood consumption is shown in table given below: Rest of the

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Rushil Dcor Pvt Ltd.

Figure 3.16: Break up of the round wood consumption in India

12% 25%

25%

Construction Furniture & Interior Joiniry Sleepers

8% 5% 25%

Packaging Others

Source: European Furniture Manufacturer Federation

In coming years the demand and supply gap of wood is expected to be widened. Table 3.4: Demand supply gap of wood
Year Demand Supply Gap % of demand gap
Source: Ganguly, 2003

2000 58 29 29 50

2010 950 70.55 24.45 25.70

2020 153 100.7 52.3 34

Due to lack of supply of domestic natural wood, import of wood base products has increase sharply in recent years. Table 3.5: Indian imports of wood products, 2002 -2003
2002 ($,000) 361,851 7,716 3,587 3,810 11,007 7,819 7,280 403,070 2003 ($,000) 692,582 12,777 3,736 4,359 13,555 13,740 12,713 753,462 % Change 91 66 4 14 23 76 75 87

Logs Sawn Lumber Veneer Plywood (incl. Veneered plywood) MDF/HDF Particleboard Wooden Furniture Total
Source: American Forest and Paper Association

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Decreasing tariffs of wood imports in India has also propelled the imports of wood in India. The growth of the imports of veneer is lowest compared to other products; this may be because of the high rise in the import of the sawn lumber. The sharp increase in the wood pane l is observed in 2003, this shows the increasing trend of the wood panel based furniture in India. With the wood panel, imports of the wooden furniture also increase by almost 75 % in year 2003.

Indian wood panel scenario The import of the wood panel is summarized in graph given below: Figure 3.17: Imports of Veneer & plywood in India (In US $ 000)

12000 10000 8000 6000 4000 2000 0 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

Veneer Plywood

Source: Federation of Indian Panel & Plywood Industries (FIPPI)

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Figure 3.18: Import of MDF/HDF & Particle Board in India (In US $ 000)

14000 12000 10000 8000 6000 4000 2000 0 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

MDF/HDF

Particleboard

Source: Federation of Indian Panel and Plywood Industries (FIPPI)

The import of the MDF/HDF and particle board has outperformed the import of the veneer and plywood. The import of the MDF has shown continuous rising trend of import in recent years, which clearly depict the inclination of the Indian consumer towards the MDF in recent years. This holds promise for the domestic manufacturers in terms of making available MDF at competitive prices within India through domestic manufacturing. 3.5 Other Relevant Issues

To put it short, the major factors that determine the demand for MDF in the country will depend on the following: Economic Growth Rate. Government policies on forest products. Thrust on infrastructure projects and housing. Product characteristics and the awareness of MDF. Price differential of MDF and its substitutes. Relative availability of MDF and its substitutes. Taxation structure of MDF and its substitutes.
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Rate of Urbanisation. Per Capita Income. Changing life styles and perception. Development of new substitutes.

Indias Economic Growth Rate: The country has been witnessing a consistent and impressive growth rate in the range of 7-9% per annum. This coupled with the increased thrust on manufacturing will have a multiplier effect on construction and infrastructure projects, major growth driver for MDF also. Government Policies on Forests: The world is experiencing global warming due to increased emission of carbon dioxide and ozone-depleting substances. The forests, to a large extent, can fight those problems (through photo synthesis using the CO2) and also preserve the rich bio-diversity. The governments the world over has woken up to this reality to prevent de-forestation by discouraging industries that use forest resources like wood and timber. At the same time using non-conventional raw materials like bagasse, wood wastes, lops& tops, barks, etc are encouraged. The National Forest Policy, 1988 stipulates that the one-third of landmass should be tree covered with at least 60% in the Himalayas. Within the broad parameters of the National Forest Policy, each State should have its own forest policy statement, for the sustainable management of its forest and wildlife resources. To sum up, the government policy on forest products is the one that would promote the use of MDF and thus enhance its demand. Product characteristics and the awareness of MDF: Product characteristics determine its suitability to a particular application. A compact look, smooth texture, rigidity and a proper colour are the primary visual characteristics which play a major role in making or breaking the success of a product.1 Good workabilitymachining operations (sawing, planing, nailing, screwing and

contouring), the quality of the machined edge thus obtained, the minimum level of

Use of a particular species of eucalyptus gave DURATUFF a dark, grey colour which made the dealers and carpenters to

mistake MDF for an inferior product. There was greater resistance during the promotion phase.
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operator skill required and the time to complete the task are all determining factors for the acceptability of MDF. It is ultimately the consumer who decides whether or not to accept a product. In addition to the price factor, the decision is strongly influenced by; a) Does the product come from a branded firm (Corporate Brand Name)? b) Does it have a quality certification (BIS mark, etc)?

c) Has the product been endorsed by industry professionals and bodies (leading architects, builders, institutes, etc)? As long as the product remains reasonable priced, acceptance at the above levels would ensure that the product acceptance trickles down rapidly to its target segment. Price differential of MDF and its substitutes: A favourable pricing of the product vis-vis substitutes is important to capture market share in the price-sensitive market. However, this can be curbed to an extent by brand-building and by running awareness programs on MDF. Relative availability of MDF and its substitutes: Nearly 75-80% of the MDF demand in India is being met by imports. There are only two manufacturers of MDF at present, namely, Mangalam Timbers (SK Birla Group) and Nu Chem. The proposed plans of Bajaj Biotec (Bajaj Hindustan Group) to set up three plants two for MDF in eastern and central Uttar Pradesh and one for PB in western UP will result in a total production capacity of 2.10 lakh cubic metres per annum. Rate of Urbanisation: The rate of urbanisation affects the demand as follows: Migration of rural population to a urban environment seeking jobs results in greater money flow as a result of employment. Over a period of time, the migrant family will start investing in house or in buying furniture. Per Capita Income: The rise in income levels and the per capita disposable income will result in the procurement of new dwelling units, furniture and the like. Needless to say, rising income levels will bring about increased economic activities.

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Changing Life Styles and Perception: The frenetic pace of life and special constraints in the big cities would necessitate the adoption of modular furniture, cabinets, kitchen, etc. MDF is a preferred choice for modular furniture. Development of New Substitutes: The dwindling wood reserves and the increased R&D efforts in the material science to find alternatives have led to the commercialisation of acrylic, fibre glass and gypsum entering the furniture market. Another substitute called Gypboard (gypsum panel) is being used increasingly as walls, false ceiling and partition. Similarly, woodplast is being used in garden/beach furniture, TV cabin, etc.

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4
4.1

Raw Material Assessment


Raw material Types

Medium Density Fibre Board can be manufactured from soft wood or from agricultural wastes like cotton stalk, bagasse, etc. Eucalyptus, poplar and pine are generally being used as a raw material for MDF board. But due to dwindling forests and the stringent government regulations to protect forests, manufacturers are looking for alternatives to produce MDF Board. RDPL (herein after referred to as client) plans to use cotton stalk/ bagasse, which is primarily an agricultural waste left after the harvesting of cotton, as the raw material for MDF Board manufacturing. 4.2 Cotton Production

As depicted below, the cotton cultivated area in India is nearly 9 million hectares (year 2005) with an average yield of 450 Kg/ha. The yield of cotton in the US is almost double of this figure, owing to the increased usage of BT cotton and other improved varieties. Since further elaboration on the subject is not relevant to our study, we may discuss issues pertaining to India and Gujarat in particular.

Figure 4.1: Cotton Production area and yields of India and U.S.

Source: commodity intelligence Report, United states Department of Agriculture (USDA)

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India India is the third-largest cotton producing country in the world after China and US. China produced 5,704,436 MT and the US 5,203,665 MT of cotton in the year 2005, while Indias cotton production in the same year was 3,984,396 MT. In terms of area of cotton production, India has the largest land area (Statistics of the year 2005). At present around 84 lakh hectares area is being used for cotton cultivation, which is expected to grow to 90 lakh hectares by year 2006-07. Figure 4.2: Indias Cotton Production and Production area

India's Cotton Production and Production area


250 200 150 100 50 0 2000-01 2001-02 2002-03 2003-04 2004-05

Area (Lakh hectares)

Production (Lakh Bales)

1 bale: 170 kilogram

Source: Cotton Corporation of India

Despite the largest land area in cotton cultivation, Indian cotton production is less than that of China and the US because of the lower yield. But in recent years Indias cotton production yield has improved steadily. Improved irrigation system and the adoption of BT cotton are the main reasons for the improvement in yield (MT/hectare).

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Figure 4.3: Indias Cotton Production Yield


India's Cotton Production Yield
500 400 300 200 100 0 2000-01 2001-02 2002-03
Yield (Kg/ ha)

2003-04

2004-05

Source: Cotton Corporation of India

The central states of Maharashtra, Gujarat, and Madhya Pradesh continue to plant approximately 63 percent of India's total cotton area. Gujarat Gujarat is the leading state of India in cotton production followed by Maharashtra and Andhra Pradesh.

Table 4.1: Cotton production


(Area in Lakh hectare) (Production in Lakh bales)

States Gujarat Maharashtra Andhra Pradesh


Source: CCI

2004-05 Area Production 19.06 54.43 30.49 52.00 11.42 32.50

2003-04 Area Production 16.41 40.26 27.66 31.00 8.25 26.00

2002-03 Area Production 16.34 30.50 28.00 26.00 8.03 19.75

In spite of lesser area for cotton cultivation than that of Maharashtra, Gujarats production is higher than that of Maharashtra, This has happened due to higher yield of cotton in Gujarat. Cotton production of Gujarat has steadily increased since year 2002, owing to two major facts, namely, the increased adoption of BT cotton in place of desi varieties and the improved irrigation facilities available to the cultivable land.

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Figure 4.4: Gujarats Cotton Production Yield

500 450 400 350 300 250 200 150 100 50 0 2000 - 2001 2001 - 2002 2002 - 2003 Yield in Kg/Ha 2003 - 2004 2004 - 2005

Source: Directorate of Agriculture

The cotton production area increased by 13.5% in year 2006, from 20.77 lakh hectares in the year 2005 to 23.60 lakh hectares in the year 2006.

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The district wise cotton production in Gujarat is mention below: Table 4.2: District wise cotton production in Gujarat
(Area in 00 hectare) (Production in 00 bales) (Productivity in kg/hectare)

Sr. No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

Name of District Ahmedabad Anand Banaskantha Bharuch Dahod Dang Gandhinagar Kheda Mehsana Narmada Navsari Panchmahal Patan Sabarkantha Surat Vadodara Valsad Amreli Bhavnagar Jamnagar Junagadh Kutch Porbandar Rajkot Surendranagar Total

Area 1680 13 45 1329 6 0 180 179 368 352 0 72 769 377 42 1581 0 1040 1901 320 192 402 37 1680 3845 16410

2003-2004 Production 2463 39 180 1919 17 0 506 398 804 621 0 184 774 1401 99 3164 0 3392 4116 1879 993 994 83 10118 6125 40269

Yield 249 552 680 245 415 0 478 378 371 300 0 434 171 632 401 340 0 554 368 998 879 420 381 1023 271 417

Area 1895 38 61 1297 18 0 327 206 467 435 0 104 1011 861 70 1728 0 1164 1987 467 249 547 32 2028 4071 19063

2004-2005 Production 3327 154 259 3350 73 0 1171 653 1122 1510 0 337 1101 2932 180 4499 0 2908 5159 2567 1401 1217 72 10683 9760 54435

Yield 298 689 722 439 689 0 609 539 408 590 0 551 185 579 437 541 0 425 441 934 957 378 383 896 408 494

Source: Directorate of agriculture, Gujarat

As shown in the above table, Surendranagar leads the pack in terms of the maximum cultivable area and production of cotton. Surendranagar also geographically connected with the Rajkot, Bhavanagar and Ahmedabad. These are the second, third and fourth highest cotton cultivated district respectively in Gujarat. Also Patan and Mehsana have good amount of cotton cultivation.

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The production of cotton in Surendranagar district is mention below in table: Table 4.3: Cotton Productions in Surendranagar District
(Area in 00 hectare) (Production in 00 bales) (Productivity in kg/hectare) Year 2000 - 2001 2001 - 2002 2002 - 2003 2003 - 2004 Unirrigated Cotton Production Area 3249 3442 3234 3100 Production 1038 2162 1050 4103 Yield 54 107 55 225 Irrigated Cotton Production Area 526 790 967 745 880 Production 775 1799 1490 2022 3835 Yield 250 387 262 462 741 Total Cotton Production Area 3775 4232 4201 3845 4071 Production 1813 3961 2540 6125 9760 Yield 82 159 103 271 408

2004 - 2005 3191 5925 316 Source: Directorate of Agriculture, Gandhinagar

The yield of the cotton production is increased considerably in last two years in Surendranagar. At present, major part of cotton cultivation area is unirrigated, which is likely to get irrigation sooner in incoming years as Sardar Sarovar project is gained fast execution in recent time. This will result in higher production of cotton stalk in Surendranagar as it has very large area for cotton cultivation.

4.3

Cotton stalk

Cotton stalks production directly depends on the production of cotton. As per the Ministry of Environment and Forests (Government of India), it is estimated that, on an average, the rain fed crop gives about 2.5 tonnes per hectare of cotton stalk and the irrigated crop gives about 5 tonnes per hectare. Generally 3 metric tons of cotton stalks is produced per hectare production of cotton. Estimated weight of the cotton stalk is 300-400 gm per plant with the average diameter varying from 1 to 1.5 inches. While the total Indian production of cotton in the year 2005-06 was 23.8 million bales (1 bale equals 170 kg), Gujarat alone produced around 7.6 million bales of cotton in the same period. Taking cues from the table (section 4.2), the cultivated area of cotton in Surendranagar in year 2004 - 05 is 4.07 lakh hectares, which can produce three times as much quantity of cotton stalk. This translates into 1.22 million metric tons of cotton stalks. The requirement of the plant is 100,000 tons which can be met by procuring the cotton stalks from the Surendranagar area only. Also emergency provisions can be made to procure the same from the adjoining districts like Rajkot, Bhavnagar and Ahmedabad.

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Techno-Economic Feasibility report of


Medium Density Fibre Board

Mott MacDonald
Rushil Dcor Pvt Ltd.

4.3.1

Cotton stalk usages

The stalk of the cotton plant is processed for the development of ethanol for petrol and diesel blends and it is also used as a mulch to improve soil. Cotton stalk is also used to prepare stock feed with the shell of the cotton seed. Cotton stalk can be used as direct fire stock in boiler and for the purpose of household. No major industrial and commercial utilization of cotton stalk is so far done in India. Cotton stalk is mainly burned either as feed stock in small capacity boilers or as fuel in household. Farmers use them to make composts in order to improve the soil fertility. Only a small fraction of the available cotton stalk is used to prepare feed stock using the shell of cotton seed. All these activities are done at a very low capacity and in unorganized manner. Cotton stalk is not utilized so far in value added activities like the manufacturing of MDF. As most of the cotton stalk is considered as waste and burnt by farmers, it can be conjectured that a significantly large portion of cotton stalk could be made available to manufacturing MDF board. This would also help farmers to earn extra money from selling cotton stalks to the manufacturers of MDF, thereby creating a win-win for both. 4.3.2 Cotton Stalk Availability

Future availability of cotton stalk depends on the production of cotton. Cotton is Gujarats one of the major revenue earning crop that supports the textile sector which is one of the leading industry sectors of Gujarat. The demand for cotton will increase due to growth of the textile industry. The major growth drivers of the textile industry in India are mentioned below: Abolition of Quota system and MFA (Multi Fibre Agreement). Growing demand for apparels and clothing. Established presence of Indian textiles in domestic and international market. Growing urbanization, increase in disposable income levels and fashion-savvy population. Comparative as well as Competitive Edge of Indian Textile Industry. Initiatives by Government to promote Textile Industry.

It is envisaged that cotton production will also increase in coming years to meet the increased demand of cotton in Gujarat. The major factors that lead the rise in cotton production in Gujarat are mentioned below:

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Techno-Economic Feasibility report of


Medium Density Fibre Board

Mott MacDonald
Rushil Dcor Pvt Ltd.

Improved irrigation In past few years, the irrigation system of Gujarat has improved due to the increased awareness of the citizens and also by the sustained effort of the Government of Gujarat. The successful implementation of Sardar Sarovar Project makes Narmada water available through the entire middle-Gujarat and Saurashtra for irrigation. Gujarat is the first state in linking rivers across the state. Construction of check dam helps to store water for longer time, to increase the ground water level and to recharge the dry well. Due to these efforts, ample water will become available for irrigation to cotton crop, which in turn can help increase the production of cotton. Adoption of BT cotton Gujarat is one of the states, which early-adopted the BT cotton and the rise in the production of cotton crop is the result of that. BT cotton protects the plant from blow worm. The height of the BT cotton plant is normally higher than the desi (non-BT) cotton plant. The production of the cotton boll also increases in BT cotton plant. Due to higher quality and large volume, BT cotton help farmers to fetch good price for their product. This becomes the prime motivation for many farmers to move onto cotton production in the state, which led to the higher cotton production in Gujarat. At present cotton stalk is treated as agro waste product with no seemingly major industrial and commercial applications. MDF board industry will not only utilize the cotton stalk in value addition activity but it also provides opportunity for farmers to earn extra money by selling cotton stalks. Going by the current economic condition and booming textile industry, the demand for cotton in coming years is likely to go up with concomitant increase in the cotton cultivation and hence the increased availability of cotton stalk in Gujarat. In short, the cotton stalk will be largely available in future to support the MDF board manufacturing industry.

4.3.3

Procurement Strategy & Design

Cotton stalk available from cotton plants are required to be processed in the following stages, before they can be used in the MDF plant: 1. Removal of the ground 2. Removal of the dirt and soil sticking to the stalk 3. Removal of leaves and smaller branches

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Techno-Economic Feasibility report of


Medium Density Fibre Board

Mott MacDonald
Rushil Dcor Pvt Ltd.

4. Removal of lint sticking to the cotton stalk 5. Removal of cotton seeds sticking to the cotton stalk 6. Washing of the cotton stalk 7. Debarking of the cotton stalk 8. Chipping of the cotton stalk 9. Drying of chips Cotton stalk would be available from the farms starting from the month of April to June. From the farms, at least for another six months, there would be no substantial deterioration in quality, if stored properly. Technically of course cotton stalk can be used for a period up to one year, if they are protected and properly stored in chipped form. RDPL can develop effective technology to procure cotton stalk for long time and mechanism to lower the cost of cotton stalk by working with organisation like CIRCOT (Central Institute of Research of Cotton), Mumbai. CIRCOT is leading institute doing research on cotton and it had successfully carried out pilot project to manufacture board from cotton stalk. Its expertise and technology knowledge would help RDPL to utilise cotton stalk in efficient way. RDPL planning to set up manufacturing unit at Dhrangadhra taluka, which is surrounded by Lakhtar, Limdi, Muli, Chuda, Sayla, and Wadhwan. All these talukas are cotton growing area and producing ample quantity of cotton in year. The production of cotton in these talukas is provided in the table given below: Table 4.4: Cotton Production in different talukas of Surendranagar
Sr. No. 1 2 3 4 5 6 7 8 Taluka Lakhtar Limdi Muli Chuda Sayla Dhrangadhra Wadhvan Halvad Cotton Production (in hectare) 47556 37000 32500 15432 28150 49900 43400 28158 cotton stalk in tones @ 1.5 tones / hectare 71334 55500 48750 23148 42225 74850 65100 42777

The planned capacity of the fibre board manufacturing unit is 30,000 CuM. The raw material requirement for this capacity is easily meet by the cotton production of this region.

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Techno-Economic Feasibility report of


Medium Density Fibre Board

Mott MacDonald
Rushil Dcor Pvt Ltd.

RDPL is planning to set up Collection-Chipping-Storage centre of cotton stalk in each of these taluka. Each CCS centre will be established on a 5 Acre land. CCS centre equipped with one Mobile chipping unit to chip the cotton stalk and one weighing machine (20 tones) facilitated by software installed terminal. Around 34 persons will be stationed at each CCS centre - 24 labourers required for chipping machine operation, 6 persons required to operate weighing machine and an accountant and a supervisor. The proposed location of the CCS centre is mention in table given below: Table 4.5: CCS Centre locations
CCS No. 1 2 3 4 5 6 7 CCS Centres (Proposed) Adalsar Samla Sudamda Gadhda Charadva Dasada Navalgarh Talukas Lakhtar Limdi Sayla Muli Halvad Patdi Dhangadhra Distance form Dhangadhra 38 57 48 38 27 38 0 Talukas Covered Lakhtar, Patdi, Limdi Limdi, Wadhwan, Chuda Sayla, Muli, Chuda, Chotila Muli, Dhangadhra, Halvad, Chotila, Vankaner Halvad, Morbi, Naliya, Vankaner Patdi, Bechraji, Viramgam Dhangadhra, Halvad

Each CCS centre will cover almost 20 km of area surrounding it, while the distance of these centres from the manufacturing unit is varied from 27 to 70 km. Cotton growing farmers from the surrounding villages will transport cotton stalks to this centre. Transportation cost up to CCS centre will be borne by RDPL. The collected cotton stalk will be chipped and stored at the centre and will only be transported to the factory whenever required. This would help to reduce required storage space at the factory, the transportation cost and the overall operational burden. The strategy also provides opportunity to create buffer stock to meet future demand and to control the price of raw material. The location of Collection-Chipping-Storage centre is diagrammatically represented as follows:

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Medium Density Fibre Board

Mott MacDonald
Rushil Dcor Pvt Ltd.

Figure 4.5: CCS Centre Mechanism

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Techno-Economic Feasibility report of


Medium Density Fibre Board

Mott MacDonald
Rushil Dcor Pvt Ltd.

(i)

Pricing

Our interaction with various agencies suggests that cotton stalk can be procured at a price of INR 300 per metric ton. This can be channelised either through farmers co-operatives or through direct buying from big farmers (RDPL is planning collection points at major locations). As this is a seasonal item, the collected cotton stalks will be stored in warehouses so that the operation of the plant can be sustained for the entire year. Besides the basic purchase price of the cotton stalk, cleaning, handling and transportaion charges should also to be considered for the calculation of the price of cotton stalk at MDF plant. It is advisable that the client would make contract or create strong linkages with farmers and co-operatives to procure cotton stalk at reasonable prices. Because there are chances that once the MDF unit is set up based on cotton stalks, farmers would realise its value, who in turn, would increase the price of cotton stalks. Moreover, due to price increase in other types of domestic fuels like coal, wood etc, usage of cotton stalks as a regular domestic fuel has received some serious attention. Some projects like White Coal have been set up to convert waste cotton stalks into more usable configuration as fuel. All these may put pressure on the prices of cotton stalks. 4.4 Bagasse as Alternate Raw Material

Bagasse is another option to be considered as a raw material for MDF production. Bagasse is the matted cellulose fibre residue from sugar cane that has been processed in a sugar mill. Most bagasse has moisture content between 45 and 55 percent by weight. Average bagasse production is about 30 percent of the sugarcane crushed. About 90 percent of bagasse produced is used as fuel. Another major use of bagasse is in paper making. However, large quantities of bagasse are either thrown away or taken away for use as fuel or for compost making. In a number of sugar manufacturing factories surplus bagasse becomes a disposal problem. India is the second largest producer of Sugar cane in world after Brazil, with an estimated production of 258.0 million MT in the year 2005 and which is estimated to touch to 329.60 million tones by the year 2015. The major sugar producing States in the country are Maharashtra, Uttar Pradesh, Tamil Nadu, Karnataka, Gujarat and Andhra Pradesh considering total sugar production and area under sugarcane. In India sugar production is undertaken practically throughout the country and there are well-established factories in 18 out of 26 States. There are approx. 575 sugar mills operating in India.
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Techno-Economic Feasibility report of


Medium Density Fibre Board

Mott MacDonald
Rushil Dcor Pvt Ltd.

Sugar production has emerged as one of the major agro industries in the rural areas of India during the last few decades particularly in the irrigated region. Sugar production in Gujarat is substantial since many of the factories are cooperatives and the producer receives full benefit from sugar production. Gujarat is one of the leading producers of the sugarcane. The southern region of Gujarat is the biggest region of sugarcane production in Gujarat as it has good irrigation facility due to presence of larger rivers like Narmada, Tapi, Mahi etc. Table 4.6: Sugarcane Productions in Gujarat
Area (in 00 Hectare) 1777 1758 2029 1764 1967 Production (in 00 MT) 12695 12465 14071 12669 14570 Yield (in kg/Hectare) 7142 7092 6934 7182 7407

Year 2000 2001 2002 2003 2004 - 01 - 02 - 03 - 04 - 05

Source: Directorate of Agriculture, Gujarat

The southern region of Gujarat also caters many sugar producing factories due to good production of the sugarcane in this region. Out of 22 sugar factories in Gujarat, 19 factories are in South Gujarat and 3 are in Saurashtra. These factories are good source of generating bagasse, which is generally transported to the Nagpur, Aurangabad. 4.4.1 Procurement of Bagasse

Bagasse can be purchased either from contractor or sugar mandi and its available either in bails or loose. The average price range of the bagasse is 475 500 Rs. /ton. Usually sugar factories crush sugarcane between October to April and hence bagasse is available for six months only in a year. Nearly 421 Kilo tons per annum of bagasse is available from the sugar factories of South Gujarat alone. RDPL will require a maximum of 60,000 MTPA of bagasse. Bagasse will be available in ample quantity from these factories to RDPL. RDPL has to transport the bagasse from the south Gujarat to Surendranagar, the selected location for MDF manufacturing facility. Due to good road network, transportation can be handled efficiently and economically. The survey of the sugar producing 15 factories in south Gujarat is summarized in Appendix J.

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Techno-Economic Feasibility report of


Medium Density Fibre Board

Mott MacDonald
Rushil Dcor Pvt Ltd.

4.4.2

Contingency Plan for Raw Material Sourcing

The success of the project will depend on the availability of quality cotton stalks at economical prices, chipping of stalks, their storage and transportation. Also it is very important to explore better ways of storing the same (as cotton stalk is available only during the harvest season) to sustain production of MDF on a continuous basis. It makes immense sense to chalk out a strategy to procure or ensure the supply of raw material that can substitute cotton stalk in case there is a scarcity for the latter or if the landed price of stalk becomes unaffordable. The client has plans to grow ailanthus excelsa or other kind of soft wood tree near the factory premises in a vast expanse of land so that the wood from the same can be used as raw material for MDF. Ideally 850 to 870 saplings can be planted per acre of land and will be ready for felling in a span of 4 years. The typical yield is 100 tons per hectare. On an average, 1.55 tons of the tree is needed to produce 1 cubic metre of MDF.

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Techno-Economic Feasibility report of


Medium Density Fibre Board

Mott MacDonald
Rushil Dcor Pvt Ltd.

5
5.1

Technological Aspects
Manufacturing Process of Fibre Board

Three major steps involved in the manufacturing of MDF are fiberising, fibre mat formation and board pressing. MDF can be processed from a variety of raw materials such as agro residues and annuals. After necessary cleaning and preparatory process, the raw material is cut into small sizes or chips. These are screened and graded in sizes. Chips larger than the pre-determined size are recycled and very small pieces are rejected. The distinct operations involved in the MDF manufacturing are: a. Raw material handling b. Chip Preparation c. Fibre Refining& Drying d. Fibre Resin Blending e. Forming Station f. Hot Pressing g. Board Finishing 5.1.1 Raw material Handling

Raw material consists of various types of cotton stalks (removed from the fields in the form of chips). The mobile chippers have been chosen to be used either in the field or at the factory. The chips are stored in piles and transported by front loader to the chip reclaim hopper. 5.1.2 Chip Preparation

The chip reclaim hopper will be equipped with a multiple screw conveyor system that feeds the chips for classification to the rolling screen. The screen has three decks. In the first one, oversized chips are separated. From, deck two, the accepted material is

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Techno-Economic Feasibility report of


Medium Density Fibre Board

Mott MacDonald
Rushil Dcor Pvt Ltd.

conveyed by a belt conveyor to a chip washing system, which pumps the chips to the digester feed bin. Unwanted fine material is taken out from the bottom of the screen and can be used as fuel in boilers. 5.1.3 Refining of Fibre and Drying

The digester feed bin is equipped with a vibrator feeder and controls to maintain uniform chip flow from the silos. Chips are fed from these silos to the digester at a controlled rate. The steam digester operates on a controlled but adjustable steam pressure that cooks (steam condition) the chips according to the adjusted time and then gets transported to the refiner. In the refiner, the chips will be reduced to fibres. The disc type refiner will have changeable grinding plates and adjustable disc clearance to provide the degree of fiberisation required. From the digester-refining unit, the fibre is discharged under steam pressure into the blow line for transportation either into the fibre drier or the start up fibre dump. During normal operation, the-fibre drying steam receives the fibre and steam from the refiner blow line and dries the fibre to approximately 5% moisture content (bone dry). This drier is of the flash tube type and does not employ a rotating drum. Large volumes of air are blown through the heater section and are heated to a predetermined, controllable temperature. Fibre and steam from the refiner are injected directly into this stream of heated air at the inlet- of the flash tube drier. Operating on the principle of air suspension drying, the fibre drier thus ensures that the fibre is maintained in suspension in a stream of heated air until the final moisture level is reached. After the flash tube, the fibre and steam are separated in the cyclone, with the fibre passing through a rotary valve airlock at the bottom of the cyclone to a reversible out feed belt. The moisture vapor is extracted from the cyclone with the transporting air and is discharged directly to atmosphere. The reversible out feed conveyor transports the fibre either to the weigh belt conveyor or, when reversed to a fire dump. This conveyor is reversed when fire has been detected in the drier or other systems upstream of the fibre bin of the mat former. Fire detection and control of the direction of this conveyor is fully automatic, but manual override is also provided.

The weigh belt conveyor totalizes the fibre flow and also controls the resin and wax
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Techno-Economic Feasibility report of


Medium Density Fibre Board

Mott MacDonald
Rushil Dcor Pvt Ltd.

addition to the fibre. From the weigh scale the fibre is dropped into the fibre bin of the mat former. The fibre bin acts as a buffer and storage device between the fibre preparation and the forming and pressing line. 5.1.4 Fibre Resin Blending

Resin, hardener and other selected chemicals are automatically blended in electronically equipped mixing units and then metered into the fibres in the blow pipe line. 5.1.5 Forming Station

Fibre is metered at a controlled rate out of the bin to the single forming head. The former lays a continuous fibre mat down out to a wire screen. After the forming head a scalper shaves off the layer of the fibre mat. 5.1.6 Hot Pressing

In the hydraulic hot press 12 mats are pressed simultaneously. 12 caul mats are stacked in an elevating loading rack in front of the press and then simultaneously charged .into the press. After the pressing they are discharged into a corresponding unloading rack behind the press, while the following 12 mats are charged into the press. The hydraulic hot press is of frame type and heated by means of steam. Pressing time, pressure and temperature are automatically controlled according to a programme to be pressed with regards to the actual type of board. 5.1.7 Trimming and Sanding

Unloaded boards are passing a thickness control on the roller conveyor in front of the cooling wheel. The boards are shortly stored in the cooling wheel before they will be trimmed and cut to size. After the trim saws the boards are automatically stacked. From the stacker, the boards are taken into the intermediate storage to complete the curing and equalizing of the board.

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Techno-Economic Feasibility report of


Medium Density Fibre Board

Mott MacDonald
Rushil Dcor Pvt Ltd.

5.2 5.2.1

Manufacturing Process of Prelam Boards: Impregnation Section

In impregnation line, the base paper and balancing paper to be used for pre-lamination of board are impregnated with MF resin. The roll of paper is un winded & fed into impregnator, where resin of required grams is applied through rollers. The paper usually weighs within a range between 80 to 140 gsm. Normally the resin pickup is 100% of the weight of paper. The impregnation paper is then dried, cooled & stored in air-conditioned room and then send for pre lamination section to apply on MDF/particle board. 5.2.2 Short cycle Laminating Process

In short cycle laminating process, impregnated paper fix on the raw MDF board, with the help of press. Heat and pressure play major role in this process. The automatic board pushing device or handling system supported with hydraulic lifting platform or scissor lift feeds raw MDF/Particle boards into the short cycle press device. Raw board brushing machine cleans the surface before board enters into the short cycle press. Melamine impregnated paper is overlapped manually on to the raw board with best efforts. Loading conveyor and board centering conveyor adjust the board inside the machine with proper alignment of the board before pressing process. The next stage is the hot pressing of paper applied raw board inside the press device. Surface of the board is applied with a pressure of 30 +/- 2 Kg / cm2. The heat required for pressing cycle is 180 +/- 5 degrees Celsius. Pressing cycle takes around 60 seconds for pressing one board. The prepared, terms also as cooked, prelam board comes out from press with help of unloading device. Roller conveyor, connecting the unloading device and stalking station, brings the boards on the stalking station for natural cooling. Whole short cycle process runs through the electrical control panel that is a PLC (programmable logical control) unit. 5.3 Manufacturing process of Laminated Flooring

The manufacturing process of laminate flooring starts from the prelam manufacturing section. Short cycle laminate press prepares pre laminated MDF/HDF boards with heat and
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Techno-Economic Feasibility report of


Medium Density Fibre Board

Mott MacDonald
Rushil Dcor Pvt Ltd.

pressure application on melamine impregnated papers and base board assembly. Prelam boards prepared out of this process are considered as raw material for laminate flooring manufacturing process. Raw material dimensions required for our process will be of W 1220 X L 2440 X T 6-10 mm. Core material can be MDF/HDF or particle board with laminated surface by melamine impregnated paper. Warp of panels can be considered within a tolerance limit of 2 mm /m (max). 5.3.1 Cutting of pre laminated raw boards

Pre laminated boards are fed in the cutting line with two sliding table saws for the manual crosscutting of boards in two pieces. These boards are stocked for stress release before sending to manual length cutting line. Cross cut boards on the sliding table saw are converted into individual planks. These planks are manually destacking and stocked for profiling process. The dimensions of finished work pieces are 190 X 1208 mm.

5.3.2

Profiling of Planks

The cut panels are then manually fed into the profiling machine. This machine basically turns groove or profile over the plank edges, both crosswise and lengthwise. Profiling operation is meant with patented/non patented click profile tooling. This click profile tooling creates profile first longitudinally and then crosswise on a single DET machine. The profiled surface is then applied with PU coating layer to make the surface moisture resistant. Profiled planks are considered as the ready to feet flooring products. These planks are then moved for packing and storage.

5.4

Location Aspects

It is very important to select an appropriate location for any project and particularly for this project owing to the following factors. In order to ensure continuous supply of raw materials (E.g: cotton stalk) Availability of man power (local availability of labour at affordable costs)

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Medium Density Fibre Board

Mott MacDonald
Rushil Dcor Pvt Ltd.

Uninterruptible supply of electricity at cheaper rates as the process is energyintensive.

Hassle-free supply of water and other utilities. To tap any incentives, if any, from the government that can help to improve the bottom line of the business.

The selected location for setting up project is Navalgarh area of Dhangadhra Taluka in Surendranagar district. The following parameters are being taken into consideration.

5.4.1

Raw Material Availability

The raw material is very crucial part of the project. As project is based on the agro waste, the location must consider the different aspects of the agricultural product used as a raw material. The selected location Navalgarh in Surendranagar district is surrounded by cotton producing areas. As the project is planned based on the use of cotton stalk as a raw material, the proximity of the cotton-producing region would help to reduce the transportation cost of the raw material, improve flexibility in procuring raw material and to control the price of raw material. The cotton stalk production quantity is higher in the region than that is required for the project. RDPL is also considering the bagasse as another option as raw material for the project. This is abundantly available in south Gujarat. At present, bagasse is being shipped out of the state to Maharashtra, etc. The distance from Valsad to the proposed site is 340 km by road and the connectivity is very good. Also the 6 laning of the N.H. 8 from Baroda to Surat (ongoing) and the extension of N.E.1 (Expressway) from Baroda till Mumbai will drastically reduce the transportation bottlenecks. RDPL is planning to import the raw material HDF board for the first phase of the project. The Kandla port can act as the hub for import of the same. Connectivity to Surendranagar from the port is reasonably good. The proposed infrastructure development plans mooted for the state of Gujarat will further improve/streamline the transportation network in the region.

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Medium Density Fibre Board

Mott MacDonald
Rushil Dcor Pvt Ltd.

5.4.2

Manpower Availability

Problems related to obtaining trained manpower are not anticipated as RDPL is already into manufacturing similar products and they have well-established factories functioning smoothly in Gujarat. Re-shuffling of some staff from existing plants in order take care of the commissioning activities of the new plant is envisaged. Also the proximity to Ahmedabad city will help RDPL to recruit technically qualified staff. Other labour staffs are also available in the region easily.

5.4.3

Strategic Location

The project is expected to export more than 60 % of their production. The proximity of port will provide the easy accessibility to the international market. Surendranagar is also connected with all the major cities of the Gujarat Ahmedabad, Surat, and Rajkot by state highways. N.H.8 connects Ahmedabad to Mumbai via Vadodara, Surat and Valsad.

5.4.4

Other Advantages Dhrangadhra in Surendranagar is well connected with the major cities of the state Ahmedabad, Rajkot, Kandla through state highways.

The nearest port location is Navlakhi which is at a distance of 100 kms. Kandla/ Mundra ports are only 250 km away from the proposed site, which is well-connected with Surendranagar through state highway.

Surendranagar has the highest cotton production in the state and is also surrounded by the other major cotton producing districts like Rajkot, Patan, Bhavnagar and Ahmedabad.

Proximity to developed towns like Dhrangadhra, Wadhwan & Halvad. Water is available at depth of 650 700 ft and can be easily accessible through bore wells

Selected location is within Industrial Environment of DCW (Dhrangadhra Chemical Works, 1927) region.

Availability of GEB power supply with 66 KVA and 220 KVA substations.

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Medium Density Fibre Board

Mott MacDonald
Rushil Dcor Pvt Ltd.

Qualified manpower available from Surendranagar and nearby cities like Ahmedabad.

Well-established infrastructure of Dhrangadhra and Wadhwan cities Established educational infrastructure of Wadhwan city that boasts of engineering college, polytechnic, management schools, medical school, Pharmacy College, etc.

5.5

Machinery Details

All the major plant and machinery required for the production of MDF/HDF will be imported from abroad. The following techno-economic parameters have been taken into consideration while deciding the overall plant design and equipment suppliers.

Figure 5.1: Techno Economic parameter for machinery selection


Technical Contemporariness Proven Modularity Scalability Energy Efficiency Commercial Cost Effectiveness After Sales Service Spare Parts Availability Quality Certification of products

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Techno-Economic Feasibility report of


Medium Density Fibre Board

Mott MacDonald
Rushil Dcor Pvt Ltd.

The detailed list of major plant and machinery is mentioned in below with its suppliers name. Table 5.1: List of Imported Machinery
Description of Machines MDF + Refiner + Sanding line Texture Press plates Matt Press plates Cushion pads Flooring line Impregnation line Short Cycle Line Supplier Name Harbin Lingzhi Mechanical & Electrical Technology Co. Ltd, PRC Sesa Press Plates,Italy Sesa Press Plates, Italy Marathon Belting U.K. Holzbearbeitngssysteme AG, Germany Longoni , Shanghai, PRC Sufoma, China (PRC)

Table 5.2: List of Indigenous Machinery


Description of Machines Steam boiler-6 TPH Thermic Fluid Heater 2500U * 3 Mobile chippers Compressor with Dryer-Oil free 195 CFM Short Cycle Line Resin Plant Tooling-diamond Supplier Name Cheema Boiler Isotex Corporation Surya energy Ingersoll-rand Master Handlers Bhagsons Leitz

Other plant and Machinery Table 5.3: List of other plant and machinery
Description of Machines Generator set [second hand machinery] Box packing Machinery Air conditioning Fork lifts Trucks Cooling towers RO Plant ETP EOT crane 5 tones Laboratory Equipments Cabling, lighting, panel boards & fittings Chimney Weighing machines with capacity 20 tones Motors, Valves, Pipes & insulation, Exhaust, electrics & Automation Supplier Name Zodiac Genset Manilal Pack Plast Pvt. Ltd. Hitachi Godrej TATA Ganara Engineers Pvt. Ltd Indian Ion Exchange Enviroclean solution Pvt Ltd Safex Equipment Pvt Ltd. Gujarat test house Electrical Darshini Avery India Local supply

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Medium Density Fibre Board

Mott MacDonald
Rushil Dcor Pvt Ltd.

RDPL has finalized foreign machinery manufacturers and suppliers for major machineries required for the plant. Brief information regarding selected machinery supplier of major machinery is mentioned below. Harbin Lingzhi Mechanical & Electrical Technology Co. Ltd, China The MDF plant with refiner and sanding line will be procured from the Harbin Lingzhi Mechanical & Electrical Technology Co. Ltd, China (hereafter referred to as Harbin). Harbin has experience of more than 12 years in supplying the wood-based and non-wood panel machinery and it is the only company in China capable of supplying the technology that is suited for MDF production from cotton stalk. In cooperation with design institutes and universities, Harbin has obtained patents for more than ten products including serial glue blender, dryer, etc. Harbin can supply machineries (for MDF production line) with capacities ranging from 15,000 to 80,000 m3/annum. The company was formed by Mr. Wang Xiaoling. Mr. XIaoling was student of Northeast Forestry University, China and worked as Director of the design department of Harbin Forestry Machine Factory from 1982 to 1994. With his immense knowledge about machineries, he compiled a book named as Panel Machine & Equipment published by Northeast Forestry University. He also served Harbin Xinglin Science & Technology Development Company in 1994 for one year as Vice General Manager. In 1995, Mr. Wang Xiaoling set up Harbin Lingzhi Mechanical and Electrical Technology Co. Ltd. and he holds the post of General Manager. Mr. Wang Xiaoling is engaged in the design and manufacture of panel machinery for more than 20 years. He has rich work experience and has made remarkable contribution in the field. He was an active participant in the design of press, hot press, loader & un loader, air forming and heavy-duty machinery. The company has good track record of client and had supplied more than thirty complete set of machinery of particleboard, MDF, Short cycle laminate press, moulding press line etc. in various Asian countries including Pakistan, Russia, Sri Lanka and Vietnam. Harbin had successfully carried out the joint stock system transformation with Harbin Forestry Machinery Factory, power-and-power union, and also set up the China Foma Group & Harbin Foma Machinery & Equipment Manufacturer Co., Ltd. Harbin holds Harbin Lingyu Economy & Trade Co., Ltd., which is considered as the independent import-export trade

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Medium Density Fibre Board

Mott MacDonald
Rushil Dcor Pvt Ltd.

power. It has also stakes in Shandong Hongfu Wooden Industry and Jiangsu Xinjinjiang Wooden Industry. Holzbearbeitngssysteme AG The Homag is one of the leading engineering groups of the Germany. The group has experience of more than 45 years in consulting and software system development, engineering and installation of complex production line, and supplying technologically leading edge products in both high end and standard segment along the entire customer supply chain. RDPL is planning to procure the flooring line from Holzbearbeitngssysteme AG. Production facility of the group is present in Europe, Asia and America with worldwide sales facility and after sales service network. The homage group has supplied plants for the panel processing woodworking and furniture industry, complete plants for parquet production, complete plants for door production. Looking at the experience of the machinery supplier in the machine manufacturing, their worldwide present, and their successful track record, both the machinery supplier seems to be capable of supplying machinery of required capacity. In short, the major machineries and equipment will be procured from proven vendors who had set up similar plants in many parts of the world. The track record and contemporary designs will further ensure quality and reliability of the systems. M/s Homag has a regional office in Mumbai which will ensure a hassle-free engineering and after sales support. Master Handlers Pvt. Ltd. Master Handlers Pvt. Ltd is one of the leading manufacturers of paper Impregnation and Lamination machinery, Material handling systems and Industrial Component Cleaning solutions. The manufacturing facility, situated at Pune, has sufficient resources to perform electric engineering and programming task. The company entered in technical collaboration with Always Engineering , U.K., Stewart-Gill Conveyers, U.K. (for overhead conveyors), Tochhio (for Paper Impregnation lines), M/s Zippel (for Industrial Component Cleaning Solution) to enhance its technical capabilities in respective fields. MHPL had also set up Software

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Techno-Economic Feasibility report of


Medium Density Fibre Board

Mott MacDonald
Rushil Dcor Pvt Ltd.

Company in 1991 named as Autovue Electronics and Automation Company in 1994 named as Automech Handlers. MHPL provides complete product technology, training of personnel, installation and start up of production and their expertise in providing customised product and service is visible from its strong client base, which includes TATA, Honda, Siemens, Escort, Bajaj, Delphi, Hundai, Kirby, Alucon, Escorts etc. In Paper impregnation line and lamination machinery, MHPL manufacture Short cycle lamination line Paper impregnation line High pressure laminate press MHPL Looking at the client list for paper impregnation and lamination machinery, RDPLs decision to procure short cycle press from MHPL seems appropriate. The client list for paper impregnation and lamination of MHPL is mentioned below: Century Formica Greenply Merino Nepal board Space Wood Furnishers Pvt. Ltd. Egyptial industrial flooring co. Pelit Arsian Bloom Isofam Neo-hy ASD Orman Samrat press line Laminate furniture machines paper foil/ veneer press , post forming machine, Lab press & flow

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Techno-Economic Feasibility report of


Medium Density Fibre Board

Mott MacDonald
Rushil Dcor Pvt Ltd.

6
6.1

Strategic Analysis of the Firm


SWOT Analysis Figure 6.1: SWOT Analysis

Strengths Proven Presence in Laminates Business Brand Name Robust Network of Dealers

Weaknesses Novice in MDF Manufacturing

Opportunities Construction Boom Proliferation of Modular Furniture Rising Income Levels Rapid Urbanisation Forest Conservation Import Substitution

Threats Presence of Global Players& New Entrants Dumping from Abroad Health concerns on resins use New substitutes

Strengths Well established presence in laminates business as well as strong brand value are anticipated to be the key factors for development of domestic as well as export market. Moreover, the product will penetrate deep into the market, in the wake of strong network of RDPL dealers throughout the country. Opportunities Macro-economic factors like huge investments in construction sector have contributed to growth in demand of modular furniture.

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Rushil Dcor Pvt Ltd.

Higher spending power of middle class population in the view of rapid growth in economy, urbanization. Conservation of forests due to Government policies to protect forests will increase dependency on agro waste based products as a substitution to raw material, which will aid MDF in achieving an edge over competing products like plywood and particleboard. Weaknesses MDF industry is dominated by presence of large players in the market. Hence, a strong marketing strategy will be required by the company. However, the robust network of distribution channels that RDPL boasts of will help to penetrate the market. Threats The negative impacts of using resins on human health, as well as probable Government regulations of shifting towards environment friendly manufacturing technology can pose a threat to the industry. RDPL is planning to replace UF resin with CARDENOL, which is a bio resin that is environmentally-friendly. The product also faces possibility of high level of substitution. Globally, large varieties of products (wood plastic composites, steel framing, OSL/Parallam) are at a developing stage and have recently been introduced in the market. Figure 6.2: Wood Products & competitors life cycles

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Rushil Dcor Pvt Ltd.

Dumping from abroad as well as government regulations of relaxing import duties can also affect the industry.

6.2

Five-Force Model Analysis

The five competitive forces acting on the external business environment is depicted below:

Figure 6.3: Five Force Model

Competitive Rivalry MDF industry is not matured in India but it is poised for a growth as a result of increased demand for engineered woods for the construction of furniture and modular office space. At present, India has only two full-fledged manufacturing facilities for MDF, which meets nearly 20% of the domestic demand. The rest is being met by imports. Plans are afoot by Bajaj Biotec and RDPL to set up manufacturing facilities in the near term to tap the lucrative market for MDF which is growing at 20-25% p.a. The new capacity additions by these firms will be absorbed easily by the market that suggests a low intensity of rivalry.

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Mott MacDonald
Rushil Dcor Pvt Ltd.

Entry Barrier The industry per se is both capital intensive and labour intensive. Also most of the critical equipments like reformer (digester) are to be imported from Germany or China. The success in marketing will depend a lot on the supply chain capabilities and extensive dealer networks in different parts of the country. In this respect, the industry segment can assumed to be the one with HIGH entry barrier. The Threat of New Entrants This is assumed to be Low to Medium due to high entry barrier and other points mentioned in the above paragraph. The Threat of Substitutes This is profoundly HIGH as both wood based and non-wood based substitutes are easily available in the market that can be used for a variety of purposes. Hence the consumers choice will depend on factors like price, easy availability, ease of use, end use, etc. Bargaining Power of Buyers The bargaining power of buyers will be Medium for branded MDF products. However for unbranded products, it will be high as the consumer will have ample choices in the market to choose from. Bargaining Power of Suppliers As far as the raw material issue is concerned, the firm plans to use cotton stalks (the remnant of cotton plant after the harvest of cotton) for the production of MDF. At present, cotton stalk is burnt in the farm itself and being utilised as manure. The demand for the same will boost the price for stalks, however it is not assumed to be high or prohibitive. The idea is to create win-win for the farmers as well as for the manufacturers. Alternatively, RDPL will engage in developing plantation so that the wood can replace the cotton stalks. This will also help in curbing the bargaining power of cotton stalk suppliers and also in mitigating any procurement problems that may arise with regard to cotton stalks.

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Techno-Economic Feasibility report of


Medium Density Fibre Board

Mott MacDonald
Rushil Dcor Pvt Ltd.

Bagasse is also being thought of as an alternative raw material for the above project, which is abundantly available in South Gujarat. As mentioned earlier in the report, it is [presently being sent out to the neighbouring states.

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Medium Density Fibre Board

Mott MacDonald
Rushil Dcor Pvt Ltd.

7
7.1

Marketing Strategy
Present Marketing Set Up

RDPL has well established domestic and international marketing network. The head office of the RDPL is situated at Ahmedabad in proximity to their manufacturing facilities. RDPL cover all the states of the India through their marketing offices established in Punjab, Delhi, Rajasthan, Gujarat, Madhya Pradesh, Maharashtra, Karnataka, Tamil Nadu, Andhra Pradesh, Chhatishgarh, Jharkhand, Bihar, Uttar Pradesh, and West Bengal, and Assam. The hierarchy of the of the department mention in figure given below: Figure 7.1: Present Marketing Set up

VP Marketing

Zonal Sales Manager

Project Manager

Branch Manager

Sales Manager

Area Sales Manager

Sales Executive

The network comprise of about 50 sales executives, 4 Area sales managers, 7 Branch managers, one project manager and 47 distribution partners in marketing channel.

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Techno-Economic Feasibility report of


Medium Density Fibre Board

Mott MacDonald
Rushil Dcor Pvt Ltd.

Domestic Market set up: RDPL has appointed direct distributors in many states, which are major markets of wood base panel in India. These states are Gujarat, Rajasthan, Punjab, Bihar, Jharkhand, West Bengal, Madhya Pradesh, Assam, Karnataka, Maharashtra, Andhra Pradesh, Uttaranchal, Uttar Pradesh, Chhattisgarh, Kerala, Delhi and Tamilnadu. On an average every state has 2 to 3 distributors appointed. These distributors are the sole contact point for the client and they are responsible to develop further dealers network in their region. The exclusive office is also operated in Mumbai in name of the client, which is directly controlled by the client. The total Indian market is clearly divided between different zones. The different zones are monitored by the zonal sales manager, who reports directly to the Vice President of Marketing. The zone structure is mentioned in the table given below: Table 7.1: The present marketing zones of RDPL in India ZONE STATES CITIES Ahmedabad Rajkot Gujarat Surat Baroda ZONE 1 (Western India) Maharashtra Mehsana Mumbai Pune Nagpur Nasik MP Chhattisgarh ZONE 2 (Southern India) Tamilnadu & Kerala Karnataka Andhra Pradesh West Bengal ZONE 3 (Eastern India) Assam Bihar
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Indore Raipur Chennai Bangalore Hyderabad Kolkata Siliguri Ranchi Jamshedpur Guwahati Patna

Jharkhand

Techno-Economic Feasibility report of


Medium Density Fibre Board

Mott MacDonald
Rushil Dcor Pvt Ltd.

ZONE Rajasthan Delhi ZONE 4 (Northern India)

STATES Jaipur Udaipur Delhi

CITIES

Chandigarh Punjab Uttaranchal Uttar Pradesh

Chandigarh Ludhiana Bhatinda Dehradun Lucknow Agra

Source: RDPL

International Market: The long-term relationship, the client enjoys with many dealers around the globe, especially in Europe can be leveraged further to export the products from India. In this respect, the cost-competitiveness and the established brand equity will play a vital role. RDPL is envisaged to export nearly 60% of the product to favourable market destinations around the globe. The international marketing network of the RDPL spread in 34 countries including Canada, USA, Venezuela, Europe, Far East countries, Australia, and countries with the strong brand name Rushil Dcor premium laminate. Table 7.2: The present marketing network of RDPL in world Region of world Country of market presence Hong Kong China Malaysia Far East Phillipines Singapore Taiwan Thailand Middle East Qatar S.Arabia Kuwait U.A.E. Gulf

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Medium Density Fibre Board

Mott MacDonald
Rushil Dcor Pvt Ltd.

Region of world

Country of market presence Yemen Bahrain Jordan Egypt Israel Mexico

North America

U.S.A. Venezuela

South America

Peru Columbia

Australia
Source: RDPL

Australia

7.2

Formulation of Marketing Strategy

MDF as a product has more than 15 years of presence in Indian market; the major chunk (whopping 80-85%) is being imported. There are only two players who manufacture MDF domestically, which is a potential substitute/supplement for plywood, particle boards, veneer, etc. Hence the obvious questions that the firm should address are; what is MDF? What is the ideal set of applications? And its advantages vis--vis plywood, veneer and similar substitutes, etc. The specific choice will hinge upon an optimum combination of the following aspects such as price discounts, product proliferation, product innovation, improved services, cost reduction, promotion, etc.

7.2.1

Product Pricing

It can adopt two different ways. The former is based on differentiation, which is, offering high quality MDF compared to that of the market leaders at a price commanding premium. However looking at the market dynamics prevailing in this segment, adopting a high-value strategy based on slightly lower price than the competitor is more likely to succeed. Also the lower cost of production on account of utilising the cheaply available cotton stalk as the feedstock will help the firm to position its range of products competitively in the market.
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Techno-Economic Feasibility report of


Medium Density Fibre Board

Mott MacDonald
Rushil Dcor Pvt Ltd.

7.2.2

Product Innovation

RDPL is the first of its kind in India and the first company to manufacture MDF from cotton stalks. Trials had been conducted in India and in Germany to produce MDF from cotton stalks and the quality of fibres were found to be very good. Trial reports and trial samples are available with the company and as per the report, by adding 20% of wood; the finished product (MDF) can even match the EN standards.

7.2.3

Product Proliferation

The thrust is to offer large number of options to the buyer in terms of plate thickness, finish, laminated versions, etc. The typical thickness of MDF ranges from 3 to 35 mm (6, 12 and 18mm being more popular in India). The surface finish could be of plain, grit or embossed. The embossed panel could be used directly for up market doors and partitions. RDPL already imports high quality paper laminates to make prelam, etc. It can be extended to MDF also.

7.2.4

Distribution Network

RDPL has a significant presence in the laminate business in India with offices and sales centres spread across the country. But these are mainly concentrated in the urban cities. With the income levels in suburbs and semi-urban places going up, it is worth while to try smaller towns and townships with a critical mass. However the bulk of revenue will come from metros and tier1 cities. Export options are also being thought of by RDPL as a riskminimisation strategy (natural hedge against business cycles).

7.2.5

Product Promotion

An important component in the famous 4Ps, the promotion will entail the following things. Obtain ISI mark and other quality certification. Obtain certifications from leading architects, furniture makers, etc. Endorsement by professionals and celebrities. Special incentives for bulk orders in the form of extended warranty, gift vouchers, etc.

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Techno-Economic Feasibility report of


Medium Density Fibre Board

Mott MacDonald
Rushil Dcor Pvt Ltd.

Product attributes like resistance to moisture, insects& termites, machinability, life cycle, etc should be highlighted to entice customers.

7.2.6

Business Intelligence

The companys market research team should be geared to continuously monitor customer preferences, international trends, company performance, industry status, etc. The strategy should be evolving based on these market pulses.

7.2.7

Product Mix

Plant and machinery being procured by RDPL is capable to produce the MDF board with the varied thickness of 6 mm to 18 mm. This provides flexibility to manufacture the product as per the demand in market. RDPL can also sell MDF and HDF boards directly, without converting it into prelam and laminated flooring, in a market that depend upon the several conditions. At present RDPL planning to manufacture the HDF laminated flooring and Prelam MDF board with the thickness of 12mm, 16mm, and 18mm. All these products have the highest market demand in panel board market. RDPL can also enter in modular furniture manufacturing in future, which will help them to move up the value chain and cater directly to end-product consumers.

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Techno-Economic Feasibility report of


Medium Density Fibre Board

Mott MacDonald
Rushil Dcor Pvt Ltd.

8
8.1

Financial Modelling & Analysis


Estimation of Capital Cost

The estimation of capital investments have been made based on information collected from the following sources Plant and Machineries as per the data provided by the client Cost of Indigenous component of the project has been worked out on the basis of : o o o 8.1.1 Cross-checking the cost with cost considered in similar projects Data obtained from Rushil Decore Pvt. Ltd. Cost information available with IMMs database

Land and Land development

RDPL has purchased 67 acre land worth of Rs. 85 Lakh at Navalgarh in Dhangadra taluka of Surendranagar district. As per the condition of the land, client has estimated land development cost is Rs.50 Lakh. 8.1.2 Building and Civil Construction

The Estimated break up of building and civil construction is provided in table given below: Table 8.1: Building and Civil Work
Sr. No. 1 2 3 4 5 6 7 8 9 11 12 13 14 15 16 17 Particular Guard Room (3*3) Scale Station Canteen Room (8*23) Shed bicycle (6*30) Office (3*27*10) Electrical Station (10*26) Product Store (15*126) Production area (30*126) Refiner Line (3*10*15) Wood Yard (95*151) Fuel Station (20*10) Boiler Room (18*30) General Storage (18*48) Pool Water Tower Waste Water Treatment Quantity 9 184 180 810 260 1890 3780 450 14345 200 540 864 300 50 200 Unit M2 M2 M2 M3 M2 M2 M2 M3 M2 M2 M2 M2 M3 M3 M3

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Techno-Economic Feasibility report of


Medium Density Fibre Board

Mott MacDonald
Rushil Dcor Pvt Ltd.

The cost of building and civil works require for the proposed project is Rs. 450 Lakh as per the architects estimation. 8.1.3 Plant and machinery cost

Imported RDPL is importing critical machineries for the project. Client has finalised supplier of all the major machinery required for the project. The detail of the machinery is provided in table given below: Table 8.2: List of imported Machinery (Rs. In lakh)
Description of Machines MDF + Refiner + Sanding line Texture Press plates Matt Press plates Cushion pads Flooring line Impregnation line Short Cycle Line Total Supplier Name Kunming Woodbased Pond Machine Plant, Kunming Sesa Press Plates,Italy Sesa Press Plates, Italy Marathon Belting U.K. V-Hold, China Supply Nantong New Century, Sanghai Yalk Ltd. phase 1 phase 2 947.52 13.37 11.57 1.56 116.95 123.39 0.00 266.84 0.00 0.00 0.00 0.00 0.00 81.41 1028.93 Total 947.52 13.37 11.57 1.56 116.95 123.39 81.41 1295.76

Indigenous The list of Indigenous equipments along with their supplier and cost estimation is given in the table below. Table 8.3: List of Indigenous machinery (Rs. In lakh)
Description of Machines Steam boiler-6 TPH Thermic Fluid Heater 2500U * 3 Mobile chippers Compressor with Dryer-Oil free 195 CFM Short Cycle Line Resin Plant Tooling-dimond Total Supplier Name Cheema Boiler Isotex Corportation Surya energy Ingersoll-rand Yalk Ltd. Bhagsons Leitz phase 1 phase 2 46.72 76.21 0.00 133.37 0.00 0.00 72.59 0.00 252.68 Final Cost 46.72 76.21 133.37 13.08 140.15 92.59 36.82 538.95

13.08 140.15 20.00 36.82 286.27

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Techno-Economic Feasibility report of


Medium Density Fibre Board

Mott MacDonald
Rushil Dcor Pvt Ltd.

Other plant and Machinery The list of other machinery required for utility and general purpose is mention below along with their supplier name and cost estimation. Table 8.4: list of other plant and machinery (Rs. In lakh)
Description of Machines Generator set [second hand machinery] Box packing Machinery Air conditioning Fork lifts Trucks Cooling towers RO Plant ETP EOT crane 5 tones Erection & commissioning Laboratory Equipments Development charges, deposit, line charges, feeder and transformer charges & 10% application charges Cabling, lighting, panel boards & fittings Chimney Weighing machines with capacity 20 tones Motors, Valves, Pipes & insulation, Exhaust, electrics & Automation Fabrication work Total Supplier Name Zodiac Genset phase 1 20.00 30.00 20.00 23.60 10.00 phase 2 82.82 0.00 0.00 11.80 10.00 2.96 20.00 50.00 13.33 90.00 Final Cost 102.82 30.00 20.00 35.41 20.00 2.96 20.00 50.00 20.00 100.00 10.00 250.00 100.00 4.94 49.36 150.00 400.00 1365.48

Godrej TATA Ganara Engineers Pvt. Ltd Indian Ion Exchange

6.67 10.00 10.00 Electrical Electrical Drshini Avery India Local supply 200.00 50.00 4.94 25.00 50.00 80.00 540.21

50.00 50.00 0.00 24.36 100.00 320.00 825.27

8.1.4

Preoperative and Preliminary (POP) cost

Preliminary & Preoperative Costs include all preliminary and pre-operative costs before commencement of production. The break of the POP cost is given below:

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Rushil Dcor Pvt Ltd.

Table 8.5: Preoperative and Preliminary cost break up (Rs. In lakh) Particulars Legal expenses Interest During construction Start up expenses Upfront/scrutiny fees Total 8.1.5 Contingency Phase 1 5.00 22.75 7.25 5.00 40.00 Phase 2 3.00 49.00 28.00 5.00 85.00

The contingency provision at roughly 10% works out to Rs.160 Lakhs in phase 1 and Rs. 234 Lakhs in phase 2.

8.1.6

Margin Money

Estimates of working capital requirements have been worked out on the basis of expenditure involving cash liabilities and other recurring requirements considering the norms mentioned below: Table 8.6: Inventory norms Particulars Raw Material Chemicals Work in Progress Finished Goods Receivable (Debtors) Sundry Creditors Phase 1 1.5 M 1 M 0.25 M 0.5 M 0.25 M 0.5 M Phase 2 6 M 3 M 0.5 M 1.5 M 0.5 M 0.25 M

The available bank finance for working capital has been considered difference between the net working capital and margin money, while margin money for working capital works out to Rs. 100 Lakhs in phase 1 and Rs. 180 Lakhs in phase 2.

8.1.7

Total Project Cost

The total project cost for this project has been estimated as given below:

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Rushil Dcor Pvt Ltd.

Table 8.7: Total Cost of Project (Rs. In lakh)


Sr. No. Particulars Phase 1 Phase 2 Total

1 2 3 4 5 6 7 8 9 10

Land Land Development Civil & structural cost Main plant & Equipment Imported Indigenous Other Equipments/Utilities Miscellaneous Fixed Assets Pre Operative & Preliminary Expense Contingency @ 10 % Total Capital Cost of Project Margin money for working capital
Total Cost of Project

85 15 350 267 286 540 15 40 160 1758 100


1858

0 35 100 1029 253 825 15 85 234 2576 180


2756

85 50 450 1296 539 1365 30 125 394 4334 280


4614

8.2

Means of Finance

Considering Debt Equity Ratio of 2.30:1, the means of finance for the project has been proposed as shown in the table below:

Table 8.8: Means of finance (Rs. In lakh)


Sr. No. 1 Particulars Promoters' Contribution -Share Capital -Pref. Share Capital -Reserves & Surplus -Internal Cash Accruals Subsidy Term Loans -FCL -T/L -Rupee Loan -NCD Unpaid Suppliers Unsecured Loans/Deposits TOTAL Phase 1 200 0 0 400 0 0 0 1200 0 0 58 1858 Phase 2 300 0 0 500 0 0 0 1800 0 0 156 2756 Total 500 0 0 900 0 0 0 3000 0 0 214 4614

2 3

4 5

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Techno-Economic Feasibility report of


Medium Density Fibre Board

Mott MacDonald
Rushil Dcor Pvt Ltd.

8.3

Assumptions

The important basis & assumptions, which are considered for the analysis, are enlisted below: 8.3.1 Operating Days & Shifts : : 300 Days Three Shifts

No. of Working Days Shift of Operation 8.3.2

Installed Capacity & Utilisation Phase 1 HDF Flooring Line Phase 2 Installed capacity of raw board : 100 m3/day : 1,374,255 Sq. Mts.

Installed Capacity

MDF Board Production HDF Board Production

: :

60 % of the installed capacity = 60 m3 / day 40 % of the installed capacity = 40 m3 / day

MDF Board will further prelam in impregnation line and short cycle press while HDF board will be sent to flooring line for manufacturing laminated flooring. The capacity of the flooring line is the same as in phase 1 and total production will be converted into laminate flooring. Capacity Utilisation Levels :

Table 8.9: Capacity Utilisation in phase 1 Year Capacity Utilization 2007-08 50% 2008-09 60%

Table 8.10: Capacity Utilisation in phase 2 Year Capacity Utilization 2007-08 2008-09 30% 2009-10 50% 2010-11 60% 2011-12 60% 2012-13 60%

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Mott MacDonald
Rushil Dcor Pvt Ltd.

The HDF laminated flooring production will be started in October 2007 with imported HDF board and, Fibre Board manufacturing and prelam plant will commence operation from October 2008.

8.3.3

Selling Price

RDPL will sell only final products in market i.e. Prelam MDF Board and Laminated HDF Flooring. At per existing market conditions, the selling price of the Laminated HDF Flooring is estimated at Rs. 380 Rs./ m2, which is lower than the imported European laminated flooring. It is also competitive vis--vis the imports from China. In prelam MDF board manufacturing, RDPL will focus on the board with the thickness of 12 mm, 16 mm and 18 mm which are preferred specifications in the prelam board market. The estimated prices for these boards are mention below: 12 mm 16 mm 18 mm = = = 322.80 Rs. / m2 (30 Rs. / ft2) 365.84 Rs. / m2 (34 Rs. / ft2) 408.88 Rs. / m2 (38 Rs. / ft2)

8.3.4

Exchange Rates 1 US $ 1 GBP 1 Euro : : : Rs. 46 Rs. 88 Rs. 60

8.3.5

Operating Norms

Operating Norms outlined below have been arrived at after analysis of guaranteed norms provided by client and actual norms collected from similar product producers:

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Medium Density Fibre Board

Mott MacDonald
Rushil Dcor Pvt Ltd.

Table 8.11: Operating norms for Fibre Board manufacturing Particulars Cotton stalks/Bagasse Urea Formaldehyde Ammonium Chloride Chemical Buffer Paraffin Wax Electricity Water Thermal Energy-steam Quantity 2 ton 0.11 ton 0.003 ton 0.003 ton 0.01 ton 400 unit 1 m3 1500000 kcal Unit cost 2000 Rs. 30000 Rs. 15000 Rs. 55000 Rs. 60000 Rs. 5 Rs. 90 Rs. 0.00057 Rs.

Table 8.12: Operating norms for Prelam MDF Board manufacturing Particular Base paper Melamine Formaldehyde resin Balancing paper Packing Plate refurbishing costTexture Plate refurbishing cost-Matt Tools & Moulds expense Thermal Energy Power Cost-150 units/hr Direct Labour Cost Total Unit GSM Kgs GSM GSM Cycles Cycles Rs. kcal units Rs. Number 80 0.5 80 50 50000 100000 Price 350 65 100 30 360000 264000 2 5 Cost per m2 28 32.5 8 6 2.4 0.88 8 2.27 5.00 2.00 95.05

1 20 labour

Table 8.13: Operating Norms for Laminated HDF Flooring Manufacturing Particulars High abrasive tissue Base paper Balancing paper Melamine Formaldehyde resin Packing Plate refurbishing costTexture Plate refurbishing cost-Matt Tools & Moulds expense thermal energy Power cost-240 units/hr Direct Labour cost Total UNIT GSM GSM GSM Kgs GSM Cycles Cycles Rs. kcal units Rs. Number 48 80 80 0.5 50 15000 100000 Price 385 350 100 65 30 360000 264000 30 2 5 Cost per m2 18.48 28 8 32.5 6 8 0.88 8 4.49 5.9 5 125.25

1.18 75

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Medium Density Fibre Board

Mott MacDonald
Rushil Dcor Pvt Ltd.

Selling Expenses

10% of total sales

Administrative Expenses : RDPL has well established administrative system therefore administrative expenses are considered 2.5 Rs. Lakh. The increment of 5 % in each following years is considered. Repairs & Maintenance 8.3.6 : 1.5% of total Plant and Machinery cost and other assets

Financing Terms Repayment & Interest

Project will be implemented in two phases and according to implementation, RDPL will require the long-term loan. Interest on Long Term Loan Repayment of Long Term Loan : : 11 % per annum.

Table 8.14: Repayment of Long Term Loan (Rs. In Lakhs) Year Repayment
2007 08 2008 09 2009 10 2010 11 2011 12 2012 13 2013 14 2014 15 2015 16

120

420

600

600 : :

600 9 % p.a. 11 % p.a.

480

180

Interest on Working Capital (WC) Loan Interest on Unsecured Loan 8.3.7 Depreciation Rates

SLM Land and Site Development Building and Civil Works Main Plant and Equipment Furniture & Fixture Misc. Fixed Assets 8.3.8 Income Tax Rates : : : : : 0% 3.34% 10.34% 6.33% 4.75%

WDV 0% 10% 15.00% 18.10% 15.00%

The rate of tax has been computed on following basis: Corporate Tax MAT : : 33.66% 11.22%
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Medium Density Fibre Board

Mott MacDonald
Rushil Dcor Pvt Ltd.

8.4

Cash flows& Profitability Statement The profitability statement of project is mention below: Table 8.15: Profitability Statement
Particular 2007-08 2008-09 644 2429 3073 2009-10 2145 2875 5020 2010-11 2574 3450 6024 Year of Operation 2011-12 2012-13 2574 3450 6024 2574 3450 6024 2013-14 2574 3450 6024 2014-15 2574 3450 6024 2015-16 2574 3450 6024 2016-17 2574 3450 6024

Revenue Prelam - MDF Laminated Flooring - HDF Total Revenue Mfg Cost MDF board mfg cost HDF board mfg cost Prelam Cost Flooring Cost Total Mfg Cost Fixed Cost Sales Expenses Administrative Expenses Repairs & Maintenance Total Fixed Cost Depreciation EBIT

1306 1306

0 0 0 876 876.22

237.65 153.40 169.31 1335.72 1896.08

792.16 511.34 564.36 947.52 2815.38

950.59 613.61 677.23 1137.02 3378.45

950.59 613.61 677.23 1137.02 3378.45

950.59 613.61 677.23 1137.02 3378.45

950.59 613.61 677.23 1137.02 3378.45

950.59 613.61 677.23 1137.02 3378.45

950.59 613.61 677.23 1137.02 3378.45

950.59 613.61 677.23 1137.02 3378.45

130.55 15.00 11.05 156.60 70.75 201.96

307.26 31.50 27.97 366.74 268.15 541.67

502.00 33.08 55.95 591.02 358.71 1254.87

602.40 34.73 55.95 693.07 358.71 1593.73

602.40 36.47 55.95 694.81 358.71 1592.00

602.40 38.29 55.95 696.63 358.71 1590.17

602.40 40.20 55.95 698.55 358.71 1588.26

602.40 42.21 55.95 700.56 358.71 1586.25

602.40 44.32 55.95 702.67 358.71 1584.14

602.40 46.54 55.95 704.89 358.71 1581.92

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Medium Density Fibre Board

Mott MacDonald
Rushil Dcor Pvt Ltd.

Particular Financial Charges Working Capital Charges Interest on Term Loan Interest on Unsecured Loan Total Financial Charges PBT Tax PAT

2007-08 27.75 66.00 3.18 96.93 105.03 20.88 84.16

2008-09 105.42 229.35 14.95 349.72 191.95 31.97 159.99

2009-10 93.99 304.43 23.53 421.94 832.92 204.94 627.99

2010-11 112.79 245.85 23.53 382.17 1211.57 361.53 850.04

Year of Operation 2011-12 2012-13 112.79 179.85 23.53 316.17 1275.83 407.95 867.88 112.79 113.85 23.53 250.17 1340.01 450.65 889.36

2013-14 112.79 49.50 23.53 185.82 1402.44 489.61 912.83

2014-15 112.79 7.43 23.53 143.74 1442.51 518.37 924.13

2015-16 112.79 0.00 23.53 136.32 1447.82 533.17 914.66

2016-17 112.79 0.00 23.53 136.32 1445.61 543.49 902.12

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Techno-Economic Feasibility report of


Medium Density Fibre Board

Mott MacDonald
Rushil Dcor Pvt Ltd.

The cash flow statement of project is mention below: Table 8.16: Cash flow Statement
(Rs. In Lakh) Sr. No. Particulars Sources of Funds : Promoter's Contribution share Capital Internal Cash Accrual Deposits Increase in Long Term Loan Increase in Working Capital Borrowing Depreciation Net Profit Before Tax & Interest (EBIT) Sub- Total (A) Disposition of Funds : Capital Expenditure Increase in Current Assets TL interest Repayment of Long Term Loan Interest on Deposits Repayment of Deposits Working Capital charges Income-Tax Dividend Sub-Total (B) A-B 2007-08 2008-09 2009-10 2010-11 Year of Operation 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17

2 3 4 5 6

200 400 57.855 1200 308.29 70.75 201.96 2439

300 500 156.068 1800 863.04 268.15 541.67 4429

-127.01 358.71 1254.87 1487

208.86 358.71 1593.73 2161

0.00 358.71 1592.00 1951

0.00 358.71 1590.17 1949

0.00 358.71 1588.26 1947

0.00 358.71 1586.25 1945

0.00 358.71 1584.14 1943

0.00 358.71 1581.92 1941

1 2 3 4 5 6 7 8 9

1758 423.44 66.00 0.00 3.18 0.00 27.75 20.88 2299 140

2576.068 1155.07 229.35 120.00 14.95 0.00 105.42 31.97 4233 196
99

-182.96 304.43 420.00 23.53 0.00 93.99 204.94 864 623

279.11 245.85 600.00 23.53 0.00 112.79 361.53 1623 539

0.00 179.85 600.00 23.53 0.00 112.79 407.95 1324 627

0.00 113.85 600.00 23.53 0.00 112.79 450.65 1301 648

0.00 49.50 480.00 23.53 0.00 112.79 489.61 1155 792

0.00 7.43 180.00 23.53 0.00 112.79 518.37 842 1103

0.00 0.00 0.00 23.53 0.00 112.79 533.17 669 1273

0.00 0.00 0.00 23.53 0.00 112.79 543.49 680 1261

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Techno-Economic Feasibility report of


Medium Density Fibre Board

Mott MacDonald
Rushil Dcor Pvt Ltd.

Opening Cash Balance Closing Cash Balance

0 140

140 336

336 959

959 1497

1497 2124

2124 2772

2772 3563

3563 4666

4666 5939

5939 7200

The calculation of component of the profitability statement and cash flow statement is mention in annexure in the report.

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Medium Density Fibre Board

Mott MacDonald
Rushil Dcor Pvt Ltd.

8.5

Financial Indicators- NPV, IRR, DSCR, Pay back Table 8.17: Financial Indicators Item Description Value 17 % 2.61 Average Value 5.98 Years 12 to 32 % range (for 10 years) Sensitivity Analysis Table 8.18: Sensitivity Analysis Particulars IRR 17 % 15% 18% 21% 12% DSCR 2.61 2.48 2.73 2.96 2.24 PBP 5.98 Years 6.15 Years 5.82 Years 5.46 Years 6.67 Years NPV Rs. 1,822 Lakh Rs. 1,572 Lakh Rs. 2,067 Lakh Rs. 2,787 Lakh Rs. 848 Lakh UOM 1,822 In Rupees Lakhs

NPV IRR DSCR PBP RoI 8.6

Base case Raw material price increase by 10 % Raw material price decrease by 10% Selling price increase by 5 % Selling price decrease by 5%

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Medium Density Fibre Board

Mott MacDonald
Rushil Dcor Pvt Ltd.

Conclusion and Recommendations

Looking at the business landscape in totality, there exists a good potential for MDF manufacturing unit to be set up in India. Synergies can be exploited in the case of RDPL who is already into the production of related products and their marketing. The existence of marketing channel in India and abroad adds to the overall attractiveness of the project (Read section on growth drivers for more details). The financial projections under normal circumstances suggest a positive net present value and an internal rate of return of 17%, which is significantly above the cost of capital. Under the proposed debt equity ratio, comfortable debt service coverage can be achieved; posing no problems to the liquidity (average DSCR is 2.61). In case of pressures on the sales price, the IRR may fall in a non-linear fashion. For example, 5% decrease in sales price, the IRR will fall to 12%. However such a scenario is less likely, looking at the market growth rate for MDF owing to the increased awareness of customers, the boom in construction and under capacity within India. Overall, the above project appears to be feasible on economic, technical and market criteria. Hence it is worth pursuing the above project to tap the increasing market opportunities; thereby enabling the firm to grow both in terms of size, product range and profitability. Ensuring an efficient supply chain in terms of raw material procurement, imports and exports will definitely help the firm to boost the bottom line. Tighter integration on the supply side for cotton stalks and alternatively for bagasse can deftly handle the uncertainties related to raw material availability.

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Medium Density Fibre Board

Mott MacDonald
Rushil Dcor Pvt Ltd.

Appendix A:

Fixed Cost Allocation of Contingency and POP expenses


(Rs. In Lakh)
Cost with Cost with Phase 2 Cost with Contingency preoperative allocation Total Cost with Contingency Cost with preoperative allocation

Sr. No.

Particulars

Phase 1

Cost with Contingency

preoperative allocation

1 2 3 4

5 6 7 8

Land Land Development Civil & structural cost Main plant & Equipment Imported Indigenous Other Equipments/Utilities Misc Fixed Assets Pre operative Expense Contingency @ 10 % Total Capital Cost of Project

85 15 350 267 286 540 15 40 160 1758

94 17 385 294 315 594 17 44 1758

96 17 395 301 323 609 17

0 35 100 1029 253 825 15 85 234 2576

0 39 110 1132 278 908 17 94 2576

0 40 114 1174 288 942 17

85 50 450 1296 539 1365 30 125 3940

85 50 450 1296 539 1365 30 125 3940

88 52 465 1338 556 1410 31

1758

2576

3940

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Medium Density Fibre Board

Mott MacDonald
Rushil Dcor Pvt Ltd.

Appendix B:

Working Capital Statement

(Rs. In Lakh) Sr. No. 1 2 3 4 5 A 6 B C D E Particular Raw material Consumables WIP Finished Goods Debtors Total Current Assets Current Liabilities Sundry Creditors Total Current Liabilities Net Working Capital Bank Finance Margin Money WC Loan interest @ rate 9 % 2007-08 111.48 149.42 36.51 108.80 54.40 460.60 37.16 37.16 423.44 308.29 115.15 27.75 2008-09 269.04 314.62 158.01 768.16 118.91 1628.73 50.23 50.23 1578.51 1171.32 407.18 105.42 2009-10 225.44 225.53 117.31 627.50 209.17 1404.94 9.39 9.39 1395.55 1044.31 351.24 93.99 2010-11 270.53 270.64 140.77 753.00 251.00 1685.93 11.27 11.27 1674.66 1253.18 421.48 112.79 Year of Operation 2011-12 2012-13 270.53 270.53 270.64 270.64 140.77 140.77 753.00 753.00 251.00 251.00 1685.93 1685.93 11.27 11.27 1674.66 1253.18 421.48 112.79 11.27 11.27 1674.66 1253.18 421.48 112.79 2013-14 270.53 270.64 140.77 753.00 251.00 1685.93 11.27 11.27 1674.66 1253.18 421.48 112.79 2014-15 270.53 270.64 140.77 753.00 251.00 1685.93 11.27 11.27 1674.66 1253.18 421.48 112.79 2015-16 270.53 270.64 140.77 753.00 251.00 1685.93 11.27 11.27 1674.66 1253.18 421.48 112.79 2016-17 270.53 270.64 140.77 753.00 251.00 1685.93 11.27 11.27 1674.66 1253.18 421.48 112.79

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Medium Density Fibre Board

Mott MacDonald
Rushil Dcor Pvt Ltd.

Appendix C:
Term Loan Amount Interest rate Year Quarter I 2007 - 08 II III IV I 2008 - 09 II III IV I 2009 - 10 II III IV I 2010 - 11 II III IV I 2011 - 12 II III IV I 2012 - 13 II III IV I 2013 - 14 II III IV I 2014 - 15 II III IV

Term Loan - Repayment & Interest


Phase 1 1200 11.00% Repayment 0.0 0.0 0.0 0.0 0.0 0.0 60.0 60.0 60.0 60.0 150.0 150.0 150.0 150.0 150.0 150.0 150.0 150.0 150.0 150.0 150.0 150.0 150.0 150.0 150.0 150.0 90.0 90.0 90.0 90.0 0.0 0.0 Outstanding Loan Start of quarter 0 0 1200 1200 1200 1200 3000 2940 2880 2820 2760 2610 2460 2310 2160 2010 1860 1710 1560 1410 1260 1110 960 810 660 510 360 270 180 90 0 0 End of quarter 0.0 0.0 1200.0 1200.0 1200.0 1200.0 2940.0 2880.0 2820.0 2760.0 2610.0 2460.0 2310.0 2160.0 2010.0 1860.0 1710.0 1560.0 1410.0 1260.0 1110.0 960.0 810.0 660.0 510.0 360.0 270.0 180.0 90.0 0.0 0.0 0.0 Quarterly Interest 0.00 0.00 33.00 33.00 33.00 33.00 82.50 80.85 79.20 77.55 75.90 71.78 67.65 63.53 59.40 55.28 51.15 47.03 42.90 38.78 34.65 30.53 26.40 22.28 18.15 14.03 9.90 7.43 4.95 2.48 0.00 0.00 7.43 180.00 49.50 480.00 113.85 600.00 179.85 600.00 245.85 600.00 304.43 420.00 229.35 120.00 66.00 0.00 Phase 2 1800 (Rs in Lakh) Yearly Interest Yearly Repayment

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Medium Density Fibre Board

Mott MacDonald
Rushil Dcor Pvt Ltd.

Appendix D:
Unsecured Loan Amount Interest rate Year Quarter

Unsecured Loan - Interest


phase 1 58 11.00% Repayment Outstanding Loan Start of quarter End of quarter Quarterly Interest Phase 2 156 (Rs in Lakh) Yearly Interest Yearly Repayment

2007 - 08

2008 - 09

2009 - 10

2010 - 11

2011 - 12

2012 - 13

2013 - 14

2014 - 15

2015 - 16

2016 - 17

I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV

0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

0.0 0.0 57.9 57.9 57.9 57.9 213.9 213.9 213.9 213.9 213.9 213.9 213.9 213.9 213.9 213.9 213.9 213.9 213.9 213.9 213.9 213.9 213.9 213.9 213.9 213.9 213.9 213.9 213.9 213.9 213.9 213.9 213.9 213.9 213.9 213.9 213.9 213.9 213.9 213.9
106

0.0 0.0 57.9 57.9 57.9 57.9 213.9 213.9 213.9 213.9 213.9 213.9 213.9 213.9 213.9 213.9 213.9 213.9 213.9 213.9 213.9 213.9 213.9 213.9 213.9 213.9 213.9 213.9 213.9 213.9 213.9 213.9 213.9 213.9 213.9 213.9 213.9 213.9 213.9 213.9

0.0 0.0 1.6 1.6 1.6 1.6 5.9 5.9 5.9 5.9 5.9 5.9 5.9 5.9 5.9 5.9 5.9 5.9 5.9 5.9 5.9 5.9 5.9 5.9 5.9 5.9 5.9 5.9 5.9 5.9 5.9 5.9 5.9 5.9 5.9 5.9 5.9 5.9 5.9 5.9

3.2

0.0

14.9

0.0

23.5

0.0

23.5

0.0

23.5

0.0

23.5

0.0

23.5

0.0

23.5

0.0

23.5

0.0

23.5

0.0

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Techno-Economic Feasibility report of


Medium Density Fibre Board

Mott MacDonald
Rushil Dcor Pvt Ltd.

Appendix E:

SLM Depreciation

(Rs. In Lakh) Sr. No. 1 2 3 4 5 6 Particulars Land & land Development Civil & structural cost Main plant & Equipment Imported Indigenous Other Equipments/Utilities Miscellaneous Fixed Assets Total 2007-08 0 6.59 15.56 16.68 31.51 0.40 70.75 2008-09 0 15.10 91.85 48.28 111.72 1.21 268.15 2009-10 0 17.07 152.21 63.28 160.40 1.62 394.58 2010-11 0 17.07 152.21 63.28 160.40 1.62 394.58 Year of Operation 2011-12 2012-13 0 0 17.07 17.07 152.21 63.28 160.40 1.62 394.58 152.21 63.28 160.40 1.62 394.58 2013-14 0 17.07 152.21 63.28 160.40 1.62 394.58 2014-15 0 17.07 152.21 63.28 160.40 1.62 394.58 2015-16 0 17.07 152.21 63.28 160.40 1.62 394.58 2016-17 0 17.07 152.21 63.28 160.40 1.62 394.58

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Medium Density Fibre Board

Mott MacDonald
Rushil Dcor Pvt Ltd.

Appendix F:

WDV Depreciation

(Rs. In Lakh) Sr. No. 1 2 3 4 5 6 Particulars Land & land Development Civil & structural cost Main plant & Equipment Imported Indigenous Other Equipments/Utilities Miscellaneous fixed Assets Total 2007-08 0 19.74 22.58 24.20 45.71 1.53 113.77 2008-09 0 23.48 126.47 62.77 148.36 4.06 365.14 2009-10 0 21.13 220.31 113.00 263.84 7.11 625.38 2010-11 0 19.02 187.27 96.05 224.26 5.82 532.41 Year of Operation 2011-12 2012-13 0 0 17.11 15.40 159.18 81.64 190.62 4.77 453.32 135.30 69.39 162.03 3.90 386.03 2013-14 0 13.86 115.01 58.98 137.72 3.20 328.77 2014-15 0 12.48 97.75 50.14 117.07 2.62 280.05 2015-16 0 11.23 83.09 42.62 99.51 2.14 238.59 2016-17 0 10.11 70.63 36.22 84.58 1.76 203.29

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Medium Density Fibre Board

Mott MacDonald
Rushil Dcor Pvt Ltd.

Appendix G:

Tax Statement
(Rs. In Lakh)

Sr. No. 1 2 3 4 5 6 7 8 9

Particulars Profit Before Tax Add : SLM Depreciation Less : WDV Depreciation Income / Loss Unabsorbed Depreciation / Losses Net Taxable Income Income Tax MAT Final Tax

2007-08 105.03 70.75 113.77 62.02 0.00 62.02 20.88 11.78 20.88

2008-09 191.95 268.15 365.14 94.97 0.00 94.97 31.97 21.54 31.97

2009-10 832.92 358.71 582.79 608.84 0.00 608.84 204.94 93.45 204.94

2010-11 1211.57 358.71 496.22 1074.06 0 1074.06 361.53 135.94 361.53

Year of Operation 2011-12 2012-13 1275.83 1340.01 358.71 358.71 422.57 359.90 1211.97 1338.81 0 0 1211.97 1338.81 407.95 450.65 143.15 150.35 407.95 450.65

2013-14 1402.44 358.71 306.57 1454.58 0 1454.58 489.61 157.35 489.61

2014-15 1442.51 358.71 261.19 1540.03 0 1540.03 518.37 161.85 518.37

2015-16 1447.82 358.71 222.56 1583.97 0 1583.97 533.17 162.45 533.17

2016-17 1445.61 358.71 189.67 1614.64 0 1614.64 543.49 162.20 543.49

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Medium Density Fibre Board

Mott MacDonald
Rushil Dcor Pvt Ltd.

Appendix H:

Debt Service Coverage Ratio


(Rs. In Lakh)

Sr. No. 1 2 3 4 5 6 7 8

Particulars Revenue Profit Before Tax Profit After Tax LT Interest Interest on Deposits Depreciation LT Loan Repayment Deposit Repayment Return on Investment (%) Debt-Service Coverage Ratio - Debt Service - Coverage DSCR Average DSCR

2007-08 1305.54 105.03 84.16 66.00 3.18 70.75 0.00 0 12% 69.18 224.09 3.24

2008-09 3072.64 191.95 159.99 229.35 14.95 268.15 120.00 0 15% 364.30 672.44 1.85

2009-10 5019.975 832.92 627.99 304.43 23.53 358.71 420.00 0 28% 747.96 1314.65 1.76

2010-11 6023.97 1211.57 850.04 245.85 23.53 358.71 600.00 0 32% 869.38 1478.13 1.70

Year of Operation 2011-12 2012-13 6023.97 6023.97 1275.83 1340.01 867.88 889.36 179.85 113.85 23.53 23.53 358.71 358.71 600.00 600.00 0 0 31% 30% 803.38 737.38 1429.97 1385.45 1.78 1.88 2.61

2013-14 6023.97 1402.44 912.83 49.50 23.53 358.71 480.00 0 29% 553.03 1344.57 2.43

2014-15 6023.97 1442.51 924.13 7.43 23.53 358.71 180.00 0 28% 210.96 1313.80 6.23

2015-16 6023.97 1447.82 914.66 0.00 23.53 358.71 0.00 0 28% 23.53 1296.90 55.11

2016-17 6023.97 1445.61 902.12 0.00 23.53 358.71 0.00 0 28% 23.53 1284.36 54.58

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Medium Density Fibre Board

Mott MacDonald
Rushil Dcor Pvt Ltd.

Appendix I: Pay Back Period & Internal Rate of Return


(Rs. In Lakh) Particulars Cash Outflow Cash Inflow Net Cash flow Cumulative Cash flow Payback Period Internal Rate of Return Discount Factor@8% DCF NPV 2007-08 1857.86 224.09 -1633.76 -1633.76 5.98 17% 0.93 -1513 1,822 2008-09 4613.92 672.44 -3941.49 -5575.25 Years 2009-10 1314.65 1314.65 -4260.60 Year of Operation 2010-11 2011-12 2012-13 1478.13 1478.13 -2782.47 1429.97 1429.97 -1352.50 1385.45 1385.45 32.95 2013-14 1344.57 1344.57 1377.53 2014-15 1313.80 1313.80 2691.32 2015-16 1296.90 1296.90 3988.22 2016-17 1284.36 1284.36 5272.58

0.86 -3379 Lakh

0.79 1044

0.74 1086

0.68 973

0.63 873

0.58 785

0.54 710

0.50 649

0.46 595

111 P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/

Techno-Economic Feasibility report of


Medium Density Fibre Board

Mott MacDonald
Rushil Dcor Pvt Ltd.

Appendix J:
Sr. No. 1

Availability of Bagasse
Sugarcane crushed per day 3500 ton Sugarcane crushed per year 4-5 lakh ton Bagasse available per year for sale 25,000 ton

Name Of Sugar Factory Shree Khedut Sahakari Kahnd Udyog Mandli Ltd. Pandvai Shree Ganesh Khand Udyog Sahakari Mandli Ltd Ganesh Gram, Vataria Vadodara Dist. Co-Operative Sugarcane Group Union Ltd. Gandhar,Karjan Sardar Co-Operative Sugar Factory, Ladhod Shree Sayan Vibhag Sahakari Khand Udyog Mandli Ltd, Sayan, Olpad Shree Chalthan Vibhag Khand Udyog Shahakri Mandli Ltd, Chalthan. Shree Khedut Sahakari Khand Udyog Mandli Ltd. Bardoli. Madhi Sugar Factory,Bhajipura, Madhi Shree Ukai Pradesh Sahakari Khand Udyog Mandli Ltd, Khusal Pura, Vyara Shree Mahuva Pradesh Sahakari Khand Udyog Mandli Ltd. Bamania, Mahuva Sahakari Khand Udyog Mandli Ltd, Gandevi, Bilimora Shree Narmada Khand Udyog Sahakari Mandli Ltd, Dharikheda, Rajpipla Shree Valsad Sahakari Khand Udyog Mandli Ltd, ParneraPardi,Valsad Shree Kamrej Vibhag Sahakari Khand Udyog Mandli Ltd,Navi Prardi, Kamrej Shree Maroli Vibhag Khand Udyog Sahakari Mandli, Ltd, Maroli,Navsari Total

3200 ton

5 lakh ton

25,000 ton

2500 ton

4 lakh ton

50,000

2500 ton

2 to 2.5 lakh ton

5000 ton

9 to 10 Lakh ton

15-17,000 ton

5000 to 6000 ton

10 lakh ton

20 to 25000 ton 65,000 to 70,000 ton

10,000 ton

18 lakh ton

7000 ton

10 lakh ton

50,000-60,000 ton

2500 ton

3.5 lakh ton

10,000 ton

10

3500 ton

5.5 to 6 lakh ton

10,000 ton

11

6000 ton

10 lakh ton

45,000 ton

12

3500 ton

5.5 lakh ton

12,000 ton

13

5000 ton

6 lakh ton

30,000-40,000 ton

14

2500-3000 ton

5 to 5.5 lakh ton

15- 17,000 ton

15

2500-3000 ton

3.5 lakh ton

15000 ton

66,200 ton
113

104.5 lakh ton

4,21,000 ton

Techno-Economic Feasibility report of


Medium Density Fibre Board

Mott MacDonald
Rushil Dcor Pvt Ltd.

114