MSME PROJECT ON GENTS SHIRTS AND TROUSERS

PREPARED BY DEBADUTTA PANIGRAHI (12DM085) RASHMI RANJAN BIHARI (12DM086) MOHAMMED IMRAN (12DM087) JYOTI RANJAN SAHOO(12DM088) FURRY AGARWAL (12DM089)

INTRODUCTION Manufacturing of Shirts and Trousers are under the category of readymade Garment industry. Readymade garment industry has occupied a unique place in the industrial scenario of our country by generating substantial export earnings and creating lot of employment. Its contribution to industrial production, employment and export earnings are very significant. This industry provides one of the basic necessities of life. The employment provided by it is a source of livelihood for millions of people. It also provides maximum employment with minimum capital investment. Since this industry is highly labour-intensive, it is ideally suited to Indian condition. This project report is prepared for the manufacture of gents shirts, gents trousers as they find wide acceptance in local and international markets. Any person having the knowledge of cutting and stitching operations can easily set up such establishments.

MARKET POTENTIAL Readymade garments are the choice of urban people. It is also gaining wider acceptance in semi-urban and rural areas. The huge charges made by tailors and delay in delivery has made people to switch over to readymade garments. In domestic market and export market, it has made spectacular progress in the last decade. This industry is becoming very vibrant and lot of foreign investment pouring in this industry because of low risk and high earning nature of this industry. As these products are fashion oriented, entrepreneurs should always keep in mind the changing fashion styles. Considering its advantageous position, it is assumed that there will be no constraint in marketing of gents readymade garments.

BASIS AND PRESUMPTIONS 1. This project is based on single shift basis and 300 working days in a year. 2. Since this industry is labour-intensive, the working efficiency is considered at 75%. 3. Costs of machinery and equipment/ material indicated refer to a particular make and approximately to those prevailing at the time of preparation of this project. 4. Installation and electrification cost is taken @ 10% of cost of machinery and equipment. 5. Non-refundable deposits, project report cost, trial production, security deposits with Electricity Board are taken under pre-operative expenses. 6-Straight Line Depreciation method has been considered on Land,Building and Plant and Machinery @ 10%. 7. Interest on capital investment has been taken @ 15% per annum and interest on Short-Term Borrowing has been considered @14% per annum.

IMPLEMENTATION SCHEDULE Implementation period in months for executing this project in stage-wise is given below:
Sl.no. 1 2 3 4 5 6 7 8 9 10 11 Activity Selection of site/working shed Formation of company (ownership/partnership) Preparation of feasibility report Registration with commissioner of Industries/DIC Arrangement of finance (Term loan and working capital) Procurement of machinery and equipment Plant erection and electrification Arrangement of raw material including packaging material etc. Recruitment of manpower Selection of market channel Miscellaneous works like power/water connection etc. Period 1 Month 1 Month 1 Month 1 Month 3 Month 1 Month 2 Weeks 1 Month 1 Month 1 Month 2 Month

TECHNICAL ASPECTS Process of Manufacture: The manufacturing process involves the following steps: Procurement of Fabric: Dyed/bleached/printed cotton/synthetic fabrics as per demand are to be procured from the open market. The fabric will be inspected by laying on the inspection table against light before cutting so that unevenness in colour/shade or any other fault, if any visible in the fabric are eliminated. Cutting and Stitching: The inspected fabric is placed on the cutting table in layers and then the different parts of the respective garments are demarked by a chalk as per different sizes. Cutting is carried out by the cutting machine. Stitching is carried out for individual portion of the garments by skilled workers with the help of over-lock, lock stitch machines etc. Washing, Checking, Pressing and Packing: All garments are charged into washing machine containing mild detergent and washed for 4 hours in order to remove dirt and stains acquired during the manufacturing process. After washing, the garments are hydro extracted to remove excess water and after this, these garments are dried in tumbler dryer. Final checking is done before pressing and packing on the checking table so that any fault in the piece may be removed and protruding threads eliminated. The individual pieces are pressed by steam presses to remove any wrinkle marks and packed in the carton boxes.

QUALITY CONTROL & STANDARD The quality of garments mainly depends on quality of fabric used. Therefore, care must be taken while purchasing fabrics to ensure good colour fastness properties, uniformity in shade etc. Generally garments are made as per customer's specification in respect of size, design and fashion.

MOTIVE POWER REQUIRED: Total 30 HP is required to run this unit at installed capacity. POLLUTION CONTROL: The process of manufacture does not generate pollution. Also we have contacted State Pollution Control Board for necessary guidance. ENERGY CONSERVATION: Maximum care is taken while selecting the machinery and other electrical equipments so as to ensure minimum power consumption.

FINANCIAL ASPECTS

1-PROJECT COST PROJECT COSTS Land Building Plant and Machinery Preliminary expenses Preoperative expenses Contingency expenses Working Capital Margin TOTAL PROJECT COST AMOUNT (IN RS.) 1200000 2400000 3500000 600000 600000 300000 600000 92,00,000

2-ANNUAL SALES AND WORKING CAPITAL ASSESSMENT 1ST YEAR Annual Sales Total Working Capital Short-Term Borrowings Cost of sales 9200000 2300000 1700000 3680000 2ND YEAR 3RD YEAR 9660000 2415000 1800000 3864000 10143000 2535750 1900000 4057200 4TH YEAR 10650150 2662537.5 2000000 4260060 5TH YEAR 11182658 2795664 2100000 4473063

3-means of financing DEBT EQUITY 6000000 3200000

4-FIVE YEAR PROJECTED INCOME STATEMENT

1ST YEAR Annual Sales Cost of sales Preliminary expenses (Written off) Depreciation @ 10% Interest on Term Loan @ 15% Interest on STB @ 14% Profit Before Tax (PBT) Tax @ 30% Profit After Tax (PAT) 9200000 3680000 120000 670000 900000 238000 3592000 1077600 25,14,400 2ND YEAR 9660000 3864000 120000 670000 900000 252000 3854000 1156200 26,97,800 3RD YEAR 10143000 4057200 120000 670000 900000 266000 4129800 1238940 28,90,860 4TH YEAR 10650150 4260060 120000 670000 900000 280000 4420090 1326027 30,94,063 5TH YEAR 11182657.5 4473063 120000 670000 900000 294000 4725594.5 1417678.35 33,07,916.15

5-FIVE YEARS PROJECTED BALANCE SHEET

1ST YEAR 2ND YEAR 3200000 6000000 5212200 1800000 1,62,12,200 3RD YEAR 3200000 6000000 8103060 1900000 1,92,03,060 4TH YEAR 3200000 6000000 11197123 2000000 2,23,97,123 5TH YEAR 3200000 6000000 14505039.15 2100000 2,58,05,039.15

LIABILITIES
1-Equity Capital 2-Debt 3-Reserves and Surplus 4-STB 5-TOTAL 3200000 6000000 2514400 1700000 1,34,14,400

ASSETS
1-Fixed Assets 2-Depreciation 3-Net Fixed Assets 4-Current Assets 5-Preliminary Expenses TOTAL 8000000 670000 7330000 2300000 480000 1,01,10,000 33,04,400 7330000 670000 6660000 2415000 360000 94,35,000 67,77,200 6660000 670000 5990000 2535750 240000 87,65,750 1,04,37,310 5990000 670000 5320000 2662537.5 120000 81,02,537.5 1,42,94,585.5 5320000 670000 4650000 2795664.375 0 74,45,664.375 1,83,59,374.78

Cash in Hand

6- FIVE YEAR CASH FLOW Statement

Preoperative year 1ST YEAR 2ND YEAR
2697800 670000 120000

3RD YEAR
2890860 670000 120000

4TH YEAR
3094063 670000 120000

5TH YEAR
3307916.15 670000 120000

CASH INFLOW
1-PAT 2-DEPRECIATION 3-PRELIMINARY EXPENSES 4-EQUITY 5-TERM LOAN 6-STB
2514400 670000 120000 3200000 6000000 1700000 92,00,000 50,04,400 100000 35,87,800 100000 37,80,860 100000 39,84,063 100000 41,97,916.15

TOTAL

CASH OUTFLOW
1-FIXED ASSET 2-PRELIMINARY EXPENSES 3-INCREASE IN WORKING CAPITAL
8000000 600000 2300000 86,00,000 6,00,000 27,04,400 33,04,400 115000 34,72,800 120750 36,60,110 126787.5 38,57,275.5 133126.875 40,64,789.275

TOTAL CASH BALANCE IN HAND

67,77,200 1,04,37,310 1,42,94,585.5 1,83,59,374.78

7-machinery and equipments Machinery Description Single Needle Lock Stitch Machine with motor. 6 Power driven cloth cutting machine 2 Needle Overlock Safety Stitching Machine with Trimmer Double Needle Lock Stitch Machine Button Hole making Machine Button Stitching Machine Hot Fusing Press Garment Washing Machine 25 Kg capacity Hydro extractor 25 Kg capacity Tumbler Dryer 25 Kg capacity Qty.Nos. Rate (in Rs.) 70 1 1 2 2 2 1 1 1 1 25000 60000 60000 80000 150000 80000 70000 150000 75000 145000 Value (in Rs.) 1750000 60000 60000 160000 300000 160000 70000 150000 75000 145000

Flat Bed Steam Iron Press with Vacuum Table Zig Zag Embroidery Machine Generator Set 30 KVA Wash Room Trolleys

5 1 1 5 TOTAL

75000 45000 100000 10000

375000 45000 100000 50000 35,00,000

8-NPV FROM THE PROJECT POINT OF VIEW Co=92,00,000 C1=41,01,000 C2=42,94,200 C3=44,97,060 C4=47,10,060 C5=1,15,83,716 Ke=0.086 Kd=0.097 Therefore cost of capital=Ke+Kd=18.3% NPV = Present value of cash inflow Present value of cash outflow = 1,66,42,341 92,00,000 =74,42,341 9-NPV FROM THE OWNERS POINT OF VIEW Co=32,00,000 C1=33,04,400 C2=34,87,800 C3=36,80,860

C4=38,84,063 C5=47,47,916 Therefore NPV=99,01,462-32,00,000 =67,01,462

10-DEBT SERVICE COVERAGE RATIO 1st Year=4.67 2nd Year=4.87 3rd Year=5.08 4th Year=5.31 5th Year=0.70 So the Average DSCR is 4.12 11-SENSITIVITY ANALYSIS The annual sales is decreased by 10% and the cost of sales is increased by 10%. The interest on Term Loan is increased to 16%. So ,DSCR For 1st Year=3.45 2nd Year=3.60 3rd Year=3.75 4th Year=3.90 5th Year=0.54 So the Average DSCR is 3.04