1

FEASIBILITY ANALYSIS OF
EXERCISE BOOKS
&
CUT PAPER STATIONARY

Part II




For
DEPARTMENT OF INDUSTRIES
MINISTRY OF ECONOMIC AFFAIRS
ROYAL GOVERNMENT OF BHUTAN



By
IDRG CONSULTANCY SERVICES
In Association with Sherpa Consultancy
February, 2009



2
CONTENTS


CHAPTER 1 – PROJECT AT A GLANCE ……………………………………………3

CHAPTER 2 – JUSTIFICATION OF THE PROJECT…………………………………5

CHAPTER 3 – MARKET ANALYSIS……………………………………………………7

CHAPTER 4 – RESOURCES…………………………………………………………..21

CHAPTER 5 – THE PLANT…………………………………………………………….25

CHAPTER 6 – PLANT LOCATION AND INFRASTRUCTURE…………………….35

CHAPTER 7 – ENVIRONMENTAL ASPECT…………………………………………37

CHAPTER 8 – PROJECT IMPLEMENTATION………………………………………39

CHAPTER 9 – COST PRESENTATION………………………………………………40

CHAPTER 10 – FINANCIAL ANALYSIS………………………………………………44

CHAPTER 11 – ECONOMIC ANALYSIS……………………………………………...59



ANNEXURES……………………………………………………………………………..61

Annexure 1 – List of machine suppliers

Annexure 2 – List of raw material suppliers

Annexure 3 - List of lab testing equipment suppliers

















3
CHAPTER 1 - PROJECT AT A GLANCE


1. Project concept – Detailed feasibility analysis of exercise books and cut paper
stationery. The project envisages the manufacture of various
types of exercise books, writing pads, registers and cut paper
stationery for a variety of applications.


2. Location - Thimphu, Paro, Trashigang, Chukka, Samatse and Samdrup
happen to be the main education centres in terms of enrollment till
higher secondary. Keeping in view, various other parameters,
these sites have been short listed in the order of preference.

Location Overall rating
Thimphu 43
Paro 40
Trashigang 36
Chhukka 35
Samatse 35
Samdrup 35


3. Markets - Based on the detailed study of the school supplies in Bhutan, it is
observed that from market point of view, it would be feasible to
setup a unit for the manufacture of exercise books and cut paper
stationery. The current demand level for various types of exercise
books for school students only is estimated to be around 2 million
per year. In addition to this, there is a demand from offices,
commercial establishment and households. Besides, the proposed
unit in Bhutan could market their products in north-eastern part of
India and also in other adjoining markets. Presently, there are no
manufacturing units for exercise books in Bhutan and the entire
demand is being met through imports. There exist possibilities of
marketing exercise books, both to the government and private
trade. There being no local competition, the proposed unit stands
a good chance of capturing substantial domestic markets.


4. Annual production
capacity
recommended - Exercise books and registers (assorted size) – 3 million nos
Cut paper stationery – 30,000 reams

5. Land and
building
requirement Plot area 1000 sq. mts
Built up area 250 sq mts
Industrial shed 500 sq. mts
6. Power 37.5 KWH

4
requirement

7. Main machinery Automatic ruling machine
Paper cutting machine
Note book folding machine
Binding machine
Wire stitching machine
Spiral binding machine


8. Man power Managerial and office staff – 5
requirement Skilled and unskilled workers – 23


9. Total project
cost Rs. 160.38 lacs


10. Project
implementation
period 10-11 months


11. Means of Debt - Rs. 112.26 lacs (70%)
finance Equity - Rs. 48.11 lacs (30%)


12. Break up of Machinery - Rs. 69.53 lacs
cost of project Construction cost - Rs. 32.50 lacs
Misc. fixed assets - Rs. 3.00 lacs
Pre-operative exp. - Rs. 5.00 lacs
Training expenses - Rs. 0.70 lacs
Interest - Rs. 13.29 lacs
Working capital - Rs. 36.36 lacs
Total - Rs. 160.38 lacs


13. Annual sales Rs. 530 lacs
turnover

14. Financial IRR – 65% on equity
analysis IRR – 36% on investment
NPV – Rs. 254.95 lacs (discount rate of 12%)
Pay back period – 2 years 6 months
Project Break-Even – 39%
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CHAPTER 2 – JUSTIFICATION OF THE PROJECT



2.1 Project Concept

The project is for carrying out detailed feasibility analysis for setting up a
manufacturing unit in Bhutan for exercise books and cut paper stationery mainly to cater
the domestic demand in school supplies sector.


2.2 Project Justification

With the fast pace of economic growth and increase in Urban population there
has been a perceptible change in education sector scenario in Bhutan. In addition to
new schools and higher education institutions being set up by the Government, a
number of private sector schools have been established to meet the growing demand of
modern educational facilities. Further to provide options for parents who can afford, the
private sector is being encouraged to set up new schools.

As discussed in part 1 of the report, in order to efficiently run the schools system
a large of number of inputs viz. Text book, exercise books & other stationary items,
school bags, uniform, item of games and sports, scientific equipment etc. are required.
Textbook, exercise books, school uniform & bags have been identified as the major
requirements as these are required by each and every student. It has been overserved
that there is sufficient capacity for printing of textbooks in Bhutan, while the requirement
of exercise books, bags and uniforms is being met through imports from India and other
countries.

The exercise books are purchased both by the Government and in the open
market by children and their parents. The Government procures exercise books mainly
to supply the stationary in rural area school while the children in urban areas have to buy
the exercise books from the market. In view of the changes in education sector, the
demand of school supplies including exercise books have under gone a change both in
terms of quality and quantity. A large number of different types of exercise books are
required by the students. Besides there is a sizable requirement of different types of
notebooks, writing pages, registers etc. in the open market. In addition to exercise books
and registers, there exists a demand for cut paper stationary viz. letter heads, coping
paper, and printing paper for computer.

The demand of exercise books is being met through imports from India and other
countries. The purchases of exercise books are made, both by the government as well
as by the private trade. The government purchases exercise books for supplying them
to students in rural schools. The proposed unit shall facilitate import substitution and
self-reliance in terms of indigenous production. Besides, this would also provide gainful
employment to a number of persons directly. There would also be indirect employment
in terms of transport of raw materials and finished goods, services and marketing of the
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indigenous production. The setting up of the unit shall lead to expansion of economic
activities in Bhutan.

The project envisages the manufacture of various types of exercise books,
writing pad, registers and cut paper stationary for a variety of applications. At present
there are no such manufacturing facilities in Bhutan and there exist a good scope for
setting up of such units to begin with the vicinity of main cities which happen to be main
education centres also.

The details of the product range, manufacturing technologies machines and
equipment and the financial parameters have been described in the subsequent
chapters.



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CHAPTER 3 – MARKET ANALYSIS


3.1 Demand and supply scenario

The current demand level for various types of exercise books in Bhutan has been
earlier estimated as 20 lac numbers of exercise books per annum. The exercise books
are purchased both by government for distribution to schools in the rural areas as well
by children and parents from open market in urban areas. In addition to the demand of
exercise books by the students, the exercise books and registers are also required by
household, institutions, shops, commercial establishments & factories. Various types of
writing pads are also required for meetings & conferences and day-to-day use in offices.

In addition to bound type of stationary items, cut paper stationary for use as
typing paper, writing paper, computer printing paper, paper for fax machine etc is
extensively used in offices and commercial establishments. In Bhutan also, there is a
sizeable demand of cut paper stationary for various types of applications. The requisite
quality of paper is cut in specified size and cut sheets are packed in 100-500 sheets per
pack. Such stationary is also needed by school students for project work and other
assignments and usually sold at stationary shops.

There are no manufacturing units in Bhutan engaged in the production of
exercise books. The demand is being met through imports from India and other
countries. The exercise books available in the market in Bhutan are of wide variety,
including those with the spiral binding with plastic covers. As per market requirement,
these exercise books are sold with different number of pages both with lining and without
lining. The price range also varies according to quality of paper, size and cover page
type and the type of binding viz conventional or spiral binding.

It has been observed during the market survey that the prices of exercise books
in Bhutan are on an average are 25-30% higher than the prices in India. Further, as the
different types of exercise books are purchased in smaller quantities by the trade, they
are not able to get the benefit of bulk purchases. The transport cost further adds to the
purchase value and is finally reflected in the sales prices. The trade is also required to
maintain substantial inventory as the purchases are made from across the border which
is a time consuming process and this further add to the sales price. Besides, the trade
also has to keep stock of the different type of exercise books to meet the varying
consumer demand adding to their inventory costs.


3.2 Competitive Advantages

Production of exercise books is essentially a paper conversion industry and the
cost of paper happens to be the major input cost (60-70%) in the final cost of production
of exercise books. In India, the exercises are being manufactured both by the paper
mills as well as other private companies, which procure paper from paper mills.
Invariably, the paper mills also get their products made from the private trade and
market them under their name and brand. Through purchase of paper in bulk at
competitive prices, the exercise books manufacturing units substantially reduce their
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cost of production. This benefit could also be availed by the proposed units in Bhutan
through procuring paper in bulk at competitive prices. The transport cost of paper would
be relatively lower than the transport cost for exercise books. The unit can transfer
these cost benefits to the trade and thus become competitive in the domestic market.

As stated earlier, the production of exercise books is essentially a paper
conversion industry and scale of operation and use of technology happen to be the
major factors affecting the cost of production. Presently, in India, the trend is to setup
units with relatively higher production capacities, so as to achieve the benefits of
economy of scale of production. In the suggested unit, these factors have been taken
into consideration and the unit envisages the production of 3 million exercise books and
registers with a view to achieve economy of production and be competitive in the market.
Further, the production facilities in the unit are mostly based on automatic, semi-
automatic operations with a view to ensure the quality of production. Such operations
have been recommended with a view to reduce the dependence on a large number of
skilled workers, which are required to be brought from outside Bhutan in the initial
phase.

The cost calculations in the project have been made on the basis of “A” grade
paper with 60 GSM. As the exercise books and registers are used for different purposes
including rough work also, the different quality of paper could be used to bring down the
cost of production for such type of products. The detailed specifications of the different
type of exercise books are given in the project; however, the unit could produce exercise
books as per customers / trade specifications. This would facilitate the unit to produce
tailor made products viz examinations answer books within the price band of the
customers. The main competitive advantage factors of the indigenously produced
exercise books over the other competitors viz imported goods could be summarized as
under: -

 Better inventory control management resulting in low overhead costs. Production
can be planned as per demand.
 Direct purchase of raw materials resulting in lower cost inputs and better quality
control.
 Lower cost inputs in terms of power, transport and labour.
 Flexibility in production both in terms of type and volume of the product.
 Different type of exercise books can be tailor made suiting to local requirements
in terms of design, convenience and usage.
 Possibility of introducing new products and new designs as per local demand.
 Quality control from raw material stage to finished product and possibility of
acquiring ISO 9000 leading to higher acceptability in the market.
 Possibility of adoption of logo and design of schools and institutions on the cover
page of the exercise books.
 Value addition leading to saving of foreign exchange.

All these factors would enable the proposed unit to market the exercise books of
acceptable design and quality at a lower cost as compared to the imported products
being presently marketed in Bhutan.



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3.3 Marketing Strategy

As there exists possibilities of marketing the exercise books, both to the
government as well to private trade, and there is no local competition, the proposed unit
stands a good chance of capturing the substantial market share. In the present
scenario, the following marketing strategies could be adopted by the unit.

 Marketing through trade channels viz by appointing whole-sellers in major cities
or through direct sales to stationery shops.
 Sales to government departments viz Ministry of Education for distribution to
schools in rural areas.
 Dedicated production with logo and monogram etc of the schools and institutions
and sales through these schools and institutions.
 Marketing of cut paper stationery, registers and writing pads to various
government departments, offices and commercial establishments.

Besides, the possibilities of exports to adjoining areas of India viz. north-eastern
region could also be explored. The possibilities of exporting the product to other
neighboring markets could also be explored.


3.4 Product range and target markets

The project has been designed for the manufacture two distinct types of
stationary products the first being cut paper stationary in packs viz. writing / typing
paper, copying paper, computer printing paper etc. and the second being bound paper
stationary items viz. exercise books, registers, writing pads etc Education sector being
the main thrust market area the emphasis would be on the production of items for
supplies to school children, however the remaining capacity of paper cutting machines
proposed to be utilized for the production of cut paper stationary which is required both
by student as well as business establishment.


3.5 Quality Standards and characteristics


3.5.1 Cut Paper Stationary

A large variety of cut paper size are used for various application viz typing paper,
letter heads, photocopying paper, loose sheet stationary both rules and un ruled,
computer printing paper. In loose stationary paper is cut in required standard size and
then 1000 sheets are packed in paper pack. International Standard Organization (ISO)
has adopted ‘A’ Series of cut & trimmed sizes based on the principle of obtaining smaller
size from a bigger sheet maintaining the same length and breadth ratio without only
wastage. The various sizes listed in A- series are as given in Table below:




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Principal Size – A series (ISO)

S. No. Designation Size (in mm)

i. 4 A0 1682 x 2378
ii. 2 A0 1189 x 1682
iii. A0 841 x 1189
iv. A1 594 x 841
v. A2 420 x 594
vi. A3 297 x 420
vii. A4 210 x 297
viii. A5 148 x 210
ix. A6 105 x 148
x. A7 74 x 105
xi. A8 52 x 74
xii. A9 37 x 52
xiii. A10 26 x 37
xiv. A11 18 x 26
xv. A12 13 x 18


Some additional sizes of paper which may be used only in exceptional
circumstances or when sizes are needed intermediate between any two adjacent of the
‘A’ series have also been specified by ISO in ‘B’ & ‘C’ series. The details of ‘B’ & ‘C’
series are as given in Table below:

Supplementary Size from B- and C- Series (ISO)

S. No. Designation Size (in mm)

i. B0 1000 x 1414
ii. B1 707 x 1000
iii. B2 500 x 707
iv. B3 353 x 500
v. B4 250 x 353
vi. B5 176 x 250
vii. B6 125 x 176
viii. B7 88 x 125
ix. B8 62 x 88
x. B9 44 x 62
xi. B10 31 x 44
xii. C0 917 x 37
xiii. C1 648 x 917
xiv. C2 458 x 648
xv. C3 324 x 458
xvi. C4 229 x 324
xvii. C5 162 x 229

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Simultaneously with a view to rationalize the size of various paper products and
ensure international coordination ISO has also recommended the size of ‘A’ series of
various commercial formats of paper product. The details are given in the table below;


Recommended Size of A-Series suitable for various commercial formats

S.
No.
Designation Size (in mm)

1. Tear Off Calendar Block A4,A5, A6,A7,A8
2. Tear Off Calendar Base A2,A3, A4,A5,A6, A7
3. Directories (General) A4,A5
4. Official Gazette A4
5. Share Scrips A3,A4, A5
6. Advertisement Posters A0, A1, A2, A3
7. Certificates A4,A5,A6
8. Order Forms A4,A5,A6
9. Printing proof A3, A4,A5,A6, A7
10. Letters (General) A4
11. Half Letter Size (General) A5
12. Books A4,A5,A6, A7,
13. Carbon Papers A4, A5
14. Railway time Table A0, A1, A2, A3, A4,A5,A6
15. Telephone Directory A4, A5
16. Scribbling Pads or Note Papers A4,A5,A6, A7,
17. Trade Books A2, A3, A4,A5
18. Commercial Letters Paper A3, A4,A5,A6, A7
19. Card Index A4,A5,A6, A7
20. Catalogues A4,A5,A6, A7
21. Advertising Pamphlet A0,A1,A2,A3, A4,A5,A6, A7, A8, A9
22. Hand Bills A6, A7, A8, A9
23. Periodicals, Magazines A3, A4,A5
24. Costing and Posting sheets A4,A5
25. Maps A0,A1,A2,A3, A4,A5,A6
26. Patent and Standard Drawing papers A3, A4
27. Posters (Big) A0,A1,A2,A3
28. Drawing A0,A1,A2,A3, A4,A5,A6
29. Post cards A6
30. Newspaper A2,A3, A4
31. Price Lists A4,A5,A6,A7
32. Receipts A5,A6
33. Instrument Record Sheets (Round) A4,A5
34. Sign Boards A0,A1,A2,A3, A4,A5,A6, A7, A8
35. Pocket Note Books A5,A6, A7
36. Sand paper A4,A5,A6
37. Instruction and Rule sheets A3, A4,A5,A6

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International Standard Organization (ISO) has also specified the sizes of
untrimmed paper, which shall normally be manufactured and stocked by the paper mills
and paper dealer in the untrimmed sizes. These sizes are as given below in the table:

Untrimmed (Raw Stock) Paper Sizes

S. No. Trimmed Size Untrimmed Size
Standard Size Special Size
Designation Size Designation Size
1 A0 RA0 860 x 1 220 SRA0 900 x 1 280
2 A1 RA1 610 x 860 SRA1 640 x 900
3 B1 RB1 750 x 1 050 -- --
4 C1 RC1 670 x 940 SRC1 680 x 960


The system of specifying size in ISO standard has been adopted by a large
number of countries including India. This adoption results in bringing about uniformity in
the size of paper to be used for correspondence, exercise books, production of books,
pamphlets and a variety of other paper products. These standard also facilitate the
manufacture of paper products to order the specific size of untrimmed paper from mills &
paper stickiest so that the wastage in cutting the required size are absolutely minimum.


3.5.2 Bound Paper Stationary

Bound paper stationary mainly comprises of various types of exercise books,
register and writing pads. Registers are also known as long note books and usually have
comparatively largers size of paper sheets with or without lines and some times with
columns and heading as per requirement of the customer. Note Books and registers are
used by the people of all walks of life, the school students and offices being the biggest
consumers. Students use them for noting down their class lessons, notes and other
important information related to their subject of studies. These written works in
notebooks can be used in future at appropriate times whenever needed. Registers and
exercise books of specified dimensions and size are used for recording science
practicals, geographical subject and also as answer sheet in examinations. Though
mainly used by students whether school going or college going, the exercise books are
not less important for a house wife who keeps her daily expenses record in the note
books.

Registers are used to keep the record of day-to-day activities of the office,
maintaining of accounts, attendance in schools and offices, stocks of raw materials
finished goods. Registers are also widely used by school and college students. Writing
pads also fall in the category of bound paper stationary and find wide applications in the
offices, conferences and seminars, business establishment and even in houses for
noting down information and details and when required. The exercise books however
remain the most important products under this category. The type & classification of
exercise books and registers are given in the forthcoming paras.


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3.5.3 Exercise Books & Registers

Exercise books and registers some times referred to as long note books are
available in the market in various sizes, shapes with varying number of pages both ruled
and plain and having various types of covers viz. paper bound, board & white card and
plastic sheet covers with spiral binding. The exercise books and register are made in
different sizes suiting to their intended application. Their sizes vary according to the
requirement.

Bureau of Indian Standards (BIS) has prescribed the following types of exercise
books and registers mainly for use in schools:

 Exercise books (wire stitched)
 Exercise books (bound)
 Drawing exercise books (wire stitched)
 Map exercise books (wire stitched)
 Science practical notebooks (bound)
 Examination answer books (wire stitched)
 Register (wire stitched) and
 Register (bound)

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In addition to the above following type of exercise book and register are now a
days used commonly:

 Exercise books with spiral binding and plastic.
 Registers with spiral binding and plastic covers.



Though exercise books and registers are available in various shapes and size,
Bureau of Indian Standard has prescribed the standards for various aspects of the
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quality and size of exercise books. The norms and standard for various types of exercise
books are as under:


3.5.4 Exercise books (wire stitched)

Size- The size of this type of exercise book shall be 162 x 229 mm (C5). This may
economically be obtained from 67 x 94 cm (RCI Standard) getting 32 pages or from 47 x
67 cm (RC2 Standard) getting 16 pages per sheet respectively.

Denominations – These books shall be composed of 32, 48, 64, 80, 96, 112 and 128
pages excluding the covers.

Binding – Exercise books of 32 pages shall have one stitch and 48 and 128 pages shall
have two stitches on the spine of each exercise book. The size of stitch (staple) shall be
13 to 16 mm in length.

Ruling – The ruling, if required, shall be done as agreed to between the purchaser and
the supplier. If required, the copy rule shall be done in blue colour and the top and side
margin shall be in red colour. For copy rule, the distance between horizontal lines shall
be 9 mm and for margin, whether it is on the top or on the side, the distance from the
end shall be 25 + 1 mm. There shall be 21 blue lines on each page.

Quality of Paper- Cream laid, cream wove or white printing hard-sized paper of
minimum 52 g/m
2
substance shall be used. The quality of paper shall be such that the
matter can be written on both sides using a latem pattern nib and ink conforming to IS :
222-1962 *, without any loss of legibility.

Cover- Coloured cover paper of minimum 66 g/m
2
substance shall be used.


3.5.5 EXERCISE BOOKS (BOUND)

Size- The size of this type of book shall be 162 x 229 mm (C5). This size may
economically be obtained from 67 x 94 cm (RC1 Standard) getting 32 pages or from 47
x 67 cm (RC2 Standard) getting 16 pages per sheet respectively.

Denominations – These books shall be composed of 96,128, 144,160,192, 256, 288,
320, 384,480 and 576 pages.

Binding – The sections shall be thread stitched and bound with binding cloth on the
spine and strawboard on the top and the bottom of the book. Millboard may also be used
for exercise books of 96 and 128 pages.

Ruling – The ruling, if required, shall be done as agreed to between the purchaser and
the supplier. If required, the copy rule shall be done in blue colour and the top and side
margin shall be in red colour. For copy rule, the distance between horizontal lines shall
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be 9 mm and for margin, whether it is on the top or on the side, the distance from the
end shall be approximately 25 mm. There shall be 21 blue lines on each page.

Quality of Paper- Cream laid, cream wove or white printing hard sized paper of
minimum 52 g/m
2
substance shall be used. The quality of paper shall be such that the
matter can be written on both sides using a latem pattern nib and ink conforming to IS :
222-1962 *, without any loss of legibility.

Cover- Strawboard suitably covered with papers both from inside and outside shall be
used as cover and the minimum substance for different denominations of bound books
shall be as follows:

Denomination
(No. of pages)
Substance
g/m
2

96,128,160 490
192, 256, 675
288, 320, 384 900
480 and 576 1100


3.5.6 DRAWING EXERCISE BOOKS (WIRE STITCHED).

Size – These books shall be of the following three sizes:

 177 x 250 mm (B5). This size may economically be obtained from 75 x 105 cm
(RB1 Standard) getting 32 pages or 52.5 x 75 cm (RB2 Standard) getting 16
pages per sheet.

 210 x 297 mm (A4). This size may economically be obtained from 61 x 86 cm
(RB1 Standard) getting 16 pages or 43 x 61 cm (RB2 Standard) getting 8 pages
per sheet respectively.

 229 x 324 mm (C4). This size may economically be obtained from 67 x 94 cm
(RB1 Standard) getting 16 pages or 47 x 67 cm (RB2 Standard) getting 8 pages
per sheet respectively.

Denominations – These books shall be composed of 16 and 24 pages excluding
covers.

Binding – The binding shall be done on the spine of the book by two wire stitches of 16
to 16 mm in length.

Quality of Paper- White cartridge (see 1848-1991) or drawing paper (see IS: 3064-
1964) of minimum 80 g/m2 substance shall be used.

Cover- Coloured cover of minimum 100 g/m 2 substances shall be used.


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3.5.7 MAP EXERCISE BOOKS (WIRE STITCHED).

The size and specification of map exercise books shall be as specified for
drawing exercise books of 210 x 297 mm (A4) and 229 x 324 mm (C4), manufactured
horizontal or vertical.


3.5.8 SCIENCE PRACTICAL NOTEBOOKS (BOUND).

Size- The size of this type of book shall be 210 x 297 mm (A4). This size may
economically obtained from 61 x 86 cm (RC1 Standard) getting 16 pages or from 43 x
61 cm (RC2 Standard) getting 8 pages per sheet respectively.

Denominations – These books shall be composed of 96, 128, 144, 160 and 192 pages
besides the printed data.

Binding- The sections shall be thread stitched and bound with binding cloth on the spine
and strawboard pasted on the top and the bottom of the book.

Ruling – The ruling shall be done as agreed to between the purchaser and the supplier
but for copy rule blue colour and for margin red colour shall be used.

Quality of Paper- Azure laid of minimum 70 g/m
2
substance shall be used. The quality
of paper shall be such that the matter can be written on both sides using a latem pattern
nib and ink conforming to without any loss of legibility.

Cover- Strawboard suitably covered with papers both from inside and outside shall be
used as cover and the minimum substance for different denominations of science
practical notebook shall be as follows:

Denomination
(No. of pages)
Substance
g/m
2

96, 128 and 144 675
160 and 192 900


3.5.9 EXAMINATION ANSWER BOOKS (WIRE STITCHED)

Size- These books shall be of two sizes:

 162 x 229 mm (C5). This size may economically be obtained from 67 x 94 cm
(RB1 Standard) getting 32 pages or 47 x 67 cm (RB2 Standard) getting 16 pages
per sheet respectively.

 210 x 297 mm (A4). This size may economically be obtained from 61 x 86 cm
(RB1 Standard) getting 16 pages or 43 x 61 cm (RB2 Standard) getting 8 pages
per sheet respectively.
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Denominations- Both the above size shall be composed of 16, 24,32 and 48 pages
inclusive of covers.

Binding- Size C5 shall have single wire stitch binding on the spine when composed of
16 pages. For other denominations of size C5 and all denominations of size A4, two wire
stitches on the spine shall be provided. Size of stitch (staple) be 13 to 16 mm long. Size
A4 shall have a hole on left hand top corner of minimum 3 mm diameter on each answer
book.

Ruling- The ruling, if required, shall be done as agreed to between the purchaser and
the supplier. If required, the horizontal lines shall be done in blue ink and the margin
shall be red. Margin, if required, shall be given at a distance of 30 mm from the spine for
C5 size and 45 mm for the A4 size; the top margins in the two cases shall be 25 mm and
30 mm respectively.

Quality of Paper- Cream laid, cream wove or white printing hard-sized paper of
minimum 60 g/m2 substance shall be used. The quality of paper shall be such that the
matter can be written on both sides using a latem pattern nib and ink conforming to IS:
222- 1962 without any loss of legibility.

Cover- There shall be no extra cover and the paper used for the top shall be same as
used for inside.


3.5.10 REGISTER (WIRE STITCHED)

Size- The register (wire stitched) shall be of the following two sizes:

 210 x 297 mm (A4). This size may economically be obtained from 61 x 86 cm
(RB1 Standard) getting 16 pages or 43 x 61 cm (RB2 Standard) getting 8 pages
per sheet respectively.

 229 x 324 mm (C4). This size may economically be obtained from 67 x 94 cm
(RB1 Standard) getting 16 pages or 47 x 67 cm (RB2 Standard) getting 8 pages
per sheet respectively.

Denominations – These registers shall be composed of 96 and 144 pages exclusive of
covers.

Binding- The binding shall be done on the spine of the register by two wire stitches of
13 to 16 mm in length.

Ruling – The ruling shall be done as agreed to between the purchaser and the supplier.

Quality of Paper – Cream laid, cream wove or white printing hard-size paper of
minimum 60 g/m2 substance shall be used. The quality of paper shall be such that the
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matter can be written on both sides using a latem pattern nib and ink conforming to IS
without any loss of legibility.

Cover- coloured cover paper of minimum 100 g/m
2
substance shall be used.


3.5.11 REGISTER (BOUND)

Size- The register (bound) shall be of the following two sizes:

 210 x 297 mm (A4). This size may economically be obtained from 61 x 86 cm
(RB1 Standard) getting 16 pages or 43 x 61 cm (RB2 Standard) getting 8 pages
per sheet respectively.
 229 x 324 mm (C4). This size may economically be obtained from 67 x 94 cm
(RB1 Standard) getting 16 pages or 47 x 67 cm (RB2 Standard) getting 8 pages
per sheet respectively.

Denominations – these registers shall be composed of 100, 200, 300, 400, 500 and
600 pages.

Binding- The sections shall be thread-stitched cloth back, paper inside and cut flash. It
shall be protected by pasting a piece of jaconet cloth throughout length of the register at
the inside joint of the text under the sheet pasted over the cover and bound with a
binding cloth on the spine and straw board on the top and the bottom of the book. Any
other binding may be used if agreed to between the purchaser and supplier.

Ruling – The ruling shall be done as agreed to between the purchaser and the supplier.

Quality of Paper- Cream laid, cream wove or white printing hard-sized or azure laid
paper of minimum 60 g/m
2
substance shall be used. The quality of paper shall be such
that the matter can be written on both sides using a latem pattern nib and ink conforming
to IS without any loss of legibility.

Cover- Strawboard covered suitably with paper both from inside and outside shall be
used as cover and for different denominations shall be minimum of the following
substance:

Denomination
(No. of pages)
Substance
g/m
2

Up to 192 675
256 and above 1100


3.6 Packaging and Marking

In accordance with Bureau of Indian Standards (BIS) specifications each
exercise notebooks on cover pages shall be clearly and durably marked with the
following particulars:

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- Name and address of the manufacturers or his trade mark.
- Weight of the paper in GSM.
- Length and width of paper in cm and
- Number of pages.

While packaging exercise books or register in package the following procedure
and norms would be adhered to:

Packaging- The notebooks shall be supplied in packages, containing copybooks of the
same type, size and having the same number of pages. Each package shall be wrapped
in paper to protect the notebooks from damage during transportation. The notebooks
may be first tied in bundles before being packaged. If the notebooks are tied in bundles,
each bundle shall be firmly bound with paper tape.

Marking- Each package of notebooks shall be marked or labeled with the following
particulars:
- Name and address of the manufacturer or his trade –mark.
- Description of the notebooks in the package, and
- Number of notebooks in the package.

Each notebook shall be clearly and durably marked with the following particulars:

- Name and address of the manufacturer or his trade mark.
- Weight of the paper (in g/m
2
)
- Length and width (in cm), and
- Number of pages.





















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CHAPTER 4 - RESOURCES


4.1 Main resources

The main resources required for the project include the following.

- Land and building
- Plant and machinery
- Paper, the main raw material
- Consumables
- Power
- Skilled and non-skilled workers

It has been envisaged in the project the land for the project would be available on
lease basis from Government of Bhutan and the building as per requirement has to be
constructed. The plant and machinery has to be imported as per details given in the
project. There is a requirement of operators and skilled workers for the project. In the
initial phase, the machine suppliers would be deputing their experts for erection and
commissioning of the plant and they would also train the local workers in various
operations. If needed, the training of Bhutanese workers could also be arranged by the
machine manufacturer in their premises.


4.2 Raw material and consumables

The major raw material required for the manufacture of cut paper stationary and
exercise books is writing paper. Various grades and qualities of paper as specified in
previous chapter are used for the production of exercise books and registers. The
common grade of paper used is between 56 to 62 GSM (grams per square meter),
which is measure of the thickness of paper. The texture and colour is the main criteria
taken in to consideration for assessing the quality of paper. The generally used textures
and colours used for the production of exercise books and registers writing pads include
the following:

- Cream laid
- Cream Wove
- White Printing hard-sized
- White cartridge
- Azure laid
- Super Cream Wove
- Super Cream Deluxe
- White Wove

The quality of paper shall also conform to Standards of writing on both side of
paper without loosing legibility as specified earlier.



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The texture, colour and gram mage of paper required for different type of
exercise books and registers have been earlier specified in the previous chapter while
describing the standards for exercise books & registers.

Another important raw material required for exercise books is the duplex board
and hard board. In case of exercise books the cover and made of paper on duplex board
or straw board of proper GSM covered on both side by paper. In case of registers the
straw board of higher GSM would be used. In case of exercise books with spiral binding
the cover shall be of polyethylene or PVC substrate with our without printing.

The main raw material viz paper is supplied by the mills either in the form of
continuous rolls of appropriate with or in the form of untrimmed cut sizes commonly
known as reams. The width of a standard roll should correspond to one dimension of
specified standard size of paper or an integral multiple thereof. In case of cut sizes the
width & length shall conform to one of the standard size of untrimmed raw stock paper
sizes.

Besides paper the other raw material required are as under:

- Ink for ruling machine
- Stitching wire
- Thread
- Cloth
- Duplex board, straw board
- Glue or adhesive
- Spiral plastic
- Packing paper



4.3 Quality Standards for Paper

As stated earlier various types of paper are used for the manufacture of exercise
books, registers, cut paper stationary broadly these papers are classified as writing and
printing papers. The standards for trimmed and untrimmed commercial size of paper
have already been specified. The various types of writing and printing paper shall
cornply with quality requirements as given in table below:
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Quality Parameters for Writing and Printing Papers

Type of paper Tensile
index
Nm/ g


Min
Brightnes
s



Min
Opacity
Percent

Min
One
Minute
Cobb
Test
Max
Averag
e
Double
fold



Min
Gloss
Percent



Min
Wax
Pick


Smoothn
ess
(Bendtse
n)
Ml/mm
Max
Tear Index

MN.m
2
/g


Min
CD MD CD MD CD MD
Account Book 17 25 75 80 22 5 10 -- No
Pick on
8A
250 4.0 3.5
Air mail /
manifold
20 30 72 70 25 -- -- -- -- 4.0 3.5
Antique wove
and antique
laid
17 25 72 80 25 -- -- -- -- 4.0 3.5
Azure laid 17 25 -- 85 25 5 10 -- -- 4.0 3.5
Bond 25 35 80 80 20 10 15 -- -- 5.0 4.0
Cartridge,
drawing
20 30 72 -- 25 20 25 -- -- 4.0 3.5
Cartridge,
white
17 25 72 80 25 -- -- -- -- 4.0 3.5
Cream laid and
cream wove
17 25 72 80 25 -- -- -- -- 4.0 3.5
Duplicating
absorbent
17 25 72 85 -- -- -- -- -- 4.0 3.5
Duplicating
semi-
absorbent
17 25 72 85 35
(Min
25)
-- -- -- -- 4.0 3.5
Poster,
Machine
glazed
17 25 72 -- 25 -- -- 18
(glazed
side
only)
-- 4.0 3.5
Printing,
coloured
17 25 -- 80 25 -- - -- 4.0 3.5
Printing,
maplitho
20 30 77 80 25 10 15 -- No
Pick on
10A
280 4.0 3.5
Printing, offset 20 30 72 80 25 -- -- -- No
Pick on
8A
280 4.0 3.5
Printing, semi
bleached
17 25 45 80 25 -- -- -- -- -- 4.0 3.5
Printing
unbleached
17 25 -- 80 25 -- -- -- - -- 4.0 3.5
Printing, white 17 25 72 80 25 -- -- -- -- -- 4.0 3.5
Printing white
super
calendared
17 25 72 75 25 -- - 15 - - 4.0 3.5
Typewriting 17 25 72 -- 25 -- -- -- - -- 4.0 3.5
1) Only for white papers.
+ Strip test water rise in 1 min -10 mm Tensile index= Breaking length, m x 0.0098; Tear Index = Tear Factor x 0.098
CD = Cross direction MD = Machine direction
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4.4 Comparative analysis of sources and prices of critical inputs
& consumables

As mentioned earlier, various raw materials required for manufacture of exercise
books include the following: -

- Paper
- Ink for ruling machine
- Stitching wire
- Thread
- Cloth
- Duplex board, straw board
- Glue or adhesive
- Spiral plastic
- Packing paper

The main raw material is paper which can be sourced either directly from paper
mills or from the dealers / wholesalers in paper raw materials. As the paper required for
the proposed project would be in the form of reels, it would be more profitable to
purchase the paper directly from paper mills or through their dealers in eastern region of
India. The small quantity of paper and board as and when required could be procured
from the local paper dealers.


4.5 Recommended sources

A list of raw material supplier has been given in the Annexure II. As mentioned
above, it would be more economical to purchase the paper directly from paper mills.


4.6 Annual requirement of raw materials

The annual requirement of various raw materials along with their prices have
been given in the chapter 9 relating to cost presentation.











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CHAPTER 5 – THE PLANT


5.1 Choice of technology

Manufacture of exercise books is essentially a paper conversion industry. The
main manufacturing operations include ruling of paper, cutting of paper followed by
stitching and binding. Depending on the type and size of the market, these operations
are carried out either manually or with the use of semi-automatic machines or by using
completely automatic machines. Sometimes, partly manual and partly semi-automatic
machines operations are also employed.


5.1.1 Process Technologies used

For the production of exercise books, normally following type of process
technology are used

 Manual process wherein the ruling of paper is outsourced and cutting and
binding operations are carried out manually.
 Semi-automatic process using disc paper ruling machine and semi-automatic
cutting and binding operations.
 Automatic reel to sheet ruling and cutting machine with semi-automatic binding
operations.
 Fully automatic sheet ruling, cutting and binding operations.


5.1.2 Factors influencing the choice of technology

A number of factors need to be taken into considerations while deciding the
choice in favour of a process technology. These factors mainly include

 Factor inputs.
 Market findings viz size of market and recurrence of repeat demand.
 Purchasing power of consumers and prevailing price spectrum.
 Future projections of market demand.
 Availability of skilled manpower and support facilities.
 Availability of infrastructure and transport facilities.
 Environmental considerations.


5.1.3 Technology recommended

Manufacture of exercise books & cut paper stationery is essentially a paper
conversion industry wherein the cost input of paper contributes a major share viz 65-75
percent in the total cost of production of finished goods. In the open market economy, in
such products wherein value addition on raw materials is relatively low, the quantum of
production or turnover has to be necessarily kept at a substantially higher level to
achieve economics of production and to be able to compete in the market. In India also,
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now a days exercise books units operate at a higher level of production capacity to
achieve the economics of production. During last few years, it has been observed in
India that the units producing lower volumes of exercise books have either upgraded
their technology and production capacities or diversified in to other areas.

Normally, two processes are used for ruling of the paper for exercise books. In
the conventional process, paper reel is first cut to sheets by use of reel to sheet cutting
machine and then sheets are ruled on disc paper ruling machine. In the modern
process, the automatic reel to sheet ruling machine is used for ruling of the paper.
Keeping in view the current trends in the industry for upgradation of the technology, the
project has been based on automatic high speed REEL to SHEET ruling machine.


5.2 Production capacity

The production capacity has been calculated on the basis of 80% utilization of
the installed capacity of the machines. Keeping in view the above, the installed capacity
of the proposed project on single shift basis, and 300 working days in a year has been
envisaged as under: -

Exercise books of assorted sizes viz - 28 lacs per annum
32, 48, 64, 80, 96 & 112, 128 pages

Practical note books & register - 2 lac per annum
with 96, 128, 144 & 160 pages

Cut paper stationary packed in reams - 30,000 reams



5.3 Details & Specification of Machinery & Equipment

I. Automatic high-speed reel to sheet ruling machine:

Copy & margin both side consisting of following: One Flexo and two Ruling Disc
Total 3 Colour on each side, one set of margin cylinder = 2 Pcs Cylinder with following
accessories and attachments.

WEB STATION: The lifting of paper reels is done by advanced mechanism suitable to
lift maximum reel web of 90 cms & reel diameter of 120 cms of core diameter of 70 mm
& reel weight maximum 700 Kgs. Can be lifted from floor by a single person easily.

RULING & MARGIN TOWER: 3 colour inking system is installed on each side. The ink
used for ruling is water-soluble which is economical for production of sheets.

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CROSS CUTTER UNIT: Most advanced technology is installed for cross cutting, which
is done by rotary system with a progressive increase of 1 cms varying from size 35 cms
upto 88 cms.

DELIVERY STATION: Jogging arrangement is done one a wooden pallet kept on
delivery platform with facility of automatic downward movement.

OUTPUT: Web line speed of 200 meters/ minute maximum depending on quality &
GSM of paper.

A set of other items includes-----
Web-guiding system tension controller (Hydraulic), Static unit, Rotary knives, disc,
spaces, Hydraulic pallet truck, margin cylinder, cylinder stand, disc rod, disc rod
stand, cylinder disc rod with collar, reel shaft, took kit, etc.

Micro perforate unit


II. REEL TO SHEET CUTTING MACHINE*

III. Disc Paper Ruling Machine* double sided double colour with
stop with cutting and perforate attachment with suitable
electrical motor and standard accessories (main drum 11”)

36”

IV. MICROCUT Paper cutting machine with all Standard Accessories as listed below:

Hydraulic Clutching device for less maintenance & slippage free operation with
instant stop fully adjustable clamping pressure.

Standard Accessories
S.S.COATING ON front side of table & side Tables also.
 Auto Guage, Photo Cell, cutting side indicator, main switch for instant stop,
side guage plate left & right hand knife changing kit, 2 knives and 4 cutting
sticks, oil can, grease gun and all operational tools, operational manual of
machine, 2 Nos. electric motor -440 volt 3 phase, one cutting line bulb, one
overload stud etc.

Technical specification:

Cutting width 1070 MM
Clamp opening 130 MM
Working depth of table (rear) 1070 MM
Table height 900 MM
Clamp pressure minimum 400 kg
Clamp pressure maximum 3500 Kg
Residual cut 27 MM
Main motor 3HP
Blower motor 1HP
Weight 3000 Kgs
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V. E.M.C. Fully Automatic High Speed paper Cutting machine
with Electromagnetic Clutch Brake, Photo Cell hand Safety
Device for instant stopping, also double switch for safe
actuation, motorized back gauge with manual micro adjustment,
illuminating magnified measuring tape at Eye Level for quick
setting back gauge, complete with lubrication pump, two electric
motors, two special steel knives, Panel switch control Board.

42”


VI. Semi Automatic Type Paper cutting Machine with Electrical, a
set of knives and a set of tools.
43”


VII. AUTOMATIC NOTE BOOK FOLDING MACHINE (for Exercise Note Books)
With counting arrangement, with standard accessories.

Technical specification:

Feeder: Automatic Flat Pile feeder
Fold: Double / Single Parallel fold
Paper Size handled:
Maximum – 90 cm (W) x 90 cm (L)
Maximum – 30 cm (W) x 43 cm (L)
Counting: From 2 to 14 sheets
Speed: 7200 to 9000 sheets per hour
Electrical; 440 V 3 phase, 50 Hz
Power: 2 HP

VIII. Paper Folding Machine, with two speed mechanical speed device
(2 cross)
(Max. sheet size 60 cm (W) x 91 cm (L), Mini: 30 cm (W) x 45 cm (L)


Technical Specification:

Maxi. Paper sizes 60 CM (W) x 91 cm (L)
Mini. Paper size 30 CM (W) x 45 cm (L)
Parallel Fold Two
Cross Fold Two
Feeder Mode Manual
Knives Vertical mechanical
Maxi. Knife stroke 6,500 P/hr. approx
Counter Infrared
Oil distribution Manual (oil pump optional)
Delivery Stacker
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Speed variation Available
Power 1.5 HP 1440 RPM
Floor space 250 (L) x 244 (W) x 130(H) cm

IX. “PERFECT” BINDING MACHINE consists of single clamp hand milling station with
4 HP motor and cutters build in waste exhaust system with bags, motorized not
melt gluing station with build in heater and thermostatic control, manual cover
feeding station with Nipping arrangement and delivery tray, drive motor and build in
Electrical Panel Board with Side Glue System

Technical Details:

Max. length (along spine) 430 mm
Min. Length (along spine) 50 mm
Max. Height (page width) 300 mm
Min. Height (page width) 50 mm
Bindable thickness 1 to 45 mm
Production speed 700
Power requirement 440 V
Motor 3.7 KWA
Heater 2 KW
Machine size 2240 x 620 mm
Machine weight 825 kgs.

X. Power Driven Automatic Wire Stitching Machine complete with motor, pulley
etc. size: 5/8”

XI. ROBERTSON make Thread Book Sewing Machine size 18” x 9 ¾”) 460 x
250mm) power operated, fitted with Magnetic Brake, speed of Machine 70 sections
per minute, supplied with all standard accessories and fittings inclusive of 0.5 HP
motor and starter


Technical specifications:

Maxi size of Book 460 x 250 mm 18” x 9 ¾”
Min. size of Book 100 x 80 mm 4” x 3 ¼”
Net weight (approx) 700 kgs
Gross weight (approx) 900 kgs
Speed 70 sections P.M
Motor 0.5 HP 1440 RMP
Space required 5’ x 5’
Provided with Magnetic
Brake


XII. TWIN BOOK PRESS
Packing charges
XIII. BOOK PRESS manual Pillar Type – Size : 18 x 24”

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Technical Details:

Pile (stock) height 70 mm
Punching stroke 90mm
Size of working table 390 x 60 mm
Distance between dies (Min-max) 100-310mm
System Punching pressure 2500 kgs
No of Strokes (Min) 15
Electrical load 1.5 /2kva /hp
Electrical supply 400/440 V AC 50Hz 3Ph.
Hydraulic Oil capacity 45 Ltrs
Overall dimension (wxDxH) 60 x 60 x 160 cms
Net weight 300 kgs.

XIV. SPIRAL BINDING MACHINE- for production of exercise books spiral binding with
plastic covers.


(*) REEL TO SHEET CUTTING MACHINE and DISC PAPER RULING MACHINE would
be required for a lower capacity unit, in place of automatic high speed REEL TO
SHEET RULING MACHINE


5.4 Process of Manufacture

As mentioned in previous chapter the exercise books and registers are
manufactured in a variety of dimensions and varying number of pages. Normally the
exercise books are of small dimension and registers are of relative larger dimensions.
The process of manufacture for exercise books & registers involve the following
operations.

- Cutting of paper
- Ruling – Line Printing
- Creasing / folding
- Stapling, wire stitching or punching, thread sewing
- Printing of cover
- Binding
- Finishing


Cutting of paper- Paper is available from the mills or dealers in the form of continuous
rolls with specific width. Paper is also available in the form of untrimmed cut size of
larger dimension. The rolls are also required to be cut in large cut sizes with the help of
cutting machine. The cut sizes of paper are then stocked in form of reams.

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Ruling – Line Printing- The paper after cutting to proper dimension is taken to the
ruling or line-printing machine. The ruling is done either on one side of paper (in case of
science practical note book) or on both sides of required for the final product. Spacing
between the horizontal lines and the spacing on top of the page & side of the page shall
be as per requirement of the product. These dimensions of spacing have been given for
various types of the exercise books & registers in the previous chapters. Selection of
proper ink is also important for clear appearance of the lines.

Creasing & Folding- After lining the paper sheets are folded in the required sizes and
the register number of folded sheets are placed together depending on the number of
page required in the final products.

Stapling, Wire stitching, thread Sewing, Punching- the folded set of paper after lining
and folding are then bonded together either stapling, wire stitching or thread sewing.
These operations are carried out with the help of wire stitching machine or thread book
sewing machine. In case of thick notebooks or registers with more pages, two or more
stapled set of papers are combined to obtain the desired number of pages. In case of
spiral binding the requisite perforation are made on the margin side of the paper sets.

Printing of Covers- Covers are provided to the note books and registers in order to
prevent the note book from reorientation & damage dulling handling while in use. Covers
are usually made of duplex board, straw board or plastic in each of spiral binding.
Covers are printed suitably giving the name of manufacture, brand name, trademark,
number of pages, size of paper and gram mage (GSM) OF PAPER. Maximum retail
price (MRP) may also be printed or stamped on the cover page. Normally printed of
cover page is outsourced from printing presses.

Binding- In case of exercise books and registers, which are required to be bound by
ordinary paper or hard paper cover, the printed covers are directly stitched or stapled
with the pages. In case of thick covers or hard board covers, the stapled sets of pages
are placed between the properly sized with a strip of cloth with the help of suitable
adhesives. The outside of board is pasted with the pointed paper cover and inside is
pasted with the top page of the inside cut paper sets. In case of spiral binding the spiral
are placed into cut perforations with the help of spiral binding machine.

Finishing- After binding the exercise books or registers are finally trimmed and finished.
The finished products are then packed for dispatch to market destinations.









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5.5 Process Flow Chart


Process flow chart for the production of bound paper stationary and cut paper
stationary is as under:









Paper Rolls
Ruling & Cutting of Paper Cut Paper Stationary
Creasing and folding
Stapling /wire stitching/thread
sewing /perforating
Binding


Printing
of Cover
Side Trimming and finishing
Packaging of Finish Products
Cutting of paper
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5.6 Technical know-how

The manufacturing process for exercise books and cut paper stationery is
relatively simple and the technical know-how is available from machine suppliers. The
machine suppliers also provide training at their premises or at the factory side to the
workers in operation of various machines.


5.7 Requirement of Power, Fuel and utilities

It is estimated that 50 HP power connections would be required for the
production unit including the power requirement for production machines and general-
purpose lighting. The cost of the power has been calculated on the basis of Re. 1.45 per
unit.


5.8 Manpower requirement

The production capacity and the financial projections are based on single shift
operation. For operation of the unit, 5 managerial and office staff, 2 marketing
executive, 8 skilled workers and operators and 15 unskilled workers would be required.
In case the unit is required to be operated in more than one shift, additional staff would
be required. In addition to this, there would be a requirement of contract workers during
construction phase of the factory and installation of machinery and equipment. The
organization chart for single shift operation would be as under:

5.9 Organization Chart

Manager
(Overall head of the factory operations)



















Production
Section

Machine
Operators – 6

Packing
Supervisor – 1

Electrician – 1

Unskilled
workers – 15
nos
Administration
and accounts

Accounts and
administration
staff – 2 nos

Marketing
Department

Marketing
Executive – 2
nos
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The project has a good employment potential for skilled and unskilled workers,
which would be employed in the production unit. Beside the project would generate
employment potential in marketing & sales of its produce, transport of raw materials and
finished products. The project would thus create opportunity both for direct & indirect
employment.


5.10 Plant Layout




















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CHAPTER 6 –PLANT LOCATION & INFRASTRUCTURE

6.1 Potential locations

It is desirable that the exercise books be manufactured at a location near to main
education centres. As mentioned earlier, the size of enrollment till higher secondary was
maximum in Thimphu followed by Chhuka, Trashigang, Samdrup, Paro and Samatse.
Evidently, Thimphu followed by Chhuka, Trashigang, Samdrup, Paro and Samatse
constitute the major centres for market sales of school supplies including exercise books
as they account for maximum numbers of students. It would, therefore be quite logical
to locate the unit at one of these main educational centres.












= Education Centres
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6.2 Selection of suitable locations

In order to select the suitable location for the manufacturing plant, various
parameters viz availability of land, environmental conditions, investments considerations,
operational logistics, future development possibilities, socio-economic factors including
availability of services like transport and communication facilities etc. have been taken
into consideration for ranking the locations. The table below shows the ranking of
locations:


Ranking of possible locations based on various parameters
Weightage of location related parameters
S.
No.
Locations Land
Access
condition
Environmental
Conditions
Socio
economic
factors
Investment
Consideration
Operational
Logistics
Future
development
possibilities
Total
1 Thimphu 7 7 7 8 7 7 43
2 Paro 7 7 7 7 6 6 40
3 Trashigang 7 7 6 5 6 5 36
4 Samdrup 7 7 6 5 5 5 35
5 Samatse 7 7 6 5 5 5 35
6 Chukka 7 7 6 5 5 5 35


It is therefore proposed that the unit be located either at Bjemina Industrial Estate
near Thimphu or Paro. The requisite infrastructure viz land, power, road transport and
communication facilities required for the proposed unit are available in and around
Thimphu specially in Bjemina Industrial Estate. The project has been conceptualized in
totality and all the manufacturing operations are proposed to be carried out in the unit
itself. The project has an inbuilt provision for spare parts, components and tools and the
cost for the same has been incorporated. There may be some requirement of minor
mechanical or electric repairs which could be taken care of by the skilled workers of the
unit. Alternatively, the assistance could be taken of from the existing mechanical and
electrical repair workshops.

Keeping in view the fact, that on the considerations of price competitiveness, one
relatively large production turnover unit is being recommended and Thimphu with its
developed trading network and concentration of printing units would the most suitable
location for exercise books unit. Further, a large part of exercise books is procured by
the government for distribution to schools in rural areas and therefore, it would be better
if the unit is setup near Thimphu.









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37
CHAPTER 7 – ENVIRONMENTAL IMPACT


7.1 Environmental aspect of manufacturing process

The manufacturing process for production of exercise books is basically a paper
conversion process, and the main operation is cutting of paper and binding. No
chemical process is involved in the manufacturing of exercise books. For ruling on
paper, water-soluble inks are proposed to be used and there are no liquid or gaseous
emissions. For binding also organic type glues or adhesive are used which do not cause
any pollution.

As stated above, in the manufacture of exercise books, there are no liquid or
gaseous effluents and the manufacturing process in totally environment friendly. The
waste paper scrap generated during side cutting trimming operations also does not have
any pollution angle. The waste paper is recycled either for making paper in the mill or
for making hand made paper.

7.2 Waste generated and mitigation measures

As stated above, the manufacturing process for exercise books is environment
friendly and no toxic & hazardous waste would be generated. However, some waste in
the form of paper trimming and cutting would be generated during manufacturing
process. Besides, there would be some waste of metal scrap, wooden scrap, broken
bricks, stone aggregates, etc during construction phase of the project. The waste
generated during construction phase is mainly used for earth filling & flooring. The
details of the waste generated during construction phase and project operation phase
along with mitigation measures are given below in subsequent paras.

7.2.1 Waste generated during construction phase

The details of the waste generated during construction phase and the mitigation
measures are as under: -

S. No. Type of waste / scrap Quantity Mitigation measures Impact on
Environment
1. Metal scrap Around 2-3 %
of the steel
used in
construction
Sold to trade
channels for
reprocessing.
No adverse
impact
2. Wooden scrap Around 5-7% of
the wood used
in construction.
Used as fuel. No adverse
impact
3. Clay stones, mounds Depending
upon on the
topography of
the construction
site.
Used for earth filling. No adverse
impact.
4. Brick stone cement
aggregate
5% of the
quantity used
Used for flooring
and earth filling.
No adverse
impact
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7.2.2 Waste generated during project operation phase

The details of the waste generated and the mitigation measures are as under:

S. No. Type of waste Quantity Mitigation
measures
Impact on
environment
1. Liquid effluents Nil Not applicable No adverse
impact
2. Gaseous effluents Nil Not applicable No adverse
impact
3. Solid effluents / waste Paper cuttings
and trimmings,
3-5% of the
consumption of
paper.
Recycling for the
production of
hand made
paper
No adverse
impact

The waste paper scrap could be easily used for making hand made paper, which
has a good market potential. There is already one hand made paper unit in Bjemina
Industrial Estate. The waste paper scrap obtained during manufacturer of exercise
books and cut paper stationary could be sold to existing hand made paper unit. As
such, there is practically no adverse impact of the project on the environment.
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CHAPTER 8 – IMPLEMENTATION SCHEDULE

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 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44
Arrangement of Funds through Bank/ Own
Procurement of Land
Procurement of Tech. know how/ transfer
of technology
Finalization of Building Contracts
Placement of Orders for Building Material
Placement of Orders for Machinery
Construction of Manufacturing premises
Delivery of Machinery
Erection, Commissioning of Plant &
Machinery & Utilities
Procurement of Raw Material and Trial
Runs
Training for workers
Commercial Production
Manufacture of Exercise Books
Week
Activity
Implementation Schedule
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CHAPTER 9 - COST PRESENTATION


9.1 Capital costs

9.1.1 Cost of land and building

A). Plot and built up area:
- Total land requirement - 1000 sq. mt.
- Constructed area for godowns and offices - 250 sq. mt.
- Industrial shed for installations of machines - 500 sq. mt.

B). Cost of construction:
- Office and godown (250 X 6000) - Rs. 15 lacs
- Industrial sheds (500 X 3500) - Rs. 17.5 lacs

C). Land on lease @ Rs. 10/- per sq. mt / annum

Cost of Land and Building
Office and godown
Industrial sheds



9.1.2 Cost of Machinery & Equipments

Automatic High Speed Reel to Sheet
Ruling Machine (M1)
1 Nos. Rs. 13,65,000/-
Micro Perforating Machine (M2) 1 Nos. Rs. 77,000/-
Microcut Paper cutting machine (M3) 1 Nos. Rs. 8,25,000/-
E.M.C. Fully Automatic High Speed paper
Cutting machine (M4)
1 Nos. Rs. 3,55,000/-
Semi Automatic Type Paper cutting
Machine (M5)
1 Nos. Rs. 1,75,000/-
Automatic Note Book Folding Machine 1 Nos. Rs. 6,55,000/-
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(M6)
Paper Folding Machine (M7) 1 Nos. Rs. 5,12,000/-
“Perfect” Binding Machine (M8) 1 Nos. Rs. 6,22,000/-
Power Driven Automatic Wire Stitching
Machine (M9)
1 Nos. Rs. 59,500/-
ROBERTSON Make Thread Book
Sewing Machine (M10)
1 Nos. Rs. 2,77,500/-
Twin Book Press (M11) 1 Nos. Rs. 2,96,000/-
Book Press (M12) 1 Nos. Rs. 13,750/-
Spiral Binding Machine (M13) 1 Nos. Rs. 75,000/-
Total Rs. 53,07,750/-

9.1.3 Miscellaneous Fixed Assets - Rs. 3 lacs

9.1.4 Pre-operative expenses - Rs. 5 lacs


9.2 OPERATING COSTS:

9.2.1 Cost of Raw Materials

A). For exercise books (4 lac nos each)
Exercise books with 32 pages - 28 mt. tonnes
Exercise books with 48 pages - 42 mt. tonnes
Exercise books with 64 pages - 56 mt. tonnes
Exercise books with 80 pages - 70 mt. tonnes
Exercise books with 96 pages - 84 mt. tonnes
Exercise books with 112 pages - 98 mt. tonnes
Exercise books with 128 pages - 112 mt. tonnes

B). For practical exercise books & registers (50,000 each)

With 96 pages - 21 mt. tonnes
With 128 pages - 28 mt. tonnes
With 144 pages - 31.5 mt. tonnes
With 160 pages - 35 mt. tonnes

C). Cut paper reams (30,000 reams)
30,000 reams of 500 sheets each - 65.4 mt. tonnes
Paper @ Rs. 60,000 per mt. tonne

D). Card board sheets, - 10% of cost of paper
White card sheets for covers
And cover printing

E). Ink and packaging material - 0.5% of cost of paper

Total cost of raw materials - Rs. 3,67,23,875/-
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9.2.2 Salary and wages

Manager - 1 no - Rs. 25,000/-
Office Staff & Marketing Executive - 4 nos - Rs. 48,000/-
Skilled workers & operators - 8 nos - Rs. 80,000/-
Unskilled workers - 15 nos - Rs. 1,05,000/-
Sub-total - Rs. 2,58,000/-

Total annual salary & wages - Rs. 30,96,000/-
Salary and Wages
Manager
Office staff & Marketing
executive
Skilled workers & operators
Unskilled workers


9.2.3 Cost of Power and Fuel

Power requirement for production machines - 39 KWH
Power requirement for general purpose with lighting
Of stores, offices and production unit - 7 KWH

Total - 46 KWH

Cost of Power per annum - Rs. 1,30,500/-


Cost of Power and Fuel
Power for production machines
Power for office and general
lighting

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9.2.4 Annual Turnover

A). Exercise books
Exercise books with 32 pages - 4 lac nos - Rs. 23,05,030/-
Exercise books with 48 pages - 4 lac nos - Rs. 34,34,340/-
Exercise books with 64 pages - 4 lac nos - Rs. 45,48,180/-
Exercise books with 80 pages - 4 lac nos - Rs. 56,46,550/-
Exercise books with 96 pages - 4 lac nos - Rs. 67,29,450/-
Exercise books with 112 pages - 4 lac nos - Rs. 78,51,025/-
Exercise books with 128 pages - 4 lac nos - Rs. 89,10,720/-

Sub-total - 28 lac nos - Rs. 3,94,25,295/-

B). Practical exercise books & registers

With 96 pages - 0.5 lac nos - Rs. 16,59,158/-
With 128 pages - 0.5 lac nos - Rs. 21,96,740/-
With 144 pages - 0.5 lac nos - Rs. 24,53,929/-
With 160 pages - 0.5 lac nos - Rs. 27,07,250/-

Sub-total - 2 lac nos - Rs. 90,17,076/-

C). Cut paper reams

Reams of 500 sheets each - 30,000 nos - Rs. 45,78,000/-

Total sales turnover - Rs. 5,30,20,371/-


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CHAPTER 10 – FINANCIAL ANALYSIS

10.1 Project Assumptions
Assumptions at a Glance
S. No Particulars Rate/Amount
1 Total Project Cost 160.38
2 Debt 70%
3 Equity 30%
4 Rate of Interest 12%
5 Depreciation (Building) SLM 10 yrs
6 Depreciation (Machinery) SLM 20 yrs
7 Tax 30%
8 Construction Cost (Building) per sq. m. 6000
9 Construction Cost (Shed) per sq. m. 3500
10 Repayment period of Debt 8 yrs
11 Moratorium period 1 yr.
12 Installed Capacity (kg) 628.53
13 Capacity Utilization 75%
14 Working Capital Cycle 1 month


10.2 Total Project Cost
Total Project cost
1 Machinery 69.53
2 Construction Cost 32.50
3 Miscellaneous Fixed Assets 3.00
4 Pre operating Expenses 5.00
5 Training Expense 0.70
6 Interest 13.29
7 Working Capital 36.36
Total 160.38

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Break up (Cost of Project)
Machinery
Construction Cost
Misc. Fixed Assets
Pre-operative Exp
Training Expenses
Interest
Working Capital



10.3 Means of Finance
Means of Finance

Debt 112.26 70%
Equity 48.11 30%
Total 160.38 100%
Means of Finance
Debt
Equity
















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10.4 Investment on Machinery and Equipments
MACHINERY
M1 1365000
M2 77000
M3 825000
M4 355000
M5 175000
M6 655000
M7 512000
M8 622000
M9 59500
M10 277500
M11 296000
M12 13750
M13 75000
Total 5307750
Add
Packaging, Forwarding, Transport and Insurance
@ 11% 583852.5
Add Installation, Erection and Commissioning @ 5% 265387.5
Add Duty and Taxes @ 10% 530775
Add Spare Parts @ 5% 265387.5
TOTAL 6953152.5

Investment on Machinery & Equipments
Cost of machines
Packaging to Insurance
Installation & Commissioning
Duty and Taxes
Spare parts

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10.5 Cost of Construction

Constructed Area (250 Sq. mtr @ 6000per Sq. mtr.) 1500000

Shed (500 Sq. mtr. @ 3500 per Sq mtr.) 1750000

Total 3250000


Cost of Construction
Constructed Area
Shed



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10.6 Cost of Raw Materials
Product Category Paper used
Board @
10% of
Paper
Consumables
@ 0.5% of
paper
Total
Material
Used
Cost per
gram
Total
Cost per
unit
No. of
copies Total cost
Weight
(in t)
Exercise Book (EB)
a) 32 pages EB 70 7 0.35 77.35 0.05 3.87 400000 1547000 28
b) 48 pages EB 105 10.5 0.53 116.03 0.05 5.80 400000 2320500 42
c) 64 pages EB 140 14 0.70 154.70 0.05 7.74 400000 3094000 56
d) 80 pages EB 175 17.5 0.88 193.38 0.05 9.67 400000 3867500 70
e) 96 pages EB 210 21 1.05 232.05 0.05 11.60 400000 4641000 84
f) 112 pages EB 245 24.5 1.23 270.73 0.05 13.54 400000 5414500 98
g) 128 pages EB 280 28 1.40 309.40 0.05 15.47 400000 6188000 112
Total 2800000 27072500 490
Practical Note book & Register (PNB)
a) 96 pages PNB 420.00 42.00 2.10 464.10 0.05 23.21 50000.00 1160250.00 21
b) 128 pages PNB 560.00 56.00 2.80 618.80 0.05 30.94 50000.00 1547000.00 28
c) 144 pages PNB 630.00 63.00 3.15 696.15 0.05 34.81 50000.00 1740375.00 31.5
d) 160 pages PNB 700.00 70.00 3.50 773.50 0.05 38.68 50000.00 1933750.00 35
Total 200000.00 6381375.00
Rim 2180 0.05 109 30000 3270000 65.4
TOTAL RAW MATERIAL COST 3030000.00 36723875.00 555.40
Raw Material Cost (Per Unit)
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10.7 Expenses incurred
Expenses (in Rs.)
Salary and Wages
Type of Employees
No. of
Employees
Per
month
Per
Annum Total
Manager 1 25000 300000 300000
Office Staff 4 12000 144000 576000
Skilled Workers 8 10000 120000 960000
Unskilled Workers 15 7000 84000 1260000
3096000
Total 3560400

Training & Development Cost ( 1% of
Machinery) 69531.525

Power (50HP@0.75/hour, 8hrs/day,
25days/mth) Rate=1.45/unit 130500

Water and Diesel RS. 5000 pm 60000

Selling Expenses (Publicity & Marketing
Expense) 5% of Sales 2651018.6

Total 6471450.1



Expenses incurred
Manager
Office staff
Skilled workers
Unskilled workers
Training & Dev. Cost
Power
Water and Diesel
Selling Expenses




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10.8 Break up of cost of Production


Particulars

Rs. In Lacs
Raw Material & Consumables 320.83
Utilities & Fuel 1.91
Wages & Salaries 35.60
Indirect Expenses 49.97


Break up of Cost of Production
Raw Material & Consumables
Utilities & Fueles
Wages & Salaries
Indirect Expenses

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10.9 Annual Turnover

Exercise Book (EB)

Revenue
Per Unit Selling
Price (Rs.)
a) 32 pages EB 2305030 5.76
b) 48 pages EB 3434340 8.59
c) 64 pages EB 4548180 11.37
d) 80 pages EB 5646550 14.12
e) 96 pages EB 6729450 16.82
f) 112 pages EB 7851025 19.63
g) 128 pages EB 8910720 22.28
Sub-total 39425295

Practical Note book & Register
(PNB)

a) 96 pages PNB 1659158 33.18
b) 128 pages PNB 2196740 43.93
c) 144 pages PNB 2453929 49.08
d) 160 pages PNB 2707250 54.15

Sub-total 9017076

Rim 4578000 152.6

TOTAL 53020371


Annual Turnover
Exercise Books
Note books & register
RIM
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10.10 Income Statement
Operating years 1 2 3 4 5 6 7 8 9 10
Capacity
Installed Capacity (tonnes) 894.53 894.53 894.53 894.53 894.53 894.53 894.53 894.53 894.53 894.53
Capacity Utilisation 75% 75% 75% 75% 75% 75% 75% 75% 75% 75%
PRODUCTION 670.9 670.9 670.9 670.9 670.9 670.9 670.9 670.9 670.9 670.9
Sales Revenue 530.20 530.20 530.20 530.20 530.20 530.20 530.20 530.20 530.20 530.20
Raw Material & Consumables 367.24 367.24 367.24 367.24 367.24 367.24 367.24 367.24 367.24 367.24
Utilities & Fueles
Power 1.31 1.31 1.31 1.31 1.31 1.31 1.31 1.31 1.31 1.31
Water, Diesel, etc 0.60 0.60 0.60 0.60 0.60 0.60 0.60 0.60 0.60 0.60
Sub Total 1.91 1.91 1.91 1.91 1.91 1.91 1.91 1.91 1.91 1.91
Wages & Salaries 35.60 35.60 35.60 35.60 35.60 35.60 35.60 35.60 35.60 35.60
Factory Overheads 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00
General Overheads 2.00 2.00 2.00 2.00 2.00 2.00 2.00 2.00 2.00 2.00
Lease
Land 0.10 0.10 0.10 0.10 0.10 0.10 0.10 0.10 0.10 0.10
Estimated Cost of Production 409.85 409.85 409.85 409.85 409.85 409.85 409.85 409.85 409.85 409.85
Selling Expenses 26.51 26.51 26.51 26.51 26.51 26.51 26.51 26.51 26.51 26.51
Cost of Sales 436.36 436.36 436.36 436.36 436.36 436.36 436.36 436.36 436.36 436.36
EBITDA 93.85 93.85 93.85 93.85 93.85 93.85 93.85 93.85 93.85 93.85
Interest 13.47 11.79 10.10 8.42 6.74 5.05 3.37 1.68 0.00 0.00
Depreciation 8.58 8.58 8.58 8.58 8.58 8.58 8.58 8.58 8.58 8.58
PBT 71.80 73.48 75.16 76.85 78.53 80.22 81.90 83.58 85.27 85.27
Taxation 21.54 22.04 22.55 23.05 23.56 24.06 24.57 25.08 25.58 25.58
PAT 50.26 51.44 52.61 53.79 54.97 56.15 57.33 58.51 59.69 59.69
Income Statement

It would be seen from table above that the PBT in the 1
st
year of operation in Rs. 71.80 lacs which works out to be 14% of the total sales. In the
10
th
year, the %age of PBT would be 16%. Similarly PAT in the 1
st
year is Rs. 50.26 lacs accounting for 9% of total turnover. PAT in 10
th
would rise
to 11%. These figures could vary depending upon change in tax structure.
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10.11 Repayment and Interest Schedule for Loans
Repayment and Interest Schedule for Loans


Operating Years 1 2 3 4 5 6 7 8 9 10
Rate of Interest 12%
Loan
(Outstanding) 112.26 98.23 84.20 70.17 56.13 42.10 28.07 14.03 0.00 0.00
Interest 13.47169 11.78773 10.10377 8.419804 6.735843 5.051883 3.367922 1.683961 0.00 0.00
Moratorium
Repayment 14.03301 14.03301 14.03301 14.03301 14.03301 14.03301 14.03301 14.03301 0.00 0.00
Closing Balance 98.23 84.20 70.17 56.13 42.10 28.07 14.03 0.00 0.00 0.00


10.12 Depreciation
Depreciation

Operating Years 1 2 3 4 5 6 7 8 9 10

Machinery @ 10% 6.95 6.95 6.95 6.95 6.95 6.95 6.95 6.95 6.95 6.95
Construction Cost @
5% 1.63 1.63 1.63 1.63 1.63 1.63 1.63 1.63 1.63 1.63

Total 8.58 8.58 8.58 8.58 8.58 8.58 8.58 8.58 8.58 8.58





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10.13 Projected Funds Flow Statement
Construction Period
1 1 2 3 4 5 6 7 8 9 10
SOURCES OF FUNDS
Equity 46.87
Debt 109.36
PBDIT 76.69 76.69 76.69 76.69 76.69 76.69 76.69 76.69 76.69 76.69
Total Sources A 156.23 76.69 76.69 76.69 76.69 76.69 76.69 76.69 76.69 76.69 76.69
APPLICATION OF FUNDS
Fixed Assets Purchase 121.01
Miscellaneous Fixed Assets 3.00
Increase in Current Assets 32.22
Repayment of Loan Payment 13.67 13.67 13.67 13.67 13.67 13.67 13.67 13.67 0.00 0.00
Payment of Interest on Term Loan 13.12 11.48 9.84 8.20 6.56 4.92 3.28 1.64 0.00 0.00
Taxation 16.50 16.99 17.48 17.97 18.47 18.96 19.45 19.94 20.43 20.43
Total Application B 156.23 43.29 42.14 40.99 39.85 38.70 37.55 36.40 35.25 20.43 20.43
SURPLUS/(DEFICIT) A-B 0.00 33.40 34.55 35.70 36.85 38.00 39.14 40.29 41.44 56.26 56.26
OPENING CASH & BANK BALANCES 0.00 33.40 67.95 103.65 140.50 178.49 217.64 257.93 299.37 355.63
CLOSING CASH & BANK BALANCES 0.00 33.40 67.95 103.65 140.50 178.49 217.64 257.93 299.37 355.63 411.89
Years
Projected Funds Flow Statement
Operation period








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10.14 Projected Balance Sheet
Sn Description
Construction
Period Operati0on Period
1 1 2 3 4 5 6 7 8 9 10
1.1 Equity 48.11 48.11 48.11 48.11 48.11 48.11 48.11 48.11 48.11 48.11 48.11
1.2 General Reserves 50.26 101.69 154.31 208.10 263.07 319.22 376.55 435.06 494.75 554.44
1.3 Debt 112.26 98.23 84.20 70.17 56.13 42.10 28.07 14.03 0.00 0.00 0.00
Total Liabilities 160.38 196.60 234.00 272.59 312.35 353.29 395.40 438.70 483.18 542.86 602.55
2 Assets
2.1 Gross Fixed Assets 124.01 124.01 124.01 124.01 124.01 124.01 124.01 124.01 124.01 124.01 124.01
2.2 Accumulated Depreciation 8.58 17.16 25.73 34.31 42.89 51.47 60.05 68.63 77.20 85.78
2.3 Net Fixed Assets 124.01 115.44 106.86 98.28 89.70 81.12 72.55 63.97 55.39 46.81 38.23
2.4 Working Capital Assets 36.36 36.36 36.36 36.36 36.36 36.36 36.36 36.36 36.36 36.36 36.36
2.5 Cash & Bank Balances 0 44.80 90.78 137.94 186.28 235.80 286.50 338.37 391.42 459.69 527.96
Total Assets 160.38 196.60 234.00 272.59 312.35 353.29 395.40 438.70 483.18 542.86 602.55
Projected Balance Sheet

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10.15 Discounted Cash Flow Statement
Discounted Cash flow statement (Total Investment)
Construction Period
Years t=0 t=1 1 2 3 4 5 6 7 8 9 10
Inflows
Net Cash Accruals After Interest
& Tax 58.84 60.01 61.19 62.37 63.55 64.73 65.91 67.09 68.27 68.27
Less: Change in Working Capital 0 0 0 0 0 0 0 0 0 0
Add back financial Expenses 13.47 11.79 10.10 8.42 6.74 5.05 3.37 1.68 0.00 0.00
Terminal value 300
Total inflow 72.31 71.80 71.30 70.79 70.29 69.78 69.28 68.77 68.27 368.27
Outflows
Investment 124.01 36.36
Bridge Loan 0 0
Total outflow 124.01 36.36
Net Cashflow -124.01 -36.36 72.31 71.80 71.30 70.79 70.29 69.78 69.28 68.77 68.27 368.27
IRR on Investment (%) 36%
NPV (12% Discount Rate) Rs. 254.95
Pay Back Period 2 Years 6 month
Discounted Cashflow Statement (Equity)
Years t=o t=1 1 2 3 4 5 6 7 8 9 10
Inflows
Net Cash Accruals After Interest
& Tax 58.84 60.01 61.19 62.37 63.55 64.73 65.91 67.09 68.27 68.27
Less: Change in Working Capital 0 0 0 0 0 0 0 0 0 0
Less: Loan Repayment 14.03 14.03 14.03 14.03 14.03 14.03 14.03 14.03 0.00 0.00
Terminal Value 210
Total Inflow 44.80 45.98 47.16 48.34 49.52 50.70 51.87 53.05 68.27 278.27
Outflows
Equity 37.20 10.91
Total Outflow 37.20 10.91
Net Cash Flow -37.20 -10.91 44.80 45.98 47.16 48.34 49.52 50.70 51.87 53.05 68.27 278.27
IRR on Equity 65%
Operation Period

The IRR on investment is 36% which is quite a positive indication about the financial health of the project because the cost of borrowing is 12%.
Similarly IRR on Equity is 65% which again is a positive indicator. The NPV @ of 12% on investment is Rs. 254.95 lacs which is quite good for any
investment.
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10.16 Break Even and Sensitivity Analysis

Break Even Point And Senstivity Analysis
Normal Case1 Case2 Case3 Case4
Variable Cost (Rs. Lacs)
Raw material & Consumable Stores 367.24 403.96 367.24 367.24 403.96
Utilities 1.91 2.10 1.91 1.91 2.10
Total Variable Cost 369.14 406.06 369.14 369.14 406.06
Average Variable Cost (Rs. per kg uses of
paper) 66.46 73.11 66.46 66.46 73.11
Fixed Cost (Rs. Lacs)
Wages & Salaries 35.60 35.60 39.16 35.60 37.38
Repairs & Maintenance 3.00 3.00 3.30 3.00 3.15
General Overheads 2.00 2.00 2.20 2.00 2.10
Lease charges 0.10 0.10 0.11 0.10 0.11
Financial Expenses 13.47 13.47 14.82 14.82 15.56
Depreciation 8.58 8.58 9.44 9.44 9.91
Total Fixed Cost (Rs. Lacs) 62.75 62.75 69.03 64.96 68.21
Average Fixed Cost (Rs. per kg uses of paper) 11.30 11.30 12.43 11.70 12.28
Average Selling Price 95.46 95.46 95.46 95.46 90.69
Project Break Even Point (t) 216.40 280.75 238.04 224.00 387.99
Project Break Even 39% 51% 43% 40% 70%
Cash Break Even Point 186.82 242.37 205.50 191.47 331.63
Cash Break Even 34% 44% 37% 34% 60%
Case 1 - 10% Increase in Variable Cost
Case 2 - 10% Increase in fixed Cost
Case 3 - 10% Increase in Project Cost
Case 4 - 10% Increase in Variable Cost and Fixed Cost
5% Increase in Fixed Cost
5% Dcrease in Selling Price


The project break even in normal case is 34% i.e. after achieving 34% of the Projected Turn Over the unit would be in be in the profit zone.
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10.17 Ratio Analysis

Ratio Analysis
1 Return on Assets 25%
2 Return on Equity 82%
3 Debt-Equity Ratio 43%
4 Interest coverage Ratio 6



10.18 Foreign exchange implications

The foreign exchange requirement for the project would be only for the import of
machines, equipments and accessories for a value of Rs. 60 lacs, during the setting up
of the project. Approximately, Rs. 5 lacs worth of foreign exchange would be required
for incidental expenses such as training, travel, etc. Additionally, there would be a
requirement of Rs. 367 lacs per annum for the import of raw materials. Thus, the foreign
exchange expenditures during first five years would be Rs. 1900 lacs. The foreign
exchange saving in terms of import substitution would be around Rs. 2650 lacs during
the first five years of operation of the project.






















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59
CHAPTER 11 – ECONOMIC ANALYSIS


11.1 Economic Rate of Return (ERR)

Economic Rate of Return is the interest rate at which the cost and benefits of a
project, discounted over its life, and equal. ERR differs from Financial Rate of Return in
that it takes into account the effects of factors such as Price Controls, Subsidies and Tax
breaks from local government, to compute the actual cost of the project to the economy.

The economic rate of return also includes indirect benefits to the economy that
are likely to be ploughed back to the investors, people, government and other
government or non-government agencies, over a longer period of time.


11.2 Relevance of ERR to the project

This concept of ERR is more relevant for big projects involving large capital
deployment. For small projects, like the project under consideration, there may not be
significant difference between Financial Rate of Return and Economic Rate of Return,
as, while formulating the project, factors like Price Controls, Subsidies and Tax breaks
from local government and also socio-economic benefits have not been taken into
account.


11.3 Socio-economic impact of the project

As state above, the concept of ERR is not quite relevant for this project and the
impact of the proposed unit would not be quite significant on the overall economic
scenario of Bhutan. However, over a long time horizon and setting up of a number of
similar units would result into following socio-economic benefits for the country.

 Indigenous production of exercise books and cut paper stationery would
lead to self-reliance for these items in the field of school supplies. This
would also insulate the school supplies from vagaries of external
economies.
 Local production of exercise books and cut paper stationery would lead to
import substitution which would result in saving of foreign exchange.
Setting up of more units to meet the requirement of school supplies would
have a multiplier effect on foreign exchange saving.
 There are possibilities of export of the exercise books and stationery to
eastern and north-eastern parts of India and other neighboring markets.
This would lead to earning to foreign exchange for the country.
 There are not many medium and small-scale units manufacturing units in
Bhutan. Setting up of this unit would have a catalytic effect on growth of
entrepreneurship in medium and small-scale sector.
 The setting up of the project would lead to generation of direct and
indirect employment, both for skilled and unskilled workers which would
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60
result into economic upliftment of local population. This would also lead
to upgradation of skills.
 There are employment opportunities in the project for persons with
managerial, technical, financial and marketing capabilities. The
employment of such people in the local industry would provide them an
option to have an employment in private sector in Bhutan and also reduce
the migration of qualified manpower.
 There would be revenue generation for the local government by way of
excise, sales tax/VAT and income tax from the unit as well as from its
promoters.
 Finally, the project would lead to enhancement of economic activities in
the field of construction, transport of raw materials and finished goods,
marketing and trade, repairs and maintenance, etc.

It is important here to mention that above benefits can only be listed but these
cannot be quantified based on a single unit with small investment. However, as
mentioned above, if a number of such units in school supplies sector or any other sector
of economy are setup, these would have a significant impact on overall economy of
Bhutan.






























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61

















Annexure


















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62
Annexure I

List of Machinery Suppliers

1. M/s Acme Machinery Company
Unit No 1, Vaibhav Ind. Est., Near Telecom Factory,
Sion-Trombay Road, Deonar, Mumbai – 400088
Tel: 91-22-25518978

2. M/s Friends Engineering Works
8-9/A, Industrial Estate
Pratap Nagar, Udaipur 313001(India).
Phone: +91-294-2492200,
Fax: +91-294-2492201

3. M/s Senior Machinery Company
116, Focal Point, Mehta Road,
Amritsar-143001 (India)
Tel. : +91-20-24491889

4. M/s Akar Ltd.
223, Laxmi Plaza, New Link Road, Andheri (west),
Mumbai -400053
Maharashtra India
Tel: 91-022-26374053

















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Annexure II
List of Raw Materials Suppliers

1. Shree Gajanan Papers & Boards Pvt. Ltd.,
Plot No. 781/1, 40 Shed Area, GIDC,
Vapi, Valsad - 396195, India, Gujarat
Tel: 91-260-2400571

2. M/s Hi-tech Papers
Opp. jayant K G Main Road
Rajkot, Gujarat
Telephone Nos. 91-281-2449061

3. M/s Rama Pulp and Papers Limited
1, Chateau Windsor, 86 Veer Nariman Road,
Mumbai - 400 020
Maharashtra - 400020

4. M/s Vandana International
6 - Mangalmurti Apartments,
Opp. NKGSB Bank Ltd., Navghar Road,
Bhayandar (E), Thane,
Phone(s): 91-22-28168793

5. M/s Paper Roll Supplying Co.
204, Malwa, Patanwala Compound,
LBS Marg, Ghatkopar (W), Mumbai, Maharashtra
Phone(s): 91-022-25003500

6. M/s Joyti (spj) Overseas
L-382-c, Mahipalpur,
New Delhi, Delhi

7. M/s Anjani International P Ltd.
3, Jaora Compound, M-1 Urvashi Complex,
Indore

8. M/s Pravin & Co.
Shop no. 29-30-31, alibhai haiderbhai cmpd,
Bail bazaar, behind SBI, Kurla (w),
Mumbai, Maharashtra

9. M/S Nirmal Printers &Stationers
Oswal Complex, M.G. Road,
Fancy Bazar, Guwahati, Assam



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64
Annexure III

List of lab testing equipment suppliers

1. M/s Imperial Lab Equipment
Address: 109, Vardhman Plaza Tower, H-3, Netaji Subhash Place
District Center, PitamPura, New Delhi, Delhi
Phone(s): 91-11-65154406 / 42470203
Fax(s): 91-11-27352924


2. M/s Scientific Engineering Corp
Address: 3280, Arya Pura Old Subzi Mandi, Delhi – 110007
Phone(s): 91-011-23829918 / 23823794
Mobile: 9811569035
Fax(s): 91-011-23829918 / 23823794


3. M/s Toshniwal Brother Pvt. Ltd.
388 Udyog Vihar Phase 3
Gurgaon – 122006
Haryana
Ph +91-124-4003629 / 4003985
Fax no +91-124-4003986
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