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Executive Summary

Plastic is the basic need of our day to day life. During recent years the
plastic industry has grown with a substantial growth rate. This growth is driven
by 3 sectors viz. packaging, infrastructure and agriculture. PET bottles
have become highly popular packaging for many kinds of liquid
products such as soft drinks, drinking water, cooking oil because
o f i t s s t r e n g t h , l i g h t w e i g h t , a n d s a t i s f a c t o r y resistance to acids
and almost all organic solvents.

We, the Care plastics provide a wide range of plastic bottles solutions for
household and raw material for packaging of various companies. Care Plastics
Company is planning to start its way with a view to manufacture plastic bottles in
Nepal. Our main focus is our industrial customer whom we will sell PET bottles and PET flakes.
It will contribute more than 90% of our sales. We will also support on
the household plastic business which is the part of our portfolio. The
pre operating cost will be Rs 131000.

Since plastic material does not carry any brand name so it will give us an additional benefit in long
term to establish our brand name. To exploit the market we
willu s e p e n e t r a t i o n p r i c i n g a s o u r m a r k e t i n g s t r a t e g y a n d u t i l
i z e o u r s t r i n g e n t distribution network and strong industrial relationship.
1.0 Company Description
1.1 Company Description

The company will provide a wide range of plastic bottles for both producers and consumers. The products
for consumers can be suitable for household water refilling purposes and portable water carriage
purposes. However, our potential customers are business producers who will be producing soft drinks and
juice. The market will be favorable for us as the prices have been set at a reasonable level. The company
after a stable start off will apply a sustainable green approach and use recycled materials.

The company has its production set up in Dhulikhel where a positive advantage will exist as the sector
has sufficient manpower and resources and it has a direct link with transportation and communication.
The administrative decisions will be centralized from the capital of the country, Kathmandu. The office
will be set up in Bagbazar. This location is best favorable with the potential market and will benefit at its

best.
1.2 Mission Statement

Care Plastics Pvt. Ltd. is a manufacturing company dedicated to manufacture


plastic bottles, utilizing environmentally friendly manufacturing methods. We
intend to make enough profit to generate a significant return for our investors and
to finance continued growth and continued development in quality products. We
will also maintain a friendly, fair, and creative work environment, which respects
diversity, new ideas and hard work.

Care Plastics Pvt. Ltd.

Strives to provide the excellent plastic bottle solution


to the customers at competitive prices.
Continually expands our range of products.
Is poised to service both large and small customers
1.3 Products

Product no.: 901


Product Code: AGYR
Product Name: PET Orange

Product Color: Transparent/Brown/Green


Product Description: Bottle for Juice and Medical Use
Product Size: 8 inches
Product Weight: 30 gm

Product no.:902
Product Code: KLRH
Product Name: PET Blue

Product Color: Transparent/Blue/Brown/Red


Product Description: Bottle for Household use
Product Size: 12 inches
Product Weight: 70gm

Product no.: 903


Product Code: GTWY
Product Name: PET Glass

Product Color: 904


Product Description: Bottle for Mineral Water
Product Size: 10 inches
Product Weight: 30 gm
Product no.: 904
Product Code: TSGF
Product Name: PET Cola

Product Color: Transparent/Green


Product Description: Bottle for Cola and Soda
Product Size: 7 inches
Product Weight: 60 gm

1.4 Current Status

Total Assets: Nrs. 1,93,07,974


Total Capital: Nrs. 73,07,974
Total Liabilities: Nrs. 1,20,00,000

Office Address: Bagbazar, Kathmandu, Nepal


Factory Location: Dhulikhel, Kabhre, Nepal
Warehouse Location: Dhulikhel, Kabhre, Nepal

No. of Employees in the Office: 10


No. of workers in the Factory: 19

1.5 Legal Status and Ownership (As on 2013)


Company Name: Care Plastics Pvt. Ltd.

PAN no. 121291235

Established year: 2013

Company Share:
1/3 ownership of Arpana Pradhan
1/3 ownership of Ayush Man Tamrakar
1/3 ownership of JashminaPradhananga

2.0 Industry Analysis


2.1 Industry Size Growth Rate and Sales Projections
The plastic bottle manufacturing industry has had a steady growth rate in the past decade
in Nepal. However, the recent years have brought an increase in various brands and
companies that have created an increased demand for bottle manufacturing in Nepal. The
plastic products manufacturing industry has players who produce not only packaging
bottles, but also plastic utensils, plastic buckets, plastic water tanks, plastic plumbing
products etc. the bottle manufacturing companies have received high demands lately due
to the increase in mineral water production. Demands are also placed by other small to
large food industries such as pickles, mayonnaise, jam, honey, coffee, tea, etc.

2.2 Industry Structure


The following pattern is likely to be general but there will be some variation from country to country.

Raw Material Producers


These are chemical and petroleum companies who produce "virgin" plastic
(sometimes called resin or polymer) in huge quantities. Virgin material is delivered in
powder or pellet form, in plastic or paper sacks of around20 kilos weight, in large
cardboard drums that hold many times that quantity or even by road tanker.

Compounders
These specialist companies, usually small, stock various polymers and provide the
manufacturers of plastic goods with technical advice and the most suitable materials or
mixtures for each individual need.

Stockists
These warehouses stock polymers and compounds but neither manufacture
themselves, nor provide a compounding service. They may be agents o
r subsidiaries of the producer companies or departments of companies concerned with the supply of
other materials such as chemical, rubber or paper. They may be willing to stock reclaim
alongside virgin materials, especially if these are in short supply.

Specialist Manufacturers or Molders


These buy their raw materials from compounders. If they do th
e i r o w n compounding, or if the material is used as produced and does
not needcompounding, they may buy direct from stockists or producer
s . T h e y a r e specialists in plastics and do not perform other types of manufacturing. They may be
an attractive market to the manufacturer because they operate at high volume, but rarely
have as much flexibility to vary product quality as molders who know,
accurately, the final market for the product.

Other Manufacturers
Many companies are not plastics specialists but employ molding operations in the
manufacture of some other product. For example shoe and boot makers use plastics
extensively and may carry out the various plastics molding operations in the same
production sequence as the work in leather, canvas, rubber etc.
Manymanufacturers use plastic packaging machinery at the end of a production
operation.

Fabricators
These firms cut and join sheet, rod or extrusion to manufacture a variety
of products. They have no opportunity to use reclaim. Machinery and Tool Makers one
other sector of the plastics industry justifies mention although not customers for reclaim. The makers
and suppliers of plastics manufacturing machinery, tools, moulds and dies are well informed
about who does what, who makes what and who uses what within the local plastics industry.
They may advise who is likely to buy material

2.4 Key Success Factors

The main keys to the success of the Company are:


Secure Supply- Contract for supply of post-consumer bottles and post-industrial
manufacturing waste for PET raw material feed stock.
Satisfy our customer so that we can retain them
Maintain low overhead and operating costs
Provide better prices than all our competitors

2.5 Long Term Prospective


The development of Care Plastics required to accomplish a series of action and
formalities. Since we are new in the market we kept our production low
initially, as demand will increase the production will be enhanced respectively. Now we
are manufacturing only two types of plastic bottles i.e. PVC and PET, as we grow we will produce a
wide the range of plastic bottles. The development process involves following steps:
Legal formalities
Office/business setup
Future offerings and expansion plan
Development strategy
In future we are looking for the production of a variety of plastic bottles. These plastic
bottles will be
LDPE ( Low density polyethylene)
HDPE ( High density polyethylene)

Our long term strategy will base on timely completion of the establishment of the
business centre with low execution cost. Our strategy will focus not only the current
uninterrupted production of PVC and PET bottles and acquisition of customer as fast as we can, but
we will also look for the future expansion plan and execution strategy. Our future
development strategy will focus on to chart out a careful plan for the future expansion
and growth of our business. The development strategy will address following issue:
How will we expand our services?
Which are the new areas we will include to provide our services?
What will be the format of the business?
Our development strategy will address all those above mentioned point. As we will grow
and our earning will increase, we will produce more of PVC and PET bottles as well
as expand in new area. We have a development strategy to expand our facility size in
order to meet the production size

3.0 Market Analysis


3.1 Market Segmentation
Strong demand for plastic bottles is working in the industry's favor. Major users of
plastic packaging, apparently responding to consumer desires, have begun incorporating
at least some recycled plastic content in their products as part of the growing interest in
recycling. Resin demand is on the rise as prices for the two major recycled resins, PET
and HDPE, continue to hold value or appreciate against their virgin counterparts.

The Company has chosen its target markets because PET is in high demand as flake
resin by converters, as roll stock sheet used to produce high visibility packaging and as
high strength strapping for the lumber industry. Sales are price-sensitive, so that
proximity to markets and feed stock source provide a competitive edge.

3.2 Buyer Behavior

Since we are new player in the market so we need to make some


s t r i n g e n t strategies to penetrate market and grab customers. The customers of
the plastic bottles industry are scattered due to lack well known brand names. So our first
priority will be to accumulate the defused customers.
The direct customers are the customers whom we are selling our prod
u c t r e g u l a r l y. S o f o r u s h o u s e h o l d s w h o m w e a r e s e l l i n g p l a s t i c g o o d s
a n d companies who are getting raw materials for packaging are direct custome
rs ( P E T b o t t l e s ) . S o o n l y i n K a t h m a n d u , in terms of business to business
market around 20small and medium scale companies are our direct customers. Apart from them
there are few small companies which are giving compounding services. They use to
collect various types of plastics flakes along with the virgin plastic and suggest customer
(companies) in choosing appropriate plastic. An Asha enterprise is one compounder whom we
will sell our plastics.

3.3 Total Market Demand

Demand can be defined as the quantity which consumer is willing to purchase at a given
price during a certain time period. In our case, demand will be determined by the
individual demand of the shops selling plastic bottles. The estimation of the demand of
the bottles is shown as follows:
Monthly demand (in Shop Number(in sample)
quantity)
1 2 3 4 5
Bottles 1120 965 1050 1035 930

Total Market Demand = 5100 units per month

Number of Competitors (Manufacturers) = 3

No. of shops selling bottles = 24

Average Market Demand = (5100 / 5) units


= 1020 units per month

Actual Total Market Demand = (1020 * 24) units


= 24480 units per month

3.4 Competitors Analysis


In plastic bottles manufacturing market there is no specific brand name existing so the market is flooded
by small companies which are in this business. So they are our biggest direct competitors. As we are
also not alone as a supplier of PET to the companies as raw materials there are many companies in this
region which are supplying PET. Om Plastic Industries is one of them who is currently selling all
types of plastic bottles. So in case of business to business market they are our direct
competitors.

3.5 Market Share


Market share will help us determine our competitors, total market share of different
competitors and how we plan to make sure that we grab more of the market share in the
future. Our market share will be estimated on the basis of number of competitors. The
industry has only 3 known competitors. Therefore, the market share of our company is:

Market share = (24480 / 4) units


= 6120 units per month

3.6 Sales Forecasting


The next important factor for success is planning. Planning involves the forecasting of
sales; that is, determining the amount of sales in advance. It helps to estimate the amount
of production to be done. Forecasting of the sales depends on the market share of the
product. Uncertain environment becomes a barrier to effective forecasting of sales. Sales
can be forecasted through:

1. Conservative estimation (60% - 70%)


2. Moderate estimation (70% - 80%)
3. Aggressive estimation (80% and above)

The sales forecast for the first five years is as follows:

Year Sales (in qty) Sales (in amt)(Rs.)


2014 55080 1,28,33,640
2015 58752 1,36,89,216
2016 62424 1,45,44,792
2017 66096 1,54,00,368
2018 73440 1,71,11,520

4.0Marketing Plan
4.1Overall Marketing Strategy

The Company has chosen to focus on the production of plastic


b o t t l e s p a c k a g i n g materials from recycled post-consumer beverage bottles. We have
identified a significant available market in the eastern part of Kathmandu. All of our
initial marketing
strategy will be to secure contracts in that segment, and after reachin
g f u l l planned capacity, we look to grow in concert with that segment and related
markets. We see little need at present for further market research and development, and
will focus on continually updating our production technology in an effort to remaining the forefront of
our chosen marketplace.

4.2Product Price Place Promotion

Product/Service Strategy
The packaging companies require high quality
and highly transparent PET bottles. The companies which are producing
mineral water will reject PET bottles with even a small impurity/ opaqueness.
So we the Care Plastics provide high end PET flakes for the perfect packaging. The
company will apply recycling and extrusion technology managed by
decades of industry specific expertise to create a competitive advantage for its
clients. These processes will produce clean, cost-efficient, recycled raw material
for manufacturers of thermoform, laminate and other high value-added products,
and high strength packaging strapping for shippers of large products and pallets,
thereby reducing costs and creating a clear pricing
e d g e a m o n g t h e i r competitors.
Plastic bottles are now in high demand. And this demand is driven by
continuously increasing promotional activities.
Pricing strategy
As plastic products do not carry any brand name so only pricing and distribution
strategies will work to achieve competitive edge. The pricing
strategy we will use is penetration pricing. The price of the plastic bottles we will sell will
be lower than the market price. Also for the PET flakes and bottles the price will be
lower than the competitors. A lower price enables us to get contracts of PET bottles
and sheets from various companies .
Place strategy
Firstly we will target Kathmandu, Bhaktapur and Lalitpur areas. We
will have a distribution center in Kathmandu which continuously
maintains the supply of the bottles. PET bottles will be stored in warehouse
which is close to the facility itself. The sales people will directly contact to the
companies which require these bottles for packaging and look for the contracts. In city
as stated above that we will have a distribution center, from that center we will
distribute to whole sellers.
Promotion strategy
Wewillp r o m o t e t h r o u g h o n l i n e s o c i a l m e d i a a n d w e w i l l a l s o d e
v e l o p o u r w e b s i t e which enables us to widely spread our contact among various
companies. The site will have full details of product which are available for
companies as well as end user.

5.0 Production Plan


5.1 General Approach to Production
Plastic bottles are the preferred containers for most soft drinks as well as for light
household cleaners and other consumer goods. Small manufacturers can make custom
plastic bottles using virgin or recycled Polyethylene Terephthalate (PET) flakes and a
simple, easy-to-obtain manufacturing apparatus. With more and more specialty consumer
products manufacturers launching new products, the need for custom-designed PET
bottles is increasing. Therefore, we are going for small packaging manufacturer to obtain
these bottles. Since the cost of entry is not great and the process is relatively simple, PET
bottle manufacturing represents an exciting small business opportunity.
The steps in the process of manufacturing plastic bottles are given below:

Step 1:
We should obtain PET from a reliable supplier. PET is manufactured by polymerizing, or
reacting, the chemicals terephthalic acid and ethylene glycol so as to produce pellets of a
raw material called polyethylene terephthalate, which is abbreviated to PET. However,
because PET is not biodegradable, it is possible to obtain raw PET for
bottlemanufacturing from shredded recycled plastic bottles.

Step 2:
Secondly, we should mold the raw PET pellets or recycled shredded PET into a preform,
which resembles a test tube in appearance.This is done using either a separate preform
molding machine or a combined one-step apparatus that includes the preform and final
molding within one machine. We are using a combined one-step apparatus.

Step 3:
Thirdly, the mold is to be stretched. The preform is placed into a mold that corresponds to
the shape of the bottle and is contained within the injection molding device. In some
cases the original preform tube is cut into shorter lengths before being placed in the
stretch-molding device. Hot, pressurized air is blown through a steel tube that pushes the
heated preform tube against the mold so that crystallization takes place as the heated
preformed PET is forced to take the shape of the inside of the mold.

Step 4:
The bottles are then trimmed as necessary to remove excess PET, and then cooled with
compressed air before they are either filled on-site or shipped to the location where they
will be filled. Hot filling bottles are only possible when they will be used for the sale of
foods of a certain degree of acidity, and this should be done only with proper equipment.

Step 5:
Finally the bottles are labeled as necessary once they are filled. Labels are produced with
separate equipment and are not usually provided by PET bottle manufacturers unless the
manufacturer also fills the bottles. Therefore, we are not labeling the product in the
factory.
5.2 Fixed Asset Requirement

S no. Description Unit Quantity Rate(Rs) Amount(Rs)


1. Land Ropani 1 48,00,000 48,00,000
2. Building Sq. ft. 7316 956.81 70,00,000
3. Plant and Machinery
a) Extrusion line Set 1 12,00,000 12,00,000
b) Cap Making Set 1 7,00,000 7,00,000
Machine Set 1 10,00,000 10,00,000
c) Combination Mixer Set 1 2,00,000 2,00,000
d) Generator
4. Furniture
a) Big table Pcs 4 7,000 28,000
b) Small table Pcs 2 4,000 8,000
c) Chair Pcs 15 1,500 22,500
5. Vehicle Set 1 30,00,000 30,00,000
Total 1,79,58,500

5.3 Life of Fixed Assets


All depreciation will be calculated on the basis of straight line method.
The building is depreciated at the rate of 15% per annum and the life is estimated
to be 25 years.
All the plants and machineries are depreciated at the rate of 20% per annum and
are estimated to have life of 12 years.
All the furniture is depreciated at the rate of 20% per annum and is estimated to
have life of 8 years.
The life of vehicle is estimated to be 10 years and is depreciated at the rate of 20%
per annum.

Life of Fixed Assets

S No. Description Amount(Rs) Depreciation Depreciation


% Amt(Rs)
1. Building 70,00,000 15% 10,50,000
2. Plant and Machinery
a) Extrusion line 12,00,000 20% 2,40,000
b) Cap Making Machine 7,00,000 20% 1,40,000
c) Combination Mixer 10,00,000 20% 2,00,000
d) Generator
2,00,000 20% 40,000
3. Furniture
a) Big table 28,000 20% 5,600
b) Small table 8,000 20% 1,600
c) Chair 22,500 20% 4,500
4. Vehicle 30,00,000 20% 6,00,000
Total 1,31,58,500 22,81,700
Monthly Depreciation 1,90,142

5.4 Planned Capacity and Future Capacity


The factory will be open from 9am to 6pm. Some of the raw materials used will be
available in the local market whereas others will be imported from China. The company
will only provide the wholesaler with an estimate of a monthly and yearly demand. The
total number of working days will be 240 days.

We have kept our capacity a bit large than what is required today but it is quite relevant in
context to the increased demand in future since there are few competitors and we expect
that the locally made plastic bottles will be widely used than those imported from abroad
in future. Below is the calculation of future capacity utilization estimation:

Future Capacity Utilization

Year Capacity Sales (in qty)


Utilization
2014 75% 4590
2015 80% 4896
2016 85% 5202
2017 90% 5508
2018 100% 6120
5.5 Factory Location and Layout

Location of the Factory Dhulikhel, Kabhre


Factory Layout as prescribed by a technical engineer on Plastic Manufaturing Company of a US based
company Lienroc Plastics Manufacturing Company

5.6 Raw Material Requirement and cost


Plastic bottles are formed using a variety of techniques. The various raw materials
required for the production of plastic bottle are:

High Density Polyethylene (HDPE) is the most widely used resin for plastic
bottles. This material is economical, impact resistant, and provides a good moisture
barrier. HDPE is compatible with a wide range of products including acids and
caustics but is not compatible with solvents. HDPE is naturally translucent and
flexible. The addition of color will make HDPE opaque although not glossy. HDPE
lends itself readily to silk screen decoration. While HDPE provides good protection at
below freezing temperatures, it cannot be used with products filled at over 160 F
(71 C) or products requiring a hermetic (vacuum) seal.

Low Density Polyethylene (LDPE) is similar to HDPE in composition. It is less


rigid and generally less chemically resistant than HDPE, but is more translucent.
LDPE is used primarily for squeeze applications. LDPE is significantly more
expensive than HDPE.

Polyethylene Terephthalate (PET, PETE or polyester) is commonly used for


carbonated beverage, water bottles and many food products. PET provides very good
alcohol and essential oil barrier properties, generally good chemical resistance and a
high degree of impact resistance and tensile strength. The orienting process serves to
improve gas and moisture barrier properties and impact strength. This material does
not provide resistance to very high temperature applicationsmax. temp. 200 F
(93 C).

Polyvinyl Chloride (PVC) is naturally clear, has extremely good resistance to


oils, and has very low oxygen transmission. It provides an excellent barrier to most
gases and its drop impact resistance is also very good. This material is chemically
resistant, but it is vulnerable to solvents. PVC is an excellent choice for salad oil,
mineral oil, and vinegar. It is also commonly used for shampoos and cosmetic
products. PVC exhibits poor resistance to high temperatures and will distort at 160 F
(71 C), making it incompatible with hot filled products.

Polypropylene (PP) is used primarily for jars and closures and provides a rigid
package with excellent moisture barrier. One major advantage of polypropylene is its
stability at high temperatures, up to 220 F (104 C). Polypropylene is autoclavable
and offers the potential for steam sterilization. The compatibility of PP with high
filling temperatures is responsible for its use with hot fill products. PP has excellent
chemical resistance, but provides poor impact resistance in cold temperatures.

Polystyrene (PS) offers excellent clarity and stiffness at an economical cost. It is


commonly used with dry products including vitamins, petroleum jellies, and spices.
Styrene does not provide good barrier properties, and exhibits poor impact resistance.

Post Consumer Resin (PCR) is a blend of reclaimed natural HDPE (primarily


from milk and water containers) and virgin resin. The recycled material is cleaned,
ground and recompounded into uniform pellets along with prime virgin material
especially designed to build up environmental stress crack resistance. PCR has no
odor but exhibits a slight yellow tint in its natural state. This tint can be hidden by the
addition of color. PCR is easily processed and inexpensive. However, it cannot come
into direct contact with food or pharmaceutical products. PCR can be produced in a
variety of recycled content percentages up to 100%.

Bioplastic- polymer structures based on processed biological materials rather than


petrochemicals.
We have decided to choose the supplier low cost without compromising on the quality.
The table below shows the total monthly raw material costs and estimated requirement
for the company. The raw material quotation is forwarded to the wholesaler who stocks
the goods according to the companys requirement.

Raw Material Requirement and Cost

S No. Description Quantity Rate (Rs) Amount (Rs)

1. Polyethylene Terephthalate 765 pound 50 38,250

2. High Density Polyethylene 700 pound 46.75 32,725

3. Low Density Polyethylene 650 pound 45 29,250

4. Polyvinyl Chloride 675 pound 55 37,125

5. Polypropylene 500 pound 50 25,000

6. Polystyrene 500 pound 55 27,500

7. Post Consumer Resin 475 pound 55 26,125

8. Bioplastic 400 pound 60 24,000

9. Others 25,000

Total 2,64,975

5.7 Labor Requirement and Cost


The business requires various types of laborers skilled, semi-skilled and unskilled as
well. Skilled laborers are required so that the plants and machineries can be handled
properly and the production process can go smoothly. Semi skilled laborers are also
required to assist the skilled ones in the minor activities. Similarly, unskilled laborers are
also required to carry out other minor activities like gate keeping, security, etc. However,
finding these various types of laborers would be difficult.

Since the factory location is Dhulikhel, we plan to employ local laborers and if required,
we will hire few from the valley as well.

The laborers will be given a proper work schedule which is to be followed strictly. One
week training program will be conducted for the laborers. They are required to inform the
management at least one month in advance before quitting the job.

Labor Requirement and Cost

S Description No. Rate(Rs) Amount Total Amt


No. (Rs) (Rs)
1. Direct labor 1,15,000
a) Skilled
-Factory head 1 12,000 12,000
-Technician 1 15,000 15,000
-Others
2 10,000 20,000
b) Semi-skilled
c) Unskilled 8 6,000 48,000
5 4,000 20,000
2. Indirect Labor 32,000
a) Production Manager 1 20,000 20,000
b) Logistics Manager 1 12,000 12,000
Total 1,47,000

5.8 Labor Motivation


The laborers will be given a proper work schedule which is to be followed strictly.
One week training program will be conducted for the laborers. They are required to
inform the management at least one month in advance before quitting the job. we
will develop effective labor packages that will be designed by proffessional HR
firms to motivate the workers. we will take careful measure regarding employee
safety in the workplace, and equip our workers with all necessary materials and
equipment.

Extrinsic rewards will be our basic motivation factor under which we will provide
enough monetary compensation to our workers. other benefits will also be
provided. we will employ proper work schedules, taking consideration to workers
breaks to create a healthy working envoirnment within the factory

5.9 Indirect Factory Overhead

Indirect Factory Overhead Expenses (Monthly)


S No. Description Amount (Rs)
1. Indirect labor 32,000
2. Refreshment 34,200
3. Electricity and Water 20,000
4. Repair and Maintenance 10,000
5. Transportation 15,000
6. Stationery 2,000
7. Warehouse expense 10,000
8. Others 10,000
9. Depreciation 1,90,142
Total 3,23,342

5.10 Per Unit Cost of Production


S No. Description Amount (Rs)
1. Monthly Raw Material Cost 2,64,975
2. Monthly Direct Labor Cost 1,15,000
3. Monthly Factory Overhead Expense 3,23,342
Monthly Total Cost of Production 7,03,317
Monthly Production 4590 units
Cost of Production per Unit 153.23

6.0 Product Design and Development Plan


6.1 Development Stats and Tasks

6.2Challenges and Risks

Strengths

The strengths of this company is that it is relatively stable. Although the demand for
manufacturing bottles tends to fluctuate with the ups and downs of the economy, it is
characterized by regular periods of recovery following any downturns. Moreover,
manufacturing plastic bottles has become highly efficient over the last century, with the
ability to maximize both the productivity of the workers and machines to maximize
profits.

Weaknesses

A weakness of our firm is that much of it is built on the production of non-essential


goods. This means that a severe downturn in the economy can have a crippling effect on
it. Another weakness is that it is a mature industry. There is little room for growth. As a
result, the manufacturing of the plastic bottles industry can be a cash cow for those who
are already in it but may be unattractive to new entrants.

Opportunities

Opportunities in this industry are in the technology and bio-technology areas. These are
growing market segments with higher profit margins. Additionally, they are knowledge-
dependent market segments that require highly specialized workers, which makes it
difficult for low wage countries to compete in this market segment, thereby providing an
edge to more industrialized countries. Foreign markets with a growing middle class are
providing opportunities for technology and bio-technology manufacturers to increase
their profitability through exports.

Threats

The largest threats to this type of firm in developed nations are from low wage countries.
The low wages of these countries have made it impossible for many businesses in
developed nations to compete, requiring them to either close or move overseas to find
cheap labor.
6.3 Intellectual Property

7.0 Management Team and Company


Structure
7.1Management Team

This company will be managed under the partnership venture of Mr. Ayush Man
Tamrakar, Ms. Jashmina Pradhananga and Ms. Arpana Pradhan. These three partners will
be contributing on equal proportions.

Ayush Man Tamrakar, President, has a 20 year history of experience encompassing all
aspects of Polymer Raw material, Plastic Conversion Methods, and Venture
Development. He has founded successful ventures in plastic converting industry, and
assisted in the launch of five plastic converting manufacturing plants.

Jashmina Pradhananga, Executive VP and COO, is a graduate Engineer with over 20


years and experience in the post- consumer plastics recycling industry and is the inventor
of the primary cleaning and refining technology used in the process for this project. She
has received a patent for her technology and has been directly involved in over twenty-
five major post consumer plastics recycling projects.

Arpana Pradhan, CFO, has over 30 years investment and merchant banking and
management experience. She has assisted in raising over $500 million and served as
board member in over 40 public and private companies.
7.2Company Structure

The organization will be managed by Ms. Jashmina Pradhananga, Mr. Ayush Man
Tamrakar and Ms. Arpana Pradhan. Under them there will be different managers who will
be directly reporting to them. Each manager will have their own department and will be
responsible for their work. The organization chart is shown below:

Central Office

Sales and
Production Accounting
Marketing
Department Department
Department
General
Manager

Sales and
Production Account
Marketing
Manager Head
Manager

Maketing Assistant Assistant


Factory Logistics Warehouse Sales
Accountant Accountant
Head Head Supervisor Supervisor Officer 1 2

Assistant Regional Regional Regional


Technical
Factory Sales Officer Sales Officer Sales Officer
Head
Head 1 2 3

7.3Preoperating Activities and Cost

The following activities need to be done before the business can be operated:

Registering the business week

Preparing the business plan 4 weeks

Applying for the loan and approval 8 weeks

Contacting equipment suppliers 2 weeks

Constructing the factory 18 weeks

Hiring the labor 2 weeks


Installing the equipment 3 weeks

Purchasing the materials 2 weeks

Trial production 2 weeks

The trail production has to be done to see how good the product comes out and whether
there is any problem with the plan and the machinery or not. Moreover, we have to come
out with the sample product in the market to see the response. All these costs are included
in the pre operating cost. They are as follows:

Description Amount

Registration cost 7000

Trial Production 100000

Market Survey 10000

Transportation cost 5000

Telephone registration 4000

Others 5000

Total 131000

10% amortization 13100


Monthly Amortization 1091.67

7.4 Fixed Asset Requirement

Asset Unit Quantity Rate Total GrandTotal

Office Building Sq.ft 1500 14 21000 21000

Plant & Machinery 110400

Computer Set 3 25000 75000

Telephone Set 3 1000 3000

Calculator Set 3 30000 2400

Generator set 1 30000

Furniture 68500

Table 3 5000 1500

Chairs pcs 9 1500 13500

Sofa 1 30000 30000

Cupboard 2 10000 10000


Total 199900

Life of Fixed Assets for Office

Assets Amount Depreciation % Depreciated amount

Building 210000 15 3150

Plant and machinery

Computer 75000 20 15000

Telephone 3000 20 600

Calculator 2400 20 480

Generator 30000 20 6000

Furniture

Table 15000 20 3000

Chairs 13500 20 2700

Sofa 30000 20 6000

Cupboard 10000 20 20000

38930
Monthly 3244

7.5Administrative Office

Description Amount

Telephone Bill 2000

Refreshment 30000

Accountant Salary 7000

Others 5000

Depreciation 3244

Amortization 1091.67

Total 48335.67

8.0 Financial Plan and Projections


8.1 Assumptions Sheet
Raw material stock for month
Production time is 2 days
Finished goods stock is 5 days
Credit facility for debtors is for 10 day
Monthly marketing expense is Rs. 30,000/-
Cash management is one month expense on direct labour, factory overhead,
marketing expense, and administrative expense
Bank loan of Rs. 1,20,00,000 at 15% interest rate per annum. The loan payback
installment is Rs. 24,00,000 each year till 5 years.
Mark up is 15% and the tax rate is 25%

Total Capital Requirement

The total capital requirement refers to the amount of money a business needs for its
normal operations and also the amount of cash and easily liquidated assets that a
broker/dealer or bank needs to meet SEC regulations, usually expressed as a proportion
of total liabilities. In general, the kinds of assets that can make up the broker-dealer
capital requirement are strictly defined.

8.2 Sources and Uses of Funds Statement


8.2.1.0Total Capital Requirement
The total fixed assets requirement is:

S No. Description Amount (Rs)


1. Fixed Assets for Factory 1,79,58,500
2. Fixed Assets for Office 1,99,900
Total Fixed Capital 1,81,58,400

8.2.1.1 Fixed Capital


S No. Description Amt (Rs)
1. Raw material stock (for month) 1,32,487.5
2. Work-in-process stock 35,243
(153.23/2 * 2 days * 230 units)
3. Finished Goods stock 1,76,214.50
(153.23 * 5 days* 230 units)
4. Credit Sales 3,52,429
(153.23 * 10 days* 230 units)
5. Cash Management 3,22,200
(1,15,000+30,000+(48,335.67-3,244-
1,091.67)+(323342-190142))
Total 10,18,574

Cash Management = Monthly Direct Labor expense + Monthly Marketing expense +


Monthly factory Overhead Expense + Monthly Administrative Expense

Working Capital

8.2.1.2Working Capital
1. Working Capital 10,18,574

8.2.1.3 Pre-operating Expenses


The trail production has to be done to see how good the product comes out and whether
there is any problem with the plan and the machinery or not. Moreover, we have to come
out with the sample product in the market to see the response. All these costs are included
in the pre operating cost. They are as follows:

S. No. Description Amount(Rs)


1. Registration cost 7,000
2. Trial Production 1,00,000
3. Market Survey 10,000
4. Transportation cost 5,000
5. Telephone registration 4,000
6. Others 5,000
Total 1,31,000
10% amortization 13,100
Monthly Amortization 1091.67

The pre-operating expense as previously calculated is Rs. 1,31,000. Thus, the total
amount required to start the business is Rs. 1,31,000.

Now the total project cost is:

Total Capital Requirement

S No. Description Amount (Rs)


1. Fixed Capital 1,81,58,400
2. Working Capital 10,18,574
3. Pre-Operating expense 1,31,000
Total Capital Requirement 1,93,07,974

8.2.2 Capital Structure


We have planned to take loan of Rs. 1,20,00,000 from Nepal Investment Bank Limited.
This makes the loan constitute 62.15% of the total capital requirement. And the rest
37.85% will be invested by the three owners in equal proportion (that is Rs. 24,35.991.33
each). The capital structure is given below:

Owners Equity 73,07,974


Loan 1,20,00,000
Total 1,93,07,974

8.3 Loan Repayment Schedule


The loan is to be pain over period of 5years at an interest rate of 15% per annum. For the
security of loan, the owners have a land and building with a valuation of Rs. 1,75,00,000
which will be kept as collateral for the loan from the bank.

The loan repayment schedule is given as below:

Year Loan Amount Payable Interest (15%) Principle Total Payment


1 1,20,00,000 18,00,000 24,00,000 42,00,000
2 96,00,000 14,40,000 24,00,000 38,40,000
3 72,00,000 10,80,000 24,00,000 34,80,000
4 48,00,000 7,20,000 24,00,000 31,20,000
5 24,00,000 3,60,000 24,00,000 27,60,000

8.4 Selling Price

S No. Description Amount (Rs) Amount (Rs)


1. Unit Cost of Production 153.23
2. Monthly Administrative Expense 48,335.67
3. Monthly Marketing Expense 30,000
4. Monthly Interest on Loan 1,50,000
(15% of 1,20,00,000)/12
Total 2,28,335.67

Monthly Production Units 4590 units


Per Unit Cost (2,28,335.67/4590) 49.75
Final Cost 202.98
15% Mark-up 30.45
Selling price per Unit 233.43
~ 233
8.5 Income Statement

Description Amt (Rs) Amt (Rs)


Income from Sales 1,28,33,640
(233 * 55080 units)
Less: Raw Materials (2,64,975 * 12) 31,79,700
Direct Labor (1,15,000 * 12) 13,80,000
Indirect Factory Overhead 38,80,100
(1,33,200 * 12) + 22,81,700
Total 84,39,800 (84,39,800)
Gross Profit 43,93,840
Less: Marketing Expense (30,000 * 12) 3,60,000
Administrative Expense 5,80,030
(44,000 * 12) + 38930 + 13100
Total 9,40,030 (9,40,030)
Earning Before Interest and Tax 34,53,810
Less: Interest expense (15%) (18,00,000)
Earning Before Tax 16,53,810
Less: Tax (25%) (4,13,452.5)
Earning After Tax 12,40,357.5

8.6 Cash Flow Statement

Description Pre-operating 1st year


Cash Inflow
Equity 73,07,974
Loan 1,20,00,000
Sales 1,28,33,640
Cash Sales 1,22,98,905
Total Cash Inflow 1,93,07,974 1,22,98,905

Cash Outflow
Pre-operating expense 1,31,000
Purchase of Fixed Assets 1,81,58,400
Raw Material Cost 31,79,700
Direct Labor Cost 13,80,000
Factory Overhead Expense 15,98,400
Marketing Expense 3,60,000
Administrative expense 5,28,000
Increase in Inventory 3,43,945
Interest expense 18,00,000
Repayment of Loan 24,00,000
Tax 4,13,452.5
Total Cash Outflow 1,82,89,400 1,20,03497.5

Net Cash Flow 10,18,574 2,95,407.5


Cash balance in the beginning - 10,18,574
Cash balance at the end 10,18,574 13,13,981.5

8.7 Balance Sheet

Description Pre-Operating 1st Year


ASSETS
Current Assets
Cash 10,18,574 13,13,981.5
Inventory - 3,43,945
Account Receivables - 5,34,735
Total Current Assets 10,18,574 21,92,661.5
Fixed Assets 1,81,58,400 1,81,58,400
Less: Depreciation - (23,20,630)
Net Fixed Assets 1,81,58,400 1,58,37,770
Pre-Operating Expense 1,31,000 1,17,900
Total Assets 1,93,07,974 1,81,48,331.5

CAPITAL AND LIABILITIES


Long term loan 1,20,00,000 96,00,000
Owners equity 73,07,974 73,07,974
Accumulated profit - 12,40,357.5
Total Owners Equity 73,07,974 85,48,331.5
Total Capital and Liabilities 1,93,07,974 1,81,48,331.5

8.8Return on Investment
8.9 Break Even Point
8.10 Projected Income Statement for 5 years

Description 1st Year 2nd Year 3rd Year 4th Year 5th Year
Capacity Utilization 75% 80% 85% 90% 100%
Sales Forecast (in
units)
Total Sales Volume
(Rs)
Direct Cost
(Raw Material and
Direct Labour) (Rs)
Indirect factory
overhead(Rs)
Total Production
Cost(Rs)
Gross Profit(Rs)
Administrative
Expense(Rs)
Marketing Expense(Rs)
Total Administrative
and Marketing
Expenses(Rs)
EBIT(Rs)
Interest expense(Rs)
EBT(Rs)
25% Tax (Rs)
EAT/ Net Profit (Rs)
Accumulated Profit
(Rs)