TABLE OF CONTENTS

TABLE OF CONTENTS 1
1 HIGHLIGHTS OF THE PROJECT 3
2 EXECUTIVE SUMMARY 5
2.1 Introduction & Background............................................................................................................5
2.2 Rationale for taking up the project.................................................................................................5
2.3 Proposed Project.............................................................................................................................7
2.4 Location of Project.........................................................................................................................7
2.5 Infrastructure & Facilities...............................................................................................................7
2.6 Manpower.......................................................................................................................................8
2.7 Raw Material..................................................................................................................................8
2.8 Plant & Machinery..........................................................................................................................9
2.9 The Company..................................................................................................................................9
2.9.1 Capital structure..............................................................................................................9
2.9.2 The Ownership.................................................................................................................9
2.10 Regulations & Licensing................................................................................................................9
2.11 The Market....................................................................................................................................10
2.12 Project Cost & Financing..............................................................................................................10
2.13 Financial Analysis........................................................................................................................10
3 ORGANIZATION & MANAGEMENT 12
3.1 The Promoters...............................................................................................................................12
3.2 Organization Structure..................................................................................................................12
3.3 Management.................................................................................................................................12
3.4 Human Resources.........................................................................................................................13
3.5 Mission, Vision & Guiding principles..........................................................................................14
3.6 Marketing Strategy.......................................................................................................................15
3.6.1 Product............................................................................................................................16
3.6.2 Pricing.............................................................................................................................16
3.6.3 Promotion.......................................................................................................................16
3.6.4 Branding.........................................................................................................................16
3.6.5 Distribution.....................................................................................................................16
4 INFRASTRUCTURAL FACILITIES & Socio economic concerns 17
4.1 Infrastructure and Site Selection...................................................................................................17
4.2 Linkages........................................................................................................................................17
4.3 Power............................................................................................................................................17

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 4.4 Water.............................................................................................................................................17
4.5 Transport & Linkages...................................................................................................................17
4.6 Communication.............................................................................................................................18
4.7 Land..............................................................................................................................................18
4.8 Civil Construction.........................................................................................................................18
4.9 Plant & Machinery........................................................................................................................18
4.10 Socio-Economic Scenario.............................................................................................................18
4.11 Quality Control.............................................................................................................................19
4.12 Environmental Concern................................................................................................................19
5 FINANCIAL ANALYSIS 21
5.1 Project Investment........................................................................................................................21
5.2 Source of Finance.........................................................................................................................21
5.3 Breakeven Analysis......................................................................................................................21
5.4 Profitability Analysis....................................................................................................................21
5.5 Financial Viability........................................................................................................................22
5.6 Financial Assumptions..................................................................................................................22
6 SWOT ANALYSIS 28
6.1 Strength.........................................................................................................................................28
6.2 Weakness......................................................................................................................................28
6.3 Opportunities................................................................................................................................28
6.4 Threats..........................................................................................................................................28
7 CONCLUSIONS 29
8 FINANCIAL ANNEXURE 30

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1 HIGHLIGHTS OF THE PROJECT

Name of the Company : IIRMA International Company PVT LTD.

Project : Manufacture, sale and research of organic

Fertilizer
Products : Organic Fertilizer in solid and liquid form

Category of Project : Manufacturing Industry

Project Location : Makawanpur District, Nepal

Market : Nepal and Abroad Countries

Production Capacity : 3000 kg of fertilizer per day (12hrs shift)

Raw Materials : solid waste materials

Power : 440 KVA

Manpower : Direct – 20 & Indirect -8 with partial outsourcing

of production job

Project Cost : Amount in Rs.

Fixed Assets 60,000,000

Working Capital 40,000,000

Total 100,000,000

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Source of Financing :
Amount in Rs.

Equity (20%) 20,000,000

Bank Loan (80%) 80,000,000

Total 100,000,000

Summary of Projected Financials :

Amount in Rs ‘000’

Particulars Year 1 Year 2 Year 3 Year 4 Year 5

Total Revenue 20,000,000 21,000,000 21,300,000 22,000,000 22,500,000

Net Profit After Tax 12,000,000 14,000,000 15,000,000 15,750,000 16,250,000

Return on Capital
Employed

Break Even Point in % of

Capacity

Debt Service Coverage

Ratio

Simple Payback Period : 5.32 years

Internal Rate of Return : 19.33 %

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2 EXECUTIVE SUMMARY

2.1 Introduction & Background

The purpose of this feasibility study report is to provide a comprehensive financial &
technical analysis of proposed business project of IIRMA International Company Pvt.
Ltd. IIRMA International Company Pvt. Ltd is a closely held private limited company
registered under Companies Act, 2063 with an objective of producing high quality
Organic fertilizer and organic vegetables with the aim of meeting the domestic and
foreign demand. The company plans to install a state of the art modern technology plant
at Hetaunda Makuwanpur which guarantees its commitment of delivering the best and
superior quality organic fertilizer to the Agro Industries in Nepal.

Apart from equity financing, the company requires loan financing in the form of working
capital and term loan.

2.2 Rationale for taking up the project

The prime source of fertilizer is imported chemical fertilizers from india and other
countries. However these fertilizers caused innumerable health hazards to human causes
many diseases, decrease, health immunity and degradation in the environment. Hence as
an environmental friendly alternative fertilizer was launched to tackle the contentious
issues.

National Bio Tech PVT LTD. was established as the first organic fertilizer Company in
2014 BS at Bajrabarahi of Lalitpur district. Few other organic fertilizer companies are
supplying organic fertilizer in local market. But because of lack of awareness people of
Nepal is using imported chemical fertilizers rather than self-made compost or organic
fertilizer.

Agriculture Inputs Company Ltd and Salt Trading Corporation Nepal are the main
importers of fertilizers in Nepal. They import inorganic fertilizer from the foreign
countries and distribute through local registered Agriculture Co-Operatives in the
Country. Nepal.

Consumption of Inorganic Fertilizer in Nepal is 131kg/hectare (2015).Nepal’s fertilizer

demand stands at700,000 tons annually. Urea and DAP accounts for 65 percent and 25

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percent respectively of Nepal’s fertilizer demand. Nepal imports fertilizer of amount to
Rs. 16 billion every year.

Now the peoples of Nepal are becoming more concerned about their health, accordingly
they are looking for the organic products because of it farmers of Nepal are trying to use
organic fertilizer instead of imported chemical fertilizer. The demand of kept on
increasing rapidly in Nepal. To meet the increasing demand of organic fertilizer users,
many bio companies are opened and working on it. But because of the lack of latest
technologies and good marketing strategies they are not being succeeded to satisfy the
farmers of the country.

Farmers in the villages and towns also started using organic fertilizer rather than using
chemical fertilizer. Previously inorganic fertilizer was a only mean to grow agro
production but at present the scenario is not the same, farming with the organic fertilizer
is a necessity.

Since then limited organic fertilizer company could not meet the increasing demand of
bio fertilizer. Number of bio Fertilizer Company has been increasing and at present there
are 10 plants all over Nepal manufacturing organic fertilizer.

It is estimated that there will be imports of around 750,000 tons of chemical fertilizer in
the country from India, Bangladesh, UAE and Singapore. No one quite knows how it
affects to human health, animal’s health and to the environment as well.

Potentially tons of chemical fertilizer that we are using in our farms could be a vital
reason of environmental degradation and illness. If the government backs down to the
pressure tactics of inorganic fertilizer suppliers and if there is tomorrow an exposition of a
chemicals that results in loss of lives, people will rightly blame the government for its
failure to ensure their safety. There is no question of compromising on health safety to
accommodate the self-serving and, ultimately, dangerous demands of the chemical
industry association.  Not just that. There is also a need to promptly put in place a strong
oversight mechanism so that the important details of available inorganic fertilizers in the
market can be checked. The government of Nepal should make a policy to support to
grow organic fertilizer company and allocate subsidy to farmers on using bio fertilizer.

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Nepal should make a plan to spread awareness among its people to use organic fertilizer
in substitute of unhealthy inorganic fertilizer for their better health.

The facilities at Hetaunda Makwanpur will be one of the best facilities in the country.
Considering the unmet demand of organic fertilizer from the domestic market, the
products of the company can be easily sold in the local market at a very reasonable and
competitive price. The project will in fact act as a import substitution and will contribute
to the industrial development of the country.

High demand of the product, abundant availability of labors in the plant location, long
time experience of the promoters in the manufacturing and trading of organic fertilizers
has encouraged to start this new venture. The Company plans to exploit the unmet
demand of organic fertilizer in Nepal with high level of professionalism and support in
industrial development of the Country.

2.3 Proposed Project

IRRMA International Company Pvt. Ltd is planning to set up a new and modern
production unit with a capacity of 3000 kg per day under a shift of 12 hours per day in the
first phase. The plant will operate for 300 days on one shift basis. The production quantity
can be easily doubled if the plant is run in two shifts.

2.4 Location of Project

IIRMA International Company Pvt. Ltd has its corporate office at Kathmandu
Metropolitan-11. The manufacturing unit will be located at Hetauda, Makwanpur the
biggest industrial place of Nepal.

The location of the factory has comparative advantages over other similar units in terms
of very low cost of transportation to and from India and easy availability of local
manpower. Further owing to the central location of the production facilities, end products
of the Company can be easily transported to the desired locations at a competitive cost.

2.5 Infrastructure & Facilities

a) Land: This project has a total of 6 Katha of land, which is sufficient for the plant,
storage of raw material and finished goods, housing of labors, staff, administrative
building, garden and other utilities.

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 b) Civil Structures: The project will construct all the required civil infrastructure at
the project site. The structure includes factory shed, go down, administrative
building, staff quarters, guard house etc. However, considering the projected low
volume of business in initial years, only the essential civil structures will be
constructed in the beginning and gradually with the increase in business volume,
additional structures will be constructed gradually.

c) Power: Required electricity will be obtained from NEA by developing necessary

infrastructure. Power during load shedding hours will be managed by installing
required capacity of Generators.

d) Water: Daily requirement of water for consumption in process streams, drinking,

housing colony is minimal. Subsoil ground water resources are very rich in the
area.

e) Transportation: The proposed site is well connected with the road network of the
country. The logistics of transportation of organic fertilizer to the mass markets of
various parts of the Country shall be managed by the independent transport
companies or individual truck operators.

f) Communication: Factory site is well connected with telephone lines, mobile

connectivity, internet and other communication facilities.

g) Fire Fighting Equipment: Adequate number of fire-fighting equipment will be

installed in the factory to control incidental fire.

2.6 Manpower

The proposed project entails extensive manual work and is labor intensive. The main
production work will be operated skilled labor’s . For supervision, production work and
overall management of the Company 12 direct and 20 indirect workers have been
planned.

2.7 Raw Material

Major Raw materials required for production of organic fertilizer are as under:

SN Nature of Raw Material Major Components Source

1 Primary Materials Nepal

2 Processing Materials India/Nepal

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 3 Finishing Materials Nepal

Primary materials will be imported from India. Other materials which are available in the
domestic market will be procured locally to the extent of availability.

2.8 Plant & Machinery

 The main machineries will be imported from India, which is built with Japanese
technology and some of the bulky items will be fabricated at the site locally. The erection
and commissioning of the plant would be under the close supervision of the technicians
and project consultants.

2.9 The Company

2.9.1 Capital structure

The capital structure of the company at the time of incorporation is as under;

Authorized Capital

Issued Capital

Paid up Capital

The promoters will introduce sufficient capital in the subsequent period in line with the
progress of the project so as to comply with the debt equity ratio of 80:20.

2.9.2 The Ownership

The shares of IIRMA International Company PVT LTD. are held by the following
eminent business personalities:

SN Name % of Holding

1 Prabhakar Bikram Shah 33.33

2 Krishna Khatiwada 33.33

3 Pradeep Thapa Chhetri 33.33

2.10 Regulations & Licensing

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The company is registered with the Office of the Company Registrar under the provisions
of Company Act 2063 with registration number 1234/075/76. Tax Registration has been
obtained on 2073.03.08. The process of obtaining other necessary approvals like industry
registration, Initial Environmental Examination (IEE) Clearance is under progress.

2.11 The Market

With an increasing demand of fertilizers, there is an increasing demand for organic

fertilizers in the domestic market. Major portion (almost 90%) of the domestic demand of
fertilizer is met inorganic fertilizer from imports India and other countries

The end product can be easily sold in the domestic market at a very attractive and
competitive price. The promoters have extensive experience in many manufacturing and
trading units including a bio fertilizer manufacturing Company. Commitment towards
highest standards of quality control will be one of the core competencies for penetrating
the national market.

2.12 Project Cost & Financing

The total fixed cost for setting up the project would be Rs. 60 million and working capital
requirement would be Rs. 40 million. The Loan component in the fixed assets is Rs. 48
million and Rs 12 Million in working capital. Owners will contribute 20 million as equity.
Debt equity ratio in the project will be 80:20

2.13 Financial Analysis

The projected financial scenario of organic fertilizer reveals attractiveness in terms of

various financial measures. The production cost of organic fertilizer is quite at par in
comparison to the price of the chemical fertilizer and would pose no problem in selling
the product in the domestic market. The good return as per projection is attractive to
investors as well as to the lenders. Key financial indicators of the project are as under:

 The break-even point of the project is very low. It is 46.98 % in the first year
of operation which reduces to 44.88 % in the fifth year. The computed BEP is
considered very attractive for this type of high capital and labor intensive
project. Therefore the project is very safe even if the capacity utilization in
low.
 The internal rate of return (IRR) of the project is around 19.33 %, which is
very attractive.

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 The simple pay- back period of the project is 5.32 years.
 The Return on Capital Employed is very high. It is 8.09 % in the first year
which increases to 18.23 % in the fifth year.
 Cash flow is positive from the first year of operation.
 Debt serving ratio is more than one throughout the project period.

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3 ORGANIZATION & MANAGEMENT

3.1 The Promoters

The promoters of the Company are eminent business personalities engaged in diverse
range of business which includes organic fertilizer industry, banking, health sector,
trading business, cement manufacturing and other manufacturing units.

The blend of experience and skills of the promoters will drive the project to its success.

3.2 Organization Structure

The organization structure of the company will be as under:

Chairman

General Manager

Manager Manager Manager Manger Manager

Admin Marketing Finance Quality Control Production

Administrative Marketing Accountant QC Supervisor

Officers Officers s officers s

Cashiers
Maintenance
Staff
Store Keeper Operators Operators Operators
Drivers
Watchman Assistants Assistants Assistants

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3.3 Management

The Chairman is a well experienced business personality with proven managerial and
entrepreneurial skill. The company will have adequate number of managers, officers and
support staff to support the business.

3.4 Human Resources

Brief summary of the key human resource positions of the Company is presented below

a) Chief Executive Officer (CEO)

The CEO will be at the helm of affairs of the operations and will be reporting to the
Board of Directors He would be the key figure for the operation of company and will
work with under the direct supervision and guidance of the Chairman. In respect with
all the matters relating to managerial, technical and administrative issues, he will act
as the key decision maker for the Company.

b) Administrative Manager

He would work under the direct supervision of the CEO and will be responsible for
the following;

 Labour relations
 Welfare & Health
 Security
 Office Administration
 Publicity
 Recruitment

c) Finance Manager

He would be under the direct supervision of the General Manager and responsible for:

 Financial Management
 Accounting functions
 Setting up internal control system
 Cost control
 Procurement & stores
 Audits

d) Plant Manager

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 The plant manager will work under the direct supervision of CEO and will be
responsible for following:

 Production planning & scheduling

 Proper maintenance of plant/ workshop

 Efficient & economical production

e) Quality Control Manger

He would be responsible for quality control affairs relating to:

 Maintenance of highest standards of quality.

 Improvements in Productivity
 Compliance with quality control standards

f) Marketing Manager

Marketing manager will be responsible all the marketing aspects of the Company for
both domestic and the international market.

Adequate number of sub-ordinates will be hired to support managers of each

functional area. In addition to above, various committees will be formed for
management of day to day to operation of the business.

3.5 Mission, Vision & Guiding principles

In a constantly evolving and challenging business environment, the strategy of IIRMA

International Company Pvt. Ltd focuses on qualitative growth and innovation. Its aim is
to deliver value for its customers, investors and employees. As a responsive corporate
citizen, it works with a missionary zeal for one larger good of the society. It believes in
continuous learning and continuously striving for perfection in order to give the best
product to its customers. Furthermore, the project aims to uplift the living standard of
local people of the region by employing local people in the factory. The company will
implement a very strict quality control measures to comply with the national and
international standards of manufacturing and commits itself to continue this tradition.

IICPL is committed towards promoting economic development of the country and the
values, which it pursues relentlessly, will enable it to move towards sustainable growth.
IICPL is committed to transparency and corporate culture.

Mission Statement

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To become a leading organic fertilizer manufacturing unit in the country and contribute to
national economy by acting as a catalyst for industrial development.

Vision Statement

A national leader in manufacturing of organic fertilizer through product innovation,

service reliability, and advanced technology for achievement of optimal customer
satisfaction, safety and sustained profitability. We build strong brand through our
customer focus mindset, in order to achieve optimal customer satisfaction, conducive
work environment and sustained profitability.

Guiding Principles

The operations of the Company will be governed by the following guiding principles:

 Safety and Quality Control

 Employees Empowerment

 Corporate Identity and Image

 Integrity and Ethics

 Balanced Life & Performance

 Strength and Stability

 Social Responsibility & Corporate Citizen

 Profit and Growth

 Respect and Trust

 Quality and Excellence

 Teamwork and Cooperation

Each individual in our company will take personal pride in achieving performance
excellence. Through our common goal we aspire to explore, challenge, and strive to
exceed the best industry practice in every task performed. This enables us to maintain
competitiveness, achieve healthy, continual growth that will benefit society, and
fulfill our commitment to our customers and responsibility to our Nation.

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3.6 Marketing Strategy

3.6.1 Product

IICPL plans to manufacture high quality of organic fertilizer which meets the
international safety standards.

3.6.2 Pricing

Based on the prevailing market price of organic fertilizer, the ex-factory price will be
determined at the competitive rate in such a way that per unit cost to the buyer will be less
that the cost of chemical fertilizer imported from India and other countries. Ex-factory
price will include basic price plus Value Added Taxes.

3.6.3 Promotion

The major customer for organic fertilizer will be the existing and new organic fertilizer
using farmers. It is expected that around 25% of the product of the Company can be sold
directly to nearby organic farms without any marketing or promotional activity. Since the
proposed product is expected to substitute imports from foreign countries, very less
promotional effort will be required to sell the products to other buyers in the domestic
market.

3.6.4 Branding

IICPL shall launch the product in its own brand name after registering the brand with the
concerned authorities.

3.6.5 Distribution

Since the numbers of buyers are known, formal distribution network will not be required
for selling the product. The Company will directly distribute the product to the buyers.

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4 INFRASTRUCTURAL FACILITIES & SOCIO ECONOMIC
CONCERNS

4.1 Infrastructure and Site Selection

The factory will be located at Makwanpur District, the Industrial hub of Nepal. Following
factors which are important for selection of project location are given careful
consideration before selecting the location for this project;

 Availability of suitable plot

 Ease of transportation of raw materials to the site
 Located at the close proximity of the Indo-Nepal Border
 Availability of infrastructure facilities such as road, transportation,
communication system, and other facilities
 Adequate availability of required utilities
 Adequate availability of required manpower for operation
 Social harmony in the region

4.2 Linkages

The factory can easily be accessed by road. There are regular bus services to the factory
site from capital and other parts of the country. The site can also be accessed by air. The
factory site is very close to Simra Airport and is only 80 Kilometres from Kathmandu.

4.3 Power

Power connectivity will be obtained from NEA. Adequate number and capacity of
Generator will be installed to operate plant during load shedding hours.

4.4 Water

Water is required in the plant for various purposes. Subsoil ground water resources are
very rich in the area. Already a number of deep well boring are working in the nearby
fields around the year and abundant quantity of water is pumped out. The quality of water
is also soft and can be used directly for industrial and domestic purposes.

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4.5 Transport & Linkages

The proposed site is well connected with the road network of the county. The logistics of
transportation of clinker to the mass markets shall be managed by the transportation
companies or individual truck operators. For the commodities to be imported from India,
there is direct connectivity with the Indian custom. The plant site is centrally located
which will ease up the movement of raw materials and finished goods.

4.6 Communication

All communication facilities like telephone, mobile, internet etc are easily available at the
plant location.

4.7 Land

The layout of the plant has to be compact with easy accessibility to all departments and
also provide flexibility of operation. 6 Kattha and 1 Dhur of land has already been
purchased for the project which will be sufficient for production facility, residential
colony and the other infrastructure. Layout is one of the most important aspects of a new
project and considerable effort goes into its visualization at the stage of planning itself.
With a view to arrive at very realistic project cost estimates as well as to ensure minimum
deviation at executed stage, all major factors will be considered to arrive at optimal plant
layout.

4.8 Civil Construction

The civil construction work inside the factory premises will be entrusted to a professional
and experience group of engineers.

4.9 Plant & Machinery

The project consists of modern machineries imported from Japan. Some of the items will
be fabricated at the site locally. The details of plant and machinery required for the
project is given in the enclosed Annexure.

4.10 Socio-Economic Scenario

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  Employment Potential

Although there is no clear pattern of the manpower requirement for this type of
industry, it is expected that the project will directly employ 12 human resources
apart from around 20 workers who will be engaged in main production line
through an outsourced company. It is therefore concluded that this type of capital
and labor intensive project is capable of generating more employment and go a
long way in promoting the regional development and uplifting the local economy.

 Import Substitution

The project will substitute imports of chemical fertilizers from India and other
countries and will also contribute in raising demands for the raw materials and
production materials in the Country which will ultimately attract investments in
Agro industries.

4.11 Quality Control

IICPL aims to provide quality assured products to its valuable clients in order to achieve
total customer satisfaction. From raw material to the finished products, stringent quality
will be maintained everywhere. Well-trained and expert quality inspectors will monitor
each and every stage of manufacturing process. The quality control policy of IICPL will
confirm to national and international quality standards. Following steps will be taken to
ensure strict quality control measure:

 Strict supervision at every processing zone for consistent quality.

 Advance technologies and planning
 In-house quality testing laboratory
 Strict guidelines of best manufacturing practice will be adhered to, at every stage,
starting from raw materials sourcing to delivery of final products.

4.12 Environmental Concern

Today there is a worldwide emphasis on the fact that the emission of chemical gases from
the industries should be as clean from obnoxious material as possible and limits have

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been imposed on the undesirable substances in the industrial fertilizer effluents.
Therefore, certain amount of pollution control becomes necessary.

IICPL is well aware of these concerns and has carefully examined the likely extents of
various types of potential pollution at each stage and has made necessary arrangements
and planning to address the concerns and ensure that the company is considered eco
friendly. Necessary environment clearance will be obtained from the concerned
department of the Government of Nepal.

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5 FINANCIAL ANALYSIS

5.1 Project Investment

The investment in fixed and working capital in the project will be Rs. 62 million and Rs
38 million respectively with total investment of Rs 100 million. (Table A)

5.2 Source of Finance

The total project cost will be financed by a mix of shareholder’s equity of Rs 20 millions
and bank loan of Rs 80 millions in the ratio of 20:80. (Table A)

5.3 Breakeven Analysis

The average break-even point of the project is s 46.98 % in the first year of operation and
44.88 % in the fifth year. Breakeven point of the project is computed separately for each
year considering the year wise change in the pattern of fixed expenses of the project. The
average breakeven point of the project is low which indicates high safety margin and less
financial risk of the project. (Table S)

5.4 Profitability Analysis

The profitability of the project has been examined by following methods:

 Internal Rate of Return (IRR)

It is a rate at which the discounted cash inflows and outflows are equal. The
calculated IRR is around 19.33 % which is very attractive. (Table T)

 Payback Period

It is the number of years required to recover the total investment in the project.
The calculated payback period is around 5.33 years. (Table T).

 Return on Capital Employed

It is the ratio of net profit after tax before interest on the total capital employed in
the business. The calculated return on capital employed which is low in the initial
years, increases gradually in subsequent years together with the increase in
capacity utilization of the project. The return on capital employed is 8.09% in
year-1 whereas it becomes 18.23% in year- 5. (Table R)

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5.5 Financial Viability

The proposed project of organic fertilizer is financial viable due to following reasons:

 The breakeven point is low.

 The internal rate of return is very high.

 The simple payback period of the project is around 5 years.

 Financial Ratios are favourable.

5.6 Financial Assumptions

Following parameters have been assumed for financial projection of proposed project of
organic fertilizer:
1. Financial projections are based on the total project cost, annual operating cost and
total revenue for the period of ten years excluding the construction period of one
year.
2. The total cost of the project is estimated to be Rs. 100 millions, having fixed
assets investment of Rs. 62 millions and Rs. 38 millions of working capital
investment. (Table A)
3. Term loan will be availed in the beginning i.e. year 0 for financing the initial fixed
cost required for the project. The additional fixed project cost, if required in
subsequent years will be financed from shareholder’s equity & internal accruals
from the project.
4. Working capital loan will be availed in Year 1, i.e the first year of commercial
production for financing the initial working capital requirement of the project. The
additional working capital requirement arising due to the increase in capacity
utilization of plant in subsequent years will be met from internal accruals from the
project.
5. Out of the project cost of Rs. 100 million, Rs. 80 million would be financed by
bank loan and Rs. 20 million by shareholders equity with a debt equity ratio of
80:20. (Table A)
6. The financial costs of bank loan i.e. term loan and working capital loans are
assumed at 8%.
7. Construction period of the project has been assumed to be 6 months. Interest
during the construction period will be capitalized.
8. Pre-operating expenses comprises of following expenses:

600,
Preliminary Expenses (Registration, Licensing, Feasibility
Study etc.) 000

900,
Pre-operating Expenses (Management expenses during
construction period) Page 22 000
Total 1,500,000
 Pre-operating expenses will be charged off entirely in the first year of operation.

9. The project finance period is considered as ten years from the date of last
disbursement which includes moratorium period of one year from the date of last
disbursement of term loan. During the moratorium period, interest will be
capitalized. Repayment of loan instalment will begin from the end of first quarter
of first year of commercial production and will be paid in quarterly installment
until the entire term loan is fully settled in tenth year of operation. Term loan
instalment will be repaid on ballooning basis. (Table M).

10. Breakdown of Estimated Sales Price is as under:

Price in NPr
Particulars
Per XXXx
Basic Sales Price 1,792.04

Value Added Tax @ 13% 232.96

Ex-Factory Price , Bara 2,025.00

11. Details of Direct and Indirect labour cost is as under:

Direct Labour Amount PM
Factory Manager 50,000

Admin Officer 40,000

Supervisor-6 150,000

Stores Manager 25,000

Store Assistant 15,000

Time Keeper 15,000

Accountant 25,000

Assistant 12,000

Incentives @ 10% 33,200

Total Fixed Labor Cost 365,200

Variable Labor Cost @ Rs 150 per XXXx 54,000,000

Human Resource- Admin Amount PM

CEO 150,000

Accounts Manager 40,000

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 Accounts Officer 25,000

Cashier 15,000

Admin Officer 25,000

Marketing Manager 50,000

Admin Assistant 20,000

Office Assistant 12,000

Incentives @ 10% 33,700

12. Estimation of Direct Cost- variable is as under:

Raw Material Cost Annual Consumption Quantity Rate (Rs) Total

HR Sheets 360,000 882 317,647,059
MS Black Pipe 360,000 45 16,128,000
HR Slits 360,000 81 29,250,000
Bungs 360,000 44 15,840,000
Valve
Utilities 360,000
Rate per unit (Rs) 175
Total 63,000,000
Processing Materials 360,000 113 40,632,570
Electricity - NEA 18.00 4,341,600
Finishing Materials 360,000 37 13,153,140
Total   25.00   2,970,000 495,650,769
Electricity - DG
Stores, Spare Parts &
Consumables 40.00 14,400,000
Total   21,711,600

13. Factory Overheads have been computed as under:

Factory Overhead Amount PM
Factory Cleaning & Maintenance 30,000
Factory Mess 50,000
Factory Insurance 100,000
Staff Welfare 50,000
Laboratory Expenses 25,000
Miscellaneous Factory Expenses 50,000
Printing & Stationary 15,000
Repair & Maintenance 100,000
Security Expenses 30,000
Vehicle Fuel & Maintenance 40,000
Total 490,000

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14. Monthly estimation of Administrative Expenses is as under
Administrative Exp Amount PM
Audit Fee 20,000
Legal & Consultancy Fee 20,000
Guest Entertainment 20,000
Local Conveyance 20,000
Miscellaneous Expenses 50,000
Newspaper & Periodicals 10,000
Office Mess 25,000
Office Rent 40,000
Office Electricity & Water 20,000
Office Repair & Maintenance 5,000
Printing & Stationary 20,000
Postage & Courier 5,000
Pooja & Festivals 5,000
Office Equipment Repair & Maintenance 5,000
Staff Welfare 25,000
Telephone, Internet & Communication 50,000
Travelling Expenses 75,000
Vehicle Fuel & Maintenance 50,000
Total 465,000

15. Based on the estimated useful life of the fixed assets, depreciation has been provided on
Straight Line Method at following rates:
Fixed Assets Rate
Land & Land Development 0.00%
Building & Civil Works 2.50%
Plant & Machinery 5.00%
Furniture, Fixture & Office Equipment and Generator 10.00%
Vehicle 10.00%

16. The portion of Working Capital in the project cost has been estimated on the basis
of working capital requirement of the first year of commercial production. The
subsequent working capital requirement arising due to higher capacity utilization
in the later years would be met from the internal accruals from the project. The
working capital cover has been assumed as under:

Working Capital Coverage (Days)

Raw Material 30
Finished Goods 15
Accounts Receivable 45
Accounts Payable 15

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 Operational Cash 30

17. It has been assumed that the factory shall operate 300 days in a year.
18. Total number of days in a year has been assumed to be 360 for working capital
calculation purpose.
19. Capacity Utilization of the workshop / plant during the projected period of ten
years has been considered as under:

Year Capacity Utilization

Year 1 55%

Year 2 65%

Year 3 70%

Year 4 75%

Year 5 90%

Year 6 90%

Year 7 90%

Year 8 90%
20. No Income Tax holiday is considered for
Year 9 90%
this project. The project will pay income
Year 10 90% tax to Government in addition to indirect
taxes like value added Tax & other taxes.
Income tax has been computed @ 20% on taxable income after adjustment of
depreciation on written down value method at the rates prescribed by Income Tax
Act, 2058.

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6 SWOT ANALYSIS

6.1 Strength
 Proven skill & experience of promoters in Nepalese industries
 Relevant experience of the promoters infertilizer Industry
 Latest and proven Japanese technology
 Professional and well experienced management team having experience of more
than 20 years
 Extensive technical and marketing knowledge of the promoters about Fertilizer
Industry.

6.2 Weakness

 Creating a brand image as a new entrant in the market.

 Reliance on other countries for some raw materials, equipment and technology
 Shortage of skilled manpower in the country

6.3 Opportunities

 Product to be used for farming to get better yield, which is an essential commodity
in Nepal
 High and ever increasing demand of the product in the domestic market
 Immense potential for infrastructure development and industrialization in the
country
 Growing population in the country
 Very few domestic players
 Easy availability of unskilled & semi-skilled labors at a cheap price

6.4 Threats
 Political instability in the country
 Labor unrest and growing labor problems in the country
 Lack of clarity & consistency in the industrial policy of the country
 Huge power shortage in the country

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7 CONCLUSIONS

The domestic demand of Organic Fertilizer in Nepal will increase further with the
development of the nation. Considering various aspects as explained above like supply
and demand situation, raw material availability, production cost, plant site, transport
facility, the decision to implement the project is found to be appropriate.

The proposed business venture of Bio fertilizer can be concluded as a viable project on
the following grounds:
 The project is promoted by a team of highly reputed, experienced and successful
entrepreneur having relevant experience of the Agro industry.
 Around 25% of the total production can be easily sold in the market.
 The company is proposed to be managed by professional and competent
management team.
 Positive results from market assessment of project conducted by experts in the
field.
 Positive results from financial analysis of the proposed business. Moreover, the
project is expected to easily sustain the adverse financial impact on the project.
 SWOT analysis of the project shows that the strength & opportunities of the
project is much stronger compared to its weakness and threat.

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8 FINANCIAL ANNEXURE

Table A Summary of Project Cost

Table B Projected Balance Sheet
Table C Projected Profit and Loss A/C
Table D Projected Cash Flow Statement
Table E Sales Revenue
Table F Production Cost
Table G Operating Cost
Table H Direct Labour Cost
Table I Factory Overheads
Table J Indirect Labour Cost
Table K Selling & Distribution Expenses
Table L Office & Administration Expenses
Table M Loan Repayment Schedule
Table N Fixed Assets and Depreciation
Table O Computation of Tax Liability
Table P Depreciation as per Income Tax Act
Table Q Working Capital Requirement
Table R Financial Ratios
Table S Breakeven Point
Table T Pay back and IRR

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