PROJECT REPORT

on

INCENSE STICKS

Submitted to

APIIC
TIRUPATHI

Submitted by

M/s. ABR SRI VAARAAHI INDUSTRIES

Prop : Sri E Amarnath Reddy
#Plot No 150, MSME Gandrajupalli,
Industrial Park, Gangavaram,Chittoor Dist,
ANDHRA PRADESH.
 M/s. ABR SRI VAARAAHI INDUSTRIES

#Plot No 150, MSME Gandrajupalli, Industrial Park, Gangavaram,Chittoor Dist, ANDHRA PRADESH.

PROJECT AT A GLANCE
1 Name of the Promoter : Sri E AMARNATH REDDY
2 Name of the Unit : M/s. ABR SRI VAARAAHI INDUSTRIES
3 Name of the Activity : INCENSE STICKS MANUFACTURING
4 Proposed Location : Industrial Park, Gandrajupalli
5 Scheme : StandUp India
# 20-4-30/03, Kothapalli, Thirupati, Chittoor Dist,
6 Residence Address : Andhra Pradesh.
7 Phone No : 9177005000
8 Project Cost : 150
9 Details of Project Cost : Rs. In Lakhs
10 Land & development Charges : 3.6
11 Building & Civil Works including Be : 10.21
12 Plant and Machinery : 5.38
13 Electricity Deposits : 0.00
14 Contingencies : 1.50
15 Pre-preliminery Operative Expenses : 2.00
16 Working Capital : 1.81
17 TOTAL : 24.50
18 Means of Finance :
19 Promoter controbution : 2.45
20 Subsidy from Govt under : 6.12
21 Term loan from Bank : 20.42
22 Working Capital loan from Bank : 1.63
23 TOTAL : 24.50
24 Revenue from Sales : 38.20
25 Profit : 2.75
26 Rate of Interest : 11.00%
27 No.of Employment : 6
28 Break Even Point : 29.29%
29 D.S.C.R : 2.75
30 D.S.C.R : 2.75
31 INTERNAL RATE OF RETURN : 38%
(IRR)
Introduction
India is a vast country and the Indian people follow various religions, speak different languages
and follow different customs and traditions. Inspite of this diversity, all people use Agarbatti(Incense
sticks) at all the places of worship, religious functions, festive occasions, weddings. This itself speaks
volumes of the paramount importance Agarbatti has. Besides, it is also used as air- freshener.
Incense sticks also called agarbattis are fragranced sticks used from ancient period by people all
over the world. The evolution of incense stick could be from the burning of aromatic woods in the
primitive period. As mankind gained civilization and became more religious, these fragranced
agarbattis played important role in daily rituals.
Agarbatti Industry is a real employment generator and is capable of providing employment to
the weaker sections of both the urban and rural populace. Most of the persons engaged in fashioning
Agarbattis are women.

A salient feature of Agarbatti Industry is that raw materials are provided by Agarbatti units to
artisans who do the job of rolling of Agarbatti at their home besides looking after their children and
household work. This largely helps them to supplement their recent family income. Agarbatti has
become a significant foreign exchange earner because of its demand in overseas markets.
Significant Characteristics of the Agarbatti Industry
1. Technical-know- how is simple.
2. Sophisticated equipment are not required.
3. Implements/tools used are simple, portable and not costlier.
4. Large capital investment is not required.
5. Initially the industry can be started with a small investment even at the residence of the
artisans.
6. Eco- friendly
7. Highly labour- intensive industry
8. No dependence on power supply.
9. No work related hazards.

Market Potential
India is largest incense stick maker and currently the export market for the sector is about Rs
450 crore. With the demand for branded agarbatti (incense sticks) growing at nearly 15 per cent every
year.
Agarbatti, mostly a handmade product [in India], is exported to almost the entire known world
from India. While many countries are known for selling unscented or raw incense sticks, India is known
for its perfumed versions.
In India, a wide variety of agarbattis are available in different shapes, colours and fragrances at
very competitive prices, from sandalwood to lavender, and rose to mogra.
 M/s. ABR SRI VAARAAHI INDUSTRIES

Agarbatti Making Machinery

According to the desired output, entrepreneurs have to choose the right machinery for the
business of making incense sticks. As far as the feasibility of the project is concerned, choosing the
right machinery is one of the most important deciding factors. The business of making incense sticks is
profitable, and various types of machinery are available in the market.

There are broadly three types of agarbatti making machines available. They are manual,
automatic, and high-speed automatic agarbatti manufacturing machines. Apart from these, you can
also consider buying incense sticks raw material mixer machine and drier to get better production
output.

I. Manual Incense Making Machines

The manual agarbatti making machine is a very easy operating machine with high output, low
price, durable, superior quality, which does not require any power. It is easy to maintain at a very
affordable price. You can make more quantity and better quality incense sticks from these machines.

II. Automatic agarbatti making machine

High volume output is a perfect option for achieving more uniform output with an automated
machine. These machines are available in attractive patterns, designs, and sizes as per exact
requirements. With this type of machine, you will get an output of 150–180 sticks/min. Both round and
square sticks may be used. Typically, these machines run on electricity. And this type of machine
demands a dedicated person to continuously feed the machine with bamboo poles.
 M/s. ABR SRI VAARAAHI INDUSTRIES

III. High-Speed Automatic Agarbatti Making Machine

Different types of agarbatti drier are available with different models. Drying machines used in
commercial production hardly cost 4-5 / kg. You will get a production output of 160 kg / 8 hours.

Powder mixer machine for making incense sticks:

In starting a commercial large-scale agarbatti business, you may consider having a powder
mixer or blender machine to achieve the same mixing quality with low labor input. These machines are
normally capable of mixing two types of powders that can be both wet and dry powders. These
machines are typically custom available in various sizes, shapes and capacities. Production capacity
normally varies from 10kg-20kg / 10min.

Process for making incense sticks

There are mainly two types of incense sticks commercially manufactured. One is aromatic
incense sticks, and the other is spice incense sticks. In the manufacture of aromatic incense sticks
powder of charcoal, gigantic, white chips, etc., a semi-solid paste is made by mixing it with water. This
property is taken on a wooden plank and is rolled by hand with an automatic incense sticks machine.
Finally, the raw rods are dipped in an appropriate aromatic compound diluted with other
solvents such as white oil or diethyl phthalate (DEP) and dried and packed.
 M/s. ABR SRI VAARAAHI INDUSTRIES

TECHNICAL ASPECTS

i) Production detail & Process of Manufacture:

To manufacture Dhoopbatti, eucalyptus leaves, tulsi leaves are cut with the help of leaf cutting
machines and left them to drying for 1-2 days. After drying leaves are pulverized and converted in powder form.
Guggal, cascalia powder, jigat powder and dried compound are mixed with D.E.P. in water bath (mixing
machine). Now dhoop wood, charcoal powder, ground net shell powder and powder leaves are mixed uniformly
in powder mixing machine. This material alongwith rubber solution (plasticizer), perfumery compound is
transferred in edge runner machine. Now material is converted in sticky paste which is transferred in cutting
machine to convert it incense sticks.

These incense sticks are packed in small boxes and in corrugated boxes for dispatching the material.

ii) Quality Control & Specification:

As such there are no quality specifications for incense sticks. However, good perfume, burning
till last point make incense sticks more popular for sale among people.

iii) Production Capacity ( per annum )

a) Quantity : 38,500 Kgs

b) Value (Rs.) : Rs. 38,70,000/

iv) Motive Power Requirement: 5 KW

 M/s. ABR SRI VAARAAHI INDUSTRIES

DETAILED PROJECT REPORT

1 COST OF PROJECT
A. Fixed Capital Investment
a. Land : 3000 Sq Ft

b. Workshed Area Rate in Amt. In Rs.

Sq.ft Rs.
Working Plant 1500 500.00 750000.00
Storage 500 300.00 150000.00
Others 700 130.00 91000.00
Parking 300 100.00 30000.00
Land 3000 120.00 360000.00
0 0 0.00 0.00
0 0 0.00 0.00
Total 1381000.00

C.
Machinery Qty. Rate Amount in Rs.
Fully Automatic Agarbatti Making 6 62000.00 372000.00
Machine
Agarbatti Powder Mixer 1 50000.00 50000.00
Perfume Mixer 1 16000.00 16000.00
Pulverizer 1 100000.00 100000.00
Total 538000.00
 M/s. ABR SRI VAARAAHI INDUSTRIES
d. Preliminary & Pre-operative Cost : Rs. 200000.00

e. Furniture & Fixtures : Rs. 100000.00

f. Contingency/Others/Miscellaneous Rs. 50000.00

Total Capital Expenditure : Rs. 2269000.00

Working Capital : Rs. 181419.00

Total Cost Project : Rs. 2450419.00

3.1 Means of Financing :

Own Contribution 10% Rs. 245042.00

Bank Finance : 90% Rs. 2042100.00

Term Loan
Working Capital Rs. 163277.00

Total Rs. 2205377.00

3.2 STATEMENT SHOWING THE REPAYMENT OF TERM LOAN & WORKING CAPITAL :
TERM LOAN

Interest @
Year Opening Balance Installment Closing Balance 11.00%
1st 2042100 408420 1633680 224631
2nd 1633680 408420 1225260 179705
3rd 1225260 408420 816840 134779
4th 816840 408420 408420 89852
5th 408420 408420 0 44926
6th 0 0 0 0
7th 0 0 0 0
8th 0 0 0 0

WORKING CAPITAL

Interest @
Year Opening Balance Installment Closing Balance 11.00%
1st 163277 32655 130622 17960
2nd 130622 32655 97966 14368
3rd 97966 32655 65311 10776
4th 65311 32655 32655 7184
5th 32655 32655 0 3592
6th 0 0 0 0
7th 0 0 0 0
8th 0 0 0 0
 M/s. ABR SRI VAARAAHI INDUSTRIES
3.3 STATEMENT SHOWING THE DEPRECIATION ON FIXED ASSETS:
WORKSHED @ 5.00%
Particulars 1st Year 2nd Year 3rd Year 4th Year 5th Year
Opening Balance 1381000 1311950 1246353 1184035 1124833
Depreciation 69050 65598 62318 59202 56242
Closing Balance 1311950 1246353 1184035 1124833 1068591
MACHINERY @ 10.00%
Opening Balance 538000 484200 435780 392202 352982
Depreciation 53800 48420 43578 39220 35298
Closing Balance 484200 435780 392202 352982 317684
TOTAL DEPRECIATION
Workshed 69050 65598 62318 59202 56242
Machinery 53800 48420 43578 39220 35298
Total 122850 114018 105896 98422 91540

2 Schedule of Sales Realization :

4.1 Details of Sales
Rate/ No. of Amount in Rs.
Particulars of Product Pair/Unit Pair/Unit
0
Dhoopbatti – 20 gms 2.50 500000 1250000.00

Dhoopbatti – 50 gms 5.60 300000 1680000.00

Dhoopbatti – 100 gms 7.50 100000 750000.00
Dhoopbatti 40.00 3500 140000.00
Total 3820000.00

4.2 Capacity Utilization of Sales

Particulars 1st Year 2nd Year 3rd Year 4th Year 5th Year

Capacity Utilization 70% 80% 90% 90% 90%

Sales / Receipts 2674000 3056000 3438000 343800 343800

0 0

3 Rawmaterials :
Particulars Unit Rate/unit Reqd.Unit Amount in Rs.
Sandal Wood Powder Kgs 125.00 30 3750.00
Dhoop Wood Kgs 25.00 300 7500.00
Cascalia Powder Kgs 130.00 30 3900.00
Charcoal Powder Kgs 150.00 30 4500.00
Wood Dust/leaves of eucalyptust Kgs 3.00 1500 4500.00
DEP LTRS 300.00 100 30000.00
Jigat Powder 0 60.00 500 30000.00
Compound of Perfumes 0 60.00 500 30000.00
Packaging Box Nos 2.00 50000 100000.00
Total 214150.00
 M/s. ABR SRI VAARAAHI INDUSTRIES

5.1 Wages :

No. of Wages Amount in Rs.

Particulars Worker Per Month (Per Annum)
Workers 2 5000.00 120000.00
Skilled Workers 2 6000.00 144000.00
Total 4 264000.00

Repairs and Maintenance : Rs. 11460.00

Rs. 7640.00
Power and Fuel :

Other Overhead Expenses : Rs. 3820.00

6. Administrative Expenses

6.1 Salary
Supervisor 10000.00 120000.00
Manager 12000.00 144000.00
0.00 0.00
0.00 0.00
0.00 0.00
Total 264000.00

6.2 Telephone Expenses 764.00

6.4 Stationery & Postage 764.00

6.5 Advertisement & Publicity 19100.00

6.6 Workshed Rent 0.00

6.7 Other Miscellaneous Expenses 19100.00

Total 303728.00
 M/s. ABR SRI VAARAAHI INDUSTRIES

4 Capacity Utilization of Manufacturing & Administrative Expenses :

Particulars 1st Year 2nd Year 3rd Year 4th Year 5th Year
Capacity Utilization 70% 80% 90% 90% 90%
Manufacturing Expenses
Rawmaterials 149905 171320 192735 192735 192735
Wages 184800 211200 237600 237600 237600
Repairs & Maintenance 8022 9168 10314 10314 10314
Power & Fuel 5348 6112 6876 6876 6876
Other Overhead Expenses 2674 3056 3438 3438 3438
Administrative Expenses
Salary 264000 264000 264000 264000 264000
Postage Telephone Expenses 535 611 688 688 688
Stationery & Postage 535 611 688 688 688
Advertisement & Publicity 13370 15280 17190 17190 17190
Workshed Rent 0 0 0 0 0
Other Miscellaneous Expenses 13370 15280 17190 17190 17190
Total: 642559 696638 750718 750718 750718
5 Assessment of Working Capital :
Particulars Amount in Rs.
Sale 3820000.00

Manufacturing Expenses
Raw Material 214150.00
Wages 264000.00
Repair & Maintenance 11460.00
Power & Fuel 7640.00
Other Overhead Expenses 3820.00

Production Cost 501070.00

Administrative Cost 303728.00
Manufacturing Cost 804798.00

Working Capital Estimate

Element of Working Capital No of Day Basis Amount in Rs.

Raw materials 90 Material Cost 64245.00

Stock in process 30 Production Cost 50107.00

Finished goods 15 Manufacturing Cost 40240.00

Receivable by 10 Manufacturing Cost 26827.00

Total Working Capital Requirement Per Cycle 181419.00

 M/s. ABR SRI VAARAAHI INDUSTRIES
Financial Analysis
9.1 Projected Profit & Loss Account :
Particulars 0 Year 1st Year 2nd Year 3rd Year 4th Year
Sales / Receipts 2674000 3056000 3438000 3438000
2674000 3056000 3438000 3438000
Manufacturing Expenses
Rawmaterials 149905 171320 192735 192735
Wages 184800 211200 237600 237600
Repairs & Maintenance 8022 9168 10314 10314
Power & Fuel 5348 6112 6876 6876
Other Overhead Expenses 2674 3056 3438 3438
Depreciation 122850 114018 105896 98422
Production Cost 473599 514874 556859 549385
Administrative Expenses
Salary 264000 277200 291060 305613
Postage Telephone Expenses 535 611 688 688
Stationery & Postage 535 611 688 688
Advertisement & Publicity 13370 15280 17190 17190
Workshed Rent 0 0 0 0
Other Miscellaneous Expenses 13370 15280 17190 17190
Administrative Cost 291810 308982 326815 341368
Interest on Bank credit @ 11%
Term Loan 224631 179705 134779 89852
Working Capital Loan 17960 14368 10776 7184
Cost of Sale 1008000 1017929 1029229 987790
Net Profit Before Tax 1666000 2038071 2408771 2450210
Less Tax 0.00 0.00 0.00 0.00
Net Profit 1666000 2038071 2408771 2450210

9.2 CALCULATION OF DEBT SERVICE CREDIT RATIO (D.S.C.R) :

Particulars 0 Year 1st Year 2nd Year 3rd Year 4th Year
Net Profit 1666000 2038071 2408771 2450210
Add :
Depreciation 122850 114018 105896 98422
TOTAL - A 1788850 2152088 2514667 2548632
Payments :
On Term Loan :
Interest 224631 179705 134779 89852
Installment 408420 408420 408420 408420
On Working Capital
Interest 17960 14368 10776 7184
TOTAL - B 651011 602493 553975 505457
D.S.C.R = A/B
2.75 3.57 4.54 5.04
Average D.S.C.R
 M/s. ABR SRI VAARAAHI INDUSTRIES
9.3 PROJECTED BALANCE SHEET :

Particulars 0 Year 1st Year 2nd Year 3rd Year 4th Year
LIABILITIES :
Promoters Capital 245042 245042 245042 245042
Profit 1666000 2038071 2408771 2450210
Term Loan 2042100 1633680 1225260 816840
Working Capital Loan 163277 130622 97966 65311
Current Liabilities 0 0 0 0
Sundry Creditors 0 0 0 0
4116419 4047415 3977039 3577403
ASSETS :
Gross Fixed Assets : 2019000 1896150 1782133 1676237
Less : Depreciation 122850 114018 105896 98422
Net Fixed Assets 1896150 1782133 1676237 1577815
Preliminary & Pre-Op. Expenses 200000 150000 112500 84375
Current Assets 163277 130622 97966 65311
Cash in Bank/Hand 2056992 2134660 2202836 1934277
Total 4116419 4047415 3977039 3577403

9.4 CASH FLOW STATEMENT :

Particulars 0 Year 1st Year 2nd Year 3rd Year 4th Year
Net Profit 1666000 2038071 2408771 2450210
Add : Depreciation 122850 114018 105896 98422
Term Loan 2042100 1633680 1225260 816840
Working Capital Loan 163277 130622 97966 65311
Promoters Capital 245042 0 0 0
Total 4239269 3916390 3837893 3430783

Total Fixed Capital Invested 2269000

Repayment of Term Loan 408420 408420 408420 408420

Repayment of WC Loan 32655 32655 32655 32655
Current Assets 163277 130622 97966 65311
Total 604352 571697 539042 506386

Opening Balance 0 3634917 6979610 10278461

Surplus 3634917 3344693 3298852 2924397
Closing Balance 3634917 6979610 10278461 13202858
 M/s. ABR SRI VAARAAHI INDUSTRIES

9.5 BREAK EVEN POINT AND RATIO ANALYSIS :

Particulars 0 Year 1st Year 2nd Year 3rd Year 4th Year
Fixed Cost 639291 602705 567489 529643
Variable Cost 491559 529242 567635 556569
Total Cost 1130850 1131947 1135124 1086212

Sales 2674000 3056000 3438000 3438000

Contribution (Sales-VC) 2182441 2526758 2870365 2881431

B.E.P in % 29.29% 23.85% 19.77% 18.38%

Break Even Sales in Rs. 783280 728944 679714 631947

Break Even Units 313312 291578 271886 252779

Current Ratio 0.24 0.21 0.17 0.12

Net Profit Ratio 62.30% 66.69% 70.06% 71.27%