Introduction
Biscuit making is a conventional activity in many parts of the country. Despite the advent of modern, large capacity and automatic biscuit making plants, large section of people especially in semi-urban and rural areas still prefer fresh biscuits from local bakery as they are cheap and offer many varieties. These manufacturers are able to cater to some typical local palate as well. Thus, they are able to withstand competition from organised sector units.
Objective
The primary objective of the model report is to facilitate the entrepreneurs in understanding the importance of setting up unit of biscuit plant. This model report will serve as guidance to the entrepreneurs on starting up such a new project and basic technical knowledge for setting up such a facility.
Raw Material Availability
The basic raw material for the manufacture of biscuits is wheat flour. Major wheat producing districts in the state are Hosangabad (4.19 lakh MT production), Ujjain (3.85 lakh MT), Dhar (3.51 lakh MT), Indore (3.34 Lakh MT) etc.
Suitable Location
The suitable recommended location of the biscuit plant is Hoshangabad, Ujjain, Dhar, Indore, Vidisha, Sehore etc. There is already a food park at Hosangabad,
Market Opportunities
Market for biscuits is scattered all over the country. There are three distinct market segments viz. urban, semi-urban and rural. Urban and semi-urban markets are dominated by many national and regional brands but even then many local manufacturers have also carved a special niche as their products are fresh, they offer many varieties and they are cheaper.
Project description
- Applications
Biscuits are eaten by all sections of people across the board round the year. They are, thus, mass consumption items with number of varieties and shapes. The market is scattered. There are some dominant national and regional brands. Biscuits can be manufactured at a location which is close to the market.
Capacity of the Project
The capacity of the project is 50 tonnes of biscuits per year.
Critical success factors
Rural and certain semi-urban markets are mainly captured by small manufacturers. This note primarily suggests entering this market. Apart from domestic customers, there is a vast market at bus and taxi stands, railway stations, weekly hats or bazaars, highway eateries or dhabas and melas or fairs. A small delivery vehicle can take care of destinations located in the vicinity of about 50-60 km. Attractive margins to traders/retailers will be crucial.
Manufacturing process
The process is conventional and easy. Wheat flour along with other ingredients is mixed with water and dough is prepared. Then it is kept at a normal room temperature for about couple of hours to allow proper fermentation. Then it is placed in biscuit moulding trays and these trays are placed in oven for baking. After requisite baking, trays are taken out, cooled and biscuits are packed. The process flow chart is as under:
| PARTICULARS | Unit | Qty | Cost/unit | Total |
| LAND & BUILDING | 13.45 | |||
| Land | SqM | 400 | 250.00 | 1.00 |
| Land Development | ||||
| Land Area | 400 | 500.00 | 2.00 | |
| Building | ||||
| Production Block | ||||
| Main Production Area | SqM | 100 | 5,000.00 | 5.00 |
| Store cum packing room & Sales Counter | SqM | 50 | 5,000.00 | 2.50 |
| Misc Handling Area | SqM | 100 | 2,000.00 | 2.00 |
| Contingencies | 10% | 0.95 | ||
| PLANT & MACHINERY | 28.98 | |||
| Flour Sifter | LS | 1 | 70,000.00 | 0.70 |
| Dough Kneader | 2 | 50,000.00 | 1.00 | |
| Electrically Operated Oven | 1 | 250,000.00 | 2.50 | |
| Biscuit Moulding Tray | 70 | 30,000.00 | 21.00 | |
| Contingencies | 15% | 3.78 | ||
| MISCELLANEOUS FIXED ASSETS | 6.73 | |||
| Furniture and Fixture | LS | 1 | 40,000 | 0.40 |
| Sealing and wraping machine | No | 2 | 50,000 | 1.00 |
| Vehicles-Delivery LCV | No | 2 | 200,000 | 4.00 |
| Weighing Scale | No | 1 | 25,000 | 0.25 |
| Others | LS | 1 | 20,000 | 0.20 |
| Contingencies | 15% | 0.88 | ||
| PRE-OPERATIVE EXPENSES | 5.90 | |||
| Establishment | 1 | 230,000 | 2.30 | |
| Professional Charges | 1 | 200,000 | 2.00 | |
| Security Deposits | 1 | 160,000 | 1.60 | |
| TOTAL | 55.06 |
- Building
The building development cost will be around Rs 10.45 lakhs.
Plant and Machinery
It is suggested to have installed production capacity to manufacture 105 tonnes of biscuits per year assuming working for about 330 days for 12 hours every day. This would require flour sifter, dough kneader, electrically operated oven, biscuit moulding tray and sealing and wrapping machine. All these machineries will cost around Rs. 28.98 lakhs.
Miscellaneous Assets
The miscellaneous assets will cost around Rs. 6.73 Lakhs.
Preliminary & Pre-operative Expenses
A provision of Rs. 5.90 lakhs would take care of pre-production expenses like establishment, professional charges, security deposits etc.
Working Capital Requirement
| ITEMS | Year 1 | Year 3 | Year 5 |
| STOCK OF RAW MATERIAL & PACKING MATERIAL | 2.59 | 3.98 | 3.98 |
| SUNDRY DEBTORS | 10.24 | 15.75 | 15.75 |
| TOTAL | 12.82 | 19.73 | 19.73 |
| MARGIN | 3.21 | 4.93 | 4.93 |
| MPBF | 9.62 | 14.80 | 14.80 |
| INTEREST ON WC | 1.06 | 1.63 | 1.63 |
Means of Finance
| EQUITYCAPITAL | 35.00% | 20.39 | ||
| MOFPISUBSIDY | 25% | 50.00 | 25.00% | 14.57 |
| TERMLOAN | ||||
| FINANANCIALINSTITUTIONS | 10.00% | 40.00% | 23.31 | |
| -Payable half yearlyInstallments | 10 | 2.30 | ||
| TOTAL | 100% | 58.26 |
Cash flow statement
| PARTICULARS | Year 1 | Year 3 | Year 5 | Year 7 |
| SOURCESOFFUNDS | ||||
| EQUITYCAPITAL | – | – | – | – |
| SUBSIDY | ||||
| NETPROFIT | 1.21 | 9.06 | 8.23 | 7.47 |
| (INTERESTADDEDBACK) | ||||
| DEPRECIATION | 3.87 | 3.87 | 3.87 | 3.87 |
| PRELIMINARYEXP.W/O | 0.84 | 0.84 | 0.84 | 0.84 |
| INCREASEINTERMLOAN | – | – | – | – |
| INCREASEINBANKBORROWINGS-WC | 9.62 | 1.48 | – | – |
| TOTAL | 1 5.54 | 15.25 | 12.94 | 12.18 |
Projected Balance Sheet
| PARTICULARS | Year1 | Year3 | Year5 | Year7 |
| LIABILITIES | ||||
| EQUITYCAPITAL | 20.39 | 20.39 | 20.39 | 20.39 |
| RESERVES&SURPLUS | 12.39 | 21.65 | 33.67 | 45.74 |
| TERMLOAN | 21.01 | 11.81 | 2.61 | 0.00 |
| BANKBORROWINGS-WC | 9.62 | 14.80 | 14.80 | 14.80 |
| TOTAL | 63.40 | 68.65 | 71.46 | 80.93 |
Projected Profit and Loss Account
| PARTICULARS | Year 1 | Year 3 | Year 5 | Year 7 |
| NETREVENUEREALISATION | 37.54 | 57.75 | 57.75 | 57.75 |
| TOTALEXPENSES | 31.62 | 43.98 | 44.81 | 45.57 |
| GROSSPROFIT | 5.92 | 13.77 | 12.94 | 12.18 |
| DEPRECIATION | 3.87 | 3.87 | 3.87 | 3.87 |
| INTEREST | 3.39 | 3.15 | 2.23 | 1.63 |
| PRELIMINARYEXP.W/O | 0.84 | 0.84 | 0.84 | 0.84 |
| PROFITBEFORETAX | (2.18) | 5.90 | 5.99 | 5.84 |
| RETAINEDPROFIT | (2.18) | 5.90 | 5.99 | 5.84 |
Key Indicators
| NET PRESENT VALUE at Current Inflation(Rs.in lakhs) | 54.85 |
| INTERNAL RATE OF RETURN% | 21.79 |
| AVERAGE DSCR | 1.97 |
| BREAK EVEN POINT % | 80.23 |
| PAY BACK PERIOD | 5.06 |
Manpower Requirement
| PARTICULARS | NOs. |
| SUPERVISORYSTAFF | |
| ProductionSupervisors | 2 |
| Accountant | 1 |
| WORKERS | |
| SkilledWorkers | 2 |
| Semi-SkilledLabour | 4 |
| Salesman | 2 |
| Driver | 2 |
| TOTAL | 13 |
Assumptions
| Project&Financing | ||
| Contingencies onBuilding | 10% | |
| Contingencies onEquipment | 15% | |
| TermLoan | 40% | |
| Rate of Intereston TermLoan | 10% | |
| Subsidy Considered Subjectto ceiling | 25% | |
| ExpectedtimeofInstallation | Months | 10 |
| Moratorium | Months | 6 |
| CAPACITY | ||
| RatedCapacity PerAnnum 80% ofInstalled capacity | TPA | 105 |
| NumberofOperationalDays DAYS | 330 | |
| WorkingHours Perday Hrs | 12 | |
| CAPACITYUTILIZATION | ||
| YearI | 65% | |
| YearII | 90% | |
| YearIII | 100% | |
| SALESPRICE | ||
| WSPrice | 55,000 | |
| OTHEREXPENSE | ||
| Commission | 5.0% | |
| MarketingExpenses | 2.5% | |
| POWER | ||
| ConnectedLoad HP | 40 | |
| DEPRICIATIONAS PERCOMPANY’S ACT | ||
| BUILDING | 3.34% | |
| PLANT&MACHINERY | 10.34% | |
| MISC.FIXEDASSETS | 7.07% | |
| LAND&SITEDEVELOPMENT | 1.63% | |
| MAINTENANCE | ||
| BUILDING | 1.00% | |
| PLANT&MACHINERY | 2.00% | |
| MISC.FIXEDASSETS | 1.50% | |
| LAND&SITEDEVELOPMENT | 1.00% |
Sources of Technology
Master Mechanical Works Pvt Ltd,75,Link Road,Lajpat Nagar 3,New Delhi-110024.
Nagpal Brothers,C-127,Phase 2, Mayapuri Industrial Area,New Delhi-110064.
Delight Engg.Works,Lane No. 8 Aslat pura,Moradabad-244001.TelNo.2498398/2491687, Fax:2494378.
Foodmac Engg. Pvt. Ltd. 37038, Sector2,Parwanoo-173220(HP).TelNo.233294/233295,Fax:233296.
KGN Engg., Plot No. 174,Old Airport Road, Secunderabad-500011. TelNo. 27952147.
The actual cost of projects may deviate on change of any of the assumptions.