Model Project on Cornflakes

Govt. of West Bengal

Submitted to
Directorate of Food Processing,
Government of West Bengal

Prepared By
NABARD Consultancy Services
Private Limited
Contents
i. Introduction ..................................................................................................................................... 1
Ii. Raw Material Availability............................................................................................................... 1
Iii. Market Opportunities ...................................................................................................................... 1
Iv. Project Description.......................................................................................................................... 2
Product And Its Uses ......................................................................................................... 2
Capacity ........................................................................................................................... 2
Manufacturing Process With Flow Chart ............................................................................. 2
V. Project Components ........................................................................................................................ 2
Land And Building ............................................................................................................ 2
Civil Works ...................................................................................................................... 3
Plant And Machineries ....................................................................................................... 3
Miscellaneous Fixed Assets................................................................................................ 3
Preliminary Preoperative Expenses ..................................................................................... 3
Contingency ...................................................................................................................... 4
Vi. Project Cost ..................................................................................................................................... 4
Vii. Mean Of Finanace ........................................................................................................................... 4
Viii. Working Capital Assesment............................................................................................................ 4
Ix. Manpower Requirement .................................................................................................................. 5
Administrative And Supervisory ............................................................................................ 5
X. Project Profitability ......................................................................................................................... 5
Installed Capacity And Capacity Utilization ........................................................................ 5
Yield And Production ........................................................................................................ 5
Sales Revenue ................................................................................................................... 5
Profit Calculations ............................................................................................................. 5
Xi. Financial Parameters ....................................................................................................................... 6
Cash Flow Statement ......................................................................................................... 6
Break Even Analysis.......................................................................................................... 6
Debt Service Coverage Ratio (DSCR) ................................................................................. 7
Internal Rate Of Return (IRR) ............................................................................................ 7
Projected Balance Sheet ..................................................................................................... 7
Xii. Assumptions.................................................................................................................................... 7
Xiii. Addressess of Supplier Of Plant And Machinery ........................................................................... 8
 PROJECT PROFILE OF CORN FLAKES

I. INTRODUCTION
Corn flakes are the most popular breakfast cereals as people have become more
conscious of health and about their daily intake of food. Maize is the major raw
material used for manufacturing of corn flakes. Corn flakes are considered as health
food and are consumed along with milk, sugar, fruits and dry fruits mainly.
Objectives:
The commercial corn flakes manufacturing will have a following objective
 Production of ready to eat or ready to serve cornflakes.
 Preservation of corn and also production of hygienic maize product.
 Export of the finished product such as cornflakes and by-products such as
broken corns and broken corn flakes as animal feed.

II. RAW MATERIAL AVAILABILITY

In India, maize is the third most important food crop after rice and wheat. Maize
in India contributes nearly 9% in the national food basket. It is also found that
there is substantial increase in the area along with the production of maize in the
country. West Bengal produces 35.23 Lakh .MT per year. The uses of maize are
very wide, ranging from corn flakes to cattle feed. The products prepared from
maize are Starch, Maize Vermicelli, Flakes, and Snacks etc. Corn flakes are very
popular breakfast cereal in the western countries and now days it is becoming
very popular in countries like India too. Corn flakes enriched with vitamins and
mineral with popular flavours are widely accepted in children. Currently brands
like Kellogg are present in market but cost of product is not economical for
middleclass customer. Definitely there will be good demand for product with
good quality and price within the range of middle class customer in near future.

III. MARKET OPPORTUNITIES

Setting up corn flakes manufacturing plant would help in value addition. The
broken corn and flakes formed during the processing can be used in the
preparation of the animal feed. Due to change in the lifestyle and increase in the
standard of living, people are changing their breakfast habit. Hence there is lot of
scope for corn flakes manufacturing.
IV. PROJECT DESCRIPTION

 PRODUCT AND ITS USES

Cornflakes are nutritious
 Corn flakes can be consumed along with milk as a breakfast
 It can also be used as a pudding ingredient in novelty food products such as
chocolates and ice cream

 CAPACITY
Capacity of corn processing plant is considered as1200MT per year

 MANUFACTURING PROCESS WITH FLOW CHART

Maize is cleaned, polished and milled to remove the germ and bran. The broken
pieces, which are comparatively big in size are cooked under pressure in a rotary
steam cooker. Maize is cooked for about 2 hours along with the flavouring agents, if
necessary. The cooked materials will have the moisture content up to 33%. Hence to
reduce the moisture content to about 15% to 20%, pre heated air is blown. The dried
material is kept in the tempering tank to enable the residual moisture to become
distributed equally. The tempered material is now passed through the heavy duty
flaking machine fitted with magnetic separator and water cooling system. The maize
flakes are then roasted in suitable ovens. The roasted flakes are the n graded and
packed in polythene containers or other suitable packaging materials.

Milling to
Cleaning and Cooking and tempering
remove germ Packing
polishing drying and roasting
and bran

V. PROJECT COMPONENTS

 Land and Building

A plot of land of around 0.5 acre shall be required which would cost around
Rs. 2.5 Lakh. The cost of land development will be Rs. 1.5 Lakhs.
  Civil Works
Main building and storage Area 600 sq. m
Other 400 sq. m
The construction cost is considered as Rs. 6000 per sq. meter. Hence the total
construction cost for built up area is Rs. 40.00 Lakhs. An amount of Rs. 4
Lakhs is necessary to take care of miscellaneous civil work.

 Plant and Machineries

Plant and Machinery Details
S. NAME OF MACHINERY QUANTITY PRICE IN
No. PLANT & MACHINERY FOR DAL MILL CAPACITY 0.5 MT Per hour
IN NOS RS
1 Feed Roll 1
2 Chilled Rolls 600Mm X 1000Mm, Balanced With 20 2
3 Spherical
Mm ChilledSelfDepth
AlliedAttached
Bearing 22330 With
By Water Shaft
Tub Of
System. 1
4 Electronic Motor 30 - 40 Hp X 960 Rpm X 400 V Ac
170 Mm Diameter 1
5 Hydraulic Cylinder 2 10,20,000.00
6 Hydraulic Pump 1
7 Lower Scrapper 1
8 Main Pully And Rolls Bearing Blocks 1
9 Full Length Magnet 1
Boiler 500 lb 1 3,00,000.00
SS Cooker 500 lit capacity 1 4,50,000.00
Emery Grinder cum challana 1 2,50,000.00
Sub Total 20,20,000.00
Excise duty 0.00% -
Total after Excise duty 20,20,000.00
Transportation cost (lumpsum) 1.00
VAT against C form 2.0% 40,400.00
Entry tax ( If Applicable) 1% 20,200.00
Total invoice value 20,80,601.00
Grand Total in INR Lakh 20.81

 Miscellaneous Fixed Assets

The cost of miscellaneous fixed assets is considered as Rs. 5.0 Lakhs. Cost of
miscellaneous fixed assets includes cost of office furniture and other
infrastructure, telephone installation, electrical infrastructure etc.

 Preliminary Preoperative Expenses

Provision of Rs. 2.00 Lakhs will be necessary to take care of the expenses like
registration, travelling etc.
  Contingency
Contingency charges are considered as a 2 % of the cost of project excluding
the pre-operative expenses and the land cost.

VI. PROJECT COST

SR. No Particulars Unit Qty. Rate in Amount

1 Land Acre 0.5 500000
Rupees 2.50
(INR. Lakh)
2 Land Development Sq. m 2200 LS 1.50
3 Civil Work Sq. m 600 6000 36.00
4 Other Civil work Sq. m 400 1000 4.00
5 Plant and Machinery 20.81
6 Miscellaneous Fixed Assets 5.00
7 Contingency 1.35
8 Working Capital Margin 11.25
9 Preliminary and 2.00
TOTAL
Preoperative Expenses 84.40

VII. MEAN OF FINANACE

Share 25% 21.10

Bank loan 75% 63.30
Total in Rs. Lakh 84.40

VIII. WORKING CAPITAL ASSESMENT

Working capital required to run the plant is enlisted below:
Working Capital Assessment (Amount in Rs Lakh)
Particulars Days Yr1 Yr2 Yr3
Raw material 15 12.00 19.20 21.60
WIP 2 1.72 2.75 3.09
Finished Goods 15 12.89 20.61 23.19
Debtors 21 18.39 30.01 33.61
Total 45.00 72.57 81.49
Creditors 0 0 0
Total 0 0 0
WCG 45.00 72.57 81.49
Margin 25% 11.25 18.14 20.37
MPBF 33.75 54.43 61.12
Interest 14% 4.73 7.62 8.56
 IX. MANPOWER REQUIREMENT
Administrative and Supervisory
Designation Quantity Salary Per Month in Rs.
Factory Manager 1 30000.00
Clark 1 14000.00
Operator 1 10000.00
Store Keeper 1 11000.00
Skilled Worker 10 6000.00
Unskilled Worker 10 5000.00
Guard 1 5000.00
Peon 4 5500.00
Total Salary in Lakh Rupees 86500

X. PROJECT PROFITABILITY

 Installed Capacity and Capacity Utilization

The capacity of corn flakes processing plant is to produce 1200 MT of corn flakes
per year. During fist year only 50% capacity will be utilized, second year 80% and
from third year onwards 90% of total capacity will be utilized.

 Yield and Production

At 90 % capacity utilization around 1200 MT of corn flakes per year will be
produced.

 Sales Revenue
The sale revenue at 90% capacity utilization will be,
Products Price / MT (In Rupees) Income (Rs in Lakhs)
Corn flakes 48550.00 524.34

 Profit Calculations
Particulars Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7
Installed Capacity in MT
Corn Flakes 1200.0 1200.0 1200.0 1200.0 1200.0 1200.0 1200.0
Total Installed capacity 1200.0 1200.0 1200.0 1200.0 1200.0 1200.0 1200.0
Capacity
in MT Utilisation 50% 80% 90% 90% 90% 90% 90%
Corn Flakes 600.0 960.0 1080.0 1080.0 1080.0 1080.0 1080.0
Total Utilised capacity 600.0 960.0 1080.0 1080.0 1080.0 1080.0 1080.0
MTMTMT
Sales
MT Value In Rs Lakh
Corn Flakes 291.30 466.08 524.34 524.34 524.34 524.34 524.34
50%
Total income in Rs. lakh 291.30 466.08 524.34 524.34 524.34 524.34 524.34
80%
90%
90%
90%
90%
Particulars Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7
Total expenditure in Rs. 264.99 431.92 483.80 483.93 484.07 484.04 484.01
PBDIT
lakh 26.31 34.16 40.54 40.41 40.27 40.30 40.33
Depreciation 7.64 9.74 8.51 7.45 6.52 5.71 5.01
Interest on Term Loan 7.60 7.60 6.28 4.96 3.64 3.64 3.64
Interest On Working 4.73 7.62 8.56 8.56 8.56 8.56 8.56
Intangible
Capital assets written 0.00 0.40 0.40 0.40 0.40 0.00 0.00
Profit after depreciation
off 6.34 8.81 16.79 19.04 21.16 22.40 23.13
Tax
and interest 2.28 3.17 6.04 6.86 7.62 8.06 8.33
Profit after depreciation 4.06 5.64 10.75 12.19 13.54 14.33 14.80
Surplus available
interest and tax for 19.30 22.97 25.54 24.59 23.70 23.68 23.44
Net Cash Accrual
repayment 11.70 15.37 18.86 18.82 19.24 19.62 19.38

XI. FINANCIAL PARAMETERS

 Cash Flow Statement

The statement of cash flow is concerned with the flow of cash in and out of the
business. Cash inflow means the source of cash which includes equity, Loan from
bank and the cash accruals from the business. Cash outflow is a sum of cash
required for the applications like increase in fixed assets, for repayment of term
loan, preoperative expenses and cash required for the payment of dividend.
Sources Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 Yr 6 Yr 7
Cash inflow 96.11 15.37 19.26 19.64 20.06 20.04 19.81
Cash out flow 84.40 11.00 11.00 11.42 11.42 11.42 8.72
Opening Balance 0.00 11.70 16.07 24.33 32.55 41.19 49.81
Surplus 11.70 4.37 8.26 8.22 8.64 8.62 11.08
Closing Balance 11.70 16.07 24.33 32.55 41.19 49.81 60.90

 Break Even Analysis

Particulars Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 Yr 6 Yr 7
Sales Revenue 291.30 466.08 524.34 524.34 524.34 524.34 524.34
Total Variable Cost 257.82 412.24 463.77 463.77 463.77 463.77 463.77
Total Fixed Cost 14.77 27.21 26.14 24.78 23.43 23.43 23.43
Contribution 33.48 53.84 60.57 60.57 60.57 33.48 53.84
Break Even Point 264.72 485.17 466.07 441.86 417.75 417.75 417.75
Break Even Point (%
(MT) 44.12% 50.54% 43.15% 40.91% 38.68% 38.68% 38.68%
)
  Debt Service Coverage Ratio (DSCR)
DSCR Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7
Coverage Available 19.30 22.97 25.54 24.59 23.70 23.68 23.44
Debt 7.60 18.60 17.28 15.96 14.64 14.64 14.64
Value 1.00 1.00 1.00 1.00 1.00 1.00 1.00
DSCR Ratio 2.541 1.235 1.478 1.541 1.619 1.618 1.602
Average DSCR Ratio 1.52

The debt service coverage ratio based on the assumed techno economic
parameters is found satisfactory. The average DSCR is 1.52.
 Internal Rate of Return (IRR)
The financial indicators like Net Present Worth (NPW), Benefit Cost Ratio (BCR),
Internal Rate of Return (IRR) etc. were analysed by discounting cash flow @15%
discounting rate. The internal rate of return is found to be more than 50 per cent
and BCR is about 1.05.

 Projected Balance Sheet

Liabilities Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 Yr 6 Yr 7
Equity 21.10 21.10 21.10 21.10 21.10 21.10 21.10 21.10
Term Loan 63.30 63.30 52.30 41.30 30.30 19.30 8.30 0.00
Reserve & 4.06 9.69 20.04 31.41 44.13 58.04 72.42
Surpluses Total 84.40 88.46 83.10 82.44 82.81 84.53 87.44 93.52
Assets
Gross Fixed Assets 82.40 82.40 82.40 82.40 82.40 82.40 82.40
Less Depreciation 7.64 17.38 25.89 33.34 39.86 45.58 50.58
Net Fixed Assets 74.76 65.02 56.51 49.06 42.54 36.83 31.82
Intangible Assets 2.00 2.00 1.60 1.20 0.80 0.80 0.80
Cash & Bank 11.70 16.07 24.33 32.55 41.19 49.81 60.90
Balance Total 88.46 83.10 82.44 82.81 84.53 87.44 93.52
TNW 105.50 109.56 104.20 103.54 103.91 105.63 108.54 114.62
TOL 63.30 63.30 52.30 41.30 30.30 19.30 8.30 0.00
TOL/TNW 0.60 0.58 0.50 0.40 0.29 0.18 0.08 0.00

XII. ASSUMPTIONS
a. The unit will work for 8 hours a day for 300 days per annum.
b. Capacity utilization: First year –50%, second year- 80% and from third year
onwards - 90%.
c. The wages for unskilled workers are taken as per prevailing rates in this type of
industry.
d. Interest rate for term loan is 12% per annum and that is for working capital is
14% per annum.
e. Margin money considered at 25% of the financial outlay.
f. Insurance charges for the fixed assets considered as 0.5% of the depreciated cost
of the assets.
g. Repayment period of seven years with one year grace period for repayment of
principal.
h. Costs of machinery and equipment are based on average prices of machinery
manufacturers.
i. Power cost is considered as Rs. 6.0 per unit and that for the fuel is Rs. 55 per litre.
j. The cost of water is considered as 30 paisa per litre.
k. Depreciation rate of 10%, 13.91% and 15% has been considered for civil
structures, plant & machineries and miscellaneous fixed assets respectively.
l. Repair and maintenance is considered as a percentage of total project cost
excluding preliminary preoperative expenses, land and land development cost.
The percentages are 0.10, 0.25 and 0.5 for first three years respectively and 0.75
for fourth year onwards.
m. The administrative expenses will be considered as Lump sum Rs. 50 thousand
per annum.
n. The 0.5% of total income would be considered to take care of promotion and
marketing expenses.
o. Insurance of the fixed assets is a function of their depreciated cost. It is
considered as a 0.5% of depreciated cost (WDV method) of assets.
p. Land cost is considered as Rs.5 Lakh per acre.
XIII. ADDRESS OF SUPPLIER OF PLANT AND MACHINERY
 Heavy Machine,
196-B & 197 B, Industrial area,
Dewas road, near Parshwanath city, Ujjain (MP).

 M/s Larson & Toubro Ltd., I.C.

House Ballard Estate, P.B. No. 278, Mumbai.

 M/s Textile Machinery Corporation Ltd.

Boiler factory royal exchange place, Kolkatta.

 M/s A P V Enginnering Co Ltd.,

P. B No. 2492, 2- Jessore road, Dum Dum, resubmitted