Contents

Executive Summery ....................................................................................................... 3 Chapter One ................................................................................................................... 5 Company Overview ....................................................................................................... 5 1.1 Introduction .......................................................................................................... 5 1.2 Vision, Mission, Objectives and Values .............................................................. 5 1.2.1 Vision ............................................................................................................ 5 1.2.2 Mission.......................................................................................................... 5 1.2.3 Objectives ..................................................................................................... 6 1.2.4 Value Proposition.......................................................................................... 6 Chapter Two................................................................................................................... 7 Assessment of Business Environment ........................................................................... 7 2.1 Political Environment .......................................................................................... 7 2.2 Economic Environment ....................................................................................... 8 2.3 Socio-Cultural Environment ................................................................................ 8 2.4 Technological Environment ............................................................................... 10 2.5 Legal Environment............................................................................................. 10 2.6 Environment and Health Issues ......................................................................... 11 Chapter Three............................................................................................................... 12 Product Description ..................................................................................................... 12 3.1 Product Introduction .......................................................................................... 12 3.2 Product Properties .............................................................................................. 12 Chapter Four ................................................................................................................ 13 Market Description ...................................................................................................... 13 4.1 Overall Market ................................................................................................... 13 4.2 Target Market..................................................................................................... 13 4.3 The Customer ..................................................................................................... 14 4.4 Key Success Factor ............................................................................................ 14 Chapter Five ................................................................................................................. 15 Competition.................................................................................................................. 15 5.1 The Competitor .................................................................................................. 15 5.2 Competitor Analysis .......................................................................................... 15 5.3 Estimated Market Share ..................................................................................... 17 Chapter Six................................................................................................................... 18 Company Strategy........................................................................................................ 18 6.1 Market Segment ................................................................................................. 18

6.2 Key Competitive Factors ................................................................................... 18 Chapter Seven .............................................................................................................. 19 Production and Operation Plan .................................................................................... 19 7.1 6.1 Pre Operation Activities............................................................................... 19 7.2 Locational Plan .................................................................................................. 19 7.3 Product Design ................................................................................................... 19 7.4 Production Process ............................................................................................. 20 7.5 Resource Requirements ..................................................................................... 21 7.5.1 Equipment and Machinery .......................................................................... 21 7.5.2 Raw Materials ............................................................................................. 21 7.5.3 Human Resource ......................................................................................... 21 7.6 Quality Assurance .............................................................................................. 21 7.7 Repair and Maintenance .................................................................................... 21 7.8 Human Resource Policies .................................................................................. 22 7.8.1 Compensation ............................................................................................. 22 7.8.2 Leaves and Holidays ................................................................................... 22 7.9 Planned Capacity and Utilization....................................................................... 22 7.10 Sales Forecasts ................................................................................................. 23 Chapter Eight ............................................................................................................... 24 Marketing Plan ............................................................................................................. 24 8.1 Overall Concept and Orientation ....................................................................... 24 8.2 Marketing Strategy............................................................................................. 24 8.2.1 Price ............................................................................................................ 24 8.2.2 Promotion.................................................................................................... 24 8.2.3 Place ............................................................................................................ 25 8.2.4 Products....................................................................................................... 25 8.3 Marketing Budget .............................................................................................. 25 Chapter Nine ................................................................................................................ 26 Financial Plan............................................................................................................... 26 9.1 Fixed Capital Requirement ................................................................................ 26 9.2 Working Capital Estimation .............................. Error! Bookmark not defined. 9.3 Projected Balance Sheet ..................................................................................... 26 9.4 Projected Income Statement .............................................................................. 26 9.5 Projected Cash Flows ......................................................................................... 26 9.6 Break Even Analysis .......................................................................................... 26 9.7 Payback Period................................................................................................... 27 9.8 Net Present Value .............................................................................................. 27 1

9.9 Internal Rate of Return....................................................................................... 27 9.7 Key Financial Ratios .......................................................................................... 27 Chapter Ten .................................................................................................................. 28 Organization and Management .................................................................................... 28 10.1 Organization Structure ..................................................................................... 28 10.2 Responsibility and Qualification of Managerial Personnel ............................. 28 10.3 Equity Position ................................................................................................. 29 10.4 Deal Structure .................................................................................................. 29 Chapter Eleven ............................................................................................................. 30 Critical Risks and Contingencies ................................................................................. 30 11.1Internal .............................................................................................................. 30 11.2 External ............................................................................................................ 30 Annexures .................................................................................................................... 31

Executive Summery
This business plan has been prepared on the behalf of BR Aggregate Industries Pvt. Ltd. The company has proposed to install and operate portable stone crushing plant in Mid-Western Terai region of Nepal. Main objective of the company is producing and supplying high quality stone aggregates. The products include concrete aggregates, stone chips and stone dust. The company will operate portable stone crushing plants of capacity of crushing 200 ton raw stone per hour.

The market of the products is government funded infrastructure projects, land development and town planning projects and residential and commercial building construction projects of Banke and Bardia districts. The company has assumed 67 percent of market share in this segment. Production process is simple ant it includes primary crushing, secondary crushing and sieving by using vibrating screen. Marketing strategy will be focused on the niche market of infrastructure development projects.

Projected financial statement shows that the project is most feasible and will have high return on investment. The project highlights are as follows. Project Highlights Rs in 000s Total Project Cost Fixed Capital Investment Working Capital Investment Long Term Loan Short Term Loan Project Payback Period Internal Rate of Return Net Present Value @ 12% First Dividend Loan Grace period Estimated Interest Rates Long Term Loans Short Term Loans Weighted Average Cost of Capital Break Even Point 80,606 73,710 6,896 36,855 3,448 2 years 3 month 72.40% 165,473 15% in year 2 6 months 13% 11% 17.53% 8.18%

Chapter One Company Overview

1.1 Introduction
Bheri Rapti Aggregate Industries Private Limited (BRAI Pvt. Ltd.) is going to register with the Company Registrar's Office (CRO), Tripureshwor in February 2012. After registration in CRO, the company will be registered with Department of Industries (DOI) and go to Department of Mining (DOM) to get the permission for stone mining.

The head office of the company will be at Karkando, Surkhet Road, Nepalgunj. The company will have Rs. 400 million-share capital. All promoters will contribute equally on share capital. The main business of the company is production and marketing of high quality stone aggregates for construction purposes. To achieve its business objective, the company has purposed to establish a portable stone crushing plant in Mid-Western Terai Region of Nepal.

The promoters of the company are Mr. Piyoosh Paudel, Mr. Shiva Raj Khanal, Mr. Padam Raj Joshi and Mr. Ganesh Karki. Mr. Paudel is a MBA graduate and has more than 5 years' experience in the field of project management. Mr. Khanal is a civil engineer and managing director of his own construction company. Mr. Joshi is a supplier of stone, sand and gravel and Mr. Karki is a chairperson of Mid-Western Truck and Transportation Businessman's Organization.

1.2 Vision, Mission, Objectives and Values

1.2.1 Vision The company has clear picture of the business in future. The vision statement of the company is: "We will be a leading construction aggregate producer and distributor in Mid-Western and Far-Western Nepal." 1.2.2 Mission The company wants to enter the aggregate business market with a fundamental purpose. The mission statement of the company is: "To contribute to infrastructure development by producing high quality stone aggregate, generate employment 5

opportunities to the Mid Western and Far Western Terai region of Nepal, minimize the adverse environmental impacts by using high standard technology during mining and crushing of stone and become a stakeholder of nation building." 1.2.3 Objectives The objectives of the company are: Produce high quality aggregate for construction works Generate employment opportunities at local level Minimize adverse environmental impacts by using high standard technology Increase wealth on share holders' equity

1.2.4 Value Proposition Customer satisfaction is the motto of the company and company's products will be positioned on customers mind as good quality construction aggregates. The value proposition of company's product is to distinguish within the industry will be: "BR aggregates are quality construction materials and it delivers at construction site"

Chapter Two Assessment of Business Environment

2.1 Political Environment
Political system has changed from constitutional monarchy to democratic republic in Nepal. Peace, progress and prosperity are the aspiration of the people. Economic development is the only means to achieve progress of the country. Political leaders, industrialists, planners and policy makers all advocate need for economic development. An infrastructure development is crucial for nation development. Nepal Government is committed for the development of physical facilities and infrastructures and planned several infrastructure development projects.

The political environment of the country is transitional, unstable and fragile. The country is in the process of preparing new constitution but conflict among major parties has delayed the process. Delayed in constitution preparation, unstable and fragile political scenario will affect the implementation of infrastructure development projects.

Further, strike and movements are common political problems faced by the country. There is a general trend of politicization of normal issues by different political groups for their stakes. Such types of activities always create problems to flourish the business environment of the country.

There seem some positive trends in political environments. All the stakeholders of the state have realized to create favorable business environment. Major political parties committed to liberal economic policy.

Political environment of the country will have severe impacts on the company's business. Political conflicts, strike and political movements will adversely affect the policy execution. Investment on construction industry will be low and it will decrease the demand of construction materials.

2.2 Economic Environment

Economic environment is the most important factor that to affect business. Good economic environment creates many opportunities to flourish the business. Nepal Government has been trying to make the economic environment favorable to the business organization.

The economic activities in developing countries like Nepal mostly depend on government budget in developing countries like Nepal. Government expenditure on infrastructure constructions and development activities boost up economic environment. However, the present trend of government expenditure is very low in these activities and even planned budget also not expended.

The monetary policy and fiscal policy are inefficient to address the inflation rate, exchange rate and unemployment rate. Inflation rate based on average consumer price change percent is 9.25% in 2010, which is very high. Fixed exchange rate with Indian Currency directly affects the inflation and interest rate of the country. The financial market does not follow the discipline of the market and there more gaps between saving and lending interest rates appears.

Unemployment rate is very high in the country. The labor force is going to foreign countries for employment. In this condition, the good economic environment provides cheap labor force and investment activities create employment opportunities in the country.

Economic expansion and higher economic growth will have positive effect on construction industry and thus will increase the demand of construction aggregates. Whereas economic contraction and recession will adversely affect the construction industry and thus demand of construction aggregate will decrease.

2.3 Socio-Cultural Environment

Socio-cultural environment also directly affects the business. The socio-cultural environment covers population, pressure groups, social classes, lifestyle, attitudes, religion, education, language, etc. According to preliminary repost of population census 2011, total population of the country is 26,620,809 among them 12,927,431 male and 13,693,378 are female. The population growth rate is 1.4 percent. The Terai 8

belt constitutes highest proportion of the population followed by Hill and Mountain belt. More than half of the total population of the country (50.2 per cent) lives in Terai.

Pressure groups conduct different activities for the interest of group or society. Such activities affect business organizations. Consumer's association, Civil Society, Human Rights Organization, Women Association, Environment Protection Forum, Children Right Forum etc. are pressure groups. As these pressure groups are working in Nepal, they affect business organizations.

Nepalese society can be classified in three classes such as high class, middle class, and lower class. Their purchasing power, lifestyle, tendency, interest, behavior, etc. differ in different class of people. Social change causes change in the lifestyle of people. Life style of people is expressed through their activities, talks, behavior, etc. The life style of Nepalese people is changing. Change in such things also affects business organizations.

The other important element of socio-cultural environment is attitude towards time, work, and change. People's attitude is affected by education, language, culture, and belief. Looking as whole, the attitude of Nepalese people towards time, work, and changes is not satisfactory. Works are not taken as duty and morality. Tendency to accept new changes in management and technology has not been developed. The Nepalese give importance to traditional concepts.

The other important element of socio-cultural environment is language. Like cultural and ethnic diversity, there are several languages in the country. It is the strongest media for communication. It directly affects business organizations. The other important element of socio-cultural environment is education. Only 53.75% people are literate in Nepal. It adversely affects the business organization.

Socio-cultural environment also affects the business of the company. The pressure groups will raise the environmental degradation and pollution issues during project implementation.

2.4 Technological Environment

This is the age of new technology. Development of technology positively affects industrial development. In Nepal, mostly labor-oriented technology is in use. However, this technology is slowly changing to capital-oriented technology.

The other important element of technological environment is research and development. The country is very poor in research and development. The business organizations are also affected by the ability of a nations scientific research and development.

Nepal lags behind in the sector of science and technology. A country should be economically sound for the development in science and technology sector. Since Nepal is economically weak, development of science and technology is impossible for the country. Hence, Nepal has adopted the policy for the transfer of new technology.

As the company will use modern crushing equipment and machinery, technology will not have any effect on the business. However, availability of work force operating the equipment will be the constraints for the company.

2.5 Legal Environment

Legal environment of the country provides bases for regulation of business organization. Favorable legal provisions positively and unfavorable legal provisions adversely affects the business environment. Legal provisions of the country are very favorable for business environment but producers and formalities are very complex.

Company Act, Private Firm Registration Act, Partnership Act provide the necessary legal provisions to register of business organization in Nepal. Public limited companies and private limited companies are registered under Company Act. The sole proprietorship firms are registered under Private Firm Registration Act. The

partnership firms are registered under Partnership Act. Other acts that influence the business environments are Nepal Mining Act, Environment Protection Act, Bonus Act, Forest Act, National Park and Wildlife Conservation Act, Income Tax Act, Value Added Tax Act, Patent Design and Trademark Act, Labor Act, Industrial Business Act etc.

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Regarding the legal provisions of the country, the company needs to register with Company Registrar's Office. After registration in Company Registrar's Office, it will have registration with Department of Industries. The company need's approval for mining from Department of Mining and Geology. The company needs to register at Inland Revenue Office and get Permanent Account Number(PAN) for tax purpose.

2.6 Environment and Health Issues

There are 69 different Acts that address environmental and consumer protection issues in the country. These Acts directly or indirectly provide the basis for regulating and enforcing various environmental protection measures, and for safeguarding the interest of general consumers. Each of the Acts is supplemented by corresponding regulations. Most of the existing laws and regulations are heavily orientated towards "command and control" measures with provisions for various penalties and punishments.

Environment Protection Act is one of the most important Act, which provides legislation framework, covers the essential aspects related to environmental protection. The major features of the Act are: Requirement for Initial Environmental Examination (IEE) study and Environmental Impact Assessment (EIA) study Inspections Testing facilities Establishment of a fund Establishment of the necessary administrative mechanism

The company needs to prepare EIA study and approval it form Ministry of Environment. Along with EIA report, the company will need to prepare mitigation measures of environmental consequences. It will need to allocate budget for these mitigation measure and administrative mechanism.

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Chapter Three Product Description

3.1 Product Introduction
The product offering from company is construction aggregate, chips and stone dust (crushed sand). Aggregate is a component of composite materials such as concrete and asphalt and it serves as reinforcement to add strength to the overall composite material. Aggregate is also used as base material under foundations, roads, airport and railroads to provide stable foundation base. Aggregate is a low-cost extender that binds with expensive cement or asphalt to form concrete.

3.2 Product Properties

Shape of the aggregate is the most important properties because durability, workability, shear resistance, tensile strength, stiffness, and fatigue response of concrete and asphalt concrete is heavily depend on the shape of aggregate particles. The company ensures granular and angular shape of the products and its chemical and physical properties.

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Chapter Four Market Description

4.1 Overall Market
The market of the products is construction industry in Mid-Western Terai Region. The demand of the products depends on construction activities. More investment in construction industries more will be the demand of the products. Therefore, the demand of products is derived based on investment on construction industry.

The overall market of the products in these region are export to India, government funded road and bridge construction projects, land development and town-planning projects, dam and hydropower constructions projects, residential and commercial building construction projects, irrigation and canal construction projects etc. The estimated market of the products in this region is as follow:

Table-1: Rough Estimate of the Overall Market

Market Segment Aggregate Demand (in cubic feet) Export to India per year Burigaun-Telpani-Surkhet Road Constuction Project Kothiyaghat Bridge Construction Project Bridge Construction at Hulaki Sadak, Karnali Veri-Babai Diversion Project Land Development and Town Planning at Water Park, Nepalgunj Land Development and Town Planning Kohalpur-Nepalgunj Corridor Land Development and Town Planning Kohalpur-Bansgadi Corridor Residential and Commercial Buildings (7,500 houses) Total 6,540,800.00 7,250,000.00 210,000.00 150,000.00 4,500,000.00 4,200,000.00 3,500,000.00 1,250,000.00 31,500,000.00 59,100,800.00

Rough Estimate 1 Ton = 29.2 cubic feet

4.2 Target Market

The target markets of the products are government funded infrastructure construction projects such as Bhurigaun-Telpani Road Construction Project, Kothiyaghat Bridge Construction Project, Bridge Construction Project at Hulaki Sadak, Karnali, VeriBabai Diversion Project. Other potential target market of the products include land development and town planning project at Water Park, Nepalgunj and Kolpur13

Nepalgung Corridor and Kohalpur-Bansgadi Corridor. Likewise, residential and commercial building builders are also target segment of the products.

4.3 The Customer

The target customers of the products are infrastructure construction companies, contractors and suppliers of these companies in Banke and Bardia districts. Other target customers are land developers, residential and commercial buildings builders.

4.4 Key Success Factor

The products possess all the attributes of high quality construction aggregate. Key success factor of the products are: The market of the products is demand driven. Investment in construction industry will increase the demand of the products. The company is offering high quality products crushed from high quality raw materials at prevailing market price. Our Competitor's product are very low in the quality and the availability of that product The products currently in use are inferior quality. Natural, unprocessed aggregates (gravel) are in use. Customer may prefer the products because they are getting high quality products at same price. Promoters are from related fields. Their experience will be the strength of marketing of products.

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Chapter Five Competition

5.1 The Competitor
Major competitors of the company are stone crushing industries, natural aggregate suppliers and hand crushed stone suppliers. The major competitors include: I. Existing stone crushing industries: The existing stone crushing may be the direct competitors of the company. There are nine stone crushing industries at present. All these crushing industries are export based and located near the Indo-Nepal boarder. The running industries are: a. Jay Ma Laxmi Roda Udhyog b. Bheri Roda Udhyog c. Himal Crusher d. Nepalgunj Stone e. Jay Bhole Baba Roda Udhyog f. Jay Bageshwori Roda g. Banke-Bardia Roda Udhyog h. Shyam Roda Udhyog i. Mahakali Roda Udhyog II. Natural aggregate suppliers from rivers: There are individual suppliers of natural aggregates from rivers. These suppliers collect gravel and sand from the riverbank and stockpile near roadside. They supply these products as order received. III. Hand crushing aggregate suppliers: Labor-intensive hand crushing aggregate suppliers are also supplying the products in the market. These suppliers collect stones from riverbank and stock near the road. Daily wages labors crush these stones.

5.2 Competitor Analysis

The competitor analysis assists to identify possible strengths and weakness of the competitor in the market. Potential strengths and weaknesses of company's competitors are:

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I. Existing Stone Crushing Industries: Strengths: Access on raw materials Established supply chain Better knowledge about the market Established network in Indian Market

Weakness Traditional crushing equipment High operational cost Far from mining site and cost of raw material is high due to transportation of raw materials from mining site to factory. Creating pollution and wastes in urban areas

II. Natural Aggregate Suppliers Strengths: Individuals from local communities Low investment and high return Have greater access with residential building constructing individuals Low price

Weaknesses Unorganized and family form of business Unprocessed and low quality products

III. Hand Crushed Aggregate Suppliers Strengths Individuals from local communities Small business unit with low investment Better quality than natural aggregate

Weaknesses Labor intensive Limited supply capacity

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5.3 Estimated Market Share

Crushed aggregate is short supply in the area. Low quality natural gravel and handcrushed aggregates are in use for construction purposes. The existing crushing industries are exporting their products in the Indian market for better price. Rough estimate during market analysis shows that implementation of infrastructure construction projects; land development and town planning projects and residential and commercial building construction projects will create 52,560,000 cubic feet aggregate demand excluding Indian market. This plan has estimated 67 percent market share of company's products.

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Chapter Six Company Strategy

6.1 Market Segment
The main objective of the company is to supply construction aggregates within the country. The company looks at the future market opportunities of the products. The company's marketing strategies will focus on government funded infrastructure construction projects, land development and town planning projects and residential and commercial building construction projects in Banke and Bardia districts. The company will also expand its market in this segment in Dang, Kailali and Surkhet districts also. The company chooses this segment of market because: There are several infrastructure development projects undergoing Infrastructure development is very poor in this region and future policy of the government focus on several infrastructure developments. There are several land development and town planning projects undergoing at local level in Kohalpur-Nepalgunj corridor and Kohalpur-Bansgadi corridor. People's awareness about high quality construction material including aggregates has increased. The existing capacity of running industries cannot meet the growing future demand. The existing industries are focusing on export to Indian market. There are no organized suppliers in this segment

6.2 Key Competitive Factors

The competitive factors in the industry are assess on mining sites, labor availability, location, relation with local communities, environmental impacts, relationship with buyers and contractors etc. The company will have following competitive factors in this industry market: The company is the first to introduce portable stone crushing plant in this area. Promoters are from the local community No any substitute of the product at present in country Cheap and easily available labor force Good relationship with local contractors Minimum environmental impacts of the plant 18

Chapter Seven Production and Operation Plan

7.1 6.1 Pre Operation Activities
The company has to do various activities before operation starts. Following are to be undertaken before going to operations. Current status and estimated time frame has been mentioned in the following table. Table-1: Pre operating activities
Activity Company Registration Registration in Department of Industries Registration in Inland Revenue Office Environmental Assessment Impact (EIA) Study Application for loan and approval Opening the letter of credit for equipment Site preparation Arrival of machine at custom point Installation of machine at site Trail production Estimated Time 1 week 1week 1 week 8 weeks 4 weeks 1 weeks 3 weeks 6 weeks 2 weeks 1 weeks

7.2 Locational Plan

The equipment and machine is portable and used for mobile crushing. The location is near the riverbank where primary raw material stones and gravel available. Major riverbanks where mining and crushing will be done are Rapti, Babai, Bheri, Karnali and Ourahi. There river systems are rich with high quality igneous, granite and sandstone.

Main purpose of installation of a portable plant is to move to another appropriate place for mining the stone and gravel. Use of portable crushing equipment reduces the cost of transportation of raw materials and reduces the accumulation of waste in specific area.

7.3 Product Design

The products of the company are construction aggregates including aggregates, stone chips and stone dust (crushed sand). Aggregates are the most commonly used construction materials. Aggregates are normally hard and granular materials, which are suitable for use either on their own or with the additions of cement, lime or

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bituminous binder in construction. Design of aggregates include crushing of raw stone to produce the products. The product features include Aggregate 10mm-40mm Stone Chips 5mm -10mm Stone Dust below 5mm

7.4 Production Process

The stone crushing process is relatively simple. The production line includes three process system; primary crushing process, secondary crushing process and screening process. The whole pant consist of Jaw Crusher for rough crushing, Cone Crusher for secondary crushing, Vibrating Feeder, Circular Vibrating Screen and Belt Conveyer. Combining three processes is a complete stone crushing production line. Firstly, the raw material are crushed initially crushed by Jaw Crusher. The roughly crushed materials are transported into the Cone Crusher through Belt Conveyer for fine crushing. The fine crushed material get into vibrating screen to be divided into three types: aggregates, chips and dust. The bigger size ones go back to cone crusher again.

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7.5 Resource Requirements

7.5.1 Equipment and Machinery The equipment and machinery required for portable stone crushing plant include Trailer, vibrating feeder, jaw crusher, cone crusher, circular vibrating screen, belt conveyer, steel structure and electric control box. The supplier of the equipment and machinery is SHANGHAI SHIBANG MACHINERY CO. LTD., China. The detail feature of the equipment and machinery has been attached in annexure. Besides crushing plant, dumper tucks and excavators will be required for mining and loading. A 50 KVA Diesel Generator will be required for the supply of electricity. 7.5.2 Raw Materials Stone, rock and gravel are the basic raw materials used for processing. The raw materials are easily available in the banks of Rapti, Babai, Bheri, Karnali and Ourahi rivers. The cost associated with the raw material is local taxes levied by the District Development Committee (DDC), Village Development Committee (VDC) and Forest User Groups of mining site. 7.5.3 Human Resource The human resources required for the company include managerial personnel, supervisors and assistant and direct labor. The managerial personnel include Managing Director, Operations Manager, Finance and Admin Manager, Engineering Manager. About the responsibility, qualifications and experience of managerial personnel has been explained in organization and management chapter. Assistant employee will be shift supervisor, operators, marketing supervisor, accountant, office assistant, maintenance staffs, drivers and peons.

7.6 Quality Assurance

The quality of aggregate depends on raw materials used for crushing, size and shape of the products. The raw materials used for crushing will be granite, igneous and sandstone. The size and shape of the product will be managed through automated circular vibrating screen. Other quality issues are not so important of these products.

7.7 Repair and Maintenance

The stone crushing equipment and machinery need reasonable maintenance and right operations in order to prolong the service life. A repair and maintenance will be made for the smooth operation of crushing plant. The plan will include daily maintenance, repair and check, minor repairs and major repairs as follow. 21

a. Daily check and maintenance b. Minor repairs: The cycle of minor repair is 1 to 3 months. During this period following repairs will be done: Checking the crusher's adjusting devices high-speed discharging mouth clearance transmission parts lubrication system and replace the wear lining board and lubricating oil c. Major repairs: The cycle of major repair is 1 to 2 years. During major repair following repair will be done: Thrust board replacement Inspection and repair bearings

The company will recruit a team of engineers and mechanics for regular maintenance and repair of the equipment and stock necessary parts and lubricating oil.

7.8 Human Resource Policies

The company will follow appropriate human resources policies to retain and motivate employee. 7.8.1 Compensation The compensation scheme of the company will be basic salary plus performance incentives. The performance incentives will depends on sales revenue incensement. The company will also provide bonus from profit as per Labor Act. The working hour is 8 hours and more than 8 hours work, the company will provide overtime payments. Retirement fund will created on the basis of equal contribution from employee and the company. 7.8.2 Leaves and Holidays The company will follow provisions of holidays based on government rule. Besides government holidays, the company will provide 15 days home leave, 10 days sick leave and 6 days casual leave. These leaves will be paid leave.

7.9 Planned Capacity and Utilization

The planned crushing capacity of the equipment is 200 MT of raw stone per hour. The machine will be operational at an average of 12 hours per day. The company estimates that the capacity of the plant will be utilized at 50% in first year, 60% in second year and 70% onwards from the third year of its installation. However, the 22

company can operate at a higher capacity to overcome any demand situation. Further, any extra capacity or new unit can be added based on demand situation in country.

7.10 Sales Forecasts

Sales forecast has been made based on production capacity utilization, as the company has estimated that demand is not bottleneck for sales.

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Chapter Eight Marketing Plan

8.1 Overall Concept and Orientation
The company is going to offer construction aggregate in Mid-Western Terai region of the country. Company's main objective is to produce and supply construction aggregate to infrastructure construction projects, land development and town planning projects and residential and commercial building construction projects. This is the focus market of the company.

The rough estimate of market size in this segment is 52,560,000 cubic feet excluding Indian market. The company estimates market share of this segment will be 67 percent. The company has planned to establish portable stone crushing plant of 200 MT per hour capacity in this area. The company assumes the capacity utilization is 50% in first year, 60% in second year and 70% after third year.

8.2 Marketing Strategy

8.2.1 Price The pricing strategy of company will be prevailing market price for crushed aggregates. Current market price for crushed aggregate is as follows: Table -2: Selling price of the finished product
Name of Product Aggregate 10mm-40mm Stone Chips 5mm-10mm Stone Dust below 5mm Selling price per cubic feet Rs. 42.00 Rs. 35.00 Rs. 25.00

Considering present inflation rate, the company assumes price of the products will be increased by 10 present each year. 8.2.2 Promotion Promotion of the products will not need advertising activities because the market is demand driven. For promotion, the company will provide discounts and credit facilities to bulk buyers. Relationship with key buyers is the most important marketing strategy in this market. Necessary budget will be allocated to establish relationship with major buyer's on the heading of guest entertainments.

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8.2.3 Place The market of the product is Banke and Bardia districts of Mid-Western Terai region of Nepal. The market will be expanded to Dang, Surkhet and Kailali districts based on demand situation. 8.2.4 Products The products offering from the company are high quality construction aggregates. The products are concrete aggregate (10mm-40mm), stone chips (5mm-10mm) and stone dust (below 5mm).

8.3 Marketing Budget

The market of the product is demand driven. No expenses will be required for advertising and promotional activities. The marketing expenses will be discounts given to major buyers. Other marketing expenses will occur to establish harmonious relationship with major stakeholders and buyers. This expense will cover guest entertainment, gifts and donations.

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Chapter Nine Financial Plan

9.1 Financial Assumptions
The financial plan has been prepared based on certain assumptions. These assumptions are as follows: Sales revenue has been calculated based on prevailing market price of the products. Assumption has been made price of the products will be increased by 10 percent. In the first year, 50 percent capacity of the plant will be utilized. In the second year, the plant will be operated at 60 percent capacity and then after at 70 percent capacity will be utilized. Interest on long term loan will be 13 percent and short term loan will be 11 percent. Depreciation on fixed assets has been provided based on Income Tax Act, 2058. Applicable income tax will be 25 percent on profit after interest bonus expenses. Accounts receivable will be collected within 25 days and accounts payable will be within 35 days.

9.3 Projected Balance Sheet

The projected balance sheet of the company will be as follow

9.4 Projected Income Statement

Projected income statement has been attached with the report.

9.5 Projected Cash Flows

Projected cash flows has been attached with the report.

9.6 Break Even Analysis

The breakeven point for the project at the conditions assumed and estimated comes out to be 8.18% of capacity. The sensitivity tests were made by increasing the cost of inputs by 15% and by reducing the revenue by 15%, the breakeven point was 8.59% and 10.38% respectively. The company proposes to utilize the capacity by minimum

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of 50% from the initial stage of the project; this shows that the company will definitely achieve its objective even at worse conditions.

9.7 Payback Period

The project has payback period 2 years and 3 months.

9.8 Net Present Value

Net present value of project calculated at zero salvage value after the end of five years at a discount rate of 12% is Rs 165,473,000.00, which is highly positive which suggests that the project is highly feasible. (Please refer annexure XIII).

9.9 Internal Rate of Return

The internal rate of return of the project calculated on the basis of the project life of 5 years is 72.40%. This shows that the return from the project is very promising. The detailed calculation has been annexed (please refer annexure XIII ).

9.7 Key Financial Ratios

Key financial ratios of has been calculated for the project. All the ratios show that the project is most feasible. Detailed calculation has been given in annex-XIV.

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Chapter Ten Organization and Management

10.1 Organization Structure
The company will have departmental organizational structure. There will marketing, finance, engineering and operations department in the structure. On the top of these department, there will be a managing director will be the responsible to achieve the organizational goals and overall performance of the company. Mr. Piyoosh Paudel will be the managing director of the company. Figure below shows the organizational structure of the company.

Managing Director

Operations Manager Shift Supervisors Operators Drivers

Finance and Admin Manager

Engineering Manager Maintenance Staffs

Marketing Manager Marketing Assistants

Accountant Office Assistant Driver Peon

10.2 Responsibility and Qualification of Managerial Personnel

A. Managing Director: Key Responsibilities: Responsible for the overall performance of the company Supervision of works of all departments Coordinate with all departments Establish networks with different stakeholders of the company

B. Operations Manager Key Responsibilities: Supervise the operations activities Prepare operations action plan Monitoring of operations activities Reporting to managing director

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Qualifications: Bachelor's Degree At least 5 years' experience in related field

C. Finance and Admin Manager Responsibilities: Financial plan preparation Internal accounting and record keeping Budgeting and resource allocation Reporting to managing to manager

Qualifications: Bachelor's Degree in finance and accountancy At least 5 years' experience in related field

D. Engineering manager Responsibilities: Repair and maintenance plan preparation Daily inspection and maintenance of equipment and machinery Scheduled repair and maintenance of equipment and machinery

Qualification: B. E. in mechanical engineering At least 3 years' experience in related field

10.3 Equity Position

The company will begin with 400,000 equity shares of capital. The shares will be distributed to the promoters in an amount of 100,000 each at a par value of Rs 100.00 per share.

10.4 Deal Structure

The promoters of the company will be four individuals who will start the business. Ownership will be divided equally, based on an equal contribution of capital to the business.
Promoter Mr. Mani Ram Paudel Mr. Padam Raj Joshi Mr. Shiva Raj Khanal Mr. Ganesh Karki Capital Contribution Rs.10,000,000.00 Rs.10,000,000.00 Rs.10,000,000.00 Rs.10,000,000.00 No. of Shares 100,000 100,000 100,000 100,000 Percentage 25 % 25 % 25 % 25 %

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Chapter Eleven Critical Risks and Contingencies

The planned business is highly profit and has high return on investment. When the return is high, the risk on investment is also high. There exist several risks and contingencies within the company and outside the company. The company has identified following weakness and risks within organization and in the environment.

11.1Internal
Availability of experienced managerial personnel hamper to execute the business Conflicts among promoters may arise during operation period and it will adversely affect

11.2 External
Present political scenario may affect the execution of government policies. It will affect the construction industry and thus the business of the organization. If economic recession prolongs for long time, it will affect the construction industry and demand of the products will be decreased The pressure group may raise the issue of environmental degradation and it will affect the smooth operation of business. Ministry of Environment may not approve EIA report and thus the company will not get permission of mining from department of Mining and Geology. In such situation, company will not be able to execute the project.

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Annexures

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