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WOVEN SACKS
1. Introduction Synthetic Woven Sacks made from HDPE or PP are one of the bulk packaging materials. These sacks are presently being used for packaging of bulk commodities like cement, fertilizers and some other applications like sugar, salt, chemicals, wheat flour, starch, poultry products, bulk drugs etc. Some of the newer applications of woven sacks are Geo-synthetic, postal/mail bags, tea packaging etc.

High density polyethylene or HDPE woven sacks have become a versatile commodity in the packaging industry Introduced for the first time in India during the year 1969 it has over the years replaced the conventional jute bags to a large extent. HDPE sacks have an edge over the conventional jute sacks in the sense that the former are light in weight, strong and attractive. These sacks are immune to the effect of corrosion, decay, moisture, atmosphere, rats, rodents, moths and insects. Being superior in quality and economic as compared to the traditional jute material, these modern sacks have gradually captured a large market for packing fertilizers, chemicals, food stuffs, animal foods, oil cakes etc. Sacks made of HDPE are laminated with LDPE inside it. This gives protection against moisture, air and the material packed cannot penetrate out of the sack. 2. Market Potential

Woven Sacks industry constitutes PP & HDPE polymers and is primarily used for packaging of industrial goods such as cement, fertilizer, flour, chemicals, sugar as well as agricultural produce. The total estimated installed capacity of woven sacks segment in North-Eastern Region is in the range of 900 MTPM dominated by PP. The woven sacks industry is the single largest PP consuming sector in the NER. At present here are no units manufacturing laminated HDPE woven sacks in Assam or in any part of the N.E. Region. As a result the full requirement of laminated HDPE woven sacks is supplied by manufactures from outside the state and region.

The current demand of woven sacks in North Eastern Region is estimated to be in the range of 600 - 650 MTPM of which only 60 - 70% of the requirement is fulfilled by local industries, Cement, Fertilizer and Flour Mills are major woven sacks consuming sectors in North-Eastern Region. The omly fertilizer complex (urea based) of NER is located in Assam with installed capacity of 0.5 MMTPA, and has reported a production growth of 12% in the past five years. Apart from urea complex, there are 9 bio-fertilizer units in the region with a total installed capacity of 1115 MTPA. The consumption of HDPE for a standard packaging size of 50 Kg fertilizer ranges between 110-120 gm. Based on this, the annual HDPE consumption for the fertilizer industry is estimated to be about 800 TPA (nearly 70 TPM). Almost entire quantity of the HDPE sacks requirement is met by suppliers outside the NER.

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3. Plant Capacity The production basis for a typical unit would be as under: Working hours/day: 8 (1 shifts) Working days in a year: 300 Annual Production capacity: 600 TPA laminated HDPE woven sacks and 400 TPA PP woven sacks.

The unit has been assumed to operate at 75%, 80%, and 90% of its installed capacity in the first, second and third year and at 100% capacity from fourth year onwards of its operation. 4. Process, Plant & Machinery (Details & List of Machinery Suppliers) The process manufacturing of laminated HDPE woven sacks involves four major operations which maintain continuity from the raw material or HDPE granules stage to the finished product stage.These operations are as follows: 1. Production of mono-axially oriented tapes in the extruder and auxiliary equipment. 2. Processing of the tapes thus produced in textile equipment and machienery to obtain the woven material or fabric. 3. Extrusion coating/laminating the out coming woven material with low density polyethylene in the extrusion coating/laminating plant. 4. Cutting and stitching the laminated woven material into the required sizes and finally printing the name, trade mark etc. of the agency whose product is to be packed on the sack to obtain the final or finished product. Major Machinery required for manufacturing woven sacks is as under: Extrusion Tape Lines for Raffia Tape Manufacture Circular Weaving Machines Laminating Machines Cutting Machine Stiching Machines Printing Machines

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Under this project, the plant would be producing the output till the laminating stage. Cutting, stitching and printing can be outsourced (on job work basis) since the production capacity is not that high and hence it is advisable to go in till the laminating stage in the initial phase. For future expansion, machines for cutting, stitching and printing can be added.

Plant and Machinery Suppliers The following table gives the names and addresses of suppliers along with the machinery type suitable for the process and product. Sl. No. 1 2 3 4 Name Lohia Starlinger Ltd. DGP Windsor India Ltd J. P. Industries Brimco Plastic Machinery (p) Ltd Communication Address D - 3/A, Panki Industrial Estate Kanpur - 208022, INDIA 5403, Phase IV, G. I. D. C. Industrial Estate Ahmedabad 38044, Gujarat 1701, G. I. D. C. Industrial Estate Ankleshwar - 393002, Dist. - Bharuch, Gujarat, India. Brimco House, 55 Govt. Industrial Estate, Charkop, Kandivli (West), Mumbai - 400067, Maharashtra, India

5. Raw Material & Utilities Requirement The major raw material required for the project is as follows: Raffia grade high density polyethylene (HDPE) Raffia grade polypropylene (PP) Lamination grade low density Polyethylene (LDPE)

The production capacity of HDPE & PP has been taken at 60:40. The raw material required would be around 630 MT of HDPE and 420 MT of PP at 100% capacity utilization. 6. Land & Built-up Area Requirement Built-

The total land required is 8000 sq.m. and the built-up area is 3200 sq.m. 7. Manpower Requirement & Project Implementation Schedule A margin of 25% has been considered for other benefits for the staff. Staff Production Manager Accountant Supervisors Skilled Workers Unskilled Workers Security Total Manpower Required Nos 1 2 4 10 15 3 35

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8. Project Cost/Fixed Capital Requirement & Means of Finance: Land has not been considered as a part of the project cost because it has been considered to be taken on lease (as applicable in Assam). One time Land Development Charges have been taken as part of the project Cost. Also, Special Maintenance Charges and an Annual Service Charge have been considered as part of operating cost. The Total Project Cost is Rs. 675.44 Lakhs as per the table below: Sl. No. 1 2 3 4 5 6 7 Cost Head Building Machinery Miscellaneous Fixed Assets Preliminary and Pre-Operative Expenses Margin Money for Working Capital Contingency Expenses Land Development Total Cost Cost (in Rs. Lakhs) 256.00 279.13 20.13 2.00 70.78 31.40 16.00 675.44

The means of finance considering Debt-Equity ratio of 2:1 will be: Means of Finance Equity Debt Total 9. Working Capital Requirement (in Rs. Lakhs)

The Total Working Capital Requirement is as under: Particulars Net WC Available Bank Finance Margin Money 10. Operating Expenses

Year-1 283.14 212.35 70.78

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Year-2 302.01 226.51 75.50

Rs. in Lakhs 225.12 450.31 675.44

Year of Operation Year-3 Year-4 339.77 377.52 254.82 283.14 84.94 94.38

Year-5 377.52 283.14 94.38

The Annual Operating expenses for the first year (75% capacity utilization) are given below: Particulars Utilities Wages & Salaries Interest on term loan Interest on Bank Finance for Working Capital Raw Material Depreciation Maintenance Charges Job Work Charges Total Expense (Rs in lakhs) 1.06 15.84 67.55 31.85 570.50 30.80 1.84 15.00 734.44

11. Profitability Estimates

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Year-1 600 400 75% 450 300 1140 571 1 30 20 29 90 2 15 757 383

Year-2 600 400 80% 480 320 1216 609 1 30 20 30 90 2 16 798 418

Year Year-3 600 400 90% 540 360 1368 685 1 30 20 34 90 2 18 880 488

Year-4 600 400 100% 600 400 1520 761 1 30 20 38 90 2 20 962 558 28 42 70 30.8 457 151 306

Year-5 600 400 100% 600 400 1520 761 1 30 20 38 90 2 20 962 558 14 42 56 30.8 471 155 316

Production/Sales Installed Capacity(HDPE) Installed Capacity (PP) Capacity Utilization Estimated Production Estimated Production (PP) Gross Sales Revenue Expenses Raw Material Consumption Utilities Administrative Overheads Salaries Sales Expenses Loan Repayment Maintenance Charges Job Work Charges TOTAL GROSS PROFIT Financial Expenses Interest On Term Loan Interest On Working Capital Sub Total Depreciation Profit Before Tax Provision For Tax Profit After Tax 12. Financial Indicators

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68 32 99 30.8 253 83 169

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56 34 90 30.8 297 98 199

42 38 80 30.8 377 124 253

The Average Break Even Point for the project is 40%. (Rs. in Lakhs) Year-5 1520 20 38 1 30 30 90 14 224

Sales Realization Fixed Costs Salaries Fixed Selling Expenses Depreciation (SLM) Utilities (Fixed) Admin. Overheads Loan Repayment Interest On L.T. Loan Total Fixed Costs

Year-1 1140 20 29 1 30 30 90 68 268

Year-2 1216 20 30 1 30 30 90 56 258

Year-3 1368 20 34 1 30 30 90 42 248

Year-4 1520 20 38 1 30 30 90 28 238

Variable Costs Raw Materials Interest On Working Capital Loan Total Variable Costs Contribution Breakeven In % Average BEP

571 31.85 602 538 50% 40%

609 33.98 643 573 45%

685 38.22 723 645 38%

761 42.47 803 717 33%

761 42.47 803 717 31%

The IRR for the project is 18.9%, Average ROI is 66% and the Average DSCR is 2.54. (Rs. In Lakhs) Particulars Revenue Profit Before Tax Profit After Tax LT Interest Depreciation LT Loan Repayment Return on Investment (%) Average ROI Debt-Service Coverage Ratio -Debt Service -Coverage DSCR Average DSCR Year-1 1140 252.64 169.27 67.55 30.80 90.06 52% 66% 157.61 267.61 1.70 2.54 Year of Operation Year-2 Year-3 Year-4 1216 1368 1520 297.29 377.14 456.98 199.18 252.68 306.18 55.84 41.88 27.92 30.80 30.80 30.80 90.06 90.06 90.06 57% 67% 76% Year-5 1520 470.94 315.53 13.96 30.80 90.06 76%

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145.90 285.82 1.96

131.94 325.36 2.47

117.98 364.90 3.09

104.02 360.29 3.46