Wooden Furniture and Decorative Items
Uploaded on : November 2019
1.0 Product and Its Applications
Wood is versatile, beautiful and it is difficult to imagine a world without wood. Wood is light and that makes it easy to handle. It also floats and when properly treated, is waterproof. The demand for the decorative items and furniture made up of woods is growing due to the increased standard of living of people and outlook. For furniture and decorative items, wood is available from the local depots/forest areas. There is ever growing market for wooden products.
This project profile is for setting up of a Wooden furniture's and household decorative items making unit, based on 300 working days per annum and 8 working hours per day. The installed production capacity of the unit per annum is as follows;
Wooden Furniture's - 240 Nos.
Wooden Decorative Items - 1000 Nos.
Wooden decorative items would include Photo frame, Key Holders, Hangers, Articles of innovative idea etc.
2.0 Market Potential
The demand for wood based products are increasing depending mostly on the increasing magnitude of the new offices, new construction, schools, colleges, requirements of the students, hotels, restaurant and for domestic uses. The Corporate sector consumes a huge quantity of wooden decorative products and variety of utility-based wooden items. The wooden furnitures and fixtures are also essential for a family. The wooden products always enjoy a ready market and selling quality furniture with elegant get up should find no difficulties in consumer market.
3.0 Process Details
The line of process for making wooden products is planned as per the measurement; shaping, bending & chiselling considering design; finishing touch with sand paper; finally apply varnish/paint/lamination; and furniture can be laminated using laminated sheet.
4.0. Cost of the Project
The estimated project cost is given below:
Particulars |
Amount (Rs. in lacs) |
Land & Site Development |
Rented |
Building & Civil works |
Rented |
Plant & Machinery |
1.21 |
Misc. Fixed assets |
0.50 |
Preliminary & pre-operative expenses |
0.33 |
Contingencies & escalation @ 3% |
0.05 |
Working capital |
0.61 |
Total |
2.70 |
4.1 Land & Site Development:
Nil.
Total Land: 1,500 Sq. Ft. ; Covered Area: 750 Sq. Ft.
4.2 Building & Civil Works:
Nil.
4.3 Plant & Machinery:
Details of plant & machinery are given below.
Particulars |
Qty |
Rate (Rs) |
Amount (Rs) |
Automatic Wood Cutting Machine with 5 HP Motor |
1 |
45000 |
45000 |
Surface and thickness planner, Circular Saw, Drilling Machine and Grinding Machine |
1 |
15000 |
15000 |
Miscellaneous Hand tools and Equipment |
LS |
-- |
50000 |
Sub total |
110000 |
||
Add: Installation, transportation, etc @ 10% |
11000 |
||
Total |
121000 |
||
Say (Rs. in lacs) |
1.21 |
||
4.4 Misc. Fixed assets:
Details of miscellaneous fixed assets are given below.
Particulars |
Qty |
Rate (Rs) |
Amount (Rs) |
Electrification including load security |
1 |
20000 |
20000 |
Working Furniture & Fixtures |
LS |
-- |
15000 |
Miscellaneous items |
LS |
-- |
10000 |
Sub total |
45000 |
||
Add: Installation, transportation, etc @ 10% |
4500 |
||
Total |
49500 |
||
Say (Rs. in lacs) |
0.50 |
||
4.5 Contingencies & Escalation:
Contingencies & escalation has been assumed at 3% of the cost of land & site development, building & civil works, plant & machinery and miscellaneous fixed assets.
4.6 Preliminary & pre-operative expenses:
Details of preliminary & pre-operative expenses are given below.
Particulars |
Amount (Rs. In lacs) |
Travelling expenses |
5000 |
Professional & other fees |
10000 |
Interest during implementation |
3410 |
Miscellaneous expenses |
15000 |
Total |
33410 |
Say (Rs. in lacs) |
0.33 |
4.7 Working capital:
Details of working capital are given below.
|
Period |
Total Current Assets (Rs. in lacs) |
||
| Year 1 | Year 2 | Year 3 | ||
Raw materials |
30 |
0.51 |
0.59 |
0.68 |
Power & utility |
30 |
0.01 |
0.02 |
0.02 |
Salary |
30 |
0.22 |
0.22 |
0.22 |
Finished Goods |
15 |
0.38 |
0.42 |
0.47 |
Receivables |
15 |
0.39 |
0.46 |
0.53 |
| Total | 1.51 | 1.71 | 1.91 | |
Working capital margin in Year 1 (40%) |
0.61 |
|||
5.0 Means of Finance
The means of finance for the project is estimated as below.
Particulars |
Percent |
Amount (Rs. in lacs) |
EQUITY |
|
|
• Equity from Promoters |
40% |
1.08 |
• Subsidy from Central/State Govt. |
- |
|
DEBT |
|
|
Term Loan from Banks/Financial Institutions |
60% |
1.62 |
Total |
100% |
2.70 |
6.0 Profitability Statement
|
(Rs. in lacs) |
||||
Particulars |
Yr 1 |
Yr 2 |
Yr 3 |
Yr 4 |
Yr 5 |
A. INCOME |
|
|
|
|
|
Production Capacity (Nos./annum) |
1240 |
1240 |
1240 |
1240 |
1240 |
Capacity utilisation |
60% |
70% |
80% |
80% |
80% |
Production/ annum at capacity utilisation |
744 |
868 |
992 |
992 |
992 |
Total income/annum |
9.61 |
11.21 |
12.81 |
12.81 |
12.81 |
B. OPERATING EXPENSES |
|
|
|
|
|
Raw Materials |
6.19 |
7.22 |
8.26 |
8.26 |
8.26 |
Power & Utility |
0.17 |
0.19 |
0.22 |
0.22 |
0.22 |
Salary |
2.64 |
2.65 |
2.67 |
2.68 |
2.69 |
Repair & Maintenance |
0.03 |
0.03 |
0.03 |
0.03 |
0.03 |
Other Expenses |
0.19 |
0.22 |
0.26 |
0.26 |
0.26 |
Total Operating Expenses |
9.22 |
10.33 |
11.43 |
11.45 |
11.46 |
Operating profit |
0.38 |
0.88 |
1.38 |
1.36 |
1.35 |
C. FINANCIAL EXPENSES |
|
|
|
|
|
Depreciation |
0.10 |
0.10 |
0.10 |
0.10 |
0.10 |
Interest on Term Loan |
0.13 |
0.10 |
0.07 |
0.04 |
0.02 |
Interest on Working Capital Loan |
0.07 |
0.08 |
0.09 |
0.09 |
0.09 |
Net Profit |
0.09 |
0.60 |
1.12 |
1.13 |
1.15 |
Net cash accruals |
0.19 |
0.70 |
1.21 |
1.23 |
1.24 |
Principal Repayment |
0.18 |
0.36 |
0.36 |
0.36 |
0.36 |
6.1 Production capacity and Sales Realisation:
Total production of Wooden Furniture and decorative items Products at 100% capacity utilization is estimated as below.
Wooden Furnitures |
240 Nos. |
Wooden Decorative Items |
1000 Nos. |
Total production per annum at 100% capacity |
1240 Nos. |
Products |
Qnty |
Average Rate Per Unit (Rs.) |
Amount (Rs) |
Wooden Furnitures |
240 Nos. |
4900 |
1176000 |
Wooden Decorative Items |
1000 Nos. |
425 |
425000 |
Total Sale Turnover per annum at 100% capacity |
1601000 |
||
6.2 Raw materials:
Total expenses on raw materials at 100% capacity utilization are estimated as below.
Products |
Qnty |
Average Rate Per Unit (Rs.) |
Amount (Rs) |
Wood Timber |
1200 Cu. Ft. |
450 |
540000 |
Plywood |
9600 Sq. Ft. |
20 |
192000 |
Consumables like sunmica, Plane Glass, Mirror, Cushion, Fevicol etc. |
LS |
Rs. 25,000 Per Month |
300000 |
Expenses on Raw Material at 100% capacity |
1032000 |
||
6.3 Power & Utility:
Total expenses on power & utility at 100% capacity utilization is estimated as below.
Particulars |
Quantity |
Power (Kw) |
Total (Kw) |
Plant & Machinery |
-- |
2.00 |
2.00 |
General Lighting |
10 |
0.10 |
1.00 |
Total power requirement/ day (Kw) |
3.00 |
||
No. of hrs/day |
8 |
||
No. of days/annum |
300 |
||
Annual power requirement (kwh) |
7200 |
||
Rate per unit (Rs) |
3.50 |
||
Expenses on power (Rs) |
25200 |
||
Expenses on Other Utility(Rs) |
2400 |
||
Expenses on power & utility at 100% capacity (Rs) |
27600 |
||
6.4 Salary:
Total expenses on salary in the 1 st year are estimated as given below. It is assumed that salary expenses will increase @ 0.5% every subsequent year.
Particulars of Employees |
Numbers |
Salary/ Month (Rs) |
Cost/ annum (Rs) |
Manager |
1 |
5000 |
60000 |
Skilled Workers |
2 |
4000 |
96000 |
Unskilled workers |
3 |
3000 |
108000 |
Expenses on salary in the 1st year (Rs) |
264000 |
||
6.5 Repair & Maintenance:
Total expenses on repair & maintenance in the 1 st year is estimated as given below. It is assumed that expenses on repair & maintenance will increase @ 2% every subsequent year.
Particulars |
Cost (Rs) |
Rate |
Amount (Rs in lacs ) |
Building & Civil works |
0.00 |
1.00% |
0.00 |
Plant & Machinery |
1.21 |
2.00% |
0.02 |
Misc. Fixed assets |
0.50 |
1.50% |
0.01 |
Expenses on repair & maintenance in year 1 |
0.03 |
||
6.6 Other Expenses:
Other expenses have been assumed at 2% of sales realisation.
6.7 Depreciation:
Depreciation has been calculated by straight line method. The details of calculation are given below.
Description |
Cost (Rs) |
Rate |
Amount/ annum (Rs. in lacs ) |
Building & Civil works |
0.00 |
3.34% |
0.00 |
Plant & Machinery |
1.21 |
5.28% |
0.06 |
Misc. Fixed assets |
0.50 |
6.33% |
0.03 |
Total |
|
|
0.10 |
6.8 Interest on term loan & principal repayment:
Interest rate has been assumed at 8%. Duration of Loan repayment has been considered for a period of 5 years including moratorium period of 6 Months with equal monthly instalments. The details of calculation are given below.
Month |
Year |
1 |
2 |
3 |
4 |
5 |
Month 1 |
Opening balance |
1.62 |
1.44 |
1.08 |
0.72 |
0.36 |
|
Repayment |
0.00 |
0.03 |
0.03 |
0.03 |
0.03 |
|
Interest (8%) |
0.01 |
0.01 |
0.01 |
0.00 |
0.00 |
|
Closing balance |
1.62 |
1.41 |
1.05 |
0.69 |
0.33 |
Month 2 |
Opening balance |
1.62 |
1.41 |
1.05 |
0.69 |
0.33 |
|
Repayment |
0.00 |
0.03 |
0.03 |
0.03 |
0.03 |
|
Interest |
0.01 |
0.01 |
0.01 |
0.00 |
0.00 |
|
Closing balance |
1.62 |
1.38 |
1.02 |
0.66 |
0.30 |
Month 3 |
Opening balance |
1.62 |
1.38 |
1.02 |
0.66 |
0.30 |
|
Repayment |
0.00 |
0.03 |
0.03 |
0.03 |
0.03 |
|
Interest |
0.01 |
0.01 |
0.01 |
0.00 |
0.00 |
Closing balance |
|
1.62 |
1.35 |
0.99 |
0.63 |
0.27 |
7.0 Debt Service Coverage Ratio (DSCR)
Year |
1 |
2 |
3 |
4 |
5 |
Profit After Tax (Net Profit) |
0.09 |
0.60 |
1.12 |
1.13 |
1.15 |
Depreciation |
0.10 |
0.10 |
0.10 |
0.10 |
0.10 |
Interest |
0.13 |
0.10 |
0.07 |
0.04 |
0.02 |
Total |
0.31 |
0.80 |
1.28 |
1.27 |
1.26 |
Interest |
0.13 |
0.10 |
0.07 |
0.04 |
0.02 |
Loan repayment |
0.18 |
0.36 |
0.36 |
0.36 |
0.36 |
Total |
0.31 |
0.46 |
0.43 |
0.40 |
0.37 |
DSCR |
1.02 |
1.73 |
2.97 |
3.15 |
3.35 |
Average DSCR = 2.49
8.0 Break Even Point (BEP)
(Rs. in lacs) |
|||
Year |
1 |
2 |
3 |
A. Net sales |
9.61 |
11.21 |
12.81 |
B. Variable cost |
|
|
|
Raw Materials |
6.19 |
7.22 |
8.26 |
Power & Utility |
0.17 |
0.19 |
0.22 |
Other expenses |
0.19 |
0.22 |
0.26 |
Interest on Working Capital Loan |
0.07 |
0.08 |
0.09 |
Total variable cost |
6.62 |
7.72 |
8.82 |
C. Contribution (A-B) |
2.98 |
3.48 |
3.98 |
D. Fixed & Semi-fixed Costs |
|
|
|
Salary |
2.64 |
2.65 |
2.67 |
Repair & maintenance |
0.03 |
0.03 |
0.03 |
Interest on Term Loan |
0.13 |
0.10 |
0.07 |
Depreciation |
0.10 |
0.10 |
0.10 |
Total fixed cost |
2.89 |
2.88 |
2.87 |
E. BREAK EVEN POINT |
96.97% |
82.75% |
71.99% |
F. BEP at operating capacity |
58.18% |
57.92% |
57.59% |
G. Cash BEP |
56.27% |
56.01% |
55.68% |
9.0 Internal Rate of Return (IRR)
(Rs. in lacs) |
||||||
Year |
0 |
1 |
2 |
3 |
4 |
5 |
CASH OUTFLOW |
|
|
|
|
|
|
Capital Expenditure |
1.76 |
0.00 |
0.00 |
0.00 |
0.00 |
0.00 |
Working Capital |
0.00 |
1.51 |
0.20 |
0.20 |
0.00 |
0.00 |
Total (A) |
1.76 |
1.51 |
0.20 |
0.20 |
0.00 |
0.00 |
CASH INFLOW |
|
|
|
|
|
|
Profit After Tax |
|
0.09 |
0.60 |
1.12 |
1.13 |
1.15 |
Add: Depreciation |
|
0.10 |
0.10 |
0.10 |
0.10 |
0.10 |
Add: Interest |
|
0.13 |
0.10 |
0.07 |
0.04 |
0.02 |
Add: Salvage Value |
|
|
|
|
|
|
Total (B) |
0.00 |
0.31 |
0.80 |
1.28 |
1.27 |
1.26 |
NET FLOW (B-A) |
-1.76 |
-1.20 |
0.60 |
1.08 |
1.27 |
1.26 |
IRR = 27%
Source:
North Eastern Development Finance Corporation Limited, Guwahati
For further information please contact
Information Manager
TIMEIS Project
E-mail: timeis@ficci.com
