18 Icecream Cones Mfg

ICE-CREAM CONES MANUFACTURING

1.0INTRODUCTIONIce-creams of many varieties, flavours and in different forms (cones, cups, slices, bulk packing, candies, etc) are served round the year and demand is going up year after year. Possibly the most popular mode of serving is in cones as it is neat & clean, easy to store and there is no disposal need. With continuous increase in sale of ice-creams, demand for cones is increasing. It is a mass consumption item.

2.1 PRODUCTIce-cream cones are prepared from wheat & corn flour and they are eaten along with the ice-cream. Pre-determined quantity of ice-cream is automatically filled in each cone. Cones are not only convenient but there is no residual waste as well. They are of different colours and flavours. This is a very common product and can be produced all over the country. Nearness to urban market should be the main guiding factor. This note considers a suitable location in Maharashtra.

2.2 Compliance with FPO is necessary.

3.1 MARKET POTENTIAL3.2 Demand and SupplyConsumption of ice-cream has been increasing steadily over the years. With changing life styles and food habits, this trend would continue even in future. Majority of the consumers prefer ice-cream in cups or cones, and party or bulk packs or serving in glass bowls or plates is very limited. Serving in paper-cups requires a spoon to eat and disposal is a problem. But in case of cones there is no need to have a spoon and they are eaten along with the ice-

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cream. Thus, this is the most convenient way of serving and also preferred by customers. Ice- cream candies result in waste while eating and there is consumer resistance.

3.3 Marketing StrategyMany national and regional brands are existing in the market. But local brands, ice-creams prepared by local dairies and parlours are the major players. Ideally, some marketing tie-up can be made with these local players as they are easily approachable and contemplated production capacity may not permit regular and large supplies to big manufacturers.

4.0MANUFACTURING PROCESSAutomatic ice-cream cone makers are available. Initially corn and wheat flour is mixed with water and required quantity of colour and flavours are added. Then this dough is fed to the cone making machine. The machine makes cones as per the mould they are baked-in and ready cones come out of it. 50 or 100 cones are packed in polythene bags.

5.1 CAPITAL INPUTS5.2 Land and BuildingA readymade shed of around 50 sq.mtrs. can accommodate machine as well as storage and packing space. It may cost Rs.1, 25,000/-.

5.3 MachineryAutomatic cone-making machines are available in the market with varying capacities. Capacity has to be decided by the size of the market and likely tie-ups. A machine with capacity to produce 48,000 cones per shift of 8 hours or 144.00 lac cones per year considering 300 working days would cost Rs.2.00 lacs.

5.4 Miscellaneous AssetsSome other support assets like SS utensils, storage racks, weighing scale, sealing machine and furniture & fixtures shall be required for which a provision of Rs. 35,000/- is enough.

5.5 UtilitiesPower requirement shall be 5 HP whereas per day water requirement would be around 700- 750 ltrs. inclusive of potable and sanitation purposes.

5.6 Raw and Packing MaterialsThe major raw materials are wheat and corn flour and some flavours and colours. Since the overall quantities of each material shall not be much, no difficulty is envisaged in procuring them. Packing materials like plastic bags and second-hand cartons shall be required.

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6.0MANPOWER REQUIREMENTS

ParticularsNos.Monthly Salary (Rs.)Total Monthly Salary (Rs.)

Skilled Workers12,5002,500

Helpers21,2502,500

Salesman12,5002,500

Total7,500

7.0TENTATIVE IMPLEMENTATION SCHEDULE

ActivityPeriod (in months)

Application and sanction of loan1.5

Site selection and commencement of civil work0.5

Completion of civil work and placement of orders for machinery1.5

Erection, installation and trial runs0.5

8.1 DETAILS OF THE PROPOSED PROJECT8.2 BuildingA readymade shed of 50 sq.mtrs. would be sufficient as discussed earlier.

8.3 MachineryThe total cost of machinery would be Rs. 2.00 lacs as explained earlier.

8.4 Miscellaneous AssetsA provision of Rs.35,000/- is adequate under this head as mentioned earlier.

8.5 Preliminary & Pre-operative ExpensesThere will be many pre-production expenses like registration, establishment and administrative charges, market survey expenses, interest during implementation, trial run expenses etc. for which an amount of Rs.50,000/- is provided for.

8.6 Working Capital RequirementsThe machine is expected to run at 60% of its rated capacity in the first year for which the following working funds shall be required:(Rs. in lacs)

ParticularsPeriodMarginTotalBankPromoters

Stock of Raw and Packing Materials Month30%0.650.450.20

Stock of Finished Goods Month25%0.800.600.20

Receivables Month25%1.000.750.25

Working Expenses1 Month100%0.30--0.30

Total2.751.800.95

8.7 Cost of the Project & Means of Financing(Rs. in lacs)

ItemAmount

Building1.25

Machinery2.00

Miscellaneous Assets0.35

P&P Expenses0.50

Contingencies @ 10% on Land and Building & Plant & Machinery

0.32

Working Capital Margin0.95

Total5.37

Means of Finance

Promoters' Contribution1.61

Term Loan from Bank/FI3.76

Total5.37

Debt Equity Ratio2.33 : 1

Promoters' Contribution30%

Financial assistance in the form of grant is available from the Ministry of Food Processing Industries, Govt. of India, towards expenditure on technical civil works and plant and machinery for eligible projects subject to certain terms and conditions.

9.1 PROFITABILITY CALCULATIONS9.2 Production Capacity & Build-upAs against the annual installed capacity of 144.00 lac cones, actual capacity utilisation in the first year is envisaged to be 60% and thereafter 70%.

9.3 Sales Revenue at 100%Considering 5% wastages and selling price of 30 paise per cone, the annual sales at 100% utilisation would be Rs.41.04 lacs.

9.4 Raw Material Required at 100%Cost of raw materials would be around 15 paise per cone with packing cost of 3 paise each. Hence total cost for 144 lac cones would be Rs. 25.92 lacs.

9.5 UtilitiesAnnual cost of utilities at 100% utilisation is expected to be Rs. 60,000/-.

9.6 Selling ExpensesTrade discount, transportation, replacement, free sampling etc. would account for 15% of the sales value every year.

9.7 InterestInterest on term loan of Rs. 3.76 lacs is calculated @ 12% per annum assuming repayment in 3 years including a moratorium period of 6 months whereas interest @ 14% per annum has been computed on bank finance for working capital.

9.8 DepreciationDepreciation has been calculated @ 10% on building and 20% on machinery and miscellaneous assets on WDV basis.

10.0PROJECTED PROFITABILITY

(Rs. in lacs)

No.Particulars1st Year2nd Year

AInstalled Capacity---- 144 Lac Nos ----

Capacity Utilisation60%75%

Sales Realisation24.6230.78

BCost of Production

Raw Materials15.5519.44

Utilities0.360.45

Salaries0.901.10

Repairs and Maintenance0.240.36

Selling Expenses @ 15%3.694.62

Administrative Expenses0.360.48

Total21.1026.45

CProfit before Interest & Depreciation3.524.33

Interest on Term Loan0.340.24

Interest on Working Capital0.250.32

Depreciation0.600.48

Profit before Tax2.333.29

Income-tax @ 20%0.460.64

Profit after Tax1.872.65

Cash Accruals2.473.13

Repayment of Term Loan0.551.10

14011.0BREAK-EVEN ANALYSIS

(Rs. in lacs)

NoParticularsAmount

[A]Sales24.62

[B]Variable Costs

Raw and Packing Materials15.55

Utilities (60%)0.22

Salaries (70%)0.63

Selling Expenses (70%)2.58

Admn Expenses (50%)0.18

Interest on WC0.2519.41

[C]Contribution [A] - [B]5.21

[D]Fixed Cost2.88

[E]Break-Even Point [D] [C]56%

12.0[A]LEVERAGES

Financial Leverage

= EBIT/EBT

= 2.92 2.33

= 1.25

Operating Leverage

= Contribution/EBT

= 5.21 2.33

= 2.24

Degree of Total Leverage

= FL/OL

= 1.25 2.24

= 0.56

141[B]Debt Service Coverage Ratio (DSCR)

(Rs. in lacs)

Particulars1st Yr2nd Yr3rd Yr4th Yr

Cash Accruals2.473.133.363.63

Interest on TL0.340.240.170.06

Total [A]2.813.373.533.69

Interest on TL0.340.240.170.06

Repayment of TL0.621.241.240.66

Total [B]0.961.481.41.72

DSCR [A] [B]2.922.272.505.12

Average DSCR---------------------------- 3.20 -----------------------

[C]Internal Rate of Return (IRR)

Cost of the project is Rs. 5.37 lacs.

(Rs. in lacs)

YearCash Accruals24%28%32%

12.471.991.931.87

23.132.031.911.80

33.361.761.601.46

43.631.541.351.19

12.597.326.796.32

The IRR is around 40%.

These machines are available from

1. T Alimohammad & Co, MJ Phule Market, Mumbai 400 003

2. S.R. Engg. Works,MIDC Satpur, Nasik

3. Sujata Enterprises,Laxmi Road, Pune

4. Techno Equipments , 31 Parekh Street, Girgaum, Mumbai-400004