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Project FinanceCase : Vamshi Rubber Ltd.

Vamshi Rubber Limited, incorporated on 24th November, 2007, as a Public Limited Compan inCollaboration !ith "ercules #ire and Rubber Co$, is settin% up a project &or the manu&acture o&

procured tread rubber and its associated products at Lin%oji%uda Villa%e, Choutuppal 'andal,Na%aland (istrict in )ndhra Pradesh$ *t is the proposed to manu&acture tread rubber !ith a capacit o&+200 tonnes per, annum, Cushion %um !ith a capacit o& 400 tonnes per annum and vulcaniin%solution !ith a capacit o& 400 tonnes per annum$

Project particulars#he Compan has purchased +$-4 acres o& land at a cost o& Rs$2.$00 la/hs$ #he site development isestimated to be Rs$$1 la/hs$

#he civil !or/s o& the compan mainl consists o& the process shed !here the rubber is mied in aninter mi, etrusion and pressin% shed$ #he area o& the process sheds about 4. s3$ mtrs and that o&

etrusion shed is .00+ 3$ 'trs$ #he other important buildin%s are &inished %oods store 5.173$ 'trs6,boiler shed 5. 3$ 'trs6, Po!er Room 50 3$ mtrs6, &&ice 8loc/ 5.29 3$'trs6, ta&& :uarters 51073$ 'trs6$ #he total ependiture to!ards buildin% and civil !or/s is estimated to be Rs$.04$+2 la/hs$

#he total o& plant and machiner is estimated to cost 2.$+1 la/hs$ Necessar provision has also beenmade &or &oundation and erection o& the e3uipment to an etent o& Rs +$14 la/hs$ #he entire e3uipmentre3uired &or the project is bein% procured &rom indi%enous sources$#he compan has provided &or &urniture and &itures, o&&ice e3uipment, electrical e3uipment, delivervan, tread coolin% line, boiler, oil stora%e tan/s, lab e3uipment, etc$ the compan has also provided &ort!o retreatin% centers, one at "derabad and the other in the North at (elhi$ #he total cost o& all thesemiscellaneous &ied assets estimated to be Rs$.17 la/hs$ Preliminar and pre;operative epenses

amount to Rs$2. and Rs$ 14 la/hs respectivel$

Assumptionsto be made in !or/in% out the Pro&itabilit Projections in the &irst ear, 70> in

the second ear and 0> &rom third ear on!ards$+$ ellin% Price< #he sellin% price o& #read Rubber is ta/en at Rs$47,000 per tonne, Cushion

?um at Rs$94,000 per tonne and Vulcaniin% olution a Rs$41,000 pr tonne$4$ Ra! 'aterials< #he ra! materials re3uired &or the manu&acture o& rubber are mainl natural

rubber, snthetic rubber, carbon blac/ and some chemicals$ )ll the ra! materials areavailable indi%enousl and !ithout an di&&icult$ #he cost o& ra! materials pr tonneincludin% process loss at .> !or/s out to Rs$+2,0-7 &or Procured Rubber, Rs$+2,970 &orCushion ?um and Rs$.1,191 &or Vulcaniin% olution$

9$ Consumables< #he cost o& consumables per tonne o& the &inished product is estimated atRs$.,000$

1$ Po!er< #he annual re3uirement o& po!er is estimated at 790 @V)$ #a/in% into accountdemand char%es at Rs$79 per @V) per month and po!er char%es at Rs$2$.9 per unit the

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total cost o& po!er !or/s out Rs$14,4-,040 &rom &ourth ear on!ards$ *t is also epectedthat the unit %ets po!er rebate at 29> &or the &irst three ears$

7$ Fuel< Re3uirement o& the &uel is ta/en at the rate o& 42 /% per hour based on 20 hours per!or/in% da$ Rate per tonne is Rs$,0.9$ *n respect o& &irst ear and second ear thenumber o& !or/in% hours per da is assumed at.+ and .1 hours respectivel$

$ Repairs A 'aintenance is estimated at 2> and 2$9> o& %ross bloc/ o& Plant A 'achiner&or the &irst 2 ears o& operation and +> &rom the third ear on!ards$-$ (epreciation has been provided on trai%ht Line 'ethod at the rate o& +>, ..> and +$+4>

on buildin%, plant and machiner and 'F)$ "o!ever, income ta is computed on the basiso& depreciation rates o& .0>, 29> and .0> respectivel$

.0$ #he rate o& interest is assumed to bea$ .7$9> p$a$ &or term loan andb$ .1> &or !or/in% capital$

..$ =or/in% Capital is arrived at ta/in% into consideration the &ollo!in% inventornorms and as appraised b 8an/ o& 8aroda

.$ #erm Loan available Rs$ +.2 Lacs$Public *ssue < 2> o& project costsPromoters Contribution < Rest o& the re3uirements

Re3uired < Calculate *6 Cost o& project, ii6 'eans o& &inance iii6 Projected pro&itabilitiv6 Projected cash &lo!s A iv6 Projected 8alance sheet

DDDDDDDDDDDDDDDD 5 8 Pro& Vive/ (ate )u%.26