Download - Sample marketing research report
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
1, Krinkal Apartment,
Mahalaxmi Society, Paldi
Ahmedabad
Gujarat
380007
Techno-Economic Feasibility Report of
Medium Density Fibre Board
January 2007
Mott MacDonald
501, Sakar II
Ellisbridge
Ahmedabad, Gujarat
India
380001
Tel: +91-79-26575550
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
Techno-Economic Feasibility Report of
Medium Density Fibre Board
This document has been prepared for the titled project or named part thereof and should not be relied upon or used for any
other project without an independent check being carried out as to its suitability and prior written authority of Mott
MacDonald being obtained. Mott MacDonald accepts no responsibility or liability for the consequence of this document
being used for a purpose other than the purposes for which it was commissioned. Any person using or relying on the
document for such other purpose agrees, and will by such use or reliance be taken to confirm his agreement to indemnify
Mott MacDonald for all loss or damage resulting therefrom. Mott MacDonald accepts no responsibility or liability for this
document to any party other than the person by whom it was commissioned.
To the extent that this report is based on information supplied by other parties, Mott MacDonald accepts no liability for any
loss or damage suffered by the client, whether contractual or tortious, stemming from any conclusions based on data
supplied by parties other than Mott MacDonald and used by Mott MacDonald in preparing this report.
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
List of Contents Page
Executive Summary
Chapters and Appendices
1 Introduction 1
1.1 Study Background 1
1.2 Project Description 1
1.3 Background of the Firm 2
1.4 About the Promoters & Management 3
1.5 Consultant’s Background 4
1.6 The Scope of Work 6
1.7 Approach and Methodology 6
1.8 Caveats 9
2 Product Description 10
2.1 Medium Density Fibreboard 10
2.2 Prelam MDF Board 13
2.3 Laminate Flooring 14
2.4 Description of Substitutes 14
3 Market Study 20
3.1 Global Scenario for MDF 20
3.2 Laminate Flooring Market 24
3.3 Indian Market 27
3.4 Indian Scenario on Furniture 38
3.5 Other Relevant Issues 46
4 Raw Material Assessment 50
4.1 Raw material Types 50
4.2 Cotton Production 50
4.3 Cotton stalk 55
4.4 Bagasse as Alternate Raw Material 61
5 Technological Aspects 64
5.2 Manufacturing Process of Prelam Boards: 67
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
5.3 Manufacturing process of Laminated Flooring 67
5.4 Location Aspects 68
5.5 Machinery Details 71
6 Strategic Analysis of the Firm 77
6.1 SWOT Analysis 77
6.2 Five-Force Model Analysis 79
7 Marketing Strategy 82
7.1 Present Marketing Set Up 82
7.2 Formulation of Marketing Strategy 85
8 Financial Modelling & Analysis 88
8.1 Estimation of Capital Cost 88
8.2 Means of Finance 92
8.3 Assumptions 93
8.4 Cash flows& Profitability Statement 97
8.5 Financial Indicators- NPV, IRR, DSCR, Pay back 101
8.6 Sensitivity Analysis 101
9 Conclusion and Recommendations 102
Appendix A: Fixed Cost Allocation of Contingency and POP expenses 103
Appendix B: Working Capital Statement 104
Appendix C: Term Loan - Repayment & Interest 105
Appendix D: Unsecured Loan - Interest 106
Appendix E: SLM Depreciation 107
Appendix F: WDV Depreciation 108
Appendix G: Tax Statement 109
Appendix H: Debt Service Coverage Ratio 110
Appendix I: Pay Back Period & Internal Rate of Return 111
Appendix J: Availability of Bagasse 113
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
List of Figures
Figure 1.1: Approach and Methodology 8 Figure 2.1: Substitutes of MDF 15 Figure 3.1: MDF Consumption in China 21 Figure 3.2: Global MDF Demand – Supply Balance 23 Figure 3.3: Global Particleboard Demand – Supply Balance 23 Figure 3.4: World Production of Laminate Flooring 24 Figure 3.5: Production of Laminate Flooring in Europe 25 Figure 3.6: Market Volumes of Laminate Flooring in North America 26 Figure 3.7: Market Volumes of Laminate Flooring in Asia – Pacific 26 Figure 3.8: Furniture Productions in Billion Euros 39 Figure 3.9: Raw material used in furniture 39 Figure 3.10: Furniture Production Break up 40 Figure 3.11: Import – Export of Furniture in India 41 Figure 3.12: Country wise break up of export of Indian furniture 41 Figure 3.13: Product wise break up of Indian furniture export 42 Figure 3.14: Country wise break up of imported furniture in India 42 Figure 3.15: Product wise break up of imported furniture in India 43 Figure 3.16: Break up of the round wood consumption in India 44 Figure 3.17: Imports of Veneer & plywood in India (In US $ ‘000) 45 Figure 3.18: Import of MDF/HDF & Particle Board in India (In US $ ’000) 46 Figure 4.1: Cotton Production area and yields of India and U.S. 50 Figure 4.2: India’s Cotton Production and Production area 51 Figure 4.3: India’s Cotton Production Yield 52 Figure 4.4: Gujarat’s Cotton Production Yield 53 Figure 4.5: CCS Centre Mechanism 60 Figure 5.1: Techno Economic parameter for machinery selection 71 Figure 6.1: SWOT Analysis 77 Figure 6.2: Wood Products & competitors life cycles 78 Figure 6.3: Five Force Model 79 Figure 7.1: Present Marketing Set up 82
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
List of Tables
Table 2.1: Classification of Board based on Density 10 Table 2.2: IS Specification of MDF Board 11 Table 2.3: Wood& Agro-based products and their application 17 Table 2.4: Characteristics comparison of different products 18 Table 3.1: Region wise MDF production 20 Table 3.2: Production and trade of MDF in the Middle East 22 Table 3.3: Indian log production, imports & apparent consumption, 2003 43 Table 3.4: Demand supply gap of wood 44 Table 3.5: Indian imports of wood products, 2002 -2003 44 Table 4.1: Cotton production 52 Table 4.2: District wise cotton production in Gujarat 54 Table 4.3: Cotton Productions in Surendranagar District 55 Table 4.4: Cotton Production in different talukas of Surendranagar 58 Table 4.5: CCS Centre locations 59 Table 4.6: Sugarcane Productions in Gujarat 62 Table 5.1: List of Imported Machinery 72 Table 5.2: List of Indigenous Machinery 72 Table 5.3: List of other plant and machinery 72 Table 7.1: The present marketing zones of RDPL in India 83 Table 7.2: The present marketing network of RDPL in world 84 Table 8.1: Building and Civil Work 88 Table 8.2: List of imported Machinery 89 Table 8.3: List of Indigenous machinery 89 Table 8.4: list of other plant and machinery 90 Table 8.5: Preoperative and Preliminary cost break up 91 Table 8.6: Inventory norms 91 Table 8.7: Total Cost of Project 92 Table 8.8: Means of finance 92 Table 8.9: Capacity Utilisation in phase 1 93 Table 8.10: Capacity Utilisation in phase 2 93 Table 8.11: Operating norms for Fibre Board manufacturing 95 Table 8.12: Operating norms for Prelam MDF Board manufacturing 95 Table 8.13: Operating Norms for Laminated HDF Flooring Manufacturing 95 Table 8.14: Repayment of Long Term Loan 96 Table 8.15: Profitability Statement 97 Table 8.16: Cash flow Statement 99 Table 8.17: Financial Indicators 101 Table 8.18: Sensitivity Analysis 101
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
Executive Summary
Rushil Group (herein after referred to as client or RDPL) has a well established market in
the decorative laminate business in India and abroad. They are planning to make forays
into the manufacturing of MDF (Medium Density Fibreboard), laminate flooring and prelam
boards. This related diversification drive not only offers synergy in operation but also
provides a sea of opportunities in terms of value addition, import substitution, promotion
of rural economy, preservation of forests and employment generation.
Every year, MDF worth US$ 67.5 million are being imported to India which meets almost
75-80% of the total domestic demand. Based on market information, the market for MDF is
growing at an impressive rate of 20-25% p.a. There are only two players in the domestic
market that manufactures MDF. In the light of the above facts, Rushil can look forward to
reap the benefits of early mover advantage. Further to this, a well-established distribution
channel will help the firm to push their new products into the market in a cost effective
way.
Manufacturing MDF from cotton stalks will be the first of its kind in India that will offer
cost advantages in terms of production. RDPL is planning to set up manufacturing unit at
Surendranagar, which is famous for cotton cultivation. Also the surrounding areas are
cotton-abundant. Alternatively, bagasse is being considered as the raw material for MDF
production; which can be easily procured from South Gujarat and Saurashtra.
The client also plans to grow ailanthus excelsa or other kind of soft wood tree near the
factory premises in a vast expanse of land so that the wood from the same can be used as
raw material for MDF. Ideally 850 to 870 saplings can be planted per acre of land and will
be ready for felling in a span of 4 years. The typical yield is 100 tons per hectare. On an
average, 1.55 tons of trees are needed to produce 1 cubic metre of MDF.
The technology and major machinery will be sourced from Germany and China. Parameters
such as contemporariness of technology, energy efficiency, post-sales customer support,
scalability, etc had been taken into account while choosing the technology.
The long-term relationship the client enjoys with many dealers in India and around the
globe, especially in Europe can be leveraged further to sell/export the products from
India. In this respect, the cost-competitiveness and the established brand equity will play a
vital role. RDPL is envisaged to export nearly 60% of the product to favourable market
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
destinations around the globe. The international marketing network of the RDPL is spread
in 34 countries including Canada, USA, Venezuela, Europe, Far East countries, Australia,
and Gulf countries with the strong brand name of “Rushil Décor”.
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
1
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
1 Introduction
1.1 Study Background
Since its inception in 1992, the Rushil Group of companies have created a niche for
themselves in the laminates business in India. Being a visionary company, it has tapped the
right opportunities so far in increasing the market share and the export volume, thereby
increasing the profits for the firm. At the same time, they have been continuously
innovating themselves in terms of product quality and services to the customers
worldwide, creating value for its stakeholders.
India’s impressive economic growth rate and the thrust on infrastructure development are
potential growth drivers for the construction materials in general and laminate in
particular. Rushil Group (herein after referred to as client or RDPL) is planning to make
forays into the manufacturing of MDF (Medium Density Fibreboard), laminate flooring and
prelam boards. This offers a sea of opportunities in terms of value addition, import
substitution, promotion of rural economy, preservation of forests, employment generation,
etc.
In the client’s endeavour for related diversification into MDF manufacturing, Mott
MacDonald (herein after referred to as the consultant) would prepare a detailed techno-
economic feasibility report for the project. This study will focus on the issues of market
demand, raw material sourcing, technology selection, supply chain management, means of
finance, revenue modelling, risk management and strategy formulation.
1.2 Project Description
RDPL is planning to set up manufacturing unit of MDF and HDF board and their downstream
products like Prelam MDF board and Laminated HDF flooring.
The location identified for the project is Navalgarh village in Dhangadhra taluka of
Surendranagar district. The land acquisition process is finalized and RDPL has purchased 67
acres of land. RDPL has also finalized major machinery suppliers and purchase order has
been placed for MDF manufacturing plant, short cycle press, impregnation line and resin
plant. By considering the expertise of manufacturing machinery, quality and price
competitiveness, RDPL has selected foreign machinery suppliers for their requirement.
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
2
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
The project will be implemented in two phases. In first phase, RDPL will manufacture
laminated flooring with imported High Density Fibre (HDF) board and in the second phase,
RDPL will manufacture Prelam MDF board and HDF laminated flooring with in-house
manufactured MDF and HDF board. The first phase will commence from October 2007,
while second phase is expected to be commissioned in October 2008.
The project has certain advantages due to its location and raw material used for
manufacturing Fibre board. The raw material selected for the project is agro waste like
cotton stalk and bagasse. RDPL is also considering social forestry route to meet its future
requirement of raw material. Due to the raw material selection, project come under the
agro industry and become eligible to get incentives from the Government of Gujarat.
1.3 Background of the Firm
Rushil Group of companies commenced operations in 1992, when Indian laminate industry
started serving to the global markets. “Vir Laminate” from the stable of Rushil Group is
one of best known brand in the laminate space and the company is one of India’s leading
decorative laminate manufacturing companies. Vir is a favourable brand for Indian
architects and interior designers. A large number of private & public sector corporate
companies spread across the length and breadth of the country are customers of the group.
Rushil pioneered Indian laminate industry into export market through the adoption of the
flexible global business practices that today enable the company to operate more
efficiently and to produce more value to its stakeholders. With a well-known product brand
‘Rushil décor premium laminate’, almost 34 countries are being served by our
comprehensive range of products as well as services.
The firm produces laminated sheets, prelam boards and door skins in their state-of-the-art
facilities at Mansa of Gandinagar District. The plant is capable of churning out 4.8 million
sheets per annum.
Milestones
• 1992 – Rushil décor Pvt. Ltd. (1st laminate manufacturing facility) established by Mr. Ghanshyam Thakkar & his son Mr. Krupesh Thakkar
• 1992 - annual turnover of Rs. 2.5 crores in the first year
• 1993 - 100% increase in sales compared to the previous year
• 1994 – company’s first export to Bangladesh
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
3
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
• 1997 - Rushil International established for export business
• 1998 - Group’s sales graph on the upswing by export & domestic sales
• 1999 - Mica Rushil Pvt. Ltd. (2nd laminate manufacturing facility) established.
• 2003 - Rushil H.P.L. (3rd laminate manufacturing facility) established.
• 2003 – Production capacity of 300000 sheets per month.
• 2003 – Company’s export reached to 34 countries.
• 2004 – Laxmi Pandit & Samir Khan as brand ambassadors.
• 2005 – Erection of short cycle laminates plant (1st prelam manufacturing facility).
• 2005 - Production of ‘Vir Prelam’ boards started.
• 2005 – Sridevi as a brand ambassador for Vir Laminate.
• 2006 – (4th laminate manufacturing facility) established.
• 2006 – production capacity reaches 4,00,000 sheets per month
• 2007- 2nd manufacturing facility for prelam started (Vertex Laminate Private Ltd,
Mumbai).
• 2007 – Reorganisation of management structure
1.4 About the Promoters & Management
The promoters of the firm are Mr. Krupeshbhai G. Thakkar and Mr. Ghanshyam Thakkar
who possess indomitable spirit of entrepreneurship. The former has nearly 20 years of
experience in laminate manufacturing industry by working in areas of production, product
and project development, exports and sales. Mr. Ghanshyam Thakkar is the founder of the
company who has 46 years of experience in plywood trading and 20 years of experience in
laminate manufacturing business. They are very upbeat about the laminate and flooring
business and are ready to tap the huge potential in this segment that will come as a
consequence of economic boom and the concomitant increased activities in infrastructure
(construction of shopping malls, multiplex, IT parks, offices, etc).
They have a highly competent and forward looking team of professionals manning different
levels and functions. International Business Development is a thrust area that will help
RDPL to tide over any slack in domestic demand that may arise in future. Similarly it has an
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
4
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
IT-enabled office environment that continuously monitor the work flow in vital functions
such as Accounting& Finance, Sales, Production, Purchase& Inventory, etc.
The firm boasts of Sales& Marketing Offices spread throughout the country and an
extremely networked trade set up that export products to 34 countries worldwide.
The Organogram is given below:
Director
↓
CEO
↓ ______________________________________________________________
↓ ↓ ↓ ↓ ↓ ↓
Account Costing Finance Export Marketing & Project &
Sales Development
↓ ↓ ↓ ↓
Production HR Purchase IT
1.5 Consultant’s Background
Mott MacDonald Private Limited (IMM) is a leading multi-disciplinary management and
engineering consultancy based in India, with offices nationwide.
As part of the global Mott MacDonald Group headquartered in U.K., IMM is able to draw on
world-class technical and managerial resources comprising over 5000 staff in more than 50
strategic centres world-wide. IMM is engaged in planning and development touching many
aspects of everyday life – from water, energy, industry, environment and transport to
building, healthcare, tourism and social development. Across these sectors IMM works for
national and local governments, public and private utilities, industrial and commercial
companies, investors, developers, banks and financial institutions, international and
bilateral funding agencies and private entrepreneurs. IMM’s strengths enable our clients to
realize their projects optimally from concept to commissioning. With 750 professionals, we
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
5
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
take care of the entire process – including providing advice on the best procurement route
and the optimum approach for maintaining the project once it enters service.
1.5.1 Services
(i) Management Consultancy
IMM provides business planning and project management for a wide spectrum of clients in
industry, infrastructure and social development, including international development banks
and funding agencies. DMM also help clients such as accountancy practices, financial
institutions and industrial companies in making a realistic appraisal of their fixed assets,
and in preparing for disinvestment, mergers or de-mergers, acquisitions, takeovers,
insurance or liquidation, collaborations and joint ventures.
(ii) Social Solutions
IMM has undertaken numerous studies and advisory roles for leading development banks
and funding agencies. Projects range from implementing vital AIDS eradication programmes
and pro-poor initiatives to studies for institutional strengthening, sector reform and impact
evaluation. DMM also offers specialist expertise in assisting with public consultation.
(iii) Engineering Services
IMM’s range of engineering services enables clients to realise optimal implementation of
projects. DMM takes care of every stage – site evaluation, basic and detailed engineering,
contract preparation, project management, procurement, equipment inspection and
testing, site supervision and commissioning.
(iv) Infrastructure
One of the key strengths of IMM lies in large-scale integrated urban infrastructure
development, encompassing water supply, drainage, solid waste, roads, sanitation, and
community buildings. Here our services range from planning and advisory assistance to
detailed engineering and construction management.
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
6
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
(v) Industry
IMM’s skills and experience have earned it a leading reputation – especially in chemicals,
textiles, oil and gas, agri& food processing and life sciences, as well as bulk drugs,
pharmaceuticals and biotechnology. DMM is known particularly for its expertise in process
engineering and licensing for speciality chemical production based on laboratory/pilot
plant know-how developed by R&D centres.
(vi) Buildings
IMM’s business covers all sectors from commercial and leisure to industry, education and
healthcare. DMM provides the full range of architectural, structural, mechanical and
electrical design skills, along with planning and project management expertise. Building
services are a special capability, notably building management systems, vertical
transportation, telecommunications and security.
1.6 The Scope of Work
The scope of work (SOW) includes-
• Assessment of raw material availability to ensure sustained operation of the
plant.
• Market assessment to justify project rationale from the market point of view.
• Technology Evaluation.
• Plant location analysis.
• Assessment of project cost, operating cost and revenue estimates.
• Working out detailed financial analysis as desired by the financial institutions.
• Sensitivity analysis to identify factors crucial for the commercial viability of the
project.
1.7 Approach and Methodology
The entire work (study) will be broken down into individual sets of mutually-exclusive and
collectively-exhaustible issues addressing market demand, availability of raw material,
technology, location aspects, economic and financial feasibility, etc.
Market study will broadly cover the demand- supply scenario prevailing globally and locally
for MDF, its competing products (substitutes), end use pattern, drivers that could spur the
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
7
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
demand, etc. We would utilise our data bank and also refer to authentic and published
materials/literature etc for the purpose of collecting information on industry structure,
international demand-supply scenario, domestic and international prices and trends
thereof, price elasticity, past imports and exports from India, destinations and prices etc.
The availability and suitability of raw material (cotton stalk) for the production of MDF,
the sourcing of the same and related logistic issues will be covered in the next section.
Also contingency plans for alternative raw material (say, ailanthus and celsa) and the steps
to ensure hassle-free availability of the same will also be discussed.
Location Study will look into issues such as raw material availability, proximity to market,
availability of power, water, etc; and a host of other relevant issues like land, labour,
transportation, storage, etc.
Technology will cover the brief description of the process along with features such as
contemporariness of technology, local availability of plant and machinery, energy
efficiency of the process, ease of operation, modularity, scalability and flexibility in
technology/ operation, etc. The endeavour is to source the best available option in terms
of reliability and superiority of technology / plant and machinery.
The marketing strategy will look into the existing sales and marketing set up, need for re-
configuration if any, and addressing the issues holistically that goes beyond 4P’s.
The detailed revenue modelling will cover the means of finance, optimal debt-equity
structure, revenue streams, calculation of projected cash flows and the estimation of NPV,
IRR and debt service coverage ratio.
In addition, elaboration on certain strategic issues pertaining to the business will be
provided. This will throw light into the competitive landscape, the forces that act within
and outside, threats and opportunities, etc. Also specific strategies will be recommended
to tide over the challenges and surge ahead successfully.
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
8
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
Figure 1.1: Approach and Methodology
Source: MM Analysis
Market Study
Demand vs. Supply
Growth Drivers
Substitutes
End Uses
Raw Material Assessment
Major Raw Material Procurement
Contingency Options
Other Issues
Technological Aspects
Track Record
Ease of Operation
Scalability/Modularity
Energy Efficiency
Flexible Line of Operation
Marketing Strategy
Existing Setup
Distribution Channel
4P’s and Beyond
Revenue Models
Means of Finance& Capital Structure
Revenue Streams& Cash Flow
Proj. Balance Sheet& Income Summary
NPV, IRR, DSCR, etc.
Site Selection
Proximity to RM/Market
Availability of Water, Power, etc
Logistics& Distribution Issues
Strategic Insights
5-Force Analysis
Competitive Strategy.
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
9
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
1.8 Caveats
Since MDF market is a bit unorganised, it is very difficult to capture the exact under
currents in the market. Also a lot of these activities are not properly recorded. This poses
a lot of challenges for the consultant and the client alike. A judicious mix of desk research,
filed visits, interviewing of key personnel in the MDF/ related business and using some
clever conjectures based on our own experience was the method adopted to address this
issue.
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
10
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
2 Product Description
2.1 Medium Density Fibreboard
Fibreboards are classified into low density, medium density and high density fibreboards
according to the density profile as shown below:
Table 2.1: Classification of Board based on Density
Fibreboard Typical Density Range (Kg/m3)
LDF (Low Density Fibreboard) 160-450
MDF (Medium Density Fibreboard) 500-800
HDF (High Density Fibreboard) 800& above
MDF is a panel product manufactured from lignocellulosic fibres combined with a synthetic
resin or other binders. The specific gravity varies from 0.5 to 0.88. MDF has a homogeneous
structure with no identifiable grain or no variations in surface hardness. It can easily be
edge-machined to into many different profiles ready for subsequent direct finishing due to
its relatively uniform thickness density profile. MDF has a good capacity to hold screws and
nails on surfaces and edges.
2.1.1 Features of MDF
MDF is resistant to warping and compression. It has excellent screw-holding ability and
edge-finishing characteristics.
MDF is available in two grades, namely, interior grade and exterior grade and are available
in thicknesses ranging from 4mm to 50mm.The IS specifications are reproduced below:
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
11
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
Table 2.2: IS Specification of MDF Board
Sr.
No. Specifications Unit Interior Grade Exterior Grade
1 Water Absorption
a) After 2 hours soaking % 9 6
b) After 24 hours soaking 18 12
2 Density Kg/m3 500-900 500-900
3 Moisture Content % 5.15 5.15
4 Linear Expansion (24
hours soaking)
a) General Absorption %
Thickness 7 4
Length 0.4 0.3
Width 0.4 0.3
5 Modulus of Rupture N/mm2
Upto 20mm 28 28
>20mm 25 25
6 Tensile Strength N/mm2
Upto 20mm 0.7 0.8
>20mm 0.6 0.7
7 Screw Withdrawal
Strength
N
Face 1500 1500
Edge 1250 1250
8 Dimensional Tolerance Mm
Length ±3
Width ±3
Thickness ±0.3
MDF offers better quality than particle board. It has lower tendency compared to particle
board for “fibre pop” which comes from larger particles in the surface that swell more
than adjacent particles. Fibre pop occurs when the board is exposed to high humidity.
MDF has better strength and stability than veneered particle board. The internal bond
strength of MDF is about 50% higher than the corresponding value for veneered particle
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
12
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
board. MDF with a highly homogeneous construction and uniform density gradient does not
require a veneer overlay.
The distinct advantages of MDF are outlined below:
a) It does not delaminate
b) Excellent moulding abilities
c) It can be joined, riveted, tongued and grooved.
d) It can be calibrated and sanded on both sides.
e) Lathe work can be done easily.
f) It is free from overlays and gaps.
g) It possesses homogeneous strength.
h) It is free from knots and cracks.
i) Humidity-resistant.
j) It has low formaldehyde content.
k) Very good screw-holding and edge-finishing properties.
l) It needs no special tools or work methods.
m) All kinds of paints, lacquers, stains and varnishes can be used on MDF.
n) It is insect-resistant.
2.1.2 Applications
MDF is being used in residential, commercial buildings for partitions, panelling, false
ceilings and furniture.
Thin MDF has applications in beds, cabinets, chairs, panelling, drawer bottoms and centre
panels in framed doors. It can also be used as skins for flush doors, partitioning, office
screens, lightweight doors and exhibition paneling.
Novel application avenues are in shoe making, motor vehicle interior parts, toys, printed
circuit board production and blades for electric fans. Due to its excellent acoustic
properties, MDF is also being successfully used in Hi-Fi equipment.
Moisture-resistant varieties are being developed that can be used for exterior applications.
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
13
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
Thick MDF boards can be used in buildings as columns and archways in place of solid wood
where the warp resistance, torsional stability, screw holding strength and edge finishing
characteristics are important. Thick MDF can be as a core substrate material for paneling
with veneers, printed surfaces, vinyl and low pressure laminates due to its dimensional
stability and smoothness. Thick MDF is also widely used as a base material for laminated
and veneered wood products for flooring and wall paneling and for foil wrapped mouldings.
It can also be used for a wide range of furniture such as tables, cabinets, windows, doors,
frames, handicraft items, display or exhibition stands and signs, ceiling, toys, carving,
partitions, maritime applications and educational equipment.
The entire versatility of MDF is yet to be utilised in a host of applications. In short, the
product has the potential to replace plastic, metals and wood in a wide variety of
applications which is only limited by our imagination.
2.2 Prelam MDF Board
To improve the aesthetic look and applicability, laminate paper is applied or fixed on the
fibre board with the help of a press. This board is known as “pre laminated board” or
“prelam board”. The prelam board has more than one paper on its surface like base paper
or balancing paper, decorative paper and other protective film. These papers help to
improve resistance to abrasion, temperature and water. As the prelam board is an
improved version of the MDF board, the specification of the Prelam board is completely
depend on the properties of the MDF board.
Prelam MDF board has certain distinct advantages, which are mentioned below:
• Resistance to steam and stains
• High abrasion resistance
• Better strength for durability
• Resistance to warping and sagging
• Surface counter balanced for greater stability
• Strong enough for load bearing applications
• Termite, fungus & borer proof
• Standard screw holding capacity
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
14
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
Prelam MDF board used to manufacture the products mention below:
• Cupboards, shutters & wardrobes.
• Shelves
• Table tops
• Cabinets
• Household & office furniture.
• Computer furniture.
• Panels in panel doors.
• Beaded doors.
• Partitions.
• Precautions
2.3 Laminate Flooring
Laminate flooring is composed of several layers of impregnated paper and raw fibre board.
Papers are forming the surface layer of a core layer which stabilizes the floor. Flooring is
available in smaller size of planks. High density fibre board is preferred for core board of
the flooring as it has to bear the load. The basic properties of the laminate flooring are
depend on the properties of the HDF board and laminated papers.
The flooring can withstand with the normal load and provide good aesthetic load. It is not
100 % water-proof and scratch-proof but by using high grade quality paper water
absorption and scratch ability can be minimized to a great extent. Laminate flooring can
withstand the temperature variation and can be installed on any flooring like wood,
ceramic, concrete, particle board, vinyl, linoleum, etc.
2.4 Description of Substitutes
MDF closely competes with other product like plywood, hardboard, particle board and
plastic panels in a variety of applications. Apart from these products, chemically treated
wood, plantation timber, rubber wood, log wood and sawn wood find similar applications.
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
15
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
Figure 2.1: Substitutes of MDF
Source: MM analysis
Chosen Material
Wood or Wood Base Non Wood
Wood Based Panels
Timber
Timber Base Panels Reconstd Wood Panels
Ply Wood Block Board Particles Board MDF Fibre Board
Steel /
Aluminium
Gyp-
board
PVC Acrylic / Fibre
glass etc.
Agro Waste Base
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
17
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
Table 2.3: Wood& Agro-based products and their application
Wood Product Major Uses Substitute
(Wood& Agro waste
Types)
Substitute
(Non-wood Types)
Plywood& Veneer Construction-walls,
doors, decorative
panelling.
Packaging- crates,
boxes, tea chests.
Furniture.
Vehicles-boats,
caravans.
Misc.- Toys, etc.
Particle board
Fibreboard
Paper Overlay-
panelling& packaging.
Sawn wood.
Plastics (furniture&
packaging).
Fibreglass, concrete,
polyester overlay.
Sawn Wood Construction-flooring, walls, joinery, panelling& lining.
Engineering- railway sleepers, piling, wharves, bridges, mining timbers.
Furniture
Packaging-boxes, crates, pallets, etc.
Vehicles
Plywood, veneer, & MDF- panelling, furniture.
Fibreboard-packaging
Particle board.
Plastics (furniture& packaging).
Paper & paperboard (packaging).
Concrete, bricks, steel, aluminium.
Particle Board Construction-flooring, walls, under floor, panelling& building elements.
Plywood, veneer, & sawn wood- packaging, construction& furniture.
Fibreboard.
Steel& aluminium (furniture);
Plastics (furniture& packaging).
MDF Furniture, packaging, construction
(Flooring, walls, panelling, etc.)
Plywood, veneer, particle board& sawn wood.
Steel& aluminium (furniture);
Plastics (furniture& packaging).
Source: MM Analysis
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
18
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
Table 2.4: Characteristics comparison of different products
Sr.
No.
Comparison
characteristics Plywood Particle Board MDF
1 Insects & Borers Attracts wood
borers
Does not attract
borers
Totally borer – proof,
as only wood fibers
are bonded together
2 Machining, carving &
post forming Not Suitable
Suitable to a limited
extent
Highly suitable
3 Density of the Board Medium Low Medium and high
4 Edge cutting &
trimming
Suitable to a
limited extent
Suitable to a limited
extent Highly suitable
5 Nail & Screw holding
capacity Medium Low to Medium High
6 Board strength &
internal bond Medium Medium High
7 Structural strength
Low due to
wood layer
bonding
Low due to particle
bonding
High due to fiber
bonding
8 Moulding Not possible Not possible Excellent
9 Joining & riveting Not possible Suitable to a limited
extent Highly suitable
10 Surface finish Medium Low Excellent
11 Tensile strength Medium Low High
12 Raw materials 100% wood Agrowaste/wood Agrowaste/wood
13 Environmental
aspects
Dangerous to
forest
resources of
country
Boon for building
material industry due
to versatility of raw
materials usage like
agro waste & wood
waste.
Eco friendly product
Boon for building
material industry due
to versatility of raw
materials usage like
agro waste & wood
waste.
Eco friendly product
14 Value added products Plywood only Prelam boards, Prelam boards,
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
19
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
modular furniture modular furniture,
embossed doors,
carved surface doors,
painted boards
15 Product Specification G1 grade G2 grade G3 grade
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
20
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
3 Market Study
3.1 Global Scenario for MDF
In 2005, the global MDF production reached about 41 million m3, compared to 39 million in
2004. Large scale production facilities are concentrated in Asia, Europe and North
America.
Table 3.1: Region wise MDF production
Region Production (‘000 m3)
Asia 18936
North America 5297.6
Europe 13300
Oceania (Australia and New Zealand) 1656
South America 1758
Total 40947.6 Source: Food and Agriculture Organization (FAO) stats
The table explains the regional production in 2005. China has grown to become a dominant
producer (14.66 million m3), followed by Europe. Production in Europe rose to 13.3 million
m3, showing a growth of 7% as compared to 2004. The total consumption also rose by 7.6%
to 12 million m3.
From 2004 to 2005, North American MDF production rose from 5.1 to 5.3 million m3, with
70% of the production concentrated in the United States. MDF production in the U.S.
increased from 3.6 to 3.7 million m3, while the Canadian production increased from 1.5 to
1.6 million m3 in the above period. MDF imports to North America (procurement sources:
Brazil, Argentina, Chile and Venezuela and Oceania) declined by 10% in 2005, to 1.7 million
m3.
MDF production in New Zealand increased to 861000 m3 in 2005. The country also has the
highest per capita consumption of the product.
MDF consumption since the past decade has well penetrated markets other than furniture
industry. But, owing to an earlier establishment of particleboard as a product, its
consumption in most countries was more than MDF before.
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
21
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
In countries like Japan and Korea, manufacturers are replacing particleboard; particularly
where MDF properties like smoothness of surface is required. This is expected to spread
worldwide, as furniture manufacturers seek cost effective methods of production.
However, with huge capacity inclusions in China, MDF consumption rose to 16 million m3,
driven by furniture industry growth (2004), compared to particleboard consumption of 4
million m3.
The figure below highlights the MDF consumption break up by segment in China:
Figure 3.1: MDF Consumption in China
Furniture
78%
Decoration
12%
Other
10%
Source: China Academy of Forestry, China Wood
Continued innovations to customers’ need and to solve their problems, and the
development of Engineered Wood products lead to newer developments. Products like
Sawn wood and plywood are well past their prime, owing to these reasons.
Moreover, these products also compete with steel and other useful materials, widely used
in construction industry and furniture.
MDF Board Market in the Middle East The Middle East regions comprise of developing countries like Algeria, Bahrain, Egypt, Iran,
etc. with growing young population, which point towards growing consumption of wood
based panels.
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
22
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
The major constraint to growth in MDF industry in the Middle East is the scarcity of raw
material. Almost 70% of the total production in the region in 2005 (54000 m3) was from
Iran. Trade statistics point towards the fact that majority of the consumption is met
through imports.
With growing demand of MDF in the region, the imports have risen from a mere 332,611 m3
in 2000 to about 2.2 million m3 in 2005.
Table 3.2: Production and trade of MDF in the Middle East
Year Production (m3) Import (m3) Export (m3)
2000 53000 279663 52
2001 14000 422631 139
2002 14000 566531 336
2003 14000 762661 144
2004 40300 1514209 913
2005 54000 2186581 1000 Source: Dieffenbacher Report
As evident from trade statistics, the export potential to Middle East region appears to be worth exploring.
Future Outlook
The Commonwealth Scientific and Industrial Organization (Australia) predicts global MDF
demand to increase by 10% till 2010.
As per Jaakko Poyry Information Service, the demand for MDF in U.S., Europe, and Asian
countries (mainly China and South Korea) is expected to exceed the supply, driven by its
popularity in construction industry and furniture manufacturing in recent years. The figure
below shows region wise forecast of MDF surplus/deficits:
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
23
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
Figure 3.2: Global MDF Demand – Supply Balance
Source: Jaakko Poyry Information Service
Figure 3.3: Global Particleboard Demand – Supply Balance
As evident from the figure above, particleboard deficits are anticipated in Europe, whereas
Asia, Oceania, South America are expected to have surplus capacities.
Global Particleboard Demand-Supply Balance
-7000
-6000
-5000
-4000
-3000
-2000
-1000
0
1000
2000
1990 1995 2000 2005 2010 (F) 2015 (F)
Years
(1000 m3) North America
Europe
Asia
Oceania
South America
Africa
1990 1995 2000 2005 2010 (F) 2015 (F)
Global MDF Demand-Supply Balance
-3500
-3000
-2500
-2000
-1500
-1000
-500
0
500
1000
1500
2000
1990 1995 2000 2005 2010 (F) 2015 (F)
Years
(1000 m3)
North America
Europe
Asia
Oceania
South America
Africa
1990 1995 2000 2005 2010 (F) 2015 (F)
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
24
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
Growth Drivers:
The demand of MDF is expected to show an upward trend, considering the following
macroeconomic factors:
1. Rapid economic growth at the world level (GDP growth rate - 4% till 2010).
2. Population growth and urbanization.
3. Trade and foreign investment deregulation.
4. Expanding wood processing capacity.
5. Anticipated growth in construction investment, furniture and decoration industry.
6. Increasing exterior use of wood based panels in European and American countries,
attributing to the suitability of climatic factors.
3.2 Laminate Flooring Market
The global production of laminate flooring from year 1990 to 2005 is depicted below.
Figure 3.4: World Production of Laminate Flooring
Source: Munksjo Paper
The production of laminate flooring has steadily grown at a rate of 34.09 % CAGR in the
last 15 years and has reached 815 million m2 in the year 2005.
Europe is the major producer of laminate flooring in the world and is a net exporter for the
last 15 years. Europe accounts for 65 % of total production of laminate flooring in the
world (year 2005).
0
100
200
300
400
500
600
700
800
900
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Production in million m2
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
25
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
The production of laminate flooring in Europe is mentioned in the figure below:
Figure 3.5: Production of Laminate Flooring in Europe
0
100
200
300
400
500
600
in m
illio
n m
2
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Production for Europe Production for Exports
Source: Munksjo Paper
Germany is the biggest producer of the laminate flooring and account for 28 to 33 % of
world production of laminate flooring in last 5 years. Other leading laminate flooring
manufacturing countries in Europe are France, Austria, Belgium, Poland, Switzerland, and
Great Britain.
In terms of import, North America is the leading continent to import the laminate flooring.
With the import, production of laminate flooring in America has also risen in the last 10
years.
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
26
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
Figure 3.6: Market Volumes of Laminate Flooring in North America
0
20
40
60
80
100
120
140
160
in m
illion m
2
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Import Domestic Production
Source: Munksjo Paper
The production of laminate flooring in Asia is constantly rising for the last 10 years until it
became net exporter in the year 2005.
Figure 3.7: Market Volumes of Laminate Flooring in Asia – Pacific
0
50
100
150
200
250
in m
illion m
2
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Domestic Production Net Import Net Export
Source: Munksjo Paper
The continuous increasing production of laminate flooring in China is the major reason
behind the spurt in Asian production of laminate flooring. From 11 % of production share of
total world production of laminate flooring in year 2001, China reached at 23 % of
production share in the year 2005, which is next to Germany only.
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
27
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
3.3 Indian Market
3.3.1 Market Survey
The market study was carried out in various segments which influence the demand for
MDF. They were divided on the basis of similarity in response pattern and the factors
affecting the demand for MDF.
Competitors (including substitute products), institutional buyers, architects & interior
decorators, industrial buyers & converters and wholesalers & distributors were contacted
during the survey. Additionally, some actual users of MDF were also contacted. The study
was conducted in Ahmedabad, Bangalore, Calcutta, Chennai, Delhi, Hyderabad, Jaipur and
Kochi.
a) Competitors:
They are the manufacturers of MDF and its substitutes. The substitutes are plywood,
particle board, hard board, etc. The regional offices and head offices of these
manufacturers were contacted during the survey.
(b) Institutional Buyers:
They are the large buyers of MDF and its substitutes, with having fairly uniform application
areas and the quantity used being substantial. For example CPWD, where the requirement
is mainly of doors & windows but quantity being used is substantial. Large construction
companies also fit into this category. These are bodies where procedures for introducing a
new product are elaborate but volume of sales justifies it.
(c) Architects & Interior Decorators:
This category represents the users of these products for a variety of applications. They are
also the innovators in finding new application areas for various products. This segment do
not form big market by them but help it grow.
(d) Industrial Buyers / Converters:
This segment consists of the converters who use MDF and its substitutes for large scale
manufacture of end use products. They may be T.V. cabinet makers, flush door and knock-
ed down furniture makers etc. Users of this segment have specific requirement and use
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
28
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
various substitute products according to the requirement of end product and the cost of
alternative products.
(e) Wholesalers / Distributors:
This is the most significant segment as they form a link between manufacturing company
and the actual end users. They are the members of distribution channel for various
substitute products (like plywood, particle boards etc.) and very often influence the end
users decision.
(f) End users:
They are both actual buyers and users of MDF. They have used MDF in a particular
application and were contacted to know their views on MDF.
3.3.2 Summary of Findings
(i) Plywood and Block board
• Plywood and Block board collectively constitute a major segment of wood panel
market.
• Plywood possesses good strength and mechanical properties, as well as firm,
easy nailing/screwing ability has given the product very good market
acceptance over the years.
• Small scale manufacturers in unorganised sector constitute the major chunk of
the total plywood manufacturing. As these units do not pay any excise duty and
evade other local taxes, they give a tough fight to organised sector plywood
manufacturers.
• This industry uses premium timber log veneers as input, which is in short supply.
• Construction, furniture and packaging industries are the biggest end-users of
this product.
• Plywood is considered first choice for the household furniture in India, but in
foreign countries where ready made and flexible furniture demand is increased
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
29
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
in last decade, there preference gradually moves to other available alternate
products.
• Plywood and Block board are available with phenol & urea formaldehyde
bonding for exterior and internal application.
• Block boards are available in a density of 750 - 900kg/m3 and thickness varies
from 10 mm to 40mm.
• Plywood offers several superior properties like bending, termite resistance,
ability to withstand varying conditions, etc. which makes it non-substitutable by
other wood panel products for some applications.
• Most of the sale is on credit. The credit period varies between 30 - 60 days
Source: Capital Market
• Marketing of these products is generally through the normal distribution channel
of company -> wholesalers/stockists -> dealers -> consumer. However,
sometimes the dealers purchase directly from the company.
• Typically the Plywood is available in panel lengths of 5, 6, 7 & 8 ft., width of 3
and 4 ft. and thickness of 4, 6, 9 and 16 mm.
• Fast moving size of Plywood and Block board is 8'x4'.
• Prices of plywood have moved upwards at a rate of 10-15% in the last few years.
This can be primarily attributed to increased prices of raw materials.
• Some plywood companies are also offering panel doors, flush doors, ceiling tiles
and Plywood with very distinctive and unorthodox surface veneers.
• Plywood shuttering is preferred over wooden or steel shuttering because it is
lighter to handle, can be bent and finish is smooth, thus saving plastering cost.
Manufacturer Installed capacity Unit
Greenply Industries (plywood/particle board) 1,18,50,000 M3
Kitply industries (plywood and boards) 14,750,000 M2
National Plywood Industries (plywood / block
board) 4 mm basis 11,350,000 M2
Century ply boards (plywood) 25200 M3
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
30
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
Particle Board
• The market size for PB in India is roughly US$110 million, with a year-on-year
growth rate of 20%. Almost 90% of the demand is met by domestic production
and the rest is imported. Imports are chiefly from Nepal, Bhutan and Sri Lanka.
• Particle boards are mainly used for partition/panelling and in the manufacture
of doors (as inserts in frame) and rarely used for table tops. Ready made
furniture manufacturer prefer particle board as main raw material.
• PB suffers from the poor edge machinability, poor tensile strength and poor
screw/nail holding strength.
• A substantial portion of particle board (around 65%) being marketed is
laminated and the remaining 35% are in the form of plain& veneer boards.
• Industry uses a variety of raw material for the manufacture of particle board,
such as bagasse, wood chips, rice husk, etc. Wood accounts for 87% of the raw
material used in the manufacture of PB.
• Standard sizes of particle board panels are 8' x 4', 9' x 4' & 10' x 4' and the
thickness ranging from 9 mm to 35 mm. 12 mm thickness particle board is used
as inserts in door frames, 18mm for modular furniture. The other sizes
commonly used are 15 and 25 mm sheets.
• At present there are 15-16 players of particle board and the demand for the
same is nearly 2.55 lakh tons per annum.
• Bhutan Board unit in Bhutan with an installed capacity of 21000 TPA has been
performing at 70% capacity utilisation. The unit is located in Bhutan. It markets
around 50% of its production in India.
• Novopan is the market leader of particle board followed by Bhutan Board.
Novopan has two manufacturing units with capacities of 50,000 and 75,000
cubic m/year respectively.
• Ecoboard, Vision Boards, Aurobindo Laminates and Trimurti used to
manufacture particle board using bagasse as raw material.
• Nepal Boards, Bhutan Boards, Mysore Chip Boards, Uro, Decoboard (Bakelite
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
31
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
Hylam) and Novopan manufactures PB from wood.
Medium Density Fibre (MDF) Board
• MDF worth US$ 67.5 million are being imported to India every year that meets
almost 75-80% of the total domestic demand. Based on market information, the
market for MDF is growing at an impressive rate of 20-25% p.a.
• There are two manufacturers of MDF in India. These are Mangalam Timber
Products Ltd. and Nuchem Ltd. The trade name of Mangalam's product is "DURA
TUFF" and that of Nuchem Ltd. is "NUWUD".
• The plant capacity of Mangalam Timber is 57000 cubic m/year and that of
Nuchem Ltd. is 60000 cubic m/year (45,000 MTPA).
• Duratuff™ is available in interior and exterior grade and also in pre-laminated
form whereas NUWUD does not have pre laminated boards.
• Plywood is considered first choice for the household furniture in India, but in
foreign countries where ready made and flexible furniture demand is increased
in last decade, there preference gradually moves to other available alternate
products.
• Pre-laminated boards of DURATUFF are preferred in the Southern and Western
regions, whereas the plain boards are dominant in Northern India. MDF market
in the Eastern region is negligible because of the easier & cheaper availability of
non-teak wood.
• Greenply, one of the major players in plywood, particle board and decorative
veneer board manufacturer, is also entering in MDF market with pre laminated
boards, branded as Greenlam™. Although Greenply not manufacturing MDF
board at present, it purchases MDF from outside and get it laminated in its unit.
• Majority of sale is of 8 ft x 4 ft. panels and thickness prefer-red are 6, 12 and 18
mm.
• MDF initially was not accepted positively by traditional carpenter because of
slightly different work practices requirement. However, at present the
carpenters find it easy to work with MDF.
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
32
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
• MDF manufacturers are trying to push the product directly to the institutional
buyers who are the large consumers. Company plays a promotional role only.
Manufacturers of MDF claimed that they are making exterior grade conforming
to international MDF specifications. They use Phenol Formaldehyde resins for
making exterior grade MDF.
• MDF has been accepted by institutions like IOC, CPWD, DDA, HVDCO, IAAI, ITC
Ltd., Ministry of External Affairs, State Housing Boards, State PWDs, Taj Group
of Hotel, etc.
• The major demand of MDF board in recent years created by the new emerged
industries in India like software, BPO, retail and banking. Corporate sector
prefers MDF because it provides good aesthetic look and fast erection of
furniture in office.
• Plywood is considered first choice for the household furniture in India, but
gradually this preference is shifting towards ready made and flexible furniture,
which is made up of MDF board. The furniture industry, valued at almost INR
30,000 crores, is expected to witness a robust growth in the wade of upswing of
purchasing power of more than 400 million middle class populations.
• The growth in furniture consumption has been attributed mainly to
unprecedented growth witnessed in construction and residential real estate
markets. The short term growth is anticipated at 7% - 8%.
• Much of the domestic demand for furniture (65%) is from ten major cities viz.
Mumbai, New Delhi, Bangalore, Chennai, Hyderabad, Ahmedabad, Pune, Surat,
Kanpur and Jaipur.
• With the rising income of middle class and willingness to change furniture often,
will also perk up the demand for MDF board.
• Poor awareness about MDF board has been a deterrent, but this can overcome
by educating carpenters and the end user.
• MDF is also being sold to original equipment manufacturers like Videocon, BPL &
Philips. These companies use MDF in the manufacture of speaker cabinets.
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
33
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
• Nuchem has a variety of downstream products of MDF like doors, windows,
mouldings, etc. These downstream products are manufactured by Nuchem on
contractual basis.
• However, most people related to MDF expect it to perform better in panels and
doors compared to furniture. This is in contradiction with the international
trend, where majority of MDF is being used in furniture making only.
• Manufacturers are quite optimistic about increase in share of MDF in the total
panel product markets and particularly plywood. Moreover, they expect it to
perform same function of timber in the manufacture of doors. They expect a
penetration level of over 30% of total panel product market in the future.
Others (Plastic Panels, Cement Bonded Particle Boards, etc.)
• The plastic panels are made of PVC which is relatively costlier vis-à-vis the
other panel products. Thus, the acceptance level is low.
• Sintex, the largest manufacturer of PVC panels, are focussing on direct
marketing to the end-users. Marketing through architects was not very
successful because of their high price.
• These panels look very attractive, but over a period they fade due to
environmental effects.
• Gujarat Synthwood claims to be making a scratch resistant product with integral
skin and appearance similar to wood.
• The plastic panels are not very strong, thus, not suitable for use in external uses
like doors & windows.
• Uses of plastic panels are limited to door & window frames, doors, windows and
partitions in commercial buildings.
• Because of excellent water resistance properties these panels surpass all the
other similar products in performance. These products need no painting,
polishing, varnishing etc. because they are pre-finished on both the surfaces.
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
34
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
• Doors of PVC panels do not find easy acceptance because of psychological
preference for wooden door. Customer accepts frames and windows of material
other than timber more readily but customers still prefer wood or something
similar in appearance and texture.
• The manufacturing companies have focussed on institutional markets where
volume is high and product requirement is standardised.
• Gujarat Synthwood is trying to promote the product in household and residential
applications to expand the market. Because of its high price & preference for
wood or something similar to wood for doors and windows the penetration of
PVC panels in the total panel product market is quite low.
• These products are also relatively new and are still trying to carve out a market
niche for themselves.
• The major manufacturers of PVC panels are Sintex, Uniplas, Gujarat Synthwood,
Caprihans & Fixopan Industries. Jain Group manufactures polystyrene (trade
name "TIMBRON") 'based panel products.
• Cement bonded particle boards are mainly used for flooring, ceilings and
partitions. The market for these is slowly developing. Cement bonded
particleboard at present is manufactured by NCL Industries (Bison Panel) in
India.
Laminated Flooring
• Laminated flooring is widely used in household, corporate offices, restaurant,
hotels, and entertainment complexes. But still granite, marble, kota and
ceramics are the most preferred flooring for house flooring market in India.
Wooden flooring also getting acceptance slowly in Indian houses because of the
availability of the laminated wooden flooring.
• Laminate floors are made up of a thin, transparent upper crust that is resistant
to wear and tear, and of high density fibre board inside. Laminate floor cheaper
than the real and hard wooden floor. Laminate floors available at Rs 200-300
per sq feet.
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
35
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
• Laminated floor provides good aesthetic look. It is available in different colours
and designs, which depends on the paper used in the surface of the wooden
floor.
• At present, demand of the wooden flooring in India is 90 % met by import only.
• More than 20 brands are selling in the Indian market presently. A large number
of these are importers. Amongst the well-known brands, there are Pergo (a
Swedish brand), Krono (a German brand), Eggar, Floormaster, etc.
• Laminated floor can be installed on existing flooring of wood, ceramic,
concrete, particle board, vinyl, linoleum, etc.
• The surface layer of laminate flooring is hard, compact and autistatic, so dirt
and dust do not adhere to it easily. It makes floor cleaning easy.
• Laminate floor are less vulnerable than pure wooden flooring from water and
dust, but they also require great care to maintain sustainable life. Due to
improvement in technology, laminated flooring is available in market with the
warranty up to 50 years.
• Technology has change laminate flooring from glue joints to mechanical click
joints; almost all laminate floors are glue-free today.
• The Indian flooring market has witnessed a lot of changes in the last 50 years.
From the traditional stone flooring, people have moved to granite, ceramic,
marble and now its laminates flooring.
3.3.3 Institutional Buyers for MDF
A SHIPPING INDUSTRY
MDF / Particle board can be used in the manufacture of furniture in ships for which at
present plywood is used. Currently marine plywood is used in this application.
B. RAILWAYS
Research Design & Standards Organization (RDSO) is the research wing of Railways. They
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
36
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
promote the use of newer materials in coach building. New class of material is tested and
certified by them. This is communicated to all the nine zones of Railways so that field staff
can use them.
The two major coach factories namely Integral Coach Factory (ICF), Perambur and Railway
Coach Factory (RCF), Kapurthala opined that approval of RDSO is needed for using any new
material. At present MDF is not used in such building.
c. SURFACE TRANSPORT
(i) Presently wood, plywood and block board are being used in bus and truck body
building.
(ii) Some bus/truck body manufacturers said that they do not know anything about MDF
and nobody has approached them for such a product.
(iii) Gujarat State Road Transport Corporation tried MDF for passenger seats by
replacing plywood which was being used earlier. But the results of this experiment were
not satisfactory. However, the trials are still on.
D. STATE AGENCIES
(i) Central Public Works Department (CPWD) is quite favourable to the product. Their
Technology Application & Development Cell (TADC) has approved the material and they are
still conducting some tests on the product. For experimentation/trial purpose they have
used it in some of the construction and are observing its performance.
(ii) Main use for CPWD is in door shutters followed by windows and frames. But the
Department is quite stringent on the Boiling Water Proof (BWP) grade product. They would
also prefer a pigmented exterior grade for easier identification.
(iii) They find that exterior grade MDF is not easily available in the market
(iv) Housing & Urban Development Corporation (HUDCO) another central government
body in housing is also giving MDF a trial by using it in some of the construction activity.
HUDCO has used MDF in its Type IV flats at Khelgaon Marg, New Delhi for joinery and
various interior
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
37
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
E. PRIVATE BUILDERS
(i) Private Builders see a great possibility of MDF application in door shutters. For
frames, steel or aluminium is used and in windows steel, aluminium and PVC are preferred.
Door shutters traditionally have been of wood and they would continue to be made up of
similar material.
(ii) Price-wise MDF is either on a bit higher side or equivalent to other material in their
assessment.
(iii) Users have found availability of MDF as a constraint.
Points (ii) & (iii) are not weaknesses per se, but opportunities. RDPL can look forward to
leveraging the advantages arising out of domestic production at economies of scale.
3.3.4 Architects & Interior Decorators
(i) Positive attitude about the product is reflected by various architects & interior
decorators contacted.
(ii) MDF is recommended in the furniture which is painted for use. However, in the
cases where polishing arid teak ply lamination is required, MDF is not preferred
because of its poor adhesive properties compared to plywood and blockboard.
(iii) Modular furniture is a new concept. It will be preferred by the people who want
economical stuff but for the class which believes in exclusiveness it is a preferred
material.
(iv) Short supply of MDF especially NUWUD has also been reported by few.
(v) MDF is preferred because of its appearance, price and versatility. Higher use of MDF
and other panel products is reported in the western and southern India.
(vi) According to majority of respondents in this category, MDF is a success abroad and
in India direct marketing and promotion through architects is required. But
carpenters or workmen need to be educated about the product for better
penetration.
(vii) Availability of larger sizes of MDF like 8'x6' (which is available in particle board) is
desired by some interior decorators.
(viii) Everybody agrees that price, performance and awareness about the product will
influence the choice of customer and the penetration is expected to increase in the
future to over 30 to 35% of the panel product market.
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
38
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
3.3.5 Industrial Buyers/Converters
(i) Respondents of this group have been using plywood and particle board till now.
(ii) As the modular furniture in India is not very popular, the use of MDF is very less.
(iii) Until now furniture manufacturers have been using other panel products like
plywood, blackboard etc. Although MDF is cheaper than plywood, most furniture
makers have not given it a try as it, is a relatively new product. However, in places
like Muzaffarnagar, U.P., which is known for its furniture made from Sheesham
wood, demand for NUWUD based furniture, is picking up. Furniture (from NUWUD
includes tables, chairs, cabinets, 0 wardrobes, racks with very good design creativity.
Cost of MDF is less than sheesham and teak wood.
(iv) Handrails and margins (mouldings) made from MDF in a wide variety of designs are
gaining popularity. These are traditionally made from teak wood. A few furniture
makers, who have replaced particle board with MDF find this uneconomical.
However, the cost-benefit is not weighed in terms of MDF's durability, strength etc.
(v) For simpler applications like TV trolleys, cabinets etc., particle board being a
cheaper product, is preferred. Also acoustic properties of particle board fit into the
requirement.
(vi) In furniture making, requirement of moulded/carved edges can be easily met with
MDF, but users have minor worries about screwing properties on the edges of MDF.
(vii) MDF is being used by ancillary units of some audio/video electronic equipments
manufacturing companies.
Some of regular users have complained about poor availability, which is forcing them to
use other panel products again. They make products on time bound order, so cannot afford
to wait.
3.4 Indian Scenario on Furniture
The Indian furniture industry is fragmented and 85 % of the furniture produced is by
handicraft. The contribution of the sector to the GDP is approximately 0.5 % only.
The furniture production trend in India is depicted below:
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
39
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
Figure 3.8: Furniture Productions in Billion Euros
Source: European Furniture Manufacturer Federation
The industry grew almost 3% per annum annual growth rate in year 1996 to 1999 and then
slowed down by 10 % in year 1999. The slow down was the result of the cyclical situation of
the economy. Furniture sector recovered from the 1999 crisis and attained a 3 % growth
rate in the year 2000 and 2001.
The wood-based furniture ruled the Indian furniture industry with 65 % share, while metal
is accounted for 25% and plastic is accounted for 10 %.
Figure 3.9: Raw material used in furniture
Source: European Furniture Manufacturer Federation
1998 2000
2016
2067
2130
1913
1986
2026
1800
1850
1900
1950
2000
2050
2100
2150
1996 1997 1999 2001
65%
10%
25%Wood
Metal
Plastic
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
40
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
The household furniture is the major segment of the total furniture production, which
accounts for 65% of the production value.
Figure 3.10: Furniture Production Break up
Source: European Furniture Manufacturer Federation
The household segment covers the upholstered furniture, bedroom, kitchen, and dining
room’s furniture. The upholstered furniture accounts for the 30 %, bedroom 20 %, and
kitchen and dining room’s furniture for the 7.5 % each. The second major segments in the
furniture industry are corporate/office and hotel furniture with the share of 15 % each.
Other furniture holds remaining 5 % share.
The office furniture segment is the one that boasts the most important companies, both
from the point of view of size and of the technological innovation of the production.
Import – Export
The import and export of the furniture is given as exhibit below:
8% 8%
5%
15%
15% 29%
20%
Upholstery Bedroom Furniture Dining room Furniture Kitchen Furniture
Other Furniture Corporate/Office Hotel/contract
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
41
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
Figure 3.11: Import – Export of Furniture in India
0
20
40
60
80
100
120
140
160
1996 1997 1998 1999 2000
in m
illion E
uro
s
Import Export
Source: European Furniture Manufacturer Federation
The exports of Indian furniture are ten times higher than imports of the furniture in India.
The exports are more in the form of cheap varieties at affordable costs whereas the
imports cater to the elite class who wants to own the best brands available in the market.
Export of Indian furniture
The United States is the biggest consumer of the Indian furniture outside India and
accounts for 24% of total export of the Indian furniture. After US, United Kingdom and
Germany are the biggest export destinations for the furniture with 14% share each.
Figure 3.12: Country wise break up of export of Indian furniture
4%
2%
24%
14%
14%5%
2%
15%
5% 10%
5%
United States Germany United kingdom France
Italy Denmark Canada Greece
others Belgium Netherlands
Source: European Furniture Manufacturer Federation
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
42
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
The indicative break up of export share of the furniture products is given below:
Figure 3.13: Product wise break up of Indian furniture export
1%
1%
8%
4%
5%8%
31%
42%
Other Wooden Furniture Office Furniture other Furniture & Parts
Kitchen Furniture Seating & Parts Plastic Furniture
Other Metal Furniture Bedrooms
Source: European Furniture Manufacturer Federation
Import of the furniture
Indian consumer prefers stylish and western furniture. The biggest import source of
furniture in India is Germany which account for the 16 % of total import of the furniture.
Germany followed by the Italy with 12 % and Korea with 10 % of import share.
Figure 3.14: Country wise break up of imported furniture in India
Source: European Furniture Manufacturer Federation
The indicative break up of import share of the furniture products is given below:
20% 3%16%
12%
7%
9%
4% 5% 7%
7%
10%
Germany
Italy
Korea
United Kingdom
United States
Irish Republic
France
Japan
Poland
others
Switzerland
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
43
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
Figure 3.15: Product wise break up of imported furniture in India
Source: European Furniture Manufacturer Federation
Indian wood scenario
India meets its wood required by natural production, plantation and imports.
Table 3.3: Indian log production, imports & apparent consumption, 2003
Logs Volume(m3)
Production
- from natural forests 14,000,000
- from plantations & homesteads 43,000,000
Imports 3,000,000
Total apparent consumption 60,000,000
Source: American Forest and Paper Association.
Due to stringent government rules and environmental concern, the availability of woods
from the natural production is reduced in recent years considerably. The concept of social
forestry and plantation is well developed in recent year and few wood panel and paper
manufacturer have developed small forest to meet their own wood demand. Teak,
Eucalyptus and rubber wood are the preferred trees for social forestry. Rest of the
demand of the wood is satisfied by the import of the wood logs.
The indicative break up of the round wood consumption is shown in table given below:
3%
3%
3%
5% 38%
29%
11%
8% Seating & Parts
Furniture Parts
Plastic Furniture
Kitchen Furniture
Bedrooms
Other Wooden Furniture Office Furniture
Other Metal Furniture
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
44
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
Figure 3.16: Break up of the round wood consumption in India
Source: European Furniture Manufacturer Federation
In coming years the demand and supply gap of wood is expected to be widened.
Table 3.4: Demand supply gap of wood
Year 2000 2010 2020
Demand 58 950 153
Supply 29 70.55 100.7
Gap 29 24.45 52.3
% of demand gap 50 25.70 34
Source: Ganguly, 2003
Due to lack of supply of domestic natural wood, import of wood base products has increase
sharply in recent years.
Table 3.5: Indian imports of wood products, 2002 -2003
2002 ($,000) 2003 ($,000) % Change
Logs 361,851 692,582 91
Sawn Lumber 7,716 12,777 66
Veneer 3,587 3,736 4
Plywood (incl. Veneered plywood) 3,810 4,359 14
MDF/HDF 11,007 13,555 23
Particleboard 7,819 13,740 76
Wooden Furniture 7,280 12,713 75
Total 403,070 753,462 87
Source: American Forest and Paper Association
25%5%
8%
25%12%
25%
Construction
Furniture & Interior
Joiniry
Sleepers
Packaging
Others
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
45
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
Decreasing tariffs of wood imports in India has also propelled the imports of wood in India.
The growth of the imports of veneer is lowest compared to other products; this may be
because of the high rise in the import of the sawn lumber. The sharp increase in the wood
pane l is observed in 2003, this shows the increasing trend of the wood panel based
furniture in India. With the wood panel, imports of the wooden furniture also increase by
almost 75 % in year 2003.
Indian wood panel scenario
The import of the wood panel is summarized in graph given below:
Figure 3.17: Imports of Veneer & plywood in India (In US $ ‘000)
Source: Federation of Indian Panel & Plywood Industries (FIPPI)
0
2000
4000
6000
8000
10000
12000
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Plywood Veneer
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
46
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
Figure 3.18: Import of MDF/HDF & Particle Board in India (In US $ ’000)
Source: Federation of Indian Panel and Plywood Industries (FIPPI)
The import of the MDF/HDF and particle board has outperformed the import of the veneer
and plywood. The import of the MDF has shown continuous rising trend of import in recent
years, which clearly depict the inclination of the Indian consumer towards the MDF in
recent years. This holds promise for the domestic manufacturers in terms of making
available MDF at competitive prices within India through domestic manufacturing.
3.5 Other Relevant Issues
To put it short, the major factors that determine the demand for MDF in the country will
depend on the following:
• Economic Growth Rate.
• Government policies on forest products.
• Thrust on infrastructure projects and housing.
• Product characteristics and the awareness of MDF.
• Price differential of MDF and its substitutes.
• Relative availability of MDF and its substitutes.
• Taxation structure of MDF and its substitutes.
0
2000
4000
6000
8000
10000
12000
14000
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
MDF/HDF Particleboard
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
47
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
• Rate of Urbanisation.
• Per Capita Income.
• Changing life styles and perception.
• Development of new substitutes.
India’s Economic Growth Rate: The country has been witnessing a consistent and
impressive growth rate in the range of 7-9% per annum. This coupled with the increased
thrust on manufacturing will have a multiplier effect on construction and infrastructure
projects, major growth driver for MDF also.
Government Policies on Forests: The world is experiencing global warming due to
increased emission of carbon dioxide and ozone-depleting substances. The forests, to a
large extent, can fight those problems (through photo synthesis using the CO2) and also
preserve the rich bio-diversity. The governments the world over has woken up to this
reality to prevent de-forestation by discouraging industries that use forest resources like
wood and timber. At the same time using non-conventional raw materials like bagasse,
wood wastes, lops& tops, barks, etc are encouraged.
The National Forest Policy, 1988 stipulates that the one-third of landmass should be tree
covered with at least 60% in the Himalayas. Within the broad parameters of the National
Forest Policy, each State should have its own forest policy statement, for the sustainable
management of its forest and wildlife resources.
To sum up, the government policy on forest products is the one that would promote the
use of MDF and thus enhance its demand.
Product characteristics and the awareness of MDF: Product characteristics determine
its suitability to a particular application. A compact look, smooth texture, rigidity and a
proper colour are the primary visual characteristics which play a major role in making or
breaking the success of a product.1
Good workability- machining operations (sawing, planing, nailing, screwing and
contouring), the quality of the machined edge thus obtained, the minimum level of
1 Use of a particular species of eucalyptus gave DURATUFF a dark, grey colour which made the dealers and carpenters to
mistake MDF for an inferior product. There was greater resistance during the promotion phase.
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
48
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
operator skill required and the time to complete the task are all determining factors for
the acceptability of MDF.
It is ultimately the consumer who decides whether or not to accept a product. In addition
to the price factor, the decision is strongly influenced by;
a) Does the product come from a branded firm (Corporate Brand Name)?
b) Does it have a quality certification (BIS mark, etc)?
c) Has the product been endorsed by industry professionals and bodies (leading
architects, builders, institutes, etc)?
As long as the product remains reasonable priced, acceptance at the above levels would
ensure that the product acceptance trickles down rapidly to its target segment.
Price differential of MDF and its substitutes: A favourable pricing of the product vis-à-
vis substitutes is important to capture market share in the price-sensitive market.
However, this can be curbed to an extent by brand-building and by running awareness
programs on MDF.
Relative availability of MDF and its substitutes: Nearly 75-80% of the MDF demand in
India is being met by imports. There are only two manufacturers of MDF at present,
namely, Mangalam Timbers (SK Birla Group) and Nu Chem. The proposed plans of Bajaj
Biotec (Bajaj Hindustan Group) to set up three plants – two for MDF in eastern and central
Uttar Pradesh and one for PB in western UP will result in a total production capacity of
2.10 lakh cubic metres per annum.
Rate of Urbanisation: The rate of urbanisation affects the demand as follows:
Migration of rural population to a urban environment seeking jobs results in greater money
flow as a result of employment. Over a period of time, the migrant family will start
investing in house or in buying furniture.
Per Capita Income: The rise in income levels and the per capita disposable income will
result in the procurement of new dwelling units, furniture and the like. Needless to say,
rising income levels will bring about increased economic activities.
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
49
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
Changing Life Styles and Perception: The frenetic pace of life and special constraints in
the big cities would necessitate the adoption of modular furniture, cabinets, kitchen, etc.
MDF is a preferred choice for modular furniture.
Development of New Substitutes: The dwindling wood reserves and the increased R&D
efforts in the material science to find alternatives have led to the commercialisation of
acrylic, fibre glass and gypsum entering the furniture market. Another substitute called
“Gypboard” (gypsum panel) is being used increasingly as walls, false ceiling and partition.
Similarly, woodplast is being used in garden/beach furniture, TV cabin, etc.
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
50
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
4 Raw Material Assessment
4.1 Raw material Types
Medium Density Fibre Board can be manufactured from soft wood or from agricultural
wastes like cotton stalk, bagasse, etc. Eucalyptus, poplar and pine are generally being
used as a raw material for MDF board. But due to dwindling forests and the stringent
government regulations to protect forests, manufacturers are looking for alternatives to
produce MDF Board. RDPL (herein after referred to as client) plans to use cotton stalk/
bagasse, which is primarily an agricultural waste left after the harvesting of cotton, as the
raw material for MDF Board manufacturing.
4.2 Cotton Production
As depicted below, the cotton cultivated area in India is nearly 9 million hectares (year
2005) with an average yield of 450 Kg/ha. The yield of cotton in the US is almost double of
this figure, owing to the increased usage of BT cotton and other improved varieties. Since
further elaboration on the subject is not relevant to our study, we may discuss issues
pertaining to India and Gujarat in particular.
Figure 4.1: Cotton Production area and yields of India and U.S.
Source: commodity intelligence Report, United states Department of Agriculture (USDA)
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
51
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
India India is the third-largest cotton producing country in the world after China and US. China
produced 5,704,436 MT and the US 5,203,665 MT of cotton in the year 2005, while India’s
cotton production in the same year was 3,984,396 MT. In terms of area of cotton
production, India has the largest land area (Statistics of the year 2005). At present around
84 lakh hectares area is being used for cotton cultivation, which is expected to grow to 90
lakh hectares by year 2006-‘07.
Figure 4.2: India’s Cotton Production and Production area
0
50
100
150
200
250
2000-01 2001-02 2002-03 2003-04 2004-05
India's Cotton Production and Production area
Area (Lakh hectares) Production (Lakh Bales)
1 bale: 170 kilogram
Source: Cotton Corporation of India
Despite the largest land area in cotton cultivation, Indian cotton production is less than
that of China and the US because of the lower yield. But in recent years India’s cotton
production yield has improved steadily. Improved irrigation system and the adoption of BT
cotton are the main reasons for the improvement in yield (MT/hectare).
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
52
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
Figure 4.3: India’s Cotton Production Yield
0
100
200
300
400
500
2000-01 2001-02 2002-03 2003-04 2004-05
India's Cotton Production Yield
Yield (Kg/ ha)
Source: Cotton Corporation of India
The central states of Maharashtra, Gujarat, and Madhya Pradesh continue to plant
approximately 63 percent of India's total cotton area.
Gujarat
Gujarat is the leading state of India in cotton production followed by Maharashtra and
Andhra Pradesh.
Table 4.1: Cotton production
(Area in Lakh hectare)
(Production in Lakh bales)
2004-05 2003-04 2002-03 States
Area Production Area Production Area Production
Gujarat 19.06 54.43 16.41 40.26 16.34 30.50
Maharashtra 30.49 52.00 27.66 31.00 28.00 26.00
Andhra Pradesh 11.42 32.50 8.25 26.00 8.03 19.75
Source: CCI
In spite of lesser area for cotton cultivation than that of Maharashtra, Gujarat’s production
is higher than that of Maharashtra, This has happened due to higher yield of cotton in
Gujarat. Cotton production of Gujarat has steadily increased since year 2002, owing to two
major facts, namely, the increased adoption of BT cotton in place of desi varieties and the
improved irrigation facilities available to the cultivable land.
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
53
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
Figure 4.4: Gujarat’s Cotton Production Yield
0
50
100
150
200
250
300
350
400
450
500
2000 - 2001 2001 - 2002 2002 - 2003 2003 - 2004 2004 - 2005
Yield in Kg/Ha
Source: Directorate of Agriculture
The cotton production area increased by 13.5% in year 2006, from 20.77 lakh hectares in
the year 2005 to 23.60 lakh hectares in the year 2006.
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
54
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
The district wise cotton production in Gujarat is mention below:
Table 4.2: District wise cotton production in Gujarat
(Area in ’00 hectare)
(Production in ’00 bales)
(Productivity in kg/hectare)
2003-2004 2004-2005 Sr. No. Name of District
Area Production Yield Area Production Yield
1 Ahmedabad 1680 2463 249 1895 3327 298
2 Anand 13 39 552 38 154 689
3 Banaskantha 45 180 680 61 259 722
4 Bharuch 1329 1919 245 1297 3350 439
5 Dahod 6 17 415 18 73 689
6 Dang 0 0 0 0 0 0
7 Gandhinagar 180 506 478 327 1171 609
8 Kheda 179 398 378 206 653 539
9 Mehsana 368 804 371 467 1122 408
10 Narmada 352 621 300 435 1510 590
11 Navsari 0 0 0 0 0 0
12 Panchmahal 72 184 434 104 337 551
13 Patan 769 774 171 1011 1101 185
14 Sabarkantha 377 1401 632 861 2932 579
15 Surat 42 99 401 70 180 437
16 Vadodara 1581 3164 340 1728 4499 541
17 Valsad 0 0 0 0 0 0
18 Amreli 1040 3392 554 1164 2908 425
19 Bhavnagar 1901 4116 368 1987 5159 441
20 Jamnagar 320 1879 998 467 2567 934
21 Junagadh 192 993 879 249 1401 957
22 Kutch 402 994 420 547 1217 378
23 Porbandar 37 83 381 32 72 383
24 Rajkot 1680 10118 1023 2028 10683 896
25 Surendranagar 3845 6125 271 4071 9760 408
Total 16410 40269 417 19063 54435 494
Source: Directorate of agriculture, Gujarat
As shown in the above table, Surendranagar leads the pack in terms of the maximum
cultivable area and production of cotton.
Surendranagar also geographically connected with the Rajkot, Bhavanagar and Ahmedabad.
These are the second, third and fourth highest cotton cultivated district respectively in
Gujarat. Also Patan and Mehsana have good amount of cotton cultivation.
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
55
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
The production of cotton in Surendranagar district is mention below in table:
Table 4.3: Cotton Productions in Surendranagar District
(Area in ’00 hectare)
(Production in ’00 bales) (Productivity in kg/hectare)
Unirrigated Cotton Production Irrigated Cotton Production Total Cotton Production Year
Area Production Yield Area Production Yield Area Production Yield
2000 - 2001 3249 1038 54 526 775 250 3775 1813 82
2001 - 2002 3442 2162 107 790 1799 387 4232 3961 159
2002 - 2003 3234 1050 55 967 1490 262 4201 2540 103
2003 - 2004 3100 4103 225 745 2022 462 3845 6125 271
2004 - 2005 3191 5925 316 880 3835 741 4071 9760 408 Source: Directorate of Agriculture, Gandhinagar
The yield of the cotton production is increased considerably in last two years in
Surendranagar. At present, major part of cotton cultivation area is unirrigated, which is
likely to get irrigation sooner in incoming years as Sardar Sarovar project is gained fast
execution in recent time. This will result in higher production of cotton stalk in
Surendranagar as it has very large area for cotton cultivation.
4.3 Cotton stalk
Cotton stalk’s production directly depends on the production of cotton. As per the Ministry
of Environment and Forests (Government of India), it is estimated that, on an average, the
rain fed crop gives about 2.5 tonnes per hectare of cotton stalk and the irrigated crop
gives about 5 tonnes per hectare. Generally 3 metric tons of cotton stalks is produced per
hectare production of cotton. Estimated weight of the cotton stalk is 300-400 gm per plant
with the average diameter varying from 1 to 1.5 inches. While the total Indian production
of cotton in the year 2005-06 was 23.8 million bales (1 bale equals 170 kg), Gujarat alone
produced around 7.6 million bales of cotton in the same period.
Taking cues from the table (section 4.2), the cultivated area of cotton in Surendranagar in
year 2004 - 05 is 4.07 lakh hectares, which can produce three times as much quantity of
cotton stalk. This translates into 1.22 million metric tons of cotton stalks. The requirement
of the plant is 100,000 tons which can be met by procuring the cotton stalks from the
Surendranagar area only. Also emergency provisions can be made to procure the same from
the adjoining districts like Rajkot, Bhavnagar and Ahmedabad.
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
56
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
4.3.1 Cotton stalk usages
The stalk of the cotton plant is processed for the development of ethanol for petrol and
diesel blends and it is also used as a mulch to improve soil. Cotton stalk is also used to
prepare stock feed with the shell of the cotton seed. Cotton stalk can be used as direct
fire stock in boiler and for the purpose of household.
No major industrial and commercial utilization of cotton stalk is so far done in India.
Cotton stalk is mainly burned either as feed stock in small capacity boilers or as fuel in
household. Farmers use them to make composts in order to improve the soil fertility. Only
a small fraction of the available cotton stalk is used to prepare feed stock using the shell
of cotton seed. All these activities are done at a very low capacity and in unorganized
manner. Cotton stalk is not utilized so far in value added activities like the manufacturing
of MDF. As most of the cotton stalk is considered as waste and burnt by farmers, it can be
conjectured that a significantly large portion of cotton stalk could be made available to
manufacturing MDF board. This would also help farmers to earn extra money from selling
cotton stalks to the manufacturers of MDF, thereby creating a “win-win” for both.
4.3.2 Cotton Stalk Availability
Future availability of cotton stalk depends on the production of cotton. Cotton is Gujarat’s
one of the major revenue earning crop that supports the textile sector which is one of the
leading industry sectors of Gujarat.
The demand for cotton will increase due to growth of the textile industry. The major
growth drivers of the textile industry in India are mentioned below:
• Abolition of Quota system and MFA (Multi Fibre Agreement).
• Growing demand for apparels and clothing.
• Established presence of Indian textiles in domestic and international market.
• Growing urbanization, increase in disposable income levels and fashion-savvy
population.
• Comparative as well as Competitive Edge of Indian Textile Industry.
• Initiatives by Government to promote Textile Industry.
It is envisaged that cotton production will also increase in coming years to meet the
increased demand of cotton in Gujarat. The major factors that lead the rise in cotton
production in Gujarat are mentioned below:
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
57
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
� Improved irrigation
In past few years, the irrigation system of Gujarat has improved due to the increased
awareness of the citizens and also by the sustained effort of the Government of Gujarat.
The successful implementation of Sardar Sarovar Project makes Narmada water available
through the entire middle-Gujarat and Saurashtra for irrigation. Gujarat is the first state in
linking rivers across the state. Construction of check dam helps to store water for longer
time, to increase the ground water level and to recharge the dry well. Due to these
efforts, ample water will become available for irrigation to cotton crop, which in turn can
help increase the production of cotton.
� Adoption of BT cotton
Gujarat is one of the states, which early-adopted the BT cotton and the rise in the
production of cotton crop is the result of that. BT cotton protects the plant from blow
worm. The height of the BT cotton plant is normally higher than the desi (non-BT) cotton
plant. The production of the cotton boll also increases in BT cotton plant. Due to higher
quality and large volume, BT cotton help farmers to fetch good price for their product.
This becomes the prime motivation for many farmers to move onto cotton production in
the state, which led to the higher cotton production in Gujarat.
At present cotton stalk is treated as agro waste product with no seemingly major industrial
and commercial applications. MDF board industry will not only utilize the cotton stalk in
value addition activity but it also provides opportunity for farmers to earn extra money by
selling cotton stalks. Going by the current economic condition and booming textile
industry, the demand for cotton in coming years is likely to go up with concomitant
increase in the cotton cultivation and hence the increased availability of cotton stalk in
Gujarat. In short, the cotton stalk will be largely available in future to support the MDF
board manufacturing industry.
4.3.3 Procurement Strategy & Design
Cotton stalk available from cotton plants are required to be processed in the following
stages, before they can be used in the MDF plant:
1. Removal of the ground
2. Removal of the dirt and soil sticking to the stalk
3. Removal of leaves and smaller branches
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
58
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
4. Removal of lint sticking to the cotton stalk
5. Removal of cotton seeds sticking to the cotton stalk
6. Washing of the cotton stalk
7. Debarking of the cotton stalk
8. Chipping of the cotton stalk
9. Drying of chips
Cotton stalk would be available from the farms starting from the month of April to June.
From the farms, at least for another six months, there would be no substantial
deterioration in quality, if stored properly. Technically of course cotton stalk can be used
for a period up to one year, if they are protected and properly stored in chipped form.
RDPL can develop effective technology to procure cotton stalk for long time and
mechanism to lower the cost of cotton stalk by working with organisation like CIRCOT
(Central Institute of Research of Cotton), Mumbai. CIRCOT is leading institute doing
research on cotton and it had successfully carried out pilot project to manufacture board
from cotton stalk. Its expertise and technology knowledge would help RDPL to utilise
cotton stalk in efficient way.
RDPL planning to set up manufacturing unit at Dhrangadhra taluka, which is surrounded by
Lakhtar, Limdi, Muli, Chuda, Sayla, and Wadhwan. All these talukas are cotton growing
area and producing ample quantity of cotton in year. The production of cotton in these
talukas is provided in the table given below:
Table 4.4: Cotton Production in different talukas of Surendranagar
Sr. No. Taluka Cotton Production
(in hectare)
cotton stalk in tones @ 1.5
tones / hectare
1 Lakhtar 47556 71334
2 Limdi 37000 55500
3 Muli 32500 48750
4 Chuda 15432 23148
5 Sayla 28150 42225
6 Dhrangadhra 49900 74850
7 Wadhvan 43400 65100
8 Halvad 28158 42777
The planned capacity of the fibre board manufacturing unit is 30,000 CuM. The raw
material requirement for this capacity is easily meet by the cotton production of this
region.
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
59
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
RDPL is planning to set up Collection-Chipping-Storage centre of cotton stalk in each of
these taluka. Each CCS centre will be established on a ‘5 Acre’ land. CCS centre equipped
with one Mobile chipping unit to chip the cotton stalk and one weighing machine (20 tones)
facilitated by software installed terminal.
Around 34 persons will be stationed at each CCS centre - 24 labourers required for chipping
machine operation, 6 persons required to operate weighing machine and an accountant
and a supervisor.
The proposed location of the CCS centre is mention in table given below:
Table 4.5: CCS Centre locations
CCS
No.
CCS Centres
(Proposed) Talukas
Distance form
Dhangadhra Talukas Covered
1 Adalsar Lakhtar 38 Lakhtar, Patdi, Limdi
2 Samla Limdi 57 Limdi, Wadhwan, Chuda
3 Sudamda Sayla 48 Sayla, Muli, Chuda, Chotila
4 Gadhda Muli 38 Muli, Dhangadhra, Halvad, Chotila,
Vankaner
5 Charadva Halvad 27 Halvad, Morbi, Naliya, Vankaner
6 Dasada Patdi 38 Patdi, Bechraji, Viramgam
7 Navalgarh Dhangadhra 0 Dhangadhra, Halvad
Each CCS centre will cover almost 20 km of area surrounding it, while the distance of these
centres from the manufacturing unit is varied from 27 to 70 km.
Cotton growing farmers from the surrounding villages will transport cotton stalks to this
centre. Transportation cost up to CCS centre will be borne by RDPL. The collected cotton
stalk will be chipped and stored at the centre and will only be transported to the factory
whenever required. This would help to reduce required storage space at the factory, the
transportation cost and the overall operational burden. The strategy also provides
opportunity to create buffer stock to meet future demand and to control the price of raw
material.
The location of Collection-Chipping-Storage centre is diagrammatically represented as
follows:
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
60
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
Figure 4.5: CCS Centre Mechanism
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
61
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
(i) Pricing
Our interaction with various agencies suggests that cotton stalk can be procured at a price
of INR 300 per metric ton. This can be channelised either through farmer’s co-operatives
or through direct buying from big farmers (RDPL is planning “collection points” at major
locations). As this is a seasonal item, the collected cotton stalks will be stored in
warehouses so that the operation of the plant can be sustained for the entire year. Besides
the basic purchase price of the cotton stalk, cleaning, handling and transportaion charges
should also to be considered for the calculation of the price of cotton stalk at MDF plant.
It is advisable that the client would make contract or create strong linkages with farmers
and co-operatives to procure cotton stalk at reasonable prices. Because there are chances
that once the MDF unit is set up based on cotton stalks, farmers would realise its value,
who in turn, would increase the price of cotton stalks. Moreover, due to price increase in
other types of domestic fuels like coal, wood etc, usage of cotton stalks as a regular
domestic fuel has received some serious attention. Some projects like “White Coal” have
been set up to convert waste cotton stalks into more usable configuration as fuel. All these
may put pressure on the prices of cotton stalks.
4.4 Bagasse as Alternate Raw Material
Bagasse is another option to be considered as a raw material for MDF production. Bagasse
is the matted cellulose fibre residue from sugar cane that has been processed in a sugar
mill. Most bagasse has moisture content between 45 and 55 percent by weight. Average
bagasse production is about 30 percent of the sugarcane crushed.
About 90 percent of bagasse produced is used as fuel. Another major use of bagasse is in
paper making. However, large quantities of bagasse are either thrown away or taken away
for use as fuel or for compost making. In a number of sugar manufacturing factories surplus
bagasse becomes a disposal problem.
India is the second largest producer of Sugar cane in world after Brazil, with an estimated
production of 258.0 million MT in the year 2005 and which is estimated to touch to 329.60
million tones by the year 2015. The major sugar producing States in the country are
Maharashtra, Uttar Pradesh, Tamil Nadu, Karnataka, Gujarat and Andhra Pradesh
considering total sugar production and area under sugarcane.
In India sugar production is undertaken practically throughout the country and there are
well-established factories in 18 out of 26 States. There are approx. 575 sugar mills
operating in India.
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
62
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
Sugar production has emerged as one of the major agro industries in the rural areas of
India during the last few decades particularly in the irrigated region. Sugar production in
Gujarat is substantial since many of the factories are cooperatives and the producer
receives full benefit from sugar production.
Gujarat is one of the leading producers of the sugarcane. The southern region of Gujarat is
the biggest region of sugarcane production in Gujarat as it has good irrigation facility due
to presence of larger rivers like Narmada, Tapi, Mahi etc.
Table 4.6: Sugarcane Productions in Gujarat
Year Area (in ’00 Hectare)
Production (in ’00 MT)
Yield (in kg/Hectare)
2000 - 01 1777 12695 7142
2001 - 02 1758 12465 7092
2002 - 03 2029 14071 6934
2003 - 04 1764 12669 7182
2004 - 05 1967 14570 7407
Source: Directorate of Agriculture, Gujarat
The southern region of Gujarat also caters many sugar producing factories due to good
production of the sugarcane in this region. Out of 22 sugar factories in Gujarat, 19
factories are in South Gujarat and 3 are in Saurashtra. These factories are good source of
generating bagasse, which is generally transported to the Nagpur, Aurangabad.
4.4.1 Procurement of Bagasse
Bagasse can be purchased either from contractor or sugar mandi and its available either in
bails or loose. The average price range of the bagasse is 475 – 500 Rs. /ton. Usually sugar
factories crush sugarcane between October to April and hence bagasse is available for six
months only in a year. Nearly 421 Kilo tons per annum of bagasse is available from the
sugar factories of South Gujarat alone. RDPL will require a maximum of 60,000 MTPA of
bagasse.
Bagasse will be available in ample quantity from these factories to RDPL. RDPL has to
transport the bagasse from the south Gujarat to Surendranagar, the selected location for
MDF manufacturing facility. Due to good road network, transportation can be handled
efficiently and economically.
The survey of the sugar producing 15 factories in south Gujarat is summarized in Appendix
J.
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
63
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
4.4.2 Contingency Plan for Raw Material Sourcing
The success of the project will depend on the availability of quality cotton stalks at
economical prices, chipping of stalks, their storage and transportation. Also it is very
important to explore better ways of storing the same (as cotton stalk is available only
during the harvest season) to sustain production of MDF on a continuous basis. It makes
immense sense to chalk out a strategy to procure or ensure the supply of raw material that
can substitute cotton stalk in case there is a scarcity for the latter or if the landed price of
stalk becomes unaffordable.
The client has plans to grow ailanthus excelsa or other kind of soft wood tree near the
factory premises in a vast expanse of land so that the wood from the same can be used as
raw material for MDF. Ideally 850 to 870 saplings can be planted per acre of land and will
be ready for felling in a span of 4 years. The typical yield is 100 tons per hectare. On an
average, 1.55 tons of the tree is needed to produce 1 cubic metre of MDF.
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
64
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
5 Technological Aspects
5.1 Manufacturing Process of Fibre Board
Three major steps involved in the manufacturing of MDF are fiberising, fibre mat formation
and board pressing. MDF can be processed from a variety of raw materials such as agro
residues and annuals. After necessary cleaning and preparatory process, the raw material
is cut into small sizes or chips. These are screened and graded in sizes. Chips larger than
the pre-determined size are recycled and very small pieces are rejected.
The distinct operations involved in the MDF manufacturing are:
a. Raw material handling
b. Chip Preparation
c. Fibre Refining& Drying
d. Fibre Resin Blending
e. Forming Station
f. Hot Pressing
g. Board Finishing
5.1.1 Raw material Handling
Raw material consists of various types of cotton stalks (removed from the fields in the form
of chips). The mobile chippers have been chosen to be used either in the field or at the
factory. The chips are stored in piles and transported by front loader to the chip reclaim
hopper.
5.1.2 Chip Preparation
The chip reclaim hopper will be equipped with a multiple screw conveyor system that
feeds the chips for classification to the rolling screen. The screen has three decks. In the
first one, oversized chips are separated. From, deck two, the accepted material is
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
65
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
conveyed by a belt conveyor to a chip washing system, which pumps the chips to the
digester feed bin. Unwanted fine material is taken out from the bottom of the screen and
can be used as fuel in boilers.
5.1.3 Refining of Fibre and Drying
The digester feed bin is equipped with a vibrator feeder and controls to maintain uniform
chip flow from the silos. Chips are fed from these silos to the digester at a controlled rate.
The steam digester operates on a controlled but adjustable steam pressure that cooks
(steam condition) the chips according to the adjusted time and then gets transported to
the refiner. In the refiner, the chips will be reduced to fibres. The disc type refiner will
have changeable grinding plates and adjustable disc clearance to provide the degree of
fiberisation required. From the digester-refining unit, the fibre is discharged under steam
pressure into the blow line for transportation either into the fibre drier or the start up
fibre dump.
During normal operation, the-fibre drying steam receives the fibre and steam from the
refiner blow line and dries the fibre to approximately 5% moisture content (bone dry). This
drier is of the flash tube type and does not employ a rotating drum. Large volumes of air
are blown through the heater section and are heated to a predetermined, controllable
temperature. Fibre and steam from the refiner are injected directly into this stream of
heated air at the inlet- of the flash tube drier. Operating on the principle of air suspension
drying, the fibre drier thus ensures that the fibre is maintained in suspension in a stream of
heated air until the final moisture level is reached. After the flash tube, the fibre and
steam are separated in the cyclone, with the fibre passing through a rotary valve airlock at
the bottom of the cyclone to a reversible out feed belt. The moisture vapor is extracted
from the cyclone with the transporting air and is discharged directly to atmosphere.
The reversible out feed conveyor transports the fibre either to the weigh belt conveyor or,
when reversed to a fire dump. This conveyor is reversed when fire has been detected in
the drier or other systems upstream of the fibre bin of the mat former. Fire detection and
control of the direction of this conveyor is fully automatic, but manual override is also
provided.
The weigh belt conveyor totalizes the fibre flow and also controls the resin and wax
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
66
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
addition to the fibre. From the weigh scale the fibre is dropped into the fibre bin of the
mat former. The fibre bin acts as a buffer and storage device between the fibre
preparation and the forming and pressing line.
5.1.4 Fibre Resin Blending
Resin, hardener and other selected chemicals are automatically blended in electronically
equipped mixing units and then metered into the fibres in the blow pipe line.
5.1.5 Forming Station
Fibre is metered at a controlled rate out of the bin to the single forming head. The former
lays a continuous fibre mat down out to a wire screen. After the forming head a scalper
shaves off the layer of the fibre mat.
5.1.6 Hot Pressing
In the hydraulic hot press 12 mats are pressed simultaneously. 12 caul mats are stacked in
an elevating loading rack in front of the press and then simultaneously charged .into the
press. After the pressing they are discharged into a corresponding unloading rack behind
the press, while the following 12 mats are charged into the press.
The hydraulic hot press is of frame type and heated by means of steam. Pressing time,
pressure and temperature are automatically controlled according to a programme to be
pressed with regards to the actual type of board.
5.1.7 Trimming and Sanding
Unloaded boards are passing a thickness control on the roller conveyor in front of the
cooling wheel. The boards are shortly stored in the cooling wheel before they will be
trimmed and cut to size. After the trim saws the boards are automatically stacked.
From the stacker, the boards are taken into the intermediate storage to complete the
curing and equalizing of the board.
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
67
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
5.2 Manufacturing Process of Prelam Boards:
5.2.1 Impregnation Section
In impregnation line, the base paper and balancing paper to be used for pre-lamination of
board are impregnated with MF resin. The roll of paper is un winded & fed into
impregnator, where resin of required grams is applied through rollers. The paper usually
weighs within a range between 80 to 140 gsm.
Normally the resin pickup is 100% of the weight of paper. The impregnation paper is then
dried, cooled & stored in air-conditioned room and then send for pre lamination section to
apply on MDF/particle board.
5.2.2 Short cycle Laminating Process
In short cycle laminating process, impregnated paper fix on the raw MDF board, with the
help of press. Heat and pressure play major role in this process.
The automatic board pushing device or handling system supported with hydraulic lifting
platform or scissor lift feeds raw MDF/Particle boards into the short cycle press device.
Raw board brushing machine cleans the surface before board enters into the short cycle
press.
Melamine impregnated paper is overlapped manually on to the raw board with best efforts.
Loading conveyor and board centering conveyor adjust the board inside the machine with
proper alignment of the board before pressing process. The next stage is the hot pressing
of paper applied raw board inside the press device. Surface of the board is applied with a
pressure of 30 +/- 2 Kg / cm2. The heat required for pressing cycle is 180 +/- 5 degrees
Celsius. Pressing cycle takes around 60 seconds for pressing one board.
The prepared, terms also as “cooked”, prelam board comes out from press with help of
unloading device. Roller conveyor, connecting the unloading device and stalking station,
brings the boards on the stalking station for natural cooling. Whole short cycle process runs
through the electrical control panel that is a PLC (programmable logical control) unit.
5.3 Manufacturing process of Laminated Flooring
The manufacturing process of laminate flooring starts from the prelam manufacturing
section. Short cycle laminate press prepares pre laminated MDF/HDF boards with heat and
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
68
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
pressure application on melamine impregnated papers and base board assembly. Prelam
boards prepared out of this process are considered as raw material for laminate flooring
manufacturing process.
Raw material dimensions required for our process will be of W 1220 X L 2440 X T 6-10 mm.
Core material can be MDF/HDF or particle board with laminated surface by melamine
impregnated paper. Warp of panels can be considered within a tolerance limit of 2 mm /m
(max).
5.3.1 Cutting of pre laminated raw boards
Pre laminated boards are fed in the cutting line with two sliding table saws for the manual
crosscutting of boards in two pieces. These boards are stocked for stress release before
sending to manual length cutting line. Cross cut boards on the sliding table saw are
converted into individual planks. These planks are manually destacking and stocked for
profiling process. The dimensions of finished work pieces are 190 X 1208 mm.
5.3.2 Profiling of Planks
The cut panels are then manually fed into the profiling machine. This machine basically
turns groove or profile over the plank edges, both crosswise and lengthwise. Profiling
operation is meant with patented/non patented click profile tooling. This click profile
tooling creates profile first longitudinally and then crosswise on a single DET machine. The
profiled surface is then applied with PU coating layer to make the surface moisture
resistant. Profiled planks are considered as the ready to feet flooring products. These
planks are then moved for packing and storage.
5.4 Location Aspects
It is very important to select an appropriate location for any project and particularly for
this project owing to the following factors.
• In order to ensure continuous supply of raw materials (E.g: cotton stalk)
• Availability of man power (local availability of labour at affordable costs)
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
69
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
• Uninterruptible supply of electricity at cheaper rates as the process is energy-
intensive.
• Hassle-free supply of water and other utilities.
• To tap any incentives, if any, from the government that can help to improve the
bottom line of the business.
The selected location for setting up project is Navalgarh area of Dhangadhra Taluka in
Surendranagar district. The following parameters are being taken into consideration.
5.4.1 Raw Material Availability
The raw material is very crucial part of the project. As project is based on the agro waste,
the location must consider the different aspects of the agricultural product used as a raw
material. The selected location Navalgarh in Surendranagar district is surrounded by cotton
producing areas. As the project is planned based on the use of cotton stalk as a raw
material, the proximity of the cotton-producing region would help to reduce the
transportation cost of the raw material, improve flexibility in procuring raw material and
to control the price of raw material. The cotton stalk production quantity is higher in the
region than that is required for the project.
RDPL is also considering the bagasse as another option as raw material for the project. This
is abundantly available in south Gujarat. At present, bagasse is being shipped out of the
state to Maharashtra, etc. The distance from Valsad to the proposed site is 340 km by road
and the connectivity is very good. Also the 6 laning of the N.H. 8 from Baroda to Surat
(ongoing) and the extension of N.E.1 (Expressway) from Baroda till Mumbai will drastically
reduce the transportation bottlenecks.
RDPL is planning to import the raw material – HDF board – for the first phase of the
project. The Kandla port can act as the hub for import of the same. Connectivity to
Surendranagar from the port is reasonably good. The proposed infrastructure development
plans mooted for the state of Gujarat will further improve/streamline the transportation
network in the region.
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
70
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
5.4.2 Manpower Availability
Problems related to obtaining trained manpower are not anticipated as RDPL is already
into manufacturing similar products and they have well-established factories functioning
smoothly in Gujarat. Re-shuffling of some staff from existing plants in order take care of
the commissioning activities of the new plant is envisaged. Also the proximity to
Ahmedabad city will help RDPL to recruit technically qualified staff. Other labour staffs
are also available in the region easily.
5.4.3 Strategic Location
The project is expected to export more than 60 % of their production. The proximity of
port will provide the easy accessibility to the international market. Surendranagar is also
connected with all the major cities of the Gujarat – Ahmedabad, Surat, and Rajkot by state
highways. N.H.8 connects Ahmedabad to Mumbai via Vadodara, Surat and Valsad.
5.4.4 Other Advantages
• Dhrangadhra in Surendranagar is well connected with the major cities of the state –
Ahmedabad, Rajkot, Kandla through state highways.
• The nearest port location is Navlakhi which is at a distance of 100 kms. Kandla/
Mundra ports are only 250 km away from the proposed site, which is well-connected
with Surendranagar through state highway.
• Surendranagar has the highest cotton production in the state and is also surrounded
by the other major cotton producing districts like Rajkot, Patan, Bhavnagar and
Ahmedabad.
• Proximity to developed towns like Dhrangadhra, Wadhwan & Halvad.
• Water is available at depth of 650 – 700 ft and can be easily accessible through
bore wells
• Selected location is within Industrial Environment of DCW (Dhrangadhra Chemical
Works, 1927) region.
• Availability of GEB power supply with 66 KVA and 220 KVA substations.
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
71
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
• Qualified manpower available from Surendranagar and nearby cities like
Ahmedabad.
• Well-established infrastructure of Dhrangadhra and Wadhwan cities
• Established educational infrastructure of Wadhwan city that boasts of engineering
college, polytechnic, management schools, medical school, Pharmacy College, etc.
5.5 Machinery Details
All the major plant and machinery required for the production of MDF/HDF will be
imported from abroad. The following techno-economic parameters have been taken into
consideration while deciding the overall plant design and equipment suppliers.
Figure 5.1: Techno Economic parameter for machinery selection
Technical Contemporariness
Proven
Modularity
Scalability
Energy Efficiency
Commercial Cost Effectiveness
After Sales Service
Spare Parts Availability
Quality Certification of products
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
72
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
The detailed list of major plant and machinery is mentioned in below with its supplier’s
name.
Table 5.1: List of Imported Machinery
Description of Machines Supplier Name
MDF + Refiner + Sanding line Harbin Lingzhi Mechanical & Electrical
Technology Co. Ltd, PRC
Texture Press plates Sesa Press Plates,Italy
Matt Press plates Sesa Press Plates, Italy
Cushion pads Marathon Belting U.K.
Flooring line Holzbearbeitngssysteme AG, Germany
Impregnation line Longoni , Shanghai, PRC
Short Cycle Line Sufoma, China (PRC)
Table 5.2: List of Indigenous Machinery
Description of Machines Supplier Name
Steam boiler-6 TPH Cheema Boiler
Thermic Fluid Heater – 2500U * 3 Isotex Corporation
Mobile chippers Surya energy
Compressor with Dryer-Oil free 195 CFM Ingersoll-rand
Short Cycle Line Master Handlers
Resin Plant Bhagsons
Tooling-diamond Leitz
Other plant and Machinery
Table 5.3: List of other plant and machinery
Description of Machines Supplier Name
Generator set [second hand machinery] Zodiac Genset
Box packing Machinery Manilal Pack Plast Pvt. Ltd.
Air conditioning Hitachi
Fork lifts Godrej
Trucks TATA
Cooling towers Ganara Engineers Pvt. Ltd
RO Plant Indian Ion Exchange
ETP Enviroclean solution Pvt Ltd
EOT crane – 5 tones Safex Equipment Pvt Ltd.
Laboratory Equipments Gujarat test house
Cabling, lighting, panel boards & fittings Electrical
Chimney Darshini
Weighing machines with capacity 20 tones Avery India
Motors, Valves, Pipes & insulation, Exhaust, electrics & Automation Local supply
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
73
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
RDPL has finalized foreign machinery manufacturers and suppliers for major machineries
required for the plant. Brief information regarding selected machinery supplier of major
machinery is mentioned below.
Harbin Lingzhi Mechanical & Electrical Technology Co. Ltd, China
The MDF plant with refiner and sanding line will be procured from the Harbin Lingzhi
Mechanical & Electrical Technology Co. Ltd, China (hereafter referred to as Harbin).
Harbin has experience of more than 12 years in supplying the wood-based and non-wood
panel machinery and it is the only company in China capable of supplying the technology
that is suited for MDF production from cotton stalk. In cooperation with design institutes
and universities, Harbin has obtained patents for more than ten products including serial
glue blender, dryer, etc. Harbin can supply machineries (for MDF production line) with
capacities ranging from 15,000 to 80,000 m3/annum.
The company was formed by Mr. Wang Xiaoling. Mr. XIaoling was student of Northeast
Forestry University, China and worked as Director of the design department of Harbin
Forestry Machine Factory from 1982 to 1994. With his immense knowledge about
machineries, he compiled a book named as “Panel Machine & Equipment” published by
Northeast Forestry University. He also served Harbin Xinglin Science & Technology
Development Company in 1994 for one year as Vice General Manager. In 1995, Mr. Wang
Xiaoling set up Harbin Lingzhi Mechanical and Electrical Technology Co. Ltd. and he holds
the post of General Manager.
Mr. Wang Xiaoling is engaged in the design and manufacture of panel machinery for more
than 20 years. He has rich work experience and has made remarkable contribution in the
field. He was an active participant in the design of press, hot press, loader & un loader, air
forming and heavy-duty machinery.
The company has good track record of client and had supplied more than thirty complete
set of machinery of particleboard, MDF, Short cycle laminate press, moulding press line
etc. in various Asian countries including Pakistan, Russia, Sri Lanka and Vietnam. Harbin
had successfully carried out the joint stock system transformation with Harbin Forestry
Machinery Factory, power-and-power union, and also set up the China Foma Group & -
Harbin Foma Machinery & Equipment Manufacturer Co., Ltd. Harbin holds Harbin Lingyu
Economy & Trade Co., Ltd., which is considered as the independent import-export trade
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
74
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
power. It has also stakes in Shandong Hongfu Wooden Industry and Jiangsu Xinjinjiang
Wooden Industry.
Holzbearbeitngssysteme AG
The Homag is one of the leading engineering groups of the Germany. The group has
experience of more than 45 years in consulting and software system development,
engineering and installation of complex production line, and supplying technologically
leading edge products in both high end and standard segment along the entire customer
supply chain. RDPL is planning to procure the flooring line from Holzbearbeitngssysteme
AG.
Production facility of the group is present in Europe, Asia and America with worldwide
sales facility and after sales service network.
The homage group has supplied plants for the panel processing woodworking and furniture
industry, complete plants for parquet production, complete plants for door production.
Looking at the experience of the machinery supplier in the machine manufacturing, their
worldwide present, and their successful track record, both the machinery supplier seems
to be capable of supplying machinery of required capacity.
In short, the major machineries and equipment will be procured from proven vendors who
had set up similar plants in many parts of the world. The track record and contemporary
designs will further ensure quality and reliability of the systems. M/s Homag has a regional
office in Mumbai which will ensure a hassle-free engineering and after sales support.
Master Handlers Pvt. Ltd.
Master Handlers Pvt. Ltd is one of the leading manufacturers of paper Impregnation and
Lamination machinery, Material handling systems and Industrial Component Cleaning
solutions.
The manufacturing facility, situated at Pune, has sufficient resources to perform electric
engineering and programming task. The company entered in technical collaboration with
Always Engineering , U.K., Stewart-Gill Conveyers, U.K. (for overhead conveyors), Tochhio
(for Paper Impregnation lines), M/s Zippel (for Industrial Component Cleaning Solution) to
enhance its technical capabilities in respective fields. MHPL had also set up Software
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
75
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
Company in 1991 named as Autovue Electronics and Automation Company in 1994 named as
Automech Handlers.
MHPL provides complete product technology, training of personnel, installation and start
up of production and their expertise in providing customised product and service is visible
from its strong client base, which includes TATA, Honda, Siemens, Escort, Bajaj, Delphi,
Hundai, Kirby, Alucon, Escorts etc.
In Paper impregnation line and lamination machinery, MHPL manufacture Short cycle
lamination line Paper impregnation line High pressure laminate press line Laminate
furniture machines – paper foil/ veneer press , post forming machine, Lab press & flow
press
MHPL Looking at the client list for paper impregnation and lamination machinery, RDPL’s
decision to procure short cycle press from MHPL seems appropriate. The client list for
paper impregnation and lamination of MHPL is mentioned below:
• Century
• Formica
• Greenply
• Merino
• Nepal board
• Space Wood Furnishers Pvt. Ltd.
• Egyptial industrial flooring co.
• Pelit Arsian
• Bloom
• Isofam
• Neo-hy
• ASD Orman
• Samrat
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
77
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
6 Strategic Analysis of the Firm
6.1 SWOT Analysis
Figure 6.1: SWOT Analysis
Strengths
• Proven Presence in Laminates
Business
• Brand Name
• Robust Network of Dealers
Weaknesses
• Novice in MDF Manufacturing
Opportunities
• Construction Boom
• Proliferation of Modular Furniture
• Rising Income Levels
• Rapid Urbanisation
• Forest Conservation
• Import Substitution
Threats
• Presence of Global Players& New
Entrants
• Dumping from Abroad
• Health concerns on resins use
• New substitutes
Strengths
• Well established presence in laminates business as well as strong brand value are
anticipated to be the key factors for development of domestic as well as export market.
• Moreover, the product will penetrate deep into the market, in the wake of strong
network of RDPL dealers throughout the country.
Opportunities
• Macro-economic factors like huge investments in construction sector have contributed to
growth in demand of modular furniture.
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
78
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
• Higher spending power of middle class population in the view of rapid growth in
economy, urbanization.
• Conservation of forests due to Government policies to protect forests will increase
dependency on agro waste based products as a substitution to raw material, which will
aid MDF in achieving an edge over competing products like plywood and particleboard.
Weaknesses
• MDF industry is dominated by presence of large players in the market. Hence, a strong
marketing strategy will be required by the company. However, the robust network of
distribution channels that RDPL boasts of will help to penetrate the market.
Threats
• The negative impacts of using resins on human health, as well as probable Government
regulations of shifting towards environment friendly manufacturing technology can pose
a threat to the industry. RDPL is planning to replace UF resin with CARDENOL, which is a
bio resin that is environmentally-friendly.
• The product also faces possibility of high level of substitution. Globally, large varieties
of products (wood – plastic composites, steel framing, OSL/Parallam) are at a developing
stage and have recently been introduced in the market.
Figure 6.2: Wood Products & competitors life cycles
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
79
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
• Dumping from abroad as well as government regulations of relaxing import duties can
also affect the industry.
6.2 Five-Force Model Analysis
The five competitive forces acting on the external business environment is depicted below:
Figure 6.3: Five Force Model
Competitive Rivalry
MDF industry is not matured in India but it is poised for a growth as a result of increased
demand for engineered woods for the construction of furniture and modular office space.
At present, India has only two full-fledged manufacturing facilities for MDF, which meets
nearly 20% of the domestic demand. The rest is being met by imports. Plans are afoot by
Bajaj Biotec and RDPL to set up manufacturing facilities in the near term to tap the
lucrative market for MDF which is growing at 20-25% p.a. The new capacity additions by
these firms will be absorbed easily by the market that suggests a low intensity of rivalry.
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
80
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
Entry Barrier
The industry per se is both capital intensive and labour intensive. Also most of the critical
equipments like reformer (digester) are to be imported from Germany or China. The
success in marketing will depend a lot on the supply chain capabilities and extensive
dealer networks in different parts of the country. In this respect, the industry segment can
assumed to be the one with HIGH entry barrier.
The Threat of New Entrants
This is assumed to be “Low to Medium” due to high entry barrier and other points
mentioned in the above paragraph.
The Threat of Substitutes
This is profoundly HIGH as both wood based and non-wood based substitutes are easily
available in the market that can be used for a variety of purposes. Hence the consumer’s
choice will depend on factors like price, easy availability, ease of use, end use, etc.
Bargaining Power of Buyers
The bargaining power of buyers will be Medium for branded MDF products. However for
unbranded products, it will be high as the consumer will have ample choices in the market
to choose from.
Bargaining Power of Suppliers
As far as the raw material issue is concerned, the firm plans to use cotton stalks (the
remnant of cotton plant after the harvest of cotton) for the production of MDF. At present,
cotton stalk is burnt in the farm itself and being utilised as manure. The demand for the
same will boost the price for stalks, however it is not assumed to be high or prohibitive.
The idea is to create win-win for the farmers as well as for the manufacturers.
Alternatively, RDPL will engage in developing plantation so that the wood can replace the
cotton stalks. This will also help in curbing the bargaining power of cotton stalk suppliers
and also in mitigating any procurement problems that may arise with regard to cotton
stalks.
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
81
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
Bagasse is also being thought of as an alternative raw material for the above project,
which is abundantly available in South Gujarat. As mentioned earlier in the report, it is
[presently being sent out to the neighbouring states.
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
82
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
7 Marketing Strategy
7.1 Present Marketing Set Up
RDPL has well established domestic and international marketing network. The head office
of the RDPL is situated at Ahmedabad in proximity to their manufacturing facilities. RDPL
cover all the states of the India through their marketing offices established in Punjab,
Delhi, Rajasthan, Gujarat, Madhya Pradesh, Maharashtra, Karnataka, Tamil Nadu, Andhra
Pradesh, Chhatishgarh, Jharkhand, Bihar, Uttar Pradesh, and West Bengal, and Assam. The
hierarchy of the of the department mention in figure given below:
Figure 7.1: Present Marketing Set up
The network comprise of about 50 sales executives, 4 Area sales managers, 7 Branch
managers, one project manager and 47 distribution partners in marketing channel.
VP Marketing
Zonal Sales Manager
Sales Manager Project Manager Branch Manager
Area Sales Manager
Sales Executive
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
83
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
Domestic Market set up:
RDPL has appointed direct distributors in many states, which are major markets of wood
base panel in India. These states are Gujarat, Rajasthan, Punjab, Bihar, Jharkhand, West
Bengal, Madhya Pradesh, Assam, Karnataka, Maharashtra, Andhra Pradesh, Uttaranchal,
Uttar Pradesh, Chhattisgarh, Kerala, Delhi and Tamilnadu. On an average every state has 2
to 3 distributors appointed. These distributors are the sole contact point for the client and
they are responsible to develop further dealers network in their region. The exclusive office is
also operated in Mumbai in name of the client, which is directly controlled by the client.
The total Indian market is clearly divided between different zones. The different zones are
monitored by the zonal sales manager, who reports directly to the Vice President of
Marketing. The zone structure is mentioned in the table given below:
Table 7.1: The present marketing zones of RDPL in India
ZONE STATES CITIES
Ahmedabad
Rajkot
Surat
Baroda
Gujarat
Mehsana
Mumbai
Pune
Nagpur Maharashtra
Nasik
MP Indore
ZONE 1
(Western India)
Chhattisgarh Raipur
Tamilnadu & Kerala Chennai
Karnataka Bangalore ZONE 2
(Southern India) Andhra Pradesh Hyderabad
Kolkata West Bengal
Siliguri
Ranchi Jharkhand
Jamshedpur
Assam Guwahati
ZONE 3
(Eastern India)
Bihar Patna
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
84
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
ZONE STATES CITIES
Jaipur Rajasthan
Udaipur
Delhi Delhi
Chandigarh Chandigarh
Ludhiana Punjab
Bhatinda
Uttaranchal Dehradun
Lucknow
ZONE 4
(Northern India)
Uttar Pradesh Agra
Source: RDPL
International Market:
The long-term relationship, the client enjoys with many dealers around the globe,
especially in Europe can be leveraged further to export the products from India. In this
respect, the cost-competitiveness and the established brand equity will play a vital role.
RDPL is envisaged to export nearly 60% of the product to favourable market destinations
around the globe. The international marketing network of the RDPL spread in 34 countries
including Canada, USA, Venezuela, Europe, Far East countries, Australia, and Gulf
countries with the strong brand name “Rushil Décor premium laminate”.
Table 7.2: The present marketing network of RDPL in world
Region of world Country of market presence
Hong Kong
China
Malaysia
Phillipines
Singapore
Taiwan
Far East
Thailand
Qatar
S.Arabia
Kuwait
Middle East
U.A.E.
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
85
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
Region of world Country of market presence
Yemen
Bahrain
Jordan
Egypt
Israel
Mexico North America
U.S.A.
Venezuela
Peru South America
Columbia
Australia Australia
Source: RDPL
7.2 Formulation of Marketing Strategy
MDF as a product has more than 15 years of presence in Indian market; the major chunk
(whopping 80-85%) is being imported. There are only two players who manufacture MDF
domestically, which is a potential substitute/supplement for plywood, particle boards,
veneer, etc. Hence the obvious questions that the firm should address are; what is MDF?
What is the ideal set of applications? And its advantages vis-à-vis plywood, veneer and
similar substitutes, etc.
The specific choice will hinge upon an optimum combination of the following aspects such
as price discounts, product proliferation, product innovation, improved services, cost
reduction, promotion, etc.
7.2.1 Product Pricing
It can adopt two different ways. The former is based on differentiation, which is, offering
high quality MDF compared to that of the market leaders at a price commanding premium.
However looking at the market dynamics prevailing in this segment, adopting a high-value
strategy based on slightly lower price than the competitor is more likely to succeed. Also
the lower cost of production on account of utilising the cheaply available cotton stalk as
the feedstock will help the firm to position its range of products competitively in the
market.
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
86
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
7.2.2 Product Innovation
RDPL is the first of its kind in India and the first company to manufacture MDF from cotton
stalks. Trials had been conducted in India and in Germany to produce MDF from cotton
stalks and the quality of fibres were found to be very good. Trial reports and trial samples
are available with the company and as per the report, by adding 20% of wood; the finished
product (MDF) can even match the EN standards.
7.2.3 Product Proliferation
The thrust is to offer large number of options to the buyer in terms of plate thickness,
finish, laminated versions, etc. The typical thickness of MDF ranges from 3 to 35 mm (6, 12
and 18mm being more popular in India). The surface finish could be of plain, grit or
embossed. The embossed panel could be used directly for up market doors and partitions.
RDPL already imports high quality paper laminates to make prelam, etc. It can be
extended to MDF also.
7.2.4 Distribution Network
RDPL has a significant presence in the laminate business in India with offices and sales
centres spread across the country. But these are mainly concentrated in the urban cities.
With the income levels in suburbs and semi-urban places going up, it is worth while to try
smaller towns and townships with a critical mass. However the bulk of revenue will come
from metros and tier1 cities. Export options are also being thought of by RDPL as a risk-
minimisation strategy (natural hedge against business cycles).
7.2.5 Product Promotion
An important component in the famous 4Ps, the promotion will entail the following things.
• Obtain ISI mark and other quality certification.
• Obtain certifications from leading architects, furniture makers, etc.
• Endorsement by professionals and celebrities.
• Special incentives for bulk orders in the form of extended warranty, gift vouchers, etc.
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
87
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
Product attributes like resistance to moisture, insects& termites, machinability, life cycle,
etc should be highlighted to entice customers.
7.2.6 Business Intelligence
The company’s market research team should be geared to continuously monitor customer
preferences, international trends, company performance, industry status, etc. The
strategy should be evolving based on these market pulses.
7.2.7 Product Mix
Plant and machinery being procured by RDPL is capable to produce the MDF board with the
varied thickness of 6 mm to 18 mm. This provides flexibility to manufacture the product as
per the demand in market. RDPL can also sell MDF and HDF boards directly, without
converting it into prelam and laminated flooring, in a market that depend upon the several
conditions. At present RDPL planning to manufacture the HDF laminated flooring and
Prelam MDF board with the thickness of 12mm, 16mm, and 18mm. All these products have
the highest market demand in panel board market.
RDPL can also enter in modular furniture manufacturing in future, which will help them to
move up the value chain and cater directly to end-product consumers.
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
88
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
8 Financial Modelling & Analysis
8.1 Estimation of Capital Cost
The estimation of capital investments have been made based on information collected
from the following sources –
• Plant and Machineries as per the data provided by the client
• Cost of Indigenous component of the project has been worked out on the basis of :
o Cross-checking the cost with cost considered in similar projects
o Data obtained from Rushil Decore Pvt. Ltd.
o Cost information available with IMMs’ database
8.1.1 Land and Land development
RDPL has purchased 67 acre land worth of Rs. 85 Lakh at Navalgarh in Dhangadra taluka of
Surendranagar district. As per the condition of the land, client has estimated land
development cost is Rs.50 Lakh.
8.1.2 Building and Civil Construction
The Estimated break up of building and civil construction is provided in table given below:
Table 8.1: Building and Civil Work
Sr. No. Particular Quantity Unit
1 Guard Room (3*3) 9 M2
2 Scale Station
3 Canteen Room (8*23) 184 M2
4 Shed bicycle (6*30) 180 M2
5 Office (3*27*10) 810 M3
6 Electrical Station (10*26) 260 M2
7 Product Store (15*126) 1890 M2
8 Production area (30*126) 3780 M2
9 Refiner Line (3*10*15) 450 M3
11 Wood Yard (95*151) 14345 M2
12 Fuel Station (20*10) 200 M2
13 Boiler Room (18*30) 540 M2
14 General Storage (18*48) 864 M2
15 Pool 300 M3
16 Water Tower 50 M3
17 Waste Water Treatment 200 M3
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
89
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
The cost of building and civil works require for the proposed project is Rs. 450 Lakh as per
the architect’s estimation.
8.1.3 Plant and machinery cost
Imported
RDPL is importing critical machineries for the project. Client has finalised supplier of all
the major machinery required for the project. The detail of the machinery is provided in
table given below:
Table 8.2: List of imported Machinery
(Rs. In lakh)
Description of Machines Supplier Name phase 1 phase 2 Total
MDF + Refiner + Sanding line Kunming Woodbased Pond
Machine Plant, Kunming 947.52 947.52
Texture Press plates Sesa Press Plates,Italy 13.37 0.00 13.37
Matt Press plates Sesa Press Plates, Italy 11.57 0.00 11.57
Cushion pads Marathon Belting U.K. 1.56 0.00 1.56
Flooring line V-Hold, China Supply 116.95 0.00 116.95
Impregnation line Nantong New Century,
Sanghai 123.39 0.00 123.39
Short Cycle Line Yalk Ltd. 0.00 81.41 81.41
Total 266.84 1028.93 1295.76
Indigenous
The list of Indigenous equipments along with their supplier and cost estimation is given in
the table below.
Table 8.3: List of Indigenous machinery
(Rs. In lakh)
Description of Machines Supplier Name phase 1 phase 2 Final
Cost
Steam boiler-6 TPH Cheema Boiler 46.72 46.72
Thermic Fluid Heater – 2500U * 3 Isotex
Corportation 76.21 0.00 76.21
Mobile chippers Surya energy 133.37 133.37
Compressor with Dryer-Oil free 195 CFM Ingersoll-rand 13.08 0.00 13.08
Short Cycle Line Yalk Ltd. 140.15 0.00 140.15
Resin Plant Bhagsons 20.00 72.59 92.59
Tooling-dimond Leitz 36.82 0.00 36.82
Total 286.27 252.68 538.95
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
90
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
Other plant and Machinery
The list of other machinery required for utility and general purpose is mention below along
with their supplier name and cost estimation.
Table 8.4: list of other plant and machinery
(Rs. In lakh)
Description of Machines Supplier Name phase
1
phase
2
Final
Cost
Generator set [second hand machinery] Zodiac Genset 20.00 82.82 102.82
Box packing Machinery 30.00 0.00 30.00
Air conditioning 20.00 0.00 20.00
Fork lifts Godrej 23.60 11.80 35.41
Trucks TATA 10.00 10.00 20.00
Cooling towers Ganara Engineers
Pvt. Ltd 2.96 2.96
RO Plant Indian Ion Exchange 20.00 20.00
ETP 50.00 50.00
EOT crane – 5 tones 6.67 13.33 20.00
Erection & commissioning 10.00 90.00 100.00
Laboratory Equipments 10.00 10.00
Development charges, deposit, line
charges, feeder and transformer charges
& 10% application charges
Electrical 200.00 50.00 250.00
Cabling, lighting, panel boards & fittings Electrical 50.00 50.00 100.00
Chimney Drshini 4.94 0.00 4.94
Weighing machines with capacity 20
tones Avery India 25.00 24.36 49.36
Motors, Valves, Pipes & insulation,
Exhaust, electrics & Automation Local supply 50.00 100.00 150.00
Fabrication work 80.00 320.00 400.00
Total 540.21 825.27 1365.48
8.1.4 Preoperative and Preliminary (POP) cost
Preliminary & Preoperative Costs include all preliminary and pre-operative costs before
commencement of production. The break of the POP cost is given below:
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
91
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
Table 8.5: Preoperative and Preliminary cost break up
(Rs. In lakh)
Particulars Phase 1 Phase 2 Legal expenses 5.00 3.00 Interest During construction 22.75 49.00 Start up expenses 7.25 28.00 Upfront/scrutiny fees 5.00 5.00 Total 40.00 85.00
8.1.5 Contingency
The contingency provision at roughly 10% works out to Rs.160 Lakhs in phase 1 and Rs. 234
Lakhs in phase 2.
8.1.6 Margin Money
Estimates of working capital requirements have been worked out on the basis of
expenditure involving cash liabilities and other recurring requirements considering the
norms mentioned below:
Table 8.6: Inventory norms
Particulars Phase 1 Phase 2
Raw Material 1.5 M 6 M
Chemicals 1 M 3 M
Work in Progress 0.25 M 0.5 M
Finished Goods 0.5 M 1.5 M
Receivable (Debtors) 0.25 M 0.5 M
Sundry Creditors 0.5 M 0.25 M
The available bank finance for working capital has been considered difference between the
net working capital and margin money, while margin money for working capital works out
to Rs. 100 Lakhs in phase 1 and Rs. 180 Lakhs in phase 2.
8.1.7 Total Project Cost
The total project cost for this project has been estimated as given below:
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
92
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
Table 8.7: Total Cost of Project
(Rs. In lakh)
Sr. No. Particulars Phase 1 Phase 2 Total
1 Land 85 0 85 2 Land Development 15 35 50 3 Civil & structural cost 350 100 450 Main plant & Equipment 4 Imported 267 1029 1296 5 Indigenous 286 253 539 6 Other Equipments/Utilities 540 825 1365 7 Miscellaneous Fixed Assets 15 15 30 8 Pre Operative & Preliminary Expense 40 85 125 9 Contingency @ 10 % 160 234 394 Total Capital Cost of Project 1758 2576 4334 10 Margin money for working capital 100 180 280
Total Cost of Project 1858 2756 4614
8.2 Means of Finance
Considering Debt Equity Ratio of 2.30:1, the means of finance for the project has been
proposed as shown in the table below:
Table 8.8: Means of finance
(Rs. In lakh)
Sr. No. Particulars Phase 1 Phase 2 Total
1 Promoters' Contribution
-Share Capital 200 300 500
-Pref. Share Capital 0 0 0
-Reserves & Surplus 0 0 0
-Internal Cash Accruals 400 500 900
2 Subsidy 0 0 0
3 Term Loans
-FCL 0 0 0
-T/L 0 0 0
-Rupee Loan 1200 1800 3000
-NCD 0 0 0
4 Unpaid Suppliers 0 0 0
5 Unsecured Loans/Deposits 58 156 214
TOTAL 1858 2756 4614
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
93
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
8.3 Assumptions
The important basis & assumptions, which are considered for the analysis, are enlisted
below:
8.3.1 Operating Days & Shifts
� No. of Working Days : 300 Days
� Shift of Operation : Three Shifts
8.3.2 Installed Capacity & Utilisation
� Installed Capacity
Phase 1
HDF Flooring Line : 1,374,255 Sq. Mts.
Phase 2
Installed capacity of raw board : 100 m3/day
MDF Board Production : 60 % of the installed capacity = 60 m3 / day
HDF Board Production : 40 % of the installed capacity = 40 m3 / day
MDF Board will further prelam in impregnation line and short cycle press while HDF board
will be sent to flooring line for manufacturing laminated flooring. The capacity of the
flooring line is the same as in phase 1 and total production will be converted into laminate
flooring.
� Capacity Utilisation Levels :
Table 8.9: Capacity Utilisation in phase 1
Year 2007-08 2008-09
Capacity Utilization 50% 60%
Table 8.10: Capacity Utilisation in phase 2
Year 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13
Capacity Utilization 30% 50% 60% 60% 60%
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
94
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
The HDF laminated flooring production will be started in October 2007 with imported HDF
board and, Fibre Board manufacturing and prelam plant will commence operation from
October 2008.
8.3.3 Selling Price
RDPL will sell only final products in market i.e. Prelam MDF Board and Laminated HDF
Flooring.
At per existing market conditions, the selling price of the Laminated HDF Flooring is
estimated at Rs. 380 Rs./ m2, which is lower than the imported European laminated
flooring. It is also competitive vis-à-vis the imports from China.
In prelam MDF board manufacturing, RDPL will focus on the board with the thickness of 12
mm, 16 mm and 18 mm which are preferred specifications in the prelam board market.
The estimated prices for these boards are mention below:
12 mm = 322.80 Rs. / m2 (30 Rs. / ft2)
16 mm = 365.84 Rs. / m2 (34 Rs. / ft2)
18 mm = 408.88 Rs. / m2 (38 Rs. / ft2)
8.3.4 Exchange Rates
• 1 US $ : Rs. 46
• 1 GBP : Rs. 88
• 1 Euro : Rs. 60
8.3.5 Operating Norms
Operating Norms outlined below have been arrived at after analysis of guaranteed norms
provided by client and actual norms collected from similar product producers:
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
95
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
Table 8.11: Operating norms for Fibre Board manufacturing
Particulars Quantity Unit cost
Cotton stalks/Bagasse 2 ton 2000 Rs.
Urea Formaldehyde 0.11 ton 30000 Rs.
Ammonium Chloride 0.003 ton 15000 Rs.
Chemical Buffer 0.003 ton 55000 Rs.
Paraffin Wax 0.01 ton 60000 Rs.
Electricity 400 unit 5 Rs.
Water 1 m3 90 Rs.
Thermal Energy-steam 1500000 kcal 0.00057 Rs.
Table 8.12: Operating norms for Prelam MDF Board manufacturing
Particular Unit Number Price Cost per
m2
Base paper GSM 80 350 28
Melamine Formaldehyde resin Kgs 0.5 65 32.5
Balancing paper GSM 80 100 8
Packing GSM 50 30 6
Plate refurbishing cost-
Texture Cycles 50000 360000 2.4
Plate refurbishing cost-Matt Cycles 100000 264000 0.88
Tools & Moulds expense Rs. 8
Thermal Energy kcal 2 2.27
Power Cost-150 units/hr units 1 5 5.00
Direct Labour Cost Rs. 20 labour 2.00
Total 95.05
Table 8.13: Operating Norms for Laminated HDF Flooring Manufacturing
Particulars UNIT Number Price Cost per m2
High abrasive tissue GSM 48 385 18.48
Base paper GSM 80 350 28
Balancing paper GSM 80 100 8
Melamine Formaldehyde resin Kgs 0.5 65 32.5
Packing GSM 50 30 6
Plate refurbishing cost-
Texture Cycles 15000 360000 8
Plate refurbishing cost-Matt Cycles 100000 264000 0.88
Tools & Moulds expense Rs. 30 8
thermal energy kcal 2 4.49
Power cost-240 units/hr units 1.18 5 5.9
Direct Labour cost Rs. 75 5
Total 125.25
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
96
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
� Selling Expenses : 10% of total sales
� Administrative Expenses :
RDPL has well established administrative system therefore administrative expenses are
considered 2.5 Rs. Lakh. The increment of 5 % in each following years is considered.
� Repairs & Maintenance : 1.5% of total Plant and Machinery cost and other assets
8.3.6 Financing Terms – Repayment & Interest
Project will be implemented in two phases and according to implementation, RDPL will
require the long-term loan.
� Interest on Long Term Loan : 11 % per annum.
� Repayment of Long Term Loan :
Table 8.14: Repayment of Long Term Loan
(Rs. In Lakhs)
Year 2007
–08
2008 –
09
2009 –
10
2010 –
11
2011 –
12
2012 –
13
2013 –
14
2014 –
15
2015 -
16
Repayment 0 120 420 600 600 600 480 180 0
� Interest on Working Capital (WC) Loan : 9 % p.a.
� Interest on Unsecured Loan : 11 % p.a.
8.3.7 Depreciation Rates
SLM WDV
� Land and Site Development : 0% 0% � Building and Civil Works : 3.34% 10%
� Main Plant and Equipment : 10.34% 15.00%
� Furniture & Fixture : 6.33% 18.10% � Misc. Fixed Assets : 4.75% 15.00%
8.3.8 Income Tax Rates
The rate of tax has been computed on following basis:
� Corporate Tax : 33.66%
� MAT : 11.22%
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
97
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
8.4 Cash flows& Profitability Statement
The profitability statement of project is mention below:
Table 8.15: Profitability Statement
Year of Operation Particular
2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17
Revenue
Prelam - MDF 644 2145 2574 2574 2574 2574 2574 2574 2574
Laminated Flooring - HDF 1306 2429 2875 3450 3450 3450 3450 3450 3450 3450
Total Revenue 1306 3073 5020 6024 6024 6024 6024 6024 6024 6024
Mfg Cost
MDF board mfg cost 0 237.65 792.16 950.59 950.59 950.59 950.59 950.59 950.59 950.59
HDF board mfg cost 0 153.40 511.34 613.61 613.61 613.61 613.61 613.61 613.61 613.61
Prelam Cost 0 169.31 564.36 677.23 677.23 677.23 677.23 677.23 677.23 677.23
Flooring Cost 876 1335.72 947.52 1137.02 1137.02 1137.02 1137.02 1137.02 1137.02 1137.02
Total Mfg Cost 876.22 1896.08 2815.38 3378.45 3378.45 3378.45 3378.45 3378.45 3378.45 3378.45
Fixed Cost
Sales Expenses 130.55 307.26 502.00 602.40 602.40 602.40 602.40 602.40 602.40 602.40
Administrative Expenses 15.00 31.50 33.08 34.73 36.47 38.29 40.20 42.21 44.32 46.54
Repairs & Maintenance 11.05 27.97 55.95 55.95 55.95 55.95 55.95 55.95 55.95 55.95
Total Fixed Cost 156.60 366.74 591.02 693.07 694.81 696.63 698.55 700.56 702.67 704.89
Depreciation 70.75 268.15 358.71 358.71 358.71 358.71 358.71 358.71 358.71 358.71
EBIT 201.96 541.67 1254.87 1593.73 1592.00 1590.17 1588.26 1586.25 1584.14 1581.92
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
98
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
Year of Operation Particular
2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17
Financial Charges
Working Capital Charges 27.75 105.42 93.99 112.79 112.79 112.79 112.79 112.79 112.79 112.79
Interest on Term Loan 66.00 229.35 304.43 245.85 179.85 113.85 49.50 7.43 0.00 0.00
Interest on Unsecured Loan 3.18 14.95 23.53 23.53 23.53 23.53 23.53 23.53 23.53 23.53
Total Financial Charges 96.93 349.72 421.94 382.17 316.17 250.17 185.82 143.74 136.32 136.32
PBT 105.03 191.95 832.92 1211.57 1275.83 1340.01 1402.44 1442.51 1447.82 1445.61
Tax 20.88 31.97 204.94 361.53 407.95 450.65 489.61 518.37 533.17 543.49
PAT 84.16 159.99 627.99 850.04 867.88 889.36 912.83 924.13 914.66 902.12
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
99
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
The cash flow statement of project is mention below:
Table 8.16: Cash flow Statement
(Rs. In Lakh)
Year of Operation Sr. No. Particulars
2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17
Sources of Funds :
1 Promoter's Contribution
share Capital 200 300
Internal Cash Accrual 400 500
2 Deposits 57.855 156.068
3 Increase in Long Term Loan 1200 1800
4 Increase in Working Capital Borrowing 308.29 863.04 -127.01 208.86 0.00 0.00 0.00 0.00 0.00 0.00
5 Depreciation 70.75 268.15 358.71 358.71 358.71 358.71 358.71 358.71 358.71 358.71
6
Net Profit Before Tax & Interest
(EBIT) 201.96 541.67 1254.87 1593.73 1592.00 1590.17 1588.26 1586.25 1584.14 1581.92
Sub- Total (A) 2439 4429 1487 2161 1951 1949 1947 1945 1943 1941
Disposition of Funds :
1 Capital Expenditure 1758 2576.068
2 Increase in Current Assets 423.44 1155.07 -182.96 279.11 0.00 0.00 0.00 0.00 0.00 0.00
3 TL interest 66.00 229.35 304.43 245.85 179.85 113.85 49.50 7.43 0.00 0.00
4 Repayment of Long Term Loan 0.00 120.00 420.00 600.00 600.00 600.00 480.00 180.00 0.00 0.00
5 Interest on Deposits 3.18 14.95 23.53 23.53 23.53 23.53 23.53 23.53 23.53 23.53
6 Repayment of Deposits 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
7 Working Capital charges 27.75 105.42 93.99 112.79 112.79 112.79 112.79 112.79 112.79 112.79
8 Income-Tax 20.88 31.97 204.94 361.53 407.95 450.65 489.61 518.37 533.17 543.49
9 Dividend
Sub-Total (B) 2299 4233 864 1623 1324 1301 1155 842 669 680
A-B 140 196 623 539 627 648 792 1103 1273 1261
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
100
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
Opening Cash Balance 0 140 336 959 1497 2124 2772 3563 4666 5939
Closing Cash Balance 140 336 959 1497 2124 2772 3563 4666 5939 7200
The calculation of component of the profitability statement and cash flow statement is mention in annexure in the report.
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
101
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
8.5 Financial Indicators- NPV, IRR, DSCR, Pay back
Table 8.17: Financial Indicators
Item Description Value UOM
NPV 1,822 In Rupees Lakhs
IRR 17 %
DSCR 2.61 Average Value
PBP 5.98 Years
RoI 12 to 32 % range (for 10 years)
8.6 Sensitivity Analysis
Table 8.18: Sensitivity Analysis
Particulars IRR DSCR PBP NPV
Base case 17 % 2.61 5.98 Years Rs. 1,822 Lakh
Raw material price increase by 10 % 15% 2.48 6.15 Years Rs. 1,572 Lakh
Raw material price decrease by 10% 18% 2.73 5.82 Years Rs. 2,067 Lakh
Selling price increase by 5 % 21% 2.96 5.46 Years Rs. 2,787 Lakh
Selling price decrease by 5% 12% 2.24 6.67 Years Rs. 848 Lakh
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
102
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
9 Conclusion and Recommendations
Looking at the business landscape in totality, there exists a good potential for MDF
manufacturing unit to be set up in India. Synergies can be exploited in the case of RDPL who
is already into the production of related products and their marketing. The existence of
marketing channel in India and abroad adds to the overall attractiveness of the project (Read
section on growth drivers for more details).
The financial projections under normal circumstances suggest a positive net present value and
an internal rate of return of 17%, which is significantly above the cost of capital. Under the
proposed debt equity ratio, comfortable debt service coverage can be achieved; posing no
problems to the liquidity (average DSCR is 2.61). In case of pressures on the sales price, the
IRR may fall in a non-linear fashion. For example, 5% decrease in sales price, the IRR will fall
to 12%. However such a scenario is less likely, looking at the market growth rate for MDF
owing to the increased awareness of customers, the boom in construction and under capacity
within India.
Overall, the above project appears to be feasible on economic, technical and market criteria.
Hence it is worth pursuing the above project to tap the increasing market opportunities;
thereby enabling the firm to grow both in terms of size, product range and profitability.
Ensuring an efficient supply chain in terms of raw material procurement, imports and exports
will definitely help the firm to boost the bottom line. Tighter integration on the supply side
for cotton stalks and alternatively for bagasse can deftly handle the uncertainties related to
raw material availability.
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
103
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
Appendix A: Fixed Cost Allocation of Contingency and POP expenses
(Rs. In Lakh)
Sr.
No. Particulars
Phase
1
Cost with
Contingency
Cost with
pre-
operative
allocation
Phase
2
Cost with
Contingency
Cost with
pre-
operative
allocation
Total Cost with
Contingency
Cost with
pre-
operative
allocation
1 Land 85 94 96 0 0 0 85 85 88
2 Land Development 15 17 17 35 39 40 50 50 52
3 Civil & structural cost 350 385 395 100 110 114 450 450 465
4 Main plant & Equipment
Imported 267 294 301 1029 1132 1174 1296 1296 1338
Indigenous 286 315 323 253 278 288 539 539 556
5 Other Equipments/Utilities 540 594 609 825 908 942 1365 1365 1410
6 Misc Fixed Assets 15 17 17 15 17 17 30 30 31
7 Pre operative Expense 40 44 85 94 125 125
8 Contingency @ 10 % 160 234
Total Capital Cost of Project 1758 1758 1758 2576 2576 2576 3940 3940 3940
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
104
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
Appendix B: Working Capital Statement
(Rs. In Lakh)
Year of Operation Sr. No. Particular
2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17
1 Raw material 111.48 269.04 225.44 270.53 270.53 270.53 270.53 270.53 270.53 270.53
2 Consumables 149.42 314.62 225.53 270.64 270.64 270.64 270.64 270.64 270.64 270.64
3 WIP 36.51 158.01 117.31 140.77 140.77 140.77 140.77 140.77 140.77 140.77
4 Finished Goods 108.80 768.16 627.50 753.00 753.00 753.00 753.00 753.00 753.00 753.00
5 Debtors 54.40 118.91 209.17 251.00 251.00 251.00 251.00 251.00 251.00 251.00
A Total Current Assets 460.60 1628.73 1404.94 1685.93 1685.93 1685.93 1685.93 1685.93 1685.93 1685.93
Current Liabilities
6 Sundry Creditors 37.16 50.23 9.39 11.27 11.27 11.27 11.27 11.27 11.27 11.27
B Total Current Liabilities 37.16 50.23 9.39 11.27 11.27 11.27 11.27 11.27 11.27 11.27
Net Working Capital 423.44 1578.51 1395.55 1674.66 1674.66 1674.66 1674.66 1674.66 1674.66 1674.66
C Bank Finance 308.29 1171.32 1044.31 1253.18 1253.18 1253.18 1253.18 1253.18 1253.18 1253.18
D Margin Money 115.15 407.18 351.24 421.48 421.48 421.48 421.48 421.48 421.48 421.48
E WC Loan interest @ rate 9 % 27.75 105.42 93.99 112.79 112.79 112.79 112.79 112.79 112.79 112.79
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
105
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
Appendix C: Term Loan - Repayment & Interest
Phase 1 Phase 2
Term Loan Amount 1200 1800
Interest rate 11.00% (Rs in Lakh)
Outstanding Loan Year Quarter Repayment
Start of quarter End of quarter
Quarterly
Interest
Yearly
Interest
Yearly Re-
payment
I 0.0 0 0.0 0.00
II 0.0 0 0.0 0.00
III 0.0 1200 1200.0 33.00 2007 - 08
IV 0.0 1200 1200.0 33.00 66.00 0.00
I 0.0 1200 1200.0 33.00
II 0.0 1200 1200.0 33.00
III 60.0 3000 2940.0 82.50 2008 - 09
IV 60.0 2940 2880.0 80.85 229.35 120.00
I 60.0 2880 2820.0 79.20
II 60.0 2820 2760.0 77.55
III 150.0 2760 2610.0 75.90 2009 - 10
IV 150.0 2610 2460.0 71.78 304.43 420.00
I 150.0 2460 2310.0 67.65
II 150.0 2310 2160.0 63.53
III 150.0 2160 2010.0 59.40 2010 - 11
IV 150.0 2010 1860.0 55.28 245.85 600.00
I 150.0 1860 1710.0 51.15
II 150.0 1710 1560.0 47.03
III 150.0 1560 1410.0 42.90 2011 - 12
IV 150.0 1410 1260.0 38.78 179.85 600.00
I 150.0 1260 1110.0 34.65
II 150.0 1110 960.0 30.53
III 150.0 960 810.0 26.40 2012 - 13
IV 150.0 810 660.0 22.28 113.85 600.00
I 150.0 660 510.0 18.15
II 150.0 510 360.0 14.03
III 90.0 360 270.0 9.90 2013 - 14
IV 90.0 270 180.0 7.43 49.50 480.00
I 90.0 180 90.0 4.95
II 90.0 90 0.0 2.48
III 0.0 0 0.0 0.00 2014 - 15
IV 0.0 0 0.0 0.00 7.43 180.00
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
106
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
Appendix D: Unsecured Loan - Interest
phase 1 Phase 2
Unsecured Loan Amount 58 156
Interest rate 11.00% (Rs in Lakh)
Outstanding Loan Year Quarter Repayment
Start of quarter End of quarter
Quarterly
Interest
Yearly
Interest
Yearly
Repayment
I 0.0 0.0 0.0 0.0
II 0.0 0.0 0.0 0.0
III 0.0 57.9 57.9 1.6 2007 - 08
IV 0.0 57.9 57.9 1.6 3.2 0.0
I 0.0 57.9 57.9 1.6
II 0.0 57.9 57.9 1.6
III 0.0 213.9 213.9 5.9 2008 - 09
IV 0.0 213.9 213.9 5.9 14.9 0.0
I 0.0 213.9 213.9 5.9
II 0.0 213.9 213.9 5.9
III 0.0 213.9 213.9 5.9 2009 - 10
IV 0.0 213.9 213.9 5.9 23.5 0.0
I 0.0 213.9 213.9 5.9
II 0.0 213.9 213.9 5.9
III 0.0 213.9 213.9 5.9 2010 - 11
IV 0.0 213.9 213.9 5.9 23.5 0.0
I 0.0 213.9 213.9 5.9
II 0.0 213.9 213.9 5.9
III 0.0 213.9 213.9 5.9 2011 - 12
IV 0.0 213.9 213.9 5.9 23.5 0.0
I 0.0 213.9 213.9 5.9
II 0.0 213.9 213.9 5.9
III 0.0 213.9 213.9 5.9 2012 - 13
IV 0.0 213.9 213.9 5.9 23.5 0.0
I 0.0 213.9 213.9 5.9
II 0.0 213.9 213.9 5.9
III 0.0 213.9 213.9 5.9 2013 - 14
IV 0.0 213.9 213.9 5.9 23.5 0.0
I 0.0 213.9 213.9 5.9
II 0.0 213.9 213.9 5.9
III 0.0 213.9 213.9 5.9 2014 - 15
IV 0.0 213.9 213.9 5.9 23.5 0.0
I 0.0 213.9 213.9 5.9
II 0.0 213.9 213.9 5.9
III 0.0 213.9 213.9 5.9 2015 - 16
IV 0.0 213.9 213.9 5.9 23.5 0.0
I 0.0 213.9 213.9 5.9
II 0.0 213.9 213.9 5.9
III 0.0 213.9 213.9 5.9 2016 - 17
IV 0.0 213.9 213.9 5.9 23.5 0.0
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
107
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
Appendix E: SLM Depreciation
(Rs. In Lakh)
Year of Operation Sr. No. Particulars
2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17
1 Land & land Development 0 0 0 0 0 0 0 0 0 0
2 Civil & structural cost 6.59 15.10 17.07 17.07 17.07 17.07 17.07 17.07 17.07 17.07
Main plant & Equipment
3 Imported 15.56 91.85 152.21 152.21 152.21 152.21 152.21 152.21 152.21 152.21
4 Indigenous 16.68 48.28 63.28 63.28 63.28 63.28 63.28 63.28 63.28 63.28
5 Other Equipments/Utilities 31.51 111.72 160.40 160.40 160.40 160.40 160.40 160.40 160.40 160.40
6 Miscellaneous Fixed Assets 0.40 1.21 1.62 1.62 1.62 1.62 1.62 1.62 1.62 1.62
Total 70.75 268.15 394.58 394.58 394.58 394.58 394.58 394.58 394.58 394.58
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
108
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
Appendix F: WDV Depreciation
(Rs. In Lakh)
Year of Operation Sr.
No. Particulars
2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17
1 Land & land Development 0 0 0 0 0 0 0 0 0 0
2 Civil & structural cost 19.74 23.48 21.13 19.02 17.11 15.40 13.86 12.48 11.23 10.11
Main plant & Equipment
3 Imported 22.58 126.47 220.31 187.27 159.18 135.30 115.01 97.75 83.09 70.63
4 Indigenous 24.20 62.77 113.00 96.05 81.64 69.39 58.98 50.14 42.62 36.22
5 Other Equipments/Utilities 45.71 148.36 263.84 224.26 190.62 162.03 137.72 117.07 99.51 84.58
6 Miscellaneous fixed Assets 1.53 4.06 7.11 5.82 4.77 3.90 3.20 2.62 2.14 1.76
Total 113.77 365.14 625.38 532.41 453.32 386.03 328.77 280.05 238.59 203.29
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
109
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
Appendix G: Tax Statement
(Rs. In Lakh)
Year of Operation Sr.
No. Particulars
2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17
1 Profit Before Tax 105.03 191.95 832.92 1211.57 1275.83 1340.01 1402.44 1442.51 1447.82 1445.61
2 Add : SLM Depreciation 70.75 268.15 358.71 358.71 358.71 358.71 358.71 358.71 358.71 358.71
3 Less : WDV Depreciation 113.77 365.14 582.79 496.22 422.57 359.90 306.57 261.19 222.56 189.67
4 Income / Loss 62.02 94.97 608.84 1074.06 1211.97 1338.81 1454.58 1540.03 1583.97 1614.64
5 Unabsorbed Depreciation / Losses 0.00 0.00 0.00 0 0 0 0 0 0 0
6 Net Taxable Income 62.02 94.97 608.84 1074.06 1211.97 1338.81 1454.58 1540.03 1583.97 1614.64
7 Income Tax 20.88 31.97 204.94 361.53 407.95 450.65 489.61 518.37 533.17 543.49
8 MAT 11.78 21.54 93.45 135.94 143.15 150.35 157.35 161.85 162.45 162.20
9 Final Tax 20.88 31.97 204.94 361.53 407.95 450.65 489.61 518.37 533.17 543.49
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
110
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
Appendix H: Debt Service Coverage Ratio
(Rs. In Lakh)
Year of Operation Sr. No. Particulars
2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17
1 Revenue 1305.54 3072.64 5019.975 6023.97 6023.97 6023.97 6023.97 6023.97 6023.97 6023.97
2 Profit Before Tax 105.03 191.95 832.92 1211.57 1275.83 1340.01 1402.44 1442.51 1447.82 1445.61
3 Profit After Tax 84.16 159.99 627.99 850.04 867.88 889.36 912.83 924.13 914.66 902.12
4 LT Interest 66.00 229.35 304.43 245.85 179.85 113.85 49.50 7.43 0.00 0.00
5 Interest on Deposits 3.18 14.95 23.53 23.53 23.53 23.53 23.53 23.53 23.53 23.53
6 Depreciation 70.75 268.15 358.71 358.71 358.71 358.71 358.71 358.71 358.71 358.71
7 LT Loan Repayment 0.00 120.00 420.00 600.00 600.00 600.00 480.00 180.00 0.00 0.00
8 Deposit Repayment 0 0 0 0 0 0 0 0 0 0
Return on Investment (%) 12% 15% 28% 32% 31% 30% 29% 28% 28% 28%
Debt-Service Coverage Ratio
- Debt Service 69.18 364.30 747.96 869.38 803.38 737.38 553.03 210.96 23.53 23.53
- Coverage 224.09 672.44 1314.65 1478.13 1429.97 1385.45 1344.57 1313.80 1296.90 1284.36
DSCR 3.24 1.85 1.76 1.70 1.78 1.88 2.43 6.23 55.11 54.58
Average DSCR 2.61
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
111
P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/
Appendix I: Pay Back Period & Internal Rate of Return
(Rs. In Lakh)
Year of Operation Particulars
2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17
Cash Outflow 1857.86 4613.92
Cash Inflow 224.09 672.44 1314.65 1478.13 1429.97 1385.45 1344.57 1313.80 1296.90 1284.36
Net Cash flow -1633.76 -3941.49 1314.65 1478.13 1429.97 1385.45 1344.57 1313.80 1296.90 1284.36
Cumulative Cash flow -1633.76 -5575.25 -4260.60 -2782.47 -1352.50 32.95 1377.53 2691.32 3988.22 5272.58
Payback Period 5.98 Years
Internal Rate of Return 17%
Discount Factor@8% 0.93 0.86 0.79 0.74 0.68 0.63 0.58 0.54 0.50 0.46
DCF -1513 -3379 1044 1086 973 873 785 710 649 595
NPV 1,822 Lakh
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
113
Appendix J: Availability of Bagasse Sr.
No. Name Of Sugar Factory
Sugarcane
crushed per day
Sugarcane
crushed per year
Bagasse available
per year for sale
1 Shree Khedut Sahakari Kahnd
Udyog Mandli Ltd. Pandvai 3500 ton 4-5 lakh ton 25,000 ton
2
Shree Ganesh Khand Udyog
Sahakari Mandli Ltd
Ganesh Gram, Vataria
3200 ton 5 lakh ton 25,000 ton
3
Vadodara Dist. Co-Operative
Sugarcane Group Union Ltd.
Gandhar,Karjan
2500 ton 4 lakh ton 50,000
4 Sardar Co-Operative Sugar
Factory, Ladhod 2500 ton 2 to 2.5 lakh ton
“
5
Shree Sayan Vibhag Sahakari
Khand Udyog Mandli Ltd,
Sayan, Olpad
5000 ton 9 to 10 Lakh ton 15-17,000 ton
6
Shree Chalthan Vibhag Khand
Udyog Shahakri Mandli Ltd,
Chalthan.
5000 to 6000 ton 10 lakh ton 20 to 25000 ton
7
Shree Khedut Sahakari Khand
Udyog Mandli Ltd.
Bardoli.
10,000 ton 18 lakh ton
65,000 to 70,000
ton
8 Madhi Sugar
Factory,Bhajipura, Madhi 7000 ton 10 lakh ton 50,000-60,000 ton
9
Shree Ukai Pradesh Sahakari
Khand Udyog Mandli Ltd,
Khusal Pura, Vyara
2500 ton 3.5 lakh ton 10,000 ton
10
Shree Mahuva Pradesh
Sahakari Khand Udyog Mandli
Ltd. Bamania, Mahuva
3500 ton 5.5 to 6 lakh ton 10,000 ton
11 Sahakari Khand Udyog Mandli
Ltd, Gandevi, Bilimora 6000 ton 10 lakh ton 45,000 ton
12
Shree Narmada Khand Udyog
Sahakari Mandli Ltd,
Dharikheda, Rajpipla
3500 ton 5.5 lakh ton 12,000 ton
13
Shree Valsad Sahakari Khand
Udyog Mandli Ltd, Parnera-
Pardi,Valsad
5000 ton 6 lakh ton 30,000-40,000 ton
14
Shree Kamrej Vibhag
Sahakari Khand Udyog Mandli
Ltd,Navi Prardi, Kamrej
2500-3000 ton 5 to 5.5 lakh ton 15- 17,000 ton
15
Shree Maroli Vibhag Khand
Udyog Sahakari Mandli, Ltd,
Maroli,Navsari
2500-3000 ton 3.5 lakh ton 15000 ton
Total 66,200 ton 104.5 lakh ton 4,21,000 ton
Techno-Economic Feasibility report of Mott MacDonald
Medium Density Fibre Board Rushil Décor Pvt Ltd.
114