yash final ee1

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Introduction

Rajwada is subsidiary of Samurai Arts one of the leading most Antique style furniture

manufacturers in the Pink city of Jaipur. Incorporated under the Companies act

1956, in the year 2004 and christened as Rajwada Handicrafts and Textiles Private

Limited,

Rajwada Handicrafts is an export house dealing in handicrafts and textiles in Jaipur

Rajasthan (India) .The Company has been doing well and has grown at a steady

rate of over 10%. The Directors of the company, Rajesh Goel and Sangita Goel are

at the helm of affairs with a mission of producing state-of-the-art products with a neo

classical fusion, chiefly to Europe, US and of course the rest of the world1.

The Company has its retail outlet at the City Palace , a national monument that

attracts about ninety percent of the local and international tourist. With an area of

about 5000 square yards, the retail division is manned by a personnel of twenty-two

people selling Handicrafts and textiles.

In addition to this another retail outlet measuring 700 square yards displaying

heavier handicrafts and art objects is located at Ramgarh Moad at Delhi road

another prime milieu for international tourists and buyers.

The company is now on the brink of being molded into a modern and sophisticated

unit with the same successful virtues of the age-old business. With no compromise

on the product line and the age-old business ethics of originality and quality

integrated in the family business, the company is looking for a deviation in its

approach with regard to sourcing, production, marketing and distribution; all global in

approach and execution.

1



The past decade has witnessed the impact of the Indian economy going global

creating a new segment of buyers and the free economy has encouraged smaller

and lesser-known players of the industry, who purely qualify on merit and cost.

Whereas Jaipur the Pink City has emerged as the face of International and national

tourism for India it also features as a front-runner in the trade of handicrafts and now

textiles, particularly the export of the same The exports have grown at a steady rate

of over 20%2 .over the last five years but the global recession which hit the global

markets in 2007-08 affected the Company¶s sales drastically bringing them down by

almost 40%.3The year 2008-09 has also not been very profitable for the Company

as the organization is still awaiting recovery from the global economies.

4

What does this graph represent

2 http://handicraft.indiamart.com/industry/3 Interview with the director 4 http://www.epch.in/moreDetails.htm



Research Question

In this scenario the Company is faced with the dilemma of trying to cut down its costs in

order to survive this period of economic slowdown.

At the moment the company is facing problems due to the following5 ±

1. Less orders in the factory- this is primarily due to the global slowdown.

2. High cost of production due to fewer machines in the factory- the production

costs are high, as the firm does not have adequate number of machines. All

machines are running at full capacity and any kind of breakdowns lead to costly

delays. However the firm is unable to purchase more machines due to space

constraint at the current factory. (wasn¶t this problem before recession also, y is it

a bigger problem now specially since less orders are coming in y will they be

running at full capacity)

3. Expenditure is increasing and there is less income- in the last two years the firm

has faced less orders and the orders, which materialize, are on very low profit

margins, this is adversely affecting the net income of the company. (y is

expenditure rising: give reasons)

4. Competition from China whose products are way cheaper- China has distinct

cost advantage, which are recognized the world over. Hence, the company is

also facing stiff competition form China made inferior quality products, which are

cannibalizing its sales.

Even though the Company would like to improve its bottom line, it is reluctant to use any

drastic measures which may be irreversible (rewrite statement explain bottom line and

what may be irresversible, not clear). As per the director, Ms. Goel,6 the Economic

recession is a temporary phase , a part of the normal business cycle 7 and she would

like to use it as an opportunity to improvise a strategy which will help them in improved

economic conditions. In this backdrop the Company has a proposal to purchase land in

5 Appendix 1: interview with the Partner 6 Appendix 1 interview with the director 7 Business cycle or trade cycle



the Special Economic Zone (SEZ). The Mahindra Group has launched a SEZ on the

outskirts of Jaipur named Mahindra World City.8 The SEZ is jointly promoted by

Mahindra Group and the Rajasthan State Industrial and Investment Corporation

(RIICO).

If the Company were to consider moving to the SEZ the cost advantages that may

accrue would be substantial and also it would be a long term growth strategy as against

the short term growth strategies which the Company may adopt for better profitability in

the short run. However, the option needs to be evaluated both financially and non

financially as the repercussions will affect the Company.

Therefore the dilemma facing the Company is that should they purchase this land and

relocates or expand to this new site. I shall try and analyze this using the tools, which I

have studied. Hence my research question will be;

³Should Rajwada Exports r elocate to the Mahindr a world city SEZ for cost

advantages´?

8 http://www.mahindraworldcity.com/mwc/location/jaipur.aspxaccessed on 12.12.09



Curr ent scenario of the business & market.

The Jaipur handicraft exports market ships its products mainly to USA and Europe. 9

The economic recession had the most impact to this sector, as a result the demand

for the Company¶s products decreased and as shown by the data on Indian exports

the exports registered a negative growth of over 20%10 in 2008-09. This is primarily

because the Indian economy was one of the least affected by the economic

recession11 and the Countries to which its exports were the once most affected.

12

This tilted the demand supply ratio in the is currently negative and the Indian

Exporters were are being hit in multifold ways. Recession has had an impact both

on revenues and on profit margins, furthermore finding new clientele is also

nonexistent not to mention non-or less growth in multiplying new clients/business

9 http://www.india-exports.com/handicraft.htmlaccessed on 01.01.10

10 http://commerce.nic.in/tradestats/indiatrade_press.asp11 http://mutiny.in/2009/06/05/worlds -best-surviving-countries-in-economic-recession/12 http://www.india-exports.com/handicraft.html



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The external environment has thus thrown a plethora of threats and to succeed against

these. Rajwada exports has to think of an alternate strategy. Hence relocating to the

SEZ appears to be a viable option which should be looked at into greater detail by the

organization.

Research Methodology

I have used both quantitative and qualitative research to gather data which I will be

using to do my analysis. I have used both primary and secondary data sources to get

the data.

Primary Data

It involvesd getting first hand information from the directors and the relevant

representatives of the company. The exploratory research has helped me in getting an

overview of the Company and its operations. It also helped me in giving context deeper

insight to the research question.

A meeting with the representatives further dissected the scope of benefits and the

quantum of growth one could possibly achieve by associating with this world-class

business milieu.

Secondary Data

The next level was studying the company reports and data related relating to the each

and every aspect of the company from sourcing to manufacturing and marketing to

dispatch and even follow-up. (Samuraiarts.co.in and Rajwadaexports.com).

I obtained information from RTDC (Rajasthan Tourism Development Corporation chiefly

responsible to promote tourism in the state: tourism the backbone of the very business I

was expediting.)(I don¶t know where your bracket is closing) Similarly visiting the web

sites of the Exporter¶s Councils in the state and the nation and similar bodies further provided an insight in to the range of benefits that can be accrued in the business.



3. Mahindra Worldcity has16

a. Excellent infrastructure: Sufficient water, power along with STP, WTP

facility.

b. Abundant manpower availability from near by villages

c. In-house logistics and Warehousing zone

d. In close proximity to current ICD/dry port

e. Dedicated handicraft zone so ancillary firms will be available leading to

external economies of scale

4. The operative unit at the SEZ would be devoid of any service tax payment to the

authorized service provider of the SEZ.

5. The Purchase/Sale transactions would be devoid of any VAT or C.S.T charges

which would certainly boost sales and margins significantly.

6. This in turn would directly impact the production cost as absence of VAT , C.S.T

and Excise duty charges would make the finished good more affordable for the

both the buyer and seller.

7. In the current times of recession this kind of impact would certainly help surviving

in the international market and help grow the market breadth in the long run.

A detailed and in depth evaluation has shown the following effects on Rajwada.

1. The land at Mahindra SEZ is available at subsidized rate of Rs Rs?????per

sq feet. As compared to the current market price of Rs.???? per sq feet it is

a saving of over over???????on the purchase of the land. These cost

advantages can be offset to help it survive the lean demand period.

2. The SEZ is exempted from State sales tax and all other taxes by the State

Government. Currently non- SEZ units have to incur a cost by way of

service tax to the tune of about 12.33% on banking charges, transport

charges, courier charges, security services and maintenance

services/charges. The Sales Tax itself is at the rate of 4 % of the invoice

16



value. In addition they have to pay a local tax known as Local Sales Tax,

which is commodity dependent but is at an average of 10 %. If the company

relocated to the SEZ then they have will a substantial cost savings of 4 %

on all raw material inputs and on local sales tax and service tax. . If we

look at the Company¶s turnover of 17 the Company in the year 2007-08,

which is ««««.the tax paid by the Company is in excess of Rs.

15,00,000. Thus by relocating to the new location the Company will stand to

save this money

3. The company is allowed 100 %R oreign Direct Investment (

R DI), hence in

future if the Company wishes to partner with a foreign Company it may do

so. This shows that in future if the company wishes to expand by

undertaking a Joint Venture or wishes to divest and sell to a foreign

Company, then the Company has that option also. This is because the

foreign companies are allowed to set up a 100% owned unit in the SEZ.

This will be an attractive factor for the firm which is interested in investing

using the brownfield expansion method. This is because it too can avail of

the sops offered.

4. The SEZ has an additional investment that it provides all the Public Utility

Benefits like;

y Road Map/Road Details

y Details of Accident Prone Areas

y Accident/Trauma Care Centers

y Email Addresses and TelephoneS

umbers

This will help the firm in cutting down the expenditure on these facilities or

tie ups for them. On an average the yearly expenditure on these benefits is

about Rs. 150,000.R urther on locating to this area, the firm will benefit by

an enhancement in its image as an employee friendly company. This is

because the availability of health units close by will definitely improve its

image.

17 Appendix 2 : P&L and Balance sheet for the year 2007-2008



5. Duty free import of goods used for production and maintenance of SEZ

units. Usually duty component for the imported raw material and machines

at approx 35% of the value. Hence, the items imported by the firm are more

expensive to this limit of approx 15%. After locating to the SEZ it will not

have to pay any import duty on items which it is importing for producing

goods for export. The imported items may be machinery or raw material. So

the firm will again have cost savings which will provide it with a competitive

edge.(where have u taken your figures from) (does it already not have

machinery, if they need to buy new ones, tell why?)

6. 100 % Income Tax exemption on export income for SEZ units for the first 5

years, 50 % for the next 5 years thereafter and 50 % of the ploughed back

export profit for the next 5 years. ± This benefit itself is one of the major

attractions of the scheme. In the year 2007-08 the company paid Income

Tax of over Rs.70,00,000. If the Company were to relocate then these

amount will not have to be paid and will add to the Company¶s basket of

cost saving. (good point here also give comparative analysis cost saving to

set up)

7. The SEZ Company can borrow up to US$500 million in a year without any

maturity restriction through recognized banking channels.. Even though the

turnover of the firm is in excess of Rs. «««««there are times when all

business need to take loans for fulfilling their business need. This feature

that Companies can borrow upto USD$ 500 million (equivalent to IT

R 2500

million, clarify this point what security or turnover do they need to have to be

eligible to get this money) will assure the promoters and help them to

undertake aggressive expansion plans if they so desire. This will take care

of the funding problems of the firm. This is because Banks often are

reluctant to lend large sums of money to partnership firms.

8. Single window clearance for Central and State level approvals- this will help

the firm get rid of the red tapism and will lead to faster working around the

bureaucracy.



Thus we see that if the firm were to purchase the land, it will get substantial cost

advantages and if we compare the cost savings to the turnover and profits made we will

find that the firm will improve its ROCE by 6% 18and its net profit margin by over 12%

In the short run it will help ensure its survival and in the long run once the demand picks

up, it will contribute to improving the firm¶s profitability

However, as the benefits are too many to let this drawback make the firm change from

purchasing the land. Thus, I believe that the firm should go ahead with the purchase of

the land in the SEZ.

Shifting to the Mahindr a SEZ ± A Par adigm Shift

(i)Financial Analysis

(Rs Millions)

Having conducted a general study of the f iscal benef its to RajwadaExports a f inancial viability and

pro ject appraisal was conducted to look at the f inancial benef its of purchasing the land at the SEZ.

PAYBACK PERIOD

The source of f unds are internal accruals19

.

No of yearsU

ash InflowV

unningU

ost NetU

ash InflowU

umulativeU

ash

Inflow

0 (37,50,000)

18 Appendix 10 ratio analyis19



1, 40,00,000 33,00,000 7,00,000 7,00,000

2 41,00,000 31,00,000 10,00,000 17,00,000

3 42,00,000 28,00,000 14,00,000 31,00,000

4 44,00,000 27,00,000 18,00,000 49,00,000

5 45,00,000 23,00,000 22,00,000 71,00,000

Calculating the payback period.

Payback period is total amount of time taken to recover the amount invested in the company so

after that owner can gain prof its.

Payback Period: So approximately the company will recover 37.5 million in3 years and 4.27 months.

Accounting Rate Of Return (ARR)

No Of YearsW

ash InflowX

unningW

ost Net InflowW

umulativeW

ash

Inflow

0 (37,50,000)

1, 40,00,000 33,00,000 7,00,000 7,00,000

2 41,00,000 31,00,000 10,00,000 17,00,000

3 42,00,000 28,00,000 14,00,000 31,00,000

4 44,00,000 27,00,000 18,00,000 49,00,000

5 45,00,000 23,00,000 22,00,000 71,00,000

Total Prof it = 71 37.5

= 34.5

Average Prof it = 34.5/5

= 6.9

ARR = (6.9 x 100) / 37.5



moving to the SEZ will be exempted from capital gains, a huge saving considering the

value of funds arising out of the sale of real estate of the existing business units would

be huge and can be channeled to facilitate and improve other avenues of the business.

Contempor ary Production Facilities

One of the major impacts the shifting of the business to the Mahindra SEZ would be on

the designing and manufacturing as it would turn more flexible (as per current market

demand) and improvements / improvisations would be in synch with international norms

and designs.

From a scattered and isolated unit the business unit would be identified as part of the

indigenous market global in every sense and would attract more revenue and business.

Further the contemporary architecture with the modern safety measures will ensure that

the new factory not only meets the world class standards but also impresses upon the

customers who may visit the Company¶s commitment to meet the highest standards in

producing high quality products. (how do you visit a commitment)

Improved Quality Standards

Quality check at the SEZ21 would by default escalate the production standard and

positively impact the business known and recognized for its authentic and qualityproducts, which otherwise would be compared to similar looking inferior product line.

This will help maintain and improve the business¶ image.

Further the transparent modus operandi at the SEZ business unit would decline the

stock pilferage and upgrade inventory systems. This will result in further cost savings for

the Organization.

Centr alised oper ations and eff ect on Labour

The current factory is located at Bhankrota, on the outskirts of Jaipur. The land

owned for the furniture and handicrafts factory is about 20000 sq yards and the

Production area is about 10000 sq yards.

21



The textiles designing and developing development divisions that are spread around

5000 square yards are situated at Champanagar and Maansarovar respectively.

The Export Office of the Company is located at Bhagat Vatika , Civil lines where it

also houses the Wholesale division to cater to the local market (nationally). The

Sampling and product display gallery is also located at the same venue22.

With the shift to the SEZ the Company will have all the various units from designing

to manufacturing to the export being located at one place. This will add to the

convenience of the management in overseeing the operations and ensure improved

performance. Further there will not be too much resistance from the labour force as

the new factory will be set up only a few kilometers away from the current one at

Bhankrota.23

This will save the Company cost and the time required to hire and train new

labourlabor and then train them.

Conclusion

After detailed deliberation and research I found that if anything that shifting our business

to this SEZ would be a very lucrative, operation-friendly and promising decision backed

by some pragmatic reasoning and acute business sensibility. The main conclusionsdrawn are;

y The biggest drive to move into the Mahindra World City SEZ would be the

hundred percent exemption of Income ±Tax in the profits / gains for the first five

years of business inception at the SEZ and Fifty percent exemption in the next

five years to follow.

y More so, it would be an extremely viable option of concentrating the focus of the

business concerns with immediate effect for sure in most areas than few.

22 Map of current locations23 Location map of proposed location



y The sourcing and Purchasing cost Purchasing would be definitely be more

affordable and lower than the current levels due to the centralized sale by the

suppliers and vendors.

y State-of-the-art and sophisticated infrastructure will replace the traditional set-up

thus enabling better brand and product visibility, systemic sampling and

distribution, more and better single roof solutions, global standards of trade and

concentrated communication.

Recommendations

The move to the SEZ would be positive and is definitely recommended. On the grounds

that it will accrue substantial cost savings for the Organization and will also help the

Company in getting a more cohesive production facility which will lead to improved

management. The shift will serve the long term objective of the Company to grow and

and innovate.(this para is repetition, in recommendation, make few suggestions along

with conclusion)

Limitations

During the research I took all care to cover the financial aspects as accurately as

possible. However bias may have crept in due to

y Reluctance of owners to provide accurate financial data. They however provided

accurate approximations.

y Lack of information regarding the exporters who are already ready to move in.

therefore it was not possible to conduct a competitor a competitor analysis,

which may have further improved the analysis.



APPEY

DIX 1

SWOT

To ensure this there were a lot of changes that Rajwada as a company introduced

since the time of its incorporation in 2004 namely:

y Y

ew designs, patterns introduced in existing product line.

y Y ew division for textiles developed.

y Retail strengthened and extended to national level exhibitions..

y E-commerce strengthened and multiplied. Brand visibility improved and extended

to foreign avenues through print and cyber media.

y Quality check initiated and upgraded.y Making drastic changes in personnel appointment and special onus upon training

and specialization.



y Product sourcing resources aggressively built.

y Machinery and equipment enhanced with imports from China and Japan.

y Direct sales force increased to eliminate middlemen and extend business

clientele

y Sampling division attached to new R & D wing with complete independence.

y Strict monitoring of international currency prices and maintaining reasonable and

safe profit margins in tandem observed.

In the wake of all the above the pertinent question was :

(1) Whether Rajwada as a business was meeting expectations in its current operations,

(2) Whether it will grow at a reasonable rate

(3) Whether it will survive the current onslaught of Recession and

(4) Whether it will multiply and grow in synch with its biggest buyer USA, which is facing

both slowdown and uncertainty at economic fronts.

APPE DIX 2

PEST Analysis

Political

The exemption of any tax on handicrafts and few textile item like the sari has worked to

the advantage of Rajwada, However the earlier extended Income tax exemptions have

been taken away by the Government. This has created a situation which has decreased

the profits of the Exporters.

The past few governments have sought foreign investments in the state by virtue of

many Socio-economic and Cultural platforms to encourage industrial set-up within the

state

EED SPECIFIC DATA



The infrastructural changes like building of national highway roads, international airport

and restoring national monuments has been done with the sole purpose of attracting

tourism, which has been on the rise.

Last few years has been a mixed bag what with the bomb blasts in Jaipur and the terror

attacks in the city of Mumbai affecting tourism big time.

State sponsorship vide its arm Udyog Bhavan has tried to provide impetus to the dying

art industry and promotional trade fairs in the nation and abroad has been to keep the

art and the artisans alive and prospering.

The creation of Tourism Police has managed to curb though only slightly the extent of

fraud and crimes affecting / involving the tourist community.

However a majority government both at the state and the centre has restored faith

amongst FDI¶s and Clients alike in the more recent past. The Rajasthan conclave

conducted yearly shows the Government¶s commitment to improving the investment

opportunities in Rjasthan.

Economic

Demand for the products over a period of time have seen agrowth of about 35 to 105 %

on a YOY basis.

Factors affecting them have been, demandboth in both international and local market.

The Boom in tourism from 2005 onwards has helped adding to the numbers however

the margins have not complemented the escalation in demand in due proportion and the

gross margins have been dwelling around the forty five percent mark



Growth and Sustained growth in the E-commerce division has been the surprise

package as a clear uptrend is visible in the orders placed through e-commerce network,

more so from the segment other than Europe and US .

The international buyers are more oriented than before and many have direct or their

own business representatives for sourcing material from Jaipur and other parts of

Rajasthan and this has definitely shrunk margins and made the competition unfair in a

few categories.

Technological

The placing of India by internationally acclaimed and approved financial outfits as a

growing economy only second to China has favored a lot of international attention who

also have looked at India as an alternate destination compared to China.

The cultural similarity on India and China has prompted a two way effect wherein Indian

products particularly art objects have infiltrated into the Chinese market domain and

alternately India is looking towards outsourcing production to its Chinese counterpart

even for its domestic requirements, considering the coat viability.

The Dispatch services at Rajwada though have been a cause of concern and as much

as 12% of the sales and revenue have taken a hit due to dispatch and delivery issues.

Quality improvement in the products in comparison to Chinese competitors has certainly

attributed to this escalation in demand, however one could feel the effects of Cheap

Chinese material for a brief.

Import of affordable Chinese machinery has provided the artisans particularly the ones

engeaed in the wood-work division to expedite jobs faster and the advent of the cyber

technology has enabled faster and clearer communication between the international

buyres and the local suppliers as most designs and orders get approved on the interent,

vide mail.

Social



An initiative by Ua ESCO to save artisans and traditional art has reached out to artisans

particularly cobblers in Rajasthan by developing and promoting its own line of leather

products under the brand name ³ MOJARI´ for which Rajwada has been the Distributor

for the entire West India and negotiations are own with the cobbler¶s co-operative

society for aggressively market the same line of leather products in the export division of

Rajwada.

Poor working conditions and illiteracy has definitely hampered the sourcing process of

products, raw material as the widely scattered artisans who form the backbone of supply

to Rajwada have not been able to hounor the deadlines for deliverables in time. Lack of

an organized body at rural regions have also delayed the cause of sourcing and

exchange of trade information.

The ever rising demands and pressures of faster deliveries of ethnic commodities has

resulted in many local suppliers using chemicals and dyes for quicker and look alike

results, resulting in environmental hazards, despite strict government regulations.

APPEa

DIX 3 ±(Ia

COMPLETE)

interview with Mr Goel

Effect of the competitors.( Positive effect-Quality check and price control are better.

a

egative effect ± Fall in demand due to selling pressures.

Finding the problems & list them.



Thereafter as per discussion with the various levels of people associated with the

business covered).

Analyzing and solving the problems related to sourcing, distribution and personnel

management.

Learning case studies. Figures related to Sales and Revenue.

Questions on Rajwada¶s brand visibility

Questions on Rajwada¶s investment versus return with regard to new line of product

development against the old and existing line of products.

Questions based on Client and market concentration / identification (local, retail and

international)

Questions based on entertaining tour operators and their viability to the business.

Questions pertaining improving technical expertise and e-commerce

How many business trips in a year. (30 Trips)

Cost? (15 Lacs)

APPEb DIX 4

Projected Profit & Loss Account

Rajwada Handicrafts And Textile Pvt. Ltd.

During the year First year

Cost Production Amount In % Sales/Revenue Amount

To Opening c tock 0.00 By c ales 4000000.00

To Purchase 1200000.00 30.00%

To d onsumable 535000.00 13.38%



To e alary/Wages/Bonus 1050000.00 26.25%

( e taff Welfare, Labour f harge)

To Packingg

xpenses 32000.00 0.80%

To Freight 25000.00 0.63%

Tog

lectric & Water 216000.00 5.40%

To Printing & e tationery 5000.00 0.13%

To Postage & f ourier 4000.00 0.10%

To Travellingg

xpenses 18000.00 0.45%

To Office

g

xpenses 12000.00 0.30%

To Vehicleg

xpenses 20000.00 0.50%

To e elling/Distributiong

xps. 33000.00 0.83%

To Depreciton 100000.00 2.50%

To Pre-operatvieg

xps. 50000.00 1.25%

To Profit 700000.00 17.50%

Total 4000000.00 Total 4000000.00

0.00

Cost In Business in First Year

Particulars Amount Particulars Amount

f apital Account Invest land in

e ez 2400000.00

e hare Holder Fund 3000000.00 Machinery Assets

Genertor, f utting machine,

Unsecured Loan 700000.00 ultrasonic machine, packing mac.,



etc, machine 800000.00

Provision/ Outstandingh

xps. 50000.00

i undry Debtors 100000.00

p ash & Bank Balance 100000.00

i ecurity & Other Advance 150000.00

Pre-operativeh

xps. 200000.00

Total 3750000.00 Total 3750000.00



APPENDIX 5 Comparative Chart showing Advantage under EOU & SEZ Schemes

q r.

No. Benefits q r Z r OU

1 Income Tax

100% tax holiday for a period of 5 yearsand 50% benefit for 5 years

thereafter.50% for an additional 5 yearson plough back of Profits. No time limit

mentioned. Units setting up anytime willavail the same benefits.

100% IT tax holiday up to

31.03.2009 or first 10 years whichever is earlier

2 s

onstruction Material

Goods for infrastructure development /

maintenance i.e. construction materialallowed to be imported / procured

indigeneously duty free

Goods for infrastructure development

/ maintenance i.e. constructionmaterial not allowed to be imported /

procured indigeneously duty free

3q

ervice Taxq r

Z units / developer exempted from

payment of q

ervice Tax

r OUs not exempted from payment of

q ervice Tax, however

s r NVAT

credit is allowed for service tax paid

4s

entralq

ales Taxr

xempted on the goods procuredindigeneously

Nos q

T exemption, bhowever s q

T

reimbursement to be claimed from jurisdictional D

s

5 DTAq

aleallowed on payment of full customs dutyas applicable on imported goods

Limited DTA sale up to 50% of FOB

value of exports permitted on paymentof concessional rate of duty

6 Trading UnitTrading units are allowed be set up in

q r

ZTrading units not permitted to be setup under

r

OU scheme

7

Domestic

Procurement

q upply from DTA to

q r Z are physical

exports

q upply from DTA to

r OU considered

as deemed exports

8 Benefit to DTAsupplier

For supplies from DTA, benefit of D

r

PB/DFt s

/Advance License

available.The drawback/claim of rebateapplicable as in case of physical export

For supplies from DTA, benefit of

deemed exportdrawback/OF

t s

/Advance license /

t efund of terminal excise duty

available

9s

ost recovery charges

No cost recovery charges recoverable for

the customs staff deputed during officehours.

r xclusive customs staff deployed

in theq r

Z for handling customs work

s ost recovery charges for Merchant

Overtime recoverable for the csutomsstaff deputed even during office hours.

No exclusive customs / central excisestaff for handling customs /

s entral

r xcise work relating to the unit

10 Period of utilisation

Duty free goods (except capital goods) to

be utilised within the validity period of LOP

Duty free goods (except capital

goods) to be utilised within thevalidity period of 03 years



1

Source:http://finance.indiamart.com/exports_imports/export_financing/export_units/inde

x.html

11 Foreign Investment

100% FDI investment permitted throughautomatic route for

u v Z manufacturing

unit and formal FIPB approval not

required

Formal FIPB approval required as per

sectoral guidelines

12 w

ustomsDocumentation

All import / export documentation and

assessment formalities to be completed inthe zone itself

All import / export documentation andassessment formalities to be

completed at the respective port of import / export

13

v xamination of

Goods

No routine examination of exports /

import goods by customs

v xamination of exports / import goods

by customs except in cases where self

certification is allowed

14 Warehousing License

Private Bonded Warehouse License not

required

Private Bonded Warehouse License is

required

15

Locational

x equirements

y Z can only be set up in the

y Z

notified under section 4 of they

Z Act

No such requirement for

OU,

OUcan be set anywhere in the country on

stand alone basis provided the areahas been declared as warehousing

stations

16Investment

x equirements

No minimum statutory investment limit prescribed

Minimum investment limit of 01 crorein plant & machinery required except

under certain specified sectors such assoftware, handicrafts, etc.



APPE DIX 6 BE EFITS FOR HA DICRAFT

Indian Govt., in its Foreign Trade Policy(2004-2009) identified

Handicrafts as one of the key sectors for export promotion and

growth.

Rajasthan is one of the major source of handicraft exports due to the

infrastructure , market development and well managed fiscal policy.

Jaipur is an excellent example of effective synergies between tourism,

craft traditions and private enterprise, along with steady stream of

skilled manpower.

Indian Institute of Crafts & Design (IICD), an institute of national

repute is located in Jaipur.

Mahindra World City offers following advantages to the industry:

Fiscal incentives on exports as provided by SEZ Act 2005.

Excellent infrastructure: Sufficient water, power along with STP,

WTP facility.

Abundant manpower availability from near by villages

In-house logistics and Warehousing zone

In close proximity to current ICD/dry port

WAREHOUSING AND LOGISTICS BENEFIT

Dedicated Warehousing & Logistics Zone.

Dedicated Rail freight corridor passing close to Jaipur. On completion

it will reduce Delhi-Jaipur transportation time from 60 hours to 36

hours.

Easy access to global market

Inland Container Depot (ICD) at Kanakpura(14 Kms from

SEZ)

Road ICD in MansarovarIndustrial Area (15 Kms from SEZ)The one stop shop for all export related companies

Mahindra World City, already under discussion with international



logistic solution provider.

TO SUMUP

Jaipur ±Strategic growth destination. High quality of life, excellent

connectivity, robust social infrastructure & International destination

Govt. thrust on education & HR development, power reforms and

development of social infrastructure

Mahindra World City, Jaipur±3000 acre integrated multi-product

SEZ. Located within Jaipur on Jaipur-Ajmer

H 8.

Mahindra World City, Jaipur±JV between the reputed Mahindra

Group and RIICO. Experience of building & operating the first

corporate SEZ in Chennai.

Mahindra World City, Jaipur ±18% low opex, faster turnaround

times, low attrition, walk-to-work concept and serene surroundings

Evolve ±25 acre campus. 1.6 million Sq.ftbuilt-up area. 2 Lac Sq.ft

area to be built in the first phase.

Transforming

into

µThe Preferred

Business

Destination¶



APPENDIX 7

The following chart sums up the viability and business prudence to move to the

Mahindr a World City SEZ of Rajwada Handicr afts and Textiles:

Export procedur e

The procedure for export from Special Economic Zone through seaports or airports or Inland Container

Depot or Container Freight Station or Land Customs Station or by Post or by Courier or by Personal

Carriage, as the case may be, shall be as under:

EXPORT PROCEDURE

If services are exported in non-physical form,the

export value is to be furnished by the Unit on self

certification basis as per the instructions of the

Reserve Bank of India.

Filing of the shipping bill

Assessment of shipping

bill

Examination of goods in

SEZ

Movement of export

consignment

Let export order given on the

basis of self certification by the

Unit



APPE DIX 8 Fiscal Incentives

Period Amount

Income Tax Holiday(Units In Sez)

For first five years

ext five years

ext five years

100% of the eligible profitsor gains

50% of the eligible profits or gains

50% of the eligible profits or gains subject to creation or specified reserve

Income Tax Holiday(Developer)

Deduction of 100% of profits derived from developing aSEZ for a Period of 10 consecutive assessment years outof the first 15 years from the year in which the SEZ isnotified by the Central Government

Capital Gain

Exemption from capital gains or transfer or specifiedassets in Consequence to shifting of industrial undertakingfrom urban or other areas to SEZ subject to certainconditions.

Dividend DistributionTax

Exemption from Dividend Distribution Tax declared or paidafter 1st April, 2005 by an enterprise engaged indeveloping or developing and operating or developing,operating and maintaining a SEZ.

Minimum AlternateTax

Exemption from the provisions of Minimum Alternate Taxfor developer as well as SEZ unit.

Customs DutiesExemption from customs duties for development of SEZfor authorized operation approved by BOA

Service Tax

Exemption from Service Tax under chapter VI of theFinance Act 1994 on taxable services provided to adeveloper or unit to carry on authorized Operation in anSEZ

SecuritiesTransaction Tax

Exemption from the Securities Transaction Tax leviableunder Section 98 of the Finance ( o.2) Act 2004 in casethe taxable securities transactions are entered into by anon-resident through the International Finance Service.

Import DutyDuty free Import domestic procurement of goods for development, Operation & maintenance of SEZ units.

Excise Duty

Exemption from any duty or excise, under the CentraExcise Act, 1944 or the Central Excise Tariff Act, 1985 or any other law for the time being in force, on goods broughtfrom Domestic Tariff Area to a Special Economic Zone or Unit, to carry on the authorized operations by theDeveloper or entrepreneur.

Central SalesTax/VAT

Exemption from Central Sales Tax/VAT on sale or purchase or goods

nvestors willalso get



y Income tax rebate for 15 years including 100% for the first five years

y Customs and excise duty exemption on construction material, capital equipment, raw material,and spares is proposed

y Exemption from service tax

y Permission for 100% FDI



APPENDIX 9 Overview of Mahindr a World City

Infrastructure Development Sector consists of Mahindra GESCO, Club Mahindra

Holidays, Mahindra World City, Mahindra Water Utilities, Mahindra Consulting

Engineers and Mahindra Infrastructure Developers.

Mahindra World City works on the concept that high quality infrastructure and a liberal

and supportive business environment can only promote more foreign investments.

The Mahindra Group is a key player in providing world-class infrastructure through the

Mahindra World City brand. The City's plug-n-play infrastructure and well-planned

township helps create a great working environment and an amazing living experience.

Mahindra has successfully developed India's first World City at Chennai. After this

milestone, the Group plans to come up with two more such projects, one at Jaipur and

another at Pune.

Mahindra World City, New Chennai - Corporate India's first operational Special

Economic Zone (SEZ) and India's first Integrated Business City is promoted by the

Mahindra Group and TIDCO (Govt of Tamil

adu Enterprise). It is a public-private

initiative.

Sitiuated on the

H45, Mahindra World City is located 45 km from Chennai city and is30 mins away from Chennai international airport. Spread over 1,400 acres (5.7 km²),

Mahindra World City is well connected by both road and rail links, with Paranur railway

station on site.

Mahindra World City is divided into 3 sector-specific Special Economic Zones (IT/ITES;

Apparel and Fashion Accessories and Auto Components), a Domestic Tariff Area and

a Residential / Social zone. Mahindra World City today has over 35 customers with

leading companies like BMW, Braun, TTK Group, CapGemini, Infosys,

estronics,

Mindtree, Renault,

issan, Wipro, Timken and TVS Group of companies, among

others.



Mahindra World City, Jaipur - Following the success of Mahindra World City,

ew

Chennai, the second Mahindra World City was established in Jaipur . Inaugurated in

December 2006, Mahindra World City, Jaipur is spread over an area of 3,000 acres

(12 km²). Promoted by the Mahindra Group in partnership with Rajasthan State

Industrial Development and Investment Corporation Ltd (RIICO, an agency of the

Government of Rajasthan). Mahindra World City, Jaipur is being developed as a multi-

product Special Economic Zone on the format of an ³Integrated Business City´.

Besides these exclusive zones, there will also be a Domestic Tariff Area (DTA)

catering to the demand of domestic industries. Mahindra World City, Jaipur will also

have a dedicated Logistics and Warehousing Zone for the manufacturing companies in

order to provide complete end to end solutions.

Mahindra World City, Jaipur has one of the largest IT/ITeS centric SEZs under

development in India. The total area spread over 750 acres (3.0 km²) is under

development and has already attracted top companies such as Deutsche Bank,

Infosys, Wipro,

agarro, Truworth, Tech Mahindra and QH Talbros among others.

A Technology Park µEvolve¶ promoted by Mahindra World City, Jaipur will also come

up as part of the IT / ITeS SEZ. Set in a campus of 25 acres, the Technology Park will

lease built-up space for IT/ITES companies.

Mahindra World City ± Karla (Pune District) - an Integrated business city with a multi-

product Special Economic Zone and a Domestic Tariff Area, Mahindra World City,

Karla will be spread over an area of 3000+ acres with separate zones for IT/ITES,

Manufacturing, Warehousing and Logistics. Jointly promoted by the Mahindra Group

and MIDC,(a Government of Maharashtra undertaking), Mahindra World City, Karla is

located off the Mumbai-Pune Expressway. Around 2 hours from Mumbai, Mahindra

World City, Karla is close to Mumbai and Pune airports and the two international

seaports, J

PT and Mumbai seaports.



Advantage of Mahindr a world city

Master planned by Jurong Constructions, Singapore, Mahindra World City will be truly

international in every way. From wide roads to seamless internet connectivity, every

little detail will be taken care of. Also a unique plug-n-play format will offer a quick start-

up and reduced cost of ownership. The City gives you an opportunity to operate in a

totally supportive environment and profit non-stop.

A modern Business City, Mahindra World City will be replete with state-of-the-art

infrastructure, flexible tenancy formats and with wide roads, potable water, power,

telecom and data connectivity.

Fail-safe utilities in the form of stable power through an in-zone sub-station and

unlimited bandwidth through an optic fibre network.

Mahindra World City provides double benefit - Fiscal benefits, Tax Holidays and

Hassle free operations coupled with world class Physical & Social Infrastructure .

T he benefits include:

Multiple tenancy formats

Plug-n-play infrastructure

Well connected with a wide road network

Fail proof power grid, water supply and data connectivity

Fibre optic communication backbone

DTA at Mahindra World City indeed offers suppliers to the SEZs, EoUs and

companies looking at tapping domestic markets an unparallel advantage.

Premium housing facilities

24 / 7 medical care

Schools and educational institutions



Banks and ATMs

Telephone exchange and post office

Clubs and recreation centers

Retail malls and Community centers

Mahindr a World City, Jaipur ± The splendor of Rajasthan

Promoted by Govt. of Rajasthan through RIICO and Mahindr a Group.

Both RIICO and Mahindra Group joined hands and signed Shareholders¶

Agreement on 25th June, 2006.

Integrated business city spread over in 3000 acres.

Shareholding / Participationin ownership of the

Company

Mahindra Lifespaces ±74%

RIICO ±

26%

Directorship (

o. of

Directors)

Mahindra Lifespaces ± 6

RIICO - 4

y Focus sectors ±

IT / ITES

Light Engineering including Automotive/Auto Component

Handicrafts

Apparel

Gems & Jewellery

Logistics and Warehousing

DTA & Social Infrastructure

Master planners: JURO

G Consultants Pte Ltd, Singapore.

Landscaping consultants: Site Concepts, Singapore.

Development of residential and social infrastructure is planned to have holistic &

inclusive development.



PROJECT DETAILS

Mahindr a World City, Jaipur - Inter ested companies

18 companies have signed to set up their units in the

Mahindr a World City, Jaipur.

This would bring the investment of approximate Rs 1000 cror es.

Expected level of peak employment gener ation would be for 75,000

per sons.

Expected level of exports from these companies would be over Rs 3500

Cror es within four year s of starting oper ations (i.e. in FY 2013-14)

Deutsche Bank & Infosys starting oper ations in July ± Aug 2008

Mahindr a World City, Jaipur ± Master Plan

Land Allotment:



IT/ITeS - Status as on date

3000 Acr

In

ustri

l (Gr

ss)

1 4 A r

Soci

l Infr

structur

(Gross)

1 7 A r

Net Saleable Area1296 Acre

Gems & Jewellery Zone25 Acre

Apparel Zone

7 A r

Logistics & Warehousing Zone

107 Acre

Light Engg & Auto Comp. Zone116 Acre

Han

icraft Zone14 A r

IT/ITeS Zone562 Acre

DT A

273 Acre Logistics Zone

85 Care In

ustrial Area188 Acre



Evolve ± Mahindr a Technology Park

25 Acr es, 1.6 Million Sq. ft Built up Ar ea

Inside Notified Special Economic Zone

Deutsche Bank as the µAnchor Client¶ ± Starting Oper ations in JULY 2008

Mahindr a World City, Jaipur - Light Engineering Zone

Jaipur enjoys close proximity to major auto production hubs of country like

oida, Gugoan, Daruheda.

Many prominent players like Ashok Leyland, Eicher (now Tafe), Caparo

Fasteners, Mico Bosch, Hi Tech Gears, already in state.

Honda Siel has finalized its plans of car production in Rajasthan.

Mahindra World City provides, many operational and fiscal benefits to light

engineering industry including auto component industry.

Located in proximity of proposed Rail freight and Industrial corridor

Fiscal incentives if located within SEZ notified area.

Lower cost of operations:

Sufficient power availability





Fast custom processing, Cargo clearances by self certifications.

Mahindr a World City, Jaipur - Handicr aft Zone

Indian Govt., in its Foreign Trade Policy(2004-2009) identified Handicrafts as

one of the key sectors for export promotion and growth.

Rajasthan is one of the major source of handicraft exports due to the

infrastructure , market development and well managed fiscal policy.

Jaipur is an excellent example of effective synergies between tourism, craft

traditions and private enterprise, along with steady stream of skilled manpower.

Indian Institute of Crafts & Design (IICD), an institute of national repute is

located in Jaipur.

Mahindra World City offers following advantages to the industry:

Fiscal incentives on exports as provided by SEZ Act 2005.

Excellent infrastructure: Sufficient water, power along with STP, WTP facility.

Abundant manpower availability from near by villages



I



Supplier s and Sourcing Support Levels

Major wood and handicrafts sourcing from vendors in Marwad in Rajasthan and

Kutch, Ahmedabad in Gujarat.

Stone suppliers from Andhra Pradesh and Metal suppliers from Delhi and Chennai.

Marble suppliers from Makrana.

µ Textiles sourced from Jaipur, Ahmedabad, Jaisalmer , Bikaner, Jodhpur Delhi

and Lucknow.

Printing vendors from Jodhpur and Surat.

Overseas suppliers from China.



Mahindr a World City, Jaipur - Appar el Zone

Rajasthan has leading position in textile production & exports:

Contributes over 7.5% of India¶s production of cotton & blended yarn.

Leading position in spinning of polyester viscose yarn and synthetic suiting.

Jaipur is well-known center for manufacturing garments for exports.

Mahindra World City Apparel zone offers following advantages:

Sufficient power from JVV

L and water from Bisalpur dam.

Water treatment facility and effluent treatment plan.

Options for µbuilt to suit¶ /flatted factories.

Fiscal benefits as specified by SEZ Act 2005.

Excellent road network and other infrastructure within the integrated city.

Developed social infrastructure zone.

Mahindr a World City, Jaipur - Gems & Jewelry Zone

Rajasthan exports 17% of total Gems & Jewelry exports from India.

Jaipur has been world renowned center for sourcing for fine cut precious and

semi precious gem stones. Jaipur also exports silver, gold and even platinum

jewelry.

Mahindra World City provides platform for Gems & Jewelry industry to become

more competitive in world by providing:

Excellent working environment.

Simplification of export processings.

Many fiscal and operational benefits.

Mahindr a World City, Jaipur - War ehousing & Logistics Zone

Dedicated Warehousing & Logistics Zone.

Dedicated Rail freight corridor passing close to Jaipur. On completion it will

reduce Delhi- Jaipur transportation time from 60 hours to 36 hours.

Easy access to global market

Inland Container Depot (ICD) at Kanakpura (14 Kms from SEZ)

Road ICD in Mansarovar Industrial Area (15 Kms from SEZ)



T

ones

op s op for all expor

r elated companies

Mahindr a World City, alr eady under discussion with inter national logistic

solution pr ovider

Mahindra World Cit

Jaipur - List growing rapidly

Bi liogr aphy

Lear ning f r om Inter net facts and f igur es, newspapers, expor t magazines, books and

liter atur e on r elevant statistics of the industr y.

Infor mation f r om RT C and Expor ter¶s Councils and similar bodies.

IT depar tments web sites, Customs and sales tax web sites.

Name of the Developer M/s. MahindraWorld City (Jaipur) Ltd.Project Proposal Construction of Multi Product SEZ & DTA

Total Area 3000 Acres

Type of Industries

IT/ITes/Apprael/LightEngg/ Gems & Jewellary/

Handicrafts / Logistics

Total Project Cost INR 1,000 Crores

Total water requirement 62 Mld (including fire demand)

Water Source Fresh Water (23 Mld)

Recycled waste water from Jaipur(20.0 Mld)

Recycled waste water from Project (19 Mld)

STP 2 nos. STP (20 + 2.5 Mld)= 22.5 Mld capacity

Power Source JVVNL

Total Power requirement 400 MW

yash final ee1

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