Anant 2702109 SPUL PRoject

8/8/2019 Anant 2702109 SPUL PRoject

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Acknowledgement All successful work needs large number of hands to accomplish any work. I take an opportunity

to extend my sincere thanks to Sidharth group of Paper Industry for offering me a unique platform to earn exposure and earn knowledge in the field of finance and learn the day-to-day

activities that are carried out in the company.

I further acquire this opportunity with much pleasure to thank all the people who have helped

me through the course of my journey towards this project. I sincerely thank my internal guide,

Prof. Kshitija Soman , for her guidance, help and motivation. Apart from the subject of my

study, I learnt a lot from her, which I am sure, will be useful in different stages of my life.

I am especially grateful to my colleagues for their assistance, criticisms and useful insights. I am

thankful to all the other students (past and present) of MITSOB, PUNE with whom I share tons

of fond memories. My sincere gratitude also goes to all those who instructed and taught me

through the years.

Finally, this project would not have been possible without the confidence, endurance and support

of my family. My family has always been a source of inspiration and encouragement. I wish to

thank my family, whose love, teachings and support have brought me this far.


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Ba ckground of the Study

D emand for paper would go on increasing in times to come. In view of paper industry's strategicrole for the society and also for the overall industrial growth it is necessary that the paper

industry performs well.

Paper industry in India is the 15th largest paper industry in the world. It provides employment to

nearly 1.5 million people and contributes Rs 25 billion to the government's kitty. The

government regards the paper industry as one of the 35 high priority industries of the country.

The Indian pulp and paper industry at present is very well developed and established. Now, the

paper industry is categorized as forest-based, agro-based and others (waste paper, secondary

fibre, bast fibers and market pulp).

In 1951, there were 17 paper mills, and today there are about 550 units engaged in the

manufacture of paper and paperboards and newsprint in India. The pulp & paper industries in

India have been categorized into large-scale and small-scale. Those paper industries, which have

capacity above 24,000 tonnes per annum are designated as large-scale paper industries. India is

self-sufficient in manufacture of most varieties of paper and paperboards. Import is confined

only to certain specialty papers. To meet part of its raw material needs the industry has to rely on

imported wood pulp and waste paper.


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Ba ckground of the topic

Paper manufacturing is a continuous process industry where Power and Steam are the major

contributors to the total cost of production. To optimize the cost of production, Co-Generation

Power Plant offers a viable option that helps in minimizing production losses that occur due to

frequent interruption of power supplied by the State Electricity Boards.

First high pressure and temperature Steam is generated in a Boiler. This high pressure and

temperature Steam goes into the Condensing-Cum Steam Extraction Turbine (Turbine is the

Steam engine which works on the basis of Steam velocity and its Enthalpy) causing the Turbine

to develop mechanical energy, which acts as the prime mover of the connected AC Generator

thereby generating electrical power. This AC Generator provides the required electrical power

for the process plant at a much lower cost in comparison to the present tariff of State Electricity

Boards due to the added fact that the residual low pressure Steam from the Turbine is passed into

the manufacturing plant for process purposes.

The technology for the Co-Generation Power Plant is now proven and widely adopted in India

being a reliable source to achieve maximum economy in the industry under an extremelycompetitive market scenario. Pursuant to its lower net cost, the Co-Generation power plant has

become a necessity of the PAPER MANUFACTURING IN D USTRY. In fact it has now become

a need of the hour. The Company proposes to install a Power Plant using coal as it is the

cheapest option. We recommend company to think of using residual fuels such as rice husk,

which shall bring about savings in Power Cost. D ue to the reduced cost of production the

Company shall have an improved bottom line


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EXECUTIVE SUMM ARY

I have a done a Project report on Siddeshwari Paper Udyog Ltd.(SPUL) a sister concern of

Sidharth Group of Paper Industries one of the largest paper manufacturing group in private

sector in India and still growing to reach the top. As title of my project was project

management so under this I have analyzed the companies new power project financial

aspects in terms of its estimated cost, its estimated profit after the projects starts. My main

aim of the study was to gain knowledge & get a first-hand experience of how an industryfunctions and manages its finance.

As for me I want to enter into a manufacturing business & become an industrialist. So, it was

very significant for me to understand how the company arranges for its finance this was

another objective of mine to know the means or mode of finance. The research methodology

used is primary & secondary data that I have collected through the companies staff & senior

managers and also by undergoing the training process.

Major findings under this project were: I have seen how a company estimates the cost of the

project and what expected output out of the project is. Each company has got its own

procedures & structure of managing its finances. Thus we need to understand the structure

and pick up the positive points in each companys functioning so as to manage our company

well.


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C omp a ny Profile

Name of Industrial Concern : SIDHESHWARI PAPER UDYOGLIMITED

Constitution : Non Listed PublicCompany

Year of Incorporation : 1990

Year of Commencement of Business : 1991

Sector : Private Sector

Capacity : Existing Kraft Paper 20000 TPAProposed Co-generation Power

Plant 6 MW

Registered Office : 432 Sita Ram ApartmentsPlot No 102, PatparganjIP ExtensionDelhi

Works Location 7 th KM, Moradabad Road,kashipur Distt Udham Singh Nagar Uttranchal220 KM from Delhion State Highway

SIDDHESHWARI PAPER UDYOG LIMITED (SPUL) is a closely held Non Listed Public

Limited Company registered under Companies Act, 1956 started on 20/02/1990 for

manufacturing of Kraft Paper. The commercial production of the Company was started in

17/11/1991 with an installed capacity of 7500 MTA. After some time looking at the increasing


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competition and various incentives declared by the Uttaranchal Government in terms of Capital

Subsidy, Excise exemption, Income Tax exemption and reduction in rate of power the promoters

decided to enhance the capacity of the plant from 7500 MTA to 27000 MTA in the year 2003.

Besides this major expansion, several investments were made from time to time to improve the

quality and productivity so as to maintain the viability and competitiveness of the products as per

the need of the hour.

The management consists of four majors Persons as the managing directors of the company and

they hold its major shares i.e. 1195800 shares 100% holding.

The Promoter D irectors belongs to a highly reputed business/industrial family of Muzaffarnagar

having very vast experience of manufacturing & marketing of Kraft Papers.

As stated above, the company is presently manufacturing Kraft Paper by using agro-based raw

material. The promoters had initially decided to set up a plant for manufacture of Kraft Paper with annual capacity of 20000 MT. The new segment of Kraft Paper has a good demand in the

packaging market and the margins are better. By setting up certain additional machineries in the

proposed Kraft Plant & the proposed power plant will add to the final capacity of the plant and it

will increase from 20000 MTA to 27000 MTA. This increased capacity will result in reduced

cost of production and increased productivity and profitability of the company.


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DETAILS OF GROUP / ALLIED / ASSOCIATE FIRMS

SIDHARTH PAPERS LIMITED (UNIT-1) -: Established in the year 1990 is a closely held

Non Listed Public Limited Company registered under Companies Act, 1956 for manufacturingof Kraft Paper.

SIDHARTH PAPERS LIMITED (UNIT-1) (SPL-2) is a closely held Non Listed Public

Limited Company registered under Companies Act, 1956 established in the year 2008 for

manufacturing of duplex Paper.

BHAGESHWARI PAPERS PRIVATE LIMITED

The company was established in 1997 , at Bhopa Road, Muzaffarnagar, for manufacturing of

Kraft Paper.

SIDDHESHWARI INDUSTRIES PRIVATE LIMITED

The company was established in 2002 , at Jansath Road, Muzaffarnagar, for manufacturing of

Kraft Paper.


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Obj ective of Study

To understand the concept of Project financing, its various components, methods and

nature of project financing.

To know economic viability of the proposed project i.e. estimated cost, its estimated

profit after the projects starts.

To gain knowledge & get a first-hand experience of how an industry functions. This was

very important opportunity that was available to me which has made me learn many

things that should be kept in mind while we focus on establishing our own industry.

To understand how the company arranges for its finance i.e. modes or means of finance.

What are the various sources available to company to borrow funds from and finance its

project other than the bank.

To know the basis for Bank finance in the sense of various components of project

financing, which is specifically used in borrowing the finance for the small-scale industry

and large-scale industry. It focuses on the requirement and the procedures applied by the

banks for assessing and sanction the term loan that the company demands for. It also

studies the various guidelines issued and recommended by various RBI committees from

time to time that the banks have to keep notice of and need to meet while giving the Termloan. It may consists of documents , various statements etc that the company may need to

submit.


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PAST PE RFORM ANCE OF THE C OM PANY

(Rs. In Crores)

Particulars31.3.07 31.3.08 31.3.09Audited Audited Audited

G ross Sales 34.21 37.75 45.02- Domestic -- -- --- Export -- -- --

% G rowth 16.72% 10.35% 19.26%

Other Incomes -- -- --PBIT 7.41 7.49 6.59Operating Profit 6.45 6.33 5.06Profits Before Tax 6.48 6.38 5.09Profits After Tax 5.74 6.25 4.46Cash Profit 6.55 7.15 5.30Paid up Capital 1.31 1.31 1.31Reserves & Surplus Excluding Revaluationreserve

21.42 27.74 32.28

Misc. Exp. Not Written off -- -- -- Accumulated Losses -- -- --Deferred Tax Liability / Assets 0.47 0.39 0.32Tangible Net Worth 23.20 29.44 33.90

Investments 4.38 7.82 9.62Unsecured Loan -- -- --Net Working Capital 10.44 12.39 13.74Current Ratio 6.31 4.19 5.04Debt Equity Ratio 0.30 0.26 0.19Operating Profits / Sales 18.85% 16.77% 11.24%

31.3.07 31.3.08 31.3.09Audited Audited Audited

TOL / TNW 0.39 0.39 0.30Fund Flow: -- -- --Long Term Sources 30.33 37.10 40.53Long Term Uses 19.90 24.72 26.71Short Term Sources 1.95 3.87 3.32Short Term uses 12.38 16.25 17.14


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Ex isting a nd Proposed Ba nking F a cilities

(Rs. In Crorores)

Nature Amount

Siddheshwari Paper Udyog Ltd. (Kraft Paper)

Fund Based 6.00

Non Fund Based 9.25

Term Loan

(i) Waste Paper Street & Soda Recovery

(ii) Disperser

(iii) Turbine Projects

7.50

5.00

19.37

Total Commitment 47.12

COLLATERAL SECURITY

y All Working Capital facilities are secured by personal guarantee of the D irectors.

y Further Secured by Charge on Companys fixed assets.


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I NFRAST RUCTU RE AVAIL AB LE

POWER :

The power requirement for the project has been estimated to 6000 KVA out of

which 2750 KVA, for which the Company has applied for power load from

Uttaranchal Power Corporation, which is already sanctioned.

WATER :

The total water requirement would be around 47 KL. Per ton of Paper which shall be met from

own tube wells of 6-8 diameter being installed at the site.

POLLUTION CONTROL :

The Existing unit is equipped with ETP & other equipments as approved by Pollution Control

authorities. The ETP for the proposed paper unit will be installed as per latest technology so as to

ensure release of water within the desired standard as described by Pollution Board.

M AN POWER :

Kashipur is developing fast industrially and all types of skilled / unskilled labour is easily

available.

OTHER INFRASTRUCTURAL FACILITIES

The Kraft Paper Manufacturing plant is already running on this site for the last 19 years and all

the infrastructure facilities are easily available .


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PRODUCTI ON PROCE SS

The manufacturing process for Kraft Paper can be broadly categorized into followingsteps :

Pulping

Stock Preparation Section

Sheet Formation

Sheet Jointing

Drying

Glazing


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PROPOSE D POWE R PROJECT y CONCEPT

It is a known fact that any paper product-manufacturing unit is power intensive as substantial

power is consumed for the operations. In recent times due to the huge overheads of Electricity

Boards and increase in other input costs, the power tariff cost has been increasing steadily.

Therefore day-by-day it is becoming increasingly difficult for paper manufacturing units to

control manufacturing cost due to high incidence of power cost resulting in decreasing profit

margins. Presently, Uttaranchal Electricity Board supplies power bears a tariff of Rs. 4.49 per

Kwh. On the other hand, the cost of power obtained from D .G. sets is Rs. 10.00 per unitincluding maintenance costs. The Company has no option in terms of the vagaries of increasing

power costs and therefore it has concluded that it is now essential to reduce long term power

input cost by installing Steam based Co-Generation Captive Power Plant. For this purpose, after

in depth study and obtaining advise from experts in this field the Company has decided to install

the 6.0 MW condensing cum Steam extraction turbine Co-Generation Power Plant which is

considered most ideally suited for Company's requirements.

There is a dual purpose for installing this Power Plant. The first and foremost purpose is to

generate adequate uninterrupted power for present operations and the second purpose is to make

use of low pressure exhaust steam from the turbine for the manufacturing process in the paper

plant. With these dual advantages the Company will not only be saving on power input cost but

also on cost of process steam which otherwise would have to be supplied by a stand alone boiler.


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C OST OF PROJECT & ME ANS OF F INANCE:

(Rs in cr)

Cost of ProjectAmount

Means of finance Amount

Item Item

Building 4.51 Term Loan 20.50

Plant & Machinery 20.71 Internal cashaccruals

5.42

Contingency 0.50 Subsidy 1.20

Pre-operative Expenses 0.25

Interest DuringConstruction period

1.15

Total 27.12 Total 27.12


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Det a ils of C ost of the pro ject

Observations-: D irectors of the company already have a past experience in setting up a turbine as they

have setup a Power project in the company sister concern Siddharth Papers ltd. (UNIT 2)

of 6 MW.

The total cost of the project have been estimated by the help of Sister concern Sidharth

paper Ltd. which is presently operating a power project of 6 MW. It has provided the

Siddeshwari Paper Udyog Ltd. with the details of the machinery that will be required for setting up a Power project.

Various quotations have been obtained from the top companies for the items mentioned

in the list as the price was expected to rise due to inflation.

Then the total cost for the project is estimated by the help of quotations obtained

The cost for civil & other works have been estimated on the basis of contactor whom the

work has been given

The company have estimated the cost for contingencies, pre-operative expenses, interest

during construction period etc. as well as the other necessary expenses during

construction.


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Analysis-:

Land & Building: RS. 4.51 crore:

The company has 3.40 Acres of land which is sufficient for construction of building for

installation of Turbine and building construction cost has been estimated at Rs. 4.51 crore and

the details of item and their cost is as under:

The estimate of building construction has been prepared by M/S Shakti Associates, Kashipur and

as per the estimate , the cost of building construction is Rs 4.51 crores.

The details of additional building to be constructed are as under. The additional building is

required for the turbine, raw materials shade, boiler, RO plant etc and are necessary for the

present expansion.

(Rs. In Crores)S.NO. PARTICULARS

MEASUREMENT RATES

AMOUNT(Rs. in Crore)

1 Site D evelopment, Earthfilling,Levelling & Roads 0.11

2 Boundary Wall (with RCC withPiller 100 Nos.)

300m Length, 3Mtrs Hight, 1.5

Mtrs. Foundationetc.

0.25

3 Building Turbine D ouble Story(1st Floor & 2nd Floor) 480 Sq.m 6000 0.58

4 Building Boiler 600 Sq.m 5000 0.305 Raw Material Shed for 9000 MT

Husk (1000 Mts 2 Feeding Sheds,3000 Mtrs. Raw Material Shed)

5000 Sq.mt. 2.00

6 Foundation of Turbine 200 Cu.m 9000/Cu.m 0.207 Foundation of Boiler & Plateform

Seat. 150 Cu.m 9000/Cu.m 0.208 Other Foundation of pumps &

condensor etc. 0.05


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9 R.O. Plant Room0.02

10 Electrical Panel Room0.02

11 In Charge Office

0.0212 Cooling Tower Tank (Comparewith SPL - IInd Tank) 250 Cu.m 4000/Cu.m 0.10

13 Condensate Water Tank 12 Cu.m 0.0314 Complete Tubewell 2 Nos. 9 Lac 0.1615 Sums K & pith

0.0216 Fire Fighting Equipments & Pipe

Line 0.35

17 Electrification ( D rawings) 0.10Total (A) 4.51


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Plant and Machinery: Rs. 20.71 crore:

The total cost of plant and machinery with details of each item and cost thereof is as under which

have been calculated by the help of quotations obtained from the top manufacturers of a

particular product :

DETAILS OF MACHINES :

S.NO. PARTICULARS AMOUNT(Rs. in Crore)

A. TURBINE1 Turbine Set 3.902 Water Storage Tank (1 Storage for R.O. to Feed 6 Lac & 1

Storage for From R.O. Ruberised 8 Lac) 0.18

3 R.O. Plant 0.354 Cooling Tower (38 TPH) 0.205 Compressor 0.036 D .G. Set 0.157 Pipe Line & Valves (Steam Piping) Including structure 0.758 Water Pump (Cooling Tower) 0.229 Switch (5 VCB) 0.30

10 Transformer (3500 + 3500 + 1000) D rive D uty @ 7.50 Lac /KVA 0.50

11 Cable (L.T.) 0.20

12 Panel (One Cooling Tower) 0.0513 H.T. Lines (240 Sqmm x 1000 Mtr) 0.1814 Crane in Turbine Room 0.1515 Instrumentation of Boiler 0.1016 Routing D esign for Piping & Support 0.1017 D istribution Header (Steam) L.P. & H.P. 0.2518 Oil Centrifuse 0.0819 Earthing Pit and Earthing 0.0220 First fill of Oil (8000 Ltrs.) 0.1221 PLC Electrical Controller (Optional) -

Total Rs. : 7.83


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B. BOILER

S.NO. PARTICULARS AMOUNT(Rs. in Crore)

1 Boiler (45 TPH 65 Kg./Cm 2g) 5.00Boiler Structure for Steel for Plateforms, Hopers, D ucting &Ledgers etc. 0.75

2 Fire Brick of Furnace 0.253 Pipe Line & Valves (Steam & Water) 0.854 Electrical Panel & Motor (1300 H.P.) 0.455 V.F. D . for Boiler Motor (3 Nos.) 0.256 Feed Conveyor (3 Nos.) Husk 0.307 Screen of Raw Material (4 Nos.) 0.158 Coal Crusher 0.159 Coal Conveyor 0.10

10 Condensate Return Line from SPI & SPUL 0.0811 P.R. D .S. 0.2012 D rawings & Support 0.1513 Motorised Vent Valve 0.0314 N.R.V. (8") 0.0515 Bunkar Fuel Feeding (100 Cum)16 Rotary Air Lock Valve (7 Nos) ESP + Ash Collection 0.0417 Chimney with D ucts 0.3018 L.T. Cable 0.2019 Start up, Material for Boiler 20 Air Conditioning for Pannel Rooms 0.0521 Lighting & Fittings in Boiler House 0.02

22 Insulation of Steam Line & Turbine 0.3023 Feed Water Tank to be added 0.059.72

Total :- 17.55

Add: @ 18% Exice duty, Tax, freight & Installation & Erection etc.3.16

Total Rs. 20.71

The quotation for these items have been obtained from the reputed manufacturers (TriveniEngineers) and copies thereof is held on record.


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Contingencies: Rs. 0.50 crore.

An amount of Rs. 0.50 crore i.e. 1.84% of the project cost has been estimated towardsunforeseen contingencies during the implementation period of the project, which is reasonable in

view of the size of project. Sometimes the calculated cost may not be as accurate there may be

rise in the cost due to unforeseen circumstances this has also been taken into account by the

company.

Pre-operative Expenses: 0.25 Crore

Certain pre-operative expenses have also been considered by the company that may arise before

the actual operation of the industry may start. Rs. 0.25 crore has been estimated as cost of pre-

operative expenses in the project.

Interest during construction period: Rs.1.15 crore:

Bank is sure to levy interest as soon as it gives loans so certain amount of interest will also be

levied for the time when the final project is in the construction stage. An amount of Rs. 1.15

crore has been estimated during implementation stage of the project considering the ROI of

11.00%. This interest will be payable as soon as the project starts or on its expected date to start

whichever is before.


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ME ANS OF F I NANCE:

Term Loan:

The company has requested for sanction of a term loan of Rs 20.50 crore from their Bank on the

basis of the collateral security given by them.

ANALYSIS OF TERM LOAN:

The company has requested to sanction term loan for the construction of the building, to purchase the plant and machinery & other fixed assets. Hence the term loan has been

assessed as under

Building under construction Rs 4.51 crore

Cost of Plant & machinery Rs 20.71 crore

Escalation & contingency Rs 0.50 crore

Total Rs 25.72 crore

Less : margin @ 20 % Rs 5.14 crore

PBF Rs 20.58 crore

Hence a term loan of Rs 20.50 crore may be sanction in favor of the unit.

INTEREST :-On the basis of Credit risk rating of the account / being considered by the

bank at present.

SECURITY

1. EM of Land & Building of the paper mill.2. Hyp. Of land & Machineries & other fixed assets to be financed by the Bank.


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REPAYMENT

Proposed TL: Rs. 20.50 crore:

The Term Loan is repayable in 25 quarterly installments to start after a moratorium period of

24 months from the completion of the project or Oct. 2011 which ever is earlier. The

proposed installed are as under:-

1st quarterly installments Rs. 10.00 lac each

2nd to 5 th quarterly installment Rs. 10.00 lac each

6th t to 9 t quarterly installment Rs. 15.00 lacs each

10 th to 13 th quarterly installment Rs. 20.00 lacs each



(Interest to be paid as and when due)

Internal Cash Accruals :

An amount of Rs. 5.42 crore shall be raised by the company themselves from their internal

sources either through relatives or unsecured loans or from any other source available to them.

However, the company had undertaken

Subsidy-:

Balance of Rs. 1.20 crore shall be available as subsidy from the Uttaranchal Government as a

part of their scheme for setting up a POWER PROJECT.


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TECHNICAL DATA AND COST & BENIFIT ANALYSIS

i. Power Requirement: - The Company's peak hour power demand for the proposed

24000 MT Kraft Paper Unit is estimated at 6000 KVA/Hr. The proposed Co-Generation Power Plant would have a designed capacity of 6000 KW per hour.

Included 400 KW per hour electric power will be consumed for operation of Power

Plant itself to run the turbine auxiliaries & boiler of power plant. The spare capacity

shall be reserved for operation of additional machinery to be installed in the plant in

future. The company keeps replacing existing machinery by modern ones and by

adding certain equipment to improve quality on a regular basis in the form of normal

capital expenditure. As such, there would be no difficulty in consuming the balance

available power.

ii. High pressure Steam Boiler: - The Company shall be installing one multi grade

rice husk fired 45 TPH steam boiler to generate high pressure (65Kg/cm2g) and

superheated (490C) steam. The entire quantity of the generated Steam will be first

supplied to the Steam Turbine at the above said pressure and temperature, which shall

generate 6000 KW per hour electric power as well as low pressure and temperature

steam for paper manufacturing process. The exhaust steam from turbine shall have a pressure of 5 Kg/Cm 2g and temperature of about 240C. However, for actual process

temperature requirement is 151C and therefore the exhaust steam from this turbine

has to be cooled down by passing it through a D e- Super heater station and is then

supplied to the plant. A part of this steam can also be used for preheating of the water

supplied to the Steam Boiler, which again can result in further cost savings.

iii. Power generation and distribution : To meet the power requirement of the

Kraft Paper Manufacturing continuous process plant the co-generation unit shall

generate 6000 KW power at 6 KV, star connection and at 50HZ. It will be


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connected to two-step down transformers. One a 1500KVA, 6 KV/400 Volts and

another 4000 KVA, 6 KV/400 Volts according to plant circuit of low voltage

power requirement in various sections through power control centers to motor

control centers through various sizes of cables.

iv. Costing & Benifits : In brief, the proposed Co-Generation Power Plant shall

be versatile in nature and will be operated most efficiently. The cost estimated

for power generation is worked out and given below which is self-explanatory.

The power generation cost will be Rs. 2.82 Per Unit. The company would have

had to pay Rs. 4.49 per unit to the State Electricity Board and Rs. 10.00 per unit

for compulsory stand-by D G Sets (So the weighted average cost works out to beRs. 4.60 per unit). Consequently, there is net saving of Rs. 1.78 per unit on the

assumption that 98% of the consumption would be from the Electricity Board

and the balance from stand-by sources. On an average gross consumption of

38707200 units per annum, the total saving per annum would be Rs. 6 88.9881 6

Lakhs . This is one of the main reasons why the company has decided to install

the 6 MW per hour Co-Generat ion Power plant.


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Other advantages of cogeneration power plant are as here under:

1. There will be uninterrupted power supply as compared to the frequent power failure and

load shedding by State Electricity Board.

2. There will be no major variation in voltage and frequency and stable power factor can be

maintained.

3. After obtaining continuous quality electric power from Co-generation plant the

production and quality of Paper shall be further enhanced.

4. Plant & Machinery will be more protected and safe. The regular maintenance burden will

also reduce.

ELECTRIC POWER GENERATION COST AT BUS BAR BY EXTRACTIONCUM COMMISSIONING STEAM TURBINE

(a) Cost of Steam Per Unit :

Super Heated Steam Cost at 65 Kg/Cm 2g, 490C Temperature.

y Steam Enthalpy = 809.9 Kacl/Kg

y Feed Water Inlet Temp. = 105C + 5Cy G CV/Rice Husk = 3200 Kcal / Kg (Average)

y Boiler Efficiency = 82% + 2%

y Heat requirement to make steam 105C water to 490C

Steam Temperature 809.9 105.0 = 704.9 Kcal / Kg.

Net Heat Transferred in to the Water at the 82% efficiency


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3200 x 82

= ------------------------- = 2624 Kacl / Kg.100

Steam Generation Per MT. of Rice Husk

2624= ------------------------- = 3.73 Tonne Steam

704.9

44 Tones Steam is required per hour to generate 6000 KW as well as 36 TPH Steamextraction at 5 Kg./Cm 2 and 230C Temp. for paper Processing.

44.00Per Hour Rice Husk Consumption = ------------------ = 11.8 MT.

3.73

Rice Husk Price F O R at Site = Rs. 3000/- Per Ton

Per Hour inlet Steam Cost = 11.8 x 3000

= Rs. 35400/-

Steam Generation Cost of Process Steam at 5 Kg/Cm 2g 151 C Temperature FeedWater Temperature 60 C (L.P. Boiler)

Steam Enthalpy = Rs. 657.9 Kacl/Kg.

Heat Requirement to Make Steam 5 Kg/Cm 2 at 60C Saturate Steam (151C)

= Rs. 657.9 60 = 597.9 Kacl/Kg.

Steam G eneration Per Mt. of Rice Husk (Process Steam)2624

= ------------------ = 4.39 Tonne597.9

Per Hour Husk Required for Process Steam36 MT.

= -------------- = 8.20 MT.4.39

Per Hour Process Steam Cost= 8.20 x 3000 = 24600/- Rs.


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Actual One Unit Cost at 6000 KW Power Generation : = 35400.00 24600.00 = 10800/-

10800= ---------- = 1.80, Rs.1.80 Per KWH

6000

(B) Power Generation Unit from the Plant :

Per Hours Power G eneration at 80% Average Load

6000 x 80= ----------------- = 4800 Kw/HR

100

Per Month Power G eneraton = 4800 x 24 x 28 = 3225600 Units.(28 Days running in a month)

Yearly Power G eneration = 3225600 x 12

= 38707200 Units.

(C) Other Operation Cost :

Annual Approval & AMC Charges = Rs. 7.30 Lakhs

Chemical Cost Per Annum = Rs. 7.30 Lakhs

Salary for Annum = Rs. 43.80 Lakhs

Ash disposal & Rice Husk feeding = Rs. 16.80 LakhsContractor Charges Per annum

= Rs. 75.20 Lakhs

Taking only 60% of above expenses for Power G eneration (Believe Balance 40%already require for Process Steam generation if we not generate our own power)

75.20 x 60 Actual Expenses = ---------------- = Rs.45.12 Lakhs100

Current Minimum State Electricity Board Demand Charges Per annum At 80% 4800 KVA x Rs. 220 / KVA x 12 Months) = Rs. 126.72 Lakhs


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Cost of Boiler Project = Rs. 1296.00 LakhsCost of Turbine Project = Rs. 1416.00 LakhsTotal Complete Power Project = Rs. 2712.00 Lakhs

Term Loan Amount = Rs. 1937.00 Lakhs

Annual Interest @ 11.50% = Rs. 222.75 Lakhs

Total Over Heads on 3,87,07,200 Units( 45.12 + 126.72 + 222.75 Lakhs ) = Rs. 394.60 Lakhs

39460000Total Over Heads on one KWH = -------------------

38707200

= Rs. 1.02 / KWH

Net Unit Price = Rs. 1.80 + 1.02

= Rs. 2.82 Per KWH.

Now we take 36 TPH Steam at 5 Kg/Cm 2g 151C

(D) Cost Saving :

Present State Electricity Board Cost

(Average) = Rs. 4.49 Per KWH.

Cost D G Set = Rs. 10.00 Per KWH.

Weighted Average Cost(4.49 x 98%) + (Rs. 10.00 x 2%)4.40 + .20 = Rs. 4.60 Per KWH.

Hence Net Saving Per unit = Rs. 4.60 2.82 Per Unit.

= Rs. 1.78 Per KWH.

*Annual Saving on Power Plant = Rs. 1.78 x 38707200 Units(Rs. 68898816)

= Rs. 688.98816 Lakhs Per Annum .


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B enefits of Proposed M a chine :

Sidheswari Paper Udyog Ltd is situated at Kashipur ( Uttranchal State). D ue to various

incentives declared by the state government, Uttranchal has become a hub by Installation of

various type of industries. Uttranchal has its own capacity of generating 13-14 Million MW

power. The state also having a central quota of 6 million MW. Before the development of Pant

Nagar Industrial Area, the average consumption of the state was ranging from 18-20 million

MW, which has now increased to 25-26 million MW. As such, there are almost power cuts of

25% normally 5-6 hours in day.

Moreover, the quality of power supplied through Grid also deteriorated on the increased demand.

The company has to bear huge damange of its product under process. Further, the machines

could not generate optimum production/quality produce in such power supplies. The power cost

supplied by the Grid is around Rs. 4.00 per unit .

The average cost of producing power from the turbine shall range between Rs. 3.00 to Rs. 3.25

per unit. To over come the shortage and cost factor of power and to produce the quality paper,

the company has intended to install 6 MW power for its own captive consumption with a totalcost estimated at Rs. 27.12 crore and has applied for sanction of Term Loan of Rs. 20.50 crore.

The company has further informed that due to use of rice husk based fuel in the proposed boiler,

they shall be eligible to obtain the Carbon Credit, which shall be an added advantage to the

company.


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Ba sis of Ba nk fin a nceTerm loans are allowed for asset expenditures and operational concerns. Under this I will be

covering various factors on the basis of my observation which are required to be known by

company when it applies for a loan i.e. various things that banks look into before granting a loan

to a company these are -:

1. Finance-: The bank only finances for 75 to 80% of the loan rest the company arranges

for itself through its own sources or means of finance. So, you need to be mentally

prepared before asking a loan and should first arrange for your finances.

2. Viability -: Second step in a project financing is that the Bank or a technical consultant

hired by the Bank will prepare a feasibility study showing the financial viability of the

project. This is very necessary in order to invest in a project.

3. Contents-: The feasibility study should analyze every technical, financial and other

aspect of the project, including the time-frame for completion of the various phases of the

project development, and should clearly set forth all of the financial and other assumptions upon which the conclusions of the study are based upon is D escription of

project, Project site, Governmental arrangements, Source of funds, Management of

project, Working capital, D ebt sourcing, Market study etc.

4. Security or Collateral-: Banks needs some security from the borrowers against the

credit facilities extended to them to avoid any kind of losses. Banks provide credit on the

basis of the following modes of security from the borrowers either by the way of

Hypothecation, lien, pledge and mortgage.

5. Documentation-: D ocumentation forms an integral part of lending by banks. It

establishes legal relationships between lender and the Bank. All the documents need to be

kept safely & secrecy of all the documents need to be maintained so as to avoid any


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discrepant documents not in compliance with the terms and conditions of the agreement.

Some of the documents that needs to be maintained are general conditions-applicable to

term/demand loan, Credit facility agreement for term/demand loan, Corporate guarantee

etc.

6 . Credit Monitoring Assessment (CMA)-: It is one of the most important documents that

each & every company needs to provide to the bank in order to get a loan. The analysis of

balance sheet in CMA data is said to give a more detailed and accurate picture of the

affairs of a corporate. This format was prescribed by RBI in the year 1974 so that they

could obtain the necessary data from borrowers to assess working capital requirement

under the (CMA) in the year 1988.

It consisted of Three methods of lending

a. First method of lending which was suitable only for small borrowers i.e. less than

10 lacs.

b. Second method of lending were the ones that enjoyed fund based credit facilities

of more than Rs. 10 lacs.

c. Third method of lending was not accepted for implementation thus it is only of academy interest.

The CMA consisted of 6 statements that needed to be prepared. They are-:

Statement I: - It contains particulars of existing credit from the entire banking system including

term loan facilities

Statement II:- Known as the operating statement, it contains data relating to gross sales, net sales,

cost of raw materials, power and fuel, etc. it gives the operating profit and the net profit figures.


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Statement III: - A complete analyses of various items of last years balance sheet, current years

estimates and following years projection are given in this form.

Statement IV: - D etails of various items of current assets and current liabilities are given. The

figures in this form must tally with those in Form III.

Statement V: - The calculation of MPBF(Maximum Permissible Bank Finance) is done in this

form to obtain the fund based credit limits to be granted to the borrower.

Statement VI: - It provides the details of fund flow from long term sources and uses to indicate

whether they are sufficient to meet the borrowers long-term requirements.

Once the MPBF is arrived at on the basis of inventory and receivables norms by the appropriate

method of lending, banks decide the various funds and non-fund limits based limits. The fund-

based limits should not exceed the MPBF. The cash credit component should not be more than

20% for borrowers having working capital limit more than Rs. 100 million from the banks. The

balance may be 80% provided as demand loan.

Once we are through all the formalities and in order that the loan is approved we must know that

your business plan should be rock solid as well as well presented & laid out. You should have a

major stake in your business as Banks like to see that you have a stake in your own business. A

term loan for equipment or the business as a whole will be more likely to be approved if you

have at least a good stake in the business. Thus all such factors are kept in mind by the company.

This helps them to get a loan.


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Over a ll I mplic a tions of the Pro ject Under this I have considered and presented the profit of the company as a whole i.e. when the

company has set up its power project what will be the projected benefits the company will obtain

after the plant has finally started. I will be presenting the data in the form of various statements

such as balance sheet, profitability statements, ratios etc. as a whole. This all needs to be

submitted by the company for obtaining a loan from the bank. So, that the bank can analyze

whether it is profitable to give such loan, and what will be the return to them & in what time i.e.

it is the CMA of the company.

Assumptions under CMA-:

1 . The Installed Capacity of the 1st Unit is 20000 MTA. The Capacity utilization is assumed120% in 1st year and subsequent years.

2. Raw Material is calculated @ Rs. 3700/- P.M.T. in first and subsequent years.

3. Chemicals are calculated @ Rs.3280/-P.M.T. in Ist and subsequent years.

4. Power & Fuel is calculated @ 3000/- P.M.T. in Ist and subsequent year.

5. Consumable Stores is calculated @ 625/- P.M.T in Ist & subsequent years.

6. Packing Material is calculated @ 130/- P.M.T in Ist & subsequent years.

7. Salary & Wages is estimated to Rs. 65.00 Lacs in Ist year and subsequent years.

8. Administrative expenses is estimated to Rs. 80.00 Lacs in Ist year and subsequent years.

9. Selling expenses is calculated @ 350/- P.M.T. in first year and subsequent years.

10. D epreciation is calculated on W. D .V. Basis.


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11. Interest on loans is calculated as follows:-

Term Loan 11.50% P.A.Bank Borrowings 11.00% P.A.

12. Selling Price is calculated to Rs.15250/- P.M.T. in first year and subsequent year of Paper exclusive of excise duty.

CAPACITY OF THE PLANT:

Particulars Projection

Year Year Year Year Year Year Year Year Year

2009-10

2010-11

2011-12

2012-13

2013-14

2014-15

2015-16

2016-17

2017-18

Installed Capacity 20,000 20,001 20,002 20,003 20,004 20,005 20,006 20,007 20,008

CapacityUtilisation

100% 100% 100% 100% 100% 100% 100% 100% 100%

Sales 48.85 50.46 51.66 51.66 51.66 51.66 51.66 51.66 51.66

Profit after Tax 4.32 4.34 1.61 2.29 2.98 3.69 4.32 4.84 5.39

Cash Profit 5.84 5.91 7.99 8.02 8.15 8.39 8.61 8.80 9.06


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PROJECTED BALANCE SHEET L I A B I L I T I E S

PARTICULARS 2009-102010-

112011-

122012-

132013-

142014-

152015-

162016-

172017-

18SHARE CAPITAL 1.31 1.31 1.31 1.31 1.31 1.31 1.31 1.31 1.31RESERVE SURPLUS 36.60 40.95 42.55 44.84 47.82 51.51 55.83 60.67 66.06D EFERRE D TAX 0.32 0.32 0.32 0.32 0.32 0.32 0.32 0.32 0.32SECURE D LOANS 19.90 28.75 26.10 22.45 17.80 13.30 9.30 4.50 0BANK BORROWINGS 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00

CURRENT LIABILITIES &PROVISIONSSUN D RY CRE D ITORS 0.25 0.26 0.26 0.26 0.26 0.26 0.26 0.26 0.26EXPENSES PAYABLE 0.16 0.17 0.14 0.15 0.16 0.10 0.10 0.10 0.10INCOME TAX PAYABLE 0.89 0.89 0.33 0.47 0.61 0.76 0.88 0.99 1.10

TOTAL Rs. 65.43 78.64 77.01 75.80 74.28 73.56 74.00 74.15 75.16

A S S E T S

PARTICULARS2009-

102010-

112011-

122012-

132013-

142014-

152015-

162016-

172017-

18FIXE D ASSETS

GROSS BLOCK 46.03 61.03 63.03 65.03 67.03 69.03 71.03 73.03 75.03LESS: D EPRECIATION 11.32 12.88 19.27 25.00 30.17 34.87 39.17 43.13 46.79

34.71 48.15 43.76 40.03 36.86 34.16 31.86 29.90 28.24

INVESTMENT 9.62 9.62 11.62 13.62 15.62 17.62 19.62 21.62 23.62CURRENT ASSETS, L &A

CLOSING STOCK 8.43 8.65 8.65 8.65 8.65 8.65 8.65 8.65 8.65SUN D RY D EBTORS < 6MONTHS 8.14 8.41 8.41 8.41 8.41 8.41 8.41 8.41 8.41SUN D RY D EBTORS > 6MONTHS 0.20 0.20 0.20 0.20 0.20 0.20 0.20 0.20 0.20CASH & BANK BALANCES 0.09 0.13 1.44 1.82 1.33 1.16 1.77 1.77 2.33F. D .R. 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00LOANS & A D VANCES 1.75 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00AD VANCE INCOME TAX 0.89 0.89 0.33 0.47 0.61 0.76 0.88 0.99 1.10SECURITY 0.60 0.60 0.60 0.60 0.60 0.60 0.60 0.60 0.60

TOTAL Rs. 65.43 78.64 77.01 75.80 74.28 73.56 74.00 74.15 75.16


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PROJECTED PROFITABILITY STATEMENT- : Rs. In Crores

PARTICULARS2009-

102010-

112011-

122012-

132013-

142014-

152015-

162016-

172017-

18YEAR (2009-10) Ist 2nd 3rd 4 th 5th 6th 7th 8 th 9th PRO D UCTION (IN 00M.T.) 240 240 240 240 240 240 240 240 240ADD : OPENINGSTOCK 3 5 5 5 5 5 5 5 5LESS: CLOSINGSTOCK 5 5 5 5 5 5 5 5 5SALES 238 240 240 240 240 240 240 240 240CAPACITYUTILISATION 120% 120% 120% 120% 120% 120% 120% 120% 120%

Raw Materials 15.60 23.28 26.50 26.50 26.50 26.50 26.50 26.50 26.50

Chemicals 8.64 1.68 1.68 1.68 1.68 1.68 1.68 1.68 1.68Consumable Stores 2.24 2.24 2.24 2.24 2.24 2.24 2.24 2.24 2.24

Power & Fuel 11.76 11.76 6.00 6.00 6.00 6.00 6.00 6.00 6.00Salary & Wages 1.05 1.10 1.16 1.21 1.27 1.34 1.40 1.47 1.55Selling Expenses 0.66 0.66 0.66 0.66 0.66 0.66 0.66 0.66 0.66AdministrativeExpenses 1.15 1.21 1.27 1.33 1.40 1.47 1.54 1.62 1.70

Excise D uty 0.06 0.06 0.06 0.06 0.06 0.06 0.06 0.06 0.06D epreciation 1.51 1.56 6.38 5.73 5.17 4.70 4.30 3.96 3.66Interest on Bank Borrowing 0.66 0.66 0.66 0.66 0.66 0.66 0.66 0.66 0.66Interest on Term Loan I 0.69 0.55 0.41 0.28 0.14 - - - -Interest on Term Loan

II 0.41 0.54 0.50 0.43 0.34 0.23 - - -Interest on Term Loan III - - 2.26 2.17 1.99 1.73 1.46 1.02 0.50

Cost of Production 44.44 45.31 49.78 48.95 48.12 47.27 46.52 45.88 45.22Add: Opening Stock 0.35 1.10 1.12 1.12 1.12 1.12 1.12 1.12 1.12Cost of Production 44.79 46.40 50.90 50.07 49.24 48.39 47.64 47.00 46.34Less: Closing Stock 1.10 1.12 1.12 1.12 1.12 1.12 1.12 1.12 1.12

Total Cost of Production 43.69 45.28 49.78 48.95 48.12 47.27 46.52 45.88 45.22

Cost of Sales 43.69 45.28 49.78 48.95 48.12 47.27 46.52 45.88 45.22

Sales Manufacturing 48.85 50.46 51.66 51.66 51.66 51.66 51.66 51.66 51.66

Other Income 0.05 0.05 0.05 0.05 0.05 0.05 0.05 0.05 0.05Profit before tax 5.21 5.23 1.94 2.76 3.59 4.44 5.20 5.83 6.50Provision for IncomeTax 0.89 0.89 0.33 0.47 0.61 0.76 0.88 0.99 1.10

Profit after tax 4.32 4.34 1.61 2.29 2.98 3.69 4.32 4.84 5.39


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Cash FlowStatementSOURCES OF FUN D S

2009-10

2010-11

2011-12

2012-13

2013-14

2014-15

2015-16

2016-17

2017-18

Net Profit after tax 4.32 4.34 1.48 2.19 2.89 3.61 4.25 4.79 5.35

Term Loan 10.00 20.50 - - - - - - -

Working Capital Limit - - - - - - - - -

D epreciation 1.51 1.56 6.53 5.86 5.28 4.79 4.38 4.02 3.72

TOTAL Rs. (A) 15.84 26.41 8.02 8.04 8.17 8.40 8.63 8.81 9.07

Capital Expenditure 13.00 16.00 2.00 2.00 2.00 2.00 2.00 2.00 2.00

Increase in CurrentAssets - - - - - - - - -

D erease in Term Loan I 1.25 1.25 1.25 1.25 1.25 - - - -

D erease in Term Loan II 0.10 0.40 0.60 0.80 1.00 2.10 - - -

D erease in Term Loan -III - Add. - - 0.80 1.60 2.40 2.40 4.00 4.80 4.50

TOTAL Rs. (B) 14.35 17.65 4.65 5.65 6.65 6.50 6.00 6.80 6.50

C. Opening Balance 0.20 1.69 10.44 13.81 16.20 17.72 19.62 22.25 24.26

D . Net Surplus (A-B) 1.49 8.76 3.37 2.39 1.52 1.90 2.63 2.01 2.57

E. Closing Balance 1.69 10.44 13.81 16.20 17.72 19.62 22.25 24.26 26.83


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DEBT SERVICE COVERAGE RATIO-:

It is calculated on the base of future projections of the company. This ratio indicates the rate at

which the debt that has been taken by the bank is being repaid to them. This ratio is very

important and needs to be calculated before taking any loan. Now if we analyze this ratio it

shows that the debt coverage is almost twice the debt to be paid i.e. the bank is assured that its

Loan will be fully paid off.

Particulars Projections2009-10

2010-11

2011-12

2012-13

2013-14

2014-15

2015-16

2016-17

2017-18

PAT 4.32 4.34 1.61 2.29 2.98 3.69 4.32 4.84 5.39Add D epreciation 1.51 1.56 6.38 5.73 5.17 4.70 4.30 3.96 3.66Add Interest 1.10 1.09 3.16 2.87 2.47 1.96 1.46 1.02 0.50A. Total Cashaccrual

6.94 6.99 11.15 10.89 10.62 10.35 10.08 9.82 9.55

TL Installments 1.35 1.65 2.65 3.65 4.65 4.50 4.00 4.80 4.50Interest on TL 1.10 1.09 3.16 2.87 2.47 1.96 1.46 1.02 0.50B. Total 2.45 2.74 5.81 6.52 7.12 6.46 5.46 5.82 5.00D SCR (A/B) 2.83 2.55 1.92 1.67 1.49 1.60 1.84 1.69 1.91Average D SCR 1.82

Detailed Sensitivity Analysis :

Sensitivity analysis has been carried out to gauge the impact of the following adverse scenarioson the projected performance of the project:

Scenario I : D ecrease in selling price by 5%.

Scenario II : Increase in raw material cost by 5%.

In the above scenarios, the overall D SCR for the company will be as follows:

Particulars Base Case Scenario I Scenario II

Overall D SCR 1.82 1.74 1.66


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ASSESSMENT OF WORKING CAPITAL LIMIT :

The company has submitted the CMA data and as per the CMA data , the company has

requested to consider the MPBF on the basis of projected inventory holdings . The proposed

inventory holding are as per the past trends and trends of the industry.

Hence the MPBF has been worked out as under-:

Rs. In crores

Item Current year estimates2009-10

Accepted for assessment year 2009-10

Chargeable Current Assets 16.57 16.57

Other current assets 2.73 2.73

Total current assets 19.30 19.30

Working Capital Gap 18.00 18.00

Net Working Capital at 25% of Totalcurrent Assets less export receivables

4.83 4.83

Projected net working Capital 12.00 12.00

Permissible Bank finance 6.00 6.00

ASSESSMENT OF NON FUND BASED LIMITS:

Particulars ILC/FLCTotal purchases during the year 24.24Purchases proposed against LC (76.24% of total purchase) 18.48RM requirement against LC per month 1.54Usance Period in months 5.00

Lead Period in month 1.00Total period in months 6.00LC requirement (3 X 6) 9.24LC recommended 9.00


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IMPLEMENTATION SCHEDULE:

Under this we will we considering how a project is implemented in terms of acquisition of land,

civil works, plant & machinery, trial run & ultimately the final production. We estimate the time

that the project is expected to take as per our calculation so that we could start the project within

its stipulated period. This schedule also needs to be provided to the bank along with the CMA

data so that the bank can know from when they will start getting the return.

Activity

Commencement CompletionAcquisition of Land Already acquired Already acquired

Civil Works Oct 2009 D ec 2010

Plant & Machinery

- Order Placement Oct 2009 D ec 2009

- Arrival Jan 2010 D ec 2010

- Erection &Commissioning

Jan 2010 Feb 2011

Trial Runs (BalancingEquipments) March 2011 March 2011

Commercial Production Already in commercial production


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SWOT ANALYSI S

Strength

The promoters are having rich experience in paper manufacturing.

The product is having demand from all segments. The per capita

consumption as well as paper production & consumption in the country

are going to increase in the coming year

The financial status of the company is very good.

Weakness

Availability of Agro fuel/material is seasonal. The company will have to

ensure uninterrupted supplies in off season. The company will need to

arrange for Agro fuel during off season to run the machine. But as, the

area is surrounded by a number of sugar mills, and being a agricultural

belt, no problem is foreseen in getting agro based raw material. In addition

to this Company is exploring the possibilities of using the waste paper to

overcome with the above problem.

Opportunity

SPUL has good opportunity to grow as it is supplying the kraft paper to

major reputed suppliers.

SPUL is installed in the Utranchal Zone, where company is getting the

benefits of excise & income tax exemption.

Threats

The product may have face tough competition from other manufactures.

Any adverse change in Govt. rules & regulation may affect the business.


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SUMM ARI SE D STATU S OF THE PAPE R I NDU ST RY

As we demand for loan from the bank it becomes very necessary for us to provide the bank with

the details of the paper industry where we are setting up the power plant. As it is very necessary

for the bank to understand what benefit the company will receive in case it sets up the power

plant and what will be its future requirements whether the increase in the production capacity

will help. They need to understand the demand for the product in the future because if they dont

see any future in this industry they wont invest in the project.

The Paper Industry, like any other industry, depends largely on market forces as the situation has

become very dynamic with customers seeking out best quality at very competitive prices.

Consequently, the company has aligned its strategy to be as market friendly as possible. The

Company has the philosophy of continuous improvements in manufacturing practices and

evolving market oriented strategies to sell the huge quantity it produces. The paper

manufacturing is continuous process industry, electrical power and steam is its back-bone. Hence

to obtain the both uninterrupted electrical power and steam at minimum cost Co-Generation

Power Plant is the only option for the survival of the Paper Industry . Energy Scenario is fastchanging in the country where the Grid Power Supply is unable to keep with the increasing pace

of energy demand from the industries and other consumers. Moreover, the paper industry is on

Energy intensive industry. The unit is located in a hilly State and all power generation is through

the Hydro generation units in winter season when there is a snow fall at upper hills and

temperatures fall down. The rivers of in the State go dry which impacts power generation due to

which the State Electricity Board has to put checks on power supplies which hamper production

schedules. Indian Paper Industry is producing approximate 7 to 7.2 million tones of paper per

year. The industry is by and large fragmented in nature almost 500 600 mills produce this

quantity of paper.


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The Industry can be divided into three major segments of its players :

1. Mills using conventional raw materials like a wood and bamboo.

2. Mills using agriculture residue like wheat straw, rice straw, grass and bagasse.

3. Mills using recycle fibers i.e. waste paper.

All three segments contribute almost one third each to the total paper production in the

country. Almost all these mills are equipped with chemical recovery systems and have

significant co-generation capacity, thereby generating electricity with more than thecaptive requirement through own power generation. However, most of the mills in Agro

and recycled sectors are still dependent on Grid Power. However, many of these mills

have already put up or are in process of putting up of captive co-generation power plant.

D omestic paper demand has increased from 3.05 mn MT paper annum in 1997-98 to around

8.56 mn MT per annum in 2010-2011. The industry is characterized with a closed or dead

capacity of 3.1 mn MT. The weighted average capacity utilization of the industry is presently

67%.


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KRAFT PAPER-:

D emand for paper is strongly correlated with trends in G D P growth and increase in per capita

consumption (PCI). According to studies conduct by the UN, the demand for paper increases by around by 1.5% - 2.5% every year for every 7.0% increase in PCI. This holds good even

for India in the higher range in spite of year on year variations in demand growth.

D emand for paper is also influenced by other factors like literacy rate, growth of service

sector, advancement of printing technology in the country, develop-ment of paperless

transaction, development of packaging industry, acceptability of substitutes etc.

The domestic paper demand in the past has increased from 3.05 mn MT in 1997-98 to 8.56

mn MT in 2010-2011 at a CAGR of 11.60%.

The correlation between growth in G D P and paper demand is used to arrive at demand

for paper industry. The paper consumption in India is expected to reach 6.9 mn MT

by the year 2010 with the assumption that the G D P will grow at the rate of 5% to 6%

for the corresponding period.

Establishment of new business areas such as telecom and power will lead to

increasing literacy levels, thus improving the low per capita consumption (PCI) of

paper, which is at 5 Kg per annum as compared to 50 Kg per annum for Japan and

about 150 Kg per annum for USA. Besides rapid growth in population, enhanced

literacy levels, growing quality consciousness and changing consumer preferences

will drive paper demand.

Certain user industries like FMCG, pharmaceuticals etc., are expected to grow at a

relatively higher rate. The increasing usage of packaged and branded consumer goods

is expected to add momentum to the use of paperboard packaging. The demand for


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paperboard is therefore expected to grow at between 10% to 11% i.e. much higher

than the overall industry growth rate.

Paper and paperboard capacity increased only 0.60% in 1999 and 1.3% in 2000

compared with an annual average of 2.1% during the 1991 to 2000 period. The 41 st

Annual Survey of Paper, Paperboard and Pulp Capacity and Fibre Consumption

projected capacity to rise at an annual average rate of 0.7% in the next three years,

specifically 0.7% in 2001, 0.9% in 2002 and 0.5% in 2003.

The major players in different types of papers are given below. Some of the players

have created a very strong brand name within a particular segment and are able to

command a premium price for their products as compared to their competitors e.g. in bond papers.

Type of Paper Major Companies

Cream Wove HPC, Orient, BILT, AP Paper, TNPLKraft Paper ITC Bhadra, Orient, Nath Pulp, Rama Pulp, and Paper

Maplitho BILT, JK Corp., AP Paper, west Coast

Speciality Paper BILT, Padumjee Pulp, Shree Vindhya

Coated Kraft Paper Balakrishna Industries, N R Agarwal, Rollatainers

LWC Kraft Paper N R Agarwal, Jayant Paper, Rohit Paper

Uncoated Kraft Paper ITC Bhadra, Orient, Seshayee


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C onclusionIndian paper industry is currently in the midst of a transformation with major capital expenditure

(capex) underway and improving operating efficiencies is the major concern of the all players.All players are committing a large amount of investment, focusing on:

Improving the operational efficiencies through rightsizing pulping capacities

By adopting technology advancements

Going further into setting up of power plant for continuous supply of electricity

leading into uninterrupted power supply.

Adherence to pollution norms by chemical recovery

This training has proved to be very beneficial & knowledgeable to me. It has broadened my

horizon of looking at the things that previously I didnt notice. The two months training have

brought me many learnable experiences and I have learned quite many things such as estimation

of the cost of the project, means of finance of a company, basis for getting a loan & various

statements company needs to maintain and present at the bank in order to get the loan approved.

Further, what I have noticed is that there is a huge scope of paper in the coming year its demand

will keep on increasing as the time passes by because as we know the government has take

severe measures to Ban plastic since the use of plastic is decreasing the paper will only be its

replacement. D ue to which it is estimated that in future the demand of paper will only increase

leading to higher profits for a company and good growth prospects for a company. Thus we see

that it is very right decision for a company to go in for self generation of power.

Documents

Anant 2702109 SPUL PRoject