TAMIL NADU RURAL TRANSFORMATION PROJECT

Business Plan for Cloth bag production (job work)

Category of Loan: NANO (Upto INR 5 Lakhs)

Introduction

 The applicant, Ms.AAAA is a resident of AA village in BB locality in Madurai

District. She has 6 years’ experience in tailoring activity.

 Her spouse is also engaged in contract business.

 She is also member in a Women Self Help Group functioning in the locality. The
SHG has received two doses of credit assistance from bank. The second dose of
credit assistance was availed recently and the loan repayment is in progress
.
 The applicant has undergone a training at ABC Company in Kappalur Industrial
estate that prompted her undertake job work of stitching cotton cloth bags. She has
submitted the proposal for term loan and working capital assistance at a cost of
Rs.1.25 lakhs under TNRTP Matching Grant Programme.

About the activity

 After the ban on plastic, cloth and paper bags are in good demand in the market.

 Hotels/Shops/Merchants have increased the usage of cloth bags to sell their

goods.

 Many SHGs were given training to produce cloth bags.

 Government encourages and extend good support to units engaged in cloth bag
production

 Many cloth bag units have started providing employment opportunities to women
at home through job works.

 Individuals/groups taking up the job work are earning decent reasonable income.
Enterprise and Entrepreneur Profile

1. Profile of the Entrepreneur:

Name Ms.AAA
Spouse Name
Age 33
Education 10th Standard
Aadhaar Card No 86XXXX111111
Address
Mobile No +91 1111111111
Number of years of experience in business 6 Years
Trainings attended (no. and hours) ABC Company, Kappalur, Madurai.
Spouse’s occupation Contractor
If Special category No

2. Enterprise Profile:
Name of the Enterprise M/S AAA Garments
Legal Form of Enterprise Individual
Registration Number -
Registration Date -
Registered with Whom -
GST No ( If available ) Not Available
Udyam Registration number Not Available

3.Bank Linkage Details:

Whether the enterprise has separate bank Yes
account
If any bank credit availed No
Name of the bank and Branch ABC Bank
Nature of the bank facility NA
Limit Sanctioned NA
Balance outstanding as on date NA

4.Enterprise Nature:
Type of Enterprise Production/Manufacturing
Product  Service Enterprise –
 Job work of cloth bag stitching
Present Demand  With plastic products banned in the
shops and hotels, a large number of
 restaurants have switched to cloth
and paper bags. Food items supplied
in plastic covers and aluminium foils
in hotels and bakeries have replaced
the same with Cloth Bags and paper
covers
Current Supply  The weaving units in Kappalur
industrial estate outside Madurai is
providing job work order for stitching
cloth bags

5. Technical Feasibility:
a. Location – Brief on Location – Whether  The unit is easily approachable and
well connected to market by road etc., well connected by pucca roads
b. Land - Extent of Land, sq.ft  Own land.
c. Building  Proposed to construct work shed
Approved plan from local body, sq,ft, whether 10’x10’. Approval to be obtained
sufficient for the proposed activity
d. Power  Power supply is available.
e. Water  Adequate water supply is available.
F.Approval Pollution control  Approval for work shed construction
Board/GST/FSSAI approvals or any other
approval is required. Present Status
g. Materials Needed Raw-materials
Quantity / Cost / Availability / Delivery Time to
be discussed.  Activity is job work. The main raw
a. Raw materials material is Cotton cloth/Gada Cloth
b. Equipment supplied by the company offering the
c. Technology job work
Equipment:
 The equipment’s required for the
activity is given in the Annexure A
Technology:
 The applicant has been in the
industry for the past 6 years.
h. Cost of capital assets:
Details of equipment/machinery with cost of As per Annexure A.
individual item required
i. Cost of working capital for one operating
cycle
a. raw-materials,
b. Semi-finished goods,  The working capital requirement is
c. finished goods, arrived at Rs.23400 as per
d. receivables outstanding. Annexure C.
Total working capital needs (The value of raw-
materials, semi-finished goods, finished
goods, receivables outstanding to be arrived)

j. Skills Requirements:  The applicant is having adequate

Skilled labour available / Not available.If not experience. Skilled experienced
available, whether people can be trained? If workers are also available in the area
so, training period and training facility? The unit require two skilled persons
Production Plan/cycle (operating cycle may  The operating cycle is assumed at
be one-day / week / month or one year as per one month recurring expenses
the activity selected): associated with the business as
detailed in Annexure C.
6.Commercial Feasibility:
a. Marketing strategy :
Direct to customers :
Bulk to Institutions :
Through Retailers/ Wholesalers:  Bulk orders from cloth bag
Through Online: production units located in the
district
b. Pricing & Discounts :
c. Market promotion strategies:
d. Physical and digital connectivity:
7.Environment Assessment:
Category of the enterprise proposed: White/Green / Orange / Red .To be entered as per the
requirement –
Environment Environment Greening Support needed
Issue Guidelines or Measures
identified mitigation identified
measures (for green, orange Implement the Implement
Integrated and red mitigation the
(Please tick) categories) measures greening
measures
 Water To ensure NA NA
Exploitation of  Wood adequate
local  Electricity measures for
resources Proper disposal of
(water and Smoke and waste
energy) water
 Dust/air pollutants To ensure NA NA
Waste  Disposal of waste adequate
generation and water measures for
disposal Proper disposal of
Smoke and waste
water
Worker and  Safety measures / Fire extinguishers NA NA
Community gadgets to be fixed in
safety sensitive places in
the unit. Full fire
protection
dresses and
gloves for workers
Whether the activity proposed is in the negative list: No.
 8.Financial Viability
Cost of the project and Means of the project:
a. Cost of the Project: (Rs)
I. Fixed capital-Cost of all the equipment’s /machinery Rs.101600/-
/construction(excluding land cost)
ii. Working capital Rs.23400/-
iii. Pre-operative expenses Nil
Total cost of the project (i + ii + iii) Rs.125000/-

b. Means of the project:

Loan from financial Institution / Bank (95% or 90%): Rs112500
Margin money -Borrower’s contribution (5% or 10%): Rs.12500
Total means of the project ( i + ii ) Rs.125000/-

c. Matching grant from the project** Rs.37500/-

Whether the entrepreneur has the sufficient means to
bring in the margin money and has enough buffer to Yes
manage any cost escalations

**Matching Grant is @30% of the total cost of the project (excluding pre-operative
expenses, land cost, lease). As Matching Grant will be kept in a “Subsidy Reserve Fund”
account of the bank as a back-ended grant, it is not shown under the Means of the project.
The matching grant to be adjusted as below:
(Rs)
Loan initially disbursed by the Bank - Rs.112500
Less 30% matching grant - Rs.37500

Balance principal amount to be repaid by Borrower – Rs.75000

Upon completion of minimum period of 18 months and upon repayment of principal

amount of Rs.75000 and the interest portion, the matching grant of Rs.37500 can be
adjusted to the loan account of the borrower and the loan account can be closed.
 Income & Expenses of the Enterprise
Particulars Amount in INR
a. Sales 240000
b. Cost of Production 153000
i. Cost of Raw Material 0
ii. Direct Wages 120000
iii. Cost of utilities( Water, Power , Fuel, Repair) 33000
c. Gross Profit(a-b) 87000
d. Admin & Selling Exp 0
e. Operating Profit before Depreciation, Interest, Tax & 87000
Amortization (c-d)
f. Depreciation 8500
g. Interest on Term Loan 7116
h. Taxes 0
i. Profit After Tax {e-(f+g+h)} 71384
J. Cash Surplus (. Profit After Tax+ Depreciation)-Withdrawal 79884
k. Income of the spouse from contract business 100000
l. Total Income (j+k) 179884
m. Household Expenses 60000
n.Net Disposable income(l-m) 119884
o.50% of Net Disposable income 59942
Repayment (Principal Rs.22500, Interest Rs.7116) 29616

50% of net disposable income covers the loan instalment and interest.

Recommendation:
The proposal is viable and complies with the guidelines of Matching Grant Programme.
We may recommend to the concerned Bank.
 Profitability Projections
Particulars Yr 1 Yr2 Yr 3 Yr4 Yr5
(Amount in Rupees)
a. Sales
No. of Cloth bags stitched @ 10000 bags per
120000 120000 120000 120000 120000
month
Stitching Charge per bag 2 2.25 2.50 2.75 3
Total income by way of stitching charges
240000 270000 300000 330000 360000
collected
b. Recurring Expenditure
Salary to 2 skilled workers @ Rs.5000/Worker 120000 130000 140000 150000 160000
Electricity Charges @ Rs.1000 per month 12000 13000 14000 15000 16000
Water Charges @ Rs.200 per month 2400 2600 2800 3000 3200
Cost of Sewing thread roll @ Rs 6 per roll 600 700 800 900 1000
Other expenses ( Needle, Oil/Lubricant,
18000 20000 22000 24000 26000
Repairs Conveyance) @ Rs.1500 per month )
Total (b) 153000 166300 179600 192900 206200
Gross Profit(a-b) = c 87000 103700 120400 137100 153800
Depreciation @5% on working shed & 10 %
8500 8500 8500 8500 8500
equipment’s (d)
Interest ( e ) 7116 4641 2165 172 0
Tax on profit(f) 0 0 0 0 0
Sub Total (g )=d+e+f) 15616 13141 10665 8672 8500
Cost of sales (b+g) = h 168616 179441 190265 201572 214700
Net Profit after tax (a-h) = i 71384 90559 109735 128428 145300
Cash Surplus (i+d)=j 79884 99059 118235 136928 153800
Principal Repayment(k) 22500 22500 22500 7500 0
Interest on Loan(l) 7116 4641 2165 172 0
Repayment obligation(D) 29616 27141 24665 7672 0

Annexure – A
Cost of Capital Assets
SL.NO Description of the Item Size/No Unit cost (Rs) Price ( Rs)
1 Cost construction of working Shed 100 Sq ft 300 30000
2 Power operated tailoring Machine 2 35000 70000
4 Scissor 2 500 1000
5 Sewing Machine Needle 50 12 600
Total 101600
 Annexure B
Basis & Presumptions
Size of the Working Shed (Sq.Ft)10’X10’ 100 Sq.ft
Cost of Construction of Working Shed @ Rs.300/Sq.Ft
No. of Skilled workers engaged 2
Salary per worker Rs.5000 per month
No. of cloth bags stitched per month 10000
Service charge collected per bag Rs.2.00
Electricity expenses per month Rs.1000
Water Charges per month Rs.300
Repairs @ maintenance Rs.500
Fuel/Conveyance expenditure per month Rs.500
Cotton Sewing Thread roll required per month 100
Cost of cotton Sewing Thread roll Rs.6 per roll
Sewing Machine needles required 50
Cost of Sewing Machine needles Rs.12 per piece
Sewing Machine Oil/Lubricant required @ 50ml bottle 2 bottles per month
Annexure C
Assessment of Working Capital
S.No. Item of expenditure per month Value (Rs )
1. Salary to two skilled worker @Rs.10000/worker 20000
2 Electricity charges 1000
3 Water Charges 300
4 Sewing thread Roll cost 600
5. Other expenditure( Fuel/Conveyance/Repairs & 1500
Maintenance)
Working Capital for One operating cycle of 30 days 23400
 Annexure D
Loan Amount – Rs.112500
Interest Rate-11%
Repayment period – 60 months
Debit Credit Balance Net Interest on Net Interest Per Principal
Loan Loan annum repayment
112500 112500 75000
1875 110625 73125 688
1875 108750 71250 670
1875 106875 69375 653
1875 105000 67500 636
1875 103125 65625 619
1875 101250 63750 602
1875 99375 61875 584
1875 97500 60000 567
1875 95625 58125 550
1875 93750 56250 533
1875 91875 54375 516
1875 90000 52500 498 7116 22500
1875 88125 50625 481
1875 86250 48750 464
1875 84375 46875 447
1875 82500 45000 430
1875 80625 43125 413
1875 78750 41250 395
1875 76875 39375 378
1875 75000 37500 361
1875 73125 35625 344
1875 71250 33750 327
1875 69375 31875 309
1875 67500 30000 292 4641 22500
1875 65625 28125 275
1875 63750 26250 258
1875 61875 24375 241
1875 60000 22500 223
1875 58125 20625 206
1875 56250 18750 189
1875 54375 16875 172
1875 52500 15000 155
 1875 50625 13125 138
1875 48750 11250 120
1875 46875 9375 103
1875 45000 7500 86 2165 22500
1875 43125 5625 69
1875 41250 3750 52
1875 39375 1875 34
1875 37500 0 17
37500 0 0 172 7500
14094 14094 75000