COMPREHENSIVE PROJECT REPORT

ON

“PLASTIC BAG INDUSTRY”

(HDPE/PP BAG)

AUTHENTICATION CERTIFICATE

“To Whom It May Concern”

This is to certify that the comprehensive project report on “PLASTIC BAG

INDUSTRY (HDPE/PP BAG)” is a bonafide work carried out by me.

The matter embodied in the comprehensive project report has not been submitted
earlier for award of any degree or diploma to the best of my knowledge and belief.

Signature of the Promoter

Name of the Promoter

Date

Executive Summary:
The main objective behind this comprehensive business plan is to check the feasibility
of project idea that comes in promoters mind. This report is about feasibility testing of
opening a PAPER BAG MANUFACTURING PLANT that caters to the nearby
market.

Before deciding it the industrial scenario, market potential, competitors and

profit margin of this market is checked.

After the idea generation, the industry analysis at domestic level was done to
understand the market trends and other factors. The industry analysis shows the
growth in this sector and also shows the different opportunities available in the
market. The survey conducted shows the information collected from the customers
about the present, past and future trends of this industry. This market survey helps to
generate Demand present in the market and possibilities to encash that demand.
Then the market analysis was done through the survey in form of questionnaires and
interviews of the manufacturers. After this the demand analysis was done by using the
statistical techniques. With this the demand estimation, the technical analysis was
done.
After completing the technical analysis, the financial analysis was done to check the
financial feasibility of the project. It involved the preparation of cash flow statements,
working capital requirement schedules, profitability statements and the balance sheets
of 7 years. This provided the data for using the performance indicators and other
capital budgeting techniques. Lastly, the risk analysis was done to estimate the risk
involved in the project.

TABLE OF CONTENTS
1.) Industry Analysis
a. Bag- Its history & role in society
b. Indian Scenario
c. Key Drivers affecting the Indian Bag Industry
d. Porters Analysis of Indian Bag Industry
2.) Market Analysis
a. Geographical Area
b. Objective of the survey
c. Sources of the information collection
d. Interpretations of questionnaire for customers.

3.) Demand
a. Driving Forces affecting demand
b. Demand Analysis
c. Demand-Supply Gap Estimation
d. Demand Forecasting
e. Marketing channel
f. Strategic Marketing Plan
 4.) Technical Analysis
a. Process flow Diagram
b. Manufacturing Process
c. Machinery Required
d. Raw Material Required
e. Manpower Requirement
f. Selection for Location

5.) Financial Analysis

a. Cost of the project & Means of Finance
b. Basic Assumptions underlying Financial Projections
c. Profitability Statements
d. Projected Cash Flow Statement
e. Projected Balance Sheet
f. Financial Performance Indicators

6.) Risk analysis

a. Scenario Analysis
b. Sensitivity Analysis

10.) Annexures

11.) Bibliography

Industry analysis:

Plastic industry over the last 50 years has come out of age. An industry which had
started as a cottage industry has grown multi dimensionally and is growing at a rapid
space. Plastics are macromolecules, formed by Polymerization and having the ability
to be shaped by the application of reasonable amount of heat and pressure or some
other form of force.

The plastic products sector provides around 1% of the country’s exports.

There is a large presence of the small scale companies in the industry which account
for more than 50% of the industry turnover. The Indian plastic processing industry is
highly fragmented and comprises 25,000 firms. Overall, the degree of competition can
be considered high in the Indian plastic processing industry. The sector has a
significant presence of the unorganised sector, which accounts for more than 70% of
the industry turnover. More than 95% of the firms in the industry are partnership,
proprietorship or private limited companies.

The key organised sector players include Nilkamal Plastics Limited and Supreme
Industries Limited. There are few barriers to entry in the Indian plastic-processing
sector whereby many players can enter the sector and provide strong threat to the
existing players. Very few players have a strong brand image.

With total polymers processed being around 5.5 million tonnes (including recycled
Polymers and waste), the capacity utilisation can be calculated to be around 65%. In
Indian plastic processing industry competitiveness is low.

Plastic bag find uses are packaging market:

Market products Plastics Non-plastic Key attributes of

used substitutes plastics Responsible
for consumption
Packaging
Flexible Films, LDPE, Jute bags Fressness,lightweight,
Woven HDPE,PP Moisture resistance,
sacks Chemical
(Bags) resistance,safety

Demand:
The demand for most plastic products has increased at double-digit growth rate during
the last decade.
Domestic demand for plastic products increasing at a rate of 14%-15% over the
medium term, their would be potential for further growth.

The critical success factors for the firms operating in the Indian plastic processing
industry are provided as follows.
Product Mix: The plastic products are used in various applications/industries—which
include household, agriculture, industrial packaging, fertiliser packaging, foodgrain
packaging, fast moving consumer goods packaging, pharmaceutical packaging.

Strong Brand Image: Supreme Industries Limited and Nilkamal Plastics Limited—
which are amongst the large sized plastic processing companies enjoy good brand
image.

The Indian plastic processing industry is dominated by a large unorganised sector.

The global polymer margins are already high and expected to continue to remain high
over short to medium term.
Packaging
Plastic packaging (including flexible film) conveys the image of high quality,
freshness and convenience. It is more cost effective than any other packaging
material, the benefits of plastic packaging which include clarity, toughness and seal
strength.

While PP is preferred for packing of cement on account of its higher service ability at
higher
temperatures and low price, HDPE is preferred for the packing of fertilisers, mineral
etc.on account of higher processor productivity and better moisture barrier properties.

Indian Scenario
During the 1990s, the demand for plastic woven sacks (HDPE and PP) increased at
the rate of around 15% per annum.
Plastic woven sacks are 50% cheaper than jute bags. Further, use of plastic woven
sacks results in lower seepage.
During nineties, production by the jute industry was stagnant and it was not able to
meet the needs of the packaging industry. Subsequently, based on the committee’s
recommendations, the Government allowed the sugar industry to use plastic woven
sacks for 20% of its produce and the cement and fertiliser industries for entire
produce.
In early 1990s, HDPE woven sacks were providing the growth momentum to the
overall woven sacks industry. However, the increasing availability of PP has resulted
in PP substituting HDPE in woven sacks. In India, raw-material suppliers are very
less. Three suppliers is Reliance Industry (Guj.), Haldia Petro Chemicals (WB), GAIL
India.

PORTER'S MODEL
The dynamic forces at work in the Indian plastic industry, from the perspective of
Porter’s Model, are highlighted in the following exhibit.

Analytical Profile of Indian Plastic bag Industry

Threat of new entrants: high

Building brand image is important. If they are high scale company, able to make the
brand image and can capture the more market, because demand are very high.
Switching cost is can be high.

Bargaining Power of Suppliers: Medium to High

Few Domestic Suppliers in market. However, their prices are depending on raw-
material cost and buyers are taking variable prices of bag. Supplier’s product is an
important input to buyer’s product.
Bargaining Power of Buyers: Medium to High
Buyers are goods manufacturing companies (for packaging their goods), buyers
industry earn low profits. Buyers have full information about product quality, price,
competitor product etc. They are forcing for higher quality.

Threat of Substitutes: Less

Plastics have a better cost to weight ratio than their substitutes. Thus, plastics allow
better performance than substitutes in most applications. Plastic bag substitute is Jute
bag.

Rivalry among competing firms in industry: Medium to High

Nearly 25,000 units are present in the industry which results in very high level of
competition. All are using price competition, but they want to increase plant capacity
to reduce the price from competition.
High storage capacity is one reason.

Market analysis:

Geographical Area
The product is to be launched in the Udaipurwati (Sikar).

Objective of the study:

• To know about the market potential for the plastic bag in this belt.
• To analyse the plastic bag manufacturing, its competition, customer
preferences and their satisfaction level.
• To find out the major players in the market
 • To find out the sales (monthly & annually) to decide upon the demand of the
product.
• To find out possible prospects for a new entrants among the already
established players.
• To find out present margins and schemes given to customer.
Sources of information collection
The market analysis done by me in divided in to two parts:
• Initial Research
• Final Research

Initial research:

It starts with answering certain basic question like why, where etc.
The market analysis starts with finding out why Plastic bag plant?

Method: - An informal survey is done to find out the feasibility of the product.
Personal interview of customers of near by area and near cement
manufacturer is done. To understand just have a brief idea about the actual market.
After the initial information was collected about the market, information related to
industry as a whole and about purification was collected.

Secondary Source: Internet, Shreya polymers manufacturer.

Source: Information is collected through Primary method
 Questionnaire
 Personal interview

Method:
Survey Area: Ringesh to Bikaner
Total Manufacturer: Cement- 15
 Flour mill-40
Mineral powder-2
Total- 57

Analysis of Questionnaire for customers:

Ques1. What is your daily requirement of HDPE/PP bags?

As per the survey done:

HDPE bag requirement is 25,358
PP bag requirement is 1,08,565
HDPE bag preference is less as compared to PP bags.

Ques 2. What are your product mix sizes?

(a) 5 kg (b) 10 kg
(c) 50 kg (d) 75 kg
 5%
18%

25%
a
b
c
d

52%

According to the survey, 52% flour mill manufacturer preferd 10 kg bags, 25%
Cement manufacturer preferd 50 kg bags, 18% mineral and cattlefied preferd 100 kg
bags and 5% also prefer by flour mill.

Ques.3 On what basis do you decide to purchase Hdpe/PP bags?

(a) Price (b) Quality
(c)Service (d) Credit given

11%

33%
16%
a
b
c
d

40%

As per the survey done, more than 40% of the customers want better quality in bags
that would create differentiate for the competitors. 33% customers suggest that
reasonable prices can also be creating good competition and 16% for timely delivery
and 11% for credit given.

Ques.4 At what price do you decide to purchase the bags?

(a)0-10 paisa less (b)same as competitor
(c)same price with discount (d) same price but better quality
 19%

37% a
b
c

28% d

16%

According to the survey, 37% customers prefer 0-10 paisa less from existing price,
28% wants same price with discount, 19% will decide on same price but better quality
and 16% will decide on same as competitor.

ques.5 Who pays the transportation cost?

(a) company (b)you

26%

a
b

74%

As per the survey, 74% cost pay by the companies that is extra involvement shown by
the companies in order to increase their sale or push their product, no burden on the
customers of getting product.

Ques.6 Which volume (sizes) prefer most?

(a)20 gm (b)30 gm
(c)72 gm (d)100gm
 5%
19%

25% a
b
c
d

51%

This graph represents that 51% of 30 gm preferred by flour mill, 25% of 72 gm

preferred by Cement company, 19% of 100 gm preferred by mineral and saras and 5%
of 20 gm preferred by flour mill.

Ques.7 How much quantity of bags is required?

(a)20 gm (b)30 gm
(c)72 gm (d)100 gm

2%
16% 4%

a
b
c
d

78%

The survey conducted shows that 78% quantity of bag requirements is 72 gm for
cement, 16% of 100 gm bag for mineral and 4% or 2% bag requirements is for 30 gm
and 20 gm.

Ques.8 How much price you except for these sizes?

(a)20 gm (b)30 gm
(c)72 gm (d)100 gm

According to the survey conducted, it can be analyzed that for 100 gm per bag price is
10.70 Rs, for 72 gm per bag price is 7.50 Rs, 30 gm per bag price is 3.50Rs and 20
gm per bag price is 2.50 Rs.

Ques.9 Do you prefer laminated bags?

(a) Yes (b) No
 25%

a
b

75%

As per the survey, 75% customer wants without laminated bag so it will save
my cost.

Ques.10 What credit period is given by manufacturing company to you?

(a)15 days (b)1 month
(c) 45 days (d) 2 month

5% 0%

37% a
b
c
d
58%

This graph represents the extent of credit period provided by the bags manufacturer to
their customers. The credit period ranges from 15 days to 1 month. But about 58% of
bags provide credit of 1 month to their customers.

Ques.11 Do you check the quality of bags?

(a) Yes (b) No

0%

a
b

100%

According to the survey, every customer check the quality of bags. So I have to
provide better quality to the competitor.

Findings of market survey:

The survey reveals some interesting facts about the bottled water market and its future
prospective as follows:

• The market is divided among the different manufacturers and there is no brand
in bags so new manufacturer can enter in to this market.
• The growth rate is around 15% and this is find out on internet and justified
through personal interview.
• The survey reveals that customers are very concern for quality as compared to
price. They want good quality of bag.
• In this market through survey I analyse that there is more demand of bag and
less competitors.
• The survey shows that Cement company wants 72 gm bag and flour mill 30
gm and other sizes also and mineral and saras prefer 100 gm bag.
• The customers are ready to switch over to other, because maximum customer
wants 0-10 paisa less and discount.
• The survey shows maximum customers prefer without laminated bag.
• If new entrants provide 1 month credit and good quality at reasonable price
then they can capture the market.
• The survey of plastic bag plant in jaipur and the survey of machines and
equipment in jaipur is valuable for having a practical idea of the whole plant
and the process followed in that plant, the labour practices etc.

DEMAND ANALYSIS
After conducting the market survey in the form of questionnaire and interview of the
manufacturers, the next step is to estimate the effective demand in the past and the
present.
As per the customer survey, the demand of the bags is as follows:
Total demand
Total number of manufacturer: 57
Target customer :
1. Cement company
2. Flour mill
3. Mineral powder

Place Name Customer Expected

demand(monthly)bags
Sikar Flour mill 46200
Neem ka thana Cement+Flour 1600000
Kotputli Cement+ Flour 153750
Behror Cement 40500
Navalgarh Cement+Flour mill 55000
Ringesh Flour mill 13500
Lakshmangarh Flour mill 26500
Fathepur+Ratangarh Flour mill 21000
Nokha Cement 50000
Bikaner Mineral + Saras+ Flour 413000
mill
Other Cement + Flour mill 78000
Total 24,97,450

Estimated total sales of bags in a year- 2497450*12= 2,99,69,400 bags/year

No. of supplier – 10
Total supply in this region – 6,46,200 monthly

Demand-Supply gap estimation:

Supply of bags is 646200/month from the local manufacturer while the demand is
24,97,450 bag/month.

So this demand-supply gap of:

= 2497450-646200
= 1851250 lacs/month
The gap is very high, because the maximum supply from outside in this region likes
from delhi and from out of Bikaner, because of the longer distances there no timely
delivery of bags. And the transportation cost is high.

Thus due to all these factors and to fill in this demand-supply gap, a new bag
company can be set up in this region.

Demand Forecasting
The information collected in market analysis is helpful in forecasting estimated
demand for my product. The market is growing with a growth rate of 15%
accordingly my production will be there. These also decide my capacity as on the
basis of market demand my capacity will be 60% for 1st year as per my demand. The
bag is used in 72gm, 100gm and 30 gm.

The production and capacity related will be:

Year Total daily Operating No. of HDPE PP PP

production capacity shifts in 100gm 30gm 72gm
a day bag/day bag/day bag/day
1st 30,000 60% 24 hrs 5465 1080 23455

2nd 34500 70% 24 hrs 6520 1007 26973

3rd 39675 80% 24 hrs 7498 1158 31019

4th 45626 90% 24 hrs 8623 1332 38335

5th 45626 90% 24 hrs 8623 1332 38335

6th 45626 90% 24 hrs 8623 1332 38335

7th 45626 90% 24 hrs 8623 1332 38335

MARKETING CHANNEL
The marketing channels just not only serve the markets but they also make markets.
Currently, the existing marketing channel of the plastic bag manufacturers in Jaipur is
as follows:-

Manufacturers

Customers
(End-users)

There are no intermediaries between manufacturers and customers. So it will

increase the margins.

Marketing strategies:

Plastic bag being an unbranded commodity, so as such no promotional expenditure is

incurred by the manufacturers. Sometimes they just increase the commissions or the
margins of the customers, if the targets are achieved enormously.
But in order to differentiate the product and capture the existing market and to
develop strong customer base, some strategic marketing plan is necessary to be
designed and implemented.
Various strategies that will be used being a new entrant are:-
• Steady supply with timely delivery and good quality would be one of the
strategic strength of the marketing plan.
• Various gifts like calendars, pens, folders, diaries and other utility gifts can be
given to the customers on their anniversaries, birthdays and other occasions.
• Also the orders are currently taken telephonically or through fax. But online
order system will also be generated by me to provide comfort and
convenience.
TECHNICAL ANALYSIS

PRODUCTION PROCESS OF 150 MT PLANT

 Raw-material

Hopper Loading

Pre-drying or
heating

Melting and
Extrusion

Film quenching

Film Slitting

Orientation in hot air oven

Stretching

Tape winding

Looming Lamination

Unlaminated Cutting

Cutting Stitching

Stitching Printing

Baleing
Printing

Despatch
Description of plastic bag process:
Step:1 Raw-materials accusation

Material is PP (Poly propylene) and HDPE (High density polyethylene)

Apart from these fillers are being added to facilitate processing.
In HDPE the bonds keeping various fibers together inside the molecular chain is
strong enough but in PP this bond is weak. So fillers have to be used for processing.

Step: 2 Tape Plant

• Hopper loading (input from hopper)

• Melting and Extrusion: It is an extrusion process in which rotating screws
takes the materials from feed opening. Material is then passed through passed
through various zones i.e. the feed zone, compression zone and metering zone
under certain pressure and heating.
• Then in the melting and extrusion department the raw materials are melted by
applying high temperature and pressure.
• The output of this is a thin volatile material.
• Film Quenching: Convert the molten materials in form of very thin sheet.
• Film Slitting: Film is slit in a bunch of tapes of sufficient width depending
upon the requirements.
• Orientation in hot air oven for reheated on other surface.
• Stretching: The threads are again stretched so as to minimize its elastic
property.
• Get threads from the tape plant to form of bobbins and to the testing and
quality control department.

Step: 3 Looming:

The fabric is woven using weaving methods on the looms. The operator
decided where to position the bobbins. The output of the looming machine is thus
huge sheets of the fabric rolled over the core pipes.

Step: 4 Lamination:

It is basically the process in which thin layer about 60 micron to 200 micron
and its provide:
1. Protection from moisture water and dust.
2. To prevent leakage of powdery products.

Step:5 Cutting:

The laminated/Unlaminated fabric comes to the cutting department where it is

cut into desired length. For cutting, high voltage is maintained across a rod which gets
heated to high temperature.
Step:4 Stitching:

After the fabric is cut it is sent to the stitching department where it is stitched
from the bottom.

Step: 5 Printing:

In this uniform ink is applied on printing plate. The printed bags are collected
and sent to the baleing department.

Step: 6 Baleing:

The large number of bags is arranged one on to other to form a stack which is
then compressed by applying pressure.

Step: 7 Despatch:

The bales are then loaded on the trucks manually from where it heads towards
their destination.
Machinery involved:
S.No. Particulars No. Rate Amount Supplier
1. Automatic paper Shristi
bag manufacturing 1 2,80,000 3,000,00 Machineries
Pvt. Ltd.
(Ahmedabad)
2. Automatic screen Lohia
Starlinger
printing machine
1 22000 30,000 Limited
(New Delhi)
3. Printing Shristi
(Manual Uniform Ink) 1 2,20,000.00 2,20,000.00 Machineries
Pvt. Ltd.
(Ahmedabad)
4. DG Set 1 13,50,000 2,00,000 -
(180 KWA)
8. Transformer 1 4,00,000 2,50,000 -
(280 KWA)
9. Work shop Euipment Shristi
(Quality control - 5,00,000 5,00,000 machineries
Euipment, Pvt.Ltd.
Parts) (Ahmedabad)

10. Transportation(Loading
and unloading)+Erection - - 30,00,000 -
and Installation5%

Location and Site development

The area for setting up a Plastic bag plant is decided after surveying all the potential
areas. The location of plant will be in Udiapurwati area near Sikar district. The
following are the reason for selection of this site:

 The next proximity is the availability of labour; the means of transportation

are also easily available.
 The other reason is more customers are also located in this area. New
entrants are also coming in this area.
The rate of land is Rs 1000/sq.yard (one side road plot), of area 3000 Sq. meter
Structure and civil works:
The construction period for the factory will of 6 month, the total covered area will of
3000 sq meter. The whole factory will be divided into two blocks, main plant, and
office block. The total cost for the whole construction and the relative dimensions are:

S.no. Particulars Area(sq.meter)

1. Main Factory

Factory Building 1520

2. Storage building
A. Raw- material 60
B. Finished product 160

3. Auxillary Buildings:
A. DG Panel Room 42
B. Watchman cabin(Guard room) 50
4. Administrative Block 600

Utilities
5. 270
Passage (9’*30’)
252
Entrance (9’* 28’)

6. Boundary Wall

11. Under ground water tank (1)

13. Gate
14. Internal- External roads 46
Total 3000 sq.meter
 Estimated cost of Structure and Civil Works= 79.11 lacs

Utilities
The important utilities used in plastic bag plant is only power. The machines consume
only electricity. Other necessary utilities used in plant are: -
♦ Fans – 6
♦ Tubelights-20
♦ Computer -1
♦ Furniture comprise of – office table, Chairs, stools.

Materials:

Raw material requirement is HDPE, PP and Power.

Raw material suppliers are Haldia(WB) ,Reliance Ind.(Guj.), Gail
For HDPE bags (30 gm) – 32.4 kg/day
For PP bags (72 gm) – 546.5 kg/day
For PP bags (100 gm) – 1688.7 kg/day
It will be change as per capacity utilisation.

Labour Requirements
The labour requirement is much as for plastic bag manufacturing. For bag plant
unskilled workers are require for doing day to day work, some semiskilled workers
are required for operating the machines etc. The requirements are:-
 Skilled workers -3
  Semi skilled workers-30
 Accountant -1
 Supervisor cum dispatch incharge-1
 Helper-10
 Guard -1
 Manager-1
This is for initial year goes on changing with the requirements.

Financial analysis: Annexure

Basic Assumptions underlying financial projections:

The profitability and other projections may be prepared on the basis of following
assumptions:-
1. The construction period will last for 6 month.
2. The company would work for 300 days per year on 24 hrs. The installed
capacity is 150 MT.
3. The expected capacity utilization will be 60% in first year, 70% in the second
year, and 80% for the third year and 90% for till 7th year.
4. The average sales realisation per bag is for 100 gm= 10.20 rs.
72 gm=7.10 rs. and 30 gm =2.30 rs.
5. Selling Expenses will be 4% of the sales.
6. The bank finance for working capital will cost 25%
7. The depreciation rates for company law purposes are as follows:
Building : 3.34%
Plant & Machinery : 10.34%
Misc Fixed asset : 10.34%

8. The depreciation rats for income taxes are :

Building : 10%
Plant & Machinery :15%

9. The current assets requirements are expected to be as follows:-

Raw materials :-15months
Stock-in-process :- 8day
Finished goods :- 10days
Book debt :- 30month

10. The suppliers of raw material will provide trade credit for 15 days.
11. The corporate tax rate is 30% p