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A PRESENTATION BY SNR.TECH-TEX CONSULTANT ,MUNISH TYAGI, Email: munish.t@rediffmail.com , phone: 098 1125 3332
Worldwide,Tech. Textiles are the fastest growing segment of Textile sector.In the developed countries, the share of such textile products has now reached 60% of all textiles.The Key demand drivers are the growth in GDP and the growth in infrastructure and overall quality of living. However,despite a strong Fiber base, India has remained a laggard and slow mover in the field of non woven and technical textiles,s reflected in poor per capita consumption of only 0.2 Kg versus 3 Kg for the developed countries.Two key grey areas have been the doubts on the types of technology to adopt and for what saleable products;and overall unerstanding of right business model. Future stars on the horizon of Tech textiles are countries like China and India,esp.over the present decade when GDP is est. to average 9-10%p.a. In India, the present market size for Tech Tex is aprox Rs 45000 crore. Due to the GDP factor, it is certainly expected to clock 65000 to 70000 Cr,by 2015.As per a Study by ICRA,the Tech tex sector in India will experience a growth of 11-12% pa. for 2010-2020 decade vis a vis growth of only 6-7% in the developed countries. With the above positive drivers,and projectors for growth and adequate support provided by the Govt. in terms of TUF scheme and capital subsidy benefits to Tech Tex projects, it is the high time for the industry to leverage upon these benefits alongwith advantages of adequate Fiber base.
Disposable income of the Middle class,and esp. The young working couples. This will esp. Drive the demand for the Disposable type non woven products like wipes,pads,hygiene and healthcare products.
Investment in large infrastructure projects for construction of railways, highways, airports, ports and dams and for coastal works and ,new type ` green` buildings. Support and facilitation by the Govt, by way of ongoing schemes to spur Investment.
Overall, it is estimated that the Disposable type nonwovens and geo textile products will be the market preferred technical textiles in India over the present 2010-2020 Decade.Before,any meaningful and fast track investments are made into Tech.tex sector; it will be critical to understand `what is the right technology for what saleable products` In this Presentation, I have tried to address the major area of doubt w.r.t Viability of investment considering that Tech tex projects are high technology and high capex projects.In further slides,I would like to guide the worthy audience thru`a profitable business model of a Rs100 crore Tech tex project,based on 2 non woven lines,for disposable and geo tex products,for upto 45 Metric ton/day.
WEB FORMATION FROM POLYMER TO FABRIC, via Spun laid or Melt blown processes which deploy 100% synth. Fibers ;PP or PES as polymer
DIFFERENT BONDING METHODS, create final nonwoven fabric via Thermal bonding,Chemical bonding,hydro entangling and,Needle punching.
Non woven production allows the mix and matching of diff. Types of processes to create diverse Techtex products of diff. GSM,strength &end uses.
PRODUCTS AND CAPACITY PLAN: The project under ref. is for setting up a New greenfield Unit having 1 Line for Disposable nonwoven products from Airlay line and,1 Line for heavier Geotextiles from geotex/Needle punching line. The key assumptions for planning a practical and Viable project for above ,are:
The unit is based on Imported plant from Europe,under 5% concessional import duty. The Unit will be working for 360 days x 3shifts per year.However, the % capacity utilisation will be 65% in 1st year and, at 75% Optimum from 3 rd year onwards. The project would be financed with Debt-Equity ratio of 3 to 1,as per TUF guidelines;and will be eligible for Interest rebate of 5% under TUF scheme.As such the Net effective term loan interest rate would be bank PLR less 5%. Also,the Unit will be eligible for 10% capital subsidy on Plant & mcy for tech tex processes. This will help bring down promoters own capital. The project will be based on prime input and raw material,of 100% Polyester fiber. The project would have Power consumption of abt 2.5MW,sourced from SEB grid. PRODUCT AND CAPACITY PLAN, PORPOSED FOR THE INTEGRATED UNIT IS AS: A] GEO TEXTILE PRODUCTS,Needle punched 22 Ton/day B] AIRLAY WEB PRODUCTS, 24 TOTAL OUTPUT AT 100% CAPACITY, IS 360X 46 TON/YEAR, WHICH EQUALS.46
Ex-Mill SALE PRICES ASSUMED ARE Rs 110/Kg for Type A,and at Rs 150/kg for Type B,which leads to an Yearly Sale turnover of Rs 160 crore, at Optimum 75% capacity for the new greenfield Unit. UNLIKE NORMAL TEXTILE UNIT A TECHTEX PROJECT HAS BETTER T/OVER TO CAPEX RATIO,1.5 to 1
Infrastructure inputs- Land , 5 acres plot, costing Buildings- 80,000 sq Ft, construction
Plant and machinery- Imported Nonwoven lines+5%Duty, Indeg. Plant and Misc. Assets,like Utility equipments,
Duties,taxes,Engg. ,and Knowhow cost. Pre operative expenses,incl. Interest during project. Provision for contingencies and escalation during project. Margin for Working capital] for Year 2 at 70% capacity]
Rs 60.0 Rs 10.5
Rs 2.85 Rs 7.0 Rs 5.0 Rs 10.5
TOTAL PROJECT COST: Rs 101 crore The overall Investment for the new Techtex project works out to a cost effective Rs 2.2 Cr/TPD,based on state of the art technology,and Imported plant being 60% of Total.
DEBT, by way of bank term loan, at Rs 75 crore. A rebate of 5% on the bank Term loan will be available under the TUF scheme.
EQUITY PART, AT 25% OF PROJECT COST, WORKS OUT TO Rs 26 crore. However, with capital Subsidy of abt Rs 5 cr.,the promoter share to be Rs 21 cr.
When the interest rebate of 5% ,under the TUF scheme, is applied the cash profit of the project further improves. Also, the project is able to deliver a pay back of 1+ 5 years; and a healthy Return on equity at 40% on the new profit.
For output of 46 Ton/day, the project would require 53 ton/day of Fiber The Yearly value of raw material works out to Rs 103 crore;and which is abt 63% of the sales turnover at optimum capacity in 3rd Year.
Besides, PSF, the project would require Packing and finishing materials, Of approx. value 2.1% of the Sale. The total cost of such Indirect material is est.at Rs 3.3 crore,at Opt. capacity. RM to Sale ratio.
Total cost of all materials works out to 65% of sales,at Opt. capacity. This leads to a healthy Gross margin[ or G P ] of 21% for the project. G P to sale ratio is essentially called PBIDT ;and indicator of comparative Financial health of Units of same capacity and same product lines.
A Summary of all major manufacturing costs is provided ,as below, for the Optimum plant capacity at 75%. A reasonable RM to sale ratio of % leads to healthy Gross Profit to Sale ratio of 21%. A] Raw materials cost: Rs 106 crore, for diretc + indirect materials And Rs 3.5 crore for inward and outward freight costs. B] Utility cost Covers the power and fuel expenses at the Opt. capacity. 1. Power cost ,at Rs 6 crore p.a 2. Steam cost,at Rs 2 crore p.a
C] Manpower cost,incl. Salaries : 1.Total Manpower requirement for production will be 140 no/day 2.The yearly manpower cost ,incl. admn. Staff and benfits, works out to Rs 2.10 crore
D] Manufacturing overheads incl. repair,insurance etc 1. The cost of various Factory overheads is est.at rs 2 crore,including maintenance etc. E] TOTAL PRODUCTION COST [ i.e Cost before Sale], works out to Rs 125 crore,and which leads to the Gross Profit margin of 21% after allowing 3% sale expenses.
DSCR of 1.76
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