Business Development Plan Himalaya Water Pvt. Ltd

Business Development Plan

Himalaya Water Pvt. Ltd

Submitted by: Prasun Shakya Term-4, MBA

Submitted to: Ace Institute of Management Pokhara University

Submitted for the course assessment of  Master in Business Administration Administration

Kathmandu January, 2014

Disclaimer The author is confident that the result of the research and the result presented in the report will be taken as guidance for a more comprehensive study on a future date for the concerned store. The author is not responsible or liable, legally against the results and consequence decisions based on the response received from the interviews. The views expressed in this report are those of the author only.

Prasun Shakya

II

Disclaimer The author is confident that the result of the research and the result presented in the report will be taken as guidance for a more comprehensive study on a future date for the concerned store. The author is not responsible or liable, legally against the results and consequence decisions based on the response received from the interviews. The views expressed in this report are those of the author only.

Prasun Shakya

II

Acknowledgement

Foremost, I would like to express my deep and sincere gratitude to my instructors Mr. Ashish Tiwari, Mr. Ajay Shah, Mr. Kumar Thapa and Mr. Anand Tuladhar for sharing their knowledge and supporting me in every step towards developing the business plan. Their support expanded my horizon to understand the process and complexities involved in the process. I would like to extend my appreciation to the staff of Glacier Food and Beverage Industries Pvt. Ltd. Badikhel, Godawari, Lalitpur for sharing their expertise on the process of water purification, bottle sterilization and packaging. Furthermore, I would like to thank Ace institute of management and Pokhara University for giving such an opportunity that will enrich the learning of the MBA program. Lastly, I would like to thank all my friends who helped me to complete the project.

Thanking you,

Sincerely, Prasun Shakya

III

Executive Summary Himalaya Water business will produce high quality sparkling water bottle for the first time in Nepal. Some of the features of our product will be 1. It will have many health benefits 2. It will the first sparkling water produced in Nepal 3. It will be one of best in quality compare to other locally produced p roduced bottled water Currently water supplied by Water Corporation is not suitable for drink. Even though there are many bottled water industry in Nepal, they are more focus on reducing cost rather than quality of water. Hence bottle water quality has been in decreasing trend and demand for good quality is very high. Premium bottled water such as Himalaya On Top and Imported sparkling bottle water like san Pellegrino, Evian etc. are very high price and most of consumers cannot afford it. This is where the opportunity to produce a good quality sparkling water at an affordable price exists. One of the most attractive aspects is that our product will be different from our competitors and it will help to attain a strong cash position and achieve profitability in the early year of operation. Due to demand for good quality drinking water is always in the increasing trend, our projection of quick profitability is attainable. There will be a supervisor employed who will also supervise the entire process. Moreover, a marketing officer and finance officer will help in the day to day functioning of the firm. The workers will be trained on the proper way to do various activities which will increase the efficiency and effectiveness of the overall process. Marketing will be a crucial task as it not only involves selling but begins with spreading awareness about sparkling water and its various health benefits. There is also a need to change people perception towards our product that it is just not an ordinary bottle of water but it is natural medication for prosperous health and life. The firm will be located in Godawari, Lalitpur and established by the equity investment of two investors at a ratio of 50% - 50% respectively. This amount will equate 60% of the entire investment required and the other 40% will be covered by bank loan. If activities follow as planned, the pay back is expected on the first quarter of third year. The company will declare and pay dividends from second year onwards. The dividend will account to 70% in net profit till year four and 80% in year five.

IV

Contents Chapter 1: Introduction ............................................................................................... .......................................................................................................................... ........................... 1 1.1

Background ................................................................. ............................................................................................................................. ............................................................ 1

1.2 Vision ................................................................................ ............................................................................................................................................. ............................................................. 1 1.3 Mission ........................................................................................................................................ .......................................................................................................................................... .. 1 1.4 Objectives.......................... Objectives............................................................................................... ............................................................................................................ ....................................... 1 1.5 Key success factors....................................................................... factors........................................................................................................................ ................................................. 2 1.6 Registration ........................................................................................................ ................................................................................................................................... ........................... 2 1.7 Organisational Structure ............................................................................................................... ............................................................................................................... 2 Chapter 2: The Industry and the Company.................................................................. ............................................................................................. ........................... 3 2.1 The Industry .................................................................................................................................. .................................................................................................................................. 3 2.2 The Company ........................................................................................................................... ................................................................................................................................ ..... 4 2.3 Product and Service ...................................................................................................................... ...................................................................................................................... 4 2.4 Entry and Growth Strategy ........................................................................................................... ........................................................................................................... 4 Chapter 3: Market research and analysis ............................................................................................... ............................................................................................... 5 3.1 SWOT Analysis................................................................... ............................................................................................................................... ............................................................ 5 3.2 Porters five competitive forces .............................................................. ..................................................................................................... ....................................... 6 Chapter 4: Strategy and Implementation Implementation ............................................................................................... ............................................................................................... 7 4.1 Value Proposition............................................................. .......................................................................................................................... ............................................................. 7 4.2 Competitive edge ............................................................................................... .......................................................................................................................... ........................... 7 4.3 Marketing Strategy ...................................................................... ....................................................................................................................... ................................................. 7 4.4 Positioning Statement.................................................................. ................................................................................................................... ................................................. 8 4.5 Pricing Strategy ............................................................................................................................. ............................................................................................................................. 8 4.6 Sales Strategy .......................................................................................... ................................................................................................................................ ...................................... 8 4.7 Web Plan Summary...................................................................... ....................................................................................................................... ................................................. 9 4.8 Distribution Strategy ............................................................................... ..................................................................................................................... ...................................... 9 4.9 Sales Forecast.................................................................... .............................................................................................................................. .......................................................... 10 Chapter 4: Manufacturing and Operations.................................................................. ........................................................................................... ......................... 11 5.1 Process and capacity design........................................................................................................ design........................................................................................................ 11 5.2 Scheduling ..................................................................................................................... ................................................................................................................................... .............. 15 5.3 Layout design .............................................................................................................................. .............................................................................................................................. 15 5.4 Human resource design .............................................................................................................. .............................................................................................................. 15 15 5.5 Inventory Management Management .............................................................................................................. 1 16 6 5.6 Location Strategy ............................................................. ........................................................................................................................ ........................................................... 16 V

5.7 Maintenance ............................................................................................................................... 16 5.8 Time and action plan................................................................................................................... 17 Chapter 6: The Financial Plan ................................................................................................................ 18 6.1 Assumptions................................................................................................................................ 18 6.2 Proforma Income Statement ...................................................................................................... 19 6.3 Cash Flow Statement .................................................................................................................. 20 6.4 Proforma Balance Sheet ............................................................................................................. 21 6.5 Financial Ratios ........................................................................................................................... 22 6.6 Payback Period ............................................................................................................................ 22 6.7 Net Present Value ....................................................................................................................... 22 6.8 Retained Earnings ....................................................................................................................... 23 6.9 Break Even Analysis..................................................................................................................... 23 Chapter 7: Exit Strategy ........................................................................................................................ 24 Bibliography ..........................................................................................................................................25 Annex .................................................................................................................................................... 26 Annex 1: Production Plant Cost ........................................................................................................ 26 Annex 2: Advertisement rates in Healthy Life Magazines ................................................................ 27 Annex 3: Price of Vehicle .................................................................................................................. 28 Annex 4: Price of Multifunction Printer ............................................................................................ 29 Annex 5: Price of Table ..................................................................................................................... 29 Annex 6: Price of Office Chairs .......................................................................................................... 30 Annex 7: Price of Bookcase ............................................................................................................... 30 Annex 8: Price of Cabinet.................................................................................................................. 31 Annex 9: Price of Desktop ................................................................................................................. 31 Annex 10: Price of Inverter ............................................................................................................... 32 Annex 11: Price of Telephone Handset ............................................................................................. 32 Annex 12: Salary................................................................................................................................ 33 Annex 13: Fixed Assets...................................................................................................................... 34 Annex 14: Administrative expenses .................................................................................................. 35 Annex 15: Depreciation .................................................................................................................... 36 Annex 16: Loan Amortization ........................................................................................................... 36 Annex 17: Sales Revenue .................................................................................................................. 37 Annex 18: Total Investment Requirement ........................................................................................ 37 Annex 19: Purchase Budget .............................................................................................................. 38 VI

Annex 20: Cost of Raw Materials ...................................................................................................... 38 Annex 21: Price of Laptop ................................................................................................................. 39 Annex 22: Fees for Registering a Company ...................................................................................... 39 Annex 23: Website Design Quotation............................................................................................... 40 Annex 24: FNCCI Cost of Construction of Building............................................................................ 41 Annex 25: MRP Calculation............................................................................................................... 41 Annex 26: Cost of Production per bottle .......................................................................................... 42 Annex 27: Approximation Fuel Consumption Chart for Generator .................................................. 42 Annex 28: Import Duty...................................................................................................................... 43

VII

List of Tables Table 1: Sales forecast .......................................................................................................................... 10 Table 2: Human Resource Design ......................................................................................................... 16 Table 3: Employees roles and responsibilities ...................................................................................... 16 Table 4: Time and action plan ............................................................................................................... 17 Table 5: Income Statement................................................................................................................... 19 Table 6: Cash flow Statement ............................................................................................................... 20 Table 7: Balance Sheet .......................................................................................................................... 21 Table 8: Financial Ratios........................................................................................................................ 22 Table 9: Payback period ........................................................................................................................ 22 Table 10: Net Present Value and IRR .................................................................................................... 22 Table 11: Retained Earnings.................................................................................................................. 23 Table 12: Break even analysis ............................................................................................................... 23 Table 13: Total Cost of Production Plant .............................................................................................. 26 Table 14: Salary ..................................................................................................................................... 33 Table 15: Details of fixed assets ............................................................................................................ 34 Table 16: Administrative expenses ....................................................................................................... 35 Table 17: Calculation of Depreciation................................................................................................... 36 Table 18: Loan amortization ................................................................................................................. 36 Table 19: Sales revenue ........................................................................................................................ 37 Table 20: Total Investment requirement .............................................................................................. 37 Table 21: Purchase Budget ................................................................................................................... 38 Table 22: Cost of Raw materials............................................................................................................ 38 Table 23: Price of raw materials ........................................................................................................... 39 Table 24: MRP calculation..................................................................................................................... 41 Table 25: Cost of production per bottle ............................................................................................... 42

VIII

List of Figures Figure 1: Organisational Structure of Himalaya Water ........................................................................... 2 Figure 2: Porters five competitive forces................................................................................................ 6 Figure 3: Prime International distribution network ................................................................................ 9 Figure 4: Sparkling Water Production Process...................................................................................... 11 Figure 5: Water Treatment System ....................................................................................................... 11 Figure 6: Water Chiller Tank ................................................................................................................. 12 Figure 7: Packing System....................................................................................................................... 14 Figure 8: Film Shrink-wrapping machine .............................................................................................. 14 Figure 9: Factory Layout........................................................................................................................ 15 Figure 10: Gantt Chart of Business execution....................................................................................... 17 Figure 11: Quotation for water production plant ................................................................................. 26 Figure 12: Advertisement tariff of ECS Media ...................................................................................... 27 Figure 13: Quotation of Van ................................................................................................................. 28 Figure 14: Quotation for MFC printer ................................................................................................... 29 Figure 15: Quotation for Table.............................................................................................................. 29 Figure 16: Quotation for Office Chairs .................................................................................................. 30 Figure 17: Quotation for Bookcase ....................................................................................................... 30 Figure 18: Quotation for Cabinet .......................................................................................................... 31 Figure 19: Quotation for Desktop Computers ...................................................................................... 31 Figure 20: Quotation for Inveter ........................................................................................................... 32 Figure 21: Quotation for Telephone ..................................................................................................... 32 Figure 22: Registration fees for a company .......................................................................................... 39 Figure 23: Website design quotation.................................................................................................... 40 Figure 24: Estimation of Construction cost ........................................................................................... 41 Figure 25: Fuel consumption chart ....................................................................................................... 42 Figure 26: Import Duty Charges ............................................................................................................ 43

IX

Chapter 1: Introduction 1.1 Background The situation of drinking water brings to the forefront two issues — first, there is insufficient supply in the valley and second, the water supplied by the government needs to be treated before it can be consumed. In this backdrop, mineral water has become one of the fastest growing businesses in the last few years. Today, there are more than 400 mineral water brands available in the market, which is natural due to the growing demand. While the mineral water market is saturated with both national and international brands, it is the domestic brands that are enjoying the larger market share. Almost all of the companies that are producing bottle water with strategy of cost minimization with little or no differentiation and quality as secondary strategy. This is where opportunity to produce good quality sparkling water exists in the market where the product itself is first of its kind in the Nepalese market. Sparkling water is water that contains carbon dioxide or hydrogen sulphide gas, whether naturally occurring or introduced on purpose to create an effervescent drink. Sparkling waters are often consumed on their own and can be served either plain or with a twist of lemon or lime as garnish. They may also be used as the base for various cocktails or sodas, and are sometimes recommended as a home remedy for an upset stomach.

1.2 Vision “To make every person  in World to drink and experience Himalaya Water and consequently

feel inspired and uplifted physically, emotionally, spiritually and mentally. ”

1.3 Mission Himalaya Water mission is to become the global sparkling water of choice for every home and business and to be acknowledged as a brand of excellence and supreme quality.

1.4 Objectives 

To raise a higher level of consciousness in humankind through various campaign about health benefits of sparkling water.



To establish a facility near Godawari, Lalitpur.



To strive for sustainability in all its endeavours.



To have strong customer base.



To provide good working condition for employees.



To differentiate our product from others in the market. 1

1.5 Key success factors 

Increasing the trend of drinking sparkling water raising awareness about health benefits.



Matching the taste of Sparkling water with palette of Nepalese Consumers.



Marketing campaign to support the use of Sparkling water as base for various cocktails and drinks as substitute to bottle water.



Offering high quality Sparkling water in an affordable price.



Effecting implementation of its operation strategy to lower the cost of production.

1.6 Registration The following legal procedures should be followed in order to register the company as Himalaya Water Pvt. Ltd. We should make an application to the Company Registrar’s Office

in the prescribed legal format, along with the prescribed official fee which is Rs. 43,000, along with the following documents: I.

Memorandum of Association

II.

Article of Association

III.

Copy of the consensus agreement

IV.

Approval or license from a competent authority, if required

V.

A Certified copy of the citizenship certificate

After making necessary inquiries, the Company Registrar’s Office will register such company within 15 days and grant the company registration certificate

1.7 Organisational Structure

General Manager

Finance Department

Marketing Department

Operation Department

Workers

Figure 1: Organisational Structure of Himalaya Water

2

Chapter 2: The Industry and the Company 2.1 The Industry Beverage is a big industry associated directly with the public’s food and drinking habit. Today’s consumers are more or less health conscious and equally needs the refreshment in

their daily life. Beverage products are basically for the refreshments and enjoyments from the daily drinking habit. People also want their health upgrade or in proper condition while they enjoy or refresh themselves by drinks. And many of the beverages have fulfilled this demand though some alcoholic drinks are not good for health. So, beverage industries and their products has been an inevitable essence of modern society. Traditional drinks like tea, coffee and traditional wines are taken the symbols of human civilization and they are being used in almost every society around the globe from the very ancient periods. These drinks are the part of our daily drinking habit. Non-alcoholic soft drinks and alcoholic hard drinks are the modern concept of drinking habit which is used all over the world in very wide range. These all type of drinks has been a civilization symbol today. This signifies the scope of beverages industries and their product. Fluid intake is very essential for health. Water makes up the 70% of body’s weight and contributes towards

many of the bodily function. Vitamins and minerals are equally important for good health. The beverages like juices and soft drinks, mineral waters are designed to upgrade the health of the consumers while providing the refreshment as they consist of vitamins and minerals. Hence these all symbolize the scope of beverage industries and their products. The world’s bottled water industry recorded a yearly growth rate of 4% in 2010 to exceed

$99 billion. The market is expected to expand by more than 27% in the five-year period ending 2015 to generate more than $126 billion in revenue. In 2010, the market had a volume in excess of 152 billion litres, forecast to reach close to 183 billion litres in 2010, representing a 20% increase in five years. Contaminated water in taps, a scarcity of drinking water, higher urban living standards and the tourism industry have all combined to boost the production of bottled drinking water in Nepal. Bottled water is now an industry with a very high turnover of more than Rs. 200 million a year and market is still growing by about 50% a year. With new export markets being tapped it could one day have the same stature as the carpet industry once had. Nepal has one of the lowest figures for access to safe drinking water among developing countries. Some would say that the water supplied in Kathmandu taps by the Nepal Drinking Water Supply Corporation is the real "mineral" water since it is contaminated with so much chemical and organic pollutants. It is the poor quality of tap water along with shortage of water that has led the people to start buying water.

3

There are more than 400 bottle water companies in Nepal and many unregistered companies as well. The fast-growing bottled-water industry is highly unregulated as studies have shown that one fourth of the water distributed in the market is contaminated. About 25 per cent of the bottled-water companies based in the Kathmandu Valley have been flouting the standards set by the Department of Food Technology and Quality Control.

2.2 The Company One of the most essential things for any living beings in the world is water and to human beings drinking water is essential for its survival. Due to mass globalization, modernization and industrialization, water is being polluted. There is scarcity of hygienic water around the world and it is even worse in Kathmandu Valley. Research has shown that 90% of human diseases are water borne. The demand of quality and hygienic drinking water is increasing and also many bottled water companies are being established to meet this demand. Initially our company will be producing sparkling water which will be hygienic, high quality and having lots of health benefits compare to other bottled drinking water in the market. The production facility will be located in Godawari, Lalitpur.

2.3 Product and Service The product will name as Himalaya Sparkling Water because Nepal is known around the world for its great Himalayan ranges. This name will represent our sparkling water as pride of Nepal. Compared to the bottle water available in the market, the drinking sparkling water brought about significant reductions in the level of low density lipoprotein (LDL) cholesterol (generally regarded as a risk factor for heart disease), as well as a significant increase in levels of high density lipoprotein (HDL) cholesterol (generally taken to reduce heart disease risk). These and other biochemical changes induced by drinking sparkling water were estimated to reduce the women’s risk of developing heart disease over the next decade by

about a third. The water will be packaged in clean and sterilized plastic bottles of 1000ml (1 litre).

2.4 Entry and Growth Strategy Increasing urbanization has increase air and water pollution in towns and cities in Nepal. In most part of urban areas, there is even scarcity of drinking water and people are having difficulty finding quality drinking water. Due to scarcity of quality drinking water, there is increase rate of water borne diseases in Nepal and people are being conscious about the safe and hygienic drinking water. There are more than 400 bottled water companies across the Nepal but only few of companies maintain their quality in production. Almost all of them are producing spring bottled water as there is not much differentiation among the products. The Sparkling Water will be first of its kind in Nepal and will enter the market with a strong marketing campaign to raise awareness about the product and its health benefits. With the help of our distribution partner, we will focus on distributing our product around the country and in the future to export to international market. 4

Chapter 3: Market research and analysis 3.1 SWOT Analysis There are factors internal and external that affects the competencies of any business. Internal factors are the management capability and resources that provide strength to the company. On the other hand, challenges and threats provided by the external factors of the business will also be abundant. The know strength and weakness will help the business opportunity to face challenges and quantify threats. Strength 

There will be a goodwill generation by providing hygienic and quality water.



Provide water that is health beneficial.



Lower cost product than other imported product



Impart not only products but also awareness and effective use.

Weakness 

Getting the skilled and dedicated manpower



Getting funding as it’s a new start-up

Opportunity 

The market for sparkling have not yet been met, therefore there is a larger market



Establishment of goodwill by providing quality and health beneficial sparkling water



Increasing awareness about health issues related with unhygienic water

Threat 

Wider availability of cheaper spring water



The unstable political environment



The increasing unionization



Changing government policies (e.g. increment in minimum wage)

5

3.2 Porters five competitive forces Porter’s five competitive forces can be used to analyse following factors

Figure 2: Porters five competitive forces

Threat of new entrants in the market:

Threat of new entrants in the market for Sparkling water is very low as it requires high investment which will be barrier for new entrants. Threat of Substitutes:

The exact substitute products are expensive imported products which customers are not buying due to high price. There are many spring bottled water in the market which can be substitute for sparkling water but increasing awareness about product benefits compare to other spring water could minimize the threat of substitutes. Bargaining power of consumers:

Consumers have alternative to go for cheaper spring water in the market due to which there is high bargaining power of consumers and setting price of product that will match the consumers’ ability and willingness to pay for the product will help to increase the sale of this

product. Bargaining power of suppliers:

Firms can switch between suppliers very quickly and easily. Suppliers for the bottle water industry do not hold much competitive pressure. Suppliers to the industry are bottling equipment manufacturers and secondary packaging suppliers which can be found in abundance hence decreasing their bargaining power. 6

Chapter 4: Strategy and Implementation 4.1 Value Proposition 

We offer a sparkling water that is pure and high quality product with a price lower than other imported sparkling water in the market.



We offer a product that is health beneficial when comparing it to locally available bottled water.

4.2 Competitive edge The following are the summarized competitive edge of our product 

Health Benefits: There are many health benefits of sparkling water compare to bottled water in the market.



Price: The price of our sparkling water will be much lesser imported sparkling water.



Differentiation: Our sparkling water will first one to be produced locally and differs from all locally bottled water in market.



Quality Water: There are only few companies in Nepal that supply high quality drinking water in the market. Therefore we can establish our product as a top quality provider of sparkling water.



Superior customer service: Company will provide superior customer service in all aspects of the company operations.



Environment Friendly: All of bottles will be recyclable hence helps minimize the environment degradation.



Base for cocktails and hard drinks: The sparkling are best used as base for cocktails in bars and restaurants and for those people who drink whiskies with water or soda, sparkling water is best complement for them to enjoy their drinks rather than using water or soda.

4.3 Marketing Strategy In order to effectively and quickly build its customer base, Himalaya water will use multitude of marketing strategies to promote and expand the product in the market. Free Trials

Free Trials marketing approach has been found to be extremely effective in enticing consumers to try sparkling bottled water and taste the difference among other bottled water. Free trials will be conducted in various departmental stores, restaurants, fitness centre, pharmacy, hospitals and malls.

7

Advertising

The Company will create marketing campaigns within local newspapers Kantipur and Healthy Life magazine of ECS media, social media platform like Facebook, twitter, Google + , and promote the business through word of mouth advertising. Trade and Consumer Shows

Attendance and exhibits at local home and mall shows is also planned, to keep the Sparkling Bottled Water name constantly in front of consumers. Placements

The company will be focusing on placing sparkling bottled water in two places 

Hospital and Clinics: People who are sick and who are health conscious are main stream people coming to hospitals and clinics. Since sparkling water has additional health benefits; it will be able to meet demand of the consumer visiting hospitals.



Restaurants, Pubs and Hotels: Sparkling water is one of good base for cocktails and whiskies hence these areas will be heavily targeted with different promotional campaigns in these areas.

4.4 Positioning Statement Himalaya Sparkling water will be of highest quality pure drinking water that will have health benefits that cannot be matched by competitor product in Nepal at our price.

4.5 Pricing Strategy The price of our product will be lower than imported sparkling water available in the market whereas it will be higher than the most of bottle water produce in Nepal except Himalaya on Top Mineral water. Since the product is of high quality and has lot of health benefits, it  justifies its higher price compared to bottle water produce in Nepal. The average price of 1 litre of imported sparkling water such as San Pellegrino cost around Rs. 200 in the market and Himalaya on Top mineral water market price for 500ml is around Rs. 40. Average price of bottle water in the market is Rs. 15. We would be offering our Sparkling water with MRP of Rs.55 in the market. (Annex 25 for calculation of MRP)

4.6 Sales Strategy Our sales force will be outsourced to the Prime International which is member of ICTC group. The company has been very successful in the past dealing with beverage products and

has

very

highly

motivated,

trained

8

and

groomed

sales

professionals.

4.7 Web Plan Summary Our website will be designed by Nepal Media Network and website will be our virtual business card and portfolio of the company. The website will be a simple, well designed website that provides information to the customers on our products and services. Our website will be an important means by which we can educate potential customers about health benefits and the potential uses of our products and services. Outsourcing our website design with Nepal Media will help us in following ways Build – Help design and host attractive and very effective web site for our business Market – Help us attract people to our web site Convert – Help convert the visitors to our site into our customers.

4.8 Distribution Strategy Our distribution will be exclusively contracted to ICTC Group Company Prime International who is specialized in promoting, marketing and distribution of different kinds of Consumer products all over the country. To deliver its products to customers/CONSUMER located anywhere in Nepal, Prime International has established a robust distribution network covering the whole country. It is at the moment dealing with products like Confectionaries, Liquor, Beer, Detergents.

Figure 3: Prime International distribution network

9

4.9 Sales Forecast The total sales of bottle water per day in Kathmandu Valley is estimated around 25,000 cases of 1 litre bottles which is equivalent to 3,00,000 bottles per day. In a year total no. of bottle sales will be estimated around 10,95,00,000. The market share of Himalaya Water is estimated to be 3%. Thus, market demand for sparkling water is as follows. Our market is 3% of 109500000 litres of bottle of water in a year Total market share = 3% of 10,95,00,000 Year 1 2 3 4 5 6

Target Sales 30% 40% 60% 70% 90% 90%

= 5760000 Projected Sales( Bottle) 17,28,000 23,04,000 34,56,000 40,32,000 51,84,000 51,84,000

Table 1: Sales forecast

10

No. of Cases 1,44,000 1,92,000 2,88,000 3,36,000 4,32,000 4,32,000

Chapter 4: Manufacturing and Operations 5.1 Process and capacity design

Water Treatment System

Processing System

Filing System

Packing System Figure 4: Sparkling Water Production Process

1) Water Treatment System

Figure 5: Water Treatment System



Water is pumped through raw water pump and store in the raw water tank



When water come through the machine, silica sand filter will stop suspend substance, protect the machine, clean the water and cleanses the equipment itself which will prolong the life of machine. 11



After silica sand filter it passes through active carbon filter for further filtration.



Precision filter is made of stainless steel as a small tank which contains precision filter membrane, which allows only un-treated water go through the membrane, and does not allow any liquid go through another part, so it can filter the un-treated water.



Reverse osmosis is made up of pre-process part, 1st reverse osmosis and ozone process and so on, and applied to unit structure.

2) Processing System

The processing system includes following parts 

Beverage Pump



Mixing Tank



Water Chiller Tank: The tank contains compressor using Freon F-12 as refrigerant and pressure sensor, and temperature regulator for automatic controlling

Figure 6: Water Chiller Tank 

Beverage mixing machine: It is used for mixing and improving the proportion of water and carbon dioxide. It adopts foreign advanced technology —static mixer to lighten water layer, increase carbonizing time, assure mixing result and deoxying. It adopts high-quality water pump and SEIMENS electrical equipment and other parts to form complete automatic control system.



Pipes and valves



Control Cabinet 12

3) Filling System

The filling system compromises of following parts and equipment 

Bottle platform table



Washing filling capping machine: This machine works harmoniously with airconveyor belt. It holds the bottles by the neck, thus, reducing the possibility of bottles falling over during conveying process. This machine is used to fill carbonated drink into pet bottle and with screw caps capping function. This machine integrated three function: 1. rinse the empty pet bottle, 2. filling the rinsed bottles, 3.capping the filled bottles



Rinser Station: Rinser station contains 304 stainless steel rinser heads, water spray style inject design, more save water consumption & more clean, 304 Stainless steel Gripper with plastic pad to ensure minimal bottle crash during washing and 304 stainless steel washing pumps.



Filling Station: It has accurate, high precision filling nozzle together with vacuum pump regurgitant system, to ensure the high filling precision, ensure same filling level with adjustable filling temperature. When there is no bottle there will be no filling.



Capper Station: Place & capping system, electromagnetic capping heads, with burden discharge function, make sure minimum bottle crash during capping and when there is no bottle no capping and automatic stop when there is lack of caps. o

Auto cap elevator: The machine mainly includes cap storage case, conveyor pipeline, drive device and appliance control.

o

Electric Part & Safe Device & Automation

o

Machine Base & Machine Construction

o

Conveyer system

o

Air conveyer

o

Light checker

13

4) Packing System The packing system contains following parts 

Drying machine: It is used to dry the bottle that feeding from the Rinser Filler Capper with pressured air, make them suitable to the post-packaging



Automatic sleeve shrink labeling machine

Figure 7: Packing System 

Ink jet printer: It is used for automatic printing for date of manufacture, batch numbers, shift numbers.



Film Shrink-wrapping machine

Figure 8: Film Shrink-wrapping machine

14

5.2 Scheduling Effective scheduling is required for smooth operation of the factory. During the first year of operation, in the summer season where demand is high for water, the factory will be schedule to run from 7am to 7pm 7 days a week and in off season where demand is less, the factory will be schedule to run from 9am to 5pm 7 days a week. This will make effective and efficient use of our resources. We will be making decision on increasing the production hours on the basis of sales forecast from second year.

5.3 Layout design

Figure 9: Factory Layout

5.4 Human resource design Human resources is the most basic and fundamental part of our operations. We need people to fulfil our missions, goals and objectives like any other organization. Most importantly we need an expert who can monitor and supervise on the day to day operations and improvise for better and faster production. We also need qualified technician for regular maintenance of all the machineries. There will be 10% increment in salary every year for all employees. We have planned on the following number of employees on different post for year 1:

15

Human Resources

Staff 

General Manager Finance Manager Marketing Manager Supervisor/Technician Workers Sweeper

1 1 2 2 6 1

Year 1 Salary (each) 25,000 15,000 15,000 15,000 8,000 8,000

Total /month 25,000 15,000 30,000 30,000 48,000 8,000

Table 2: Human Resource Design

Human Resources

Roles & responsibilities

General Manager

Responsible for recruiting staffs, employee leave management, monitoring the operations, assigning jobs to analysts, job evaluation, finding if there is a need of external contractors etc.

Finance and Marketing Officer

Responsible for maintaining financial statements, employee benefits, incentives, marketing activities, promotional activities, brand management etc.

Expert / Supervisor

Responsible for providing training to the workers and supervising day to day workings.

Workers

Responsible for operating plants and machineries

Table 3: Employees roles and responsibilities

5.5 Inventory Management Our inventories consist of plastic bottles, bottle caps, labels and cartons and quantity of these inventories will be kept on the basis of sales projection for next months. Inventory of bottle of sparkling water will be 200 cartons and usually inventory are stored in FIFO basis and usually store for not more than 2 days as its shelf life is around 3 months.

5.6 Location Strategy Location largely affects the productivity and efficiency of the manufacturing unit. Being a water producing company, the location we have chosen is where there is plenty of water and where there is proper road for distribution to the dealers. With this prospective in mind we have chosen Godawari, Lalitpur as our location for the factory. The advantageous of Godawari over other location in Kathmandu valley is its geological formation which is famous for its spring water.

5.7 Maintenance Maintenance is a crucial part of our continued operations of plant. All necessary office equipment, web site and machinery needs periodic tune up. For this purpose we will hire an external technician for quarterly service fee.

16

5.8 Time and action plan Activity

Duration (Weeks) 6 2 24 3+1(Training)

Preparing the business plan Registration of Business Factory layout and establishment Hiring professionals and supporting staffs Table 4: Time and action plan Weeks

2

4

6

8

10 12 14 16 18 20

(worked)

Activity Preparing Business Plan Registration of business Factory layout

&

establishment Hiring  professionals & supporting staffs

Figure 10: Gantt Chart of B usiness execution

17

22

24

26

28

30

32

34

36

Chapter 6: The Financial Plan 6.1 Assumptions 

Costs of Goods Sold: Cost of production includes all the costs of raw materials such as water, gases, bottles, labels, cartons, electricity and direct labour.



Salary: Salary of the employees is increased by 10% from the second year. Since the company starts earning profit from the second year, we decided to increase the good amount of income for the employees as well as number of employees. The details of the salary to be distributed to the staffs according to their positions are shown in Annex 12.



Advertisement: The advertisement expenses are assumed to grow every year by 20% and would be expanded depending upon the growth of business. The detail of calculation of advertisement expense is shown in Annex 14.



Lease: A 3 ropani land will be lease for 10 years at Godawari, Lalitpur and the facility is built. The yearly lease will amount to Rs. 300,000. The rate of lease of land and building is calculated using data provided by Glacier Food and Beverage.



Construction cost of building data from FNCCI is used to calculate the cost which is shown in Annex 24. Construction cost of factory building is Rs.1200 per sq. ft. and since we will be built on 2 Ropani of Land which will equate to 10952 sq. ft. The total cost of construction of building will be Rs. 1200 x 10952 = Rs. 13142400



Depreciation: The assets of the store are depreciated under diminishing balance method at the rate of 5% for building, 15% for machinery and 25% for furniture and office equipment. The calculation is shown in Annex 15.



Interest on loan: The interest rate on loan is 15%, which will be paid annually in 5 years. The loan amortization schedule is shown in Annex 16.

18

6.2 Proforma Income Statement Particulars

Ye ar 1

Ye ar 2  

Ye ar 4

Ye ar 5 18,14,40,000

  12,09,60,000

  14,11,20,000

18,14,40,000

4,50,48,000

 

6,75,12,000

 

7,87,44,000

10,12,08,000

85,800

 

1,29,250

 

1,61,563

2,68,555

  5,33,18,750

  6,22,14,438

7,99,63,445

 

Total Re ve nue

  6,04,80,000

  8,06,40,000

 

3,38,16,000

 

 

78,000

 

Less: Cost of Raw Materials Less: Direct Labor  Gross Profit

6,04,80,000

14,11,20,000

Sales

  2,65,86,000

Ye ar 3

8,06,40,000

 

  3,55,06,200

12,09,60,000

 

Less Expense s: Salary

 

19,50,000

 

21,45,000

 

34,81,500

 

43,51,875

66,58,008

Expenses Generator Fuel

   

1,33,54,000 32,13,600

   

1,47,14,800 33,74,280

   

1,71,85,980 35,42,994

   

1,97,62,118 37,20,144

2,08,93,878 39,06,151

Preliminary exp W/O Total Expense s EBIT

  2,92,967   1,88,10,567   77,75,433

  2,92,967   2,45,03,441   2,88,15,309

  2,92,967   2,81,27,103   3,40,87,334

2,92,967 3,17,51,003 4,82,12,442

 

 

Less: Depreciation Less: Interest @ 15% EBT Tax @ 25% Ne t Profit

  2,92,967   2,05,27,047   1,49,79,153

 

54,09,715

 

       

32,40,000 (8,74,282) (2,18,570) (6,55,711)

       

46,51,721 27,59,458 75,67,975 18,91,994 56,75,981

40,07,028

  22,06,834   2,26,01,448   56,50,362   1,69,51,086

34,58,117

29,90,257

  15,71,317   2,90,57,900   72,64,475   2,17,93,425

8,40,472 4,43,81,714 1,10,95,428 3,32,86,285

Table 5: Income Statement

19

6.3 Cash Flow Statement Particular A. Revenue: Beginning Balance Equity Financing Loan fi nanci ng Revenue from sale   Total receipts B. Disbursement: Prel imi nary e xpe nse s Fi xed assets Purchase Dividend paid Payment of loan administrative expenses Salary expenses Generator fuel Interest payment Tax payment   Total Disbursement Surplus/Deficit (A-B)   Less: Investment Ending cash balance

Year 0

Year 1 -

Year 2

 

77,58,767

 

58,48,121

   

6,04,80,000 6,82,38,767

   

8,06,40,000 8,64,88,121

 

3,75,70,000

   

4,69,20,000 40,00,000

Year 3  

69,12,632

Year 4  

Year 5

1,09,90,930

1,22,91,140

  12,09,60,000   12,78,72,632

  14,11,20,000   15,21,10,930

18,14,40,000 19,37,31,140

   

   

10,12,08,000 2,67,00,000

3,24,00,000 2, 16, 00, 000 5,40,00,000 14,64,833 4,47,76,400 6,84,48,000 1,20,00,000

8,06,16,000 1,75,00,000

 

32,03,616

 

36,84,158

 

42,36,782

 

48,72,299

56,03,144

 

1,33,54,000

 

1,47,14,800

 

1,71,85,980

 

1,97,62,118

2,08,93,878

 

20,28,000

 

22,30,800

 

36,10,750

 

45,13,438

69,26,563

 

32,13,600

 

33,74,280

 

35,42,994

 

37,20,144

39,06,151

   

32,40,000 (2,18,570)

   

27,59,458 18,91,994

   

22,06,834 56,50,362

   

15,71,317 72,64,475

8,40,472 1,10,95,428

4,62,41,233

 

6,23,90,646

 

7,95,75,490

 

58,48,121

 

69,12,632

  11,68,81,702   1,09,90,930

  13,98,19,790   1,22,91,140

17,71,73,636

77,58,767

 

58,48,121

 

69,12,632

 

 

Table 6: Cash flow Statement

20

1,09,90,930

1,22,91,140

1,65,57,504 1,65,57,504

6.3 Cash Flow Statement Particular

Year 0

Year 1

Year 2

Year 3

Year 4

Year 5

A. Revenue: Beginning Balance

-

Equity Financing

3,24,00,000

 

77,58,767

 

58,48,121

Loan fi nanci ng

2, 16, 00, 000    

6,04,80,000 6,82,38,767

   

8,06,40,000 8,64,88,121

Purchase Dividend paid

 

3,75,70,000

   

Payment of loan

 

32,03,616

administrative expenses

 

Salary expenses

 

Generator fuel Interest payment Tax payment

Revenue from sale Total receipts

 

1,09,90,930

1,22,91,140

  12,09,60,000   12,78,72,632

  14,11,20,000   15,21,10,930

18,14,40,000 19,37,31,140

4,69,20,000 40,00,000

   

6,84,48,000 1,20,00,000

   

8,06,16,000 1,75,00,000

10,12,08,000 2,67,00,000

 

36,84,158

 

42,36,782

 

48,72,299

56,03,144

1,33,54,000

 

1,47,14,800

 

1,71,85,980

 

1,97,62,118

2,08,93,878

20,28,000

 

22,30,800

 

36,10,750

 

45,13,438

69,26,563

 

32,13,600

 

33,74,280

 

35,42,994

 

37,20,144

39,06,151

   

32,40,000 (2,18,570)

   

27,59,458 18,91,994

   

22,06,834 56,50,362

   

15,71,317 72,64,475

8,40,472 1,10,95,428

4,62,41,233

 

6,23,90,646

 

7,95,75,490

 

58,48,121

 

69,12,632

  11,68,81,702   1,09,90,930

  13,98,19,790   1,22,91,140

17,71,73,636

77,58,767

 

58,48,121

 

69,12,632

 

 

5,40,00,000

 

69,12,632

 

B. Disbursement: Prel imi nary e xpe nse s

14,64,833

Fi xed assets

4,47,76,400

  Total Disbursement Surplus/Deficit (A-B)   Less: Investment Ending cash balance

1,09,90,930

1,22,91,140

1,65,57,504 1,65,57,504

Table 6: Cash flow Statement

20

6.4 Proforma Balance Sheet Ye ar

Ye ar 1

Ye ar 2

Ye ar 3

Ye ar 4

  69,12,632   56,26,000   1,25,38,632

  1,09,90,930   65,62,000   1,75,52,930

  1,22,91,140   84,34,000   2,07,25,140

Ye ar 5

ASSETS Current Ass ets

Cash and cash equivalents Inventory Total Current Asse ts Fixed Asse ts Land lease   Building Less : Accumulated Depre ciation Machinery & Equipments Less : Accumulated Depre ciation Furniture and Fixture Less : Accumulated Depre ciation Office equipment Less : Accumulated Depre ciation Vehicle Less : Accumulated Depre ciation Investments Total Fixed Assets Intangiable Fixe d ass et: Preliminary expenses TOTAL ASSETS

     

58,48,121 37,54,000 96,02,121

                 

300000 13142400 (6,57,120) 3,06,34,050 (45,95,108) 55,350 (13,838) 2,94,600 (73,650) 3,50,000 (70,000) 3,93,66,685

 

                   

300000 12485280 (6,24,264) 2,60,38,943 (39,05,841) 41,513 (10,378) 2,20,950 (55,238) 2,80,000 (56,000) 3,47,14,964

                   

300000 11861016 (5,93,051) 2,21,33,101 (33,19,965) 31,134 (7,784) 1,65,713 (41,428) 2,24,000 (44,800) 3,07,07,936

                   

300000 11267965.2 (5,63,398) 1,88,13,136 (28,21,970) 23,351 (5,838) 1,24,284 (31,071) 1,79,200 (35,840) 2,72,49,819

1,65,57,504 84,34,000 2,49,91,504 300000 10704566.94 (5,35,228) 1,59,91,166 (23,98,675) 17,513 (4,378) 93,213 (23,303) 1,43,360 (28,672) 2,42,59,562

  11,71,867   5,01,40,673

  8,78,900   4,81,32,496

  5,85,933   4,88,46,800

2,92,967   4,82,67,925

4,92,51,066

  1,83,96,384   1,83,96,384

  1,47,12,226   1,47,12,226

  1,04,75,444   1,04,75,444

56,03,144 56,03,144

0 0

  3,24,00,000   (6,55,711)   3,17,44,289   5,01,40,673

  3,24,00,000   10,20,270   3,34,20,270   4,81,32,496

  3,24,00,000   59,71,356   3,83,71,356   4,88,46,800

  3,24,00,000   1,02,64,781   4,26,64,781   4,82,67,925

3,24,00,000 1,68,51,066 4,92,51,066 4,92,51,066

LIABILITIES Long Te rm Liabilities

Bank Loan Total Long Te rm Liabilitie s Capital & Equity Equity Reta ined Earning Total Equity TOTAL LIABILITIES AND EQUITY

Table 7: Balance Sheet

21

6.4 Proforma Balance Sheet Ye ar

Ye ar 1

Ye ar 2

Ye ar 3

Ye ar 4

  69,12,632   56,26,000   1,25,38,632

  1,09,90,930   65,62,000   1,75,52,930

  1,22,91,140   84,34,000   2,07,25,140

Ye ar 5

ASSETS Current Ass ets

Cash and cash equivalents Inventory Total Current Asse ts Fixed Asse ts Land lease   Building Less : Accumulated Depre ciation Machinery & Equipments Less : Accumulated Depre ciation Furniture and Fixture Less : Accumulated Depre ciation Office equipment Less : Accumulated Depre ciation Vehicle Less : Accumulated Depre ciation Investments Total Fixed Assets Intangiable Fixe d ass et: Preliminary expenses

     

58,48,121 37,54,000 96,02,121

                 

300000 13142400 (6,57,120) 3,06,34,050 (45,95,108) 55,350 (13,838) 2,94,600 (73,650) 3,50,000 (70,000) 3,93,66,685

 

TOTAL ASSETS

                   

300000 12485280 (6,24,264) 2,60,38,943 (39,05,841) 41,513 (10,378) 2,20,950 (55,238) 2,80,000 (56,000) 3,47,14,964

                   

300000 11861016 (5,93,051) 2,21,33,101 (33,19,965) 31,134 (7,784) 1,65,713 (41,428) 2,24,000 (44,800) 3,07,07,936

                   

300000 11267965.2 (5,63,398) 1,88,13,136 (28,21,970) 23,351 (5,838) 1,24,284 (31,071) 1,79,200 (35,840) 2,72,49,819

1,65,57,504 84,34,000 2,49,91,504 300000 10704566.94 (5,35,228) 1,59,91,166 (23,98,675) 17,513 (4,378) 93,213 (23,303) 1,43,360 (28,672) 2,42,59,562

  11,71,867   5,01,40,673

  8,78,900   4,81,32,496

  5,85,933   4,88,46,800

2,92,967   4,82,67,925

4,92,51,066

  1,83,96,384   1,83,96,384

  1,47,12,226   1,47,12,226

  1,04,75,444   1,04,75,444

56,03,144 56,03,144

0 0

  3,24,00,000   (6,55,711)   3,17,44,289   5,01,40,673

  3,24,00,000   10,20,270   3,34,20,270   4,81,32,496

  3,24,00,000   59,71,356   3,83,71,356   4,88,46,800

  3,24,00,000   1,02,64,781   4,26,64,781   4,82,67,925

3,24,00,000 1,68,51,066 4,92,51,066 4,92,51,066

LIABILITIES Long Te rm Liabilities

Bank Loan Total Long Te rm Liabilitie s Capital & Equity Equity Reta ined Earning Total Equity TOTAL LIABILITIES AND EQUITY

Table 7: Balance Sheet

21

6.5 Financial Ratios Particulars Return on Investments (%) Return on Assets (%) Debt-to-Equity Ratio Return on Equity (%)

Year 1 -1.29 -1.31 0.57 -2.02

Year 2 12.05 11.79 0.45 17.52

Year 3 39.54 34.70 0.32 52.32

Year 4 57.35 45.15 0.17 67.26

Year 5 102.74 67.58 0.00 102.74

Table 8: Financial Ratios

6.6 Payback Period Year

Investment

0 1 2 3 4 5

Cashflow

(5,40,00,000)          

0 47,54,004 1,03,27,702 2,09,58,114 2,52,51,543 3,62,76,542

Cumulative CF

(5,40,00,000) (4,92,45,997) (3,89,18,295) (1,79,60,181) 72,91,361 4,35,67,904

Payback Period in Years

3.29

Table 9: Payback period

6.7 Net Present Value Year 0

Cash Flow

Year 1

(5,40,00,000)   47,54,004

Year 2

Year 3

Year 4

Year 5

 1,03,27,702

 2,09,58,114

 2,52,51,543

3,62,76,542

NPV

Rs. 89,53,119.56

IRR

17%

Table 10: Net Present Value and IRR

The Net Present Value is positive for the business, which means business will be in profit. So, it would be better to start the business. The Internal Rate of Return (IRR) is 17%.

22

6.5 Financial Ratios Particulars Return on Investments (%) Return on Assets (%) Debt-to-Equity Ratio Return on Equity (%)

Year 1 -1.29 -1.31 0.57 -2.02

Year 2 12.05 11.79 0.45 17.52

Year 3 39.54 34.70 0.32 52.32

Year 4 57.35 45.15 0.17 67.26

Year 5 102.74 67.58 0.00 102.74

Table 8: Financial Ratios

6.6 Payback Period Year

Investment

0 1 2 3 4 5

Cashflow

(5,40,00,000)          

Cumulative CF

0 47,54,004 1,03,27,702 2,09,58,114 2,52,51,543 3,62,76,542

(5,40,00,000) (4,92,45,997) (3,89,18,295) (1,79,60,181) 72,91,361 4,35,67,904

Payback Period in Years

3.29

Table 9: Payback period

6.7 Net Present Value Year 0

Cash Flow

Year 1

(5,40,00,000)   47,54,004

Year 2

Year 3

Year 4

Year 5

NPV

 1,03,27,702

 2,09,58,114

 2,52,51,543

3,62,76,542

IRR

Rs. 89,53,119.56

17%

Table 10: Net Present Value and IRR

The Net Present Value is positive for the business, which means business will be in profit. So, it would be better to start the business. The Internal Rate of Return (IRR) is 17%.

22

6.8 Retained Earnings Particulars Opening balance  Net income (profit) Less: Dividend Closing balance (RE)

Year 1

       

(6,55,711) (6,55,711)

       

Year 2 (6,55,711)  

56,75,981 40,00,000 10,20,270

     

Year 3 10,20,270

1,69,51,086 1,20,00,000 59,71,356

       

Year 4 59,71,356

2,17,93,425 1,75,00,000 1,02,64,781

Year 5 1,02,64,781 3,32,86,285 2,67,00,000 1,68,51,066

Table 11: Retained Earnings nd

nd

rd

th

Dividend is distributed from 2  year and In 2  and 3  year, around 70% of Net Profit is distributed as dividend and around 80% in the 4  and th 5  year.

6.9 Break Even Analysis Particulars

Year 1

Sales Fixed Cost Variable Cost BEP (%) VC/Revenue 1-VC/Revenue BEP in Rupees

6,04,80,000 1,16,44,682 4,64,69,600 0.83 0.77 0.23

     

5,02,67,683.09

Table 12: Break even analysis

The company’s break even sales for first year is Rs. 5,02,67,683.09

23

6.8 Retained Earnings Particulars Opening balance  Net income (profit) Less: Dividend Closing balance (RE)

Year 1

       

(6,55,711) (6,55,711)

       

Year 2 (6,55,711)  

56,75,981 40,00,000 10,20,270

     

Year 3 10,20,270

1,69,51,086 1,20,00,000 59,71,356

       

Year 4 59,71,356

2,17,93,425 1,75,00,000 1,02,64,781

Year 5 1,02,64,781 3,32,86,285 2,67,00,000 1,68,51,066

Table 11: Retained Earnings nd

nd

rd

th

Dividend is distributed from 2  year and In 2  and 3  year, around 70% of Net Profit is distributed as dividend and around 80% in the 4  and th 5  year.

6.9 Break Even Analysis Particulars

Year 1

Sales Fixed Cost Variable Cost BEP (%) VC/Revenue 1-VC/Revenue BEP in Rupees

6,04,80,000 1,16,44,682 4,64,69,600 0.83 0.77 0.23

     

5,02,67,683.09

Table 12: Break even analysis

The company’s break even sales for first year is Rs. 5,02,67,683.09

23

Chapter 7: Exit Strategy There are many constraints for a business of this nature to succeed in Nepal as the competition is too high. Hence, if the company suffers tremendous loses and needs to be shut down, two alternatives will be considered: The first alternative is that the company will try to tie up with other similar company, prioritizing the outside investors. The next alternative is to sell all the assets of the company such as machineries, equipment, generator, computers, laptops, furniture and so on.

Chapter 7: Exit Strategy There are many constraints for a business of this nature to succeed in Nepal as the competition is too high. Hence, if the company suffers tremendous loses and needs to be shut down, two alternatives will be considered: The first alternative is that the company will try to tie up with other similar company, prioritizing the outside investors. The next alternative is to sell all the assets of the company such as machineries, equipment, generator, computers, laptops, furniture and so on.

24

Bibliography Times. 

Nepali

(2000,

August).

Retrieved

December

24,

2013,

from

5,

2013,

from

http://nepalitimes.com/news.php?id=11264#.UtGFsvQW1at The

Himalayan

Times. 

(2011).

Retrieved

December

http://www.thehimalayantimes.com/perspectives/fullnews.php?headline=for+quality+contr ol&newsid=MTI0NQ== . (2013, January 14). Retrieved December 2013, http://cooking.stackexchange.com/questions/30055/how-much-co2-does-it-take-to-

Cooking

Stackexchange

from

carbonate-water-using-a-household-soda-siphon Soda

Stream.

(n.d.).

Retrieved

November

http://www.sodastreamusa.com/

25

2013,

from

Soda

Stream

USA:

 Annex  Annex 1: Production Plant Cost

Figure 11: Quotation for water production plant

Description

Price

Water Production Plant CO2 Production Plant Cost with Import Duty Installation Air Ticket for Installer Accomodation Shipping Cost of Plants Total Cost of Production Plant

23961000 2560000

Import Duty(5%) Total Cost

1198050 128000

Table 13: Total Cost of Production Plant

26

25159050 2688000 27847050 55000 32000 100000 1100000 29134050

 Annex 2: Advertisement rates in Healthy Life Magazines

Figure 12: Advertisement tariff of ECS Media

27

 Annex 3: Price of Vehicle

Figure 13: Quotation of Van

28

 Annex 4: Price of Multifunction Printer

Figure 14: Quotation for MFC printer

 Annex 5: Price of Table

Figure 15: Quotation for Table

29

 Annex 6: Price of Office Chairs

Figure 16: Quotation for Office Chairs

 Annex 7: Price of Bookcase

Figure 17: Quotation for Bookcase

30

 Annex 8: Price of Cabinet

Figure 18: Quotation for Cabinet

 Annex 9: Price of Desktop

Figure 19: Quotation for Desktop Computers

31

 Annex 10: Price of Inverter

Figure 20: Quotation for Inveter

 Annex 11: Price of Telephone Handset

Figure 21: Quotation for Telephone

32

 Annex 12: Salary

Year 1 Salary Staff  (each) 1 25,000 1 15,000 2 15,000 2 15,000 6 8,000 1 8,000

Human Resources

General Manager Finance Manager Marketing Manager Supervisor/Technician Workers Sweeper

Total Staffs Total Expenses per month Total Expenses /year

Year 2 Salary Staff  (10% 1 27,500 1 16,500 2 16,500 2 16,500 6 8,800 1   8,800

Total /month 25,000 15,000 30,000 30,000 48,000 8,000

Total /month 27,500 16,500 33,000 33,000 52,800 8,800

Staff 

1 2 3 2 8 1

Year 3 Salary (10% 34,375   20,625   20,625   20,625   11,000   11,000  

Total /month 34,375 41,250 61,875 41,250 88,000 11,000

Staff

1 2 3 2 8 1

Year 4 Salary (10% 42,969   25,781   25,781   25,781   13,750   13,750  

Total Staff /month 42,969 1 51,563 2 77,344 4 51,563 3 1,10,000 10 13,750 1

Year 5 Salary (10% 53,711   32,227   32,227   32,227   17,188   17,188  

13

13

17

17

21

1,56,000

1,71,600

2,77,750

3,47,187.50

5,32,813

20,28,000

22,30,800

36,10,750

45,13,438

69,26,563

Total /month 53,711 64,453 1,28,906 96,680 1,71,875 17,188

Table 14: Salary

33

 Annex 13: Fixed Assets Year 1

Items Land and building: Land lease Building Machinary: Production System GI Pipe Generator Furnitures: Table Chair Plastic chairs Bookcase Cabinet Office equipment: Computers Printer/ Scanner/Photocopier  Invertor/UPS Laptops Telephone set Other  Vehicle Total Fixed Assets

Qty

Rate

3 ropani 1

 

2,51,48,000

1

  14,70,000

4 4 15 2 2

Rate

15,960 7,960 14,850 6,580 10,000

25,000

50,000

  1,17,000

1,17,000

2  

 

1

     

1   1   1  

 

1

Year 3

Total

Qty

Rate

300000

Year 4

Total

Qty

Rate

300000

Year 5

Total

Qty

Rate

300000

70,000 48,600 9,000

70,000 48,600 9,000

  3,50,000 4,47,76,400

3,50,000 3,96,66,685

3,53,14,964

3,16,07,936

2,84,49,819

54,09,715

46,51,721

40,07,028

34,58,117

29,90,257

3,93,66,685

3,50,14,964

3,13,07,936

2,81,49,819

2,54,59,562

Table 15: Details of fixed assets

34

Total 300000

2,91,34,050 30,000 14,70,000

3,990 1,990 990 3,290 5,000

 

Balance after depreciation

Qty

3,00,000 1,31,42,400

1

Depriciation per year

Year 2

Total

 Annex 13: Fixed Assets Year 1

Items

Qty

Land and building: Land lease Building Machinary: Production System GI Pipe Generator Furnitures: Table Chair Plastic chairs Bookcase Cabinet Office equipment: Computers Printer/ Scanner/Photocopier  Invertor/UPS Laptops Telephone set Other  Vehicle Total Fixed Assets

Year 2

Rate

Total

3 ropani 1

 

2,51,48,000

1

  14,70,000

4 4 15 2 2

Total

15,960 7,960 14,850 6,580 10,000

25,000

50,000

  1,17,000

1,17,000

2  

 

1

     

1   1   1  

 

1

Qty

Rate

300000

Year 4

Total

Qty

Year 5

Rate

Total

300000

Qty

Rate

300000

70,000 48,600 9,000

70,000 48,600 9,000

  3,50,000 4,47,76,400

3,50,000 3,96,66,685

3,53,14,964

3,16,07,936

2,84,49,819

54,09,715

46,51,721

40,07,028

34,58,117

29,90,257

3,93,66,685

3,50,14,964

3,13,07,936

2,81,49,819

2,54,59,562

Table 15: Details of fixed assets

34

 Annex 14: Administrative expenses Year 1

Particular Electricity

Year 2

9440000

Year 3

10280000

Year 4

11960000

13640000

Year 5 13640000

Telephone @3000

 

36,000

 

39,600

 

43,560

 

47,916

52,708

Internet @ 1500

 

18,000

 

19,800

 

21,780

 

23,958

26,354

Office expense@ 2000

 

24,000

 

26,400

 

29,040

 

31,944

35,138

Stationary @1000

 

12,000

 

13,200

 

14,520

 

15,972

17,569

Registration

 

43,000

 

2,000

 

2,000

 

2,000

2,000

Fuel for Vehicle

 

1,56,000

 

1,71,600

 

1,88,760

 

2,07,636

2,28,400

Website maintenance

 

 

2,400

 

2,880

 

Total Operating Cost

2,000 97,31,000

3,456

4,147

1,05,55,000

1,22,62,540

  1,39,72,882

1,40,06,316

Marketing: Advertisement in ECS Media (Half P age) ( 20 % an nu al i ncre me nt )

 

5, 46, 000

 

6,55,200

 

7,86,240

 

9,43,488

11,32,186

Business cards@5

 

7,000

 

7,000

 

7,000

 

7,000

7,000 53,74,771

Advertis ement in k antipur (180cc*800)   25,92,000

  31,10,400

  37,32,480

 

44,78,976

Trad e an d Co ns um er Sh ow s

(20% annual increment)

 

2, 00, 000

 

1,00,000

 

1,00,000

 

50,000

50,000

Place me nts

 

1,00,000

 

1,00,000

 

1,00,000

 

1,00,000

1,00,000

Fre e Tri al s

 

1,00,000

 

1,00,000

 

1,00,000

 

1,00,000

1,00,000

  35,45,000

  40,72,600

  48,25,720

 

56,79,464

67,63,957

Machine Servicin g

 

12,000

 

13,200

 

14,520

 

15,972

17,569

Ronash Testing

 

6,000

 

6,000

 

6,000

 

6,000

6,000

Social Organization

 

15,000

 

16,500

 

18,150

 

19,965

21,962

Godawari Club

 

25,000

 

27,500

 

30,250

 

33,275

36,603

Total marketing cost

Auditors Fee (20% increment)

Total M is ce lle ne ous e xpe ns es Total

20,000

24,000

28,800

34,560

41,472

78,000 87,200 97,720 1,09,772 1,23,605 1,33,54,000 1,47,14,800 1,71,85,980 1,97,62,118 2,08,93,878

Table 16: Administrative expenses

35

Total 300000

2,91,34,050 30,000 14,70,000

3,990 1,990 990 3,290 5,000

 

Balance after depreciation

Year 3

Rate

3,00,000 1,31,42,400

1

Depriciation per year

Qty

 Annex 14: Administrative expenses Year 1

Particular Electricity

Year 2

9440000

Year 3

10280000

Year 4

11960000

Year 5

13640000

13640000

Telephone @3000

 

36,000

 

39,600

 

43,560

 

47,916

52,708

Internet @ 1500

 

18,000

 

19,800

 

21,780

 

23,958

26,354

Office expense@ 2000

 

24,000

 

26,400

 

29,040

 

31,944

35,138

Stationary @1000

 

12,000

 

13,200

 

14,520

 

15,972

17,569

Registration

 

43,000

 

2,000

 

2,000

 

2,000

2,000

Fuel for Vehicle

 

1,56,000

 

1,71,600

 

1,88,760

 

2,07,636

2,28,400

Website maintenance

 

 

2,400

 

2,880

 

2,000

Total Operating Cost

97,31,000

3,456

4,147

1,05,55,000

1,22,62,540

  1,39,72,882

1,40,06,316

Marketing: Advertisement in ECS Media (Half P age) ( 20 % an nu al i ncre me nt )

 

5, 46, 000

 

6,55,200

 

7,86,240

 

9,43,488

11,32,186

Business cards@5

 

7,000

 

7,000

 

7,000

 

7,000

7,000 53,74,771

Advertis ement in k antipur (180cc*800)   25,92,000

  31,10,400

  37,32,480

 

44,78,976

Trad e an d Co ns um er Sh ow s

(20% annual increment)

 

2, 00, 000

 

1,00,000

 

1,00,000

 

50,000

50,000

Place me nts

 

1,00,000

 

1,00,000

 

1,00,000

 

1,00,000

1,00,000

Fre e Tri al s

 

1,00,000

 

1,00,000

 

1,00,000

 

1,00,000

1,00,000

Total marketing cost

  35,45,000

  40,72,600

  48,25,720

 

56,79,464

67,63,957

Machine Servicin g

 

12,000

 

13,200

 

14,520

 

15,972

17,569

Ronash Testing

 

6,000

 

6,000

 

6,000

 

6,000

6,000

Social Organization

 

15,000

 

16,500

 

18,150

 

19,965

21,962

Godawari Club

 

25,000

 

27,500

 

30,250

 

33,275

36,603

Auditors Fee (20% increment)

20,000

Total M is ce lle ne ous e xpe ns es Total

24,000

28,800

34,560

41,472

78,000 87,200 97,720 1,09,772 1,23,605 1,33,54,000 1,47,14,800 1,71,85,980 1,97,62,118 2,08,93,878

Table 16: Administrative expenses

35

 Annex 15: Depreciation Particulars Building@ 5%

Year 1 Year 2 Year 3 Year 4 Year 5  1,31,42,400  1,24,85,280  1,18,61,016  1,12,67,965 1,07,04,567

Depreciation

 

Machinery@ 15%

 3,06,34,050   45,95,108

 2,60,38,943   39,05,841

   

55,350 13,838

   

   

2,94,600 73,650

   

3,50,000 70,000

Depreciation Furniture @ 25% Depreciation Office e quipment @ 25% Depreciation Vehicle @ 20% Depreciation

6,57,120

 

6,24,264

 

5,93,051

 

5,63,398

5,35,228

 2,21,33,101   33,19,965

 1,88,13,136   28,21,970

1,59,91,166 23,98,675

41,513 10,378

   

31,134 7,784

   

23,351 5,838

17,513 4,378

   

2,20,950 55,238

   

1,65,713 41,428

   

1,24,284 31,071

93,213 23,303

   

2,80,000 56,000

   

2,24,000 44,800

   

1,79,200 35,840

1,43,360 28,672

Table 17: Calculation of Depreciation

 Annex 16: Loan Amortization Year

Beginning Balance

Scheduled Payment

Principal

Interest

Ending balance

1

2,16,00,000 18396384 14712226 10475444 5603144

6443616 6443616 6443616 6443616 6443616

3203616 3684158 4236782 4872299 5603144

3240000 2759458 2206834 1571317 840472

18396384 14712226 10475444 5603144 0

2 3 4 5

Table 18: Loan amortization

36

 Annex 15: Depreciation Particulars

Year 1 Year 2 Year 3 Year 4 Year 5  1,31,42,400  1,24,85,280  1,18,61,016  1,12,67,965 1,07,04,567

Building@ 5% Depreciation

 

Machinery@ 15%

 3,06,34,050   45,95,108

 2,60,38,943   39,05,841

   

55,350 13,838

   

   

2,94,600 73,650

   

3,50,000 70,000

Depreciation Furniture @ 25% Depreciation Office e quipment @ 25% Depreciation Vehicle @ 20% Depreciation

6,57,120

 

6,24,264

 

5,93,051

 

5,63,398

5,35,228

 2,21,33,101   33,19,965

 1,88,13,136   28,21,970

1,59,91,166 23,98,675

41,513 10,378

   

31,134 7,784

   

23,351 5,838

17,513 4,378

   

2,20,950 55,238

   

1,65,713 41,428

   

1,24,284 31,071

93,213 23,303

   

2,80,000 56,000

   

2,24,000 44,800

   

1,79,200 35,840

1,43,360 28,672

Table 17: Calculation of Depreciation

 Annex 16: Loan Amortization Year

Beginning Balance

Scheduled Payment

Principal

Interest

Ending balance

1

2,16,00,000 18396384 14712226 10475444 5603144

6443616 6443616 6443616 6443616 6443616

3203616 3684158 4236782 4872299 5603144

3240000 2759458 2206834 1571317 840472

18396384 14712226 10475444 5603144 0

2 3 4 5

Table 18: Loan amortization

36

 Annex 17: Sales Revenue Sources of Revenue

1st year Price per Quantity bottle

No. of Bottles 17,28,000

Total Revenue

35

Year 2 Total

6,04,80,000

6,04,80,000

Quantity

Year 3

Price per bottle

23,04,000

35

Total

8,06,40,000

Quantity

34,56,000

8,06,40,000

Price per bottle

35 12,09,60,000

Table 19: Sales revenue

 Annex 18: Total Investment Requirement Fixed assets required in the first year Preliminary Expenses Salary Expenses for the first six months

4,47,76,400 1464833.333 10,14,000

Administrative Expenses for the first six months Contengency Total Investment Requirement

66,77,000 67,767 5,40,00,000

Table 20: Total Investment requirement

37

Total

Year 4

Year 5

Price per Quantity bottle

Price per Quantity bottle

12,09,60,000 40,32,000

Total

35 14,11,20,000 51,84,000 14,11,20,000

35

Total

18,14,40,000

18,14,40,000

 Annex 17: Sales Revenue Sources of Revenue

1st year Price per Quantity bottle

No. of Bottles 17,28,000

Total Revenue

35

Year 2 Total

Quantity

6,04,80,000

Price per bottle

23,04,000

6,04,80,000

Year 3

35

Total

Quantity

8,06,40,000

Price per bottle

34,56,000

8,06,40,000

Total

35

Year 4

Year 5

Price per Quantity bottle

Price per Quantity bottle

12,09,60,000 40,32,000

12,09,60,000

Total

35 14,11,20,000 51,84,000 14,11,20,000

35

 Annex 18: Total Investment Requirement 4,47,76,400 1464833.333 10,14,000

Administrative Expenses for the first six months Contengency Total Investment Requirement

66,77,000 67,767 5,40,00,000

Table 20: Total Investment requirement

37

 Annex 19: Purchase Budget Year 1

Particulars Opening Stock  Cost of goods sold Closing Stock  Purchase

       

3,38,16,000 37,54,000 3,75,70,000

Year 2   37,54,000  4,50,48,000   56,26,000  4,69,20,000

Year 3   56,26,000  6,75,12,000   65,62,000  6,84,48,000

       

Year 4 65,62,000 7,87,44,000 84,34,000 8,06,16,000

Year 5   84,34,000 10,12,08,000 84,34,000 10,12,08,000

Year 6 84,34,000

Table 21: Purchase Budget

 Annex 20: Cost of Raw Materials Year Unit Description 1 Li tre P l asti c Bo ttl es ( Rs. 4) Bottle Caps (Rs. 1) Labels (Rs. 1.5) Cartons (Rs. 3) Carbon Dioxide (Rs. 10) Water Total Raw material Cost

1

2

 

3

4

5

6

17,28,000

 

23,04,000

  34,56,000

  40,32,000

 

51,84,000

51,84,000

  69,12,000   17,28,000   25,92,000   51,84,000   1,72,80,000   1,20,000   3,38,16,000

             

92,16,000 23,04,000 34,56,000 69,12,000 2,30,40,000 1,20,000 4,50,48,000

 1,38,24,000   34,56,000   51,84,000  1,03,68,000  3,45,60,000   1,20,000  6,75,12,000

 1,61,28,000   40,32,000   60,48,000  1,20,96,000  4,03,20,000   1,20,000  7,87,44,000

  2,07,36,000   51,84,000   77,76,000   1,55,52,000   5,18,40,000   1,20,000   10,12,08,000

2,07,36,000 51,84,000 77,76,000 1,55,52,000 5,18,40,000 1,20,000 10,12,08,000

Table 22: Cost of Raw materials

38

18,14,40,000

18,14,40,000

Table 19: Sales revenue

Fixed assets required in the first year Preliminary Expenses Salary Expenses for the first six months

Total

 Annex 19: Purchase Budget Year 1

Particulars Opening Stock  Cost of goods sold Closing Stock  Purchase

       

3,38,16,000 37,54,000 3,75,70,000

Year 2   37,54,000  4,50,48,000   56,26,000  4,69,20,000

Year 3   56,26,000  6,75,12,000   65,62,000  6,84,48,000

Year 4   65,62,000   7,87,44,000   84,34,000   8,06,16,000

Year 5   84,34,000 10,12,08,000 84,34,000 10,12,08,000

Year 6 84,34,000

Table 21: Purchase Budget

 Annex 20: Cost of Raw Materials Year Unit Description 1 Li tre P l asti c Bo ttl es ( Rs. 4) Bottle Caps (Rs. 1) Labels (Rs. 1.5) Cartons (Rs. 3) Carbon Dioxide (Rs. 10) Water Total Raw material Cost

1

2

 

3

4

5

6

17,28,000

 

23,04,000

  34,56,000

  40,32,000

 

51,84,000

51,84,000

  69,12,000   17,28,000   25,92,000   51,84,000   1,72,80,000   1,20,000   3,38,16,000

             

92,16,000 23,04,000 34,56,000 69,12,000 2,30,40,000 1,20,000 4,50,48,000

 1,38,24,000   34,56,000   51,84,000  1,03,68,000  3,45,60,000   1,20,000  6,75,12,000

 1,61,28,000   40,32,000   60,48,000  1,20,96,000  4,03,20,000   1,20,000  7,87,44,000

  2,07,36,000   51,84,000   77,76,000   1,55,52,000   5,18,40,000   1,20,000   10,12,08,000

2,07,36,000 51,84,000 77,76,000 1,55,52,000 5,18,40,000 1,20,000 10,12,08,000

Table 22: Cost of Raw materials

38

 Annex 21: Price of Laptop

Table 23: Price of raw materials

 Annex 22: Fees for Registering a Company

 Annex 21: Price of Laptop

Table 23: Price of raw materials

 Annex 22: Fees for Registering a Company

Figure 22: Registration fees for a company

39

 Annex 23: Website Design Quotation

Figure 23: Website design quotation

40

 Annex 24: FNCCI Cost of Construction of Building

Figure 24: Estimation of Construction cost

 Annex 25: MRP Calculation Profit Himalaya Water Pvt. Ltd. Prime International Distributer Wholesaler Retailer

35 43.75 48.125

Table 24: MRP calculation

41

Selling Price 8.75 4.375 4.8125

35 43.75 48.125 52.9375

 Annex 26: Cost of Production per bottle Monthly Raw Material Cost Monthy Direct labour cost Monthly Factory OH cost Total Cost of Production Total Production/Month Cost of Production Per Unit Monthly Administrative expenses Monthly Marketing expenses Monthly Intererest on Loan Total Per unit Cost Final Cost

28,18,000.00 78,000.00 8,10,609.58 37,06,609.58 1,44,000.00 25.74 8,03,416.67 2,95,416.67 2,70,000.00 13,68,833.34 9.51 35.25

Table 25: Cost of production per bottle

 Annex 27: Approximation Fuel Consumption Chart for Generator

Figure 25: Fuel consumption chart

42