M/s Sharma Furniture House

Pramod Kumar Sharma

PROPRIETOR

Unit Address:
Village Anwerkheda,
Post-Tikra
Unnao-209801

Project Report
Of

Saw Mill
(Wood Based Industries)

PREPARED BY:-
(Prepared on the bath or information and projections provided to us)

MAYANK GUPTA & ASSOCIATES.

CHARTERED ACCOUNTANTS
128/10, D-Block
Kidwai Nagar
Kanpur-208011
Mobile No.-9839703064
 CRUX INFORMATION
1 Name of Unit Sharma Furniture House

2 Constitution Proprietorship

3 Name of the Proprietor Pramod Kumar Sharma

4 Date of Birth 03/05/1991

5 Father's Name Sri Nattha Laal

6 Location
A. Unit Gram-Anwerkheda, Post
Tikra, Unnao.

Village- Anwerkheda,, Post

B. Residence
Tikra, Unnao

7 Activities Saw Mill (Wood Based Industries)

8 Cost of Project Rs : 1,00,00,000.00

9 Employment Potential 15 Nos.

10 Cost of the project :

Machines and Equipments 30,00,000.00
Work Shed 15,00,000.00
Furniture and Electric Fittings 1,00,000.00
Working Capital 54,00,000.00
Total 1,00,00,000.00

Means of Financing
Own Contribution • 15,00,000.00
Term Loan from bank 25,50,000.00
Working Capital 59,50,000.00
Total 1,00,00,000.00
11 Repayment Schedule In 7 years. (84 Monthly Installment )

12 Interest Coverage Ratio 2.89

13 DSCR 6.26
 INDEX

CRUX INFORMATION

INTRODUCTION AND BUSINESS DETAIL

CALCULATION OF TOTAL FUND REQUIREMENT

PROJECTED PROFITABILITY STATEMENT

PROJECTED BALANCE SHEET

STATEMENT OF DEPRECIATION AND FIXED ASSETS

STATEMENT OF REPAYMENT OF TERM LOAN AND

INTEREST

CASH FLOW STATEMENT

RATIO ANALYSIS
INTRODUCTION :
Mr. Pramod Kumar Sharma is going to setup the business of Saw Mill.. The constitution of
the unit will be proprietorship. Address of the unit is Gram-Anwerkheda, Post-Tikra,
Unnao. Mr. Pramod Kumar Sharma has more than 10 years' experience in the Saw Mill
Business.

ABOUT THE BUSINESS SAW MILL:-

Saw mill:
A saw mill is a facility where logs are cut into lumber. Modern sawmills use a
motorized saw to cut logs lengthwise to make long pieces, and crosswise to length
depending on standard or custom sizes (dimensional lumber). The "portable" sawmill is of
simple operation. The log lies flat on a steel bed, and the motorized saw cuts the log
horizontally along the length of the bed, by the operator manually pushing the saw. The most
basic kind of sawmill consists of a chainsaw and a customized jig ("Alaskan sawmill"),
with similar horizontal operation. Saw mill is a form of microenterprises or small
enterprises. It is a mill where timber is saw with the help of saw in different forms of usable
timber. There is major saw mill, electric motor, some labor, and timbers .

Saw mill process:

Sawmilling lumber is a throughput process where a raw or rough log starts a journey through
mechanized steps and emerges as a smooth finished product. Modern sawmills operate as an
on-demand, pull-through system with the mechanized mill parts sitting between the front-
end loggers and the tail end marketplace. The sawmill process involves many intentional
decisions during these steps. Although today's sophisticated computerization maximizes
efficient log use and removes a lot of guesswork, a modern sawmill operation still relies on
the slump eye and quick hands of experienced sawyers,

Process steps involved in making a sawmill work :

Felling: Loggers cut or fell standing trees in various woodlots. Most mw log inventory
comes from second or third growth woodlots. Gasoline-powered chainsaws are still the
prime felling tool despite advancements in machines like feller-bunchers. Trees are
limbed in the forest before getting loaded for transport to the sawmill site.

Debarking: The first on-site sawmill step is debarking the whole logs. Most sawmills
use debarking machines like mechanical ring cutters or Cambio drums. Some mills employ
water-jet blasters instead. Bark waste is an important by-product, adding value for the
sawmill ac landscaping mulch or fuel for the sawmill's kilns. Logs are also bucked or
crosscut with a circular saw into specific lengths at this stage.

Metal detecting: Examining the log for metal contamination is a vital step in preventing ruined
saw blades or sending shrapnel through the mill. Often, nails, sign attachments or fencing wire
get embedded in standing trees and are covered over by years of growth. Any logs
containing metal go for a secondary examination. If the metal can be removed, the whole
log goes back into the production line. If not, it's salvaged in small sections.

Merchandising: This is a critical step in modern computerized sawmill operations.

Laser scanning or camera viewing estimates the raw log for its maximum cut value. This
information determines what sizes of timber, dimensional lumber and boards can come from
a particular log. Merchandising takes in more than just the log's length and girth. It assesses each
log for market conditions and standing orders.

Head rig sawing: Head rig is the heart of a saw mill. Ready logs get clamped to a conveyor
and fed to the head rig saw. In some sawmills, the conveyor is a stationary carriage, and the
head rig moves its blades lengthwise through the log. Other sawmills have fixed head rigs.
They move the log on a mobile conveyor. No matter which system, most modern sawmills
use band saw blades in their head rigs. Some advanced head rigs can follow a log's natural
curve for maximum wood capture.

Canting: The head rig cuts the log into sections called cants. The first or primary
breakdown is called the best opening face (BOF). This sets a flat surface to square the
work for secondary cants that turn into rough sizes for finished lumber products. Waste
sections, or slabs, from cants are recycled into chips, pellets or mulch.

Resawing: Large cut cants from the head rig enter a secondary process called re-sawing.
Here, multiple band saw blades reduce the cants to smaller sizes according to the
merchandising prescription. Re-saws come in many profiles, including vertical and
horizontal bands. twin or quad bands. circle ganga double arbor gangs, band
center splitters, band line bars and so on. Re-saw steps also use the curve sawing
technique.

Edging and trimming: Moving along in the sawmill process, we find the edging and
trimming stages. Here timbers, boards and dimensional lumber get their sides cut to fit a
rough grade size. Then, the products pass to a trimmer where they're cut to specific
lengths. For most of the lumber industry, those lengths start at 8 feet and progress in 2-
foot increments going as far as 24 feet or more.

Grading, drying and planning: All wood products emerging from a saw mill are
graded in a quality control process. This ensures lumber pieces get separated into similar
batches. All wood entering a saw min is considered "green - or having a high natural
moisture content. Once graded, products either air dry or get placed in kilns for forced
drying. Planning is the last sawmill step before bundling and shipping. Planers give the
products their final size and appearance. Once the lumber is planned, it's marked with
finished grade stamps and ready for market.

PRODUCTS:-

The main product of the saw mill is sawn timber. The sawmill processes round wood
(pine only) and produces sawn timber as well as a number of other valuable by-products
including:

Off-cuts and waste timber

Bark planks
Inner planks
Saw
Sawn timber is used in the local market (for chairs, table, beds, shelving, post beams
and timber for house construction ) and is primarily sold in local market. However. the saw
mill's by-products are utilized mainly In the local market, as domestic fuel or for the construction of
temporary houses, toilets, and poultry and animal yards, Sawdust has no significant value in the
villages and has, so far, been considered a waste product,

MARKET POTENTIAL :-
There is huge demand of sawn timber in the market. The unit will sale its products in local
market as well as nearby areas.

INFRASTRUCTURE FACILITIES:-

Land.
The proprietor has owned land having area about 76500/- Sq Feet connected with link road
and highways.

Technical Know How

The project does not require any sophisticated technology but skilled operators are
capable enough to operate the machines.

Man Power
Since the project does not require any sophisticated technology. The skilled and semi-
skilled operators/ workers are equipped to manage the operations.

Power
The power requirement is 15 KW. The unit will install take electric connection from
electricity department to fulfill the requirement of Power.
BRIEF PARTICULARS OF THE COST OF PROJECT :

MACHINES AND EQUIPMENTS Rs. 30,00,000/- :

The cost of various machines used in saw mill will be Rs. 30,00,000/-

FURNITURE AND ELECTRICAL FITTINGS Rs. 1,00,000/-

The total cost of furniture and electrical fitting with electric connection will be Rs.
1,00,000/,

WORK SHED AND GODOWN SHED Rs. 15,00,000/-

The total cost of construction of work shed will be Rs. 15,00,000/-

WORKING CAPITAL 54,00,000/-:

The total working capital required will be Rs. 54,00,000/,

BRIEF PARTICULARS OF MEANS OF FINANCE:

TERM LOAN FROM BANK

The unit proposes to have term loan from Bank of Rs 25,50,000/- & Working Capital
Loan of Rs. 59,50,000/-, Own contribution of proprietor will be Rs. 15,00,000/-. The
total project cost is Rs. 1,00,00,000/,

BASIS AND PRESUMPTIONS: -

COST OF RAW MATERIAL.

The cost of raw material will be assumed 75% of the total sale price.

LABOUR EXPENSES
Labour expenses are assumed 8% of sales value.
ELECTRICITY EXPENSES
Electricity expenses are assumed 1% of sales value.

DEPRECIATION :-

The depreciation on fixed assets has been computed in annexure of this project report in
accordance with the admissibility of the same under the Income Tax Act, 1961 .

INTEREST :

Computation of interest on term loans is given in Annexure.

COST OF PROJECT & MEANS OF FINANCE

Amount of Project :
Machines and Equipment 30,00,000.00
Work Shed & Godown shed 15,00,000.00
Furniture and Electrical 1,00,000.00
Working capital 54,00,000.00

Total : 1,00,00,000.00
Means Of Finance :
Term Loan from Bank 25,50,000.00
59,50,000.00
Working Capital Loan
Own Contribution 15,00,000,00

Total : 1,00,00,000.00

LOAN REPAYMENT SCHDULE

TERM LOAN FROM BANK : Rs. 25,50,000/-
: 7 Years in 84 Monthly
Total Term Loan
Installments
Total Duration
DETAILS OF FIXED ASSETS

1-Details Of Plant and Machinery

[Link]. PARTICULARS Amount

1 Bensa
2 Trolly

Total 3000000.00

Total Value of Machines 3000000.00

2-DETAILS OF WORK SHED & GODOWN SHED

[Link]. P A R T I C U L A R S Amount

I Construction of work shed and Godown Shed 1500000.00

Total 1500000.00

Total Value of Work Shed 1500000.00

3-DETAILS OF FURNITURE AND ELECTRICAL FITTINGS

[Link]. PARTICULARS Amount

1 Furniture 50000.00
2 Electrical Fittings 50000.00

Total
100000.00
Total Value of Furniture and Electrical Fittings
Total cost of Fixed Assets 100000.00

4600000.00
CALUCALATION OF TOTAL FUND REQUIREMENT

CALCULATION OF WORKING CAPITAL REQUIREMENTS

S. No. Particulars Amount (Rs)

1 Stock of Raw Material 4100000.00

2 Stock of Finished Goods 1000000.00
3 Sundry Debtors 500000.00
5600000.00
Less: Sundry Creditors 200000.00

Total Working Capital requirement (A) 5400000.00

STATEMENT OF FUND REQUIREMENT FOR FIXED ASSETS

S. NO. PARTICULARS Amount (Rs)

1 Machines 3000000.00
2 Work Shed and Godown Shed 1500000.00
3 Furniture arid Electrical Fittings 100000.00

Total (B) 4600000.00

TOTAL FUND REQUIREMENT (A+B)

10000000.00
1500000.00
OWN CONTRIBUTION 15%
FINANCE FROM BANK 85% 8500000.00

TOTAL 10000000.00
(

'

s
)

C
I

E
 T

YEARS PARTCULARS Work Plant & Furniture & Total

Shed Machinery Electrical Fittings

Rate of Depreciation
0.10 0.15 0.05
1ST YEAR Opening balance
0.00 0.00 0.00 0.00
Purchase during the year
1500000.00 3000000.00 100000.00 4600000.00
Total
1500000.00 3000000.00 100000.00 4600000.00
Less: Depreciation 150000.00 450000.00 10000.00 610000.00
W.D.V.1st year 1350000.00 2250000.00 90000.00 3990000.00

II ND YEAR Less: Depreciation 135000.00 337500.00 4500.00 477000.00

W.D.V. 11 nd year 1215000.00 1912500.00 85500.00 3513000.00

lit RD YEAR Less: Depreciation 121500.00 286875.00 4275.00 412650.00

W.D.V. III rd year 1093500.00 1625625.00 81225.00 3100350.00

IV TH YEAR Less: Depreciation 109350.00 243843.75 4061.25 357255.00

W.D.V IVth Year 4
984150.00 1381781.25 77163.75 2743095.00
V TH YEAR Less: Depreciation 98415.00 207267.18 3859.87 309541.05

W.D.V Vth year 885735.00 1174514.06 73304.88 2433553.95

VI TH YEAR Less: Depreciation 88573.50 176177.10 3665.24 268415.84

797161.50 998336.95 69639.63 2165138.11
W.D.V VIth year
VII TH YEAR Less: Depreciation 79716.15 149750.54 3481.98 232948.67
W.D.V VIIth year 717445.35 848586.41 66157.65 1932189.44
 (Amount in ' 000 Rupees)
STATEMENT OF REPAYMENT OF TERM LOAN & INTEREST

PARTICULARS LOAN INTEREST Total PRINCIPAL TOTAL BALANCE

AMOUNT PAYMENT

1ST YEAR 2274160.00

2550000.00 204160.00 2754160.00 275840.00 480000.00

lIND YEAR 2274160.00 178640.00 2452800.00 301360.00 480000.00 1972800.00

111RD YEAR 1972800.00 153120.00 2125920.00 326880.00 480000.00 1645920.00

IVTH YEAR 1645920.00 125280.00 1771200.00 354720.00 480000.00 1291200.00

VTH-1YEAR 1291200.00 92800.00 1384000.00 387200.00 480000.00 904000.00

VITH YEAR 904000.00 46400.00 950400.00 433600.00 480000.00 470400.00

V1ITH YEAR 470400.00 9600.00 480000.00 470400.00 480000.00 0.00

PROFITABILITY STATEMENT (Amount in ' 000 Rupees)

PARTICULARS 1STYEAR IIND YEAR IIIRD YEAR IVTH YEAR VTH YEAR VITH YEAR VIITH YEAR

SALES 15000000.00 16500000.00 18150000.00 19965000.00 21961000.00 24157000.00 26573000.00

Total (A) 15000000.00 16500000.00 18150000.00 19965000.00 21961000.00 24157000.00 26573000.00

Ray/ Material Consumed 11250000.00 12375000.00 13612500.00 14973750.00 16470750.00 18117750.00 19929750.00
Labour Exps. 1200000.00 1320000.00 1452000.00 1597200.00 1756880.00 1932560.00 2125840.00
Electricity 150000.00 82500.00 90750.00 99825.00 109805.00 120785.00 132865.00
Telephone Exps. 12000.00 13000.00 14000.00 15000.00 16000.00 17000.00 18000.00
Salary Exps. 225000.00 247500.00 272250.00 299475.00 329415.00 362355.00 398595.00
Travelling & Conveyance 75000.00 82500.00 90750.00 99825.00 109805.00 120785.00 132865.00
Staff: Welfare 60000.00 66000.00 72000.00 80000.00 88000.00 98000.00 107800.00
Repair & Maintenance 24000.00 30000.00 36000.00 40000.00 44000.00 48000.00 52000.00
Misc. Expenses 24000.00 30000.00 36000.00 40000.00 44000.00 48000.00 52000.00
Printing & Stationery 6000.00 7000.00 8000.00 9000.00 10000.00 11000.00 12000.00
Depreciation 375000.00 326250.00 284062.50 196498.13 220969.41 192999.90 168708.22
Interest On Term Loan 204160.00 178640.00 153120.00 125280.00 92800.00 46400.00 9600.00
Interest on Working Cap Loan 595000.00 595000.00 595000.00 595000.00 595000.00 595000.00 595000.00
Total Cost 14200160.00 15353390.00 16716432.50 18170853.13 19887424.41 21710634.90 23735023.22

Net Profit 799840.00 1146610.00 1433567.50 1794146.86 2073575.59 2446365.10 2837976.78

Add: Depreciation 375000.00 326250.00 284062.50 196498.13 220969.41 192999.90 168708.22
Add: Intl On Loan 799160.00 773640.00 748120.00 720280.00 687800.00 641400.00 604600.00
Total 1974000.00 2246500.00 2465750.00 2710925.00 2982345.00 3280765.00
3611285.00

Total Cash Accruals 1974000.00 2246500.00 2465750.00 2710925.00 2982345 00 3780765 00

3611285.00
Interest 799160.00 773640.00 748120.00 720280.00 687800.00 641400.00 604600.00
lntt. Coverage Ratio 2.47 2.90 3.30 3.76 4.34 5.12 5.97
 (Amount in ' 000 Rupees)
PROJECTED BALANCE SHHET
1ST YEAR 1IND YEAR IIIRD YEAR IV THE YEAR VTH YEAR VITH YEAR VIITH YEAR

Own Contribution 1500000.00

1500000.00 1500000.00 1500000.00 1500000.00 1500000.00 1500000.00
RESERVE & SURPLUS

Opening P & L Account 0.00 249840.00 696450.00 1130017.50 1724164.38 2297739.97 2944105.07
Add : Net Profit 799840.00 1794146.88 2073575.59 2446365.10 2837976.78
1146610.00 1433567.50

Less : Drawings 550000.00 700000.00 1000000.00 1200000.00 1500000.00 1800000.00 2000000.00

Balance P&L Account 249840.00 696450.00 1130017.50 1724164.38 2297739.97 2944105.07 3782081.85

SECURED LOAN
Term Loan 2274160.00 1972800.00 1645920.00 1291200.00 904000.00 470400.00 0.00
Working Capital Loan 5950000.00 5950000.00 5950000.00 5950000.00 5950000.00 5950000.00 5950000.00

CURRENT LIABILITIES
Sundry Creditors 200000.00 225000.00 250000.00 275000.00 300000.00 325000.00 350000.00

10174000.00 10344250.00 10475937.50 10740364.38 10951739.97 11189505.07 11582081.85

Total
FIXED ASSETS 2625000.00 2298750.00 2014687.50 1818189.38 1597219.91 1404220.W 1235511.85

CURRENT ASSETS

Stock of Raw Material 5000000.00 5250000.00 5512500.00 5788125.00 6077531.25 6381407.81 6700478.20
Stock of Finished Goods 1700000.00 1785000.00 1874250.00 1967962.50 2066360.63 2169678.66 2278162.59
Sudnry Debtors 500000.00 525000.00 551250.00 578812.50 607753.13 638140.78 670047.82
Cash & Bank Balances 349000.00 485500.00 523250.00 587275.00 602875.00 596057.75 697881.39

Total 10174000.00 10344250.00 10476937.60 10740364.38 10951739.97 11189505.07 11582081.85

CASH FLOW STATEMENT ( Amount In OO Rupees)
'

PARTICULAR’S 1st Year IInd Year IIIrd Year IVth Year Vth Year VIth Year VIIth Year

SOURCES OF FUNDS
1500000.00 0.00 0.00 0.00
Own Contribution 0.00 0.00 0.00
Net profit 799840.00 1146610.00 1433567.50 1794146.88 2073575.59 2446365.10 2837976.78
Depreciation 375000.00 326250.00 284062.50 196498.13 220969.41 192999.90 168708.22
Increase in term loan 2550000.00 0.00 0.00 0.00 0.00 0.00 0.00
Increase in Working Capital Loan 5950000.00 0.00 0.00 0.00 0.00 0.00 0.00
Increase in Current
Liabilities 200000.00 25000.00 25000.00 25000.00 25000.00 25000.00 25000.00

Total 11374840.00 1497860.00 1742630.00 2015645.00 2319545.00 2664365.00 3031685.00

APPLICATION OF FUNDS

Increase in Fixed Assets 3000000.00 0.00 0.00 0.00 0.00 0.00 0.00
Increase in current assets 7200000.00 360000.00 378000.00 396900.00 416745.00 437582.25 459461.36
Decrease in Term Loan 275840.00 301360.00 326880.00 354720.00 387200.00 433600.00 470400.00
Drawings 550000 00 700000.00 1000000.00 1200000.00 1500000.00 1800000.00 2000000.00

Total 11025840.00 1361360.00 1704880.00 1951620.00 2303945.00 2671182.25 2929861.36

Opening Balance 0.00 349000.00 485500.00 523250.00 587275.00 602875.00 596057.75

Increase/Decrease 349000.00 136500.00 37750.00 64025.00 15600.00 -6817.25 101823.64
Closing Balance 349000.00 485500.00 523250.00 587275.00 602875.00 596057.75 697881.39
RATIO ANALYSTS

RATIOS IST YEAR lIND YEAR IIIRD YEAR IVth year Vth Year VI th Year

GROSS :
GROSS PROFIT X100 17.00 17.00 17.00 17.00 17.00 17.00

TOTAL SALES

NET PROFIT RATIO

NET PROFIT X100 5..33 6.95 7.90 8.99 9.44 10.68

INTERPRETATION :

NET PROFIT RATIO SHOWS INCRESING TREND WHICH INDICATES BUSINESS IS GROWING YEAR BY YEAR.

INTEREST COVERAGE RATIO

NET CASH ACCRUALS+ INTT 2.47 2.90 3.30 3.76 4.34 5.97
INTEREST
2.89
INTERPRETATION :
IN THE FIRST YEAR NET PROFIT COVERS INTEREST 2.89 TIMES AND IN FURTHER YEAR RATIO SHOWS RISING TRENDS

WHICH INDICATES THAT THE BUSINESS IS IN GOOD FINANCIAL POSITION.

Debt Service Coverage ratio

NET CASH ACCRUALS+INTT ON TERM LOAN 5.78 6.29 6.70 7.15 7.65 8.17
INSTALMENT OF TERM LOAN+INTT. ON TERM LOAN
AVERAGE DSCR 6.26

INTERPRETATION:

THE DSCR IN THE FIRST YEAR THAT IS ABOVE THE ACCEPTABLE RATIO IS 6.26
THIS RATIO SHOWS FIRM HAS STRENGTH TO PAY THE LOAN.

Current Assets Ratio

CURRENT ASSETS 15.13 14.36 13.76 13.24 12.74 12.11

CURRENT LIABILITES
AVERAGE CURRENT RATIO 14.42