IUBAT INTERNATIONAL UNIVERSITY OF BUSINESS AGRICULTURE AND TECHNOLOGY

Welcome
To Presentation Of Feasibility Study Report

Group No : 08

Feasibility Report
On

Project Name

Auto Rice Husking Mill in Bangladesh Project Members Md. Shahin Manjurul Alam Md. Rasedul Alam ID # 07207013 ID # 07207023

Auto Rice Husking Mill

Context
Project Summary Management Aspects Project Timetable and Status Marketing Aspects Technical Aspects Financing Aspects Taxation Aspects Financial Aspects Social Aspects

Project Summary
Introduction The study provides information regarding investment opportunity for setting up a rice husking and polishing unit in Bangladesh, especially in the area of Netrokona, Dinajpur, Bogra, Rajshahi and Jamalpur districts. Where is grown on a large irrigated area in Bangladesh. The objective of this document is to provide information about investment opportunity for setting up a Rice Husking & Polishing Unit.

Project Summary
Vision statement We will strive to provide our customers with the largest selection of rice varieties and rice-related products available at a competitive price and in a friendly and timely manner. In addition, our customers will always be treated with the utmost integrity, honesty and fairness.

Project Summary
Mission statement Always comes up to the expectations of customers. It makes a concerted effort to give the best quality. The achievement of excellence of standards that we have set up for irreproachable quality of rice is made possible through constant vigilance of the entire process from procurement to marketing. We offer traceability, end-to-end controlled process by conducting checks and monitoring every stage.

Project Summary
Executive Summary Rice Milling is an important activity in rural areas both for self sustenance as well as source of subsidiary income to small farmers & agricultural laborers. The bye product i.e. rice-husk can be also used for producing rice-bran oil if the volume is large as well as for domestic fuel. Rice Milling can be also undertaken on commercial basis for producing rice from paddy & sell it on a profit.

Project Timetable and Status

Project Duration
Phasing of the project a) General Project Planning b) Incorporation c) Preparation of Engineering Specification d) Building Construction e) Selection of Machinery Supplier f) Arrival of Machinery g) Installation of Machinery h) Trial Run J) Start of selling Operation
2 years
Beginning from 2010 to 2012 1 Month 1 Month 1 Month 1 Year 1 Month 3 Month 1 Month 15 days 1 Month

Management Aspects
Management during the pre-operation period. Management during the operation period. Labor
Monthly Salary (BDT.)
3600 3000 2000 TOTAL
Total Monthly

Particulars
Skilled Worker Semi-skilled Workers Helpers

Nos.
2 2 4

Salary (BDT.) 6400 6000 8000 20400

Marketing Aspects
Demand Rice production systems make a vital contribution to the reduction of hunger and poverty in Bangladesh. Total rice production in Bangladesh was 10.32 million tons in the year 1975-76 when the country's population was only 79.90 millions and cultivated rice area was 10.32 million ha (BBS and DAE, 2007). However, the country is producing 34.28 million tons rice in the year of 2008-09, where Boro rice contributed more than 55% (18.5 million tons). From the analysis of the last few years data we found that its contribution in total rice production follows an increasing trend. Recently, the rate is increasing rapidly due to adoption of high yielding rice varieties, including modern rice cultivation technologies, improvement irrigation facilities and applications of fertilizer and pesticides.

Marketing Aspects

Figure: Rice Production in Bangladesh (2008-09)

Boro

T. Aman

Aus

Marketing Aspects
MARKET POTENTIAL According to buying power of the rice consumers, the market for rice can be broadly categorized into three major groups. Lower income group, includes people with income level of less than BDT 3,000 per month. The majority of this segment is looking for purchasing cheap rice. This segment is the major market of broken rice and Irri rice. The price of broken rice is almost equivalent to the wheat prices. Middle income group, includes middle and upper income households in the urban areas with monthly income of BDT 5000-10,000. This segment purchases good quality rice (polished rice as well as semi-polished rice) Upper income group includes the upper income segment of the society; they prefer to buy high quality branded rice. The hotels and restaurants also purchase polished and semi polished rice for their different dishes.

Products

Technical Aspects

Applications What come out during milling operation are husk, milled rice or edible portion, bran and the broken rice. Depending upon the type of rice mill, the by-products come out in mixed or separated form. Milling is usually done when paddy is dry (around 14% moisture content). Wet soft grains are powered and very dry brittle grains would break. Availability of technical know-how and Compliances BITAC, Dhaka, has successfully developed the technical know-how. Compliance under the BSTI Act is compulsory. Manufacturing Process Quality rice from BITAC Hi-Tech Modern Rice Mill undergoes 8 production processes before hitting the shop floor. The process includes Cleaning, Hulling, Whitening & Polishing, Grading, Optical Sorting, Blending & Packaging (Most varieties of rice requires boiling, cooling & drying along with 8 processes mentioned earlier). The Quality Assurance between each process ensures that only the finest quality of rice reaches the middlemen who in turn offer the same to the consumers. The rice is manufactured using German technology acquired from Buhler group, who offer the best rice milling solutions till date.

Technical Aspects
Modern rice milling processes consist of: Pre Cleaning: Removing all impurities and unfilled grains from paddy

De-stoning: Separating small stones from paddy Parboiling (Optional): Helps in improving the nutritional quality by gelatinization of starch inside the rice grain. It improves the milling recovery percent during dishelming and polishing / whitening operation Husking: Removing husk from paddy. Husk Aspiration: Separating the husk from brown rice/ unhusked paddy. Paddy Separation: Separating the unhusked paddy from brown rice. Whitening: Removing all or part of the bran layer and germ from brown rice
Polishing: Improving the appearance of milled rice by removing the remaining bran particles and by polishing the exterior of the milled kernel. Length Grading: Separating small and large broken from head rice Blending: Mixing head rice with predetermined amount of broken, as required by the customer Weighing and bagging: Preparing the milled rice for transport to the Customer

De-cleaning

Parboiling

Husking

Paddy Separation

Whitening

Bagging

Technical Aspects

Technical Aspects
1 - paddy is dumped in the intake pit feeding the pre-cleaner 2 - pre-cleaned paddy moves to the rubber roll husker: 3 - mixture of brown rice and unhusked paddy moves to the separator 4 - unhusked paddy is separated and returned to the rubber roll husker 5 brown rice moves to the destoner 6 - de-stoned, brown rice moves to the 1st stage (abrasive) whitener 7 - partially milled rice moves to the 2nd stage (friction) whitener 8 milled rice moves to the sifter 9a - (for simple rice mill) upgraded, milled rice moves to bagging station 9b (for more sophisticated mill) milled rice moves to the polisher 10 - Polished rice, will move to length grader 11 - Head rice moves to head rice bin 12 Brokens moves to brokens bin 13 Pre-selected amount of head rice and brokens move to blending station 14 Custom-made blend of head rice and brokens moves to bagging station 15 Bagged Rice moves to the market A straw, chaff and empty grains are removed B - husk removed by the aspirator C small stones, mud balls etc. removed by de-stoner D - Coarse (from 1st whitener) and fine (from 2nd whitener) bran removed from the rice grain during the whitening process E - Small brokens/brewers rice removed by the sifter

Technical Aspects
Plant & Machinery The details of plant and machinery for the rice milling unit are as follows: Paddy cleaner Rubber Roll Paddy Shellers Paddy Separators Blowers, Husk and Barn Aspirators Paddy Polishers Rice grader/ aspirator Bucket Elevators

Technical Aspects
Civil construction: The various construction requirement of an improved rice milling unit are as follows: 1. Raw paddy warehouse. 2. Cleaning unit 3. Drier and necessary supporting structures such as, boiler /blower system etc. 4. Milling section 5. Finished product stores 6. Machine rooms 7. Auxiliary structures such as office watch and ward etc.

Technical Aspects
Raw materials Paddy is the only raw material required. The input-output ratio is 100:80 and to that extent, the quantum of paddy would go up. Thus even at 100% utilization, the requirement will not be more than 750 tones per year. Looking to the total production of paddy in Netrokona, Dinajpur, Bagura, Rajshahi and Jamalpur districts, supplies should not be a problem. But it is advisable to have long term supply arrangements in place. Utilities Total power requirement will be 30 HP whereas water requirements are not much. Annual expenditure under this head at 100% activity level could be BDT. 90, 000/-.

Taxation Aspects
Agro Based Industry Taxation Rate - 3.20% In order to entice investors, the government has put in place an extensive programe of incentives, which include: Tax-holidays. Tax-exemption and duty-free importation of capital machinery and spare parts for 100% export-oriented industries. Capital, profit and dividend repatriation facilities. Hundred percent foreign equity allowed. Exemption of income tax unto three years for expatriate employees. Term loans and working capital loans from local banks allowed. Reinvestment of repairable dividends treated as new investment. Double-taxation avoidance, as per bilateral agreements already concluded. Tax exemption on the interest payable on foreign loans and on royalties and technical know-how fees. Open exchange controls.

Financing Aspects
Project Economics Bank 40% Equity 60% BDT. 27,918,606 41,877,908

Total Financing 100%

69,796,514

Financial Aspects
DETAILS OF THE PROPOSED PROJECT 1. Land and Building Land admeasuring to about 200 sq.mtrs. With built-up area of 80 sq.mtrs. will be adequate. The respective cost would be BDT. 0.60 lac and BDT. 2.10 lacs. 2. Plant and Machinery A detailed list is already furnished. The total cost under this head is taken at Rs. 2.30 lacs. 3. Miscellaneous Assets A provision of BDT.50,000/- is adequate. 4. Preliminary & Pre-operative Expenses Expenses like registration and legal fees, administrative and other charges, interest during implementation etc. are taken at BDT. 40,000/-. 5. Working Capital Requirement Capacity utilization in the first year is assumed to be 60% and at that level, total working capital needs are likely to be BDT. 5.40 lacs comprising of bank loan of Rs.3.80 lacs and margin of BDT. 1.60 lacs as worked out hereunder:

Financial Aspects
(BD. in lacs) Particulars Shock of RMs Stock of Finished Goods Receivables Other Expenses Period Month Month Margin 30% 25% Total 1 1.4 Bank 0.7 1.05 Promoters 0.3 0.35

1 Month 1 Month

25% 100% Total

2.75 0.25 5.4

2.05 -3.8

0.7 0.25 1.6

Financial Aspects
Cost of the Project and Means of Financing
Item
Land and Building Plant and Machinery Miscellaneous Assets P&P Expenses Contingencies @ 10% on Building and Plant & Machinery Working Capital Margin Total Means of Finance Promoters' Contribution Loan from Bank/FI Total Debt Equity Ratio Promoters' Contribution 2.4 5.6 8 2.33 : 1 30% 1.6 8 (BDT. in lacs)

Amount
2.7 2.3 0.5 0.4 0.5

Financial Aspects
PROFITABILITY CALCULATIONS 1. Production Capacity and Build-up The processing capacity is taken at 600 tonnes per year on two shift working. As explained earlier, processing of 600 tonnes would, on an average, yield 480 tonnes of edible paddy or rice with 80% recovery. Hence, capacity utilisation in the first year is taken at 60% whereas second year onwards, it is assumed to be 70%. 2. Sales Revenue at 100 (BDT. in lacs)
Product Rice Husk/Bran, etc. Qty. (Tones) 480 90 Selling Price/Ton 25,000 3,500 Total Sales Value 120 3.15 123.5

Selling price of rice would vary depending upon the quality of inputs. Product-mix may vary and hence an average selling price of BDT 25,000/- per ton is assumed. Similarly, price of husk and bran is also taken at BDT. 3,500/- which would fluctuate in line with quality of inputs, processing techniques etc. as explained earlier. 3. Raw Materials Required at 100% Different qualities of paddy is grown in the state and the mill would process suitable good paddy from time to time. The annual requirement at 100% capacity shall be 600 tonnes. Considering average price of BDT. 13,750/- per ton, the yearly cost would be BDT. 82.50 lacs. 4. Utilities The annual expenditure under this head at 100% activity level is estimated to be BDT. 60,000/-. 5. Interest Interest on term loan of BDT. 9.60 lacs is calculated @ 12% assuming repayment in 4 years including a moratorium period of 1 year. Interest on bank assistance for working capital is computed @ 14% per annum. 6. Depreciation It is computed on WDV basis and rates assumed are 10% on building and 20% on machinery and miscellaneous assets.

Financial Aspects
No. A Particulars Installed Capacity Capacity Utilization Sales Realization B Cost of Production Raw Materials Utilities Salaries Stores & Spares Repairs & Maintenance Selling Expenses @ 10% Administrative Expenses Total C Profit before Interest & Depreciation Interest on Term Loan Interest on Working Capital Depreciation 24.30 0.36 1.37 0.18 0.21 3.33 0.30 30.05 3.25 0.60 0.53 0.71 1 Year --600 Tonnes-60% 33.30
st

(BDT. in lacs) 2 Year

nd

70% 38.85

28.35 0.42 1.55 0.21 0.30 3.88 0.39 35.10 3.75 0.45 0.62 0.59

Net Profit
Income-tax @ 20% Profit after Tax Cash Accruals Repayment of Term Loan

1.41
0.28 1.13 1.84 --

2.09
0.42 1.67 2.26 1.65

Financial Aspects
BREAK-EVEN ANALYSIS
No. [A] [B] Particulars Sales Variable Costs Raw Materials Utilities (70%) Salaries (60%) Stores & Spares Selling Expenses (80%) Admn Expenses (50%) Interest on WC [C] [D] [E] Contribution [A] - [B] Fixed Cost Break-Even Point [D] [C] 24.3 0.25 0.82 0.18 2.66 0.15 0.53 28.89 4.41 2.5 57% Amount 33.3

(BDT. in lacs)

Financial Aspects
LEVERAGES Financial Leverage
= EBIT/EBT = 2.54 1.41 = 1.80

Operating Leverage
= Contribution/EBT = 4.41 1.41 = 3.13

Degree of Total Leverage

= FL/OL = 1.80 3.13 = 0.58

Financial Aspects
Debt Service Coverage Ratio (DSCR)
Particulars Cash Accruals 1st Yr 1.84 2nd Yr 2.26 3rd Yr 2.45

(BDT. in lacs)
4th Yr 2.67

Interest on TL
Total [A] Interest on TL Repayment of TL Total [B] DSCR [A] [B] Average DSCR

0.6
2.44 0.6 -0.6 4.07

0.45
2.71 0.45 1.85 2.3 1.18

0.23
2.68 0.23 1.85 2.08 1.29

0.11
2.78 0.11 1.9 2.01 1.39

Internal Rate of Return (IRR)

Cost of the project is BDT. 8.00 lacs. Year 1 2 3 4 5 6 Cash Accruals 1.84 2.26 2.45 2.68 2.89 3.14 15.26 16% 1.59 1.68 1.57 1.48 1.38 1.29 8.99 18% 1.56 1.62 1.49 1.38 1.26 1.16 8.47 (BDT. in lacs) 20% 1.53 1.57 1.42 1.29 1.16 1.05 8.02

The IRR is around 20%.

Social Aspects
Objectives: The main objective of the PROJECT is to strengthen the national agricultural technology system to increase the agricultural productivity and add value to the selected commodities and improve market linkage.

Agricultural Extension. The main focus of this component is to strengthen and introduce a decentralized pluralistic extension system. Emphasis would be given on making the system more efficient, demand-driven, knowledge-based and responsive to the changing need of farmers in the context of increasing commercialization of agriculture. Planning and funding of the public extension programs would be decentralized up to the Upazila level. This system may be referred as `One Station` service where the users will get necessary advisory services on crop, livestock and fisheries sub-sectors. Development of Value Chain. The main focus of this component is to promote the development of value chain of a few selected high value commodities (e.g. fruits, vegetables, poultry, milk, fish) based on comparative advantage, farmers preference and market demand. More specifically, the component would finance: (i) stronger farmer market linkage through- (a) promotion of contract farming, (b) improved low cost post-harvest management practices, and (c) introduction of higher sanitary and phyto-sanitary standards for the national and export markets; and (ii) institutional efficiency enhancing measures through-(a) institutional strengthening of Hortex Foundation and other dedicated agencies dealing with high value agriculture, and (b) develop capacity of farmers, agri-business staff and public officials in commercial farming including export procedures.

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