1 | P a g e

Executive Summary

Universal Knitwears is being established with the mission of providing good quality designer
sweaters at economical prises. Its launching two brands Damsel and Winter wonders.
Damsel constitutes range of designer sweater targeting elite high income group women
winter wonders focuses on value for money for the middle income population.
The strategic advantage of the business is the already established sales network in the
Northern eastern States by sister concern Assam Trading Company- working in trading of
woollen goods from past 12 years.
The process of manufacturing will be outsourced to specialized fabricators thus focusing
more on marketing and selling.
The total investment required for the business is Rs 94 lacks, 25% of which is being taken as
loan and rest 75% as owners fund.
An average of 200 pieces of sweater per day is estimated for the first year. The company
targets 500 pieces in the first 3 years and 1500 in the first 10 years.
The net profit margin of the company is 13 percent; all the loans of the company are paid
back in the first six years making it a self financed from 7 year onwards.
The company aims to make all India presence in the first 7 years , the long term vision of the
company is to diversify into complete range of women clothings, and to open retail outlet
throughout the country.

2 | P a g e

Description of the Project

Universal Knitwears is a Ludhiana based company whose mission is to provide good
quality, designers ladies sweaters at economical prises .The Company is a part of backward
intergradations of sister concern Assam trading Company(ATC), involved in trading of all
kind of hosiery goods in Ludhiana for past 12 years.
Universal Knitwears will manufacture two brands of sweaters
Damsel Exclusive ladies designer sweater for the elite class.
Winter Wonders-Economical Sweaters Targeting Middle Income Group.
The manufacturing of sweaters is outsourced to various contractors thus focusing more on
selling and marketing of Goods.The Company has fabricators specializing in manufacturing
vivid designs customizing the need of target market.
The sweater focuses unique styling and fine quality acrylic wool. The designs are highly
fashionable and include subdued colors and patterns, giving a one of a kind feel to the
sweater. The wool is specially processed to allow the sweaters to be hand washable, making
them easy to care for. The Company stays in touch with customers and with fashion trends to
keep its product lines fresh and fashionable.
3 | P a g e


Market Research
Study of local, national & export market

Knitwear is emerging as the fastest growing segment of Indian garment exports as compared
to all other segments, including woven garments and the mill-made garments. In the textile
industry, the role of hosiery or knitwear sector is increasing day by day. Knitted garments are
preferred over woven garments the world over due to comfort, stretch ability and easy breath
ability built within the knitted fabric structure.

The important centres of knitwear industry in India are listed below:

1. Ludhiana in Punjab for woollen and synthetic knitwear

2. Tirupur in Tamil Nadu for cotton knitwear

3. Delhi (Gurgaon & Noida included) for synthetic knitwear

4. Bangalore for cotton and synthetic knitwear

5. Mumbai for cotton and synthetic knitwear

The garment industry all over the world is at the threshold for far - reaching institutional
changes. Over the past three to four decades, trade dynamics, especially - price and
quantitative restrictions have come to play a major role in the patterns of the sectors
development. The removal of quantitative restrictions has brought about important
implications. It has thrown open both opportunities and threat, especially for the low
Income economies seeking to industrialize through promotion of the garment sector.
Internationally retailers are concentrating on their core business, which is selling to the end-
consumer. Many are turning to lean retailing, or cutting down inventory to the minimum,
as a means to achieve this. Reducing stocks requires fast and on-time delivery from the
manufacturer
4 | P a g e

According to a research Ludhiana Diagnostic Study conducted by Ludhiana Knitwear and
Apparel Cluster the demand for knitwears is growing steadily. About 66% of firms believe
that business opportunity was abundant in the last two years however 17 % believe that the
sales have reduced due to recession and the rest 17% believes that the market have remain
constant though export gap was fulfilled by high local demand.



Demand Conditions - Industry

Demand of hosiery goods is totally depended on weather condition.

In Ludhiana knitwear industry, there is no distinction between a manufacturer and a
marketer. There are very few firms who are selling directly through their own retail outlets.
Many units are doing job work for big brands.

There is no emphasis on branding and this largely reduces the margin because maximum
value addition in the value chain at this stage.

There is very less participation in domestic trade fairs while the international ones are
seldom visited to get a feel of the market trends. The marketing in the export sector is
5 | P a g e

targeted mainly at the buying houses. There are very few units which are directly marketing
in the international market.

95% of the domestic demand for woollen knitwear is fulfilled by Ludhiana industry alone.
The export markets include USA, European Union and the CIS (erstwhile USSR). The
domestic segment consists of both high-end (such as Delhi, Ahmedabad, Mumbai, Lucknow,
and Kanpur) and low-end middle-income mass markets (comprising of Tibetan s/Nepal is).

Another major market for the industry is Government purchases (primarily for Armed
Forces and other departments) which is done through tendering by the respective government
departments.

Potential users of the product/service
Girls of the age group 16-24 who are more inclined towards fashion and latest trend.
Women of 24-40 years who seek latest design and value for their money invested.
Distribution Network

1. Direct to Retailers-
Goods will be sold directly to retailers who are well known in their city to generate
substantial volume of sales and have good credibility. Credibility plays crucial role in
choosing these channel as the probability is high.
This channel plays a crucial role in demand and trend analysis as retailers are directly
linked to the customers. They provide first hand feedback.
2. Through Whole sellers
Selling through whole sellers is very necessary because they generate huge volume of
sales. It will also help in penetrating the market deep till village level.
Whole sellers located in Delhi-Gandinagar and Ludhiana sells to small retailers
throughout the country. They also provide credit facility in the beginning of the
season by paying advance for good s purchased.

Various whole sellers in Ludhiana
Punjab Hosiery Mills
Haryana Hosiery Mills
Shurbi Traders
Jainsons etc

6 | P a g e


3. Through Commission Agents
Commission agents act as link between the manufactures and whole sellers.
70 percent of sales will generated through commission agents as they provide credit
guarantee. These agents take commission of around 2-5 percent above sales price.
Various Commission Agents that will be target are-
Assam Trading Company
Krishna Trading Company
Ram Chandra Kamal Kishore
Tayal Brothers
Jeet Mall Jain
Sanjay Knitwear traders
Bharat Trading Company etc






7 | P a g e


Competition SWOT Analysis

STRENGTH
Design & Quality
Contract Based manufacturing and
payment
Easy availability of Raw Material
Satisfied worker and exporter
Cluster benefits.





OPPORTUNITY
Product Diversification- T shirts,
sweat shirts etc
Market Expansion-
Domestic and Export
From production to retail.
Manufacturing of ancillary products-
Printing Units, Dying Units, etc



WEAKNESS
Risky business(credit risk)
Seasonal Business
Labour ( Industry as a whole)
Technology of production





THREATS
New Entrants
Competition
Poor Infrastructure(Connectivity by
road, airport, Electricity)
Contract manufacturer starts marketing



8 | P a g e


Micheal Porter Five force Analysis














Bargaining Power of Supplier: -In knitwears industry supplier have a higher
bargaining power as they are offering specialized product. Spinning units are few and
large in size giving them the benefit. It it will be difficult to get credit from these
companies.
Bargaining Power of Customers: - Bargaining power of customer will be very high
initially, goods are being sold through agents thus they need to be given extra
discount to sell our product. Once a brand is built up the bargaining power will shift
in our hands as consumers will directly demand the product and the agents will have
no other option.

Threats of New
Entrants
Bargaining Power of
Buyer
Competitive
Rivalry in
knitwear
Industry
Threats of Substitute
Products
Bargaining Power of
Supplier
9 | P a g e


Threat of New Entrant
It is easy for the new entrant to enter the knitwear industry but difficult to enter this
segment of production as it involves greater technical knowledge and a well establish
market base.
Threats of Substitute Product/Services: - Threats of substitute is high, the market is
fashion based, consumer may opt for substitutes like jackets, sweat shirts, shawls etc.

Competition
1. Competition from Branded Companies
Competition from Branded companies like Monte Carlo , Canterbury, Creative Line
Priknit etc is not that significant as of now because their target market is different and
they follow their own channel of Distribution.
2. Direct Competition
Direct competition will be faced from companies who manufacturer similar product
and use the same distribution channel. They have an advantage as they are in the
market from past many years, and have established a good brand name.
Unique styling, and economical prising will help cutting competition, special offers
and discounts needs to given to the agent so that they stock our product.
Immense competition from companies like
Queens land- Operating from Past 12 years, generates huge volume of sales
from north eastern regions. Retail Counter in Darjeeling adds to its advantage.
Revance- Operating intensely in north eastern states from past 5 years
Advantage of having Tibetan market network. Offers wide collection of
designs.
Soft Pink
Money Bell etc





10 | P a g e

3. Indirect Competition
Indirect competition from companies supplying Jackets, sweat shirts is directly
related to the fashion prevailing.


Critical factors that determines market potential

Quality- Quality plays a very critical role as production is being subcontracted, there
may be possibility that the fabricator does not adhere to the quality specification.

Design- Design is very crucial, factor, if the design produced is not liked by the
market, it may not generate enough sales leaving huge amount of stock to be sold at
less price.

Raw Material price fluctuation- The prices of raw material keeps fluctuating, purchase
of raw material at right prices plays a crucial role in determining profitability.

Timely Delivery- The goods ordered are to delivered at right time delay will lead to
customer dissatisfaction.

Market Plan Strategies deployed to market entry/penetrate

Winter Wonders and Damsel will be targeting women of the age group 20-40 years.
Income group - Middle and upper middle class.
In the first year of operation north eastern states i.e Assam, West Bengal, Sikkim Arunachal
Pradesh etc will be targeted using existing distribution channel of sister concern Assam
trading company.
Hill Station will be prime target as it provides a market for entire year.
The following Hill stations will be targeted in the 1
st
year-
Darjeeling- Presence of 2 retail outlet, Universal stores and Anupam will be of great
benefit in generating sales and 1
st
hand customer feedback and trend analysis .These
two outlet will also be used for the purpose of testing of samples and product
development.


11 | P a g e

Gangtok
Kaimpong
Shillong
Tawang


After gaining sustainable sales in north eastern region, hilly areas of Northern states i.e
Uttaranchal, Himachal Pradesh, Uttar Pradesh will be targeted. The market will be
approached through agents or through whole sellers who can generate volume sales and have
good credit reputation.
There after Local market of Punjab, Delhi and Haryana will be targeted as these markets
generate huge volumes of sales from the month of October to February dude to chilling
winter. Whole seller in Delhi and Ludhiana generate sales through out the country.
Other states will be targeted depending on the market potential and selling capacity year on
year.
After generation substantial sales volume focus will be on brand building and development of
product line from sweaters to entire ladies wear. Retail outlet throughout the country will be
established.















12 | P a g e

Technical Feasibility

Product, it specifications and uses

Sweater is a garment used to cover the upper part of the body; it is generally worn above a t-
shit or a top. It is worn to protect against cold. Sweaters in earlier times always were, made
from wool; however, they can be made of cotton, synthetic fibers, or some combination
thereof.

Wool is the textile fibre obtained from sheep and certain other animals, including cashmere
from goats, mohair from goats, alpaca, and camel from animals in the camel family, and
angora from rabbits.
Synthetic yarn is more popular for making sweater these days, the most commonly used is
Rainbow acrylic wool, daffodil, nylon etc and their combination.
There are two types of sweater-
1. Cardigan-Front open sweater, more common among ladies.
2. Pullover- Its not open from above more common among gents.

The type of the sweater depends on the yarn used and the method of knitting and the
thickness of the yarn.
Sweater are categorised on the basis of the thickness that is determined by the way of
knitting.
The thickness of sweater varies from 6 gauges to 16 gauge, the more the gauge the finer the
sweater. The price of the sweater is calculated on the basis of quantity of yarn used per
sweater.
13 | P a g e

Process of Manufacturing



It starts with spinning of raw wool, acrylic or other fibers that are sourced from outside
Ludhiana. A cleaning operation is
carried out locally for wool by medium or upper end of small scale spinning units before
spinning the yarn. This yarn is then supplied to the industry for further operations.
The hosiery units buy the yarn from spinning units directly or through traders and then send it
to dyeing units for dyeing in different shades. Small units buy different shades from traders
who stock these for retail.

Yarn is wound over cardboard cones. Knitting the yarn into fabric is done through hand
operated flat knitting machines, semiautomatic or fully computerized knitting machines.
Different designs are made on the fabric through these knitting machines manually or
mechanically depending upon the machine used. Generally a master craftsman is employed
for making designs for flat machines (hand driven and mechanical both). In computerized
machines, design inputs are fed through available software programs.
14 | P a g e


The fabric then undergoes milling process in which fabric is dipped in chemicals and soap.
This process softens the fabric. It then gets ready for cutting and tailoring which is generally
done in-house by most of the hosiery units on piece rate basis. After cutting and tailoring,
manufactured garments undergo washing .Visual checking is done before packing them into
boxes.
Installed capacity calculation & utilization of capacity

Manufacturing is outsourced to specialised fabricators, on the basis of skill and technology
possessed by them. Outsourcing does not limit the capacity of production to a certain limit;
the capacity depends on ability of selling and finance available.
In the first year goods is outsourced to a single fabricator who produces on a average 200 pcs
per day. He have in built capacity for 400 pcs per day including hand machines, fully fashion
12 gauge machines and Stoll -8 gauge and 12 gauge machines . Availability of different
machines gives us the benefit of creating a wide portfolio of designs.
Every subsequent year, new fabricators will be contacted and capacity of existing fabricators
will be increased, also new fully automatic Stoll computer machines will be installed
depending on the market conditions.
The capacity is increased to 300 per day in 2
nd
year and 500 and 600 consecutively for 3
rd

and and 4
th
year, thereafter 20% rise year on year.
Selection of location & site
Knitwears is diversified industry in India, Ludhiana is cluster for manufacturing of products
from wool and acrylic wool, over 80% of Indias woollen products is manufactured in
Ludhiana, giving benefits of economy of scale due to presence of large number of ancillary
industries enhancing the production and reducing the cost.
Knitwear manufacturers (including manufacturers-cum-traders/exporters) are at the core of
the cluster. Spinners, dyers and subcontracting knitting units provide backward process
support. Dye manufacturers, machinery manufacturers and accessory suppliers provide
requisite raw material backup to various processes. On the domestic front forward linkage is
provided by intermediate agents, wholesalers and retailers. Exports are being affected either
directly or through merchant exporters, buying agents and buying houses. A number of
technical support institutions are also present Ludhiana.
The main hosiery knitting centres in Ludhiana are geographically centred within the city
only. According to industry concentration, the places within Ludhiana can be divided into the
following four blocks:
15 | P a g e


1. Purana Bazar/ Madhopuri, Sundernagar and Shivpuri

2. Industrial area

3. Bahadur Ke Road

4. Focal Point (Dhandari Kalan)

About 20% of the firms each are concentrated in the designated Industrial Area(s) like the
Industrial area and Focal Point (Dhandari Kalan), and another 10% in the Bahadur Ke Road
area. In the undesignated area (s), viz., Old city Area (Sunder Ngr, Purana bazar, Dal bazar),
and Civil Lines another 40% of the firms are located. The remaining 10% of the firms are
scaterred across the city.
Site of production will be located in Shivpuri adjoining sunder nager. Its a developing are
adjoining sunder nager.
The advantages of this location are-
a) Easy availability of labour.
b) In the market not difficult for the customers to locate the firm.
c) Wide roads and easy availability of transport facility unlike purana bazaar (Highly
congested old market)
d) Price of land is less as compare to Industrial thus giving advantage too small and
medium scale industries.
e) Surrounded by well-known companies like Sona- Rupa, AL Jain, Bl Jain Attam
Vallabh, LBR jackets etc.





16 | P a g e

Capital inputs: Land & Building (design) plant and machinery; (selection
and justification)


Land
Land and Site Development 2808000

Land 3600sq feet Rs. 780/Sq feet Rs28 Lakhs


Building
Construction Cost of around 30 Lakhs as per the estimate done by various architect during
preconstruction time.
Two floors are being constructed. Ground floor space is utilized for construction of office,
accounts office, sample room, stock room and packaging room.
Tata 407 or mini pick up can be parked inside the premise foe loading and unloading purpse.
The floor is constructed keeping future in mind, it can accommodate any kind of knitting
machines as of todays technology.
First floor will be used for stitching and garmenting machines, and stall quarters will also be
built in first floor.
Rain water harvesting is done in the building thus protecting the level of ground water.

17 | P a g e


Ground Floor Design
18 | P a g e

Plant and Machinery

As of now manufacturing of goods is outsourced so plant and machinery is not installed, but
subsequent year 2- Stoll CMS 433.6fully computerised machines will be installed .
Details of the machine

19 | P a g e




20 | P a g e

Cost of project


Details Rs
Land and Site Development 2808000
Building 3000000
MFA 695000
Preliminary Expenses 23000
Pre-operative Exp 422500
Contingency Margin 694850
Working Capital Margin 1820435

Total 9463785

21 | P a g e

Recurring inputs- Requirement & Availability of manpower,
infrastructure facilities (transport & communications, power, water etc),
and raw material (cost, quality)
Earlier labour was easily available from states like Bihar, Uttar Pradesh, Uttaranchal,
Himachal Pradesh Etc but dude due industrial development taking place in these states the
availability of labour reducing, also resulting in increasing cost of labour.
Less availability of labour is also helping the industry into capital intensive, more and more
companies are installing automatic machines thus reducing the demand for labour who run
hand knitting machines.
a) Skilled labour is a problem. Training of labour take place in the factories itself, there
are few institution that provide training like Government Poly technique for Women
b) Sportking Institute of Fashion Technology.
c) Government Institute of textile chemistry and Knitting
Infrastructure facilities
a) Support services are fairly affordable. The industry is actively supported by an array
of supportive activities in the value chain, located within the city. These activities
relate to the forward and backward linkages within the industry such as tailoring,
embroidery, Packing, retailing and marketing etc.
b) Telecommunication facilities are very good in the cluster.
c) Connectivity is a major problem as there is no airport in the city and hence the
overseas buyers are usually unwilling to travel to Ludhiana.
d) Infrastructure in the industry is very poor, especially erratic electric power supply and
the increasing pressure on the roads has put considerable strain on the growth.
e) Lack of required infrastructure renders the city unsuitable for visits by foreign buyers
or as a venue for any high-level conference.
The cluster is so big that there are no proper ways of information exchange.
f) The use of ICT including the Internet is very limited.
g) Awareness about various government and institutions aided schemes for the benefit of
the industry in terms of optimum utilization of each and every resource is missing.
h) The winter production is seasonal in nature and also the way it is sold to distributor/
suppliers and the industry is largely unorganized; so are the organizations. There is
very little inventory management; stock details of various accessories are not kept and
there is low- capacity utilization.
22 | P a g e

i) Water is available easily as almost every units have their own tube well to bore water
from the ground.
Raw Material
There are various kinds of yarn most commonly used is Acrylic wool, the use of natural
wool is limited to large scale industry due to high cost and less availability.
Some of the fancy yarn in use is nylon, polyester, daffodil, bulbul, feather etc, These
yarns are available in different counts, companies select the yarn on the basis of the
design required.
Yarn is purchased from spinning units directly or through agents of the spinning mills.
Yarn is easily available but the price fluctuates very rapidly.
Various Companies Supplying Raw Material
In Ludhiana there are 50-55 small and large spinning units supplying yarn to the knitting
units directly or through agents.
The prominent ones are-
a) Malwa-Oswal
b) Sportking
c) Arhiant
d) Vardhaman
e) Nahar
f) Jindal
g) Kotex etc

The yarn agents are mainly agents of traders who collect requirements of knitters for different
shades on a daily basis by going door to door. They then purchase these shades from traders
at night and deliver the required amount of different shades to knitters by early next morning
before the unit commences its daily operations. The yarn is purchased through agents because
it gives safeguard of payment to the yarn manufacturers.


23 | P a g e

Various agents supplying Yarn are-

Rabindra Knitwears Raghav Woollen Mills Pvt Ltd
Rahul Sales Corp
Ranjit Silk & Woolen Mills
Sanmati Udyog Shakti Wool Centre
Sharma Yarn Agency
Shree Vallabh Agencies
Vimal Hosiery & Textis

Vee Kay Entprs

Victor Corporation
24 | P a g e

Cost of production
Costing
Year -1
Yarn Rs Per Kg 370.00

Average Yarn Usage 500 gm

Cost of yarn per piece 185

Knitting 45

Stitching 40

270

Assumptions
Sales are assumed on per day basis.
300 days of production is considered in a year, in first year 250 days of
production is considered.
40% growth in sales is shown in the first two years i.e to achieve economy of
scale, there after 32% growth year on year basis.
500 gm of yarn is assumed to be used averagely per sweater, the quantity of
yarn depends on the size and design of sweater. Yarn quantity varies from
350-700 grams.
Fabricator 1 has a total capacity of 200 pieces per day, as of now he is
supplying 50% capacity to us and rest to the market.
Its assumed that the fabricator will grow at a certain pace thus capacity of
each fabricator is increased year on year.
Subsequently every year different fabricators is contacted based on
specialization of production
Knitting charges varies from Rs 35 to Rs 55 so average if Rs 45 is taken
Stitching and washing is outsourced too, average of Rs 40 per sweater is
estimated.
25 | P a g e

Implementation schedule

S.no Activity Period
1 Preparation of Project Report 1 month
2 Construction of Office 6 months
4 Registration of Firm and Brand 1 week
3 Selection of Fabricators 1 months
4 Purchase of raw material 1 week
5 Requirements of staff 1 months
6 Arrangement of Finance 3 months
Construction of factory building has been started in the month November 2010 and is
expected to get over till May 2010. Fabricators are being contacted and it is expected
to produce the sample goods till 1st week of May thus the production can be started
from June onwards.

26 | P a g e


Quality Control
The product proposed for manufacturing is a fashioned item and having different
designs and colour combinations depending upon the demand of the consumers. So,
proper quality control on the product is not possible to be maintained. However, for
quality goods, the quality of yarn in respect of evenness and correct counts and colour
fastness can be maintained. For this proposed items the specification IS 2422:1963
may be followed.
Synthetic Acrylic wool is used for manufacturing of sweaters so wool mark cannot be
used.

Environmental Impact Analysis

The process of Knitting is not harmful individually as it consumes less energy. The
machine used is environment friendly, but the raw material used, i.e dyed yarn is
harmful to the environment as most of the dying companies are conventionally set up.
They have not installed Environment Treatment Plants, and have immense pressure
from the government to shift their dying units outside the premises of Ludhiana city.
The major problem of the dying units is to dumb the water.
Most of the large scale dying units have moved outside Ludhiana and have installed
ETP. Small companies are collectively setting up ETP with government support. I
will put my efforts to buy yarn from dying units who have their ETPs.
The factory and office building is constructed keeping environment factors in
consideration.
It has its own tube well to pump ground water.
A rain water harvesting plant has been set up to drain out the rain water directly into
the ground water level.







27 | P a g e

Financial Feasibility
Basic Assumptions

Construction period will last for six months from November 2010 to April 2010.
Production will start from the month of June 2011
On the first year 280 days of production is assumed, thereafter 300 days year on year.
The aversge yarn used per sweater is 500gm.
The suppliers will provide a credit of 7 days.]
Finished goods need to be stocked for 2 months.
Credit of 3 months will be provided to the customers
The fabricators will be paid for 15 days advance.
25 percent of tern loan is being taken at a interest of 13.5 percent
Interest on working capital loan 13.5 percent.
Depreciation has been calculated by both written down and straight line method.
Preliminary expenses have been written down in 10 equal annual installements
Income tax is calculated at the rate of 30%.
No withdrawals in the first year of operation, there after 25 percent of withdrawals
averagely.
28 | P a g e

Cost of project, preliminary & pre operating expenses
COST OF PROJECT


In Rupees

Land and Site Development 2808000

Buliding 3000000

MFA 695000

Preliminary Expenses 23000

Pre-operative Exp 422500

Contigency Margin 694850

Working Capital Margin 1822757


Total 9466107


Means of Finance


Equity 70.00% 6626275

Loan 30.00% 2839832


Working .notes

Land 3600 780 2808000



MFA

Laptop 35000

Desktop 25000

Printer 15000

Motor Bikes- Splendor-2 90000

A/C 30000

Furniture 500000

Total 695000



Pre Operative Exp

Interest During Construction 3000000 13.50% 6 months 202500
Design Pass

150000
Electricity Meter

20000
Water Meter

50000
Total

422500

Preiminary Expenses

Firm Registration 3000

Brand Registration 15000

Miscellaneous 5000

Total 23000


29 | P a g e


Contigency Margin

10% of COP except WIP 694850

30 | P a g e

WORKING CAPITAL SCHEDULE
Current
Assets Year
hp in months 1 2 3 4 5 6 7 8 9 10
Raw. Mat.
Stock 0.25 208125 346875 578125 693750 832500 999000 1198800 1438560 1726272 2071526.4
WIP Stock 0.5 197500 325625 538812.5 645818.75 774150.625 928065.6875 1112672.256
1334099.48
2 1599701.43 1918301.973
Debtors
Stock 3 4738500 7897500 13162500 15795000 18954000 22744800 27293760 32752512 39303014.4 47163617.28
Finished
Goods 2 2430000 4050000 6750000 8100000 9720000 11664000 13996800 16796160 20155392 24186470.4
TOTAL 7574125 12620000
21029437.
5 25234568.75 30280650.63 36335865.69 43602032.26
52321331.4
8 62784379.83 75339916.05
Current
Liability-
trade credit 0.5 416250 693750 1156250 1387500 1665000 1998000 2397600 2877120 3452544 4143052.8
Working
Capital Gap 7157875 11926250 19873188 23847069 28615651 34337866 41204432 49444211 59331836 71196863
Cash In
hand 133152 209763 335016 402019 482422 578907 694688 833626 1000351 1200421
Net WC 7291027 12136013 20208203 24249087 29098073 34916773 41899120 50277837 60332187 72397285
Bank
Finance 5468271 9102010 13102010 10102010 9502010 4002010 0 0 0 0
Self Finance 1822757 3034003 7106193 14147078 19596063 30914763 41899120 50277837 60332187 72397285
Short term
Int. 738217 1228771 1768771 1363771 1282771 540271 0 0 0 0
RAW MATERIAL CYCLE
Year 1st year 2nd year 3rd year 4th year 5th year 6th year 7th year 8th year 9th year 10th year
Raw
Material 9990000 16650000 27750000 33300000 39960000 47952000 57542400 69050880 82861056
99433267.
2
Stock 208125 346875 578125 693750 832500 999000 1198800 1438560 1726272 2071526.4
WIP CYCLE
31 | P a g e

Year 1st year 2nd year 3rd year 4th year 5th year 6th year 7th year 8th year 9th year 10th year
WIP 4590000 7650000 12750000 15300000 18360000 22032000 26438400 31726080 38071296
45685555.
2
Salary -15
days 150000 165000 181500 199650 219615 241576.5 265734.15 292307.565 321538.3215
353692.15
37
Total 4740000 7815000 12931500 15499650 18579615 22273576.5 26704134.15 32018387.57 38392834.32
46039247.
35
Stock 197500 325625 538812.5 645818.75 774150.625 928065.6875 1112672.256 1334099.482 1599701.43
1918301.9
73
FINISHED GOODS CYCLE
Year 1st year 2nd year 3rd year 4th year 5th year 6th year 7th year 8th year 9th year 10th year
Finished
goods
1458000
0 24300000 40500000 48600000 58320000 69984000 83980800 100776960 120932352
14511882
2.4
Stock 2430000 4050000 6750000 8100000 9720000 11664000 13996800 16796160 20155392
24186470.
4
DEBTORS CYCLE
Year 1st year 2nd year 3rd year 4th year 5th year 6th year 7th year 8th year 9th year 10th year
Sales
1895400
0 31590000 52650000 63180000 75816000 90979200 109175040 131010048 157212057.6
18865446
9.1
Stock 4738500 7897500 13162500 15795000 18954000 22744800 27293760 32752512 39303014.4
47163617.
28
CASH IN HAND
Total Cash
Exp
1569653
4
25639840
.8
42107808.
96 50529370.75 60635244.9 72762293.88 87314752.66 104777703.2 125733243.8
15087989
2.6
Raw
material 9990000 16650000 27750000 33300000 39960000 47952000 57542400 69050880 82861056
99433267.
2
5706534
8989840.
8
14357808.
96 17229370.75 20675244.9 24810293.88 29772352.66 35726823.19 42872187.83
51446625.
4
Cash in
Hand
133152.
5
209762.9
52
335015.54
24 402018.6509 482422.3811 578906.8573 694688.2287 833625.8745 1000351.049
1200421.2
59
32 | P a g e

Cost of capital
Cost of Capital Calculation Equity Debt

70.00 30.00

20.00 13.50

18.05%


33 | P a g e

Profitability Statement
1 2 3 4 5 6 7 8 9 10
Sales Revenue 1,89,54,000 3,15,90,000 5,26,50,000 6,31,80,000 7,58,16,000 9,09,79,200 10,91,75,040 13,10,10,048 15,72,12,058 18,86,54,469
Cost Of Production
Raw Material 99,90,000 1,66,50,000 2,77,50,000 3,33,00,000 3,99,60,000 4,79,52,000 5,75,42,400 6,90,50,880 8,28,61,056 9,94,33,267
WIP 45,90,000 76,50,000 1,27,50,000 1,53,00,000 1,83,60,000 2,20,32,000 2,64,38,400 3,17,26,080 3,80,71,296 4,56,85,555
Electricity 1,20,000 1,44,000 1,72,800 2,07,360 2,48,832 2,98,598 3,58,318 4,29,982 5,15,978 6,19,174
Adm & Selling OH
Administrative Exp 4,32,000 5,18,400 6,22,080 7,46,496 8,95,795 10,74,954 12,89,945 15,47,934 18,57,521 22,29,025
Selling Exp 5,64,534 6,77,441 8,12,929 9,75,515 11,70,618 14,04,741 16,85,689 20,22,827 24,27,393 29,12,871
Total 1,56,96,534 2,56,39,841 4,21,07,809 5,05,29,371 6,06,35,245 7,27,62,294 8,73,14,753 10,47,77,703 12,57,33,244 15,08,79,893
Gross Profit b4 interest 32,57,466 59,50,159 1,05,42,191 1,26,50,629 1,51,80,755 1,82,16,906 2,18,60,287 2,62,32,345 3,14,78,814 3,77,74,577
Total Financial Exp
Long Term Interest 3,69,941 3,07,900 2,37,050 1,56,141 63742.53 0 0 0 0 0
Interest on wc 7,38,217 12,28,771 17,68,771 13,63,771 12,82,771 5,40,271 0 0 0 0
Depreciation 1,80,995 1,80,995 1,80,995 1,80,995 1,80,995 1,80,995 1,80,995 1,80,995 1,80,995 1,80,995
Prelimeniry Exp wo 2,300 2,300 2,300 2,300 2,300 2,300 2,300 2,300 2,300 2,300
Profit b4 Tax 23,35,954 45,38,093 85,90,124 1,11,03,563 1,37,14,688 1,74,93,339 2,16,76,992 2,60,49,049 3,12,95,518 3,75,91,281
Provision for tax 5,94,523 12,85,141 25,17,110 32,85,195 40,80,652 52,24,735 64,88,936 78,08,483 93,89,349 1,12,84,142
Profit after Tax 17,41,431 32,52,952 60,73,015 78,18,368 96,34,037 1,22,68,605 1,51,88,056 1,82,40,566 2,19,06,169 2,63,07,139
Less With Drawals 0 6,50,590 12,14,603 23,45,510 28,90,211 24,53,721 30,37,611 54,72,170 65,71,851 78,92,142
Retained Profit 17,41,431 26,02,361 48,58,412 54,72,857 67,43,826 98,14,884 1,21,50,445 1,27,68,396 1,53,34,318 1,84,14,998
Add Dep 1,80,995 1,80,995 1,80,995 1,80,995 1,80,995 1,80,995 1,80,995 1,80,995 1,80,995 1,80,995
Prelimeniry Exp wo 2,300 2,300 2,300 2,300 2,300 2,300 2,300 2,300 2,300 2,300
Net Cash Accurals 15,58,136 24,19,066 46,75,116 52,89,562 65,60,530 96,31,588 1,19,67,149 1,25,85,101 1,51,51,023 1,82,31,702
Working Notes 54000 90000 150000 180000 216000 259200 311040 373248 447897.6 537477.12
Raw Material cost per
piece 185 185 185 185 185 185 185 185 185 185
Total rw 99,90,000 1,66,50,000 2,77,50,000 3,33,00,000 3,99,60,000 4,79,52,000 5,75,42,400 6,90,50,880 8,28,61,056 9,94,33,267
WIP per piece 85 85 85 85 85 85 85 85 85 85
Total WIP 45,90,000 76,50,000 1,27,50,000 1,53,00,000 1,83,60,000 2,20,32,000 2,64,38,400 3,17,26,080 3,80,71,296 4,56,85,555
Salary
34 | P a g e

Accountant Part Time 5,000 12 60,000
Adm Manager 7,000 12 84,000
Sales Manager 5,000 12 60,000
Office Boy 3,000 12 36,000
Designer Part time 5,000 12 60,000
Total 3,00,000
Other
Telephone and Mobiles 8,000 12 96,000
Internet 1,000 12 12,000
Miscellaneous 2,000 12 24,000
Administrative Exp 4,32,000
Selling Exp
Fuel 100 365 36,500
Posters 1,00,000
Gifts 30,000
Sales Commision 3,98,034
Total 5,64,534


35 | P a g e

Break Even Analysis

Operation Break Even
Break Even Analysis
1 2 3 4 5 6 7 8 9 10
Sales 18954000 31590000 52650000 63180000 75816000 90979200 109175040 131010048 157212057.6 188654469.1
Variable Cost 15144534.00 24977440.80 41312928.96 49575514.75 59490617.70 71388741.24 85666489.49 102799787.39 123359744.87 148031693.84
Variable Percent 80% 79% 78% 78% 78% 78% 78% 78% 78% 78%
Fixed Cost 552000 662400 794880 953856 1144627 1373553 1648263 1977916 2373499 2848199
Break Even Sales 2746476.278 3164465.582 3691467.739 4429761.287 5315713.544 6378856.253 7654627.504 9185553.005 11022663.61 13227196.33
Financial Break Even
Fixed Cost 1843453 2382367 2983997 2657063 2674436 2097119 1831558 2161211 2556794 3031494
Break Even Sales 9172100.553 11381216.9 13857851.28 12339552.34 12420233.95 9739140.687 8505861.368 10036786.87 11873897.47 14078430.19

36 | P a g e

Ratios

Debt Equity 3:7

Gross Profit Ratio- 19.32%

Net Profit Ratio-13.32%

DACR
Net Operating
Income 183144129.1
Total Debt 54118151
DACR 3.38





NPV and IRR of the Project

Cost of Capital 18.00%
NPV 7140010.67
IRR 35.95%


Equity NPV IRR
NPV
Rs.
1,84,78,258.15
IRR 41%


Interest Coverage
Ratio
EBIT/Int
exp
EBIT 182445950.8
Interest Exp 8057347.927
22.64
37 | P a g e

Scenario Analysis

If the sale price is reduced up to 13percent i.e. from Rs 351 to Rs.305 the company will start
incurring losses, so the company cannot fluctuate its prices more than 13% irrespective of
rising raw material price, immense competition or non sale of goods due to improper
designing.
The company can absorb the shock in yarn prices up to Rs 90, if the yarn prices go from Rs
370 to Rs 460.
Variable cost can be fluctuated to the extent of 30%, if variable cost is increased more than
30% company will start incurring losses.
In case of optimistic if the company increases by the sale price per unit by 5% the Net Profit
will increase by around 30%.

Investment Decision

The main aim in the first five years is to repay the principal and interest of term loan, the
working capital loan is also being repaid by 6th year making the self sufficient. Profit has
been retained back in the business to invest more in working capital so as to increase the sales
volume and profit margin. Averagely around 25% of profit is withdrawn so that knitting
machines can be installed to make the company self productive.






38 | P a g e

Support from various organisation in the Knitwear Industry
UNIDOs (cluster Development Programme)

The objective of UNIDO intervention in Ludhiana cluster was to address poor endowment of
human resources, weak international market linkages, and to respond to a stagnating domestic
market, low level of competitiveness and weak institutional framework. Through these
efforts, the project aimed at enhancing the capability of the cluster to rapidly respond to the
changing demand pattern of consumers.
Project Vikas
Microsoft, along with the NMCC and other stakeholders, through Project Vikas- a five-
year project strived to make SMEs more competitive. This dedicated and scalable multi-
divisional programme was projected to harness skills and build capacity cover knowledge
creation and dissemination, and enable linkages in the cluster ecosystem.
SBI Uptech
Project Uptech was a intiative taken by the SBI (The State Bank of India) for Ludhiana
cluster development. It was focused on facilitating techno-managerial consultancy services to
the individual units to upgrade the technology. The other issues tackled in the project were
skill development of workers, financial support to the SMEs, preventing obsolescence,
energy conservation, and enhancing global competitiveness & exports.
Textile Committee
The objective of this program was capacity building of SMEs, through a cluster based
approach, by improving the existing support system and by enhancing the collective
efficiency of SMEs so that the opportunities coming up as a result of globalization can be
fully utilized. The salient initiatives under the project have been
1. Facilitation of consortia of 6 local manufacturers Launched brand wee
2. Exposure visit to other cluster to study best cluster practices
3. Energy audits of firms with PCRA
4. Awareness Session(s) on overview of Indian Apparel Industry and Quality Testing
5. Training Seminar(s) on Defects causes and remedies for fabrics
6. Training Seminar(s) on quality improvement through motivation and Inspection

PUNJAB APPAREL PARK

Punjab Apparel Park, a joint venture of PSIEC (Punjab Small Industries and Export
Corporation Ltd) . and APPEAL (Apparel Promoters and exporters Associaton of Ludhiana,
is a special Purpose Vehicle (SPV) being set up to develop a 100 acre Aparel Park with a
total investment of Rs 355 crores at Doraha Distt, Ludhiana under the Apparel Park Scheme
of Ministry of Textile, Govt. of India. To Facilitate the industry the proposal includes
facilities like exemption from stamp duty & registration fee, Sales tax ,continuous power
supply, single window clearance etc for the units set up at Park.
39 | P a g e

LUDHIANA INTEGRATED TEXTILE PARK

The endeavour is a brainchild of of Knitwear Club has always been to ensure betterment of
Knitwear/Textile and Allied industry. The knitwear club formed a special purpose vehicle
(SPV) namely Ludhiana Integrated Textile Park Ltd. as it was a pre-requisite for developing a
Textile park under the Government of India Ministry of Textiles scheme, namely scheme for
Integrated Textile Parks (SITP).
Punjab Governments empowerment committee for mega projects granted its approval in
2006 for setting up of Textile Park and allowed certain concessions such as waiver of stamp
duty etc. Simultaneously Infrastructure Leasing and Financial Services (IL&FS) - a
consultant agency for preparing and submission of detailed project report (DPR) to Ministry
of Textiles, Government of India was engaged. For the purpose, land measuring 57.18 Acres
was registered in the name of the company for development of the Textile Park. The park
now stands approved and grant sanctioned by Ministry of Textiles.
The main features of the project are as under.
1) The park to be developed on around 60 acres of land with the provision of further
extension if possible.
2) A cluster of about 80 units of Knitwear/Textile industry envisaged under the park
3) A Total investment in the cluster to the tune of Rs. 1500 Crores.
4) The cluster to provide direct and indirect employment to about 1,25,000 persons.
5) The project to have the provision for excellent Roads, Lights, Effluent Treatment Plant,
Sewerage, Storm Water, Captive Power Plant, Trade Centre and Sophisticated Research &
Development Centre.
6) The compact functioning of the park envisaged to change the unorganised functioning in
the cluster. Necessary state of the art conference infrastructure will be an important
component of the with the top class facilities available. This will brace up the cluster for
national and global competitiveness.
MSME Institute
It is a govt. of India centre dedicated to provide technical support to the small sector
companies that cannot afford to have in-house R&D. The institute also provides training
support to the industry in addition to conducting entrepreneurship development programs.
The institute also hosts a modern machining centre that houses expensive machines and
where the industry is unable to invest large amounts , the services of these machines is
offered on a no profit basis. The institute also has a small test house and a large auditorium
that is made available to the industry associations for conducting workshops for the industry
benefit at a very nominal fee.




\
40 | P a g e

Management team with their role and organizational setup.
1. Managing Director
Mr Subhash Agarwal will be the managing director of the firm. He is working in
the industry for past 30 years. He has experience in both retail and wholesale
trading of woollen and readymade garments.
His role in the company is to act as a guiding figure, to be involved in the process
of planning and decision making. Major work will be Selection and procurement
of fabricators, finalizing the designs to be produced etc

2. Manager
Mr. Nitesh Agarwal, Son of Mr Subhash Agarwal will be the handling the day
to day management, checking each day production, procurement of samples,
managing daily accounts, HR functions etc.





41 | P a g e

3. Sales Manger
The main work of sales manager is to interact with various dealers, set up
targets for sales year on year basis. Packaging, quality checking and timely
distribution of goods Market touring for feedback etc
4. Administrative Manager
The day to day management of production, procurement of raw material from
yarn dealers, supplying the raw material to the fabricators, purchase of
ancillary products etc
5. Accounting- Daily accounting, making of bills tax filing etc
6. Designer- Procurement of sample, designing the garment in line with the target
market, interacting with fabricator to explain him how to produce the design with
minimum wastage.