CAPEX PROJECT FINAL REPORT

Food Magic Ltd.

BY

Pooja V (G14034)

Ranadip Chanda (G14041)

Angshuman Bala (G14067)

Deepak Kumar (G14077)

Priyadarshini Priyanka(G14097)
Business Model

The restaurant expected to begin it operation from 1st April 2016. Construction & related activities
will be started from 1st April 2015. It will take approximately 1 year to start the full-fledged
operation. In the construction period we will be getting all necessary regulatory approvals from
respective authorities. A land of approximately 3000 square feet opposite GMP hostels will be taken
on lease basis for 15 years at a lease rental of 10 Lakhs per annum. We have decided to do capital
expenditure in two phases. During 1st phase it would be more of constructing fine dining
infrastructure and during the 2nd phase we will be adding add-ons to fine dining such as ice-cream
parlour. However, our core business is mainly on fine dining segment.

CAPEX REQUIREMENT SCHEDULE

FY 2015-2016
Items Cost
Building & Construction 5148000
Electricity & wiring 617760
Furniture 314622
Interior Decoration 1566620
Air Conditioning 100000
Television with satellite facility 107980
Music System 50000
Fine Dine Serving Set 169355
Kitchen Equipment 515583
Kitchen Utensils 1245000
Sanitation System 257400
License Cost for shop & Establishment 42000
Computer& add-ons 60000
Working Capital Margin 427026.529
Marketing cost 260000
Communication System 47000
Advance Lease 2000000
Contingency cost 2500000
Total CAPEX 15428347
Debt 12342677.2
Equity 3085669.31

Management & Promoters

Food Magic Limited, founded by five XLRI graduates in 2015, has an objective to bring uniqueness in
fine dining with creative ambiance. The Founders of Food Magic Restaurant come from diverse
backgrounds and hold distinctive credentials as professional from diverse industries such as Hotel
Industries, Manufacturing, Information Technology and Financial Services. One thing is common
between all of them is that the all love foods and love cooking. That is one reason why they all came
together after having a very successful career in corporate and looking for a career as entrepreneurs.
All have a very clear objective of giving unique experience of fine dining in Tier II cities like
Jamshedpur. Considering Tier II and Tier III towns have begun to witness balanced growth across all
business sectors and Tier II and III cities account for 24 per cent of India’s households and these
people have a disposable income of 23 per cent which stands at INR 1.7 lakh crore the founders
narrowed down to target Tier II cities to start with. Academically, all are educated in best colleges in
India and abroad.

Name of the Company Food Magic Private Ltd.

Proposed Date of
incorporation 1st April, 2015
Proposed Legal Status Private limited company
Proposed to be registered
with Registrar of Companies, Jamshedpur
Proposed Board of Pooja Kumari, Priyanka Dey, Deepak Mangalam Birla, Angshuman
Directors Rajput, Ranadip Thakur ,Mr. S. Sengupta ( Independent Director)
Proposed Registered
Office Jamshedpur
Proposed Project Establishing an Fine Dining Restaurant
Expected date of
commencement of
operations 1st April, 2016
We find it essential to mention that all the founders maintain high ethical standard and never been
accused of any crime. They all are credit worthy and never been defaulted until now.

The Twinkle Investors

The group of promoters also includes The Twinkle Investors, the venture capital fund created a
decade ago with keen interest Indian restaurant industry which is growing at annual rate of 7%. They
have exceptional knowledge Indian restaurant industry and they invest more than 15 crore in this
industry segment. It is an added advantage for as they bring their expertise along with dedication in
make a mark in Restaurant business.

Financing

Debt Payment Schedule:

 Principal Principal
Instalment Balance Interest Principal Balance
Year Payment (Opening) paid paid (Closing)

2016 2790812.668 12342677.22 1604548.04 1186264.629 11156412.59

2017 2790812.668 11156412.59 1450333.64 1340479.031 9815933.562
2018 2790812.668 9815933.562 1276071.36 1514741.305 8301192.257
2019 2790812.668 8301192.257 1079154.99 1711657.675 6589534.582
2020 2790812.668 6589534.582 856639.496 1934173.173 4655361.409
2021 2790812.668 4655361.409 605196.983 2185615.685 2469745.724
2022 2790812.668 2469745.724 321066.944 2469745.724 0

Equated Annual instalments (Loan)

Interest Rate 13%
Year
1 0.884955752
2 0.783146683
3 0.693050162
4 0.613318728
5 0.542759936
6 0.480318527
7 0.425060644
Total (12% rate for a period of 5 years) 4.422610433

The Loan Amount (Rs) 12342677.22

Annual Equated Loan instalments (Rs) 2790812.668

Management & Promoters

Food Magic Limited, founded by five XLRI graduates in 2015, has an objective to bring uniqueness in
fine dining with creative ambiance. The Founders of Food Magic Restaurant come from diverse
backgrounds and hold distinctive credentials as professional from diverse industries such as Hotel
Industries, Manufacturing, Information Technology and Financial Services. One thing is common
between all of them is that the all love foods and love cooking. That is one reason why they all came
together after having a very successful career in corporate and looking for a career as entrepreneurs.
All have a very clear objective of giving unique experience of fine dining in Tier II cities like
Jamshedpur. Considering Tier II and Tier III towns have begun to witness balanced growth across all
business sectors and Tier II and III cities account for 24 per cent of India’s households and these
people have a disposable income of 23 per cent which stands at INR 1.7 lakh crore the founders
narrowed down to target Tier II cities to start with. Academically, all are educated in best colleges in
India and abroad. The detail biographies are furnished below.

Pooja Kumari , MD & CEO of ITC hotel has over 20 years of experience in hotel industries. Under her
leadership ITC hotels top line has grown by 15%. She has been instrumental in establishing new
hotels in India and abroad. She holds a bachelor degree in Hotel Management from University of
Nevada - Las Vegas and MBA degree in Marketing from XLRI Jamshedpur. On a personal note she
loves cooking & loves food. On leisure time she cooks delicious food for her friends & family. She is
regarded as the finest cook among her friends and family.

Priyanka Dey , Senior Vice President of IBM, India has over 20 Years of experience in Information
Technology services industry. Under her leadership IBM has grown from strength 4000 to 60000
employees within a period of 6 years. Now, IBM exports around USD 3billon of IT services to US, UK.
She also a member of NASSCOM. She holds a bachelor degree in technology from NIT Jamshedpur
and MBA in strategy from XLRI Jamshedpur. Her understanding of Jamshedpur is 2nd to none as she
stayed more than 5 years in Jamshedpur. She has clear understanding of socio economic
environment of Jamshedpur.

Deepak Mangalam Birla, Chief Operating Officer of Birla group has over 22 years of experience in
manufacturing sector. He is a strong professional and has been instrumental in growth of Birla Group
over past decade. He brings sound operation knowledge from manufacturing industry. He holds a
bachelor degree from BITS, Pilani and MBA in Operation management from XLRI Jamshedpur. On a
lighter note he loves cooking for his family. He often defines cooking as an Art. Now, it is needless to
mention his inspiration behind his willingness to open a fine dining restaurant.

Angshuman Rajput, CEO of Taj Group has over 20 years of experience in hotel industry. He is
recognized as top business leader and recipients of CNN-IBN business leader of the year 2015. He is
also a visiting faculty in Marketing Area in several top b-schools in India and abroad. He is the Author
of “Invisible hands of Marketing” which has given different dimension in modern marketing
approach. He holds a bachelor degree in Literature from St. Stephen College, Delhi and an MBA from
in Marketing from XLRI, Jamshedpur.

Ranadip Thakur, Managing Director of Morgan Stanley has over 20 years of experience in
Investment Banking. In his career he has advised many firms on their CAPEX decision. He holds a
bachelor degree in Computer Science and a Management Degree in Finance from XLRI, Jamshedpur.
Ranadip believes; in a growing economy like India Tier II cities has lot of potential and can be a
justified place to start restaurant business. His interest in cooking is well known among his family
and friends. He believes that quality food with a creative ambiance and affordable price is what we
all need to be successful in fine dining business.

The Twinkle Investors

The group of promoters also includes The Twinkle Investors, the venture capital fund created a
decade ago with keen interest Indian restaurant industry which is growing at annual rate of 7%. They
have exceptional knowledge Indian restaurant industry and they invest more than 15 crore in this
industry segment. It is an added advantage for as they bring their expertise along with dedication in
make a mark in Restaurant business.

Credit Worthiness Analysis

Character
The promoters of the ‘Food Magic’ restaurant include stalwarts from various walks of life. Two of the
five promoters have impeccable knowledge about the ‘Hotel and Restaurant’ industry from their
past experience and others have substantial foothold in business acumen and endeavor in running a
business. The business education from premier B-Schools have equipped them to master the ‘know-
how’ and measure all the risks associated with the business and mitigate them.

Capital
The owners have put 26.4 lakh from their own investment and secured the lease of 3000 Square feet
of land from the TATA group of trustees. The experience and zeal of the owners is the true capital
for the project. The owners have convinced SBI branch manager Mr. Sanjay Kumar Jha to lend
approximately 105 lakh to invest in this venture and financing seems to be very secure for years to
come. Any further financing will be done through accumulated cash reserve.

Capacity
The current campus is now home of 3 flagship management programs and has added capacity of
many other part-time, research and global exchange courses. There is no ‘Fine dining’ restaurant in
1km radius of the campus; the proposition looks very lucrative to attract a break even capacity from
the second operational year itself. As the years go by, the capacity utilization will increase and the
average footfall is expected to be almost 90% in peak season in few years.

Collateral
The building to be constructed from the debt amount collected is secured as collateral by the bank.
The transferrable lease is viable option for the bank and the land has been taken on lease for a
significant amount of time. Everything other than the operating equipment and furniture in the
building can be labelled as collateral.

Condition
Being the hub of steel and automotive industry, Jamshedpur has a significant population of middle
to high income group customers. Especially the area near circuit house has no significant food joint.
The students of XSM have shown very positive response when asked about their willingness to dine
in restaurant offering luxury cuisine. The overall economic and market condition looks to be
favourable for the restaurant.

Credit Score Model

For the first two years business will be mostly into very into beginning phase while first one year is
gestation period. Hence we found that it is reasonable to project the score card for a period of 2018-
2022. By 2022 we will be done with all long term debt servicing. The average rating score is quite
sound and more than 3 except for year 2018 as this year basically we start operating with our
potential.

Parameters Weights 2018 2019 2020 2021 2022

Intention to pay 0.4 5 5 5 5 5
Value 1.08 1.50 1.55 1.64 1.73
DSCR 0.2
Score 1.00 1.00 1.00 1.00 1.00
Interest Value 1.69 3.25 5.64 8.95 18.48
0.2
Coverage Ratio Score 1.00 4.00 5.00 5.00 5.00
Net Profit Value 10.12% 22.67% 22.97% 25.70% 27.96%
0.1
Margin Score 2.00 2.00 3.00 3.00 4.00
Return on Value 25.70% 53.96% 50.92% 49.58% 47.29%
0.1
Equity Score 3 5 5 4 4
Total
Score 2.90 3.70 4.00 3.90 4.00

Scoring Key
Ratios
<1 1-2 2-3 3-4 4-5 >5
0 1 2 3 4 5
Margins
<10% 10%-20% 20%-30% 30%-40% 40%-50% >50%
0 1 2 3 4 5

Business Model

The restaurant expected to begin it operation from 1st April 2016. Construction & related activities
will be started from 1st April 2015. It will take approximately 1 year to start the full-fledged
operation. In the construction period we will be getting all necessary regulatory approvals from
respective authorities. A land of approximately 3000 square feet opposite GMP hostels will be taken
on lease basis for 15 years at a lease rental of 10 Lakhs per annum. We have decided to do capital
expenditure in two phases. During 1st phase it would be more of constructing fine dining
infrastructure and during the 2nd phase we will be adding add-ons to fine dining such as ice-cream
parlour. However, our core business is mainly on fine dining segment.

Total operating area will approximately be 1600 square feet while kitchen and storage area will be
1400 square feet. Interior will be aesthetically designed which will give a different experience in fine
dining with soft music. Total seat capacity will be around 35. Main pick hours expected to be lunch
and dinner time. Cuisine will essentially include Indian, Thai, and Chinese & Italian dishes. However,
there is plan is extend it further depending upon the market condition and demand.
Revenue will be mainly generated from selling of dishes as per À la carte selling lunch, dinner &
midnight buffet. Major expenses will essentially include variable cost like Vegetable & grocery costs
and fixed costs like salary paid to employees.

Theme
Theme for Food Magic is simple and straightforward – quality food, creative ambiance & affordable
price. Main target audience will be students, faculty & support staff of XLRI and middle-class to high
class citizens of metropolitan area of Jamshedpur. The restaurant will begin with Indian, Thai,
Chinese & Italian menu items then according to the demand we may think of extending further. The
ambiance will essentially include soft music to add value to dining experience.

Industry Overview
Over the past decade the dining culture has been evolving with huge growth infrastructure growth and
expanding middle class in the cities owing to a strong economic growth. The fine-dining culture pays
special attention to the quality of food served as well as the ambience. With market liberalisation policies
undertaken by the government, India has also become a consumer market with a huge customer base.
Indian middle–class has huge potential when it comes to disposable income. According to NCAER, India’s
middle class population to touch 267 million in 5 yrs. Further ahead, by 2025-26 the number of middle
class households in India is likely to more than double from the 2015-16 levels to 113.8 million
households or 547 million individuals. We expect the same phenomenon in Tier-II cities like Jamshedpur.

Let’s look at the size of the Indian food industry. A report by National Restaurant Association of India
(NRAI) and Technopak reveals that the size of the food services market in India is estimated at $48 billion
in 2013. This is projected to grow at a CAGR of 11 per cent over the next five years to reach $78 billion by
2018. This market is largely unorganised. Chains account for as much as five per cent of the total market.
Today, the Indian restaurant industry is mainly based in the urban areas and tourist destinations. We are
making an effort to increase the market in the Tier-II cities as well. Our main target customer will be the
growing middle-class and will serve quality food with creative ambiance to create a unique fine dining
experience in Tier –II cities. Apart from middle- class we have keen eye on Going-Out habit of Indian
youth.
We are planning to start our Restaurant in a very prime location of Jamshedpur – just at the heart of XLRI.
We have an access of around 800 fulltime students and more than 100 faculty members and supporting
staffs. However, the restaurant will be open for all in Jamshedpur. As per our close observations
placements seasons will be very prime time for our business as many recruiter comes to campus for
recruitment process which goes over period of 3 months. It is likely that we will have full capacity
utilization during that period. Here are below is the potential of Jamshedpur in pertain to our business –

Demand Drivers –

Increase in 1,337,131
Life Style
income and urban
Changes
cosumptions Per capita income population
growth rate of Total literacy rate Health & Hygenic
Jharkhand is 76.13% conciousness
13.4%

Supply Drivers –
 Improved
Multiple Availability
retail
Cuisins of Suppliers
format Sgnificant
Emergance of
Prefernce has been improvement in
logistic provider &
changing retail format due to
contract cultivation
great infrastruture

Market Size Estimation

SWOT Analysis
Strengths:
 Involved promoters are experienced and are from a relevant background
 First of its kind in the area, ample demand to support the project
 The business model is exhaustive and takes care of contingencies at various levels
 Growing middle class with higher disposable income
 Easily reachable and can get the food in the shortest possible time

Weaknesses:
 Even though the potential market is huge, it is highly cost-sensitive which may act as a
deterrent to the success of the project
 Lack of brand recognition among the target population
 Majority of the customers in near vicinity have busy schedule
 Sense of outing is not captured hence will deter some customers to other location

Opportunities:
 Huge number of student & faculty inside the campus with unsaturated demand for quality
food in minimum possible time
 High acceptance expected among students who prefer not going outside for quality food
due to time constraints
 Being in the prime location, opportunity to cater to the higher income customers
 Catering service inside the campus for college festival and birthday celebration
 Opportunity to capture the outsiders such as Parents, friends, family & recruiters

Threats:
 Dominos and established restaurants are in the town
 Higher proclivity of students to opt out food as compare to the available in the close vicinity