Sample marketing research report

Techno-Economic Feasibility report of Mott MacDonald

Medium Density Fibre Board Rushil Décor Pvt Ltd.

P:\Ahmedabad\AMC\USERS\PROJECTS\230431-Rushil -MDF -Feasibility\report\Final Report - Amended 26th Nov 2007.doc/

1, Krinkal Apartment,

Mahalaxmi Society, Paldi

Ahmedabad

Gujarat

380007

Techno-Economic Feasibility Report of

Medium Density Fibre Board

January 2007

Mott MacDonald

501, Sakar II

Ellisbridge

Ahmedabad, Gujarat

India

380001

Tel: +91-79-26575550




Techno-Economic Feasibility Report of

Medium Density Fibre Board

This document has been prepared for the titled project or named part thereof and should not be relied upon or used for any

other project without an independent check being carried out as to its suitability and prior written authority of Mott

MacDonald being obtained. Mott MacDonald accepts no responsibility or liability for the consequence of this document

being used for a purpose other than the purposes for which it was commissioned. Any person using or relying on the

document for such other purpose agrees, and will by such use or reliance be taken to confirm his agreement to indemnify

Mott MacDonald for all loss or damage resulting therefrom. Mott MacDonald accepts no responsibility or liability for this

document to any party other than the person by whom it was commissioned.

To the extent that this report is based on information supplied by other parties, Mott MacDonald accepts no liability for any

loss or damage suffered by the client, whether contractual or tortious, stemming from any conclusions based on data

supplied by parties other than Mott MacDonald and used by Mott MacDonald in preparing this report.




List of Contents Page

Executive Summary

Chapters and Appendices

1 Introduction 1

1.1 Study Background 1

1.2 Project Description 1

1.3 Background of the Firm 2

1.4 About the Promoters & Management 3

1.5 Consultant’s Background 4

1.6 The Scope of Work 6

1.7 Approach and Methodology 6

1.8 Caveats 9

2 Product Description 10

2.1 Medium Density Fibreboard 10

2.2 Prelam MDF Board 13

2.3 Laminate Flooring 14

2.4 Description of Substitutes 14

3 Market Study 20

3.1 Global Scenario for MDF 20

3.2 Laminate Flooring Market 24

3.3 Indian Market 27

3.4 Indian Scenario on Furniture 38

3.5 Other Relevant Issues 46

4 Raw Material Assessment 50

4.1 Raw material Types 50

4.2 Cotton Production 50

4.3 Cotton stalk 55

4.4 Bagasse as Alternate Raw Material 61

5 Technological Aspects 64

5.2 Manufacturing Process of Prelam Boards: 67




5.3 Manufacturing process of Laminated Flooring 67

5.4 Location Aspects 68

5.5 Machinery Details 71

6 Strategic Analysis of the Firm 77

6.1 SWOT Analysis 77

6.2 Five-Force Model Analysis 79

7 Marketing Strategy 82

7.1 Present Marketing Set Up 82

7.2 Formulation of Marketing Strategy 85

8 Financial Modelling & Analysis 88

8.1 Estimation of Capital Cost 88

8.2 Means of Finance 92

8.3 Assumptions 93

8.4 Cash flows& Profitability Statement 97

8.5 Financial Indicators- NPV, IRR, DSCR, Pay back 101

8.6 Sensitivity Analysis 101

9 Conclusion and Recommendations 102

Appendix A: Fixed Cost Allocation of Contingency and POP expenses 103

Appendix B: Working Capital Statement 104

Appendix C: Term Loan - Repayment & Interest 105

Appendix D: Unsecured Loan - Interest 106

Appendix E: SLM Depreciation 107

Appendix F: WDV Depreciation 108

Appendix G: Tax Statement 109

Appendix H: Debt Service Coverage Ratio 110

Appendix I: Pay Back Period & Internal Rate of Return 111

Appendix J: Availability of Bagasse 113




List of Figures

Figure 1.1: Approach and Methodology 8 Figure 2.1: Substitutes of MDF 15 Figure 3.1: MDF Consumption in China 21 Figure 3.2: Global MDF Demand – Supply Balance 23 Figure 3.3: Global Particleboard Demand – Supply Balance 23 Figure 3.4: World Production of Laminate Flooring 24 Figure 3.5: Production of Laminate Flooring in Europe 25 Figure 3.6: Market Volumes of Laminate Flooring in North America 26 Figure 3.7: Market Volumes of Laminate Flooring in Asia – Pacific 26 Figure 3.8: Furniture Productions in Billion Euros 39 Figure 3.9: Raw material used in furniture 39 Figure 3.10: Furniture Production Break up 40 Figure 3.11: Import – Export of Furniture in India 41 Figure 3.12: Country wise break up of export of Indian furniture 41 Figure 3.13: Product wise break up of Indian furniture export 42 Figure 3.14: Country wise break up of imported furniture in India 42 Figure 3.15: Product wise break up of imported furniture in India 43 Figure 3.16: Break up of the round wood consumption in India 44 Figure 3.17: Imports of Veneer & plywood in India (In US $ ‘000) 45 Figure 3.18: Import of MDF/HDF & Particle Board in India (In US $ ’000) 46 Figure 4.1: Cotton Production area and yields of India and U.S. 50 Figure 4.2: India’s Cotton Production and Production area 51 Figure 4.3: India’s Cotton Production Yield 52 Figure 4.4: Gujarat’s Cotton Production Yield 53 Figure 4.5: CCS Centre Mechanism 60 Figure 5.1: Techno Economic parameter for machinery selection 71 Figure 6.1: SWOT Analysis 77 Figure 6.2: Wood Products & competitors life cycles 78 Figure 6.3: Five Force Model 79 Figure 7.1: Present Marketing Set up 82




List of Tables

Table 2.1: Classification of Board based on Density 10 Table 2.2: IS Specification of MDF Board 11 Table 2.3: Wood& Agro-based products and their application 17 Table 2.4: Characteristics comparison of different products 18 Table 3.1: Region wise MDF production 20 Table 3.2: Production and trade of MDF in the Middle East 22 Table 3.3: Indian log production, imports & apparent consumption, 2003 43 Table 3.4: Demand supply gap of wood 44 Table 3.5: Indian imports of wood products, 2002 -2003 44 Table 4.1: Cotton production 52 Table 4.2: District wise cotton production in Gujarat 54 Table 4.3: Cotton Productions in Surendranagar District 55 Table 4.4: Cotton Production in different talukas of Surendranagar 58 Table 4.5: CCS Centre locations 59 Table 4.6: Sugarcane Productions in Gujarat 62 Table 5.1: List of Imported Machinery 72 Table 5.2: List of Indigenous Machinery 72 Table 5.3: List of other plant and machinery 72 Table 7.1: The present marketing zones of RDPL in India 83 Table 7.2: The present marketing network of RDPL in world 84 Table 8.1: Building and Civil Work 88 Table 8.2: List of imported Machinery 89 Table 8.3: List of Indigenous machinery 89 Table 8.4: list of other plant and machinery 90 Table 8.5: Preoperative and Preliminary cost break up 91 Table 8.6: Inventory norms 91 Table 8.7: Total Cost of Project 92 Table 8.8: Means of finance 92 Table 8.9: Capacity Utilisation in phase 1 93 Table 8.10: Capacity Utilisation in phase 2 93 Table 8.11: Operating norms for Fibre Board manufacturing 95 Table 8.12: Operating norms for Prelam MDF Board manufacturing 95 Table 8.13: Operating Norms for Laminated HDF Flooring Manufacturing 95 Table 8.14: Repayment of Long Term Loan 96 Table 8.15: Profitability Statement 97 Table 8.16: Cash flow Statement 99 Table 8.17: Financial Indicators 101 Table 8.18: Sensitivity Analysis 101




Executive Summary

Rushil Group (herein after referred to as client or RDPL) has a well established market in

the decorative laminate business in India and abroad. They are planning to make forays

into the manufacturing of MDF (Medium Density Fibreboard), laminate flooring and prelam

boards. This related diversification drive not only offers synergy in operation but also

provides a sea of opportunities in terms of value addition, import substitution, promotion

of rural economy, preservation of forests and employment generation.

Every year, MDF worth US$ 67.5 million are being imported to India which meets almost

75-80% of the total domestic demand. Based on market information, the market for MDF is

growing at an impressive rate of 20-25% p.a. There are only two players in the domestic

market that manufactures MDF. In the light of the above facts, Rushil can look forward to

reap the benefits of early mover advantage. Further to this, a well-established distribution

channel will help the firm to push their new products into the market in a cost effective

way.

Manufacturing MDF from cotton stalks will be the first of its kind in India that will offer

cost advantages in terms of production. RDPL is planning to set up manufacturing unit at

Surendranagar, which is famous for cotton cultivation. Also the surrounding areas are

cotton-abundant. Alternatively, bagasse is being considered as the raw material for MDF

production; which can be easily procured from South Gujarat and Saurashtra.

The client also plans to grow ailanthus excelsa or other kind of soft wood tree near the

factory premises in a vast expanse of land so that the wood from the same can be used as

raw material for MDF. Ideally 850 to 870 saplings can be planted per acre of land and will

be ready for felling in a span of 4 years. The typical yield is 100 tons per hectare. On an

average, 1.55 tons of trees are needed to produce 1 cubic metre of MDF.

The technology and major machinery will be sourced from Germany and China. Parameters

such as contemporariness of technology, energy efficiency, post-sales customer support,

scalability, etc had been taken into account while choosing the technology.

The long-term relationship the client enjoys with many dealers in India and around the

globe, especially in Europe can be leveraged further to sell/export the products from

India. In this respect, the cost-competitiveness and the established brand equity will play a

vital role. RDPL is envisaged to export nearly 60% of the product to favourable market

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destinations around the globe. The international marketing network of the RDPL is spread

in 34 countries including Canada, USA, Venezuela, Europe, Far East countries, Australia,

and Gulf countries with the strong brand name of “Rushil Décor”.



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1 Introduction

1.1 Study Background

Since its inception in 1992, the Rushil Group of companies have created a niche for

themselves in the laminates business in India. Being a visionary company, it has tapped the

right opportunities so far in increasing the market share and the export volume, thereby

increasing the profits for the firm. At the same time, they have been continuously

innovating themselves in terms of product quality and services to the customers

worldwide, creating value for its stakeholders.

India’s impressive economic growth rate and the thrust on infrastructure development are

potential growth drivers for the construction materials in general and laminate in

particular. Rushil Group (herein after referred to as client or RDPL) is planning to make

forays into the manufacturing of MDF (Medium Density Fibreboard), laminate flooring and

prelam boards. This offers a sea of opportunities in terms of value addition, import

substitution, promotion of rural economy, preservation of forests, employment generation,

etc.

In the client’s endeavour for related diversification into MDF manufacturing, Mott

MacDonald (herein after referred to as the consultant) would prepare a detailed techno-

economic feasibility report for the project. This study will focus on the issues of market

demand, raw material sourcing, technology selection, supply chain management, means of

finance, revenue modelling, risk management and strategy formulation.

1.2 Project Description

RDPL is planning to set up manufacturing unit of MDF and HDF board and their downstream

products like Prelam MDF board and Laminated HDF flooring.

The location identified for the project is Navalgarh village in Dhangadhra taluka of

Surendranagar district. The land acquisition process is finalized and RDPL has purchased 67

acres of land. RDPL has also finalized major machinery suppliers and purchase order has

been placed for MDF manufacturing plant, short cycle press, impregnation line and resin

plant. By considering the expertise of manufacturing machinery, quality and price

competitiveness, RDPL has selected foreign machinery suppliers for their requirement.

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The project will be implemented in two phases. In first phase, RDPL will manufacture

laminated flooring with imported High Density Fibre (HDF) board and in the second phase,

RDPL will manufacture Prelam MDF board and HDF laminated flooring with in-house

manufactured MDF and HDF board. The first phase will commence from October 2007,

while second phase is expected to be commissioned in October 2008.

The project has certain advantages due to its location and raw material used for

manufacturing Fibre board. The raw material selected for the project is agro waste like

cotton stalk and bagasse. RDPL is also considering social forestry route to meet its future

requirement of raw material. Due to the raw material selection, project come under the

agro industry and become eligible to get incentives from the Government of Gujarat.

1.3 Background of the Firm

Rushil Group of companies commenced operations in 1992, when Indian laminate industry

started serving to the global markets. “Vir Laminate” from the stable of Rushil Group is

one of best known brand in the laminate space and the company is one of India’s leading

decorative laminate manufacturing companies. Vir is a favourable brand for Indian

architects and interior designers. A large number of private & public sector corporate

companies spread across the length and breadth of the country are customers of the group.

Rushil pioneered Indian laminate industry into export market through the adoption of the

flexible global business practices that today enable the company to operate more

efficiently and to produce more value to its stakeholders. With a well-known product brand

‘Rushil décor premium laminate’, almost 34 countries are being served by our

comprehensive range of products as well as services.

The firm produces laminated sheets, prelam boards and door skins in their state-of-the-art

facilities at Mansa of Gandinagar District. The plant is capable of churning out 4.8 million

sheets per annum.

Milestones

• 1992 – Rushil décor Pvt. Ltd. (1st laminate manufacturing facility) established by Mr. Ghanshyam Thakkar & his son Mr. Krupesh Thakkar

• 1992 - annual turnover of Rs. 2.5 crores in the first year

• 1993 - 100% increase in sales compared to the previous year

• 1994 – company’s first export to Bangladesh

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• 1997 - Rushil International established for export business

• 1998 - Group’s sales graph on the upswing by export & domestic sales

• 1999 - Mica Rushil Pvt. Ltd. (2nd laminate manufacturing facility) established.

• 2003 - Rushil H.P.L. (3rd laminate manufacturing facility) established.

• 2003 – Production capacity of 300000 sheets per month.

• 2003 – Company’s export reached to 34 countries.

• 2004 – Laxmi Pandit & Samir Khan as brand ambassadors.

• 2005 – Erection of short cycle laminates plant (1st prelam manufacturing facility).

• 2005 - Production of ‘Vir Prelam’ boards started.

• 2005 – Sridevi as a brand ambassador for Vir Laminate.

• 2006 – (4th laminate manufacturing facility) established.

• 2006 – production capacity reaches 4,00,000 sheets per month

• 2007- 2nd manufacturing facility for prelam started (Vertex Laminate Private Ltd,

Mumbai).

• 2007 – Reorganisation of management structure

1.4 About the Promoters & Management

The promoters of the firm are Mr. Krupeshbhai G. Thakkar and Mr. Ghanshyam Thakkar

who possess indomitable spirit of entrepreneurship. The former has nearly 20 years of

experience in laminate manufacturing industry by working in areas of production, product

and project development, exports and sales. Mr. Ghanshyam Thakkar is the founder of the

company who has 46 years of experience in plywood trading and 20 years of experience in

laminate manufacturing business. They are very upbeat about the laminate and flooring

business and are ready to tap the huge potential in this segment that will come as a

consequence of economic boom and the concomitant increased activities in infrastructure

(construction of shopping malls, multiplex, IT parks, offices, etc).

They have a highly competent and forward looking team of professionals manning different

levels and functions. International Business Development is a thrust area that will help

RDPL to tide over any slack in domestic demand that may arise in future. Similarly it has an

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IT-enabled office environment that continuously monitor the work flow in vital functions

such as Accounting& Finance, Sales, Production, Purchase& Inventory, etc.

The firm boasts of Sales& Marketing Offices spread throughout the country and an

extremely networked trade set up that export products to 34 countries worldwide.

The Organogram is given below:

Director

↓

CEO

↓ ______________________________________________________________

↓ ↓ ↓ ↓ ↓ ↓

Account Costing Finance Export Marketing & Project &

Sales Development

↓ ↓ ↓ ↓

Production HR Purchase IT

1.5 Consultant’s Background

Mott MacDonald Private Limited (IMM) is a leading multi-disciplinary management and

engineering consultancy based in India, with offices nationwide.

As part of the global Mott MacDonald Group headquartered in U.K., IMM is able to draw on

world-class technical and managerial resources comprising over 5000 staff in more than 50

strategic centres world-wide. IMM is engaged in planning and development touching many

aspects of everyday life – from water, energy, industry, environment and transport to

building, healthcare, tourism and social development. Across these sectors IMM works for

national and local governments, public and private utilities, industrial and commercial

companies, investors, developers, banks and financial institutions, international and

bilateral funding agencies and private entrepreneurs. IMM’s strengths enable our clients to

realize their projects optimally from concept to commissioning. With 750 professionals, we

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take care of the entire process – including providing advice on the best procurement route

and the optimum approach for maintaining the project once it enters service.

1.5.1 Services

(i) Management Consultancy

IMM provides business planning and project management for a wide spectrum of clients in

industry, infrastructure and social development, including international development banks

and funding agencies. DMM also help clients such as accountancy practices, financial

institutions and industrial companies in making a realistic appraisal of their fixed assets,

and in preparing for disinvestment, mergers or de-mergers, acquisitions, takeovers,

insurance or liquidation, collaborations and joint ventures.

(ii) Social Solutions

IMM has undertaken numerous studies and advisory roles for leading development banks

and funding agencies. Projects range from implementing vital AIDS eradication programmes

and pro-poor initiatives to studies for institutional strengthening, sector reform and impact

evaluation. DMM also offers specialist expertise in assisting with public consultation.

(iii) Engineering Services

IMM’s range of engineering services enables clients to realise optimal implementation of

projects. DMM takes care of every stage – site evaluation, basic and detailed engineering,

contract preparation, project management, procurement, equipment inspection and

testing, site supervision and commissioning.

(iv) Infrastructure

One of the key strengths of IMM lies in large-scale integrated urban infrastructure

development, encompassing water supply, drainage, solid waste, roads, sanitation, and

community buildings. Here our services range from planning and advisory assistance to

detailed engineering and construction management.



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(v) Industry

IMM’s skills and experience have earned it a leading reputation – especially in chemicals,

textiles, oil and gas, agri& food processing and life sciences, as well as bulk drugs,

pharmaceuticals and biotechnology. DMM is known particularly for its expertise in process

engineering and licensing for speciality chemical production based on laboratory/pilot

plant know-how developed by R&D centres.

(vi) Buildings

IMM’s business covers all sectors from commercial and leisure to industry, education and

healthcare. DMM provides the full range of architectural, structural, mechanical and

electrical design skills, along with planning and project management expertise. Building

services are a special capability, notably building management systems, vertical

transportation, telecommunications and security.

1.6 The Scope of Work

The scope of work (SOW) includes-

• Assessment of raw material availability to ensure sustained operation of the

plant.

• Market assessment to justify project rationale from the market point of view.

• Technology Evaluation.

• Plant location analysis.

• Assessment of project cost, operating cost and revenue estimates.

• Working out detailed financial analysis as desired by the financial institutions.

• Sensitivity analysis to identify factors crucial for the commercial viability of the

project.

1.7 Approach and Methodology

The entire work (study) will be broken down into individual sets of mutually-exclusive and

collectively-exhaustible issues addressing market demand, availability of raw material,

technology, location aspects, economic and financial feasibility, etc.

Market study will broadly cover the demand- supply scenario prevailing globally and locally

for MDF, its competing products (substitutes), end use pattern, drivers that could spur the

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demand, etc. We would utilise our data bank and also refer to authentic and published

materials/literature etc for the purpose of collecting information on industry structure,

international demand-supply scenario, domestic and international prices and trends

thereof, price elasticity, past imports and exports from India, destinations and prices etc.

The availability and suitability of raw material (cotton stalk) for the production of MDF,

the sourcing of the same and related logistic issues will be covered in the next section.

Also contingency plans for alternative raw material (say, ailanthus and celsa) and the steps

to ensure hassle-free availability of the same will also be discussed.

Location Study will look into issues such as raw material availability, proximity to market,

availability of power, water, etc; and a host of other relevant issues like land, labour,

transportation, storage, etc.

Technology will cover the brief description of the process along with features such as

contemporariness of technology, local availability of plant and machinery, energy

efficiency of the process, ease of operation, modularity, scalability and flexibility in

technology/ operation, etc. The endeavour is to source the best available option in terms

of reliability and superiority of technology / plant and machinery.

The marketing strategy will look into the existing sales and marketing set up, need for re-

configuration if any, and addressing the issues holistically that goes beyond 4P’s.

The detailed revenue modelling will cover the means of finance, optimal debt-equity

structure, revenue streams, calculation of projected cash flows and the estimation of NPV,

IRR and debt service coverage ratio.

In addition, elaboration on certain strategic issues pertaining to the business will be

provided. This will throw light into the competitive landscape, the forces that act within

and outside, threats and opportunities, etc. Also specific strategies will be recommended

to tide over the challenges and surge ahead successfully.

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Figure 1.1: Approach and Methodology

Source: MM Analysis

Market Study

Demand vs. Supply

Growth Drivers

Substitutes

End Uses

Raw Material Assessment

Major Raw Material Procurement

Contingency Options

Other Issues

Technological Aspects

Track Record

Ease of Operation

Scalability/Modularity

Energy Efficiency

Flexible Line of Operation

Marketing Strategy

Existing Setup

Distribution Channel

4P’s and Beyond

Revenue Models

Means of Finance& Capital Structure

Revenue Streams& Cash Flow

Proj. Balance Sheet& Income Summary

NPV, IRR, DSCR, etc.

Site Selection

Proximity to RM/Market

Availability of Water, Power, etc

Logistics& Distribution Issues

Strategic Insights

5-Force Analysis

Competitive Strategy.



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1.8 Caveats

Since MDF market is a bit unorganised, it is very difficult to capture the exact under

currents in the market. Also a lot of these activities are not properly recorded. This poses

a lot of challenges for the consultant and the client alike. A judicious mix of desk research,

filed visits, interviewing of key personnel in the MDF/ related business and using some

clever conjectures based on our own experience was the method adopted to address this

issue.



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2 Product Description

2.1 Medium Density Fibreboard

Fibreboards are classified into low density, medium density and high density fibreboards

according to the density profile as shown below:

Table 2.1: Classification of Board based on Density

Fibreboard Typical Density Range (Kg/m3)

LDF (Low Density Fibreboard) 160-450

MDF (Medium Density Fibreboard) 500-800

HDF (High Density Fibreboard) 800& above

MDF is a panel product manufactured from lignocellulosic fibres combined with a synthetic

resin or other binders. The specific gravity varies from 0.5 to 0.88. MDF has a homogeneous

structure with no identifiable grain or no variations in surface hardness. It can easily be

edge-machined to into many different profiles ready for subsequent direct finishing due to

its relatively uniform thickness density profile. MDF has a good capacity to hold screws and

nails on surfaces and edges.

2.1.1 Features of MDF

MDF is resistant to warping and compression. It has excellent screw-holding ability and

edge-finishing characteristics.

MDF is available in two grades, namely, interior grade and exterior grade and are available

in thicknesses ranging from 4mm to 50mm.The IS specifications are reproduced below:

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Table 2.2: IS Specification of MDF Board

Sr.

No. Specifications Unit Interior Grade Exterior Grade

1 Water Absorption

a) After 2 hours soaking % 9 6

b) After 24 hours soaking 18 12

2 Density Kg/m3 500-900 500-900

3 Moisture Content % 5.15 5.15

4 Linear Expansion (24

hours soaking)

a) General Absorption %

Thickness 7 4

Length 0.4 0.3

Width 0.4 0.3

5 Modulus of Rupture N/mm2

Upto 20mm 28 28

>20mm 25 25

6 Tensile Strength N/mm2

Upto 20mm 0.7 0.8

>20mm 0.6 0.7

7 Screw Withdrawal

Strength

N

Face 1500 1500

Edge 1250 1250

8 Dimensional Tolerance Mm

Length ±3

Width ±3

Thickness ±0.3

MDF offers better quality than particle board. It has lower tendency compared to particle

board for “fibre pop” which comes from larger particles in the surface that swell more

than adjacent particles. Fibre pop occurs when the board is exposed to high humidity.

MDF has better strength and stability than veneered particle board. The internal bond

strength of MDF is about 50% higher than the corresponding value for veneered particle

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board. MDF with a highly homogeneous construction and uniform density gradient does not

require a veneer overlay.

The distinct advantages of MDF are outlined below:

a) It does not delaminate

b) Excellent moulding abilities

c) It can be joined, riveted, tongued and grooved.

d) It can be calibrated and sanded on both sides.

e) Lathe work can be done easily.

f) It is free from overlays and gaps.

g) It possesses homogeneous strength.

h) It is free from knots and cracks.

i) Humidity-resistant.

j) It has low formaldehyde content.

k) Very good screw-holding and edge-finishing properties.

l) It needs no special tools or work methods.

m) All kinds of paints, lacquers, stains and varnishes can be used on MDF.

n) It is insect-resistant.

2.1.2 Applications

MDF is being used in residential, commercial buildings for partitions, panelling, false

ceilings and furniture.

Thin MDF has applications in beds, cabinets, chairs, panelling, drawer bottoms and centre

panels in framed doors. It can also be used as skins for flush doors, partitioning, office

screens, lightweight doors and exhibition paneling.

Novel application avenues are in shoe making, motor vehicle interior parts, toys, printed

circuit board production and blades for electric fans. Due to its excellent acoustic

properties, MDF is also being successfully used in Hi-Fi equipment.

Moisture-resistant varieties are being developed that can be used for exterior applications.

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Thick MDF boards can be used in buildings as columns and archways in place of solid wood

where the warp resistance, torsional stability, screw holding strength and edge finishing

characteristics are important. Thick MDF can be as a core substrate material for paneling

with veneers, printed surfaces, vinyl and low pressure laminates due to its dimensional

stability and smoothness. Thick MDF is also widely used as a base material for laminated

and veneered wood products for flooring and wall paneling and for foil wrapped mouldings.

It can also be used for a wide range of furniture such as tables, cabinets, windows, doors,

frames, handicraft items, display or exhibition stands and signs, ceiling, toys, carving,

partitions, maritime applications and educational equipment.

The entire versatility of MDF is yet to be utilised in a host of applications. In short, the

product has the potential to replace plastic, metals and wood in a wide variety of

applications which is only limited by our imagination.

2.2 Prelam MDF Board

To improve the aesthetic look and applicability, laminate paper is applied or fixed on the

fibre board with the help of a press. This board is known as “pre laminated board” or

“prelam board”. The prelam board has more than one paper on its surface like base paper

or balancing paper, decorative paper and other protective film. These papers help to

improve resistance to abrasion, temperature and water. As the prelam board is an

improved version of the MDF board, the specification of the Prelam board is completely

depend on the properties of the MDF board.

Prelam MDF board has certain distinct advantages, which are mentioned below:

• Resistance to steam and stains

• High abrasion resistance

• Better strength for durability

• Resistance to warping and sagging

• Surface counter balanced for greater stability

• Strong enough for load bearing applications

• Termite, fungus & borer proof

• Standard screw holding capacity

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Prelam MDF board used to manufacture the products mention below:

• Cupboards, shutters & wardrobes.

• Shelves

• Table tops

• Cabinets

• Household & office furniture.

• Computer furniture.

• Panels in panel doors.

• Beaded doors.

• Partitions.

• Precautions

2.3 Laminate Flooring

Laminate flooring is composed of several layers of impregnated paper and raw fibre board.

Papers are forming the surface layer of a core layer which stabilizes the floor. Flooring is

available in smaller size of planks. High density fibre board is preferred for core board of

the flooring as it has to bear the load. The basic properties of the laminate flooring are

depend on the properties of the HDF board and laminated papers.

The flooring can withstand with the normal load and provide good aesthetic load. It is not

100 % water-proof and scratch-proof but by using high grade quality paper water

absorption and scratch ability can be minimized to a great extent. Laminate flooring can

withstand the temperature variation and can be installed on any flooring like wood,

ceramic, concrete, particle board, vinyl, linoleum, etc.

2.4 Description of Substitutes

MDF closely competes with other product like plywood, hardboard, particle board and

plastic panels in a variety of applications. Apart from these products, chemically treated

wood, plantation timber, rubber wood, log wood and sawn wood find similar applications.

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Figure 2.1: Substitutes of MDF

Source: MM analysis

Chosen Material

Wood or Wood Base Non Wood

Wood Based Panels

Timber

Timber Base Panels Reconstd Wood Panels

Ply Wood Block Board Particles Board MDF Fibre Board

Steel /

Aluminium

Gyp-

board

PVC Acrylic / Fibre

glass etc.

Agro Waste Base



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Table 2.3: Wood& Agro-based products and their application

Wood Product Major Uses Substitute

(Wood& Agro waste

Types)

Substitute

(Non-wood Types)

Plywood& Veneer Construction-walls,

doors, decorative

panelling.

Packaging- crates,

boxes, tea chests.

Furniture.

Vehicles-boats,

caravans.

Misc.- Toys, etc.

Particle board

Fibreboard

Paper Overlay-

panelling& packaging.

Sawn wood.

Plastics (furniture&

packaging).

Fibreglass, concrete,

polyester overlay.

Sawn Wood Construction-flooring, walls, joinery, panelling& lining.

Engineering- railway sleepers, piling, wharves, bridges, mining timbers.

Furniture

Packaging-boxes, crates, pallets, etc.

Vehicles

Plywood, veneer, & MDF- panelling, furniture.

Fibreboard-packaging

Particle board.

Plastics (furniture& packaging).

Paper & paperboard (packaging).

Concrete, bricks, steel, aluminium.

Particle Board Construction-flooring, walls, under floor, panelling& building elements.

Plywood, veneer, & sawn wood- packaging, construction& furniture.

Fibreboard.

Steel& aluminium (furniture);


MDF Furniture, packaging, construction

(Flooring, walls, panelling, etc.)

Plywood, veneer, particle board& sawn wood.

Steel& aluminium (furniture);


Source: MM Analysis



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Table 2.4: Characteristics comparison of different products

Sr.

No.

Comparison

characteristics Plywood Particle Board MDF

1 Insects & Borers Attracts wood

borers

Does not attract

borers

Totally borer – proof,

as only wood fibers

are bonded together

2 Machining, carving &

post forming Not Suitable

Suitable to a limited

extent

Highly suitable

3 Density of the Board Medium Low Medium and high

4 Edge cutting &

trimming

Suitable to a

limited extent

Suitable to a limited

extent Highly suitable

5 Nail & Screw holding

capacity Medium Low to Medium High

6 Board strength &

internal bond Medium Medium High

7 Structural strength

Low due to

wood layer

bonding

Low due to particle

bonding

High due to fiber

bonding

8 Moulding Not possible Not possible Excellent

9 Joining & riveting Not possible Suitable to a limited

extent Highly suitable

10 Surface finish Medium Low Excellent

11 Tensile strength Medium Low High

12 Raw materials 100% wood Agrowaste/wood Agrowaste/wood

13 Environmental

aspects

Dangerous to

forest

resources of

country

Boon for building

material industry due

to versatility of raw

materials usage like

agro waste & wood

waste.

Eco friendly product

Boon for building

material industry due

to versatility of raw

materials usage like

agro waste & wood

waste.

Eco friendly product

14 Value added products Plywood only Prelam boards, Prelam boards,



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modular furniture modular furniture,

embossed doors,

carved surface doors,

painted boards

15 Product Specification G1 grade G2 grade G3 grade



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3 Market Study

3.1 Global Scenario for MDF

In 2005, the global MDF production reached about 41 million m3, compared to 39 million in

2004. Large scale production facilities are concentrated in Asia, Europe and North

America.

Table 3.1: Region wise MDF production

Region Production (‘000 m3)

Asia 18936

North America 5297.6

Europe 13300

Oceania (Australia and New Zealand) 1656

South America 1758

Total 40947.6 Source: Food and Agriculture Organization (FAO) stats

The table explains the regional production in 2005. China has grown to become a dominant

producer (14.66 million m3), followed by Europe. Production in Europe rose to 13.3 million

m3, showing a growth of 7% as compared to 2004. The total consumption also rose by 7.6%

to 12 million m3.

From 2004 to 2005, North American MDF production rose from 5.1 to 5.3 million m3, with

70% of the production concentrated in the United States. MDF production in the U.S.

increased from 3.6 to 3.7 million m3, while the Canadian production increased from 1.5 to

1.6 million m3 in the above period. MDF imports to North America (procurement sources:

Brazil, Argentina, Chile and Venezuela and Oceania) declined by 10% in 2005, to 1.7 million

m3.

MDF production in New Zealand increased to 861000 m3 in 2005. The country also has the

highest per capita consumption of the product.

MDF consumption since the past decade has well penetrated markets other than furniture

industry. But, owing to an earlier establishment of particleboard as a product, its

consumption in most countries was more than MDF before.

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In countries like Japan and Korea, manufacturers are replacing particleboard; particularly

where MDF properties like smoothness of surface is required. This is expected to spread

worldwide, as furniture manufacturers seek cost effective methods of production.

However, with huge capacity inclusions in China, MDF consumption rose to 16 million m3,

driven by furniture industry growth (2004), compared to particleboard consumption of 4

million m3.

The figure below highlights the MDF consumption break up by segment in China:

Figure 3.1: MDF Consumption in China

Furniture

78%

Decoration

12%

Other

10%

Source: China Academy of Forestry, China Wood

Continued innovations to customers’ need and to solve their problems, and the

development of Engineered Wood products lead to newer developments. Products like

Sawn wood and plywood are well past their prime, owing to these reasons.

Moreover, these products also compete with steel and other useful materials, widely used

in construction industry and furniture.

MDF Board Market in the Middle East The Middle East regions comprise of developing countries like Algeria, Bahrain, Egypt, Iran,

etc. with growing young population, which point towards growing consumption of wood

based panels.

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The major constraint to growth in MDF industry in the Middle East is the scarcity of raw

material. Almost 70% of the total production in the region in 2005 (54000 m3) was from

Iran. Trade statistics point towards the fact that majority of the consumption is met

through imports.

With growing demand of MDF in the region, the imports have risen from a mere 332,611 m3

in 2000 to about 2.2 million m3 in 2005.

Table 3.2: Production and trade of MDF in the Middle East

Year Production (m3) Import (m3) Export (m3)

2000 53000 279663 52

2001 14000 422631 139

2002 14000 566531 336

2003 14000 762661 144

2004 40300 1514209 913

2005 54000 2186581 1000 Source: Dieffenbacher Report

As evident from trade statistics, the export potential to Middle East region appears to be worth exploring.

Future Outlook

The Commonwealth Scientific and Industrial Organization (Australia) predicts global MDF

demand to increase by 10% till 2010.

As per Jaakko Poyry Information Service, the demand for MDF in U.S., Europe, and Asian

countries (mainly China and South Korea) is expected to exceed the supply, driven by its

popularity in construction industry and furniture manufacturing in recent years. The figure

below shows region wise forecast of MDF surplus/deficits:

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Figure 3.2: Global MDF Demand – Supply Balance

Source: Jaakko Poyry Information Service

Figure 3.3: Global Particleboard Demand – Supply Balance

As evident from the figure above, particleboard deficits are anticipated in Europe, whereas

Asia, Oceania, South America are expected to have surplus capacities.

Global Particleboard Demand-Supply Balance

-7000

-6000

-5000

-4000

-3000

-2000

-1000

0

1000

2000

1990 1995 2000 2005 2010 (F) 2015 (F)

Years

(1000 m3) North America

Europe

Asia

Oceania

South America

Africa

1990 1995 2000 2005 2010 (F) 2015 (F)

Global MDF Demand-Supply Balance

-3500

-3000

-2500

-2000

-1500

-1000

-500

0

500

1000

1500

2000

1990 1995 2000 2005 2010 (F) 2015 (F)

Years

(1000 m3)

North America

Europe

Asia

Oceania

South America

Africa

1990 1995 2000 2005 2010 (F) 2015 (F)

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Growth Drivers:

The demand of MDF is expected to show an upward trend, considering the following

macroeconomic factors:

1. Rapid economic growth at the world level (GDP growth rate - 4% till 2010).

2. Population growth and urbanization.

3. Trade and foreign investment deregulation.

4. Expanding wood processing capacity.

5. Anticipated growth in construction investment, furniture and decoration industry.

6. Increasing exterior use of wood based panels in European and American countries,

attributing to the suitability of climatic factors.

3.2 Laminate Flooring Market

The global production of laminate flooring from year 1990 to 2005 is depicted below.

Figure 3.4: World Production of Laminate Flooring

Source: Munksjo Paper

The production of laminate flooring has steadily grown at a rate of 34.09 % CAGR in the

last 15 years and has reached 815 million m2 in the year 2005.

Europe is the major producer of laminate flooring in the world and is a net exporter for the

last 15 years. Europe accounts for 65 % of total production of laminate flooring in the

world (year 2005).

0

100

200

300

400

500

600

700

800

900

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Production in million m2

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The production of laminate flooring in Europe is mentioned in the figure below:

Figure 3.5: Production of Laminate Flooring in Europe

0

100

200

300

400

500

600

in m

illio

n m

2

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Production for Europe Production for Exports


Germany is the biggest producer of the laminate flooring and account for 28 to 33 % of

world production of laminate flooring in last 5 years. Other leading laminate flooring

manufacturing countries in Europe are France, Austria, Belgium, Poland, Switzerland, and

Great Britain.

In terms of import, North America is the leading continent to import the laminate flooring.

With the import, production of laminate flooring in America has also risen in the last 10

years.

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Figure 3.6: Market Volumes of Laminate Flooring in North America

0

20

40

60

80

100

120

140

160

in m

illion m

2

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Import Domestic Production


The production of laminate flooring in Asia is constantly rising for the last 10 years until it

became net exporter in the year 2005.

Figure 3.7: Market Volumes of Laminate Flooring in Asia – Pacific

0

50

100

150

200

250

in m

illion m

2

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Domestic Production Net Import Net Export


The continuous increasing production of laminate flooring in China is the major reason

behind the spurt in Asian production of laminate flooring. From 11 % of production share of

total world production of laminate flooring in year 2001, China reached at 23 % of

production share in the year 2005, which is next to Germany only.

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3.3 Indian Market

3.3.1 Market Survey

The market study was carried out in various segments which influence the demand for

MDF. They were divided on the basis of similarity in response pattern and the factors

affecting the demand for MDF.

Competitors (including substitute products), institutional buyers, architects & interior

decorators, industrial buyers & converters and wholesalers & distributors were contacted

during the survey. Additionally, some actual users of MDF were also contacted. The study

was conducted in Ahmedabad, Bangalore, Calcutta, Chennai, Delhi, Hyderabad, Jaipur and

Kochi.

a) Competitors:

They are the manufacturers of MDF and its substitutes. The substitutes are plywood,

particle board, hard board, etc. The regional offices and head offices of these

manufacturers were contacted during the survey.

(b) Institutional Buyers:

They are the large buyers of MDF and its substitutes, with having fairly uniform application

areas and the quantity used being substantial. For example CPWD, where the requirement

is mainly of doors & windows but quantity being used is substantial. Large construction

companies also fit into this category. These are bodies where procedures for introducing a

new product are elaborate but volume of sales justifies it.

(c) Architects & Interior Decorators:

This category represents the users of these products for a variety of applications. They are

also the innovators in finding new application areas for various products. This segment do

not form big market by them but help it grow.

(d) Industrial Buyers / Converters:

This segment consists of the converters who use MDF and its substitutes for large scale

manufacture of end use products. They may be T.V. cabinet makers, flush door and knock-

ed down furniture makers etc. Users of this segment have specific requirement and use

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various substitute products according to the requirement of end product and the cost of

alternative products.

(e) Wholesalers / Distributors:

This is the most significant segment as they form a link between manufacturing company

and the actual end users. They are the members of distribution channel for various

substitute products (like plywood, particle boards etc.) and very often influence the end

users decision.

(f) End users:

They are both actual buyers and users of MDF. They have used MDF in a particular

application and were contacted to know their views on MDF.

3.3.2 Summary of Findings

(i) Plywood and Block board

• Plywood and Block board collectively constitute a major segment of wood panel

market.

• Plywood possesses good strength and mechanical properties, as well as firm,

easy nailing/screwing ability has given the product very good market

acceptance over the years.

• Small scale manufacturers in unorganised sector constitute the major chunk of

the total plywood manufacturing. As these units do not pay any excise duty and

evade other local taxes, they give a tough fight to organised sector plywood

manufacturers.

• This industry uses premium timber log veneers as input, which is in short supply.

• Construction, furniture and packaging industries are the biggest end-users of

this product.

• Plywood is considered first choice for the household furniture in India, but in

foreign countries where ready made and flexible furniture demand is increased

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in last decade, there preference gradually moves to other available alternate

products.

• Plywood and Block board are available with phenol & urea formaldehyde

bonding for exterior and internal application.

• Block boards are available in a density of 750 - 900kg/m3 and thickness varies

from 10 mm to 40mm.

• Plywood offers several superior properties like bending, termite resistance,

ability to withstand varying conditions, etc. which makes it non-substitutable by

other wood panel products for some applications.

• Most of the sale is on credit. The credit period varies between 30 - 60 days

Source: Capital Market

• Marketing of these products is generally through the normal distribution channel

of company -> wholesalers/stockists -> dealers -> consumer. However,

sometimes the dealers purchase directly from the company.

• Typically the Plywood is available in panel lengths of 5, 6, 7 & 8 ft., width of 3

and 4 ft. and thickness of 4, 6, 9 and 16 mm.

• Fast moving size of Plywood and Block board is 8'x4'.

• Prices of plywood have moved upwards at a rate of 10-15% in the last few years.

This can be primarily attributed to increased prices of raw materials.

• Some plywood companies are also offering panel doors, flush doors, ceiling tiles

and Plywood with very distinctive and unorthodox surface veneers.

• Plywood shuttering is preferred over wooden or steel shuttering because it is

lighter to handle, can be bent and finish is smooth, thus saving plastering cost.

Manufacturer Installed capacity Unit

Greenply Industries (plywood/particle board) 1,18,50,000 M3

Kitply industries (plywood and boards) 14,750,000 M2

National Plywood Industries (plywood / block

board) 4 mm basis 11,350,000 M2

Century ply boards (plywood) 25200 M3



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Particle Board

• The market size for PB in India is roughly US$110 million, with a year-on-year

growth rate of 20%. Almost 90% of the demand is met by domestic production

and the rest is imported. Imports are chiefly from Nepal, Bhutan and Sri Lanka.

• Particle boards are mainly used for partition/panelling and in the manufacture

of doors (as inserts in frame) and rarely used for table tops. Ready made

furniture manufacturer prefer particle board as main raw material.

• PB suffers from the poor edge machinability, poor tensile strength and poor

screw/nail holding strength.

• A substantial portion of particle board (around 65%) being marketed is

laminated and the remaining 35% are in the form of plain& veneer boards.

• Industry uses a variety of raw material for the manufacture of particle board,

such as bagasse, wood chips, rice husk, etc. Wood accounts for 87% of the raw

material used in the manufacture of PB.

• Standard sizes of particle board panels are 8' x 4', 9' x 4' & 10' x 4' and the

thickness ranging from 9 mm to 35 mm. 12 mm thickness particle board is used

as inserts in door frames, 18mm for modular furniture. The other sizes

commonly used are 15 and 25 mm sheets.

• At present there are 15-16 players of particle board and the demand for the

same is nearly 2.55 lakh tons per annum.

• Bhutan Board unit in Bhutan with an installed capacity of 21000 TPA has been

performing at 70% capacity utilisation. The unit is located in Bhutan. It markets

around 50% of its production in India.

• Novopan is the market leader of particle board followed by Bhutan Board.

Novopan has two manufacturing units with capacities of 50,000 and 75,000

cubic m/year respectively.

• Ecoboard, Vision Boards, Aurobindo Laminates and Trimurti used to

manufacture particle board using bagasse as raw material.

• Nepal Boards, Bhutan Boards, Mysore Chip Boards, Uro, Decoboard (Bakelite



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Hylam) and Novopan manufactures PB from wood.

Medium Density Fibre (MDF) Board

• MDF worth US$ 67.5 million are being imported to India every year that meets

almost 75-80% of the total domestic demand. Based on market information, the

market for MDF is growing at an impressive rate of 20-25% p.a.

• There are two manufacturers of MDF in India. These are Mangalam Timber

Products Ltd. and Nuchem Ltd. The trade name of Mangalam's product is "DURA

TUFF" and that of Nuchem Ltd. is "NUWUD".

• The plant capacity of Mangalam Timber is 57000 cubic m/year and that of

Nuchem Ltd. is 60000 cubic m/year (45,000 MTPA).

• Duratuff™ is available in interior and exterior grade and also in pre-laminated

form whereas NUWUD does not have pre laminated boards.

• Plywood is considered first choice for the household furniture in India, but in

foreign countries where ready made and flexible furniture demand is increased

in last decade, there preference gradually moves to other available alternate

products.

• Pre-laminated boards of DURATUFF are preferred in the Southern and Western

regions, whereas the plain boards are dominant in Northern India. MDF market

in the Eastern region is negligible because of the easier & cheaper availability of

non-teak wood.

• Greenply, one of the major players in plywood, particle board and decorative

veneer board manufacturer, is also entering in MDF market with pre laminated

boards, branded as Greenlam™. Although Greenply not manufacturing MDF

board at present, it purchases MDF from outside and get it laminated in its unit.

• Majority of sale is of 8 ft x 4 ft. panels and thickness prefer-red are 6, 12 and 18

mm.

• MDF initially was not accepted positively by traditional carpenter because of

slightly different work practices requirement. However, at present the

carpenters find it easy to work with MDF.

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• MDF manufacturers are trying to push the product directly to the institutional

buyers who are the large consumers. Company plays a promotional role only.

Manufacturers of MDF claimed that they are making exterior grade conforming

to international MDF specifications. They use Phenol Formaldehyde resins for

making exterior grade MDF.

• MDF has been accepted by institutions like IOC, CPWD, DDA, HVDCO, IAAI, ITC

Ltd., Ministry of External Affairs, State Housing Boards, State PWDs, Taj Group

of Hotel, etc.

• The major demand of MDF board in recent years created by the new emerged

industries in India like software, BPO, retail and banking. Corporate sector

prefers MDF because it provides good aesthetic look and fast erection of

furniture in office.

• Plywood is considered first choice for the household furniture in India, but

gradually this preference is shifting towards ready made and flexible furniture,

which is made up of MDF board. The furniture industry, valued at almost INR

30,000 crores, is expected to witness a robust growth in the wade of upswing of

purchasing power of more than 400 million middle class populations.

• The growth in furniture consumption has been attributed mainly to

unprecedented growth witnessed in construction and residential real estate

markets. The short term growth is anticipated at 7% - 8%.

• Much of the domestic demand for furniture (65%) is from ten major cities viz.

Mumbai, New Delhi, Bangalore, Chennai, Hyderabad, Ahmedabad, Pune, Surat,

Kanpur and Jaipur.

• With the rising income of middle class and willingness to change furniture often,

will also perk up the demand for MDF board.

• Poor awareness about MDF board has been a deterrent, but this can overcome

by educating carpenters and the end user.

• MDF is also being sold to original equipment manufacturers like Videocon, BPL &

Philips. These companies use MDF in the manufacture of speaker cabinets.

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• Nuchem has a variety of downstream products of MDF like doors, windows,

mouldings, etc. These downstream products are manufactured by Nuchem on

contractual basis.

• However, most people related to MDF expect it to perform better in panels and

doors compared to furniture. This is in contradiction with the international

trend, where majority of MDF is being used in furniture making only.

• Manufacturers are quite optimistic about increase in share of MDF in the total

panel product markets and particularly plywood. Moreover, they expect it to

perform same function of timber in the manufacture of doors. They expect a

penetration level of over 30% of total panel product market in the future.

Others (Plastic Panels, Cement Bonded Particle Boards, etc.)

• The plastic panels are made of PVC which is relatively costlier vis-à-vis the

other panel products. Thus, the acceptance level is low.

• Sintex, the largest manufacturer of PVC panels, are focussing on direct

marketing to the end-users. Marketing through architects was not very

successful because of their high price.

• These panels look very attractive, but over a period they fade due to

environmental effects.

• Gujarat Synthwood claims to be making a scratch resistant product with integral

skin and appearance similar to wood.

• The plastic panels are not very strong, thus, not suitable for use in external uses

like doors & windows.

• Uses of plastic panels are limited to door & window frames, doors, windows and

partitions in commercial buildings.

• Because of excellent water resistance properties these panels surpass all the

other similar products in performance. These products need no painting,

polishing, varnishing etc. because they are pre-finished on both the surfaces.



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• Doors of PVC panels do not find easy acceptance because of psychological

preference for wooden door. Customer accepts frames and windows of material

other than timber more readily but customers still prefer wood or something

similar in appearance and texture.

• The manufacturing companies have focussed on institutional markets where

volume is high and product requirement is standardised.

• Gujarat Synthwood is trying to promote the product in household and residential

applications to expand the market. Because of its high price & preference for

wood or something similar to wood for doors and windows the penetration of

PVC panels in the total panel product market is quite low.

• These products are also relatively new and are still trying to carve out a market

niche for themselves.

• The major manufacturers of PVC panels are Sintex, Uniplas, Gujarat Synthwood,

Caprihans & Fixopan Industries. Jain Group manufactures polystyrene (trade

name "TIMBRON") 'based panel products.

• Cement bonded particle boards are mainly used for flooring, ceilings and

partitions. The market for these is slowly developing. Cement bonded

particleboard at present is manufactured by NCL Industries (Bison Panel) in

India.

Laminated Flooring

• Laminated flooring is widely used in household, corporate offices, restaurant,

hotels, and entertainment complexes. But still granite, marble, kota and

ceramics are the most preferred flooring for house flooring market in India.

Wooden flooring also getting acceptance slowly in Indian houses because of the

availability of the laminated wooden flooring.

• Laminate floors are made up of a thin, transparent upper crust that is resistant

to wear and tear, and of high density fibre board inside. Laminate floor cheaper

than the real and hard wooden floor. Laminate floors available at Rs 200-300

per sq feet.



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• Laminated floor provides good aesthetic look. It is available in different colours

and designs, which depends on the paper used in the surface of the wooden

floor.

• At present, demand of the wooden flooring in India is 90 % met by import only.

• More than 20 brands are selling in the Indian market presently. A large number

of these are importers. Amongst the well-known brands, there are Pergo (a

Swedish brand), Krono (a German brand), Eggar, Floormaster, etc.

• Laminated floor can be installed on existing flooring of wood, ceramic,

concrete, particle board, vinyl, linoleum, etc.

• The surface layer of laminate flooring is hard, compact and autistatic, so dirt

and dust do not adhere to it easily. It makes floor cleaning easy.

• Laminate floor are less vulnerable than pure wooden flooring from water and

dust, but they also require great care to maintain sustainable life. Due to

improvement in technology, laminated flooring is available in market with the

warranty up to 50 years.

• Technology has change laminate flooring from glue joints to mechanical click

joints; almost all laminate floors are glue-free today.

• The Indian flooring market has witnessed a lot of changes in the last 50 years.

From the traditional stone flooring, people have moved to granite, ceramic,

marble and now its laminates flooring.

3.3.3 Institutional Buyers for MDF

A SHIPPING INDUSTRY

MDF / Particle board can be used in the manufacture of furniture in ships for which at

present plywood is used. Currently marine plywood is used in this application.

B. RAILWAYS

Research Design & Standards Organization (RDSO) is the research wing of Railways. They



36


promote the use of newer materials in coach building. New class of material is tested and

certified by them. This is communicated to all the nine zones of Railways so that field staff

can use them.

The two major coach factories namely Integral Coach Factory (ICF), Perambur and Railway

Coach Factory (RCF), Kapurthala opined that approval of RDSO is needed for using any new

material. At present MDF is not used in such building.

c. SURFACE TRANSPORT

(i) Presently wood, plywood and block board are being used in bus and truck body

building.

(ii) Some bus/truck body manufacturers said that they do not know anything about MDF

and nobody has approached them for such a product.

(iii) Gujarat State Road Transport Corporation tried MDF for passenger seats by

replacing plywood which was being used earlier. But the results of this experiment were

not satisfactory. However, the trials are still on.

D. STATE AGENCIES

(i) Central Public Works Department (CPWD) is quite favourable to the product. Their

Technology Application & Development Cell (TADC) has approved the material and they are

still conducting some tests on the product. For experimentation/trial purpose they have

used it in some of the construction and are observing its performance.

(ii) Main use for CPWD is in door shutters followed by windows and frames. But the

Department is quite stringent on the Boiling Water Proof (BWP) grade product. They would

also prefer a pigmented exterior grade for easier identification.

(iii) They find that exterior grade MDF is not easily available in the market

(iv) Housing & Urban Development Corporation (HUDCO) another central government

body in housing is also giving MDF a trial by using it in some of the construction activity.

HUDCO has used MDF in its Type IV flats at Khelgaon Marg, New Delhi for joinery and

various interior



37


E. PRIVATE BUILDERS

(i) Private Builders see a great possibility of MDF application in door shutters. For

frames, steel or aluminium is used and in windows steel, aluminium and PVC are preferred.

Door shutters traditionally have been of wood and they would continue to be made up of

similar material.

(ii) Price-wise MDF is either on a bit higher side or equivalent to other material in their

assessment.

(iii) Users have found availability of MDF as a constraint.

Points (ii) & (iii) are not weaknesses per se, but opportunities. RDPL can look forward to

leveraging the advantages arising out of domestic production at economies of scale.

3.3.4 Architects & Interior Decorators

(i) Positive attitude about the product is reflected by various architects & interior

decorators contacted.

(ii) MDF is recommended in the furniture which is painted for use. However, in the

cases where polishing arid teak ply lamination is required, MDF is not preferred

because of its poor adhesive properties compared to plywood and blockboard.

(iii) Modular furniture is a new concept. It will be preferred by the people who want

economical stuff but for the class which believes in exclusiveness it is a preferred

material.

(iv) Short supply of MDF especially NUWUD has also been reported by few.

(v) MDF is preferred because of its appearance, price and versatility. Higher use of MDF

and other panel products is reported in the western and southern India.

(vi) According to majority of respondents in this category, MDF is a success abroad and

in India direct marketing and promotion through architects is required. But

carpenters or workmen need to be educated about the product for better

penetration.

(vii) Availability of larger sizes of MDF like 8'x6' (which is available in particle board) is

desired by some interior decorators.

(viii) Everybody agrees that price, performance and awareness about the product will

influence the choice of customer and the penetration is expected to increase in the

future to over 30 to 35% of the panel product market.

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3.3.5 Industrial Buyers/Converters

(i) Respondents of this group have been using plywood and particle board till now.

(ii) As the modular furniture in India is not very popular, the use of MDF is very less.

(iii) Until now furniture manufacturers have been using other panel products like

plywood, blackboard etc. Although MDF is cheaper than plywood, most furniture

makers have not given it a try as it, is a relatively new product. However, in places

like Muzaffarnagar, U.P., which is known for its furniture made from Sheesham

wood, demand for NUWUD based furniture, is picking up. Furniture (from NUWUD

includes tables, chairs, cabinets, 0 wardrobes, racks with very good design creativity.

Cost of MDF is less than sheesham and teak wood.

(iv) Handrails and margins (mouldings) made from MDF in a wide variety of designs are

gaining popularity. These are traditionally made from teak wood. A few furniture

makers, who have replaced particle board with MDF find this uneconomical.

However, the cost-benefit is not weighed in terms of MDF's durability, strength etc.

(v) For simpler applications like TV trolleys, cabinets etc., particle board being a

cheaper product, is preferred. Also acoustic properties of particle board fit into the

requirement.

(vi) In furniture making, requirement of moulded/carved edges can be easily met with

MDF, but users have minor worries about screwing properties on the edges of MDF.

(vii) MDF is being used by ancillary units of some audio/video electronic equipments

manufacturing companies.

Some of regular users have complained about poor availability, which is forcing them to

use other panel products again. They make products on time bound order, so cannot afford

to wait.

3.4 Indian Scenario on Furniture

The Indian furniture industry is fragmented and 85 % of the furniture produced is by

handicraft. The contribution of the sector to the GDP is approximately 0.5 % only.

The furniture production trend in India is depicted below:

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Figure 3.8: Furniture Productions in Billion Euros

Source: European Furniture Manufacturer Federation

The industry grew almost 3% per annum annual growth rate in year 1996 to 1999 and then

slowed down by 10 % in year 1999. The slow down was the result of the cyclical situation of

the economy. Furniture sector recovered from the 1999 crisis and attained a 3 % growth

rate in the year 2000 and 2001.

The wood-based furniture ruled the Indian furniture industry with 65 % share, while metal

is accounted for 25% and plastic is accounted for 10 %.

Figure 3.9: Raw material used in furniture


1998 2000

2016

2067

2130

1913

1986

2026

1800

1850

1900

1950

2000

2050

2100

2150

1996 1997 1999 2001

65%

10%

25%Wood

Metal

Plastic

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The household furniture is the major segment of the total furniture production, which

accounts for 65% of the production value.

Figure 3.10: Furniture Production Break up


The household segment covers the upholstered furniture, bedroom, kitchen, and dining

room’s furniture. The upholstered furniture accounts for the 30 %, bedroom 20 %, and

kitchen and dining room’s furniture for the 7.5 % each. The second major segments in the

furniture industry are corporate/office and hotel furniture with the share of 15 % each.

Other furniture holds remaining 5 % share.

The office furniture segment is the one that boasts the most important companies, both

from the point of view of size and of the technological innovation of the production.

Import – Export

The import and export of the furniture is given as exhibit below:

8% 8%

5%

15%

15% 29%

20%

Upholstery Bedroom Furniture Dining room Furniture Kitchen Furniture

Other Furniture Corporate/Office Hotel/contract

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Figure 3.11: Import – Export of Furniture in India

0

20

40

60

80

100

120

140

160

1996 1997 1998 1999 2000

in m

illion E

uro

s

Import Export


The exports of Indian furniture are ten times higher than imports of the furniture in India.

The exports are more in the form of cheap varieties at affordable costs whereas the

imports cater to the elite class who wants to own the best brands available in the market.

Export of Indian furniture

The United States is the biggest consumer of the Indian furniture outside India and

accounts for 24% of total export of the Indian furniture. After US, United Kingdom and

Germany are the biggest export destinations for the furniture with 14% share each.

Figure 3.12: Country wise break up of export of Indian furniture

4%

2%

24%

14%

14%5%

2%

15%

5% 10%

5%

United States Germany United kingdom France

Italy Denmark Canada Greece

others Belgium Netherlands


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The indicative break up of export share of the furniture products is given below:

Figure 3.13: Product wise break up of Indian furniture export

1%

1%

8%

4%

5%8%

31%

42%

Other Wooden Furniture Office Furniture other Furniture & Parts

Kitchen Furniture Seating & Parts Plastic Furniture

Other Metal Furniture Bedrooms


Import of the furniture

Indian consumer prefers stylish and western furniture. The biggest import source of

furniture in India is Germany which account for the 16 % of total import of the furniture.

Germany followed by the Italy with 12 % and Korea with 10 % of import share.

Figure 3.14: Country wise break up of imported furniture in India


The indicative break up of import share of the furniture products is given below:

20% 3%16%

12%

7%

9%

4% 5% 7%

7%

10%

Germany

Italy

Korea

United Kingdom

United States

Irish Republic

France

Japan

Poland

others

Switzerland



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Figure 3.15: Product wise break up of imported furniture in India


Indian wood scenario

India meets its wood required by natural production, plantation and imports.

Table 3.3: Indian log production, imports & apparent consumption, 2003

Logs Volume(m3)

Production

- from natural forests 14,000,000

- from plantations & homesteads 43,000,000

Imports 3,000,000

Total apparent consumption 60,000,000

Source: American Forest and Paper Association.

Due to stringent government rules and environmental concern, the availability of woods

from the natural production is reduced in recent years considerably. The concept of social

forestry and plantation is well developed in recent year and few wood panel and paper

manufacturer have developed small forest to meet their own wood demand. Teak,

Eucalyptus and rubber wood are the preferred trees for social forestry. Rest of the

demand of the wood is satisfied by the import of the wood logs.

The indicative break up of the round wood consumption is shown in table given below:

3%

3%

3%

5% 38%

29%

11%

8% Seating & Parts

Furniture Parts

Plastic Furniture

Kitchen Furniture

Bedrooms

Other Wooden Furniture Office Furniture

Other Metal Furniture

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Figure 3.16: Break up of the round wood consumption in India


In coming years the demand and supply gap of wood is expected to be widened.

Table 3.4: Demand supply gap of wood

Year 2000 2010 2020

Demand 58 950 153

Supply 29 70.55 100.7

Gap 29 24.45 52.3

% of demand gap 50 25.70 34

Source: Ganguly, 2003

Due to lack of supply of domestic natural wood, import of wood base products has increase

sharply in recent years.

Table 3.5: Indian imports of wood products, 2002 -2003

2002 ($,000) 2003 ($,000) % Change

Logs 361,851 692,582 91

Sawn Lumber 7,716 12,777 66

Veneer 3,587 3,736 4

Plywood (incl. Veneered plywood) 3,810 4,359 14

MDF/HDF 11,007 13,555 23

Particleboard 7,819 13,740 76

Wooden Furniture 7,280 12,713 75

Total 403,070 753,462 87

Source: American Forest and Paper Association

25%5%

8%

25%12%

25%

Construction

Furniture & Interior

Joiniry

Sleepers

Packaging

Others

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Decreasing tariffs of wood imports in India has also propelled the imports of wood in India.

The growth of the imports of veneer is lowest compared to other products; this may be

because of the high rise in the import of the sawn lumber. The sharp increase in the wood

pane l is observed in 2003, this shows the increasing trend of the wood panel based

furniture in India. With the wood panel, imports of the wooden furniture also increase by

almost 75 % in year 2003.

Indian wood panel scenario

The import of the wood panel is summarized in graph given below:

Figure 3.17: Imports of Veneer & plywood in India (In US $ ‘000)

Source: Federation of Indian Panel & Plywood Industries (FIPPI)

0

2000

4000

6000

8000

10000

12000

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

Plywood Veneer

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Figure 3.18: Import of MDF/HDF & Particle Board in India (In US $ ’000)

Source: Federation of Indian Panel and Plywood Industries (FIPPI)

The import of the MDF/HDF and particle board has outperformed the import of the veneer

and plywood. The import of the MDF has shown continuous rising trend of import in recent

years, which clearly depict the inclination of the Indian consumer towards the MDF in

recent years. This holds promise for the domestic manufacturers in terms of making

available MDF at competitive prices within India through domestic manufacturing.

3.5 Other Relevant Issues

To put it short, the major factors that determine the demand for MDF in the country will

depend on the following:

• Economic Growth Rate.

• Government policies on forest products.

• Thrust on infrastructure projects and housing.

• Product characteristics and the awareness of MDF.

• Price differential of MDF and its substitutes.

• Relative availability of MDF and its substitutes.

• Taxation structure of MDF and its substitutes.

0

2000

4000

6000

8000

10000

12000

14000

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

MDF/HDF Particleboard

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• Rate of Urbanisation.

• Per Capita Income.

• Changing life styles and perception.

• Development of new substitutes.

India’s Economic Growth Rate: The country has been witnessing a consistent and

impressive growth rate in the range of 7-9% per annum. This coupled with the increased

thrust on manufacturing will have a multiplier effect on construction and infrastructure

projects, major growth driver for MDF also.

Government Policies on Forests: The world is experiencing global warming due to

increased emission of carbon dioxide and ozone-depleting substances. The forests, to a

large extent, can fight those problems (through photo synthesis using the CO2) and also

preserve the rich bio-diversity. The governments the world over has woken up to this

reality to prevent de-forestation by discouraging industries that use forest resources like

wood and timber. At the same time using non-conventional raw materials like bagasse,

wood wastes, lops& tops, barks, etc are encouraged.

The National Forest Policy, 1988 stipulates that the one-third of landmass should be tree

covered with at least 60% in the Himalayas. Within the broad parameters of the National

Forest Policy, each State should have its own forest policy statement, for the sustainable

management of its forest and wildlife resources.

To sum up, the government policy on forest products is the one that would promote the

use of MDF and thus enhance its demand.

Product characteristics and the awareness of MDF: Product characteristics determine

its suitability to a particular application. A compact look, smooth texture, rigidity and a

proper colour are the primary visual characteristics which play a major role in making or

breaking the success of a product.1

Good workability- machining operations (sawing, planing, nailing, screwing and

contouring), the quality of the machined edge thus obtained, the minimum level of

1 Use of a particular species of eucalyptus gave DURATUFF a dark, grey colour which made the dealers and carpenters to

mistake MDF for an inferior product. There was greater resistance during the promotion phase.

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operator skill required and the time to complete the task are all determining factors for

the acceptability of MDF.

It is ultimately the consumer who decides whether or not to accept a product. In addition

to the price factor, the decision is strongly influenced by;

a) Does the product come from a branded firm (Corporate Brand Name)?

b) Does it have a quality certification (BIS mark, etc)?

c) Has the product been endorsed by industry professionals and bodies (leading

architects, builders, institutes, etc)?

As long as the product remains reasonable priced, acceptance at the above levels would

ensure that the product acceptance trickles down rapidly to its target segment.

Price differential of MDF and its substitutes: A favourable pricing of the product vis-à-

vis substitutes is important to capture market share in the price-sensitive market.

However, this can be curbed to an extent by brand-building and by running awareness

programs on MDF.

Relative availability of MDF and its substitutes: Nearly 75-80% of the MDF demand in

India is being met by imports. There are only two manufacturers of MDF at present,

namely, Mangalam Timbers (SK Birla Group) and Nu Chem. The proposed plans of Bajaj

Biotec (Bajaj Hindustan Group) to set up three plants – two for MDF in eastern and central

Uttar Pradesh and one for PB in western UP will result in a total production capacity of

2.10 lakh cubic metres per annum.

Rate of Urbanisation: The rate of urbanisation affects the demand as follows:

Migration of rural population to a urban environment seeking jobs results in greater money

flow as a result of employment. Over a period of time, the migrant family will start

investing in house or in buying furniture.

Per Capita Income: The rise in income levels and the per capita disposable income will

result in the procurement of new dwelling units, furniture and the like. Needless to say,

rising income levels will bring about increased economic activities.



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Changing Life Styles and Perception: The frenetic pace of life and special constraints in

the big cities would necessitate the adoption of modular furniture, cabinets, kitchen, etc.

MDF is a preferred choice for modular furniture.

Development of New Substitutes: The dwindling wood reserves and the increased R&D

efforts in the material science to find alternatives have led to the commercialisation of

acrylic, fibre glass and gypsum entering the furniture market. Another substitute called

“Gypboard” (gypsum panel) is being used increasingly as walls, false ceiling and partition.

Similarly, woodplast is being used in garden/beach furniture, TV cabin, etc.



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4 Raw Material Assessment

4.1 Raw material Types

Medium Density Fibre Board can be manufactured from soft wood or from agricultural

wastes like cotton stalk, bagasse, etc. Eucalyptus, poplar and pine are generally being

used as a raw material for MDF board. But due to dwindling forests and the stringent

government regulations to protect forests, manufacturers are looking for alternatives to

produce MDF Board. RDPL (herein after referred to as client) plans to use cotton stalk/

bagasse, which is primarily an agricultural waste left after the harvesting of cotton, as the

raw material for MDF Board manufacturing.

4.2 Cotton Production

As depicted below, the cotton cultivated area in India is nearly 9 million hectares (year

2005) with an average yield of 450 Kg/ha. The yield of cotton in the US is almost double of

this figure, owing to the increased usage of BT cotton and other improved varieties. Since

further elaboration on the subject is not relevant to our study, we may discuss issues

pertaining to India and Gujarat in particular.

Figure 4.1: Cotton Production area and yields of India and U.S.

Source: commodity intelligence Report, United states Department of Agriculture (USDA)

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India India is the third-largest cotton producing country in the world after China and US. China

produced 5,704,436 MT and the US 5,203,665 MT of cotton in the year 2005, while India’s

cotton production in the same year was 3,984,396 MT. In terms of area of cotton

production, India has the largest land area (Statistics of the year 2005). At present around

84 lakh hectares area is being used for cotton cultivation, which is expected to grow to 90

lakh hectares by year 2006-‘07.

Figure 4.2: India’s Cotton Production and Production area

0

50

100

150

200

250

2000-01 2001-02 2002-03 2003-04 2004-05

India's Cotton Production and Production area

Area (Lakh hectares) Production (Lakh Bales)

1 bale: 170 kilogram

Source: Cotton Corporation of India

Despite the largest land area in cotton cultivation, Indian cotton production is less than

that of China and the US because of the lower yield. But in recent years India’s cotton

production yield has improved steadily. Improved irrigation system and the adoption of BT

cotton are the main reasons for the improvement in yield (MT/hectare).



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Figure 4.3: India’s Cotton Production Yield

0

100

200

300

400

500

2000-01 2001-02 2002-03 2003-04 2004-05

India's Cotton Production Yield

Yield (Kg/ ha)

Source: Cotton Corporation of India

The central states of Maharashtra, Gujarat, and Madhya Pradesh continue to plant

approximately 63 percent of India's total cotton area.

Gujarat

Gujarat is the leading state of India in cotton production followed by Maharashtra and

Andhra Pradesh.

Table 4.1: Cotton production

(Area in Lakh hectare)

(Production in Lakh bales)

2004-05 2003-04 2002-03 States

Area Production Area Production Area Production

Gujarat 19.06 54.43 16.41 40.26 16.34 30.50

Maharashtra 30.49 52.00 27.66 31.00 28.00 26.00

Andhra Pradesh 11.42 32.50 8.25 26.00 8.03 19.75

Source: CCI

In spite of lesser area for cotton cultivation than that of Maharashtra, Gujarat’s production

is higher than that of Maharashtra, This has happened due to higher yield of cotton in

Gujarat. Cotton production of Gujarat has steadily increased since year 2002, owing to two

major facts, namely, the increased adoption of BT cotton in place of desi varieties and the

improved irrigation facilities available to the cultivable land.



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Figure 4.4: Gujarat’s Cotton Production Yield

0

50

100

150

200

250

300

350

400

450

500

2000 - 2001 2001 - 2002 2002 - 2003 2003 - 2004 2004 - 2005

Yield in Kg/Ha

Source: Directorate of Agriculture

The cotton production area increased by 13.5% in year 2006, from 20.77 lakh hectares in

the year 2005 to 23.60 lakh hectares in the year 2006.



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The district wise cotton production in Gujarat is mention below:

Table 4.2: District wise cotton production in Gujarat

(Area in ’00 hectare)

(Production in ’00 bales)

(Productivity in kg/hectare)

2003-2004 2004-2005 Sr. No. Name of District

Area Production Yield Area Production Yield

1 Ahmedabad 1680 2463 249 1895 3327 298

2 Anand 13 39 552 38 154 689

3 Banaskantha 45 180 680 61 259 722

4 Bharuch 1329 1919 245 1297 3350 439

5 Dahod 6 17 415 18 73 689

6 Dang 0 0 0 0 0 0

7 Gandhinagar 180 506 478 327 1171 609

8 Kheda 179 398 378 206 653 539

9 Mehsana 368 804 371 467 1122 408

10 Narmada 352 621 300 435 1510 590

11 Navsari 0 0 0 0 0 0

12 Panchmahal 72 184 434 104 337 551

13 Patan 769 774 171 1011 1101 185

14 Sabarkantha 377 1401 632 861 2932 579

15 Surat 42 99 401 70 180 437

16 Vadodara 1581 3164 340 1728 4499 541

17 Valsad 0 0 0 0 0 0

18 Amreli 1040 3392 554 1164 2908 425

19 Bhavnagar 1901 4116 368 1987 5159 441

20 Jamnagar 320 1879 998 467 2567 934

21 Junagadh 192 993 879 249 1401 957

22 Kutch 402 994 420 547 1217 378

23 Porbandar 37 83 381 32 72 383

24 Rajkot 1680 10118 1023 2028 10683 896

25 Surendranagar 3845 6125 271 4071 9760 408

Total 16410 40269 417 19063 54435 494

Source: Directorate of agriculture, Gujarat

As shown in the above table, Surendranagar leads the pack in terms of the maximum

cultivable area and production of cotton.

Surendranagar also geographically connected with the Rajkot, Bhavanagar and Ahmedabad.

These are the second, third and fourth highest cotton cultivated district respectively in

Gujarat. Also Patan and Mehsana have good amount of cotton cultivation.

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The production of cotton in Surendranagar district is mention below in table:

Table 4.3: Cotton Productions in Surendranagar District

(Area in ’00 hectare)

(Production in ’00 bales) (Productivity in kg/hectare)

Unirrigated Cotton Production Irrigated Cotton Production Total Cotton Production Year

Area Production Yield Area Production Yield Area Production Yield

2000 - 2001 3249 1038 54 526 775 250 3775 1813 82

2001 - 2002 3442 2162 107 790 1799 387 4232 3961 159

2002 - 2003 3234 1050 55 967 1490 262 4201 2540 103

2003 - 2004 3100 4103 225 745 2022 462 3845 6125 271

2004 - 2005 3191 5925 316 880 3835 741 4071 9760 408 Source: Directorate of Agriculture, Gandhinagar

The yield of the cotton production is increased considerably in last two years in

Surendranagar. At present, major part of cotton cultivation area is unirrigated, which is

likely to get irrigation sooner in incoming years as Sardar Sarovar project is gained fast

execution in recent time. This will result in higher production of cotton stalk in

Surendranagar as it has very large area for cotton cultivation.

4.3 Cotton stalk

Cotton stalk’s production directly depends on the production of cotton. As per the Ministry

of Environment and Forests (Government of India), it is estimated that, on an average, the

rain fed crop gives about 2.5 tonnes per hectare of cotton stalk and the irrigated crop

gives about 5 tonnes per hectare. Generally 3 metric tons of cotton stalks is produced per

hectare production of cotton. Estimated weight of the cotton stalk is 300-400 gm per plant

with the average diameter varying from 1 to 1.5 inches. While the total Indian production

of cotton in the year 2005-06 was 23.8 million bales (1 bale equals 170 kg), Gujarat alone

produced around 7.6 million bales of cotton in the same period.

Taking cues from the table (section 4.2), the cultivated area of cotton in Surendranagar in

year 2004 - 05 is 4.07 lakh hectares, which can produce three times as much quantity of

cotton stalk. This translates into 1.22 million metric tons of cotton stalks. The requirement

of the plant is 100,000 tons which can be met by procuring the cotton stalks from the

Surendranagar area only. Also emergency provisions can be made to procure the same from

the adjoining districts like Rajkot, Bhavnagar and Ahmedabad.

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4.3.1 Cotton stalk usages

The stalk of the cotton plant is processed for the development of ethanol for petrol and

diesel blends and it is also used as a mulch to improve soil. Cotton stalk is also used to

prepare stock feed with the shell of the cotton seed. Cotton stalk can be used as direct

fire stock in boiler and for the purpose of household.

No major industrial and commercial utilization of cotton stalk is so far done in India.

Cotton stalk is mainly burned either as feed stock in small capacity boilers or as fuel in

household. Farmers use them to make composts in order to improve the soil fertility. Only

a small fraction of the available cotton stalk is used to prepare feed stock using the shell

of cotton seed. All these activities are done at a very low capacity and in unorganized

manner. Cotton stalk is not utilized so far in value added activities like the manufacturing

of MDF. As most of the cotton stalk is considered as waste and burnt by farmers, it can be

conjectured that a significantly large portion of cotton stalk could be made available to

manufacturing MDF board. This would also help farmers to earn extra money from selling

cotton stalks to the manufacturers of MDF, thereby creating a “win-win” for both.

4.3.2 Cotton Stalk Availability

Future availability of cotton stalk depends on the production of cotton. Cotton is Gujarat’s

one of the major revenue earning crop that supports the textile sector which is one of the

leading industry sectors of Gujarat.

The demand for cotton will increase due to growth of the textile industry. The major

growth drivers of the textile industry in India are mentioned below:

• Abolition of Quota system and MFA (Multi Fibre Agreement).

• Growing demand for apparels and clothing.

• Established presence of Indian textiles in domestic and international market.

• Growing urbanization, increase in disposable income levels and fashion-savvy

population.

• Comparative as well as Competitive Edge of Indian Textile Industry.

• Initiatives by Government to promote Textile Industry.

It is envisaged that cotton production will also increase in coming years to meet the

increased demand of cotton in Gujarat. The major factors that lead the rise in cotton

production in Gujarat are mentioned below:



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� Improved irrigation

In past few years, the irrigation system of Gujarat has improved due to the increased

awareness of the citizens and also by the sustained effort of the Government of Gujarat.

The successful implementation of Sardar Sarovar Project makes Narmada water available

through the entire middle-Gujarat and Saurashtra for irrigation. Gujarat is the first state in

linking rivers across the state. Construction of check dam helps to store water for longer

time, to increase the ground water level and to recharge the dry well. Due to these

efforts, ample water will become available for irrigation to cotton crop, which in turn can

help increase the production of cotton.

� Adoption of BT cotton

Gujarat is one of the states, which early-adopted the BT cotton and the rise in the

production of cotton crop is the result of that. BT cotton protects the plant from blow

worm. The height of the BT cotton plant is normally higher than the desi (non-BT) cotton

plant. The production of the cotton boll also increases in BT cotton plant. Due to higher

quality and large volume, BT cotton help farmers to fetch good price for their product.

This becomes the prime motivation for many farmers to move onto cotton production in

the state, which led to the higher cotton production in Gujarat.

At present cotton stalk is treated as agro waste product with no seemingly major industrial

and commercial applications. MDF board industry will not only utilize the cotton stalk in

value addition activity but it also provides opportunity for farmers to earn extra money by

selling cotton stalks. Going by the current economic condition and booming textile

industry, the demand for cotton in coming years is likely to go up with concomitant

increase in the cotton cultivation and hence the increased availability of cotton stalk in

Gujarat. In short, the cotton stalk will be largely available in future to support the MDF

board manufacturing industry.

4.3.3 Procurement Strategy & Design

Cotton stalk available from cotton plants are required to be processed in the following

stages, before they can be used in the MDF plant:

1. Removal of the ground

2. Removal of the dirt and soil sticking to the stalk

3. Removal of leaves and smaller branches

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4. Removal of lint sticking to the cotton stalk

5. Removal of cotton seeds sticking to the cotton stalk

6. Washing of the cotton stalk

7. Debarking of the cotton stalk

8. Chipping of the cotton stalk

9. Drying of chips

Cotton stalk would be available from the farms starting from the month of April to June.

From the farms, at least for another six months, there would be no substantial

deterioration in quality, if stored properly. Technically of course cotton stalk can be used

for a period up to one year, if they are protected and properly stored in chipped form.

RDPL can develop effective technology to procure cotton stalk for long time and

mechanism to lower the cost of cotton stalk by working with organisation like CIRCOT

(Central Institute of Research of Cotton), Mumbai. CIRCOT is leading institute doing

research on cotton and it had successfully carried out pilot project to manufacture board

from cotton stalk. Its expertise and technology knowledge would help RDPL to utilise

cotton stalk in efficient way.

RDPL planning to set up manufacturing unit at Dhrangadhra taluka, which is surrounded by

Lakhtar, Limdi, Muli, Chuda, Sayla, and Wadhwan. All these talukas are cotton growing

area and producing ample quantity of cotton in year. The production of cotton in these

talukas is provided in the table given below:

Table 4.4: Cotton Production in different talukas of Surendranagar

Sr. No. Taluka Cotton Production

(in hectare)

cotton stalk in tones @ 1.5

tones / hectare

1 Lakhtar 47556 71334

2 Limdi 37000 55500

3 Muli 32500 48750

4 Chuda 15432 23148

5 Sayla 28150 42225

6 Dhrangadhra 49900 74850

7 Wadhvan 43400 65100

8 Halvad 28158 42777

The planned capacity of the fibre board manufacturing unit is 30,000 CuM. The raw

material requirement for this capacity is easily meet by the cotton production of this

region.



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RDPL is planning to set up Collection-Chipping-Storage centre of cotton stalk in each of

these taluka. Each CCS centre will be established on a ‘5 Acre’ land. CCS centre equipped

with one Mobile chipping unit to chip the cotton stalk and one weighing machine (20 tones)

facilitated by software installed terminal.

Around 34 persons will be stationed at each CCS centre - 24 labourers required for chipping

machine operation, 6 persons required to operate weighing machine and an accountant

and a supervisor.

The proposed location of the CCS centre is mention in table given below:

Table 4.5: CCS Centre locations

CCS

No.

CCS Centres

(Proposed) Talukas

Distance form

Dhangadhra Talukas Covered

1 Adalsar Lakhtar 38 Lakhtar, Patdi, Limdi

2 Samla Limdi 57 Limdi, Wadhwan, Chuda

3 Sudamda Sayla 48 Sayla, Muli, Chuda, Chotila

4 Gadhda Muli 38 Muli, Dhangadhra, Halvad, Chotila,

Vankaner

5 Charadva Halvad 27 Halvad, Morbi, Naliya, Vankaner

6 Dasada Patdi 38 Patdi, Bechraji, Viramgam

7 Navalgarh Dhangadhra 0 Dhangadhra, Halvad

Each CCS centre will cover almost 20 km of area surrounding it, while the distance of these

centres from the manufacturing unit is varied from 27 to 70 km.

Cotton growing farmers from the surrounding villages will transport cotton stalks to this

centre. Transportation cost up to CCS centre will be borne by RDPL. The collected cotton

stalk will be chipped and stored at the centre and will only be transported to the factory

whenever required. This would help to reduce required storage space at the factory, the

transportation cost and the overall operational burden. The strategy also provides

opportunity to create buffer stock to meet future demand and to control the price of raw

material.

The location of Collection-Chipping-Storage centre is diagrammatically represented as

follows:



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Figure 4.5: CCS Centre Mechanism



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(i) Pricing

Our interaction with various agencies suggests that cotton stalk can be procured at a price

of INR 300 per metric ton. This can be channelised either through farmer’s co-operatives

or through direct buying from big farmers (RDPL is planning “collection points” at major

locations). As this is a seasonal item, the collected cotton stalks will be stored in

warehouses so that the operation of the plant can be sustained for the entire year. Besides

the basic purchase price of the cotton stalk, cleaning, handling and transportaion charges

should also to be considered for the calculation of the price of cotton stalk at MDF plant.

It is advisable that the client would make contract or create strong linkages with farmers

and co-operatives to procure cotton stalk at reasonable prices. Because there are chances

that once the MDF unit is set up based on cotton stalks, farmers would realise its value,

who in turn, would increase the price of cotton stalks. Moreover, due to price increase in

other types of domestic fuels like coal, wood etc, usage of cotton stalks as a regular

domestic fuel has received some serious attention. Some projects like “White Coal” have

been set up to convert waste cotton stalks into more usable configuration as fuel. All these

may put pressure on the prices of cotton stalks.

4.4 Bagasse as Alternate Raw Material

Bagasse is another option to be considered as a raw material for MDF production. Bagasse

is the matted cellulose fibre residue from sugar cane that has been processed in a sugar

mill. Most bagasse has moisture content between 45 and 55 percent by weight. Average

bagasse production is about 30 percent of the sugarcane crushed.

About 90 percent of bagasse produced is used as fuel. Another major use of bagasse is in

paper making. However, large quantities of bagasse are either thrown away or taken away

for use as fuel or for compost making. In a number of sugar manufacturing factories surplus

bagasse becomes a disposal problem.

India is the second largest producer of Sugar cane in world after Brazil, with an estimated

production of 258.0 million MT in the year 2005 and which is estimated to touch to 329.60

million tones by the year 2015. The major sugar producing States in the country are

Maharashtra, Uttar Pradesh, Tamil Nadu, Karnataka, Gujarat and Andhra Pradesh

considering total sugar production and area under sugarcane.

In India sugar production is undertaken practically throughout the country and there are

well-established factories in 18 out of 26 States. There are approx. 575 sugar mills

operating in India.



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Sugar production has emerged as one of the major agro industries in the rural areas of

India during the last few decades particularly in the irrigated region. Sugar production in

Gujarat is substantial since many of the factories are cooperatives and the producer

receives full benefit from sugar production.

Gujarat is one of the leading producers of the sugarcane. The southern region of Gujarat is

the biggest region of sugarcane production in Gujarat as it has good irrigation facility due

to presence of larger rivers like Narmada, Tapi, Mahi etc.

Table 4.6: Sugarcane Productions in Gujarat

Year Area (in ’00 Hectare)

Production (in ’00 MT)

Yield (in kg/Hectare)

2000 - 01 1777 12695 7142

2001 - 02 1758 12465 7092

2002 - 03 2029 14071 6934

2003 - 04 1764 12669 7182

2004 - 05 1967 14570 7407

Source: Directorate of Agriculture, Gujarat

The southern region of Gujarat also caters many sugar producing factories due to good

production of the sugarcane in this region. Out of 22 sugar factories in Gujarat, 19

factories are in South Gujarat and 3 are in Saurashtra. These factories are good source of

generating bagasse, which is generally transported to the Nagpur, Aurangabad.

4.4.1 Procurement of Bagasse

Bagasse can be purchased either from contractor or sugar mandi and its available either in

bails or loose. The average price range of the bagasse is 475 – 500 Rs. /ton. Usually sugar

factories crush sugarcane between October to April and hence bagasse is available for six

months only in a year. Nearly 421 Kilo tons per annum of bagasse is available from the

sugar factories of South Gujarat alone. RDPL will require a maximum of 60,000 MTPA of

bagasse.

Bagasse will be available in ample quantity from these factories to RDPL. RDPL has to

transport the bagasse from the south Gujarat to Surendranagar, the selected location for

MDF manufacturing facility. Due to good road network, transportation can be handled

efficiently and economically.

The survey of the sugar producing 15 factories in south Gujarat is summarized in Appendix

J.



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4.4.2 Contingency Plan for Raw Material Sourcing

The success of the project will depend on the availability of quality cotton stalks at

economical prices, chipping of stalks, their storage and transportation. Also it is very

important to explore better ways of storing the same (as cotton stalk is available only

during the harvest season) to sustain production of MDF on a continuous basis. It makes

immense sense to chalk out a strategy to procure or ensure the supply of raw material that

can substitute cotton stalk in case there is a scarcity for the latter or if the landed price of

stalk becomes unaffordable.

The client has plans to grow ailanthus excelsa or other kind of soft wood tree near the

factory premises in a vast expanse of land so that the wood from the same can be used as

raw material for MDF. Ideally 850 to 870 saplings can be planted per acre of land and will

be ready for felling in a span of 4 years. The typical yield is 100 tons per hectare. On an

average, 1.55 tons of the tree is needed to produce 1 cubic metre of MDF.



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5 Technological Aspects

5.1 Manufacturing Process of Fibre Board

Three major steps involved in the manufacturing of MDF are fiberising, fibre mat formation

and board pressing. MDF can be processed from a variety of raw materials such as agro

residues and annuals. After necessary cleaning and preparatory process, the raw material

is cut into small sizes or chips. These are screened and graded in sizes. Chips larger than

the pre-determined size are recycled and very small pieces are rejected.

The distinct operations involved in the MDF manufacturing are:

a. Raw material handling

b. Chip Preparation

c. Fibre Refining& Drying

d. Fibre Resin Blending

e. Forming Station

f. Hot Pressing

g. Board Finishing

5.1.1 Raw material Handling

Raw material consists of various types of cotton stalks (removed from the fields in the form

of chips). The mobile chippers have been chosen to be used either in the field or at the

factory. The chips are stored in piles and transported by front loader to the chip reclaim

hopper.

5.1.2 Chip Preparation

The chip reclaim hopper will be equipped with a multiple screw conveyor system that

feeds the chips for classification to the rolling screen. The screen has three decks. In the

first one, oversized chips are separated. From, deck two, the accepted material is

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conveyed by a belt conveyor to a chip washing system, which pumps the chips to the

digester feed bin. Unwanted fine material is taken out from the bottom of the screen and

can be used as fuel in boilers.

5.1.3 Refining of Fibre and Drying

The digester feed bin is equipped with a vibrator feeder and controls to maintain uniform

chip flow from the silos. Chips are fed from these silos to the digester at a controlled rate.

The steam digester operates on a controlled but adjustable steam pressure that cooks

(steam condition) the chips according to the adjusted time and then gets transported to

the refiner. In the refiner, the chips will be reduced to fibres. The disc type refiner will

have changeable grinding plates and adjustable disc clearance to provide the degree of

fiberisation required. From the digester-refining unit, the fibre is discharged under steam

pressure into the blow line for transportation either into the fibre drier or the start up

fibre dump.

During normal operation, the-fibre drying steam receives the fibre and steam from the

refiner blow line and dries the fibre to approximately 5% moisture content (bone dry). This

drier is of the flash tube type and does not employ a rotating drum. Large volumes of air

are blown through the heater section and are heated to a predetermined, controllable

temperature. Fibre and steam from the refiner are injected directly into this stream of

heated air at the inlet- of the flash tube drier. Operating on the principle of air suspension

drying, the fibre drier thus ensures that the fibre is maintained in suspension in a stream of

heated air until the final moisture level is reached. After the flash tube, the fibre and

steam are separated in the cyclone, with the fibre passing through a rotary valve airlock at

the bottom of the cyclone to a reversible out feed belt. The moisture vapor is extracted

from the cyclone with the transporting air and is discharged directly to atmosphere.

The reversible out feed conveyor transports the fibre either to the weigh belt conveyor or,

when reversed to a fire dump. This conveyor is reversed when fire has been detected in

the drier or other systems upstream of the fibre bin of the mat former. Fire detection and

control of the direction of this conveyor is fully automatic, but manual override is also

provided.

The weigh belt conveyor totalizes the fibre flow and also controls the resin and wax



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addition to the fibre. From the weigh scale the fibre is dropped into the fibre bin of the

mat former. The fibre bin acts as a buffer and storage device between the fibre

preparation and the forming and pressing line.

5.1.4 Fibre Resin Blending

Resin, hardener and other selected chemicals are automatically blended in electronically

equipped mixing units and then metered into the fibres in the blow pipe line.

5.1.5 Forming Station

Fibre is metered at a controlled rate out of the bin to the single forming head. The former

lays a continuous fibre mat down out to a wire screen. After the forming head a scalper

shaves off the layer of the fibre mat.

5.1.6 Hot Pressing

In the hydraulic hot press 12 mats are pressed simultaneously. 12 caul mats are stacked in

an elevating loading rack in front of the press and then simultaneously charged .into the

press. After the pressing they are discharged into a corresponding unloading rack behind

the press, while the following 12 mats are charged into the press.

The hydraulic hot press is of frame type and heated by means of steam. Pressing time,

pressure and temperature are automatically controlled according to a programme to be

pressed with regards to the actual type of board.

5.1.7 Trimming and Sanding

Unloaded boards are passing a thickness control on the roller conveyor in front of the

cooling wheel. The boards are shortly stored in the cooling wheel before they will be

trimmed and cut to size. After the trim saws the boards are automatically stacked.

From the stacker, the boards are taken into the intermediate storage to complete the

curing and equalizing of the board.



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5.2 Manufacturing Process of Prelam Boards:

5.2.1 Impregnation Section

In impregnation line, the base paper and balancing paper to be used for pre-lamination of

board are impregnated with MF resin. The roll of paper is un winded & fed into

impregnator, where resin of required grams is applied through rollers. The paper usually

weighs within a range between 80 to 140 gsm.

Normally the resin pickup is 100% of the weight of paper. The impregnation paper is then

dried, cooled & stored in air-conditioned room and then send for pre lamination section to

apply on MDF/particle board.

5.2.2 Short cycle Laminating Process

In short cycle laminating process, impregnated paper fix on the raw MDF board, with the

help of press. Heat and pressure play major role in this process.

The automatic board pushing device or handling system supported with hydraulic lifting

platform or scissor lift feeds raw MDF/Particle boards into the short cycle press device.

Raw board brushing machine cleans the surface before board enters into the short cycle

press.

Melamine impregnated paper is overlapped manually on to the raw board with best efforts.

Loading conveyor and board centering conveyor adjust the board inside the machine with

proper alignment of the board before pressing process. The next stage is the hot pressing

of paper applied raw board inside the press device. Surface of the board is applied with a

pressure of 30 +/- 2 Kg / cm2. The heat required for pressing cycle is 180 +/- 5 degrees

Celsius. Pressing cycle takes around 60 seconds for pressing one board.

The prepared, terms also as “cooked”, prelam board comes out from press with help of

unloading device. Roller conveyor, connecting the unloading device and stalking station,

brings the boards on the stalking station for natural cooling. Whole short cycle process runs

through the electrical control panel that is a PLC (programmable logical control) unit.

5.3 Manufacturing process of Laminated Flooring

The manufacturing process of laminate flooring starts from the prelam manufacturing

section. Short cycle laminate press prepares pre laminated MDF/HDF boards with heat and



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pressure application on melamine impregnated papers and base board assembly. Prelam

boards prepared out of this process are considered as raw material for laminate flooring

manufacturing process.

Raw material dimensions required for our process will be of W 1220 X L 2440 X T 6-10 mm.

Core material can be MDF/HDF or particle board with laminated surface by melamine

impregnated paper. Warp of panels can be considered within a tolerance limit of 2 mm /m

(max).

5.3.1 Cutting of pre laminated raw boards

Pre laminated boards are fed in the cutting line with two sliding table saws for the manual

crosscutting of boards in two pieces. These boards are stocked for stress release before

sending to manual length cutting line. Cross cut boards on the sliding table saw are

converted into individual planks. These planks are manually destacking and stocked for

profiling process. The dimensions of finished work pieces are 190 X 1208 mm.

5.3.2 Profiling of Planks

The cut panels are then manually fed into the profiling machine. This machine basically

turns groove or profile over the plank edges, both crosswise and lengthwise. Profiling

operation is meant with patented/non patented click profile tooling. This click profile

tooling creates profile first longitudinally and then crosswise on a single DET machine. The

profiled surface is then applied with PU coating layer to make the surface moisture

resistant. Profiled planks are considered as the ready to feet flooring products. These

planks are then moved for packing and storage.

5.4 Location Aspects

It is very important to select an appropriate location for any project and particularly for

this project owing to the following factors.

• In order to ensure continuous supply of raw materials (E.g: cotton stalk)

• Availability of man power (local availability of labour at affordable costs)



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• Uninterruptible supply of electricity at cheaper rates as the process is energy-

intensive.

• Hassle-free supply of water and other utilities.

• To tap any incentives, if any, from the government that can help to improve the

bottom line of the business.

The selected location for setting up project is Navalgarh area of Dhangadhra Taluka in

Surendranagar district. The following parameters are being taken into consideration.

5.4.1 Raw Material Availability

The raw material is very crucial part of the project. As project is based on the agro waste,

the location must consider the different aspects of the agricultural product used as a raw

material. The selected location Navalgarh in Surendranagar district is surrounded by cotton

producing areas. As the project is planned based on the use of cotton stalk as a raw

material, the proximity of the cotton-producing region would help to reduce the

transportation cost of the raw material, improve flexibility in procuring raw material and

to control the price of raw material. The cotton stalk production quantity is higher in the

region than that is required for the project.

RDPL is also considering the bagasse as another option as raw material for the project. This

is abundantly available in south Gujarat. At present, bagasse is being shipped out of the

state to Maharashtra, etc. The distance from Valsad to the proposed site is 340 km by road

and the connectivity is very good. Also the 6 laning of the N.H. 8 from Baroda to Surat

(ongoing) and the extension of N.E.1 (Expressway) from Baroda till Mumbai will drastically

reduce the transportation bottlenecks.

RDPL is planning to import the raw material – HDF board – for the first phase of the

project. The Kandla port can act as the hub for import of the same. Connectivity to

Surendranagar from the port is reasonably good. The proposed infrastructure development

plans mooted for the state of Gujarat will further improve/streamline the transportation

network in the region.



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5.4.2 Manpower Availability

Problems related to obtaining trained manpower are not anticipated as RDPL is already

into manufacturing similar products and they have well-established factories functioning

smoothly in Gujarat. Re-shuffling of some staff from existing plants in order take care of

the commissioning activities of the new plant is envisaged. Also the proximity to

Ahmedabad city will help RDPL to recruit technically qualified staff. Other labour staffs

are also available in the region easily.

5.4.3 Strategic Location

The project is expected to export more than 60 % of their production. The proximity of

port will provide the easy accessibility to the international market. Surendranagar is also

connected with all the major cities of the Gujarat – Ahmedabad, Surat, and Rajkot by state

highways. N.H.8 connects Ahmedabad to Mumbai via Vadodara, Surat and Valsad.

5.4.4 Other Advantages

• Dhrangadhra in Surendranagar is well connected with the major cities of the state –

Ahmedabad, Rajkot, Kandla through state highways.

• The nearest port location is Navlakhi which is at a distance of 100 kms. Kandla/

Mundra ports are only 250 km away from the proposed site, which is well-connected

with Surendranagar through state highway.

• Surendranagar has the highest cotton production in the state and is also surrounded

by the other major cotton producing districts like Rajkot, Patan, Bhavnagar and

Ahmedabad.

• Proximity to developed towns like Dhrangadhra, Wadhwan & Halvad.

• Water is available at depth of 650 – 700 ft and can be easily accessible through

bore wells

• Selected location is within Industrial Environment of DCW (Dhrangadhra Chemical

Works, 1927) region.

• Availability of GEB power supply with 66 KVA and 220 KVA substations.



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• Qualified manpower available from Surendranagar and nearby cities like

Ahmedabad.

• Well-established infrastructure of Dhrangadhra and Wadhwan cities

• Established educational infrastructure of Wadhwan city that boasts of engineering

college, polytechnic, management schools, medical school, Pharmacy College, etc.

5.5 Machinery Details

All the major plant and machinery required for the production of MDF/HDF will be

imported from abroad. The following techno-economic parameters have been taken into

consideration while deciding the overall plant design and equipment suppliers.

Figure 5.1: Techno Economic parameter for machinery selection

Technical Contemporariness

Proven

Modularity

Scalability

Energy Efficiency

Commercial Cost Effectiveness

After Sales Service

Spare Parts Availability

Quality Certification of products

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The detailed list of major plant and machinery is mentioned in below with its supplier’s

name.

Table 5.1: List of Imported Machinery

Description of Machines Supplier Name

MDF + Refiner + Sanding line Harbin Lingzhi Mechanical & Electrical

Technology Co. Ltd, PRC

Texture Press plates Sesa Press Plates,Italy

Matt Press plates Sesa Press Plates, Italy

Cushion pads Marathon Belting U.K.

Flooring line Holzbearbeitngssysteme AG, Germany

Impregnation line Longoni , Shanghai, PRC

Short Cycle Line Sufoma, China (PRC)

Table 5.2: List of Indigenous Machinery


Steam boiler-6 TPH Cheema Boiler

Thermic Fluid Heater – 2500U * 3 Isotex Corporation

Mobile chippers Surya energy

Compressor with Dryer-Oil free 195 CFM Ingersoll-rand

Short Cycle Line Master Handlers

Resin Plant Bhagsons

Tooling-diamond Leitz

Other plant and Machinery

Table 5.3: List of other plant and machinery


Generator set [second hand machinery] Zodiac Genset

Box packing Machinery Manilal Pack Plast Pvt. Ltd.

Air conditioning Hitachi

Fork lifts Godrej

Trucks TATA

Cooling towers Ganara Engineers Pvt. Ltd

RO Plant Indian Ion Exchange

ETP Enviroclean solution Pvt Ltd

EOT crane – 5 tones Safex Equipment Pvt Ltd.

Laboratory Equipments Gujarat test house

Cabling, lighting, panel boards & fittings Electrical

Chimney Darshini

Weighing machines with capacity 20 tones Avery India

Motors, Valves, Pipes & insulation, Exhaust, electrics & Automation Local supply



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RDPL has finalized foreign machinery manufacturers and suppliers for major machineries

required for the plant. Brief information regarding selected machinery supplier of major

machinery is mentioned below.

Harbin Lingzhi Mechanical & Electrical Technology Co. Ltd, China

The MDF plant with refiner and sanding line will be procured from the Harbin Lingzhi

Mechanical & Electrical Technology Co. Ltd, China (hereafter referred to as Harbin).

Harbin has experience of more than 12 years in supplying the wood-based and non-wood

panel machinery and it is the only company in China capable of supplying the technology

that is suited for MDF production from cotton stalk. In cooperation with design institutes

and universities, Harbin has obtained patents for more than ten products including serial

glue blender, dryer, etc. Harbin can supply machineries (for MDF production line) with

capacities ranging from 15,000 to 80,000 m3/annum.

The company was formed by Mr. Wang Xiaoling. Mr. XIaoling was student of Northeast

Forestry University, China and worked as Director of the design department of Harbin

Forestry Machine Factory from 1982 to 1994. With his immense knowledge about

machineries, he compiled a book named as “Panel Machine & Equipment” published by

Northeast Forestry University. He also served Harbin Xinglin Science & Technology

Development Company in 1994 for one year as Vice General Manager. In 1995, Mr. Wang

Xiaoling set up Harbin Lingzhi Mechanical and Electrical Technology Co. Ltd. and he holds

the post of General Manager.

Mr. Wang Xiaoling is engaged in the design and manufacture of panel machinery for more

than 20 years. He has rich work experience and has made remarkable contribution in the

field. He was an active participant in the design of press, hot press, loader & un loader, air

forming and heavy-duty machinery.

The company has good track record of client and had supplied more than thirty complete

set of machinery of particleboard, MDF, Short cycle laminate press, moulding press line

etc. in various Asian countries including Pakistan, Russia, Sri Lanka and Vietnam. Harbin

had successfully carried out the joint stock system transformation with Harbin Forestry

Machinery Factory, power-and-power union, and also set up the China Foma Group & -

Harbin Foma Machinery & Equipment Manufacturer Co., Ltd. Harbin holds Harbin Lingyu

Economy & Trade Co., Ltd., which is considered as the independent import-export trade



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power. It has also stakes in Shandong Hongfu Wooden Industry and Jiangsu Xinjinjiang

Wooden Industry.

Holzbearbeitngssysteme AG

The Homag is one of the leading engineering groups of the Germany. The group has

experience of more than 45 years in consulting and software system development,

engineering and installation of complex production line, and supplying technologically

leading edge products in both high end and standard segment along the entire customer

supply chain. RDPL is planning to procure the flooring line from Holzbearbeitngssysteme

AG.

Production facility of the group is present in Europe, Asia and America with worldwide

sales facility and after sales service network.

The homage group has supplied plants for the panel processing woodworking and furniture

industry, complete plants for parquet production, complete plants for door production.

Looking at the experience of the machinery supplier in the machine manufacturing, their

worldwide present, and their successful track record, both the machinery supplier seems

to be capable of supplying machinery of required capacity.

In short, the major machineries and equipment will be procured from proven vendors who

had set up similar plants in many parts of the world. The track record and contemporary

designs will further ensure quality and reliability of the systems. M/s Homag has a regional

office in Mumbai which will ensure a hassle-free engineering and after sales support.

Master Handlers Pvt. Ltd.

Master Handlers Pvt. Ltd is one of the leading manufacturers of paper Impregnation and

Lamination machinery, Material handling systems and Industrial Component Cleaning

solutions.

The manufacturing facility, situated at Pune, has sufficient resources to perform electric

engineering and programming task. The company entered in technical collaboration with

Always Engineering , U.K., Stewart-Gill Conveyers, U.K. (for overhead conveyors), Tochhio

(for Paper Impregnation lines), M/s Zippel (for Industrial Component Cleaning Solution) to

enhance its technical capabilities in respective fields. MHPL had also set up Software



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Company in 1991 named as Autovue Electronics and Automation Company in 1994 named as

Automech Handlers.

MHPL provides complete product technology, training of personnel, installation and start

up of production and their expertise in providing customised product and service is visible

from its strong client base, which includes TATA, Honda, Siemens, Escort, Bajaj, Delphi,

Hundai, Kirby, Alucon, Escorts etc.

In Paper impregnation line and lamination machinery, MHPL manufacture Short cycle

lamination line Paper impregnation line High pressure laminate press line Laminate

furniture machines – paper foil/ veneer press , post forming machine, Lab press & flow

press

MHPL Looking at the client list for paper impregnation and lamination machinery, RDPL’s

decision to procure short cycle press from MHPL seems appropriate. The client list for

paper impregnation and lamination of MHPL is mentioned below:

• Century

• Formica

• Greenply

• Merino

• Nepal board

• Space Wood Furnishers Pvt. Ltd.

• Egyptial industrial flooring co.

• Pelit Arsian

• Bloom

• Isofam

• Neo-hy

• ASD Orman

• Samrat



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6 Strategic Analysis of the Firm

6.1 SWOT Analysis

Figure 6.1: SWOT Analysis

Strengths

• Proven Presence in Laminates

Business

• Brand Name

• Robust Network of Dealers

Weaknesses

• Novice in MDF Manufacturing

Opportunities

• Construction Boom

• Proliferation of Modular Furniture

• Rising Income Levels

• Rapid Urbanisation

• Forest Conservation

• Import Substitution

Threats

• Presence of Global Players& New

Entrants

• Dumping from Abroad

• Health concerns on resins use

• New substitutes

Strengths

• Well established presence in laminates business as well as strong brand value are

anticipated to be the key factors for development of domestic as well as export market.

• Moreover, the product will penetrate deep into the market, in the wake of strong

network of RDPL dealers throughout the country.

Opportunities

• Macro-economic factors like huge investments in construction sector have contributed to

growth in demand of modular furniture.



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• Higher spending power of middle class population in the view of rapid growth in

economy, urbanization.

• Conservation of forests due to Government policies to protect forests will increase

dependency on agro waste based products as a substitution to raw material, which will

aid MDF in achieving an edge over competing products like plywood and particleboard.

Weaknesses

• MDF industry is dominated by presence of large players in the market. Hence, a strong

marketing strategy will be required by the company. However, the robust network of

distribution channels that RDPL boasts of will help to penetrate the market.

Threats

• The negative impacts of using resins on human health, as well as probable Government

regulations of shifting towards environment friendly manufacturing technology can pose

a threat to the industry. RDPL is planning to replace UF resin with CARDENOL, which is a

bio resin that is environmentally-friendly.

• The product also faces possibility of high level of substitution. Globally, large varieties

of products (wood – plastic composites, steel framing, OSL/Parallam) are at a developing

stage and have recently been introduced in the market.

Figure 6.2: Wood Products & competitors life cycles



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• Dumping from abroad as well as government regulations of relaxing import duties can

also affect the industry.

6.2 Five-Force Model Analysis

The five competitive forces acting on the external business environment is depicted below:

Figure 6.3: Five Force Model

Competitive Rivalry

MDF industry is not matured in India but it is poised for a growth as a result of increased

demand for engineered woods for the construction of furniture and modular office space.

At present, India has only two full-fledged manufacturing facilities for MDF, which meets

nearly 20% of the domestic demand. The rest is being met by imports. Plans are afoot by

Bajaj Biotec and RDPL to set up manufacturing facilities in the near term to tap the

lucrative market for MDF which is growing at 20-25% p.a. The new capacity additions by

these firms will be absorbed easily by the market that suggests a low intensity of rivalry.



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Entry Barrier

The industry per se is both capital intensive and labour intensive. Also most of the critical

equipments like reformer (digester) are to be imported from Germany or China. The

success in marketing will depend a lot on the supply chain capabilities and extensive

dealer networks in different parts of the country. In this respect, the industry segment can

assumed to be the one with HIGH entry barrier.

The Threat of New Entrants

This is assumed to be “Low to Medium” due to high entry barrier and other points

mentioned in the above paragraph.

The Threat of Substitutes

This is profoundly HIGH as both wood based and non-wood based substitutes are easily

available in the market that can be used for a variety of purposes. Hence the consumer’s

choice will depend on factors like price, easy availability, ease of use, end use, etc.

Bargaining Power of Buyers

The bargaining power of buyers will be Medium for branded MDF products. However for

unbranded products, it will be high as the consumer will have ample choices in the market

to choose from.

Bargaining Power of Suppliers

As far as the raw material issue is concerned, the firm plans to use cotton stalks (the

remnant of cotton plant after the harvest of cotton) for the production of MDF. At present,

cotton stalk is burnt in the farm itself and being utilised as manure. The demand for the

same will boost the price for stalks, however it is not assumed to be high or prohibitive.

The idea is to create win-win for the farmers as well as for the manufacturers.

Alternatively, RDPL will engage in developing plantation so that the wood can replace the

cotton stalks. This will also help in curbing the bargaining power of cotton stalk suppliers

and also in mitigating any procurement problems that may arise with regard to cotton

stalks.



81


Bagasse is also being thought of as an alternative raw material for the above project,

which is abundantly available in South Gujarat. As mentioned earlier in the report, it is

[presently being sent out to the neighbouring states.



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7 Marketing Strategy

7.1 Present Marketing Set Up

RDPL has well established domestic and international marketing network. The head office

of the RDPL is situated at Ahmedabad in proximity to their manufacturing facilities. RDPL

cover all the states of the India through their marketing offices established in Punjab,

Delhi, Rajasthan, Gujarat, Madhya Pradesh, Maharashtra, Karnataka, Tamil Nadu, Andhra

Pradesh, Chhatishgarh, Jharkhand, Bihar, Uttar Pradesh, and West Bengal, and Assam. The

hierarchy of the of the department mention in figure given below:

Figure 7.1: Present Marketing Set up

The network comprise of about 50 sales executives, 4 Area sales managers, 7 Branch

managers, one project manager and 47 distribution partners in marketing channel.

VP Marketing

Zonal Sales Manager

Sales Manager Project Manager Branch Manager

Area Sales Manager

Sales Executive



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Domestic Market set up:

RDPL has appointed direct distributors in many states, which are major markets of wood

base panel in India. These states are Gujarat, Rajasthan, Punjab, Bihar, Jharkhand, West

Bengal, Madhya Pradesh, Assam, Karnataka, Maharashtra, Andhra Pradesh, Uttaranchal,

Uttar Pradesh, Chhattisgarh, Kerala, Delhi and Tamilnadu. On an average every state has 2

to 3 distributors appointed. These distributors are the sole contact point for the client and

they are responsible to develop further dealers network in their region. The exclusive office is

also operated in Mumbai in name of the client, which is directly controlled by the client.

The total Indian market is clearly divided between different zones. The different zones are

monitored by the zonal sales manager, who reports directly to the Vice President of

Marketing. The zone structure is mentioned in the table given below:

Table 7.1: The present marketing zones of RDPL in India

ZONE STATES CITIES

Ahmedabad

Rajkot

Surat

Baroda

Gujarat

Mehsana

Mumbai

Pune

Nagpur Maharashtra

Nasik

MP Indore

ZONE 1

(Western India)

Chhattisgarh Raipur

Tamilnadu & Kerala Chennai

Karnataka Bangalore ZONE 2

(Southern India) Andhra Pradesh Hyderabad

Kolkata West Bengal

Siliguri

Ranchi Jharkhand

Jamshedpur

Assam Guwahati

ZONE 3

(Eastern India)

Bihar Patna



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ZONE STATES CITIES

Jaipur Rajasthan

Udaipur

Delhi Delhi

Chandigarh Chandigarh

Ludhiana Punjab

Bhatinda

Uttaranchal Dehradun

Lucknow

ZONE 4

(Northern India)

Uttar Pradesh Agra

Source: RDPL

International Market:

The long-term relationship, the client enjoys with many dealers around the globe,

especially in Europe can be leveraged further to export the products from India. In this

respect, the cost-competitiveness and the established brand equity will play a vital role.

RDPL is envisaged to export nearly 60% of the product to favourable market destinations

around the globe. The international marketing network of the RDPL spread in 34 countries

including Canada, USA, Venezuela, Europe, Far East countries, Australia, and Gulf

countries with the strong brand name “Rushil Décor premium laminate”.

Table 7.2: The present marketing network of RDPL in world

Region of world Country of market presence

Hong Kong

China

Malaysia

Phillipines

Singapore

Taiwan

Far East

Thailand

Qatar

S.Arabia

Kuwait

Middle East

U.A.E.



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Region of world Country of market presence

Yemen

Bahrain

Jordan

Egypt

Israel

Mexico North America

U.S.A.

Venezuela

Peru South America

Columbia

Australia Australia

Source: RDPL

7.2 Formulation of Marketing Strategy

MDF as a product has more than 15 years of presence in Indian market; the major chunk

(whopping 80-85%) is being imported. There are only two players who manufacture MDF

domestically, which is a potential substitute/supplement for plywood, particle boards,

veneer, etc. Hence the obvious questions that the firm should address are; what is MDF?

What is the ideal set of applications? And its advantages vis-à-vis plywood, veneer and

similar substitutes, etc.

The specific choice will hinge upon an optimum combination of the following aspects such

as price discounts, product proliferation, product innovation, improved services, cost

reduction, promotion, etc.

7.2.1 Product Pricing

It can adopt two different ways. The former is based on differentiation, which is, offering

high quality MDF compared to that of the market leaders at a price commanding premium.

However looking at the market dynamics prevailing in this segment, adopting a high-value

strategy based on slightly lower price than the competitor is more likely to succeed. Also

the lower cost of production on account of utilising the cheaply available cotton stalk as

the feedstock will help the firm to position its range of products competitively in the

market.



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7.2.2 Product Innovation

RDPL is the first of its kind in India and the first company to manufacture MDF from cotton

stalks. Trials had been conducted in India and in Germany to produce MDF from cotton

stalks and the quality of fibres were found to be very good. Trial reports and trial samples

are available with the company and as per the report, by adding 20% of wood; the finished

product (MDF) can even match the EN standards.

7.2.3 Product Proliferation

The thrust is to offer large number of options to the buyer in terms of plate thickness,

finish, laminated versions, etc. The typical thickness of MDF ranges from 3 to 35 mm (6, 12

and 18mm being more popular in India). The surface finish could be of plain, grit or

embossed. The embossed panel could be used directly for up market doors and partitions.

RDPL already imports high quality paper laminates to make prelam, etc. It can be

extended to MDF also.

7.2.4 Distribution Network

RDPL has a significant presence in the laminate business in India with offices and sales

centres spread across the country. But these are mainly concentrated in the urban cities.

With the income levels in suburbs and semi-urban places going up, it is worth while to try

smaller towns and townships with a critical mass. However the bulk of revenue will come

from metros and tier1 cities. Export options are also being thought of by RDPL as a risk-

minimisation strategy (natural hedge against business cycles).

7.2.5 Product Promotion

An important component in the famous 4Ps, the promotion will entail the following things.

• Obtain ISI mark and other quality certification.

• Obtain certifications from leading architects, furniture makers, etc.

• Endorsement by professionals and celebrities.

• Special incentives for bulk orders in the form of extended warranty, gift vouchers, etc.



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Product attributes like resistance to moisture, insects& termites, machinability, life cycle,

etc should be highlighted to entice customers.

7.2.6 Business Intelligence

The company’s market research team should be geared to continuously monitor customer

preferences, international trends, company performance, industry status, etc. The

strategy should be evolving based on these market pulses.

7.2.7 Product Mix

Plant and machinery being procured by RDPL is capable to produce the MDF board with the

varied thickness of 6 mm to 18 mm. This provides flexibility to manufacture the product as

per the demand in market. RDPL can also sell MDF and HDF boards directly, without

converting it into prelam and laminated flooring, in a market that depend upon the several

conditions. At present RDPL planning to manufacture the HDF laminated flooring and

Prelam MDF board with the thickness of 12mm, 16mm, and 18mm. All these products have

the highest market demand in panel board market.

RDPL can also enter in modular furniture manufacturing in future, which will help them to

move up the value chain and cater directly to end-product consumers.



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8 Financial Modelling & Analysis

8.1 Estimation of Capital Cost

The estimation of capital investments have been made based on information collected

from the following sources –

• Plant and Machineries as per the data provided by the client

• Cost of Indigenous component of the project has been worked out on the basis of :

o Cross-checking the cost with cost considered in similar projects

o Data obtained from Rushil Decore Pvt. Ltd.

o Cost information available with IMMs’ database

8.1.1 Land and Land development

RDPL has purchased 67 acre land worth of Rs. 85 Lakh at Navalgarh in Dhangadra taluka of

Surendranagar district. As per the condition of the land, client has estimated land

development cost is Rs.50 Lakh.

8.1.2 Building and Civil Construction

The Estimated break up of building and civil construction is provided in table given below:

Table 8.1: Building and Civil Work

Sr. No. Particular Quantity Unit

1 Guard Room (3*3) 9 M2

2 Scale Station

3 Canteen Room (8*23) 184 M2

4 Shed bicycle (6*30) 180 M2

5 Office (3*27*10) 810 M3

6 Electrical Station (10*26) 260 M2

7 Product Store (15*126) 1890 M2

8 Production area (30*126) 3780 M2

9 Refiner Line (3*10*15) 450 M3

11 Wood Yard (95*151) 14345 M2

12 Fuel Station (20*10) 200 M2

13 Boiler Room (18*30) 540 M2

14 General Storage (18*48) 864 M2

15 Pool 300 M3

16 Water Tower 50 M3

17 Waste Water Treatment 200 M3



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The cost of building and civil works require for the proposed project is Rs. 450 Lakh as per

the architect’s estimation.

8.1.3 Plant and machinery cost

Imported

RDPL is importing critical machineries for the project. Client has finalised supplier of all

the major machinery required for the project. The detail of the machinery is provided in

table given below:

Table 8.2: List of imported Machinery

(Rs. In lakh)

Description of Machines Supplier Name phase 1 phase 2 Total

MDF + Refiner + Sanding line Kunming Woodbased Pond

Machine Plant, Kunming 947.52 947.52

Texture Press plates Sesa Press Plates,Italy 13.37 0.00 13.37

Matt Press plates Sesa Press Plates, Italy 11.57 0.00 11.57

Cushion pads Marathon Belting U.K. 1.56 0.00 1.56

Flooring line V-Hold, China Supply 116.95 0.00 116.95

Impregnation line Nantong New Century,

Sanghai 123.39 0.00 123.39

Short Cycle Line Yalk Ltd. 0.00 81.41 81.41

Total 266.84 1028.93 1295.76

Indigenous

The list of Indigenous equipments along with their supplier and cost estimation is given in

the table below.

Table 8.3: List of Indigenous machinery

(Rs. In lakh)

Description of Machines Supplier Name phase 1 phase 2 Final

Cost

Steam boiler-6 TPH Cheema Boiler 46.72 46.72

Thermic Fluid Heater – 2500U * 3 Isotex

Corportation 76.21 0.00 76.21

Mobile chippers Surya energy 133.37 133.37

Compressor with Dryer-Oil free 195 CFM Ingersoll-rand 13.08 0.00 13.08

Short Cycle Line Yalk Ltd. 140.15 0.00 140.15

Resin Plant Bhagsons 20.00 72.59 92.59

Tooling-dimond Leitz 36.82 0.00 36.82

Total 286.27 252.68 538.95



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Other plant and Machinery

The list of other machinery required for utility and general purpose is mention below along

with their supplier name and cost estimation.

Table 8.4: list of other plant and machinery

(Rs. In lakh)

Description of Machines Supplier Name phase

1

phase

2

Final

Cost

Generator set [second hand machinery] Zodiac Genset 20.00 82.82 102.82

Box packing Machinery 30.00 0.00 30.00

Air conditioning 20.00 0.00 20.00

Fork lifts Godrej 23.60 11.80 35.41

Trucks TATA 10.00 10.00 20.00

Cooling towers Ganara Engineers

Pvt. Ltd 2.96 2.96

RO Plant Indian Ion Exchange 20.00 20.00

ETP 50.00 50.00

EOT crane – 5 tones 6.67 13.33 20.00

Erection & commissioning 10.00 90.00 100.00

Laboratory Equipments 10.00 10.00

Development charges, deposit, line

charges, feeder and transformer charges

& 10% application charges

Electrical 200.00 50.00 250.00

Cabling, lighting, panel boards & fittings Electrical 50.00 50.00 100.00

Chimney Drshini 4.94 0.00 4.94

Weighing machines with capacity 20

tones Avery India 25.00 24.36 49.36

Motors, Valves, Pipes & insulation,

Exhaust, electrics & Automation Local supply 50.00 100.00 150.00

Fabrication work 80.00 320.00 400.00

Total 540.21 825.27 1365.48

8.1.4 Preoperative and Preliminary (POP) cost

Preliminary & Preoperative Costs include all preliminary and pre-operative costs before

commencement of production. The break of the POP cost is given below:



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Table 8.5: Preoperative and Preliminary cost break up

(Rs. In lakh)

Particulars Phase 1 Phase 2 Legal expenses 5.00 3.00 Interest During construction 22.75 49.00 Start up expenses 7.25 28.00 Upfront/scrutiny fees 5.00 5.00 Total 40.00 85.00

8.1.5 Contingency

The contingency provision at roughly 10% works out to Rs.160 Lakhs in phase 1 and Rs. 234

Lakhs in phase 2.

8.1.6 Margin Money

Estimates of working capital requirements have been worked out on the basis of

expenditure involving cash liabilities and other recurring requirements considering the

norms mentioned below:

Table 8.6: Inventory norms

Particulars Phase 1 Phase 2

Raw Material 1.5 M 6 M

Chemicals 1 M 3 M

Work in Progress 0.25 M 0.5 M

Finished Goods 0.5 M 1.5 M

Receivable (Debtors) 0.25 M 0.5 M

Sundry Creditors 0.5 M 0.25 M

The available bank finance for working capital has been considered difference between the

net working capital and margin money, while margin money for working capital works out

to Rs. 100 Lakhs in phase 1 and Rs. 180 Lakhs in phase 2.

8.1.7 Total Project Cost

The total project cost for this project has been estimated as given below:



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Table 8.7: Total Cost of Project

(Rs. In lakh)

Sr. No. Particulars Phase 1 Phase 2 Total

1 Land 85 0 85 2 Land Development 15 35 50 3 Civil & structural cost 350 100 450 Main plant & Equipment 4 Imported 267 1029 1296 5 Indigenous 286 253 539 6 Other Equipments/Utilities 540 825 1365 7 Miscellaneous Fixed Assets 15 15 30 8 Pre Operative & Preliminary Expense 40 85 125 9 Contingency @ 10 % 160 234 394 Total Capital Cost of Project 1758 2576 4334 10 Margin money for working capital 100 180 280

Total Cost of Project 1858 2756 4614

8.2 Means of Finance

Considering Debt Equity Ratio of 2.30:1, the means of finance for the project has been

proposed as shown in the table below:

Table 8.8: Means of finance

(Rs. In lakh)

Sr. No. Particulars Phase 1 Phase 2 Total

1 Promoters' Contribution

-Share Capital 200 300 500

-Pref. Share Capital 0 0 0

-Reserves & Surplus 0 0 0

-Internal Cash Accruals 400 500 900

2 Subsidy 0 0 0

3 Term Loans

-FCL 0 0 0

-T/L 0 0 0

-Rupee Loan 1200 1800 3000

-NCD 0 0 0

4 Unpaid Suppliers 0 0 0

5 Unsecured Loans/Deposits 58 156 214

TOTAL 1858 2756 4614



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8.3 Assumptions

The important basis & assumptions, which are considered for the analysis, are enlisted

below:

8.3.1 Operating Days & Shifts

� No. of Working Days : 300 Days

� Shift of Operation : Three Shifts

8.3.2 Installed Capacity & Utilisation

� Installed Capacity

Phase 1

HDF Flooring Line : 1,374,255 Sq. Mts.

Phase 2

Installed capacity of raw board : 100 m3/day

MDF Board Production : 60 % of the installed capacity = 60 m3 / day

HDF Board Production : 40 % of the installed capacity = 40 m3 / day

MDF Board will further prelam in impregnation line and short cycle press while HDF board

will be sent to flooring line for manufacturing laminated flooring. The capacity of the

flooring line is the same as in phase 1 and total production will be converted into laminate

flooring.

� Capacity Utilisation Levels :

Table 8.9: Capacity Utilisation in phase 1

Year 2007-08 2008-09

Capacity Utilization 50% 60%

Table 8.10: Capacity Utilisation in phase 2

Year 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13

Capacity Utilization 30% 50% 60% 60% 60%



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The HDF laminated flooring production will be started in October 2007 with imported HDF

board and, Fibre Board manufacturing and prelam plant will commence operation from

October 2008.

8.3.3 Selling Price

RDPL will sell only final products in market i.e. Prelam MDF Board and Laminated HDF

Flooring.

At per existing market conditions, the selling price of the Laminated HDF Flooring is

estimated at Rs. 380 Rs./ m2, which is lower than the imported European laminated

flooring. It is also competitive vis-à-vis the imports from China.

In prelam MDF board manufacturing, RDPL will focus on the board with the thickness of 12

mm, 16 mm and 18 mm which are preferred specifications in the prelam board market.

The estimated prices for these boards are mention below:

12 mm = 322.80 Rs. / m2 (30 Rs. / ft2)

16 mm = 365.84 Rs. / m2 (34 Rs. / ft2)

18 mm = 408.88 Rs. / m2 (38 Rs. / ft2)

8.3.4 Exchange Rates

• 1 US $ : Rs. 46

• 1 GBP : Rs. 88

• 1 Euro : Rs. 60

8.3.5 Operating Norms

Operating Norms outlined below have been arrived at after analysis of guaranteed norms

provided by client and actual norms collected from similar product producers:



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Table 8.11: Operating norms for Fibre Board manufacturing

Particulars Quantity Unit cost

Cotton stalks/Bagasse 2 ton 2000 Rs.

Urea Formaldehyde 0.11 ton 30000 Rs.

Ammonium Chloride 0.003 ton 15000 Rs.

Chemical Buffer 0.003 ton 55000 Rs.

Paraffin Wax 0.01 ton 60000 Rs.

Electricity 400 unit 5 Rs.

Water 1 m3 90 Rs.

Thermal Energy-steam 1500000 kcal 0.00057 Rs.

Table 8.12: Operating norms for Prelam MDF Board manufacturing

Particular Unit Number Price Cost per

m2

Base paper GSM 80 350 28

Melamine Formaldehyde resin Kgs 0.5 65 32.5

Balancing paper GSM 80 100 8

Packing GSM 50 30 6

Plate refurbishing cost-

Texture Cycles 50000 360000 2.4

Plate refurbishing cost-Matt Cycles 100000 264000 0.88

Tools & Moulds expense Rs. 8

Thermal Energy kcal 2 2.27

Power Cost-150 units/hr units 1 5 5.00

Direct Labour Cost Rs. 20 labour 2.00

Total 95.05

Table 8.13: Operating Norms for Laminated HDF Flooring Manufacturing

Particulars UNIT Number Price Cost per m2

High abrasive tissue GSM 48 385 18.48

Base paper GSM 80 350 28

Balancing paper GSM 80 100 8

Melamine Formaldehyde resin Kgs 0.5 65 32.5

Packing GSM 50 30 6

Plate refurbishing cost-

Texture Cycles 15000 360000 8

Plate refurbishing cost-Matt Cycles 100000 264000 0.88

Tools & Moulds expense Rs. 30 8

thermal energy kcal 2 4.49

Power cost-240 units/hr units 1.18 5 5.9

Direct Labour cost Rs. 75 5

Total 125.25



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� Selling Expenses : 10% of total sales

� Administrative Expenses :

RDPL has well established administrative system therefore administrative expenses are

considered 2.5 Rs. Lakh. The increment of 5 % in each following years is considered.

� Repairs & Maintenance : 1.5% of total Plant and Machinery cost and other assets

8.3.6 Financing Terms – Repayment & Interest

Project will be implemented in two phases and according to implementation, RDPL will

require the long-term loan.

� Interest on Long Term Loan : 11 % per annum.

� Repayment of Long Term Loan :

Table 8.14: Repayment of Long Term Loan

(Rs. In Lakhs)

Year 2007

–08

2008 –

09

2009 –

10

2010 –

11

2011 –

12

2012 –

13

2013 –

14

2014 –

15

2015 -

16

Repayment 0 120 420 600 600 600 480 180 0

� Interest on Working Capital (WC) Loan : 9 % p.a.

� Interest on Unsecured Loan : 11 % p.a.

8.3.7 Depreciation Rates

SLM WDV

� Land and Site Development : 0% 0% � Building and Civil Works : 3.34% 10%

� Main Plant and Equipment : 10.34% 15.00%

� Furniture & Fixture : 6.33% 18.10% � Misc. Fixed Assets : 4.75% 15.00%

8.3.8 Income Tax Rates

The rate of tax has been computed on following basis:

� Corporate Tax : 33.66%

� MAT : 11.22%



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8.4 Cash flows& Profitability Statement

The profitability statement of project is mention below:

Table 8.15: Profitability Statement

Year of Operation Particular

2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17

Revenue

Prelam - MDF 644 2145 2574 2574 2574 2574 2574 2574 2574

Laminated Flooring - HDF 1306 2429 2875 3450 3450 3450 3450 3450 3450 3450

Total Revenue 1306 3073 5020 6024 6024 6024 6024 6024 6024 6024

Mfg Cost

MDF board mfg cost 0 237.65 792.16 950.59 950.59 950.59 950.59 950.59 950.59 950.59

HDF board mfg cost 0 153.40 511.34 613.61 613.61 613.61 613.61 613.61 613.61 613.61

Prelam Cost 0 169.31 564.36 677.23 677.23 677.23 677.23 677.23 677.23 677.23

Flooring Cost 876 1335.72 947.52 1137.02 1137.02 1137.02 1137.02 1137.02 1137.02 1137.02

Total Mfg Cost 876.22 1896.08 2815.38 3378.45 3378.45 3378.45 3378.45 3378.45 3378.45 3378.45

Fixed Cost

Sales Expenses 130.55 307.26 502.00 602.40 602.40 602.40 602.40 602.40 602.40 602.40

Administrative Expenses 15.00 31.50 33.08 34.73 36.47 38.29 40.20 42.21 44.32 46.54

Repairs & Maintenance 11.05 27.97 55.95 55.95 55.95 55.95 55.95 55.95 55.95 55.95

Total Fixed Cost 156.60 366.74 591.02 693.07 694.81 696.63 698.55 700.56 702.67 704.89

Depreciation 70.75 268.15 358.71 358.71 358.71 358.71 358.71 358.71 358.71 358.71

EBIT 201.96 541.67 1254.87 1593.73 1592.00 1590.17 1588.26 1586.25 1584.14 1581.92



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Year of Operation Particular

2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17

Financial Charges

Working Capital Charges 27.75 105.42 93.99 112.79 112.79 112.79 112.79 112.79 112.79 112.79

Interest on Term Loan 66.00 229.35 304.43 245.85 179.85 113.85 49.50 7.43 0.00 0.00

Interest on Unsecured Loan 3.18 14.95 23.53 23.53 23.53 23.53 23.53 23.53 23.53 23.53

Total Financial Charges 96.93 349.72 421.94 382.17 316.17 250.17 185.82 143.74 136.32 136.32

PBT 105.03 191.95 832.92 1211.57 1275.83 1340.01 1402.44 1442.51 1447.82 1445.61

Tax 20.88 31.97 204.94 361.53 407.95 450.65 489.61 518.37 533.17 543.49

PAT 84.16 159.99 627.99 850.04 867.88 889.36 912.83 924.13 914.66 902.12



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The cash flow statement of project is mention below:

Table 8.16: Cash flow Statement

(Rs. In Lakh)

Year of Operation Sr. No. Particulars

2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17

Sources of Funds :

1 Promoter's Contribution

share Capital 200 300

Internal Cash Accrual 400 500

2 Deposits 57.855 156.068

3 Increase in Long Term Loan 1200 1800

4 Increase in Working Capital Borrowing 308.29 863.04 -127.01 208.86 0.00 0.00 0.00 0.00 0.00 0.00

5 Depreciation 70.75 268.15 358.71 358.71 358.71 358.71 358.71 358.71 358.71 358.71

6

Net Profit Before Tax & Interest

(EBIT) 201.96 541.67 1254.87 1593.73 1592.00 1590.17 1588.26 1586.25 1584.14 1581.92

Sub- Total (A) 2439 4429 1487 2161 1951 1949 1947 1945 1943 1941

Disposition of Funds :

1 Capital Expenditure 1758 2576.068

2 Increase in Current Assets 423.44 1155.07 -182.96 279.11 0.00 0.00 0.00 0.00 0.00 0.00

3 TL interest 66.00 229.35 304.43 245.85 179.85 113.85 49.50 7.43 0.00 0.00

4 Repayment of Long Term Loan 0.00 120.00 420.00 600.00 600.00 600.00 480.00 180.00 0.00 0.00

5 Interest on Deposits 3.18 14.95 23.53 23.53 23.53 23.53 23.53 23.53 23.53 23.53

6 Repayment of Deposits 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

7 Working Capital charges 27.75 105.42 93.99 112.79 112.79 112.79 112.79 112.79 112.79 112.79

8 Income-Tax 20.88 31.97 204.94 361.53 407.95 450.65 489.61 518.37 533.17 543.49

9 Dividend

Sub-Total (B) 2299 4233 864 1623 1324 1301 1155 842 669 680

A-B 140 196 623 539 627 648 792 1103 1273 1261



100


Opening Cash Balance 0 140 336 959 1497 2124 2772 3563 4666 5939

Closing Cash Balance 140 336 959 1497 2124 2772 3563 4666 5939 7200

The calculation of component of the profitability statement and cash flow statement is mention in annexure in the report.



101


8.5 Financial Indicators- NPV, IRR, DSCR, Pay back

Table 8.17: Financial Indicators

Item Description Value UOM

NPV 1,822 In Rupees Lakhs

IRR 17 %

DSCR 2.61 Average Value

PBP 5.98 Years

RoI 12 to 32 % range (for 10 years)

8.6 Sensitivity Analysis

Table 8.18: Sensitivity Analysis

Particulars IRR DSCR PBP NPV

Base case 17 % 2.61 5.98 Years Rs. 1,822 Lakh

Raw material price increase by 10 % 15% 2.48 6.15 Years Rs. 1,572 Lakh

Raw material price decrease by 10% 18% 2.73 5.82 Years Rs. 2,067 Lakh

Selling price increase by 5 % 21% 2.96 5.46 Years Rs. 2,787 Lakh

Selling price decrease by 5% 12% 2.24 6.67 Years Rs. 848 Lakh



102


9 Conclusion and Recommendations

Looking at the business landscape in totality, there exists a good potential for MDF

manufacturing unit to be set up in India. Synergies can be exploited in the case of RDPL who

is already into the production of related products and their marketing. The existence of

marketing channel in India and abroad adds to the overall attractiveness of the project (Read

section on growth drivers for more details).

The financial projections under normal circumstances suggest a positive net present value and

an internal rate of return of 17%, which is significantly above the cost of capital. Under the

proposed debt equity ratio, comfortable debt service coverage can be achieved; posing no

problems to the liquidity (average DSCR is 2.61). In case of pressures on the sales price, the

IRR may fall in a non-linear fashion. For example, 5% decrease in sales price, the IRR will fall

to 12%. However such a scenario is less likely, looking at the market growth rate for MDF

owing to the increased awareness of customers, the boom in construction and under capacity

within India.

Overall, the above project appears to be feasible on economic, technical and market criteria.

Hence it is worth pursuing the above project to tap the increasing market opportunities;

thereby enabling the firm to grow both in terms of size, product range and profitability.

Ensuring an efficient supply chain in terms of raw material procurement, imports and exports

will definitely help the firm to boost the bottom line. Tighter integration on the supply side

for cotton stalks and alternatively for bagasse can deftly handle the uncertainties related to

raw material availability.



103


Appendix A: Fixed Cost Allocation of Contingency and POP expenses

(Rs. In Lakh)

Sr.

No. Particulars

Phase

1

Cost with

Contingency

Cost with

pre-

operative

allocation

Phase

2

Cost with

Contingency

Cost with

pre-

operative

allocation

Total Cost with

Contingency

Cost with

pre-

operative

allocation

1 Land 85 94 96 0 0 0 85 85 88

2 Land Development 15 17 17 35 39 40 50 50 52

3 Civil & structural cost 350 385 395 100 110 114 450 450 465

4 Main plant & Equipment

Imported 267 294 301 1029 1132 1174 1296 1296 1338

Indigenous 286 315 323 253 278 288 539 539 556

5 Other Equipments/Utilities 540 594 609 825 908 942 1365 1365 1410

6 Misc Fixed Assets 15 17 17 15 17 17 30 30 31

7 Pre operative Expense 40 44 85 94 125 125

8 Contingency @ 10 % 160 234

Total Capital Cost of Project 1758 1758 1758 2576 2576 2576 3940 3940 3940



104


Appendix B: Working Capital Statement

(Rs. In Lakh)

Year of Operation Sr. No. Particular

2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17

1 Raw material 111.48 269.04 225.44 270.53 270.53 270.53 270.53 270.53 270.53 270.53

2 Consumables 149.42 314.62 225.53 270.64 270.64 270.64 270.64 270.64 270.64 270.64

3 WIP 36.51 158.01 117.31 140.77 140.77 140.77 140.77 140.77 140.77 140.77

4 Finished Goods 108.80 768.16 627.50 753.00 753.00 753.00 753.00 753.00 753.00 753.00

5 Debtors 54.40 118.91 209.17 251.00 251.00 251.00 251.00 251.00 251.00 251.00

A Total Current Assets 460.60 1628.73 1404.94 1685.93 1685.93 1685.93 1685.93 1685.93 1685.93 1685.93

Current Liabilities

6 Sundry Creditors 37.16 50.23 9.39 11.27 11.27 11.27 11.27 11.27 11.27 11.27

B Total Current Liabilities 37.16 50.23 9.39 11.27 11.27 11.27 11.27 11.27 11.27 11.27

Net Working Capital 423.44 1578.51 1395.55 1674.66 1674.66 1674.66 1674.66 1674.66 1674.66 1674.66

C Bank Finance 308.29 1171.32 1044.31 1253.18 1253.18 1253.18 1253.18 1253.18 1253.18 1253.18

D Margin Money 115.15 407.18 351.24 421.48 421.48 421.48 421.48 421.48 421.48 421.48

E WC Loan interest @ rate 9 % 27.75 105.42 93.99 112.79 112.79 112.79 112.79 112.79 112.79 112.79



105


Appendix C: Term Loan - Repayment & Interest

Phase 1 Phase 2

Term Loan Amount 1200 1800

Interest rate 11.00% (Rs in Lakh)

Outstanding Loan Year Quarter Repayment

Start of quarter End of quarter

Quarterly

Interest

Yearly

Interest

Yearly Re-

payment

I 0.0 0 0.0 0.00

II 0.0 0 0.0 0.00

III 0.0 1200 1200.0 33.00 2007 - 08

IV 0.0 1200 1200.0 33.00 66.00 0.00

I 0.0 1200 1200.0 33.00

II 0.0 1200 1200.0 33.00

III 60.0 3000 2940.0 82.50 2008 - 09

IV 60.0 2940 2880.0 80.85 229.35 120.00

I 60.0 2880 2820.0 79.20

II 60.0 2820 2760.0 77.55

III 150.0 2760 2610.0 75.90 2009 - 10

IV 150.0 2610 2460.0 71.78 304.43 420.00

I 150.0 2460 2310.0 67.65

II 150.0 2310 2160.0 63.53

III 150.0 2160 2010.0 59.40 2010 - 11

IV 150.0 2010 1860.0 55.28 245.85 600.00

I 150.0 1860 1710.0 51.15

II 150.0 1710 1560.0 47.03

III 150.0 1560 1410.0 42.90 2011 - 12

IV 150.0 1410 1260.0 38.78 179.85 600.00

I 150.0 1260 1110.0 34.65

II 150.0 1110 960.0 30.53

III 150.0 960 810.0 26.40 2012 - 13

IV 150.0 810 660.0 22.28 113.85 600.00

I 150.0 660 510.0 18.15

II 150.0 510 360.0 14.03

III 90.0 360 270.0 9.90 2013 - 14

IV 90.0 270 180.0 7.43 49.50 480.00

I 90.0 180 90.0 4.95

II 90.0 90 0.0 2.48

III 0.0 0 0.0 0.00 2014 - 15

IV 0.0 0 0.0 0.00 7.43 180.00



106


Appendix D: Unsecured Loan - Interest

phase 1 Phase 2

Unsecured Loan Amount 58 156

Interest rate 11.00% (Rs in Lakh)

Outstanding Loan Year Quarter Repayment

Start of quarter End of quarter

Quarterly

Interest

Yearly

Interest

Yearly

Repayment

I 0.0 0.0 0.0 0.0

II 0.0 0.0 0.0 0.0

III 0.0 57.9 57.9 1.6 2007 - 08

IV 0.0 57.9 57.9 1.6 3.2 0.0

I 0.0 57.9 57.9 1.6

II 0.0 57.9 57.9 1.6

III 0.0 213.9 213.9 5.9 2008 - 09

IV 0.0 213.9 213.9 5.9 14.9 0.0

I 0.0 213.9 213.9 5.9

II 0.0 213.9 213.9 5.9

III 0.0 213.9 213.9 5.9 2009 - 10

IV 0.0 213.9 213.9 5.9 23.5 0.0

I 0.0 213.9 213.9 5.9

II 0.0 213.9 213.9 5.9

III 0.0 213.9 213.9 5.9 2010 - 11

IV 0.0 213.9 213.9 5.9 23.5 0.0

I 0.0 213.9 213.9 5.9

II 0.0 213.9 213.9 5.9

III 0.0 213.9 213.9 5.9 2011 - 12

IV 0.0 213.9 213.9 5.9 23.5 0.0

I 0.0 213.9 213.9 5.9

II 0.0 213.9 213.9 5.9

III 0.0 213.9 213.9 5.9 2012 - 13

IV 0.0 213.9 213.9 5.9 23.5 0.0

I 0.0 213.9 213.9 5.9

II 0.0 213.9 213.9 5.9

III 0.0 213.9 213.9 5.9 2013 - 14

IV 0.0 213.9 213.9 5.9 23.5 0.0

I 0.0 213.9 213.9 5.9

II 0.0 213.9 213.9 5.9

III 0.0 213.9 213.9 5.9 2014 - 15

IV 0.0 213.9 213.9 5.9 23.5 0.0

I 0.0 213.9 213.9 5.9

II 0.0 213.9 213.9 5.9

III 0.0 213.9 213.9 5.9 2015 - 16

IV 0.0 213.9 213.9 5.9 23.5 0.0

I 0.0 213.9 213.9 5.9

II 0.0 213.9 213.9 5.9

III 0.0 213.9 213.9 5.9 2016 - 17

IV 0.0 213.9 213.9 5.9 23.5 0.0



107


Appendix E: SLM Depreciation

(Rs. In Lakh)


2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17

1 Land & land Development 0 0 0 0 0 0 0 0 0 0

2 Civil & structural cost 6.59 15.10 17.07 17.07 17.07 17.07 17.07 17.07 17.07 17.07

Main plant & Equipment

3 Imported 15.56 91.85 152.21 152.21 152.21 152.21 152.21 152.21 152.21 152.21

4 Indigenous 16.68 48.28 63.28 63.28 63.28 63.28 63.28 63.28 63.28 63.28

5 Other Equipments/Utilities 31.51 111.72 160.40 160.40 160.40 160.40 160.40 160.40 160.40 160.40

6 Miscellaneous Fixed Assets 0.40 1.21 1.62 1.62 1.62 1.62 1.62 1.62 1.62 1.62

Total 70.75 268.15 394.58 394.58 394.58 394.58 394.58 394.58 394.58 394.58



108


Appendix F: WDV Depreciation

(Rs. In Lakh)

Year of Operation Sr.

No. Particulars

2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17

1 Land & land Development 0 0 0 0 0 0 0 0 0 0

2 Civil & structural cost 19.74 23.48 21.13 19.02 17.11 15.40 13.86 12.48 11.23 10.11

Main plant & Equipment

3 Imported 22.58 126.47 220.31 187.27 159.18 135.30 115.01 97.75 83.09 70.63

4 Indigenous 24.20 62.77 113.00 96.05 81.64 69.39 58.98 50.14 42.62 36.22

5 Other Equipments/Utilities 45.71 148.36 263.84 224.26 190.62 162.03 137.72 117.07 99.51 84.58

6 Miscellaneous fixed Assets 1.53 4.06 7.11 5.82 4.77 3.90 3.20 2.62 2.14 1.76

Total 113.77 365.14 625.38 532.41 453.32 386.03 328.77 280.05 238.59 203.29



109


Appendix G: Tax Statement

(Rs. In Lakh)

Year of Operation Sr.

No. Particulars

2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17

1 Profit Before Tax 105.03 191.95 832.92 1211.57 1275.83 1340.01 1402.44 1442.51 1447.82 1445.61

2 Add : SLM Depreciation 70.75 268.15 358.71 358.71 358.71 358.71 358.71 358.71 358.71 358.71

3 Less : WDV Depreciation 113.77 365.14 582.79 496.22 422.57 359.90 306.57 261.19 222.56 189.67

4 Income / Loss 62.02 94.97 608.84 1074.06 1211.97 1338.81 1454.58 1540.03 1583.97 1614.64

5 Unabsorbed Depreciation / Losses 0.00 0.00 0.00 0 0 0 0 0 0 0

6 Net Taxable Income 62.02 94.97 608.84 1074.06 1211.97 1338.81 1454.58 1540.03 1583.97 1614.64

7 Income Tax 20.88 31.97 204.94 361.53 407.95 450.65 489.61 518.37 533.17 543.49

8 MAT 11.78 21.54 93.45 135.94 143.15 150.35 157.35 161.85 162.45 162.20

9 Final Tax 20.88 31.97 204.94 361.53 407.95 450.65 489.61 518.37 533.17 543.49



110


Appendix H: Debt Service Coverage Ratio

(Rs. In Lakh)


2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17

1 Revenue 1305.54 3072.64 5019.975 6023.97 6023.97 6023.97 6023.97 6023.97 6023.97 6023.97

2 Profit Before Tax 105.03 191.95 832.92 1211.57 1275.83 1340.01 1402.44 1442.51 1447.82 1445.61

3 Profit After Tax 84.16 159.99 627.99 850.04 867.88 889.36 912.83 924.13 914.66 902.12

4 LT Interest 66.00 229.35 304.43 245.85 179.85 113.85 49.50 7.43 0.00 0.00

5 Interest on Deposits 3.18 14.95 23.53 23.53 23.53 23.53 23.53 23.53 23.53 23.53

6 Depreciation 70.75 268.15 358.71 358.71 358.71 358.71 358.71 358.71 358.71 358.71

7 LT Loan Repayment 0.00 120.00 420.00 600.00 600.00 600.00 480.00 180.00 0.00 0.00

8 Deposit Repayment 0 0 0 0 0 0 0 0 0 0

Return on Investment (%) 12% 15% 28% 32% 31% 30% 29% 28% 28% 28%

Debt-Service Coverage Ratio

- Debt Service 69.18 364.30 747.96 869.38 803.38 737.38 553.03 210.96 23.53 23.53

- Coverage 224.09 672.44 1314.65 1478.13 1429.97 1385.45 1344.57 1313.80 1296.90 1284.36

DSCR 3.24 1.85 1.76 1.70 1.78 1.88 2.43 6.23 55.11 54.58

Average DSCR 2.61



111


Appendix I: Pay Back Period & Internal Rate of Return

(Rs. In Lakh)

Year of Operation Particulars

2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17

Cash Outflow 1857.86 4613.92

Cash Inflow 224.09 672.44 1314.65 1478.13 1429.97 1385.45 1344.57 1313.80 1296.90 1284.36

Net Cash flow -1633.76 -3941.49 1314.65 1478.13 1429.97 1385.45 1344.57 1313.80 1296.90 1284.36

Cumulative Cash flow -1633.76 -5575.25 -4260.60 -2782.47 -1352.50 32.95 1377.53 2691.32 3988.22 5272.58

Payback Period 5.98 Years

Internal Rate of Return 17%

Discount Factor@8% 0.93 0.86 0.79 0.74 0.68 0.63 0.58 0.54 0.50 0.46

DCF -1513 -3379 1044 1086 973 873 785 710 649 595

NPV 1,822 Lakh



113

Appendix J: Availability of Bagasse Sr.

No. Name Of Sugar Factory

Sugarcane

crushed per day

Sugarcane

crushed per year

Bagasse available

per year for sale

1 Shree Khedut Sahakari Kahnd

Udyog Mandli Ltd. Pandvai 3500 ton 4-5 lakh ton 25,000 ton

2

Shree Ganesh Khand Udyog

Sahakari Mandli Ltd

Ganesh Gram, Vataria

3200 ton 5 lakh ton 25,000 ton

3

Vadodara Dist. Co-Operative

Sugarcane Group Union Ltd.

Gandhar,Karjan

2500 ton 4 lakh ton 50,000

4 Sardar Co-Operative Sugar

Factory, Ladhod 2500 ton 2 to 2.5 lakh ton

“

5

Shree Sayan Vibhag Sahakari

Khand Udyog Mandli Ltd,

Sayan, Olpad

5000 ton 9 to 10 Lakh ton 15-17,000 ton

6

Shree Chalthan Vibhag Khand

Udyog Shahakri Mandli Ltd,

Chalthan.

5000 to 6000 ton 10 lakh ton 20 to 25000 ton

7

Shree Khedut Sahakari Khand

Udyog Mandli Ltd.

Bardoli.

10,000 ton 18 lakh ton

65,000 to 70,000

ton

8 Madhi Sugar

Factory,Bhajipura, Madhi 7000 ton 10 lakh ton 50,000-60,000 ton

9

Shree Ukai Pradesh Sahakari

Khand Udyog Mandli Ltd,

Khusal Pura, Vyara

2500 ton 3.5 lakh ton 10,000 ton

10

Shree Mahuva Pradesh

Sahakari Khand Udyog Mandli

Ltd. Bamania, Mahuva

3500 ton 5.5 to 6 lakh ton 10,000 ton

11 Sahakari Khand Udyog Mandli

Ltd, Gandevi, Bilimora 6000 ton 10 lakh ton 45,000 ton

12

Shree Narmada Khand Udyog

Sahakari Mandli Ltd,

Dharikheda, Rajpipla

3500 ton 5.5 lakh ton 12,000 ton

13

Shree Valsad Sahakari Khand

Udyog Mandli Ltd, Parnera-

Pardi,Valsad

5000 ton 6 lakh ton 30,000-40,000 ton

14

Shree Kamrej Vibhag

Sahakari Khand Udyog Mandli

Ltd,Navi Prardi, Kamrej

2500-3000 ton 5 to 5.5 lakh ton 15- 17,000 ton

15

Shree Maroli Vibhag Khand

Udyog Sahakari Mandli, Ltd,

Maroli,Navsari

2500-3000 ton 3.5 lakh ton 15000 ton

Total 66,200 ton 104.5 lakh ton 4,21,000 ton



114

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