Start a Roasted & Salted Cashewnut Business

    




(212).Start a Roasted & Salted Cashewnut  Business


1.0 INTRODUCTION
Cashewnut is one of the important ingredients in the category of dry fruits along with 
almond, raisin, walnut etc. India is one of the leading producers of cashew and the states of 
Kerala, Karnataka, Tamilnadu, Andhra Pradesh, Goa and Maharashtra are the major 
contributors. This note envisages Maharashtra as the proposed location. Konkan region of 
Maharashtra and the adjacent state of Goa produce substantial quantity of cashewnuts. 
Reportedly, Ratnagiri district of the Konkan region alone has more than 20,000 acres of land 
under cashew cultivation. The state government as well as NABARD are encouraging cashew 
plantation. Hence, this region is ideally suited for the project.


2.0 PRODUCT
Cashewnuts are popular all over the world and is an important table enricher. Roasted and 
salted cashewnuts are very popular especially with the high-income group population and are 
served in star hotels, high-end restaurants, bars and clubs.


3.0 MARKET POTENTIAL
3.1 Demand and Supply
Cashewnuts form an integral part of dry fruits. Properly processed nuts have shelf life of 4 to 
6 months. Roasted and salted cashewnuts are used as table enrichers in many restaurants, 
clubs, pubs etc. and are also served during flights. Their household consumption is limited to 
high income groups wherein they are consumed regularly, whereas others eat them 
occasionally. There are good export possibilities as well provided the quality is of 
international standard. 


3.2 Marketing Strategy
Initial breakthrough can be made with the help of Indians settled abroad and having 
appropriate selling outlets. Consistent quality, attractive packing and placement of the 
product at strategic locations like speciality stores, super markets, shopping malls, 
departmental stores, retail outlets at the airports etc. are important aspects.


4.0 MANUFACTURING PROCESS
It is easy and standardised. Very good quality cashewnuts (around 220-240 counts) are deep 
fried in vegetable oil in thermostat controlled pans at a steady temperature of about 80-90 C. 
Then they are dressed with the solution of antioxidant to prevent rancidity. The materials 
used are butylated hydroxianisole or gum guaise or citric acid. Then cashews are passed 
through a centrifugal chamber to ensure uniform coating and to remove traces of oil sticking 
on the nuts. Salting is done before packing in tins. Spices can also be added. Tins are seamed 
and vacuumised and an inert gas (nitrogen flushing) is introduced. This increases the shelf 
life substantially. The process flow chart is as under:

• Cleaning of Cashewnuts
• Deep Frying
• Dressing with Anti-oxidants
• Salting
• Packing

5.0 CAPITAL INPUTS
5.1 Land and Building
A readymade shed of around 80 sq.mtrs. may be bought to save time and capital cost of land. 
The price is assumed to be Rs.2.00 lacs.


5.2 Machinery
Processing capacity of 42 tonnes per year with 2 shift working and 300 working days would 
need following machines:
Item Qty. Price (Rs.)
Electrically-operated Roaster with thermostatic control 1 1,00,000
Centrifuge Chamber 1 50,000
Can Seamer 1 30,000
Vacuum Packing machine with nitrogen filling facility 1 50,000
SS utensils, weighing scales, aluminium trays etc. -- 50,000
Total 2,80,000


5.3 Miscellaneous Assets
Some other assets like furniture and fixtures, electrical, working tables etc. shall be required 
for which a provision of Rs. 60,000/- is made.


5.4 Utilities
Total power requirement would be 25 HP whereas per day water requirement shall be 1000 
ltrs.


5.5 Raw and Packing Materials
The most critical raw material would be high quality cashewnuts. Since even at 100% activity 
level, the monthly requirement will not even be 4 tonnes, procurement should not be a 
problem. Other materials like salt, spices, vegetable oil, anti-oxidants etc. shall be required in 
small quantity. Proper before hand arrangements shall have to be made for packing 
materials like tin containers, labels, cartons, box strapping etc.


6.0 MANPOWER REQUIREMENTS
Particulars Nos. Monthly Total Monthly 
Salary (Rs.) Salary (Rs.)
Skilled Workers 2 2,500 5,000
Helpers 4 1,250 5,000
Salesman 1 2,500 2,500
Total 12,500


7.0 TENTATIVE IMPLEMENTATION SCHEDULE
Activity Period (in months)
Application and sanction of loan 1.5 
Site selection and commencement of civil work 0.5
Completion of civil work and placement of 
orders for machinery 1.5
Erection, installation and trial runs 0.5


8.0 DETAILS OF THE PROPOSED PROJECT
8.1 Land and Building
A readymade shed of around 80 sq.mtrs. would cost Rs. 2.00 lacs as stated before.


8.2 Machinery
A provision of Rs. 2.80 lacs is enough as explained earlier.


8.3 Miscellaneous Assets
Other assets would cost around Rs. 60,000/- as stated before.


8.4 Preliminary & Pre-operative Expenses
Pre-production expenses like registration, establishment, administrative and travelling 
expenses, interest during implementation, trial runs etc. would be around Rs.65,000/-.


8.5 Working Capital Requirements
At 60% capacity utilisation in the first year, the estimated working capital needs shall be as 
under: (Rs.  in  lacs)
Particulars Period Margin Total Bank Promoters
Stock of Raw and  ½ Month 30% 2.20 1.55 0.65
Packing Materials
Stock of Finished Goods ½ Month 25% 2.50 1.85 0.65
Receivables ½ Month 25% 3.15 2.35 0.80
Other Expenses 1 Month 100% 0.25 -- 0.25
Total 8.10 5.75 2.35


8.6 Cost of the Project & Means of Financing (Rs. in lacs)
Item Amount
Building 2.00
Machinery 2.80
Miscellaneous Assets 0.60
P&P Expenses 0.65
Contingencies @ 10% on Building & 
Plant & Machinery 0.50
Working Capital Margin 2.35
Total 8.90
Means of Finance
Promoters' Contribution 2.70
Term Loan from Bank/FI 6.20
Total 8.90
Debt Equity Ratio 2.28 : 1
Promoters' Contribution 30%
Financial assistance in the form of grant is available from the Ministry of Food Processing 
Industries, Govt. of India, towards expenditure on technical civil works and plant and 
machinery for eligible projects subject to certain terms and conditions.


9.0 PROFITABILITY CALCULATIONS


9.1 Production Capacity & Build-up
As against annual rated capacity of 42 tonnes, actual utilisation in the first year is envisaged 
to be 60% and 75% during subsequent years.


9.2 Sales Revenue at 100%
Considering selling price of Rs. 3.00 lacs per ton, the annual income for 42 tonnes would be 
Rs. 126.00 lacs.


9.3 Raw and Packing Materials Required at 100% (Rs. in lacs)
Product Qty. Price/Ton  Value 
(Tonnes) (Rs.)
Cashewnuts 42 1.90 Lacs 79.80
Vegetable Oil 3 0.70 Lacs 0.60
Salt, Spices, Chemicals etc. -- -- 0.60
Packing Material @ Rs.12000/Ton -- -- 5.04
Total 87.54


9.4 Utilities
Annual cost of utilities is estimated to be Rs. 70,000/-.


9.5 Selling Expenses
A provision of 20% of sales income every year would take care of selling commission, 
transportation, publicity etc.


9.6 Interest
Interest on term loan of Rs. 6.20 lacs is computed @ 12% per annum assuming repayment in 
3 years including a moratorium period of 6 months and on working capital loan it is 
calculated @ 14% per annum.


9.7 Depreciation
It is calculated on WDV basis @ 10% on building and 20% on machinery and miscellaneous 
assets.


10.0 PROJECTED PROFITABILITY
       (Rs.  in  lacs)
No. Particulars 1st Year 2nd Year
A Installed Capacity --- 42 Tonnes ---
Capacity Utilisation 60% 75%
Sales Realisation 75.60 94.50
B Cost of Production
Raw and Packing Materials 52.52 65.66
Utilities 0.42 0.53
Salaries 1.50 1.75
Stores and Spares 0.18 0.24
Repairs & Maintenance 0.30 0.36
Selling Expenses @ 20% 15.12 18.90
Administrative Expenses 0.60 0.80
Total 70.64 88.24
C Profit before Interest & Depreciation 4.96 6.26
Interest on Term Loan 0.61 0.36
Interest on Working Capital 0.80 1.00
Depreciation 0.88 0.72
Profit before Tax 2.67 4.18
Income-tax @ 20% 0.53 0.83
Profit after Tax 2.14 3.35
Cash Accruals 3.02 4.07
Repayment of Term Loan 1.10 2.20
15011.0 BREAK-EVEN ANALYSIS
         (Rs. in lacs)
No Particulars Amount
[A] Sales 75.60
[B] Variable Costs


Raw and Packing Materials 52.52
Utilities (70%) 0.29
Salaries (70%) 1.05
Stores & Spares 0.18
Selling Expenses (70%) 10.58
Admn Expenses (50%) 0.30
Interest on WC 0.80 65.72
[C] Contribution [A] - [B] 9.88
[D] Fixed Cost 6.10
[E] Break-Even Point [D] ÷ [C] 62%
12.0 [A] LEVERAGES
Financial Leverage
= EBIT/EBT
= 4.08 ÷ 2.67
= 1.53
Operating Leverage
= Contribution/EBT
= 9.88 ÷ 2.67
= 3.70
Degree of Total Leverage
= FL/OL
= 1.53 ÷ 3.70
= 0.41
151[B] Debt Service Coverage Ratio (DSCR)
           (Rs.  in  lacs)
Particulars 1st Yr 2nd Yr 3rd Yr
Cash Accruals 3.02 4.07 4.39
Interest on TL 0.61 0.36 0.17
Total [A] 3.63 4.43 4.56
Interest on TL 0.61 0.36 0.17
Repayment of TL 1.25 2.50 2.45
Total [B] 1.86 2.86 2.62
DSCR [A] ÷ [B] 1.95 1.74 1.79
Average DSCR --------------- 1.69---------------
[C] Internal Rate of Return (IRR)
Cost of the project is Rs. 8.90 lacs.
                      (Rs.  in  lacs)
Year Cash 24% 28% 32%
Accruals
1 3.02 2.43 2.36 2.29
2 4.07 2.65 2.48 2.34
3 4.39 2.30 2.09 1.91
4 4.76 2.01 1.78 1.57
16.24 9.39 8.71 8.11
The IRR is around 27%.


Some of the machinery and packing material suppliers are
1. Raylon Metal Works,JB Nagar, Andheri(E), Mumbai 400 059
2. Sujata Enterprises,Laxmi Rd., Pune
3. G R Engg. Works Pvt Ltd, Worli, Mumbai 400 059
4. Container Industries, C-299, Ghatkopar Industrial Estate, 72 LBS Marg, Mumbai-400080