Innovobiz-2016 Conference Proceedings GE-International Journal of Management Research

ISSN (O): (2321-1709), ISSN (P): (2394-4226), IF-4.88

Volume 4, Issue 4, April 2016. Website- www.aarf.asia

FEASIBILITY STUDY FOR SETTING UP A NEW AUTOCLAVED AERATED

CONCRETE BLOCKS MANUFACTURING PLANT

Dr. Sunita Dhote,

Asst Professor Shri Ramdeobaba College of Engineering and Management, Nagpur.

Mr. Nikhil Singh,

MBA, 4th Sem, Shri Ramdeobaba College of Engineering and Management, Nagpur.

ABSTRACT

This paper presents the research study of the project conducted to study the feasibility of setting up a AAC
Blocks Manufacturing Plant .

The object of this feasibility study is to provide a frame work about the technical, economical & financial
aspects in a broader sense and implementation of the project under the projected time-frame. In other words the
study is aimed at analyzing Technical, Economical and Financial viability of setting up an AAC Blocks
Manufacturing Plant .

Fly ash is a major raw material source (65-70% of finished goods is fly ash) and by locating the plant almost
adjacent to raw material source gives manifold advantage both logistically and commercially. The unit will be
located in MIDC Butibori that is having direct AACess to all corners of the country through 4-laned national
highways. The land is ideally located as it can cater to Nagpur (about 25 Kms) and surrounding markets very
conveniently
The current presumptions will be adequate and necessary for operation of 150,000 cu meter AAC unit. The
plant design, OH cranes, rails have been planned in such a manner that the unit can double up its capacity
simply by installing autoclaving chambers, with minimal changes in the infrastructure in the years to come.

CHAPTER II

INTRODUCTION

The Feasibility study is based on setting up an AAC blocks manufacturing plant on proposed & alloted land at
MIDC Butibori by the government for industrial use having installed capacity of 1,50,000 cu.m. p.a. AAC
blocks are next generation construction material that are extensively in used in developed markets. It has started
gaining AACeptance in Indian construction markets in last decade and it will used extensively in future as
government is promoting the same since it consumed environmentally hazardous fly ash (generated by coal
based thermal power plants) that is abundant in India.

There is an established and rapidly growing market demand for AAC products manufactured in Vidarbha,
West Chattisgarh, North Andhra Pradesh and rest of Maharashtra and to meet the demand the product is being
transported from large distances at present.

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Innovobiz-2016 Conference Proceedings GE-International Journal of Management Research
ISSN (O): (2321-1709), ISSN (P): (2394-4226), IF-4.88
Volume 4, Issue 4, April 2016. Website- www.aarf.asia

PROJECT AT A GLANCE:

Name of the product : Autoclaved Aerated Concrete Blocks

Nature of Industry : Manufacturing

Approx .Land Area Required : 28,200 sq. m.
Proposed Built up area : Factory Shed : 5600 Sq Mtrs
Proposed Capacity of the unit : 150,000 Cubic Metre per annum
Raw Material Required : It is made with mixture of fine powder of
Fly Ash, Cement, Quick Lime, Gypsum &
Alumina
Assumed Sales Price of AAC Blocks : ` 2800/- per Cu Metre (Excl. of duties & taxes)
No of working days assumed : 300 working days
No of Shifts : 3 Shifts (full capacity)
Man Power Requirement : Managerial Staff, Skilled and unskilled labors
and others 60 Total
Power Requirement Assumed : 700 KVA
Connectivity : Road and Rail
Loan Period (Including : Seven years three months
proposed repayment holiday)
Door to Door repayment : Eight years six months
(including construction period)

PROJECT COST :-
(Rs in Lacs)

ESTIMATED
PARTICULARS AMOUNT

01 Land : 91.80

02 Civil Work # : 815.58

03 Plant & Machinery # : 1858.77

04 Electric Installation : 71.05

05 Furniture & Fixtures : 1.23

06 Preoperative Expenses : 20.00

07 Margin money for working Capital : 147.70

08 Margin money for working Capital : 158.00

Total : 3164.13

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Innovobiz-2016 Conference Proceedings GE-International Journal of Management Research
ISSN (O): (2321-1709), ISSN (P): (2394-4226), IF-4.88
Volume 4, Issue 4, April 2016. Website- www.aarf.asia

MEANS OF FINANCE:
(Rs In Lacs)
ESTIMATED
PARTICULARS AMOUNT

01 Promoters Contribution : 934.13

02 Term Loan From Bank

2230.00

Total : 3164.13

WORKING CAPITAL REQUIREMENTS:

(Rs In Lacs)
PARTICULARS AMOUNT

Total Working Capital Gap 610.00

25% Margin Money Covered In Project Cost

160.00
Working Capital Limit From Bank
450.00

LITERATURE REVIEW:-

As per a report published by Economy Watch (2010) Construction Industry Trends all over the world show a
rise in its rate of growth. This industry is composed of many components including construction of heavy and
civil engineering (highways, bridges, railway tracks, airports, etc.), real estate (both residential as well as
commercial) development, and specialized construction products (such as architectural products, electrical
connections, decorative items, etc.). All these segments cannot be expected to show similar trends and in fact are
showing differential growth pattern all over the world. India is seeing a boom in the construction sector mainly
due to the government initiative in expansion of the developmental facilities. Economic upsurge has also
generated enhanced generation of demand in the real estate sector (both residential as well as commercial).
Construction Industry in India is rising at a phenomenal rate of 7 to 8% p.a.

As stated by Nargis Namazi (2011) in an article published in Business Review across the world, the
construction industry is witnessing a tremendous boom.
Singh Vandana (2009) concluded her research paper with the remark that the Real Estate is a very wide concept
and it is highly affected by the macro-economic factors like GDP, FDI, per capital income, interest rates and
employment in the nation.

ABOUT THE PRODUCT: AUTOCLAVED AERATED CONCRETE (AAC) BLOCK

AAC is an environmentally friendly material. AAC is inert and non-toxic. It is produced with environmentally
sound, low cost, and readily available raw materials. In fact, by using fly ash, a waste product of coal-fired
electrical generators, AAC even mitigates a solid waste disposal problem faced by electrical utilities.
Manufacturing requires relatively small amounts of energy and does not release pollutants; scrap can even be
ground and put back into the mix.. On the contrary, AAC allows vapors and concentrations of other gasses to
diffuse through its cellular structure and has been endorsed by European environmental agencies, including the
Federal Association for Healthy Building Products and the International Institute for Healthy Construction.
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Innovobiz-2016 Conference Proceedings GE-International Journal of Management Research
ISSN (O): (2321-1709), ISSN (P): (2394-4226), IF-4.88
Volume 4, Issue 4, April 2016. Website- www.aarf.asia

Environmental concerns about plastic foam and fibrous insulation materials are other reasons to consider AAC
as an alternative to currently used materials.

Industry Outlook:

The AAC Block industry is in early stages in the country. The consumers of this industry can be profiled as
government supplies, real estate developers/builders and individuals. Construction segment is the biggest
consumers of AAC blocks. The construction segment has further gained significance with the NDA led new
government at the Centre envisaging a roll out package to boost housing sector. Therefore, it can be concluded
as the sunshine sector due its advantage over the traditional red clay bricks.

Construction industry is one of the most rapidly developing sector in India since last decade and it is expected to
out-pace the growth of other industries in present decade as well. Construction industry is also very vital
because anybody who is concerned with economic development these days highlights the need for infrastructure
development. This has resulted in higher demand for building material supply industry like steel, cement, bricks,
sand and builder hardware, paints etc. This has further gained substance with the NDA (BJP) led new
government at the Centre envisaging a roll out package to boost housing sector.

AAC blocks are substitute to traditional red bricks and are better in terms of supply strength and environmental
effects for lesser energy consumption and waste recycling. AAC is made with fine aggregates, cement, and an
expansion agent that causes the fresh mixture to rise like bread dough.

The product viability arises from the fact that there is a huge existing market for conventional clay bricks which
neither offers huge technical advantages obtained from AAC, neither is the manufacturing environment friendly
compared to AAC production. An alternative to conventional clay bricks is fly ash brick made using fly ash &
sand is also equally expensive and very heavy. They also lack desired quality and strength as the sector is
mostly un-organised and controlled by fly by night operators. So the AAC has a ready market and as can be
observed from financial reports, it is remunerative to sell AAC bricks even at lower price than clay bricks.

FINANCIAL ANALYSIS

1. SENSIVITY ANALYSIS:

Scenario 1: When Sale Price remains constant and Raw Material and Production Cost increases by 5%
(Rs Lacs)
Particulars 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23

Net Sales (` In Lacs) 1,487 2,491 2,720 2,730 3,130 3,150 3,350 3,360

Operating Profit 413 636 529 505 475 347 233 84

(` In Lacs)

PAT (` In Lacs) (71) 128 82 67 73 15 (26) (102)

Break Even Sales

(BEP) 61234 78895 87175 99681 108664 129397 158758 245375
In Cu. M.

ROCE 5.33% 13.51% 11.73% 12.25% 11.89% 8.42% 1.13% -7.92%

ISCR 1.60 2.50 2.45 2.48 3.10 3.42 6.20 65.33

DSCR 1.60 1.16 1.08 1.05 0.82 0.66 0.53 0.53

Average DSCR 0.93

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ISSN (O): (2321-1709), ISSN (P): (2394-4226), IF-4.88
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Scenario 2: Sale Price rise by 5% and Raw Material and Production Cost rise by 10%
(Rs Lacs)
Particulars 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23
Net Sales (` In Lacs) 1,487 2,615 2,999 3,160 3,805 4,020 4,489 4,728

Operating Profit 413 678 608 610 615 495 384 210
(` In Lacs)

PAT (` In Lacs) (71) 155 137 143 176 130 94 9

Break Even Sales

(BEP) 61234 75034 79045 85942 89438 100354 114674 154965
In Cu. M.

ROCE 5.33% 14.36% 13.43% 14.61% 15.24% 12.97% 7.34% 0.60%

ISCR 1.60 2.61 2.70 2.84 3.78 4.49 9.10 116.55

DSCR 1.60 1.21 1.19 1.21 1.00 0.86 0.77 0.95

Average DSCR 1.10

Scenario 3: When Sale Price fall by 5% and Raw Material and Production Cost increase by 5%
(Rs Lacs)
Particulars 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23
Net Sales (` In Lacs) 1,487 2,366 2,455 2,341 2,550 2,438 2,464 2,347

Operating Profit 413 516 272 128 (87) (344) (627) (898)
(` In Lacs)

PAT (` In Lacs) (71) 22 (166) (295) (461) (671) (896) (1,130)

Break Even Sales (BEP) 61234 94658 137791 266653 2924256 -258514 -111391 -67117
In Cu. M.

ROCE 5.33% 10.09% 2.58% -5.54% -49.04% 115.91% 59.04% 43.79%

ISCR 1.60 2.07 1.35 0.75 (0.44) (3.00) (14.67) (410.74)

DSCR 1.60 0.96 0.59 0.32 (0.12) (0.58) (1.25) (3.35)

Average DSCR (0.23)

2. Key Financial Indicators:

` (Rs Lacs)
Particulars / Period
2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23

No. of Months 10 12 12 12 12 12 12 12

Net Sales 1,486.80 2,664.94 3,114.63 3,344.25 4,103.06 4,417.88 5,027.69 5,395.20
PBILDT 413.20 774.22 834.46 980.64 1,222.96 1,313.07 1,507.23 1,619.74

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ISSN (O): (2321-1709), ISSN (P): (2394-4226), IF-4.88
Volume 4, Issue 4, April 2016. Website- www.aarf.asia

PBT (71.05) 280.56 411.38 589.66 900.76 1,064.83 1,337.69 1,514.27

PAT (71.05) 218.54 288.79 392.66 586.18 684.33 855.76 965.60
Net Cash AACruals 131.74 461.88 532.13 636.00 829.50 927.55 1,098.80 1,206.29
PBILDT / Net Sales
(%) 27.79% 29.05% 26.79% 29.32% 29.81% 29.72% 29.98% 30.02%
PAT / Net Sales (%) -4.78% 8.20% 9.27% 11.74% 14.29% 15.49% 17.02% 17.90%
Gross Block 3,032.74 3,032.74 3,032.74 3,032.74 3,032.74 3,032.74 3,032.74 3,032.74
Net Block 2,820.24 2,576.90 2,333.55 2,090.21 1,846.88 1,603.66 1,360.62 1,119.93
Paid up Capital 350.00 350.00 350.00 350.00 350.00 350.00 350.00 350.00
Tangible Networth
(TNW) 276.14 494.68 783.47 1,176.13 1,762.30 2,446.64 3,302.40 4,267.99
Group Investments - - - - - - - -

Adjusted TNW 276.14 494.68 783.47 1,176.13 1,762.30 2,446.64 3,302.40 4,267.99
LTD/TNW 7.05 3.36 1.76 0.82 0.29 0.03 - -
DFS/TNW
TOL/TNW 8.68 4.27 2.33 1.20 0.55 0.21 0.14 0.11
Current Assets 648.61 952.86 1,109.82 1,196.20 1,463.64 1,574.10 1,782.57 1,912.05
Current liabilities 413.53 772.48 788.85 797.67 936.05 981.99 987.90 616.57
Net Working Capital 235.08 180.38 320.97 398.53 527.59 592.11 794.67 1,295.48
Current Ratio 1.57 1.23 1.41 1.50 1.56 1.60 1.80 3.10

Other Indicators
ROCE (%) 5.33% 16.26% 17.65% 20.92% 24.41% 24.31% 22.18% 19.31%
ISCR 1.60 2.87 3.37 4.03 6.51 9.68 27.38 559.27
DSCR 1.60 1.33 1.49 1.71 1.72 1.86 2.33 4.57
Average DSCR 2.08

3. DSCR
(Rs Lacs)
Particulars 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23

PAT (71.05) 218.54 288.79 392.66 586.18 684.33 855.76 965.60

Depreciation 202.79 243.35 243.35 243.35 243.32 243.22 243.04 240.69

Interest on Term
Loan 220.71 247.44 224.09 209.98 150.63 106.92 41.65 2.16

Total 352.45 709.32 756.23 845.98 980.13 1,034.47 1,140.45 1,208.45

SERVICE:

Repayment of Term - 284.00 284.00 284.00 418.00 448.00 448.00 64.00

Loan

Interest On Term
Loan 220.71 247.44 224.09 209.98 150.63 106.92 41.65 2.16
Total 220.71 531.44 508.09 493.98 568.63 554.92 489.65 66.16

ISCR 1.60 2.87 3.37 4.03 6.51 9.68 27.38 559.27

DSCR 1.60 1.33 1.49 1.71 1.72 1.86 2.33 4.57

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SWOT ANALYSIS

STRENGTH:

Promoters will have have good experience, skills, resources and networking of marketing and business which
can be cashed well.

Round the year availability of raw material.

Vast growing domestic market.

Updated plant and machinery use of latest technology in the manufacturing process.

Appropriate location.

Environmentally green project.

WEAKNESS:

Manpower remuneration less attractive in comparison to contemporary discipline for talent.

Promoters will have little or no industrial experience.

OPPORTUNITIES:

Vast potential and Scope of Central India market.

The industry is expected to grow at fast pace of about 1.5 times of GDP growth rate.

Clay brick market is unable to keep pace with demand and alternative and environmentally friendly modern
technology remains the best bet.

THREATS:

Alternative more environmental friendly technology breakthrough may be a possible substitute to the use of
AAC.

The growing global concerns arising out of the impact of crude prices along with increased inflation on
domestic front.

Competition from national as well and International players

Loss of trained manpower to new competitors as this industry is still in nascent stage.

Industry is regulated by very small unorganized players.

CONCLUSION:

After analyzing the project details and other relevant data in detail and from the information collected from
internet & existing players in the industry which i believe to be true and subject to my observations in the
overview, the proposed manufacturing plant is considered "Financially Viable and Technically Feasible".

This seems a temporary phase with economy/construction sector expected to bounce dynamically with the
government thrust on housing sector. The unit is expected to achieve the breakeven in 2nd year of operation and
thereafter sales will be showing a growing trend. The unit will belong to the sunshine booming sector with
latest technology. There is ready market for the AAC Blocks. The proposed unit will enjoy monopoly in central
India as heavy capital cost creates entry barrier for the competition. Moreover, any player coming with such
AAC block unit has to go through the same process incurring same cost/higher cost due to dollar exchange rate
and increase in cost inflation in construction and steel costs.
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ISSN (O): (2321-1709), ISSN (P): (2394-4226), IF-4.88
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Hence in our opinion the research study presented for manufacture of Autoclaved Aerated Concrete
manufacturing unit is
Technically as well as Economically Viable & Financially Feasible.

REFRENCES:

www.tolexo.com
http://shodh.inflibnet.ac.in/bitstream/123456789/303/3/03_literature%20review.pdf (Literature Review on
Indian Construction Industry)
www.tradeindia.com
https://en.wikipedia.org/wiki/Autoclaved_aerated_concrete
http://www.biltechindia.com/biltech-ace-aac-benefits-advantages.asp?links=b3
http://www.aac-india.com/
www.alibaba.com

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