HERBAL HAIR OIL

INTRODUCTION
Hair oil is widely consumed by all the people every day; it is an essential
item in every day life. It gives good attraction and fragrance to hair. The
usage is increasing every day in line with the improvement in standard of
living of the people. The herbal essences and perfumes are added now in
the hair oil to give them a natural flavour and benefits of some herbs to
hair for better nourishment growth and colour.

MARKET

India’s per capita cosmetic and toiletries consumption is 50 times lesser

than that of Hong Kong, 18 of Japan, 15 of Taiwan, 12 of Philippines and
Malaysia and half of China, despite high penetration levels for cosmetic
products because of its population and size based, according to The
Associated Chambers of Commerce and Industry of India (ASSOCHAM).

The Associated Chambers of Commerce and Industry of India

(ASSOCHAM) has projected that the market size of herbal industry which
is currently estimated at Rs. 7,500 crores (Rs. 75 billion) will double to
levels at Rs. 15,000 crore by 2015 since this industry would be growing
at a compounded annual growth rate of over 20% henceforth.

In a study brought out by ASSOCHAM on Herbal Industry and Global

Market 2015, it is pointed out that India’s rich resource of
medicinal plants and traditional treasure of knowledge in this area, its
share at present is considered very meager. A quick estimate of the
potential reveals that India can generate raw stock of around Rs. 300
billion and easily achieve around Rs.150 billion value added products.
Thus, India is hardly able to exploit less than 50% of its potential.
Interestingly both raw materials (herbs) and herbal products have ready
market globally.

Releasing the study, ASSOCHAM Secretary General, D.S.Rawat said that

ideally, the niche market that India can focus on include Ayurvedic
Medicines and Dietary Supplements (including health drinks), extracts,
Oils and other derivatives , skin care and beauty aids.

According to the study, the Indian domestic market can be broadly

segmented into two categories. The first one will cover raw materials
required by the industrial units and direct consumption for household
remedies, whereas the second category will cover ready to use finished
medicines, health supplements, etc.

Herbal cosmetics
The herbal cosmetics industry is "driving growth in the beauty business"
in India and is expected to grow at a rate of seven per cent as more
people shun chemical products in favour of organic ones.

"During the last decade, the herbal beauty care business has actually
driven the growth of the beauty business in India. The emphasis has
been on the spectacular growth of the herbal and ayurvedic beauty
products business," as per the beauty expert Shahnaz Husain
She was the first to introduce the concept of ayurvedic cosmetics to the
world when she launched her products way back in 1970.

Today, the Indian cosmetics industry has a plethora of herbal cosmetic

brands like Forest Essentials, Biotique, Himalaya, Blossom Kochhar,
VLCC, Dabur and Lotus; and many more are adding to the list.

The Indian cosmetics market - defined as skin care, hair care, colour
cosmetics, fragrances and oral care segments - stood at an estimated
$2.5 billion in 2008 and is expected to grow at seven per cent, according
to an analysis of the sector. One such brand is Tathaastu, which deals in
products made of essential oils.

Divita Kanoria, Tathaastu chief wellness officer, said the presence of

artificial and chemical ingredients in their cosmetic products has made
people rethink about suitable alternatives to suit their skin.

"Of late, there have been attempts to find alternatives. Beauty recipes
from China and India using traditional herbs have earned a special
significance the world over. Ayurvedic recipes from India for skin and
hair treatment also serve as cosmetics," Kanoria said.

"The best part about organic cosmetics is that unlike chemical-based

cosmetics, these do not interfere with the body's absorption of Vitamin D.
Moreover, these help an individual to have a healthy skin, lustrous hair
and glowing complexion in a completely natural way," she added. People
have also become aware of the "ingredients" of cosmetic products. "Today
awareness of beauty products and treatments, fashion and grooming is
at an all time high. The Indian customer is very much aware of the
ingredients in cosmetic products, the benefits of plant products and the
harmful effects of chemical ingredients," Husain said.

"Also the concept of 'total well being' has steadily gained ground. There is
much more awareness of the wellness concept and its benefits among
people today," she added.

Husain recollects how she had to create awareness among people about
the benefits of ayurvedic products when she launched her brand four
decades ago.

"Very early in my career, I had to create awareness of the benefits of

ayurvedic products and herbal healing. I made it a point to reply
personally to letters seeking solutions for skin and hair problems,"
Husain said.

"My philosophy and faith in Ayurveda have not only influenced markets
and minds but have become an integral part of my person and brand
image," she added.

INSTALLED CAPACITY
The proposed installed capacity of the unit is manufacturing 4800 litres
of Hair oil per annum. The capacity per day is 16 litres. (64 nos of 250
ml bottles)

PLANT AND MACHINERY

The plant and machinery required are the following

Qty Rs
Mixing tank
with stirrer-50 Ltrs
Filling machine-manual
Sealing machine
Bottle washing machine
Filter press
Testing equipments
TOTAL 320000.00

Testing Instruments & Laboratory

Moisture Balance –
Water testing
P- Turbidity meter Ph meter, Conductivity Meter etc.

MANUFACTURING PROCESS
The process of manufacture consists of mixing the oil, colour and
perfume with stirring. Then it is filtered and packed in bottles. The
bottles are sealed by cap sealing machines.

RAW MATERIALS
The raw materials required for manufacturing Hair oil are the following

For Quantity-Litres 4800.00

Qty Rate Value
Coconut oil 3840 98.00 376320
Castor oil 816 98.00 79968
Perfume/Herbal extracts Kgs 96 1200.00 115200

Colour Kgs 48.00 600.00 28800

TOTAL 600288
TOTAL for 4800.00 Rs. lakhs 6.00
Raw material cost per MT Litre 125.06
Packing material cost Litre 7.00 33600
Packing cost Rs lakhs 0.34

LOCATION & BUILDING

Building Area required 500 sq.ft
Monthly rent Rs 5000
Advance 10 months Rs 50000

UTILITIES
Three phase KW 3.00
Power charges Rs.lakhs p.a 0.40
For human consumption 200

MAN POWER
Monthly Total
wages
Supervisor 1 9000 9000
Skilled 1 7000 7000
Helpers 2 5000 10000
Assistant 1 6000 6000

sub total 32000

Add benefits 20% 6400
Total per month 38400

SCHEDULE OF IMPLEMENTATION
After finalizing the financing arrangements for the project, the project
can be implemented in three months period.
COST OF PRODUCTION AND PROFITABILITY
A cost and profitability statement projected for the first 3 years of
operations is given in Annexure. The profitability is based on the
following assumptions.

Assumptions
Installed capacity 4800 Litres of Hair Oil per annum (19200
bottles of 250 Ml)
Capacity utilisation Year-1 -60%
Year -2 -70%
Year-3 onwards- 80%
Selling price Rs.450.00 per litre ( Rs.112.50 per 250 Ml)
Raw materials As per the details given above
Packing materials As per details given above
Power Rs.0.24 lakh per annum at 100%
Wages and salaries Rs.4.61 lakhs with increase 5% every year.
Repairs and Maintenance Rs.0.06 lakh per annum
Depreciation Written down value method -15 % on
machinery
Selling general and Rs.30000 per annum
administrative expenses
Interest on Term loan 14% per annum
Interest on working capital 14 % per annum
Income tax 34 % on profits

PLANT AND MACHINERY SUPPLIERS:

1. The Royal Scientific Industries, T.S.74-A, Tiny Sector, SIDCO
Industrial Estate, Ekkaduthangal, Chennai 600 097.
2. Fluidtech Engineers, 10/8, Chakrapani Road, Race View Colony,
Guindy, Chennai 600 032.

3. Techno Consultants, 52 (138), North Usman Road, T.Nagar,

Chennai 600 017.

RAW MATERIAL SUPPLIERS

W. Dorairajalu Chetty Chemical Depot,
30/1, Rasappa Chetty Street, Chennai 600 003.

Sha Rajaji Chemicals,

167, Govindappa Naicken Street, Chennai 600 001.

Sri Devi Chemicals,

114, Nyniappa Naicken Street,
Chennai 600 001.

Several other chemicals dealers in Govindappa Naicken Street,

Nyniappan Street, Chennai.

FINANCIAL ASPECTS

1. COST OF PROJECT
[Rs.lakhs]

Land & Building (Advance) 0.50

Plant & Machinery 3.20
Other Misc. assets 0.50
Pre-Operative expenses 1.00
Margin for WC 0.20
5.40
 2. MEANS OF FINANCE

Capital 3.00
Term Loan 2.40
5.40

3. COST OF PRODUCTION & PROFITABILITY STATEMENT

[Rs.lakhs]
Years 1 2 3 4 5

Installed Capacity Kgs 4800 4800 4800 4800 4800

Utilisation 60% 70% 80% 80% 80%
Production/Sales Kgs 2880 3360 3840 3840 3840

Selling Price Rs.450.00 per litre

Sales Value (Rs.lakhs) 12.96 15.12 17.28 17.28 17.28

Raw Materials 3.60 4.20 4.80 4.80 4.80

Packing 0.20 0.24 0.27 0.27 0.27
Material
s
Power 0.24 0.28 0.32 0.32 0.32
Wages & 4.61 4.70 4.79 4.89 4.99
Salaries
Repairs & Maintenance 0.30 0.33 0.36 0.40 0.44
Depreciation 0.48 0.41 0.35 0.29 0.25
Cost of 9.43 10.15 10.89 10.97 11.07
Productio
n
Selling, Admin, & General exp 2.40 2.52 2.65 2.78 2.92
Interest on Term Loan 0.34 0.29 0.21 0.21 0.21
Interest on Working Capital 0.00 0.00 0.00 0.00 0.00
Total 12.17 12.96 13.75 13.96 14.20

Profit Before Tax 0.79 2.16 3.53 3.32 3.08

Provision for tax 0.00 0.73 1.20 1.13 1.05
Profit After Tax 0.79 1.43 2.33 2.19 2.03

Add: 0.48 0.41 0.35 0.29 0.25

Depreciation Cash Accruals 1.27 1.84 2.68 2.48 2.28

Repayment of Term Loan 0.00 0.60 0.60 0.60 0.60

4. WORKING CAPITAL:

Months Values % Margin Bank

Consumptions Amount Finance

Raw Materials 0.50 0.15 100% 0.15 0.00

Expenses 1.00 0.05 100% 0.05 0.00
0.20 0.20 0.00

5. PROFITABILITY RATIOS BASED ON 80% UTILISATION

Profit after Tax = 2.33 13%

Sales 17.28

Profit before Interest and Tax = 3.74 69%

Total Investment 5.40

Profit after Tax = 2.33 78%

Promoters Capital 3.00

6. BREAK EVEN LEVEL

Fixed Cost (FC): [Rs.lakhs]

Wages & Salaries 4.79
Repairs & Maintenance 0.36
Depreciation 0.35
Admin. & General expenses 2.65
Interest on TL 0.21
8.36
Profit Before Tax (P) 3.53

BEL FC x = 8.36 x 80 x 100

= 100
FC +P 11.89 100

56% of installed capacity