Draft Detailed Project

Report

Textile & Allied Products

Cluster, Hisar
Submitted to,

Department of Industries and Commerce

Government of Haryana
(for assistance under Mini Cluster Scheme)

Report No. 2019-CHD-0003

March 2019

Submitted by,
Hisar Textile & Allied CFC Private Limited

Prepared by,
Ernst & Young LLP
Under the project: MSME Ecosystem
Transformation in Haryana
 Draft Diagnostic Study Report of Textile and Allied Products Cluster, Hisar

25th March 2019

Director
Department of Industries & Commerce,
Government of Haryana
1st Floor, 30 Bays Building,
Sector 17, Chandigarh

Dear Sir/Madam,
As part of our engagement for providing consulting services for ‘MSME Ecosystem
Transformation in the State of Haryana’, we hereby submit the Draft Detailed Project Report
(DPR) for setting up of Common Facility Centre (CFC) at Textile & Allied Products Cluster,
Hisar for your kind perusal. The deliverable has been prepared in accordance with our
engagement agreement with Directorate of Industries, Govt. of Haryana dated 03 Jan
2017, and our procedures were limited to those described in that agreement.
This Detailed Project Report is based on studies of and discussions with:
► Directorate of Industries, Govt. of Haryana

► DIC Hisar

► Textile and allied products manufacturing units located in Hisar

► Industry experts

► Secondary research

Our work has been limited in scope and time and we stress that more detailed procedures
may reveal other issues not captured here. The procedures summarized in our Draft
Detailed Project Report do not constitute an audit, a review or other form of assurance in
accordance with any generally accepted auditing, review or other assurance standards, and
accordingly we do not express any form of assurance. This draft Detailed Project Report is
intended solely for the information and use of the Office of Director General Industries &
Commerce-Haryana and is not intended to be used by anyone other than specified party.
We appreciate the cooperation and assistance provided to us during the preparation of this
report. If you have any questions, please contact the undersigned.

Sincerely,

Amar Shankar, Partner – Advisory Services

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Disclaimer
This Draft Detailed Project Report for development of Common Facility Centre (CFC) at
Textile & Allied Products Cluster, Hisar has been prepared by Ernst & Young LLP
(hereinafter referred to as ‘EY’ or ‘Ernst & Young’ or ‘Us’) and delivered to the ‘Office of
Director of Industries & Commerce – Government of Haryana (O/o of DI-HR)’ (hereinafter
referred to as ‘the Client’).
The inferences and analyses made by EY in this report are based on information collated
through primary research, secondary research, discussions with the client personnel and
key stakeholders and our knowledge about the state mini cluster scheme and its objectives.
EY has taken due care to validate the authenticity and correctness of the information from
various sources, however, no representations or warranty, expressed or implied, is given by
EY or any of its respective partners, officers, employees or agents as to the accuracy or
completeness of the information, data or opinions provided to EY by third parties or
secondary sources.
Nothing contained herein, to the contrary and in no event shall EY be liable for any loss of
profit or revenues and any direct, incidental or consequential damages incurred by the
Client or any other user of this report.
In case the report is to be made available or disclosed to any third party, this disclaimer
along with all the limiting factors must be issued to the concerned party. The fact that EY
assumes no liability whatsoever, if for the reason any party is led to incur any loss for acting
upon this report, must be brought to the notice of the concerned party.
© EY, 2019

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 Draft Diagnostic Study Report of Textile and Allied Products Cluster, Hisar

Acknowledgement
We would like to express our sincere gratitude to Department of Industries & Commerce -
Haryana and its officials for their involvement and valuable inputs during the preparation of
this DPR. We are thankful to Sh. Devender Singh, IAS, Additional Chief Secretary,
Industries & Commerce and Sh. Ashok Sangwan, IAS, Director General Industries &
Commerce, Government of Haryana for sharing their insights about the ‘Enterprises
Promotion Policy 2015’ and their vision about the Mini Cluster Development Scheme.
Special thanks for Sh. R.C. Dahra, Advisor MSME Development, Department of Industries
& Commerce, Haryana for his proactive support and guidance to the team during the entire
process.
We would like to convey our sincere thanks to members of textile and allied products cluster,
Hisar for their assistance in facilitating stakeholder discussions. Further, we would also like
to thank officials of DIC, Hisar for providing support and information related to textile and
related units in Hisar.
Also, we must extend our sincere thanks to SME entrepreneurs and other key stakeholders
who gave us their valuable time and insights with respect to various dimensions of the
engineering industry and its support requirements. Without their help, capturing of the
industry insights would not have been possible.

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Abbreviations
AEMA Apparel Exporters & Manufacturers Association
AoA Articles of Association
AEPC Apparel Export Promotion Council
ATDC Apparel Training & Design Centre

BDS Business Development Services

BEP Break Even Point
CAGR Compound Annual Growth Rate
CFC Common Facility Centre

DIC District Industries Centre

DSR Diagnostic Study Report
DPR Detailed Project Report

DSCR Debt Service Coverage Ratio

EU European Union

GDP Gross Domestic Product

GSDP Gross State Domestic Product
HFC Haryana Financial Corporation

HSIIDC Haryana State Infrastructure & Industrial Development Corporation

HSVP Haryana Sahari Vikas Pradhikaran

HUS Hisar Udoyg Sangh

IDBI Industrial Development Bank of India

IRR Internal Rate of Return

MSME Micro, Small and Medium Enterprises
MSME-DI Micro, Small and Medium Enterprises – Development Institute

NCR National Capital Region

NPV Net Present Value
NIFT National Institute of Fashion Technology
NITRA North India Textile Research Association
NSIC National Small Industries Corporation

ROCE Return on Capital Employed

SIDBI Small Industries Development Bank of India
SWOT Strength, Weaknesses, Opportunities and Threats
UAM Udyog Aadhar Memorandum
USA United States of America

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Table of Contents
Executive Summary ................................................................................................................ 8
Sector overview ..................................................................................................................... 9
1. Introduction .................................................................................................................. 16
1.1 Overview of the cluster ........................................................................................... 16
1.2 About the State...................................................................................................... 16
1.3 Geographical Traits ................................................................................................ 17
1.4 Demographic Trends and Economic Structure .......................................................... 17
2. Sector Overview ............................................................................................................ 20
2.1 Brief Global Scenario .............................................................................................. 20
2.2 India Scenario ........................................................................................................ 21
2.3 Cluster scenario ..................................................................................................... 23
2.4 Cluster Products .................................................................................................... 25
3. Diagnostic Study Findings .............................................................................................. 27
3.1 Cluster Actors and their role ................................................................................... 27
3.2 Cluster Turnover, Market and Employment .............................................................. 31
3.3 Production Process ................................................................................................ 32
3.4 Strengths, Weaknesses, Opportunities and Threats (SWOT) Analysis ........................ 35
3.5 Major Issues / Problem Areas of the Cluster ............................................................ 39
3.6 Key technologies missing ........................................................................................ 40
4. Diagnostic Study Recommendations ............................................................................... 42
4.1 Soft Interventions Recommended and Action Taken ................................................. 42
4.2 Hard Interventions (Machines / Technology in the proposed CFC) ............................. 43
5. SPV for Project Implementation ..................................................................................... 47
5.1 Shareholder profile and Shareholding mix ................................................................ 47
5.2 Initiatives undertaken by the SPV ........................................................................... 50
5.3 SPV Roles and Responsibilities ............................................................................... 50
6. Project Economics ......................................................................................................... 53
6.1 Project Cost ........................................................................................................... 53
6.1.1 Land and Building ............................................................................................... 53
6.1.2 Plant and Machinery ........................................................................................... 53
6.1.3 Miscellaneous Fixed Assets ................................................................................. 56
6.1.4 Preliminary and Pre-Operative Expenses.............................................................. 56
6.1.5 Provision for Contingencies ................................................................................. 57
6.1.6 Margin Money for Working Capital ....................................................................... 57
6.1.7 Summary Project Cost ........................................................................................ 57
6.2 Means of Finance ................................................................................................... 58

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6.2.1 Share Capital ...................................................................................................... 59

6.2.2 Grant-in-Aid ....................................................................................................... 59
6.3 Expenditure Estimates............................................................................................ 59
6.3.1 Consumables ...................................................................................................... 59
6.3.2 Manpower Requirement ...................................................................................... 62
6.3.3 Utilities .............................................................................................................. 63
6.3.4 Annual Repairs and Maintenance Expenses .......................................................... 64
6.3.5 Insurance and Miscellaneous Administrative Expenses ......................................... 65
6.4 Working Capital Requirements ................................................................................ 66
6.5 Depreciation Estimates ........................................................................................... 68
6.6 Income/Revenue estimates ..................................................................................... 69
6.7 Estimation of profitability: Income and Expenditure statement ................................. 71
6.8 Cash flow statement ............................................................................................... 73
6.9 Projected Balance Sheets ....................................................................................... 74
6.10 Break-even analysis ............................................................................................... 76
6.11 Feasibility analysis summary and sustainability indicators ........................................ 79
6.12 Additional revenue sources ..................................................................................... 80
6.13 Risk Analysis & Sensitivities ................................................................................... 80
6.14 Assumptions for financial calculations: .................................................................... 81
7. Project Implementation and Monitoring .......................................................................... 84
7.1 Envisaged Implementation Framework .................................................................... 84
7.2 Monitoring Mechanism ............................................................................................ 86
8. Conclusion .................................................................................................................... 88
9. Annexures .................................................................................................................... 90
Annexure 1: DSR Approval & DPR Preparation Letter ......................................................... 90
Annexure 2: SPV Certificate of Incorporation .................................................................... 91
Annexure 2(a) & (b): Copy of Memorandum of Association (MoA) & Article of Association
(AoA) ............................................................................................................................... 92
2b (Articles of Associations) .............................................................................................. 96
Annexure 3: Verification of units by DIC, Hisar ................................................................. 108
Annexure 4: Building Availability Proof ............................................................................ 109
Annexure 5: Machinery Quotations .................................................................................. 110

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List of Figures
Figure 1: GSDP Composition 2015-16 ..................................................................................... 16
Figure 2: Haryana District Map ............................................................................................... 17
Figure 3: District Map of Hisar ................................................................................................ 17
Figure 4: Global Apparel Market Segmentation (based on global export data) ............................. 21
Figure 5: Textile and Garment Exports from India (US$ billion) .................................................. 21
Figure 6: Indian Textile & Garment Industry Snapshot ............................................................... 22
Figure 7: Textiles and Apparel Industry Trends in Haryana ........................................................ 24
Figure 8: Key Cluster Actors .................................................................................................. 31
Figure 9: Flow Chart of Production Process ............................................................................. 33
Figure 10: Organisational Structure of Proposed CFC ............................................................... 51

List of Tables
Table 1: Value Chain Analysis of seat cover for Swift Car ......................................................... 34
Table 2: SWOT analysis of the cluster...................................................................................... 35
Table 3: Major Gaps Identified ................................................................................................ 39
Table 4: Technology Gaps Identified and Interventions ............................................................. 40
Table 5: List of SPV Directors ................................................................................................. 48
Table 6: Details of SPV Members of Textile & Allied Products Cluster, Hisar & Shareholding Pattern
........................................................................................................................................... 49
Table 7: List of Proposed Plant & Machinery ............................................................................ 54
Table 8: Miscellaneous Fixed Assets ........................................................................................ 56
Table 9: Preliminary and Pre-Operative Expenses .................................................................... 56
Table 10: Total Project Cost ................................................................................................... 57
Table 11: Means of Finance .................................................................................................... 58
Table 12: Consumables .......................................................................................................... 60
Table 13: Expenditure Related to Salary (Direct Manpower) ...................................................... 62
Table 14: Expenditure Related to Salary (Indirect Manpower) .................................................... 62
Table 15: Machine & Equipment (facility) wise power requirement ............................................. 63
Table 16: Annual Expenditure Statement vis-à-vis Power Charges ............................................. 64
Table 17: Annual Repairs and Maintenance Expenditure ........................................................... 64
Table 18: Insurance and Miscellaneous Administrative Expenses ............................................... 65
Table 19: Calculation of Working capital requirement ............................................................... 66
Table 20: Depreciation based on WDV ..................................................................................... 68
Table 21: User Charges for Machinery..................................................................................... 70
Table 22: Income and Expenditure Statement .......................................................................... 71
Table 23: Cash Flow Statement .............................................................................................. 73
Table 24: Balance Sheet ........................................................................................................ 75
Table 25: Break Even Estimates ............................................................................................. 76
Table 26: Financial Analysis ................................................................................................... 79
Table 27: Calculation of Return on Capital Employed ................................................................ 79
Table 28: Sensitivity Analysis ................................................................................................. 80
Table 29: Project Implementation Schedule ............................................................................. 84

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Executive
Summary

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Executive Summary

The Government of Haryana through the Department of Industries and Commerce intends
to transform the MSME sector of the state and put it on a growth path. Several incentives
have been offered under the state’s ambitious ‘Enterprise Promotion Policy (EPP) 2015’ to
provide an impetus to growth of the MSME sector. Towards this, the state aims to
strengthen the technology infrastructure as well as enhance productivity and
competitiveness of various MSME clusters across the state by leveraging funding under the
State Mini Cluster Scheme providing grant under its EPP 2015.

In this context, this Detailed Project Report (DPR) has been prepared to seek grant-in-aid
assistance under the State Mini Cluster Scheme to set up a state-of-the art Common Facility
Centre (CFC) in Textile & Allied Products Cluster at Hisar, Haryana.

Sector overview
India’s textile and garment sector is one of the oldest industries in Indian economy dating
back several decades. Even today, textile and garment sector is one of the largest
contributors to India’s exports with approximately 11 per cent of total exports. The textile
and garment industry is also labour intensive and is one of the largest employers. The textile
and garment industry can be broadly divided into two segments - yarn and fibre, and
processed fabrics and apparel. India accounts for ~14 per cent of the world's production of
textile fibres and yarns (largest producer of jute, second largest producer of silk and cotton,
and third largest in cellulosic fibre). India has the highest loom capacity (including hand
looms) with 63 per cent of the world's market share.
India was the third largest exporter of textiles in 2015, and the 8th largest exporter of
clothing (behind China, European Union, Bangladesh, Vietnam, and Hong Kong)1. Textile
and apparel exports from India were US$ 40 billion in 2016, and expected to increase to
US$ 82 billion by 2021. Apparel categories had a larger share of 56%, while textile
categories had the remaining share of 44% in the overall trade. EU & USA are the largest
markets for textile and apparel with a share of 36% and 15% respectively2.

The Handloom Sector is one of the largest unorganized economic activities after agriculture
and constitutes an integral part of the rural and semi-rural livelihood. As per 3rd Handlooms
Census, carried out in 2009-10, more than 43 lakh people are engaged in weaving and allied
activities which was 65.5 lakh as per 2nd handloom census conducted during 1995-96. India
has the highest loom capacity (including hand looms) with 63 per cent 2.4 million looms of
varied designs and construction) of the world’s market share. Readymade garments remain
the largest contributor to total textile and apparel exports from India, contributing 40 per
cent to total textile and apparel exports. Cotton and man-made textiles were the other major
contributors with shares of 31 per cent and 16 per cent, respectively. Apart from this,
leather industry is gaining a place of prominence in the global economy due to substantial
export earnings and growth.

1
WTO - World Trade Statistical Review 2016
2
FICCI White Paper – Global Shifts in Textile Industry & India’s Position - 2016

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The Indian leather industry accounts for around 12.93 per cent of the world’s leather
production of hides/skins. The country ranks second in terms of footwear and leather
garments production in the world and accounts for 9.57 per cent of the world’s footwear
production.
The export of leather and leather products multiplied during the past couple of decades –
from US$ 1.42 billion in 1990-91 to about US$ 4 billion in 2010-11 and further to US$ 6.5
billion in 2014-15.The industry today is among the top 10 foreign exchange earning
industries for the country.3The main export market for Indian leather and leather products
was Germany with a share of12.3% in 2014-15.While leather exports from India has
witnessed an increasing trend, there is a need to focus on identifying products where India
can enhance its exports and increase its share in global exports.

Blessed with a resource advantage with Haryana as one of the largest producers of cotton
in Northern India. Haryana is one of the leading producers of textiles, readymade garments
and apparel. Hisar has a diverse range of establishments manufacturing full lines of
automobile accessories such as seat cover, dashboard cover, floor mats etc and bags such
as school bags, backpacks etc.

The Textile & Allied Products Cluster, Hisar houses about 40 micro units across the value
chain for textiles (including leather). The cluster is located in and around Hisar. All the units,
in the cluster are micro enterprises. These units are located in automarket of Hisar in close
proimity to the National Highway 10 as the nearest National Highway. The annual turnover
of the cluster is about 8 Crore. Several micro level entrepreneurs face challenges in precise
cutting machinery and designing facility due to high costs and lack of local availability.

The cluster units are engaged automobile accessories & Bag manufacturing, including
cutting, stitching, washing, finishing, packing, etc. Most units manufacture for other brands,
while some also manufacture under their own brands in addition to manufacturing for other
brands. They manufacture automobile accessories with Rexene, non-woven fabric etc.
which are having a greater demand domestically.

Diagnostic Study and Interventions

A diagnostic study was undertaken by the cluster members in February 2019 to map the
existing business processes in the cluster, identify the gaps, and understand the
requirements of the cluster. The diagnostic study report (DSR) was prepared by EY in close
consultation with cluster stakeholders and the DIC, Hisar. The awareness level of the cluster
units (on new technologies, cluster development initiatives, etc.) was found to be
satisfactory. Additionally, it was observed that most of the cluster units deploy out-dated
technologies and are unable to meet the requirements of the market due to lack of
availability of modern machines/equipment. The quality of products is ordinary due to
dependence on manual techniques and conventional machines. Due to non-availability of
advanced facilities, units are unable to diversify and produce good quality products. These

3 “Indian Leather Industry – Perspective and Strategies”, EXIM Bank of India, 2015

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were the major pain areas that necessitated an urgent intervention. In this context, the units
decided to establish a CFC.

The DSR was validated by the stakeholders under the chairmanship of JD, DIC Hisar on 14th
March 2019. It was subsequently accepted and approved by W/DI&C on 19th March 2019.
The SPV was granted permission to go ahead and EY was directed to prepare Detailed
Project Report (DPR) for the cluster.

Proposed Common Facility Centre

The proposed CFC will facilitate:
► Facility for computerized fabric cutting, designing and lamination.

Such a common facility will both supplement and complement the activities of firms in the
cluster, and there is no similar facility available in the district for use by the micro
enterprises of the cluster. The proposed common facilities will be utilized by the SPV
members and will also be available to non-members units within and outside the cluster. The
facility will provide a much needed infrastructural push to the cluster units and will enable
them to become more competitive.

Special Purpose Vehicle for Project Implementation

After the diagnosis study, the cluster units came together to form a Special Purpose Vehicle
(SPV) by the name and style of ‘Hisar Textiles & Allied CFC Pvt Ltd.’ Hisar’ The SPV has
been set up as a private limited company under section 8 of the Companies Act, 2013 and
rule 7 of the Companies (Incorporation) Rules, 2014. DIC, Hisar has played an important
role in SPV formation by cluster stakeholders. The SPV already includes about 12 members
who are subscribing to the necessary equity base of the company. The proposed CFC will be
implemented on public-private partnership basis through the SPV by availing support from
Government of Haryana (under EPP 2015).

The SPV members have a track record of cooperative initiatives. SPV members are also
members of prominent cluster associations. Cluster members have been autonomously
undertaking several soft interventions to enhance knowledge and exposure of the cluster
units on new trends in textile& leather industry and enhancing productivity of their units.
This includes exposure to cluster development initiatives in other clusters, exposure visits
to fairs, registration under UAM, awareness programs on new trends in textile
manufacturing, lean manufacturing techniques, design interventions and new technologies.
These programs were conducted in collaboration with DIC, State Government and BDS
providers such as DI-MSME, etc.

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Project Parameters, Viability and Sustainability

The ‘Hisar Textiles & Allied CFC Pvt Ltd.’ Hisar with support from State Government (under
the Mini Cluster Development Scheme) is planning to set up a Common Facility Centre
having state-of-the-art textile &allied products finishing facilities to undertake job work of
cluster units with a total project cost of about Rs.209.20 Lakhs. However, the maximum
eligible project cost as per the scheme guidelines is Rs 200 lakhs, with government of
Haryana’s grant restricted to 90% of max eligible project cost i.e. to Rs 180 lakhs. Hence,
the SPV members have proposed to contribute entire amount beyond Rs. 180 lakhs, taking
their overall contribution to about INR 39.69 of the total project cost. Support from State
Government is envisaged for Rs. 169.51 Lakhs.

The cost of the project and proposed means of finances is tabulated below:

(Rs in Lakh)
PROJECT COST
Total Amount
S.
Particulars Project as per Remarks
No.
Cost Guidelines
1 Land & Building
a. Land Value 0.00
b. Land Development 0.00
0.00 On Lease
c. Building & Other Civil Works 0.00
d. Building Value 0.00
Sub Total (A) 0.00 0.00
2 Plant & Machinery
a. Indigenous 15.64
b. Imports 158.82 188.35 Eligible
c. Secondary Machines 13.90
Sub Total (B) 188.35 188.35
3 Miscellaneous fixed assets (C) 1.50 0.00
4 Preliminary & Preoperative Expenses (D) 4.15 0.00
5 Contingency
Not eligible
a. Building @ 2% 0.00 0.00
for grant
b. Plant & Machinery @ 5% 9.42 0.00
Sub Total (E) 9.42 0.00
6 Margin money for working capital @ 75% C.U. (F) 5.79 0.00
Grand Total (A+B+C+D+E+F) 209.20 188.35

The total project cost is estimated to be Rs. 209.20 lakhs. As indicated above, assistance
to the project from the Govt. of Haryana is envisaged to the tune of Rs. 169.51 lakhs. SPV
contribution is to the tune of Rs. 39.69 lakhs of the total project cost. The means of
financing are presented below:

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DETAILED MEANS OF FINANCE

Project cost up to INR
Project cost over INR 200 lakh
200 lakh
S. Source of Total
Amount Amount Remarks
No. finance Percentage Percentage Amount
(INR in (INR in
Contribution Contribution (INR in
lakh) lakh)
lakh)
As per EPP,
Grant-in-aid 2015 GoH
under State contribution
Mini Cluster is max 90%
90% 169.51 0% 0.00 169.51
1 Development (Including
Scheme (Govt. soft
of Haryana) intervention
expenses)

Contribution
10% 18.83 100% 20.85 39.69
2 of SPV

Total 100% 188.35 100% 20.85 209.20

The viability and sustainability of the project is evident from the project economics as well
as the cooperative spirit and profile of the SPV members. Some indicators of the viability
are as follows:

Project’s financial indicators

S. No. Particulars Estimates

BEP (cash BEP at initial operating capacity of
1 57.61%
75%)

2 Av. ROCE (PAT/CE) 29.09%

3 Internal Rate of Return (IRR) 24.15%

Net Present Value (at a discount rate of 10 NPV is positive and high (Rs.
4 per cent) - incorporating viability gap funding 149.691 lacs) at a conservative
(grant) by GoH project life of 10 years

4 years 11 months with Grant-in-

5 Payback period
aid assistance from GoH

Not Applicable (non-availment of

6 DSCR
term loan in this project)

As evident from the financials above, with viability gap funding under Mini Cluster
Development Scheme of GoH, the project is highly viable and sustainable. The project is

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expected to generate surplus from the fourth year of operation. Risk and sensitivity analysis
considering a decline in user charge/ capacity utilization also validates the project
sustainability.

Project Implementation

Project implementation is envisaged to involve a time-frame of about 10 months upon

receipt of approval of grant-in-aid assistance from the Government of Haryana under State
Mini Cluster Scheme. The project will be implemented by the SPV in close association with
DIC, Hisar.

In addition, for implementing this CFC project, a Project Management Committee (PMC)
comprising of the JD, DIC Hisar, and representatives of the SPV, FI, and EY experts shall be
constituted to directly oversee effective monitoring and implementation. The project will be
implemented through the SPV, and the PMC will report progress of implementation to the
CDCC as well as State Level Steering Committee.

The potential for the Cluster to grow is enormous, with an increasing demand of good quality
automobile accessories in the region. The strengths of the clusterlies in its location (both
geographically & industrially), with a thriving textile industry in the region. Hisar has become
a major industrial hub with presence of a large number of industries across various
segments such as engineering, textile food processing, rice milling, agriculture implements
and so on. The region along the NH 10 particularly witnessed tremendous growth of the
industries during the early 1990s. The Textile & Allied Products Cluster, Hisar produces
automobile accessories and other products for the domestic market, including large
retailers as well as the open market.

A majority of the manufacturers are concentrated in automarket of Hisar. The other

enterprises including job work units are primarily located in and around Hisar Town.
However, the cluster units are unable to diversify and produce cost efficient products due
to high fabric wastage, increased costs, production delays and poor margins.

This cluster has the ability to increase its output and market share by reducing wastage and
focussing on manufacturinghigh quality products. The proposed facility will be open to all
cluster firms to enable them to get job work done in order to cater to the textile product
requirements of the market. The facility will also provide an opportunity to micro units to
reduce fabric wastage and increase their capacity utilization and profitability. The facility
will provide a major infrastructural push to the units reeling under high competition. The
CFC will also enhance the co-operation and joint action among cluster stakeholders to
improve their competitiveness to meet the demands of the domestic market.

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Introduction

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1. Introduction
1.1 Overview of the cluster
There are about 40 textile manufacturing units in Hisar district, Haryana, with 12 units
willing to join hands to form a Special Purpose Vehicle (SPV) to set up a Common Facility
Centre (CFC) to address common problems of the cluster. Hisar district comprises of a total
1000 micro and small units engaged in several activities like textiles, garments,
engineering, auto components, food processing and so on. Several micro and small level
entrepreneurs face challenges in precise cutting machinery, designing facilities due to high
costs and lack of local availability. The annual turnover of the textile and leather cluster
(micro and small units) is about INR 8 Crore.
The cluster units are engaged in textile and allied accessories manufacturing, including
knitting, cutting, stitching, washing, finishing, packing, etc. Most units manufacture under
their own brands. They manufacture automobile accessories such as seat cover, steering
wheel cover, dashboard cover, neck rest etc and travel bags such as backpacks. Most units
supply to the franchise owners of the showrooms of the various brands such as Maruti,
TATA, Hyundai etc.

1.2 About the State

Haryana is 11thstate in the country in
terms of GSDP, with growth rate of
around 6.5%. Haryana contributes to
nearly 3.4% of the India’s GDP. With 18.20%
just 1.37% of the country’s
geographical area and 1.97% of 51.20%
country’s total population, the state is 30.60%
counted among the top few states with
the highest per capita income. The
state economy is predominantly
agriculture.
Primary Sector Secondary Sector Tertiary Sector
The industry sector contributes about
18% of the total GSDP of the state. Figure 1: GSDP Composition 2015-16
Haryana is fast emerging as one of the
most favoured investment destinations in India. The globalization of markets and a resilient
economy have given an incredible drive to the industrial sector in Haryana, which already
has a competitive advantage in terms of strategic location, basic infrastructure, and a large
skilled, educated and young workforce. Besides, the State has an investor-friendly policy
and regulatory environment. It is one of the leading states in terms of industrial production,
especially passenger cars, mobile cranes, two-wheelers & tractors. It is the 2nd largest
contributor of food grains to India’s central pool, accounts for more than 60% of the export
of basmati rice in the country, and is 3rd largest exporter of software.

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The state is gradually transforming

from an agrarian economy to an
industrial economy. To boost the
growth rate further and make
Haryana a favourable investment
destination, the state has developed
the Enterprise Promotion Policy in
2015. With the Enterprise Promotion
Policy-2015, the state has envisaged
a sustainable industrial spectrum in
the state with a special focus on
MSMEs in its endeavour for effecting a Figure 2: Haryana District Map
balanced regional and sustainable
development. In order to accelerate the industrial growth in the state, the focus of the
government is on holistic development by encompassing initiatives for resource efficiency
improvement, smarter technology, and environment friendly methods which reduce
resource consumption.

1.3 Geographical Traits

The state of Haryana was formed on 01 November 1966. It is situated in the northwest of
India with the capital of Chandigarh as a Union Territory. The state is surrounded by Delhi,
Rajasthan, & Uttar Pradesh with around 30% of the total area of the state falling under
National Capital Region (NCR). The state stands 21st in terms of its area. According to the
Census of India 2011, the state is 18th largest by the population. Over the last 5 decades
since its formation in 1966, Haryana has transformed and matured into a diversified
economy with a thriving secondary and tertiary sector. Although Haryana has an area
covering just 1.3 per cent of the country, Haryana contributes nearly 3.63 per cent to India's
GSDP. During 2004-16, the state’s GSDP grew at a compound annual growth rate (CAGR) of
12.12 per cent.

1.4 Demographic Trends and Economic Structure

Hisar is the administrative headquarters of
Hisar district of Hisar division in the state of
Haryana in north-western India. It is located at
29.09°N 75.43°E in western Haryana and
surrounded by Fatehabad district in the North,
Bhiwani district in South, Jind & Rohtak district
in east.
Hisar is only 164 km to the west of New Delhi
and has been identified as a counter-magnet
city for the National Capital Region to develop
as an alternative centre of growth to Delhi.
The total population of the district as per Figure 3: District Map of Hisar
2011 census is 1,743,931 consists of

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931,562 male population and 812,369 female population. There was a change of 13.5 % in
the population as compared to population as per 2011. Males constitute 53% of the
population and females 47%, with 879 females per thousand males. The district has a
population density of 438 per square kilometre. The literacy rate of the district is 72.9
percent as compared to the State literacy rate of 75.6 percent and it is ranking 15th among
the districts of the State. The literacy rate is higher in urban area as compared to rural area.
It is 81.7 percent in urban area and 68.7percent in rural area. The strength of population in
0-6 age group in Hisar district has decreased to 215,167 in 2011 from 237,820 in 2001
and the proportion of population in 0-6 age group is 12.34 percent in 2011. The child sex
ratio of the district is 851 in 2011 as compared to 832 of 2001.

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Sector Overview

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2. Sector Overview
2.1 Brief Global Scenario
Industries in the Textile Manufacturing subsector group establishments with two distinct
manufacturing processes:

(1) Cut and sew (i.e., purchasing fabric and cutting and sewing to make a product), and

(2) Manufacture of garments in establishments that first knit fabric and then cut and sew
the fabric into a garment.

The textile manufacturing subsector includes a diverse range of establishments

manufacturing full lines of leather accessories, ready-to-wear apparel and custom apparel
accessories: apparel contractors, performing cutting or sewing operations on materials
owned by others; jobbers performing entrepreneurial functions involved in garment
manufacture; and tailors, manufacturing custom garments for individual clients; are all
included. Knitting, when done alone, is classified in the textile mills subsector, but when
knitting is combined with the production of complete garments, the activity is classified in
apparel manufacturing.

Despite the global economic downturn, the global apparel industry continues to grow at a
healthy rate and this, coupled with the absence of switching costs for consumers and great
product differentiation, means that rivalry within the industry is no more than moderate.
The apparel industry is of great importance to several economies in terms of trade,
employment, investment and revenue. This particular industry has short product life cycles,
vast product differentiation and is characterized by great pace of demand change coupled
with rather long and inflexible supply processes.

The global apparel market is worth approximately US$ 1.7 trillion, and constitutes around
2% of the world’s GDP. EU, USA and China are the world’s largest apparel markets with a
combined share of approximately 54%. The top 8 apparel consuming nations form a
dominating share of 70% of the global apparel market size. The global market size is
expected to reach US$ 2.6 trillion in 2025, growing at a projected rate of 4%. The major
growth drivers of the global apparel market will be the developing economies, mainly China
and India, both growing in double digits. China will become the largest apparel market
adding more than US$ 378 billion in market size by 2025, while India will be the second
most attractive apparel market adding more than US$ 121 billion by 2025. The global textile
and apparel trade stood at US$ 820 billion in 2014, growing at a CAGR of 5.6% over the last
decade. Apparel categories had a larger share of 56%, while textile categories had the
remaining share of 44% in the overall trade. EU & USA are the largest markets for textile
and apparel with a share of 36% and 15% respectively4.

The largest segments of the garment industry are Women suits, dresses, skirts & shorts with
a 28% share; followed by men’s suits, jackets & trousers with a 17% share; Jersey pullovers
& cardigans with a 14% share; T-shirts, singlets, vests with 11% share; men’s shirts with a

4
FICCI White Paper – Global Shifts in Textile Industry & India’s Position - 2016

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7% share; Women blouses & shirts with a 5% share, etc. The market segmentation of the
global apparel industry is provided in figure 45:

Figure 4: Global Apparel Market Segmentation (based on global export data)

2.2 India Scenario

India’s textile and garment sector is one of the oldest industries in Indian economy dating
back several decades. Even today, textile and garment sector is one of the largest
contributors to India’s exports with approximately 11 per cent of total exports. The textile
and garment industry is also labour intensive and is one of the largest employers. The textile
and garment industry can be broadly divided into two segments - yarn and fibre, and
processed fabrics and apparel. India accounts for ~14 per cent of the world's production of
textile fibres and yarns (largest producer of jute, second largest producer of silk and cotton,
and third largest in cellulosic fibre). India has the highest loom capacity (including hand
looms) with 63 per cent of the world's market share.
As per IBEF data, the domestic textile and garment industry in India is estimated to reach
US$ 141 billion by 2021 from US$ 67 billion in 2014. Increased penetration of organised
retail, favourable demographics,
and rising income levels are likely to
drive demand for textiles.6 The
trend of exports of textiles and
garments from India is illustrated in
figure 4.
India was the third largest exporter
of textiles in 2015, and the
8thlargest exporter of clothing
(behind China, European Union,
Bangladesh Vietnam, and Hong Figure 5: Textile and Garment Exports from India (US$ billion)

5
International Apparel Federation
6
IBEF – Textile and Apparel Industry in India

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Kong)7. Textile and apparel exports from India were US$ 40 billion in 2016, and expected
to increase to US$ 82 billion by 2021. Readymade garments remain the largest contributor
to total textile and apparel exports from India, contributing 40 per cent to total textile and
apparel exports. Cotton and man-made textiles were the other major contributors with
shares of 31 per cent and 16 per cent, respectively. A snapshot of the Indian textile and
garment industry is provided in figure 6:

Figure 6: Indian Textile & Garment Industry Snapshot8

Leather industry
Leather is one of the most widely traded commodities globally. The growth in demand for
leather is driven by the fashion industry, especially footwear. Apart from this, furniture and
interior design industries, as well as the automotive industry also demand leather. The
leather industry has a place of prominence in the global economy due to substantial export
earnings and growth. Comparative advantages in terms of factor conditions such as raw
material availability and low labour cost coupled with environmental considerations have
contributed to a shift in the processing segment of leather sector value chains towards
developing countries.
The Indian leather industry accounts for around 13 per cent of the world’s leather
production of hides/skins. The country ranks second in terms of footwear and leather
garments production in the world and accounts for about 10 per cent of the world’s
footwear production.
The Indian leather industry has undergone a drastic change, from being an exporter of mere
raw materials in the early 60’s and 70’s to an exporter of finished, value added leather

7
WTO - World Trade Statistical Review 2016
8
IBEF – Textile Industry in India

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products today. The Indian leather industry has established itself as a prominent industry
both in the international as well as in the domestic market.
The export of leather and leather products multiplied during the past couple of decades –
from US$ 1.42 billion in 1990-91 to about US$ 4 billion in 2010-11 and further to US$ 6.5
billion in 2014-15.The industry today is among the top 10 foreign exchange earning
industries for the country.9The main export market for Indian leather and leather products
was Germany with a share of12.3% in 2014-15. The other major markets in2014-15 were
all western economies (except Hong Kong) of USA (11.8%), U.K. (11.6%),Italy (7.8%), Hong
Kong (6.5%), France (5.7%),Spain (5.4%) and the Netherlands (3.5%). These countries
together accounted for more than two thirds of India’s total exports of leather and leather
products in 2014-15.
While leather exports from India has witnessed an increasing trend, there is a need to focus
on identifying products where India can enhance its exports and increase its share in global
exports. In 2013, India was the second largest exporter of leather footwear component,
leather garments, and saddlery and harness; third largest exporter of finished leather;
fourth largest exporter of leather goods; and sixth largest exporter of footwear of leather.
In the leather garments segment, India has significant market share of 20.6%. It can further
enhance its presence in the global market by focussing more on the USA market. USA is the
largest importer of these products, but the market is largely dominated by Chinese imports.
Leather goods: Leather goods form an important segment of the leather industry in India.
According to the Council for Leather Exports, production capacity of leather goods was
estimated to be 63 million pieces annually in 2013-14. Various types of leather goods and
accessories are manufactured in India like trunks, suit-cases, vanity-cases, executive-cases,
brief-cases, school satchels, travelling bags / luggage, portfolio and similar such items, hand
bags, shopping bags and similar such items, wallets, purses, pouches, passport holders,
credit card holders, diary covers and similar such items, leather belts, caps etc. India also
produces leather upholstery – sofa seat covers, car seat covers etc. Most of the units
manufacturing leather goods are located in Kolkata, Chennai, Mumbai, Kanpur, Bangalore
and Puducherry, although the industry also has presence in few other clusters. India is the
fifth largest exporter of leather goods and accessories (inclusive of gloves) in the world.
With the availability of quality raw materials coupled with skilled craftsmanship, India is
now poised to become a major destination for global sourcing of leather goods and
accessories. State-of-the-art production units and in-house design studios will strengthen
the industry in producing products with exquisite design and quality.

2.3 Cluster scenario

The textile and apparel industry in Haryana exhibits strength across the entire value chain
from fibre to fashion. The state is one of the leading cotton producers in the country with
Sirsa, Fatehabad, Bhiwani, Hisar and Jind being the main cotton producing districts. This
bounteous availability of raw materials gives Haryana a competitive advantage in the textile
sector. The cluster-based approach to industrial development has produced robust textile
centres such as Panipat, Gurugram, Faridabad, Hisar and Sonipat. The sector today provides

9
“Indian Leather Industry – Perspective and Strategies”, EXIM Bank of India, 2015

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employment to approximately 1 million people with readymade garments worth USD 2

billion being exported from the state annually10.
Blessed with a resource advantage with Haryana as one of the largest producers of cotton
in Northern India. Haryana is one of the leading producers of textiles and readymade
garments.

The numbers of industries under this sector stand at more than 4624 units. The sector
employs more than 98,518 people which is a share of more than 12% of the total mapped
manpower in the state. The total textiles and apparels exports (handloom and readymade
goods) stood at Rs. 88,704 million as in 2015-16. The overall exports composition of
textiles and readymade garments (including handlooms) as a percent of total exports from
the state has averaged close to 10% from 2013-14 to 2015-16. Clearly, textiles and
readymade garments is a leading export-oriented sector of the state11.
Figure 7 provides details of the net value added, gross fixed capital formation, and
employment by the textiles and apparel sector in Haryana as well as the state contribution
of the sector to national levels from 2011-12 to 2013-1412:

6.4% 4%

6.0% 3% 0.06%
2%
0.06%
5.6%

608 703 879 0.05%

2987 3860 3817 1287 1295 1392
2011-12 2012-13 2013-14
2011-12 2012-13 2013-14 2011-12 2012-13 2013-14
Total Gross Fixed Capital
Total Net Value Added in Employed in Haryana Total Employment in
Haryana (INR in crores) (INR in crores) Haryana ( '000s)
Haryana as % of all-India Haryana as % of all-India Haryana as % of all-India

Figure 7: Textiles and Apparel Industry Trends in Haryana

The Draft Textile Policy 2017 for the state is targeting an investment of Rs. 5000 crores in
the sector, creation of 50,000 new jobs and CAGR of 20% during the policy period.
The Hisar Textile & Allied Products Cluster houses about 40 micro units across the value
chain. The cluster units of Hisar is concentrated near auto market of Hisar. The cluster
produces auto accessories for the domestic market, including large retailers as well as the
open market. The accessories is made from Rexene, Foam, non-woven fabric etc. Products
include a range of auto accessories (seat covers, dashboard cover, neck rest, steering cover
etc.) made from all types of fabric material (including leather/synthetic leather). Some of
the units in the cluster also specialise in apparel accessories made from fabric such as
Backpacks, handbags etc. The cumulative turnover of all these units is estimated at Rs. 8
crores and provides employment to about 320 persons.

10
Haryana Textile Policy 2017
11
Department of Industry and Commerce, Haryana
12
Annual Survey of Industries

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2.4 Cluster Products

The cluster products include seat cover, dashboard cover, steering cover, neck rest, bags,
floor mats etc and bags such as school bags, travelling bags (Backpack) etc. The units
undertake a range of activities such as manufacturing complete product, innovation and
value addition, finishing and packaging.
A few of the products manufactured by the cluster are presented in figure 8:

Car Seat Cover DashBoard Cover

Vehicle Floor Mat Neck Rest

Backpack Body Cover Two-Wheeler Seat Cover

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Diagnostic Study
Findings

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3. Diagnostic Study Findings

The diagnostic study was undertaken in the cluster February 2019 to map the existing
business processes in the cluster, identify the gaps, and understand the requirements of the
cluster. The diagnostic study report (DSR) was compiled with inputs from cluster SPV in
close coordination with the DIC, Hisar, with inputs from DI-MSME. The awareness level of
the cluster units (on new technologies, cluster development initiatives, etc.) was found to
be low. Additionally, it was observed that most of the cluster units deploy obsolete
technologies and are unable to meet the requirements of the market due to lack of
availability of modern facilities for cutting, designing & quilting. The cluster faces challenges
in fabric wastage due to manual techniques and conventional machines used in the
manufacturing process.

The DSR was validated by stakeholders in a meeting held under the chairmanship of AD, DIC
Hisar on 14th March 2019 and was subsequently accepted & approved by the W/DI&C on
25th January 2018. The approval letter of DSR and permission to undertake the Detailed
Project Report (DPR) are provided in Annexure 1. The SPV was granted permission to go
ahead and EY was directed to prepare the DPR for the cluster. The major findings of the
DSR are presented below:

3.1 Cluster Actors and their role

The primary stakeholders in the cluster are manufacturers of accessories for automobile
such as seat covers, cushion, steering cover, neck rest, floor mats etc and other products
such as Backpacks, Handbags etc. based mostly out of auto market of Hisar. The other
stakeholders include the major industry associations, government agencies (mainly DIC,
regulatory bodies), raw material suppliers, and academic/ training institutes. These cluster
actors provide various services to the cluster units. Some of the major cluster actors located
in and outside the cluster and catering to the units of the region are mentioned below:
A. Industry Associations
► The Hisar Udhyog Sang
It is the most prominent association of MSMEs in Hisar. It has members from various
sectors like textile, engineering, auto components and food processing. The
association undertakes numerous activities to promote interests of its members.
The association has played a key role in propagating various schemes and
incentives offered under Haryana EPP 2015.
► New Industrial Area Welfare Association
It is created and run by entrepreneurs to facilitate and promote the growth and
development of small businesses across Hisar. The focus of this Institution is not to
just raise or highlight problems and issues, but to identify common problems and
find collective solutions.
► Small Scale Industrial Association
It is the largest association of MSMEs in Hisar, and has been representing problems
of small industries and working towards their overall development. It provides
services such as filing of income tax returns, preparation of balance sheet, sales

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tax consultation, allotment of PAN, TAN & TDS procedures, etc. to new
entrepreneurs. It also regularly organizes seminars for business development for
its members such as vendor buyer meets, interaction with domestic business
delegations.
► Apparel Export Promotion Council (AEPC)
Incorporated in 1978, AEPC is the official body of apparel exporters in India that
provides assistance to Indian exporters as well as importers/international buyers
who choose India as their preferred sourcing destination for garments. AEPC works
towards integrating the entire industry - starting at the grass root level of training
the workforce and supplying a steady stream of man power to the industry;
identifying the best countries to source machinery and other infrastructure and
brokering deals for its members and finally helping exporters to showcase their best
at home fairs as well as be highly visible at international fairs the world over. Twice
a year, AEPC showcases the best of India's garment export capabilities through the
prestigious India International Garment Fair, playing host to over 350 exhibitors.
► Apparel Exporters & Manufacturers Association (AEMA)
AEMA was set up in 1981, and has since functioned as an important think tank for
the Central Government and for the AEPC in advocating policy and encouraging
smooth growth of the export-oriented apparel manufacturing sector. AEMA
undertakes activities for its members, including holding exhibitions for domestic
and international buyers and facilitating members to participate in international
garment fairs like India International Garment Fair and Vastra.

A. Government Bodies
► District Industries Centre (DIC)
DIC is the most important government stakeholder for the cluster. The office of DIC
comes under the Dept. Of Industries and is headed by General Manager who is
assisted functional managers and technical field officers. DIC promotes and routes
subsidy to micro and small enterprises in the region. The Mini Cluster Development
Scheme under which the Textile & allied product manufacturing units want to set
up a CFC will also be implemented through the DIC office. The Hisar DIC is actively
promoting cluster development in the district and also helps the local units register
under Udyog Aadhar Memorandum (UAM). It would play a key role in formulation
of the textile & allied units SPV.
► MSME-Development Institute, Karnal
MSME - Development Institute, Karnal is a field office of the Development
Commissioner (MSME), Ministry of MSME, New Delhi, which is an apex body for
formulating, coordinating and monitoring the policies and programmes for
promotion and development of MSMEs in the country. MSME -DI provides a wide
range of extension / support services to the MSMEs.

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► Haryana State Infrastructure & Industrial Development Corporation (HSIIDC)

HSIIDC is a major agency in the State to promote the setting up and promotion of
small, medium and large scale industrial units. The Corporation also acts as a State-
level financial institution and provides long term loans for industrial projects. The
important activities of the Corporation are:
• Development of industrial areas/ estates
• Helps entrepreneurs on matters such as securing registrations/ licences/
clearances from the statutory/other authorities.
• Provision of term-loans

► Haryana Shahri Vikas Pradhikaran (HSVP)

HSVP is the urban planning agency of the state of Haryana in India. It was
established in 1967. It plays a key role in land development and execution of
development works like roads, water supply, sewage, and drainage etc.

► National Small Industries Corporation (NSIC)

National Small Industries Corporation (NSIC) was established in the year 1955 with
a view to promote, aid and foster growth of small industries in the country. It
provides diverse services to MSMEs in Hisar such as:
• Helps entrepreneurs in purchasing machinery and equipment
• Equipment leasing and working capital finance
• Information on technological up gradation
• Composite loan scheme and export assistance

B. Educational Institutes
► The Technological Institute of Textile & Science (TIT&S), Bhiwani
The Technological Institute of Textile & Science (TIT&S) provides training in textile
technology, textile chemistry, fashion & apparel engineering, etc. Courses cover
areas including fibre specialization, yarn specialization, fabric specialization, textile
manufacturing, fashion & designing, garment & accessories, computerized
designing, textile & garment surface designing, textile & garment quality
assistance, etc. The institute also has a research & development wing which
undertakes research on textiles and other streams.
► National Institute of Fashion Technology (NIFT), Delhi
National Institute of Fashion Technology (NIFT), set up in 1986 under the aegis of
Ministry of Textiles, Government of India, is a Statutory Institute Governed by the
NIFT Act 2006. The institute provides a firm foundation in fashion education in the
domains of Design, Management and Technology. NIFT also has a network of NIFT
Resource Centres, which serve as a Fashion Information System (FIS), catering to
the needs of fashion professionals, entrepreneurs and fashion educators. The
integrated collections of print, digital, audio and visual creative resources are the
only systematically documented learning resources available in India for the study

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of international and contemporary Indian fashion. FIS is a decentralized network,

computerized and coordinated by the National Resource Centre at NIFT.
► North India Textile Research Association (NITRA), Ghaziabad
Northern India Textile Research Association (NITRA) is one of the prime textile
research institutes in the country. The textile industry and Ministry of Textiles,
Govt. of India jointly established NITRA in 1974 for conducting applied scientific
research and providing support services to Indian textile industry. NITRA’s prime
activities include R&D technical consultancy, quality evaluation of materials,
manpower training and publishing technical books and papers. To meet industrial
HRD needs, NITRA regularly conducts various industry-recognized job-oriented
techno-management training programs across the complete textile & apparel
supply chain on full-time and DLP modes. In addition to this, NITRA regularly
organizes seminars, workshops and also conducts on and off-shop customized
training programs.
► Government Polytechnic Hisar
Govt. Polytechnic, Hisar was established in 1992 with the aim to enhance
employability of the youth by equipping them with latest technical skills for suitable
employment through technical education.
At present, Institute offers twelve diploma courses including Textile Design, Textile
Processing, Textile Technology. It also organises Institute-Industry interaction
which has participation of leading industry and academia.
C. Banks / FIs
► Haryana Financial Corporation (HFC)
Haryana Financial Corporation, based in Chandigarh was promoted jointly by the
Government of Haryana and the Industrial Development Bank of India (IDBI). HFC
has been approved by SEBI as a category-I merchant banker. The corporation’s
activities include merchant banking, trade finance, lease finance and term lending.
The corporation has diversified its range of financial services to include no-fund-
based assistance in the form of guarantees, letter of credit and forex services.
► Small Industries Development Bank of India (SIDBI)
SIDBI is the apex financial institution responsible for the growth and development
of the MSME sector. Almost all the government subsidy schemes and bilateral lines
of credit are implemented through SIDBI. Hisar industry is catered through the
SIDBI regional office in Chandigarh.
► Syndicate Bank, Hisar
Syndicate Bank is the lead bank of the Hisar district and many local cluster units
have a banking relationship with Syndicate Bank.

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D. Leading Manufacturers
Some of the leading textile & allied products manufacturers in Hisar include Rajendra
Seat Cover, Car Expert, Chauhan Bag, V.K Industries etc.
Key stakeholders of Hisar cluster are presented in figure 8:

Govt Bodies
DIC, MSME DI,
HSIIDC, HUDA

BDS Industry
Providers/FI Association
s HUS, Small
SIDBI, HFC, Textile and Scale Industry
Syndicate Bank Association
Allied
Products
Cluster, Hisar

Technical Key
Manufacturers
Institutions
Rajendra Seat
TIT&S, NITRA, Cover, Chouhan
NIFT, Govt. Bag, Car Expert,
Polytechnic V.K Industries

Figure 8: Key Cluster Actors

3.2 Cluster Turnover, Market and Employment

The cluster units are mainly concentrated in auto market of Hisar town. The cumulative
annual turnover of the Textile & Allied Products Cluster is estimated to be around INR 8
crores. The average annual turnover of units is approximately INR 22 Lakh.
The units in the cluster cater majorly to the domestic market. Manufacturing is mostly done
to order, and is usually based on the buyer’s specifications. However, some of the unit
manufacture made to stock for retailing in the local market. MSMEs cater to orders from
retailers of Haryana and other neighboring states such as Rajasthan, Punjab, Uttar Pradesh.
Apart from retailers, MSMEs also supply to franchise showrooms of the auto manufacturers
such as Maruti, Hyundai, TATA, Mahindra etc.
This textile manufacturing industry is labor intensive. Presently, this cluster provides
employment to approximately 320 people directly. On an average, micro units employ
approximately 8 persons. The owners of units in the cluster are Graduate in engineering or
Diploma in Textile Technology. Managers and employees are also technically qualified,
having B. Tech/ Diploma. The workforce involved in the industry is both unskilled and skilled.
Skilled labor earns more than INR 1.80 lakh per annum.
However, there is an enormous potential of increasing the production from cluster units by
reducing the wastage from cutting. Improving quality of stitching and diversify in critical
seam stitching activities. This would also result in reduced wastage, increased margins and

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enhanced turnover. Currently, units are incurring high wastage during fabric cutting and
stitching due to inefficient accuracy of manual / semi-automatic machinery for producing
fabric (including leather and air mesh fabric) for finished products such as auto-accessories
(seat covers, etc.,). Recommendations around these were provided in the DSR and have
been elaborated in this DPR as well.
The manufacturing units in the cluster face challenges in diversifying into the manufacturing
of finished products with good quality efficiency and at low costs. Due to technological
backwardness, lack of textile & allied products finishing capacity and poor quality of
products, cluster units are unable to obtain and cater to bulk orders from large customers.
This cluster has ability to increase its output and market share through manufacturing
quality products at competitive prices.
The proposed facility will be open to all cluster firms to enable them to get job work done in
order to cater to the product requirements of the market. The proposed CFC will provide an
opportunity to micro units to get job work done on modern machines and manufacture high
quality products, thereby increasing their individual capacity utilization and profitability.
The facility will provide a major infrastructural push to the units reeling under high
competition and will enable the local units to supply their produce to large retailers and
OEMs. The CFC will also lead to creation of jobs for supervisors, machine operators and
unskilled workers like helpers both within the CFC and at an individual unit level due to
enhanced capacity utilization.

3.3 Production Process

The units in the cluster are engaged in manufacturing of various products. The units in the
cluster are engaged in various activities across the value chain of manufacturing of seat
covers and other accessories of automobiles. From selection of raw materials, to the
finished products, various activities are involved in this process. Following are some
common activities generally used by the cluster units are

Processes:
1. Order
a. PO Received from Client: Purchase order is issued by the client with the delivery time
and other conditions. Design sample is sent to the client of made to stock available
products. Client may change some basic design elements and send the approval to
manufacture the product.
2. Operations
a. Raw Material: Units order the required raw material as per the
order placed by buyer.
b. Patterns: Units have prepared the patterns either on paper or
cardboard depending upon the product cycle.
c. Marking: As per the pattern, the fabric and foam is marked. This
step is preparation of the cutting stage.

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d. Cutting: The fabric & foam is cut into pieces as per the markings in the previous step.
e. Bundling: The cut fabric is bundled based on size in order to ensure
that there is no variation.
f. Quilting: Layering of the Rexene, foam and non-woven fabric is
done. Foam is either pasted to the Rexene or stitched.
g. Designing: Various design elements is added such as embossing,
piping etc.
h. Stitching: Stitching is done in an assembly line fashion, with groups
of people sewing different parts of the garment and then passing it
on to the next.
3. Distribution:
a. Finishing: This involves cutting of extra fabric, threads etc and inspection of each
product for defects.
b. Packaging: Products are packaged in preparation of shipping.
c. Shipping: Products are shipped to the buyers or distributors.

Raw Material Stitching Finishing

Patterns Designing Packaging

Marking Quilting Out for Delivery

Cutting Bundling

Figure 9: Flow Chart of Production Process

units in the cluster are engaged in various activities across the value chain of textile
manufacturing. This includes garment washing and dyeing (10% of units in the cluster),
stitching (25 – 30% of units in the cluster), embroidery (20% of units in the cluster), and
printing (25% of units in the cluster). Approximately 15-20% of the units are engaged in end-
to-end textile & allied products manufacturing. Units undertaking each of these activities
have a requirement for fabric, which they either directly procure or obtain from domestic
suppliers and undertake services on this fabric.

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Value Chain Analysis

Value chain analysis of the most commonly produced cluster products have been conducted
to ascertain the major cost areas and identify suitable interventions. The value chain
analysis of seat cover for swift car is provided in table 1:
13
Table 1: Value Chain Analysis of seat cover for Swift Car

Value
Total Value % of cost of
Particulars Added
(INR) production
(INR)
Fabric 660 660 33.25%

Foam 525 1185 26.45%

Others (thread, elastic etc) 150 1335 7.56%

Manpower 550 1885 27.71%

Electricity 25 1910 1.26%

Finishing 50 1960 2.52%

Packaging 25 1985 1.26%

Total Production Cost 1985 100.0

Profit Margin (5.8%) 115
Selling Price 2100

The value chain analysis has been prepared based on the stakeholder consultation. It can
be observed that the raw materials amount to 67.26% of production price. Post the
implementation of the CFC, there will be reduction in raw material consumption and thereby
resulting in signification reduction of cost of production. Another major cost of production
is manpower which is about 27.71% of cost of production. The competitiveness of the
cluster units can be increased by targeting these major cost areas and providing better
facilities to the units. It may be observed that the manufacturing cost will be reduced by
around 20% by establishment of CFC in the cluster. Moreover, the competitiveness of the
cluster units will be increased manifold in terms of cost inputs, delivery efficiency and the
option to innovate.

13
Source: Stakeholder Consultation inputs

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3.4 Strengths, Weaknesses, Opportunities and Threats (SWOT) Analysis

A SWOT (Strengths, Weaknesses, Opportunities and Threats) analysis of the MSME textile & allied products manufacturing units in the cluster
is carried out keeping in mind the technology, marketing, product quality, skills, inputs, innovation, business environment and
energy/environment compliance of the units. The SWOT analysis provided in table 2:
Table 2: SWOT analysis of the cluster

Current situation Future

Area
Strengths Weaknesses Opportunities Threats
Market ► Steady domestic demand ► Presence of other large ► Rising income levels and ► Intense competition from
for cluster products players to whom bulk increasing urbanisation domestic markets
► Cluster located within orders are made are driving growth of the ► Competition from other
Hisar auto market area, ► Units are unable to price domestic market major players like Auto
which is well connected. their product ► Potential to price foam & Autokame etc.
► Cluster located in the competitively due to products competitively
proximity of Delhi which higher cost incurred due with acquisition of
is a major supply hub to wastage during fabric technology, in order to
► Presence of a large cutting, lamination & compete effectively with
number of buying houses embroidery countries such as China
in the region. ► Growing demand for
► Presence of good rapport products of the cluster.
with buyers such as auto
dealers.
Technology ► Raw Material can be ► Lack of latest ► Setting up of CFC with ► Increase in cost of
/ Product inspected upon delivery computerised technology equipment for fabric production.
Quality ► Each unit undertakes for fabric cutting in cutting, sewing, ► Increase in awareness of
inspection of pieces at manufacturing results in lamination & embroidery people on quality
each stage in their units having to obtain resulting in units being certifications shall lead to
manufacturing process these from private able to diversify, obtain losing out to business /
► Products are made as per service providers at these services at lower requirement for more
specifications specified higher costs or from costs and price their stringent testing
by buyers, and are thus distant locations products competitively. procedures

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Current situation Future

Area
Strengths Weaknesses Opportunities Threats
made-to-order (No ► Since products are ► Competition from
challenge of inventory manufactured in batches, vendors manufacturing
build-up) errors in steps such as products at lower costs
cutting leading to fitment for similar products
issues, results in that ► Faster technology
entire batch being obsolescence
rejected
► For supply to OEMs, there
is growing importance on
various ecological
parameters, which makes
for more stringent
requirements for the
units

Skill/ ► Skills acquired on-the-job ► High labour costs ► Customized training ► Youth interested to work
Manpower ► Presence of technical ► Lack of interaction programs on required in other lucrative sectors
institutes such as ITI’s between SMEs and skills (operations, soft which are not labour
and Apparel Training & technical institutes for skills etc.) intensive
Design Centre at Gurgaon providing technical ► Engage technical
training institutes for skill
► No mechanism to development programs
mobilize regional youth ► Increased cost of labour
for training in the sector in China provides
opportunity for Indian
industry
Inputs ► Availability of raw ► Challenge in getting low ► Potential for common ► Cost of power in India is,
materials from local priced knitted fabric due facility for high accuracy on average, higher than
dealers and suppliers to high cost / lack of local cutting, sewing and key competing countries
► Buyers sometimes availability perforation of fabric by like China, Bangladesh,
specify dealers from local units Vietnam

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Current situation Future

Area
Strengths Weaknesses Opportunities Threats
whom they want ► Challenge in achieving ► Potential to develop a ► High Cost of power in
materials higher accuracy during portal displaying Haryana
cutting to reduce information (price,
wastage of fabric suppliers) of raw
materials
Innovation ► Ability to manufacture ► Lack of a standardised ► Development of a ► Could lose business to
garments as per the ERP solution for garment standard IT based ERP other more price
manufacturer’s industry. solution competitive
specifications ► Low investment in ► Structured processes for manufacturers from
► Most of the units development of designs information sharing national and international
manufacture their own ► Lack of process among units in the cluster countries such as Sri
designs and sell in the automation Lanka, Bangladesh, China
domestic market. if units do not innovate

Business ► Steady growth in ► Lack of knowledge of ► Establish CFC with latest ► Change in policies and
Environme domestic demand regulatory frameworks technologies for accurate regulatory environment
nt ► Cluster well known as a and government schemes cutting, knitting yarn into ► Increase in land rates
garment hub across India among micro level fabric, critical seam ► Environmental policies
► Conducive policy and garment units sewing for diversification result in shutting down of
regulatory initiatives ► High cost of industrial ► Create better awareness dying houses impacting
► Active State Govt. and land in the cluster of government schemes textile and allied products
schemes for development ► Lack of common and regulations industry
of the sector infrastructure/CFC
► Proactive industries facilities
associations in Hisar ► No long-term vision of
industrialists
Energy/ ► Increased focus on ► Lack of knowledge of ► Regular checks on ► Increase in power tariff
Environme environment due to energy efficiency maintaining quality and ► Increased focus on
nt requirement from buyers resulting in higher energy safety standards environment standards
consumption

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Current situation Future

Area
Strengths Weaknesses Opportunities Threats
► High energy cost ► Potential to reduce ► Dyeing and washing
structure because of lack energy costs by energy require environment
of efficient processes auditing compliances, and if units
diversify into these
services then these
compliances and
certifications would have
to be met

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3.5 Major Issues / Problem Areas of the Cluster

The key problems cluster related problems identified are:
► Lack of fully automatic computerised fabric cutting machine: Fabric is required for
the manufacture of all garments, and there is a large demand for knitted apparel and
auto accessories, which is consistently growing. Specific fabrics (including leather)
are required by buyers. Currently the units are incurring increased costs due to
wastage (20-30%) of fabric due to lack of computerized cutting machinery.
Alternatively, manual or semi-automatic machines are used for fabric cutting
resulting in higher wastage. This is a challenge for these units as higher wastage is
resulting in declining profit margin.
► Absence of specialised facility for Designing: Fully automatic, large format,
embroidery machine with advantages such as cost – efficiency, speed, versatility.
Machines such as automatic sewing & perforation, embroidery would allow the units
to bring new innovations in the design of the products. With this cutting-edge
technology, units can design any quality of fabrics thereby serving quality products
to automobile accessories such as seat covers. Units currently are either dependent
on the skilled labor or outsourcing of the same. These lead to the production delays
and sometimes loss of order as manufacturing can’t be completed in the stipulated
time. Such facility would allow the units to not only increase their production
capacity but also quality of the product at competitive prices.
► Lack of Facility of Lamination Machine: As mentioned in the production process,
the quilting i.e. layering of the Rexene, foam and other fabric is done either by
pasting or by stitching. Also, at present the layering process is done after cutting of
the fabric and foam. This leads to the high wastage percentage (up to 30%) of raw
material. Lamination will allow the layering process to be completed before the
cutting process. The establishment of a common facility centre, which enables units
to undertake the process effectively could reduce the cost on quilting by
approximately 20%.
The other gaps which are identified are mentioned in table 3:
Table 3: Major Gaps Identified

S. No Area Problem

► High Rates of interest restrict the ability of small firms to

obtain loans as they operate on low margins
1. Finance
► Machinery suppliers are also not willing to offer line of
credit to small scale enterprises
► Challenge in competing with international players due to
higher manufacturing cost due to manual processes
2. Market
followed and high wastage and not meeting quality
expectations

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► Currently the units are incurring increased costs due to

wastage (20-30%) of fabric in manufacturing process.
3. Productivity Manual or semi-automatic machines are used in the
manufacturing process resulting in higher wastage and
slow production speed.
► Lack of capabilities for manufacturing high quality/low
Product wastage fabric in-house, which could reduce costs and
4.
development increase efficiency by ensuring that the specifications
are met.

Due to lack of these facilities, the units face higher wastage costs, thereby reducing their
competitiveness, especially compared to other countries, domestically as well as for export.
This results in loss of market share. These facilities, if provided through a CFC in the cluster
with government support will help the units become more competitive and enable them to
dramatically move up the value chain.

3.6 Key technologies missing

The key technologies that are required in the cluster along with the proposed intervention
to be set up under the CFC are mentioned in table 4:
Table 4: Technology Gaps Identified and Interventions

Sr. Facility/ Technology Gaps Identified Technology

No. Equipment Interventions

1. Fabric ► Absence of computerised equipment for fabric ► Acquisition of

cutting cutting (including leather) computerised (fully
facility ► Fabric (including leather) cutting is a key automatic) cutting
requirement for reducing wastage and cost equipment
incurred
► This is currently done using manual and semi-
automatic machinery resulting in 20-30%
wastage of raw material during cutting
► This is leading to reduced profit margin for
these units
2 Designing ► Absence of computerised equipment for ► Acquisition of
Facility innovation in designing. automatic sewing &
► Design elements such as perforation and perforation machine.
stitching are done manually, which leads to ► Acquisition of
product delays and inconsistency in the batch. computerized
► Units are currently dependent on skilled labor. embroidery machine.
► Manual Process leads to the delay in the
manufacturing process and high wastage of
raw material
3 Lamination ► Absence of lamination facility in the cluster ► Acquisition of foam
Facility ► This activity is outsourced currently and not fabric lamination
available in-house. machine.
► Units are using obsolete methods such as glue
pasting and stitching of foam with fabric.

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Diagnostic Study
Recommendations

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4. Diagnostic Study Recommendations

Based upon the diagnostic study and intense discussions with various cluster stakeholders
regarding gap identification in the cluster, hard interventions (setting up of CFC) are being
proposed to enhance the competitiveness of the cluster units. The CFC will be set up with
grant in aid support from Government of Haryana.

The recommendations for hard interventions have been elaborated in subsequent sections.
Cluster enterprises have also been undertaking several soft interventions on their own
expense and have been active in enhancing their awareness and exposure. The units have
conducted a few awareness programs and trainings at their own expense. They have also
conducted exposure visits to large enterprises, participated in national exhibitions and
facilitated UAM registrations.

4.1 Soft Interventions Recommended and Action Taken

The cluster has presence of a couple of proactive industries associations like Small Scale
Industry Association which frequently undertake several capacity building programs for the
cluster stakeholders. The cluster has been actively involved in conducting key programs in
collaboration with BDS providers and DIC Hisar. The programs have been centered around
skill enhancement, and policy implementation, etc. Some of the key programs, seminars,
workshops conducted by the SPV members recently are highlighted below:

1. GST Awareness: Cluster units organized and attended the GST awareness camp
which included GST implementation, process, steps to be followed, etc., was
organized for the cluster stakeholders.

2. Government Scheme: Capacity building

workshop on State Mini Cluster Development
scheme of Haryana Government for SPV
formation- In this workshop the details of the
scheme, its benefits, SPV formation process
was discussed.

3. UAM Campaign: Cluster members attended the UAM awareness program

organized by Hisar Udyog Sangh. In program, cluster members are sensitized
about the UAM, benefits of UAM, registration process etc.

4. International Visit: Cluster members recently

visited China to know how the latest
technologies being used in sector. Members
also visited different units to understand their
business cycle to increase their
competitiveness in domestic as well as
international market.

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5. Health Camp: Cluster Members had organized a health camp for the benefit of the
cluster stakeholders, workers etc.
6. Exhibition Visit: Cluster members had
visited the Garment Technology Expo at
NSIC Exhibition Complex, New Delhi,
India on 22nd February 2018. Expo
provided a complete sourcing platform
to apparel manufacturers. The
exhibition was focused on a wide range
of garment machinery, accessories and
support services from India and
different parts of the world. Latest
technology, live demonstrations, new products launches and technical seminars
was an integral part of the show.

4.2 Hard Interventions (Machines / Technology in the proposed CFC)

The cluster units would require modern fabric cutting, designing and lamination
infrastructure facilities on an urgent basis to improve the competitiveness of the micro units
and to enable them to move up the value chain.

The potential members of the SPV with support from the state government are willing to
set up a dedicated Common Facility Centre which shall have state-of-the-art facility. The
total cost of project is estimated around 2.04 crore. This facility shall provide a much-
needed technical impetus to the cluster units and will enable them to become more
competitive.

► Facility for computerized fabric cutting, designing and lamination.

Currently, the units use manual / semi-automatic machines for fabric cutting, sewing
and quilting processes for undertaking fabric to finished products as per buyer
specifications and requirements. This is resulting in fabric wastage ranging between
20%-30%. This has resulted in declining margins for these units due to higher
production costs due to wastage. The use of manual / semi-automatic production is
also leading to delays in production processes for micro units. Therefore, a common
facility has been proposed in the CFC for providing latest technology for these
services.
The factors that necessitate garment finishing facility include:
► Necessary for all apparel and leather accessories manufacturing, for which there is
a large and growing market.
► Use of manual or semi-automatic machines for fabric cutting, sewing resulting in
higher wastage. This is a challenge for these units as higher wastage is resulting in
declining profit margin.

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► Manual processes lead to high dependency on skills of labor. This leads to the slow
production rate and high cost in manufacturing of the product with variation in
quality of finished product.
► The establishment of a common facility centre, which enables units to automate the
processes could reduce the costs by approximately 20%.
► The establishment of a common facility centre, which enables units to undertake
innovation in designing could provide more market opportunities.
A brief description of the fabric knitting equipment required is provided below:
Computerised fabric cutting machine: This machine is important for preproduction process
of separating (sectioning, carving, severing) a spread
into garment parts that are the precise size and shape
of the pattern pieces on a marker, with highest
accuracy, resulting in minimal wastage. Units would
bring their own fabric and utilize the equipment for
cutting as desired. They can subsequently utilize the
fabric (including leather) either for in-house product
manufacturing or for other units to sell directly. 1 fully
automatic fabric cutting machine would be obtained,
for cutting different types of fabric.
Automatic sewing and perforation machine:

Sewing Machine is one of the new Computer Digital

Control Sewing Machine. An equipment with garment
CAD software, computer control system and
computer embroidery and quilting technology. Sewing
machine is divided into A and B working area,
alternated run. When A is running, B can prepare the
fabric for next sewing process. This machine will
provide the much-needed facility to manufacture the
product with complex designs. Also, it will help the
unit to manufacture better quality products at
competitive prices.

Embroidery Machine:

Embroidery machine will provide the cluster units in

house facility to design their products. With machines
like sewing and embroidery, provide the necessary
infrastructure to expand their market and to supply to
OEMs such as Maruti, Hyundai etc.

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Foam Fabric Lamination:

The equipment will allow the layering process to be completed

before the cutting process. The establishment of a common
facility centre, which enables units to undertake the process
effectively could reduce the cost on quilting by approximately
20%.

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Special Purpose
Vehicle (SPV) for
Project
Implementation

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5. SPV for Project Implementation

The micro units at Hisar Textile & Allied Products Cluster came together to form a Special
Purpose Vehicle (SPV) as a private limited company under section 7 of the Companies Act,
2013 and rule 8 of the Companies (Incorporation) Rules, 2014. The SPV is named as ‘Hisar
Textile & Allied CFC Private Limited’. The certificate of registration is provided at
Annexure-2 along with Memorandum of Association (MoA) and Articles of Association (AoA)
and PAN Card of the SPV are provided in Annexure – 2(a) & (b).The Company has an
authorized paid up capital of Rs. 10.00 Lakh which shall be enhanced in the near future.
The members are micro-sized firms (registered units) involved in textile manufacturing
related activities, predominately based in Hisar town.
DIC, Hisar and state government both played an important role in SPV formation by cluster
stakeholders. The SPV includes about 12 members who are subscribing to the necessary
equity base of the company. The SPV shall be open for new members to join and for the
existing members to leave while maintaining a minimum member base of at least 10 at all
times. The proposed CFC will be implemented on public-private partnership basis through
SPV ‘Hisar Textile & Allied CFC Private Limited’ by availing support from Government of
Haryana (under EPP 2015) state mini cluster scheme.
The SPV members have a strong track record of cooperative initiatives. SPV members are
also members of prominent cluster associations. Cluster members have autonomously
undertaken several soft interventions to enhance knowledge and exposure of the cluster
units on new trends in sector and enhancing productivity of their units as mentioned in the
previous sections. These include exposure to cluster development initiatives in other
clusters, exposure visits to fairs, registration under UAM and awareness programs on new
trends in the industry, GST, design interventions and new technologies. These programs
were conducted in collaboration with DIC and BDS providers.
The SPV has conducted a series of stakeholder consultations (with various members, DIC,
Hisar and EY experts) during finalization of project components, selection of technologies
and development of Detailed Project Report. The SPV has been instrumental in spreading
awareness about cluster development under state mini-cluster scheme in Hisar and has also
helped in validation of findings and recommendations. It has kept the state government and
the DIC Hisar engaged during the entire period of development of DSR and DPR.

5.1 Shareholder profile and Shareholding mix

List of Directors: The SPV has three directors. The details of the directors are furnished in
the table 5. Other than these directors, the SPV will have provision of having one director
from the state government. The SPV comprises members from micro textile & allied
products manufacturing units.

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Table 5: List of SPV Directors

S. No. Director Name Name of the unit Unit address

1 Jaswant Singh Rajendra Seat Shop No 559, Second Floor Auto Market,
Cover Hisar
2 Narender Car Expert Shop No. 2, First Floor, Auto Market, Hisar

The lead promoters/ shareholders have several years of successful experience in production
of textiles and allied products and 2 are also well versed with the benefits of cluster
development initiatives. These units are financially viable in nature.
Members of the SPV have been engaged in production of automobile accessories products
in Hisar for several years. SPV directors/ members of the SPV also have considerable
experience in marketing and manufacturing of textile products. Directors/members have
been in close interactions with technical experts, government institutions and machinery
suppliers. The DIC Hisar also acknowledged the genuineness and enthusiasm of the SPV
members to undertake project initiatives under state mini cluster scheme as well as verified
the existence of the SPV members. The verified list is provided in Annexure 3.
The SPV was formed with the objective of taking up cluster level activity in a joint and
coordinated manner, wherein all units have equal say. The shareholding pattern of members
of the registered SPV includes the contribution from every member of SPV and no individual
shareholder holds more than 10% equity stake in the capital of the company. Details of SPV
members along with their contact persons, unit details, UAM numbers and products
manufactured are provided in table 6.

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Table 6: Details of SPV Members of Textile & Allied Products Cluster, Hisar & Shareholding Pattern

Sr. Contact Person Company Contact Address of Unit UAM Number Products of the % of Share
No. Name Number Cluster holding

1. Jaswant Singh Rajendra Seat 9416646297 Shop No 559, Second Floor HR06A0003152 Car Seat Cover 10%
Cover Auto Market, Hisar
2. Narender Car Expert 9992011447 Shop No. 2, First Floor, Auto HR06A0003167 Car Floor Mats 10%
Market, Hisar
3. Vipin V.K. Industries 9992665550 Shop No. 532, Ground Floor, HR06A0003166 Steering Cover and 10%
Auto Market, Hisar Seat Covers
4. Jitendra Singh Shri Shyam 9680641682 Plot No. 40, Udaipurian HR06A0003362 Seat Cover 10%
Comforts Mohalla, Hisar
5. Parveen Kumar Chouhan Bag & 9255855337 Shop No. 37, First Floor, Guru HR06A0003339 Seat Cover & Bags 5%
Seat Tailor Jambheswar Market, Hisar
6. Parmod Kumar Birma Car 9416647352 Shop No.106-B, Auto Market, HR06A0003343 Seat Cover 5%
Covers Hisar
7. Manu Vikas Manu 9811847748 Shop No. 556, First Floor, Auto HR06A0003332 Seat Cover 5%
Enterprises Market, Hisar
8. Parveen Amar Auto 9896415410 Shop No. 527, First Floor, Auto HR06A0003331 Seat Cover 10%
Covers Market, Hisar
9. Jyoti Singh Car Cushions 9351217749 Plot No. 505, Sector -14, Hisar HR06A0003335 Neck Rest and 10%
Sisodiya Cushions.
10. Tanuj Nirwan Jhalak Car 7737274778 Plot No. 352, Vikas Nagar, HR06A0003336 Seat Cover 10%
Cover Hisar
11. Naveen Chouhan Bag 9416784690 Shop No.1, Sunil Lodge, Hisar HR06A0003386 Bags 5%
House
12. Love Verma Verma 7838155688 Plot No. 63, Udaipuriyan HR06A0003388 Dashboard Cover 10%
Creations Mohalla, Hisar

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5.2 Initiatives undertaken by the SPV

As mentioned in detail in section 4.1 (Soft interventions recommended and action taken),
the SPV members have proactively undertaken a lot of capacity building initiatives to
promote the cooperation among cluster units and enhance knowledge and exposure of the
units. These initiatives have been undertaken in collaboration with DIC, EY, MSME-DI, etc.
Several units currently attend domestic and international garment exhibitions. Hence, the
cluster does not intend to obtain government funding for soft interventions. The major
initiatives are:
► Pursuing initiatives in close coordination with DIC to facilitate understanding of cluster
development, common procurement, marketing, available government support, latest
technology for common facility etc.
► Exposure visits to trade fairs and machinery fairs in NCR and large factories in other
locations to understand the technology, market requirement and available
opportunities.
► Conducting various programs for capacity building, awareness generation and
technological advancement in the cluster as well as participation in similar programs
organized by stakeholders.
► Identification of building for setting up of CFC and collective acquisition of building in
the name of SPV.

5.3 SPV Roles and Responsibilities

The SPV will play an important guiding role in the overall management and operations of
the CFC. It will provide direction to the management of the CFC and will monitor usage and
performance of the CFC. The SPV will constantly report to the state government about the
performance of the CFC. The major roles and responsibilities that are envisaged to be
performed by the SPV post the submission of this DPR are mentioned below:
► Coordinating with the state industry department for DPR approvals in the SLSC
► Accompanying EY experts to various meetings at the state government departments
► Execution of building lease document in SPV name
► Garnering the SPV project contribution from the members
► Formation of purchase committees for procurement of machines
► Establishing, operating and maintaining all common facilities as mentioned in the
DPR
► Obtain any statutory approvals/clearances from various government departments
► Recruit appropriate professionals to ensure smooth execution of the CFC
► Collection of user charges from members and other users of the facilities as per the
decided rates so as to meet the recurring expenses and future expansions of the CFC.
While various estimates on user charges / service fee are presented in this DPR, all
decisions including usage priority of facilities by members will be made on the basis of
decision by members of SPV.
► Preparation and submission of progress reports to state industry department

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The Memorandum and by-laws of the Cluster SPV indicates the democratic process in terms
of decision making on the basis of votes. All members of SPV will meet once every
fortnight/month to discuss/resolve operational issues. The management of the CFC will be
a two-tier structure for smooth and uninterrupted functioning. The executive body i.e.
Board of Directors (BoD) will include office bearers elected/nominated from time to time,
including one nominee of State Government (DIC). They will also remain present during
meetings.
While various estimates on user charges/service fees are presented in this DPR, all decisions
including usage priority of facilities by members will be made by unanimous decision of the
members. The CFC will seek direction and guidance from the SPV BoD, and the day-to-day
administration will be taken care of by the management that shall be appointed by the SPV
BoD. Their role is detailed below:
1. Board of Directors: The BoD will be the main governing body and will oversee the
operations of the CFC. They will have the decision-making power in terms of fixing user fees
(for members and non-members) and usage of reserves etc. for future expansion. The
Chairman and Managing Director will oversee the entire operations; each Director will be
entrusted with specific responsibility like marketing, technical, finance, public relations etc.
based on their interests and experience.
2. Managerial, Technical and Administrative staff: A competent and well qualified
professional with a background in the textile and leather industry will be appointed as the
Chief Executive Officer (CEO), who will look after day-to-day operations of the CFC and shall
be directly reporting to the Board of Directors. Additionally, a Cluster Development
Executive (CDE) shall be hired to manage the facility and coordinate with government
authorities. Each facility will have its own expert staff (supervisors, operations and helpers)
as per the requirement. The details of manpower and other requirements are already
mentioned in the DPR in the Project Economics section. There shall be provisions for
administrative staff such as accounts personnel, marketing professional, store-keepers etc.
to ensure effective functioning of the CFC. The proposed organizational structure of the
CFC is given in figure 10:

Figure 10: Organisational Structure of Proposed CFC

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Project Economics

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6. Project Economics

6.1 Project Cost

The actual total cost of setting up a CFC Textile & Allied Products Cluster, Hisar is estimated
at Rs. 209.20 Lakhs.
The total cost estimation includes the following project components:
1. Building on lease
2. Machinery and equipment
3. Miscellaneous fixed assets
4. Preliminary & Pre-operative expenses
5. Contingency
6. Margin money for working capital
The detail of each project component is provided below:

6.1.1 Land and Building

The SPV has identified an existing building in Vikas Nagar, district Hisar. The building is in
commercial area, and provision for power is available. Many textile & allied products units
are also operating in this industrial estate. The available built up area is 3000 sq ft. that
shall be taken on lease by the SPV.
The letter from the building owner establishing the proof for availability of building is
provided in Annexure 4. The lease rental is estimated at INR 1.80 Lakh for first year (Table
8).

6.1.2 Plant and Machinery

As detailed in section 4.2 (Hard interventions) a number of modern automatic and high
capacity machines for fabric cutting, sewing with perforation and embroidery, etc. have
been recommended to enable cluster units to enhance their competitiveness. The machines
have been categorized as primary and secondary. The machines that shall be used primarily
for job work have been categorized as primary, whereas, the auxiliary/supporting machines
have been categorized as secondary machines. The major facilities proposed at the CFC are
fabric cutting, sewing with perforation and embroidery. The total cost of plant and
machinery including secondary machine has been estimated at Rs. 188.35 lakhs and
contingency works out to Rs. 9.42 Lakhs.

The details of the proposed machinery items are presented Table 7. The detailed
specifications and quotations of the machines are provided in Annexure 5. The SPV has
considered quotations for machinery from suppliers based on the manufacturer’s
reputation, service support, price and quality. However, an open online tendering system
shall be followed for procurement of these machines during project execution, and selected
vendors will be further invited to negotiate.

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Table 7: List of Proposed Plant & Machinery

PLANT & MACHINERY

Grand
S. Quantity Basic Price Total Basic Price Gst as Applicable * Total Price
Machine Name Total
No.
Indigenous Imported Indigenous Imported Indigenous Imported Indigenous Imported Indigenous Imported
A Primary Machinery
Fully Automatic
Sewing and
1 - - - 30.51
Perforation 25.86 25.86 4.65 30.51
1 Machine

Embroidery
1 - - - 17.11
2 Machine 14.50 14.50 2.61 17.11

Computerized
Fabric Cutting 1 - - - 111.19
94.23 94.23 16.96 111.19
3 Machine

Flame
Lamination - - - 15.64
13.25 13.25 2.39 15.64
4 Machine 1

Sub Total (A) 1 3 13.25 134.59 13.25 134.59 2.39 24.23 15.64 158.82 174.45
B Secondary Machinery
- - - 4.82
1 DG Set 1 4.28 4.28 0.54 4.82

- - - 4.25
2 UPS 30KVA 1 3.60 3.60 0.65 4.25

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- - - 3.08
3 UPS 10 KVA 1 2.61 2.61 0.47 3.08

- - - 1.75
4 UPS 10KVA 1 1.48 1.48 0.27 1.75

Sub Total (B) 2 0 11.97 - 11.97 - 1.93 - 13.90 - 13.90

Grand Total 3 3 25.22 134.59 25.22 134.59 4.31 24.23 29.53 158.82 188.35

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6.1.3 Miscellaneous Fixed Assets

The CFC would also require fixed assets such as furniture, fixtures, and office items etc. for
smooth running of operations. The total estimated capital expenditure for purchase of
miscellaneous fixed assets is estimated to be Rs. 1.50 Lakhs. Details are provided in the
Table 8.

Table 8: Miscellaneous Fixed Assets

(Rs in Lakh)
MISCELLANEOUS FIXED ASSETS
S. No. Particulars Amount

1 Office computer (1 nos.) 0.50

2 Furniture (3 tables, 6 chairs & stools) 0.50
3 Office items and allied items 0.50
Total 1.50

6.1.4 Preliminary and Pre-Operative Expenses

Another major component of the project cost is the preliminary and pre-operative expenses.
The preliminary expenses are envisaged as expenses incurred for registration of SPV, legal
and administrative expenses, detailed civil engineering drawings with estimates, tendering
forms, and tendering cost etc.
Pre-operative expenses include expenses for electricity connection charges, administrative
establishment, travelling, bank charges, stationery, telephone, overhead expenses during
construction and machinery testing period such as salaries, machine testing cost, bank
charges, travelling, etc. The total expenditure for preliminary and pre-operative expenses
is estimated at Rs. 4.15 Lakhs (details provided in the Table 9).
Table 9: Preliminary and Pre-Operative Expenses

PRELIMINARY & PRE OPERATIVE EXPENSES

S. No. Particulars Amount
1 Company Registration Charges 0.10

2 Tender forms & tendering cost 1.00

3 Project Report Preparation (DSR & DPR) Nil

4 Project Management Charges Nil

5 Travelling Cost 0.50

6 One-time electricity connection charges 1.47

7 Lease deed registration charges 0.43

8 Security Deposit (Rent) 0.15

9 Bank Appraisal Charges 0.50

Total 4.15

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6.1.5 Provision for Contingencies

Provision for contingencies has to be made on plant/machinery and buildings. As the
building will be taken on lease, therefore no contingency has been provided on building.
Contingencies on plant and machinery have been estimated at 5% that amounts to Rs. 9.42
lakh.

6.1.6 Margin Money for Working Capital

The total working capital requirement during the first year of operation at 75% capacity
utilization is estimated at Rs. 23.15 lakh with margin money requirement of Rs. 5.79 Lakh
(being more than 25% of working capital requirement as margin). The working capital
requirement has been calculated based on requirement of one month of operational
expenses and three months’ debtor collection period. The calculation has been provided in
the subsequent section.

6.1.7 Summary Project Cost

A summary of total estimated project cost as per actual and as per State Mini Cluster
Development Scheme is presented in the Table 10.
Table 10: Total Project Cost

(Rs in Lakh)
PROJECT COST
Total Amount
S.
Particulars Project as per Remarks
No.
Cost Guidelines
1 Land & Building
a. Land Value 0.00
b. Land Development 0.00 Building on
0.00
c. Building & Other Civil Works 0.00 lease
d. Building Value 0.00
Sub Total (A) 0.00 0.00
2 Plant & Machinery
a. Indigenous 15.64
b. Imports 158.82 188.35 Eligible
c. Secondary Machines 13.90
Sub Total (B) 188.35 188.35
3 Miscellaneous fixed assets (C) 1.50 0.00
4 Preliminary & Preoperative Expenses (D) 4.15 0.00
5 Contingency
Not eligible
a. Building @ 2% 0.00 0.00
for grant
b. Plant & Machinery @ 5% 9.42 0.00
Sub Total (E) 9.42 0.00
6 Margin money for working capital @ 75% C.U. (F) 5.79 0.00
Grand Total (A+B+C+D+E+F) 209.20 188.35

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6.2 Means of Finance

The project will be financed from two sources: equity from SPV and grant-in-aid from Govt. of
Haryana (under State Mini Cluster Development Scheme, EPP-2015). Working capital loan, if
required, will be secured from ICICI Bank. The assistance to the project from Govt. of Haryana
under the State Mini Cluster Development Scheme is envisaged to the tune of 90% of
maximum project cost of Rs. 200 lakhs. The SPV will be required to contribute 10% of project
cost for project cost up to Rs. 200 lakh and any amount in excess of Rs. 200 lakhs. Hence,
the SPV members have proposed to contribute entire amount beyond Rs. 180 lakhs, towards
the total project cost. The total contribution of SPV members will amount to Rs. 39.69 lakhs.
Support from the State Government is envisaged for Rs. 169.51 Lakhs.

Table 11: Means of Finance

MEANS OF FINANCE
Total Amount (Rs. In
S. No. Source of finance
Lakh)
Grant-in-aid under State Mini Cluster Development Scheme
1 (Govt. of Haryana) 169.51

Contribution of SPV 39.69

2

Total 209.20

DETAILED MEANS OF FINANCE

Project cost up to INR
Project cost over INR 200 lakh
200 lakh
S. Source of Total
Amount Amount Remarks
No. finance Percentage Percentage Amount
(INR in (INR in
Contribution Contribution (INR in
lakh) lakh)
lakh)
As per EPP,
Grant-in-aid 2015 GoH
under State contribution
Mini Cluster is max 90%
90% 169.51 0% 0.00 169.51
1 Development (Including
Scheme (Govt. soft
of Haryana) intervention
expenses)

Contribution
10% 18.83 100% 20.85 39.69
2 of SPV

Total 100% 188.35 100% 20.85 209.20

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6.2.1 Share Capital

The contribution of the SPV members will be by way of subscription to shares in the SPV
registered as a Private Limited Company. The extent of paid-up share capital/equity
contribution would be Rs. 39.69 lakh contributed by the cluster SPV.
The authorized share capital of the company is Rs. 10 lakh at present which shall be
increased in due course. The extent of share capital/equity contribution by each member
will be restricted to a maximum of 10% of the total contribution to the share capital of the
company.

6.2.2 Grant-in-Aid
Grant-in-aid of Rs. 169.51 lakh is expected from the Government of Haryana. The amount
received by the way of grant under the State Mini Cluster Development Scheme will be
utilized towards procurement of plant and machinery for the project.

6.3 Expenditure Estimates

In this section, a detailed estimate of expenditure of the CFC has been given on eight hour
single shift operation basis. This has been estimated based upon extensive inputs by the
cluster members and the prevalent rates of consumables, utilities and manpower in the
cluster. This section considers annual cost of undertaking job work and expenditure
estimates. The critical components related to expenditure comprise consumables,
manpower, electricity and also expenditure on repair and maintenance of assets, insurance
and administrative overheads.
Other elements comprise expenditures by the way of interest toward working capital loans,
miscellaneous expenses and non-cash depreciation expenditure.

6.3.1 Consumables
Machines installed in the CFC shall require consumables during operations and completion
of the job work. Consumables are critical components of project facilities and may be
understood in terms of Threads, Needles, Grease, Oil, diesel, electronic replacements and
others etc.
The detailed calculations are provided in Table 13.

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Table 12: Consumables

CONSUMABLES REQUIRED FOR MACHINES

Monthly Consumable
Total Amoun Amoun Amoun Amoun Amoun
Amount s required Amount
S. Machine No. Of monthl t (in t (in t (in t (in t (in
Particulars per annually (in Rs.
No. Name Machines y Amt Rs. Rs. Rs. Rs. Rs.
Machin (Rs. In Lakh)
(Rs.) Lakh) Lakh) Lakh) Lakh) Lakh)
e (Rs.) Lakh)
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6
75% 80% 85% 90% 95% 100%
A. Primary Machines
Fully
Threads,
Automatic
Needles &
Sewing and 3000 3000 0.36 0.27 0.29 0.31 0.32 0.34 0.36
Grease,
Perforation
Oil
1 Machine 1
Treads,
Non
Embroidery woven
2 2000 2000 0.24 0.18 0.19 0.20 0.22 0.23 0.24
Machine pasting,
oil &
1 grease
Needles,
Computerize Plastic
d Fabric Rolls, 3500 3500 0.42 0.32 0.34 0.36 0.38 0.40 0.42
Cutting Lubricatio
3 Machine 1 n Oil
Flame
Lamination LPG, 2000 2000 0.24 0.18 0.19 0.20 0.22 0.23 0.24
4 Machine 1 Foam
B. Secondary Machine
2 DG Set 1 Diesel 5000 5000 0.60 0.45 0.48 0.51 0.54 0.57 0.60

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Total 1.26 0.95 1.01 1.07 1.13 1.20 1.26

Consumables
per month 0.11 0.08 0.08 0.09 0.09 0.10 0.11

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6.3.2 Manpower Requirement

Another major expenditure head is the manpower. The facilities installed in the CFC will
require manpower to function effectively as mentioned in section 5.3 of the report. The
total manpower requirement for the project would be about 14 persons. The manpower
required under the project has been divided under two categories: Direct & Indirect. Direct
manpower is required for operation of machines while indirect manpower is required for
administrative purposes. One office boy and one security guard have been kept under direct
manpower considering their requirement will depend upon the volume of work in the unit.
The annual expenditure on salary component for direct manpower is estimated at Rs. 18.55
lakh and for indirect at 5.41 lakhs. The total expense on manpower is projected at Rs. 2.00
lakh per month or Rs. 23.96 lakh per annum. The details of monthly and yearly expenses
for manpower required for running the project is provided in Table 13 & 14:
Table 13: Expenditure Related to Salary (Direct Manpower)

MANPOWER REQUIREMENT
Total
No. of salary &
Salary per month per Total Salary Per
Category Manpower wages per
person (INR) Month (INR)
Required Year (INR
lakh)
DIRECT MANPOWER
Operator 3 10,000.00 30,000.00 3.60
Helper 3 8,000.00 24,000.00 2.88
Digitizer 1 12,000.00 12,000.00 1.44
Office Boy 1 8,500.00 8,500.00 1.02
Security Guard 1 9,000.00 9,000.00 1.08
9 47,500.00 83.500.00 10.02
Add: Perquisites/Fringe Benefits @ 10% 1.00
Sub Total (A) 11.02

Table 14: Expenditure Related to Salary (Indirect Manpower)

INDIRECT MANPOWER
Total
No. of salary &
Salary per month per Total Salary Per
Category Manpower wages per
person (INR) Month (INR)
Required Year (INR
lakh)
Cluster Development
Executive (CDE) 1 15,000.00 15,000.00 1.80

Accountant 1 12,000.00 12,000.00 1.44

2 27,000.00 27,000.00 3.24
Add: Perquisites/Fringe Benefits @ 10% 0.32
Sub-Total (B) 3.56

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6.3.3 Utilities
The most important utility required in the project is power supply. Proposed CFC requires
power for operation of machinery as well as other supporting equipment for smooth
operations. The total connected load requirement has been estimated at 44.55 kW. The
table below depicts the machine and equipment wise power requirement in the CFC. The
drawn power is conservatively assumed at 60% of the connected load in the case of
operating facilities and shop floor.

Table 15: Machine & Equipment (facility) wise power requirement

UTILITIES
Power Total power
Requirement requirement
S. No. Machine & Equipment (kW)/ (60% of
Connected drawn
Load power) kWh
1 Fully Automatic Sewing and Perforation Machine 2.50 1.50
2 Embroidery Machine 3.00 1.80
3 Computerized Fabric Cutting Machine 25.00 15.00
4 Flame Lamination Machine 7.00 4.20
5 Administrative Facilities 3.00 1.80
Total Connected load for CFC 40.50 24.30
Buffer Connected Load (10% of Total Connected
4.05
Load)
Total 44.55

The power requirement for operation of core machinery equipment and administrative
facilities is 43 kW. Electricity required for shop floor activities in terms of operation of core
machinery and equipment is 4860 units per month. The facility is heavily based on
electricity for operations and will also require additional 10% connected load as a buffer to
get the electricity connection. The total connected load for the CFC is estimated to be 44.55
kW.
Fixed charges for connection of 44.55kW @ Rs. 173 per kW equals Rs. 7,707.15/- and
variable energy consumption charge 7 @ Rs. per unit for a consumption of 5160 units
amounts to Rs. 34,020/-. This has been calculated based on the prevalent rates of the
power provider.
Table 16 presents the estimated annual expenditure in terms of power related charges.

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Table 16: Annual Expenditure Statement vis-à-vis Power Charges

Power charges at various C.U.

Year Year Year Year Year Year Year
Year 1 Year 2 Year 3
4 5 6 7 8 9 10

75% 80% 85% 90% 95% 100% 100% 100% 100% 100%

Fixed 0.92 0.92 0.92 0.92 0.92 0.92 0.92 0.92 0.92 0.92

Variable 3.06 3.27 3.47 3.67 3.88 4.08 4.08 4.08 4.08 4.08

Total 3.99 4.19 4.39 4.60 4.80 5.01 5.01 5.01 5.01 5.01

Per month 0.33 0.35 0.37 0.38 0.40 0.42 0.42 0.42 0.42 0.42

6.3.4 Annual Repairs and Maintenance Expenses

The annual repair and maintenance expenses have been estimated to be Rs. 5.80 lakh.
The details are presented in the table below:
Table 17: Annual Repairs and Maintenance Expenditure

ANNUAL REPAIR AND MAINTENANCE EXPENSES

Particulars Amt (in Rs. Lakh)
Repair & Maintenance of Building 0.15
Repair & Maintenance of Plant and Machineries @ 3% 5.65
Total 5.80

(Rs. In
lakh)
REPAIR & MAINTENANCE as per Capacity Utilisation

Year Year Year Year Year Year Year Year Year Year
Repair & 1 2 3 4 5 6 7 8 9 10
Maintenance of
75% 80% 85% 90% 95% 100% 100% 100% 100% 100%
Building 0.11 0.12 0.13 0.14 0.14 0.15 0.15 0.15 0.15 0.15
Plant &
Machineries 4.24 4.52 4.80 5.09 5.37 5.65 5.65 5.65 5.65 5.65
Total 4.35 4.64 4.93 5.22 5.51 5.80 5.80 5.80 5.80 5.80

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6.3.5 Insurance and Miscellaneous Administrative Expenses

Insurance is a critical component of asset protection at the CFC. Insurance is computed on
the basis of 0.5 % on the fixed assets. Cost of insurance shall remain as a fixed cost.
Miscellaneous administrative expenses are estimated at a lump-sum of Rs. 1.89 lakh per
year. The cost of miscellaneous expenses is also considered to be fixed irrespective of scale
of operation. The details are presented in the table below:

Table 18: Insurance and Miscellaneous Administrative Expenses

OTHER EXPENSES
Particulars Amt (in Rs. Lakh)
Insurance Charges (Estimate @ 0.5% on fixed assets (such as
buildings, civil works, and Plant & machinery, including related
contingency expenses of approx. Rs. Lakh) 0.99
Miscellaneous Expenses (Stationery, communication, travelling, and
other misc. overheads) 0.90

Total 1.89

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6.4 Working Capital Requirements

Working capital has been calculated in terms of one month’s operating expenses required for the CFC as well as three months’ debtor collection
period. The operating expenses include consumables, salaries, utilities and rent expenses. The details are presented in the table below.
Table 19: Calculation of Working capital requirement

(Rs. In
. Lakh)
WORKING CAPITAL
S. No. Particulars Period As per Capacity Utilisation
Year
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9
10
75% 80% 85% 90% 95% 100% 100% 100% 100% 100%
1 Consumables 1 month 0.08 0.08 0.09 0.09 0.10 0.11 0.11 0.11 0.11 0.11
2 Utilities (Power) 1 month 0.33 0.35 0.37 0.38 0.40 0.42 0.42 0.42 0.42 0.42
Working Expenses
3 (Manpower ) 1 month 0.99 1.03 1.08 1.12 1.17 1.22 1.22 1.22 1.22 1.22
4 Rent 1 month 0.15 0.17 0.18 0.20 0.22 0.24 0.27 0.29 0.32 0.35
Sundry Debtors (Sales
5 Value) 3 months 21.60 23.04 24.48 25.92 27.36 28.80 28.80 28.80 28.80 28.80
Working capital (Total
6 expenses) 23.15 24.67 26.19 27.72 29.25 30.78 30.80 30.83 30.86 30.89
7 Working Capital Margin 5.79 6.17 6.55 6.93 7.31 7.69 7.70 7.71 7.71 7.72
8 Working Capital Loan 17.36 18.50 19.65 20.79 21.94 23.08 23.10 23.12 23.14 23.17
Interest on Working
9 capital loan @11% p.a. 1.91 2.04 2.16 2.29 2.41 2.54 2.54 2.54 2.55 2.55
10 Working Cap Margin %age 25.00% 25.00% 25.00% 25.00% 25.00% 25.00% 25.00% 25.00% 25.00% 25.00%

The working capital requirement of the project for the one month of operation has been considered for consumables and expenses. The SPV
will contribute the margin money for working capital and rest of working capital will be borrowed from local bank. While calculating the project

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cost, minimum 25% of working capital is shown as margin for working capital and the remaining will be borne by SPV as borrowings. The
margin money required for working capital is estimated to Rs. 5.79 lakh during the first year of operation (75% C.U.). Further, total working
capital required at an operating capacity of 75% comes out to Rs. 23.15 lakh and the corresponding loan amounts at Rs. 17.36 lakh.

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6.5 Depreciation Estimates

Estimates of depreciation are non-cash expenditure and presented in this section on the basis of Written down Value (WDV) method.
Accounting for depreciation would facilitate sustainability of operations in terms of developing a fund for replacement of assets. The relevant
fund that is accumulated could facilitate the replacement of such assets toward the end of the envisaged asset life of 10 years. Depreciation
of building is considered nil as it will be taken on lease, depreciation of plant and machinery at 15% a year, and miscellaneous fixed assets at
the rate of 10% a year. The calculation is provided in the table below.
Table 20: Depreciation based on WDV

(Rs. In
lakh)
DEPRECIATION (WRITTEN DOWN VALUE METHOD)
Particulars Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Land
Opening Balance 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Less : Depreciation - - - - - - - - - -
Closing Balance 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Building and Civilwork
Opening Balance 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Less: Depreciation @ 10% 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Closing Balance 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Plant & Machinery
Opening Balance 197.77 168.10 142.89 121.45 103.24 87.75 74.59 63.40 53.89 45.81
Less: Depreciation @ 15% 29.67 25.22 21.43 18.22 15.49 13.16 11.19 9.51 8.08 6.87
Closing Balance 168.10 142.89 121.45 103.24 87.75 74.59 63.40 53.89 45.81 38.94
Computers
Opening Balance 0.50 0.20 0.08 0.03 0.01 0.01 0.00 0.00 0.00 0.00
Less: Depreciation @ 60% 0.30 0.12 0.05 0.02 0.01 0.00 0.00 0.00 0.00 0.00
Closing Balance 0.20 0.08 0.03 0.01 0.01 0.00 0.00 0.00 0.00 0.00

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Furniture
Opening Balance 0.50 0.45 0.41 0.36 0.33 0.30 0.27 0.24 0.22 0.19
Less: Depreciation @ 10% 0.05 0.05 0.04 0.04 0.03 0.03 0.03 0.02 0.02 0.02
Closing Balance 0.45 0.41 0.36 0.33 0.30 0.27 0.24 0.22 0.19 0.17
Other Misc. Fixed Assets
Opening Balance 0.50 0.43 0.38 0.34 0.31 0.28 0.25 0.23 0.20 0.18
Less: Depreciation @ 15% 0.08 0.04 0.04 0.03 0.03 0.03 0.03 0.02 0.02 0.02
Closing Balance 0.43 0.38 0.34 0.31 0.28 0.25 0.23 0.20 0.18 0.16
Total Depreciation 30.09 25.42 21.56 18.31 15.56 13.22 11.24 9.56 8.13 6.91
Depreciated value 169.18 143.75 122.19 103.89 88.33 75.11 63.87 54.31 46.18 39.27

6.6 Income/Revenue estimates

The CFC is expected to generate revenue by way of user charges that shall be levied based upon the hours a machine is operated for a
particular job. The user charges shall vary based upon the user i.e. the SPV members and non SPV members. The user charges will be less for
the SPV members as compared to non SPV members. Firms based outside district Hisar, shall be charged a premium for availing the CFC
services. The major income sources for the CFC are envisaged by the way of providing computerized fabric cutting facilities, fabric knitting
facilities and fabric printing facilities.
The user charges have been estimated based upon the operational expenses of the CFC and the prevalent market rates in district, Hisar. User
charges for secondary machineries have not been considered as a part of revenue. Estimation of user charges for availing services at CFC has
been done on a conservative basis.
The relevance and appropriateness of user charges is also evident from the fact that the rates fixed help meet operating expenditures and
provide sustainable replacement of assets. It is also envisaged that the CFC will generate enough income to sustain and grow, making it an
absolutely viable project.
The estimated user charges for various machineries are presented in table below:

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Table 21: User Charges for Machinery

REVENUE GENERATION AT CFC

Rate No. Of Revenue Annual

per hour Workin Workin per Revenue Amount Amount Amount Amount Amount Amoun
S. No. Of
Machine Name per g hours g days month generation in Rs. in Rs. in Rs. in Rs. in Rs. t in Rs.
No. Machines
machine per day per (Rs. (in Rs. Lakh) Lakh) Lakh) Lakh) Lakh) Lakh)
(Rs.) month lakh) lakh)
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6
1 75% 80% 85% 90% 95% 100%
Fully
Automatic
Sewing and 1 1200 8 25 2.40 28.80 21.60 23.04 24.48 25.92 27.36 28.80
Perforation
1 Machine
Embroidery
1 800 8 25 1.60 19.20 14.40 15.36 16.32 17.28 18.24 19.20
2 Machine
Computerized
Fabric
1 2000 8 25 4.00 48.00 36.00 38.40 40.80 43.20 45.60 48.00
Cutting
3 Machine
Flame
Lamination 1 800 8 25 1.60 19.20 14.40 15.36 16.32 17.28 18.24 19.20
4 Machine

Total 115.20 86.40 92.16 97.92 103.68 109.44 115.20

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Total gross revenue in-flow is estimated to Rs. 115.20 lakhs for first year at an operating capacity of 75%. For projection purposes, operating
capacity of 75% is considered during first year, 80% during second year and 100% from 6th year onwards.

6.7 Estimation of profitability: Income and Expenditure statement

The projection for income and expenditures of the CFC has been conducted for ten years. The projections have been undertaken based upon
the income and expenditure heads mentioned in previous sections. The projected statements highlight income, expenses, profits earned,
income tax and net profit etc. The details are presented in the table below:
The total gross revenue is estimated to be Rs. 21.36 lakhs for first year at an operating capacity of 75%. For projection purposes, operating
capacity of 75% is considered during first year, 80% during next year and 100% capacity from 6th year onwards.
The income tax rates have been considered as per rates applicable to a company according to the Income Tax Act, 1961. Income tax has been
considered at 25.75% per cent on taxable profit inclusive of all the tax components. The incidence of tax ranges from Rs. 7.41 lakhs in the
first year to Rs. 18.98 lakhs in Year 10.
As evident from the table below, the project is financially viable. A cumulative surplus of about Rs. 434.37 lakh shall be earned by the SPV
even after accounting for taxation and depreciation at the end of ten years. This surplus generated shall be used for further addition in the
machinery or improvement and up-gradation of facilities. Additionally, the SPV intends to conduct a lot of other development activities in the
cluster that shall be funded through the surplus earned at the CFC.
Table 22: Income and Expenditure Statement
(Rs. In
Lakh)
PROFIT & LOSS ACCOUNT
Particulars Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Number of working days 300 300 300 300 300 300 300 300 300 300
Number of shift 1 1 1 1 1 1 1 1 1 1
Capacity Utilisation in % 75% 80% 85% 90% 95% 100% 100% 100% 100% 100%
A. Income
(User/ Service Charge) 86.40 92.16 97.92 103.68 109.44 115.20 115.20 115.20 115.20 115.20
B. Cost of Production :

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1. Utilities Power (Fixed + Variable) 3.99 4.19 4.39 4.60 4.80 5.01 5.01 5.01 5.01 5.01
2. Direct labour and wages 8.27 8.82 9.37 9.92 10.47 11.02 11.02 11.02 11.02 11.02
3. Consumable 0.95 1.01 1.07 1.13 1.20 1.26 1.26 1.26 1.26 1.26
4. Repair and Maintenance 4.35 4.64 4.93 5.22 5.51 5.80 5.80 5.80 5.80 5.80
5. Depreciation 30.09 25.42 21.56 18.31 15.56 13.22 11.24 9.56 8.13 6.91
Total Cost of production 47.64 44.08 41.32 39.18 37.54 36.31 34.33 32.65 31.22 30.00
C. Administrative expenses :
6. Manpower (Indirect) 3.56 3.56 3.56 3.56 3.56 3.56 3.56 3.56 3.56 3.56
7. Rent 1.80 1.98 2.18 2.40 2.64 2.90 3.19 3.51 3.86 4.24
8. Insurance 0.99 0.85 0.72 0.61 0.52 0.44 0.38 0.32 0.27 0.23
9. Misc Expense 0.90 0.90 0.90 0.90 0.90 0.90 0.90 0.90 0.90 0.90
Total Administrative Expenses 7.25 7.29 7.36 7.47 7.62 7.80 8.03 8.29 8.59 8.94
D. Financial expenses :
10. Interest on Working capital loan
@ 11% per annum 1.91 2.04 2.16 2.29 2.41 2.54 2.54 2.54 2.55 2.55
Total Financial Expenses 1.91 2.04 2.16 2.29 2.41 2.54 2.54 2.54 2.55 2.55
E. Total Expenses B+C+D 56.80 53.40 50.85 48.94 47.57 46.66 44.90 43.48 42.36 41.49
F. Profit A - E 29.60 38.76 47.07 54.74 61.87 68.54 70.30 71.72 72.84 73.71
G. P&P Expenses written off 0.83 0.83 0.83 0.83 0.83 0.00 0.00 0.00 0.00 0.00
H. Income before Tax (F-G) 28.77 37.93 46.24 53.91 61.04 68.54 70.30 71.72 72.84 73.71
I. Adjustment of Loss - - - - - - - - - -
J. Income Tax (@25.75% for
Company) 7.41 9.77 11.91 13.88 15.72 17.65 18.10 18.47 18.76 18.98
K. Net Profit /Loss for the year 21.36 28.16 34.34 40.03 45.32 50.89 52.20 53.25 54.09 54.73
L. Cumulative Surplus 21.36 49.52 83.86 123.88 169.21 220.10 272.30 325.55 379.64 434.37

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6.8 Cash flow statement

Cash flow statement indicates the cash balance and the liquidity position of the project over the years. The table below presents the sources
and disposal/uses of funds statement of the project.
Table 23: Cash Flow Statement

(Rs in
Lakh)

CASH FLOW STATEMENT

Construction Year
Particulars Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9
Period 10

A. Source Funds :

1. Cash Accurals (Net Profit + Interest

Paid) 31.51 40.79 49.23 57.03 64.28 71.08 72.84 74.26 75.39 76.26

2. Increase in capital 39.69 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

3. Depreciation 30.09 25.42 21.56 18.31 15.56 13.22 11.24 9.56 8.13 6.91

4. Increase in WC Loan 17.36 1.14 1.14 1.14 1.15 1.15 0.02 0.02 0.02 0.02

5. Change in Expenses Payable 1.55 0.08 0.08 0.09 0.09 0.09 0.02 0.03 0.03 0.03

6. Increase in Grant-in-aid from GoH 169.51 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Total Sources of Funds 209.20 80.51 67.44 72.02 76.57 81.07 85.54 84.12 83.87 83.57 83.23

B. Use of Funds :

1. P&P Expenses 4.15 - - - - - - - - - -

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2. Increase in fixed assets 199.27 - - - - - - - - - -

3. Increase in other Assets 5.79 34.15 7.21 8.58 10.22 12.18 14.55 17.00 20.40 24.48 29.38

4. Increase in Sundry Debtors 21.60 1.44 1.44 1.44 1.44 1.44 0.00 0.00 0.00 0.00

5. Interest 1.91 2.04 2.16 2.29 2.41 2.54 2.54 2.54 2.55 2.55

6. Taxation 7.41 9.77 11.91 13.88 15.72 17.65 18.10 18.47 18.76 18.98

Total Use of Funds 209.20 65.07 20.45 24.09 27.83 31.76 36.17 37.64 41.41 45.78 50.91

C. Net Surplus (A -B) 15.44 46.99 47.94 48.74 49.32 49.37 46.48 42.45 37.78 32.32

D. Cumulative Surplus 15.44 62.43 110.36 159.10 208.42 257.79 304.27 346.72 384.51 416.83

The cash flow statement showcases the available net surplus for 10 years of the CFC operations. Depreciation is also considered on a higher
side on the Written Down Value method for cash flow calculations along with adjusted preliminary expenses. As most of the capital expenditure
is being supported as grant under the State Mini Cluster Development Scheme, EPP-2015, therefore it does not have any negative effect on
the Cash flow, in terms of interest, etc.

6.9 Projected Balance Sheets

The annual balance sheets for the CFC have been projected based upon estimates in the earlier sub-sections with regard to various current
and fixed liabilities and also current and fixed assets. As evident from the projections, a considerable amount of reserves and surplus gets
accumulated. These shall also be utilized for expansion of the CFC and undertaking other cluster development activities. Decision on
deployment of reserves and surplus accumulated will be based on the performance of the project and requirements of cluster firms and
members of the SPV. The projected balance sheets are provided in the table below:

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Table 24: Balance Sheet

(Rs in
lakh)
PROJECTED BALANCE SHEET
At the end of
Particulars Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
impl. Period

1. Fixed Assets :
Gross Block 199.27 199.27 169.18 143.75 122.19 103.89 88.33 75.11 63.87 54.31 46.18
Less : Depreciation (WDV) 30.09 25.42 21.56 18.31 15.56 13.22 11.24 9.56 8.13 6.91
Net Block 199.27 169.18 143.75 122.19 103.89 88.33 75.11 63.87 54.31 46.18 39.27
Total Fixed Assets (A) 199.27 169.18 143.75 122.19 103.89 88.33 75.11 63.87 54.31 46.18 39.27
2. Current Assets :
Cash & bank Surplus (B.F) 15.44 62.43 110.36 159.10 208.42 257.79 304.27 346.72 384.51 416.83
Sundry Debtors 21.60 23.04 24.48 25.92 27.36 28.80 28.80 28.80 28.80 28.80
Margin Money for WC Loan 5.79 5.79 6.17 6.55 6.93 7.31 7.69 7.70 7.71 7.71 7.72
Other Current Assets 34.15 40.98 49.18 59.01 70.81 84.98 101.97 122.37 146.84 176.21
P&P Exp 4.15 3.32 2.49 1.66 0.83 0.00 0.00 0.00 0.00 0.00 0.00
Total current Assets (B) 80.30 135.10 192.23 251.79 313.91 379.26 442.74 505.60 567.86 629.56
Total Assets (A+B) 209.20 249.47 278.86 314.42 355.68 402.24 454.37 506.61 559.91 614.04 668.83
3. Current Liabilities :
Working Capital Loan 17.36 18.50 19.65 20.79 21.94 23.08 23.10 23.12 23.14 23.17
Expenses Payable 1.55 1.63 1.71 1.80 1.89 1.98 2.00 2.03 2.06 2.09
Total Current Liabilities (C) 18.91 20.13 21.36 22.59 23.83 25.06 25.11 25.15 25.20 25.26
4. Fixed Liabilities
Shareholders' Contribution 39.69 39.69 39.69 39.69 39.69 39.69 39.69 39.69 39.69 39.69 39.69
Grant from GoH 169.51 169.51 169.51 169.51 169.51 169.51 169.51 169.51 169.51 169.51 169.51
Reserves and Surplus 21.36 49.52 83.86 123.88 169.21 220.10 272.30 325.55 379.64 434.37

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Total Fixed Liabilities (D) 209.20 230.57 258.72 293.06 333.09 378.41 429.30 481.50 534.75 588.84 643.57
Total Liabilities (C+D) 209.20 249.47 278.86 314.42 355.68 402.24 454.37 506.61 559.91 614.04 668.83

6.10 Break-even analysis

The break-even (BE) estimates of the project indicate the level of activity at which the total revenues of the project equal the total costs. The
Break-even percentage indicates whether the fixed costs are being covered by the revenue generated from the operations, as well as profits
are being generated after paying for such fixed costs. As per the calculations, the CFC achieves break even in the first year itself as no major
interest costs are being incurred. Hence, BE estimates at level of activity relevant to the first year and subsequent years of activity are
provided in the table below:
Table 25: Break Even Estimates

(Rs. In
Lakh)
BREAKEVEN POINT AT VARIOUS C.U.
Particulars Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

Capacity Utilization 75% 80% 85% 90% 95% 100% 100% 100% 100% 100%

A. Total Earning by way of user

charges 86.40 92.16 97.92 103.68 109.44 115.20 115.20 115.20 115.20 115.20

B. Variable costs
Consumables 0.95 1.01 1.07 1.13 1.20 1.26 1.26 1.26 1.26 1.26

3.06 3.27 3.47 3.67 3.88 4.08 4.08 4.08 4.08 4.08
Utilities (Power-Variable Charges)
1.91 2.04 2.16 2.29 2.41 2.54 2.54 2.54 2.55 2.55
Interest on WC Loan

4.35 4.64 4.93 5.22 5.51 5.80 5.80 5.80 5.80 5.80
Repair & Maintenance

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8.27 8.82 9.37 9.92 10.47 11.02 11.02 11.02 11.02 11.02
Manpower (Direct)
Total Variable Cost (B) 18.53 19.77 21.00 22.24 23.47 24.70 24.71 24.71 24.71 24.71
C. Contribution (A-B) 67.87 72.39 76.92 81.44 85.97 90.50 90.49 90.49 90.49 90.49

D. Fixed Overheads (Cash)

Manpower (Indirect) 3.56 3.56 3.56 3.56 3.56 3.56 3.56 3.56 3.56 3.56

0.92 0.92 0.92 0.92 0.92 0.92 0.92 0.92 0.92 0.92
Utilities (Power-Fixed Charges)
Rent 1.80 1.98 2.18 2.40 2.64 2.90 3.19 3.51 3.86 4.24
Insurance 0.99 0.85 0.72 0.61 0.52 0.44 0.38 0.32 0.27 0.23
Misc. Expenditure 0.90 0.90 0.90 0.90 0.90 0.90 0.90 0.90 0.90 0.90
Sub-total (D) 8.18 8.21 8.29 8.40 8.54 8.73 8.95 9.22 9.52 9.86

E. Fixed Overheads (Non-cash)

Depreciation 30.09 25.42 21.56 18.31 15.56 13.22 11.24 9.56 8.13 6.91
Preliminary & Pre-operative 0.83 0.83 0.83 0.83 0.83 0.00 0.00 0.00 0.00 0.00
expenses written off
Sub-total (E) 30.92 26.25 22.39 19.14 16.39 13.22 11.24 9.56 8.13 6.91
F. Total Fixed Overheads (D+E) 39.10 34.47 30.68 27.53 24.93 21.95 20.19 18.77 17.64 16.77
Break even point (F/C) 57.61% 47.61% 39.88% 33.81% 29.00% 24.26% 22.32% 20.75% 19.50% 18.54%

Book break-even is achieved at 57.61% (of operational capacity at 75 per cent) and at 47.61% (of operational capacity at 80 percent). The
operation of the CFC is expected to break-even and realizes profit from 1st year of operations. Therefore, very low risk is involved in the
project.
Moreover, the SPV members have the potential to run the facility for longer than one shift resulting in enhanced capacity utilization and
generation of more revenues. In that case, project will break even earlier than estimated. Additionally, the approach has been to develop

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projections based upon conservative estimates (costs on a higher side and user charge/ revenues on a lower side) whereas, in real the
revenues may be far higher.

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6.11 Feasibility analysis summary and sustainability indicators

A summary of the financial analysis in terms of key financial indicators such as Return on
Capital Employed (ROCE), Net Present Value (NPV), Break Even Point (BEP) and the Internal
Rate of Return (IRR) is presented in the table below. The indicators validate the financial
viability and sustainability potential of the proposed project.
Table 26: Financial Analysis

FEASIBILITY
S. No. Particulars Estimates
BEP (cash BEP at initial operating
1 57.61%
capacity of 75%)
2 Av. ROCE (PAT/CE) 29.09%
3 Internal Rate of Return (IRR) 24.17%
Net Present Value (at a discount rate NPV is positive and high (Rs. 149.69
4 of 10 per cent) - incorporating lacs) at a conservative project life of 10
viability gap funding (grant) by GoH years
4.91 years with Grant-in-aid assistance
5 Payback period
from GOH
Not Applicable (non-availment of term
6 DSCR
loan in this project)

The annual estimates in the context of ROCE are presented in the table below:
Table 27: Calculation of Return on Capital Employed

RETURN ON CAPITAL EMPLOYED (ROCE)

Particul Year Year Year Year Year Year Year Year Year Year AVER
ars 1 2 3 4 5 6 7 8 9 10 AGE

ROCE = EBIT/Captial Employed

15.1 19.6 23.6 27.3 30.8 34.5 35.3 35.9 36.4 36.7
ROCE 4% 0% 5% 9% 7% 5% 4% 6% 4% 9% 29.09%

The average value of ROCE (with grant-in-aid) is 29.09%. This indicates the high techno-
economic viability of the project should the government contribute a significant portion of
the project cost as grant. Capital employed considered includes SPV contribution as well as
Grant-in-aid.
The Net Present Value is estimated at Rs. 149.69 lakhs at a discount rate of 10%. However,
as reflected from the high values of NPV, it is positive at even 10%, the rate at which bank
offers debt capital facility and even at higher discount rates. Project IRR is high at over
24.52% (at a conservative project life of 10 years). This substantiates the viability of the
project.

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6.12 Additional revenue sources

Additional sources of revenue shall also be explored by the SPV by offering procurement
and marketing services in future to more enterprises. The SPV members are strong
believers of the cluster concept and would like to explore the potential of undertaking
cluster initiatives to improve the backward and forward linkages of the cluster units.
However, in order to ensure conservativeness in income estimates, in the initial years, the
income earning possibilities of such revenues are not captured in this DPR.

6.13 Risk Analysis & Sensitivities

Risk in the project is relatively low in the context of the following:
► Promoters are experienced: Risk in the project is quite low given the strength and
profile of the SPV members. They have considerable experience not only in the textile
industry but also in undertaking cluster developmental initiatives.
► Facility is pre-marketed: Evidently, complete capacity of the core facility to be
established in terms of various facilities may be easily availed by members of the SPV
themselves, thus the facility would already have a captive market.
► Sustainability indicators in terms of the strength of the SPV and the economics of
the project: Evidence of cooperative initiatives of SPV members as articulated in
previous chapters; for instance, in terms of pursuing several joint efforts, registering
the SPV, proceeding towards procurement of land, and securing commitment from
members, vis-à-vis progressively mobilizing necessary paid up capital, all reflect the
strength of the SPV.
High economic viability indicators upon considering the benefits of grant-in-aid under the
state mini cluster scheme and EPP 2015 also serve as evidence of techno-economic viability
and sustainability of the project. A sensitivity analysis has been carried out to ascertain the
impact on the project, should there be any loss of revenue. This has been calculated
assuming drop in user charges. Major financial parameters are still attractive. The important
parameters related to the sensitivity analysis are presented in the table below:
Table 28: Sensitivity Analysis

SENSTIVITY ANALYSIS
With 10% With 15%
With 5%
Base decline in decline in
S. No. Particulars decline in
case user user
user charge
charge charge
BEP (cash BEP at operating
1 57.61% 63.03% 67.76% 73.26%
capacity of 75%)

2 Internal Rate of Return (IRR) 24.15% 21.93% 19.65% 17.24%

3 Av. ROCE (PAT/CE) (with Grant) 29.09% 27.77% 24.77% 21.74%

Net Present Value (at a discount

rate of 10 per cent) -
4 149.69 145.17 114.15 83.13
incorporating viability gap
funding (grant) GoH

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Even assuming a fall in user charge, ROCE is favourable. From the above it is evident that
the project is very viable even under (unlikely) risky environment circumstances.

6.14 Assumptions for financial calculations:

The financial statements and project profitability estimates in this DPR are based on the
following assumptions:

1. The total project cost is pegged at Rs. 209.20 Lakh on the basis of estimates and
quotations.

2. To finance the project, a total of Rs. 209.20 Lakhs is required. The financing will consist
of grant from Government of Haryana and contribution by SPV.

In the financial projections and analysis, year 2019 is the envisaged period of project
implementation also involving obtaining building on lease and installation of plant,
machinery and other equipment. This period will commence from the date of final approval
by the State Level Project Steering Committee under the State Mini Cluster Development
Scheme. The financial projections thereafter are prepared for 10 years of operation starting
2019.

4. The Registered SPV will manage CFC, and these services are to be used by the SPV to
member as well as non-member units. The common facility will benefit registered SPV as
well as non-member firms who (in some cases) may not afford to contribute to necessary
equity capital.

5. The CFC will operate for 25 days a month, that is, for 300 days a year on an eight hour
single shift basis. Operation on single shift basis is assumed for purposes of projecting
income estimates.

6. Capacity utilization is assumed at 75% in the first year; 80% for second, 85% for third,
and 100% in the 6h years onwards. This is a conservative estimate for first 6 years as SPV
members alone could avail of over 100 per cent of the installed capacity on single-shift
basis.

7. The workings with regard to expenses related to the project have been tabulated and
categorized in terms of those related to consumables, manpower, electricity, and
miscellaneous administrative expenditures.

8. Repairs and maintenance is provided @ 3% of plant and machinery cost at varying

capacity utilization.

9. Insurance is provided @ 0.5% on fixed assets including building & civil works, machinery,
contingency as fixed cost at all capacity utilization.

10. Electricity connection required for the CFC shall cost at Rs. 3300/- (Rs. 1100 as security
deposit and Rs. 2000 as service charge per kW) connected load as per the regulatory norms
in Haryana.

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11. Fixed charges per kW of electric connection shall be charged @ Rs. 173 and variable
charges @ Rs. 7 per unit consumed.

12. Income estimates have been projected most conservatively. The prescribed user
charges are competitive vis-à-vis charges for similar services in other regions.

13. Depreciation on fixed assets is calculated on Written Down Value (WDV) method for tax
calculation purposes.

14. Provision for income tax has been made @ 25.75% including surcharge.

15. Profitability estimates in terms of ROCE, NPV, and IRR are computed considering
operating results for first 10 years of operation.

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Project
Implementation
and Monitoring

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7. Project Implementation and Monitoring

7.1 Envisaged Implementation Framework

1. Time frame: Project implementation is envisaged to involve a time-frame of about
10 months upon receipt of final approval of grant-in-aid assistance from the
Government of Haryana under mini cluster development scheme.

2. User Base: The facilities may be used by SPV members and non-members. However,
the charges will vary. The SPV will also be open for new entrants subject to them
subscribing to the shareholding of the SPV, and them being genuinely pro-active and
interested in cluster initiatives. The BoD of the SPV can decide on same or
differential user charges for both members and non-members or based upon the
volume of the output.

3. Project implementation schedule: The project implementation schedule envisaged

over a period of 10 months involves several activities. The schedule is elaborated in
the table below:
Table 29: Project Implementation Schedule

Activity/Month 1 2 3 4 5 6 7 8 9 10
Collecting
Contribution from
SPV members
Lease deed
registration of
Building in the
name of SPV
Receipt of final
sanction from GoH
Formation of
purchase
committee
Inviting E tenders
for purchase of
machines
Obtaining
statutory
clearances and
approvals
Purchase of
machinery and
equipment
Installation and
trial run of
machinery and
equipment

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Arrangement of
working capital
Monitoring of the
project by BoD
Monitoring of the
project by PMC
Commencement of
operations of the
facility

4. Contractual agreements/MoU with member units: Agreements have been finalized

in terms of utilization of assets in respect of shareholders.

A total of 12 units are participating in the SPV and all these units have agreed to
contribute towards the SPV share of the project cost. The utilization of the common
facility will be in line with the proposed shareholding pattern. The consent letter
wherein the member units agree for payments of 10% share of cost of CFC will be
submitted in due course of time and as per final approval from Government of
Haryana.

5. Memorandum and Article of Association of Registered Company: MOA, AOA and

bye laws are indicative of the management and decision-making structure of the
SPV. All the members of SPV have paid an advance and are members of the
Registered Private Entity. Few other units are also willing to be members of the SPV
and once the CFC is approved and sanctioned from government of Haryana, many
more members will be interested to subscribe to the shares of the SPV.

6. Availability of Building & Status of Acquisitions: Building is being procured on lease

by the SPV for the proposed CFC at Vikas Nagar in Hisar district. The building (of
area 3000 sq. ft.) has already been identified by the SPV and shall be taken on lease
by SPV soon.

7. Availability of Requisite Clearances: All necessary required clearances will be

procured by the SPV. Electricity is already available in the area and the proposed
CFC can easily be connected to the grid. The other required clearances
(environment, labor etc.) shall be obtained in due course.

8. O & M Plan: The revenue stream for O&M is dependent on realization of user charges
from the SPV members and other users/MSMEs in the case of various facilities. As
detailed in the financial section, the cash incomes are sufficient to meet operating
expenditures, overheads as well as depreciation for sustainable replacement of
assets. The SPV will also have to keep a track of maintenance of assets through
collection of user charges from the members/ users.

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7.2 Monitoring Mechanism

As mentioned in the implementation schedule, the following key activities shall be
conducted during establishment of the CFC:
► Civil Alterations
► Electrical works
► Purchase of machinery & commissioning
► Trial production
► Commercial production

The successful implementation of above activities will depend on the following aspects:
► Implementation of above within the time frame
► Supervising and overseeing the implementation of the proposals and fine tuning and
advocating more measures if needed, depending on the site conditions
► Project level monitoring indicators to evaluate the implementation of the CFC
proposal at recommended intervals
► Suitable purchase mechanisms for proposed plant & machinery
► Periodical reporting of the status of implementation and monitoring of the results of
key performance indicators, and
► Constant evaluation of the measures implemented based on the data available from
project level monitoring and status reports and providing directions accordingly.
In addition, for implementing the Hisar Textile & Allied Products Cluster CFC project, a
Project Management Committee (PMC) comprising the Joint Director, DIC – Hisar, and
representatives of SPV, and EY experts shall be constituted to directly oversee effective
monitoring and implementation.
The project will be implemented through SPV and PMC will report progress of
implementation to State Level Steering Committee and DIC Hisar.

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Conclusion

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8. Conclusion

There is a high demand for different types of accessories made from a variety of fabrics in
both domestic and international markets. State-of-the-art production units and in-house
automatic fabric cutting centre & design studios will strengthen the industry in producing
products with exquisite design and quality.
The weak areas include lack of computerised fabric cutting, design facility and lamination
facility, which results in units having to use manual or semi-automatic machines available
in-house or through outsourcing. This increases the costs due to wastage of raw material
during manufacturing processes for the units, job work costs, etc., thereby reducing their
competitiveness. It also results in production delays. This challenge can be overcome by
setting up a CFC with this facility, which can be availed at lower costs. The recommendations
have been detailed out in this DPR.
The cost of project, essentially the plant and machinery is estimated to be approximately
INR 209.20 lakh. The project shall be implemented by the SPV “Hisar Textile & Allied CFC
Private Limited” which has been constituted by the cluster firms. The SPV has proactively
undertaken various initiatives to increase the exposure level of stakeholders. A number of
capacity building programs and exposure visits have been organised by the SPV for the
benefit for its members.
The CFC will be set up with support from DIC and the state government (Department of
Industries & commerce) under PPP mode. The building space to be taken on lease for the
project has already been identified by the SPV and shall be acquired immediately upon in
final approval by State Government. The state industry department is envisaged to provide
grant for setting up of the modern machines under the Mini Cluster Development scheme,
Haryana EPP 2015. The SPV members have proposed to contribute Rs. 39.69 lakhs of the
project cost. Support from Mini Cluster Development Scheme of the State Government of
Haryana is envisaged for Rs. 169.51 lakhs. Working capital requirement for the project will
be provided by ICICI bank. The project is financially viable and is expected to generate
enough revenue to ensure its sustainability.

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Annexures

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9. Annexures
Annexure 1: DSR Approval & DPR Preparation Letter

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Annexure 2: SPV Certificate of Incorporation

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Annexure 2(a) & (b): Copy of Memorandum of Association (MoA) & Article of
Association (AoA)

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2b (Articles of Associations)

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Annexure 3: Verification of units by DIC, Hisar

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Annexure 4: Building Availability Proof

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Annexure 5: Machinery Quotations

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REF/IEC-KAR/2018-19/DG/RKJ Dated:-16-03-2019

RAJENDRA SEAT COVER

559 AUTO MARKET
HISAR

K.A. MR. MANISH THAKUR

SUB: QUOTATION FOR KOEL GREEN SILENT ELECTRIC GENERATING SET WITH
STD MANUAL PANEL.

Dear Sir,
We acknowledge with thanks the receipt of your valued enquiry referred to above. We are
accordingly submitting our most competitive offer for your favorable consideration.
S. DESCRIPTION UNIT
No. PRICE
EACH
1 Supply of 45 KVA KOEL GREEN SILENT DG SET comprising of
Kirloskar make AIR cooled Diesel Engine model HA494TCI-G1
(CPCB NORMS II COMPLIANT) developing 56 BHP @ 1500 4,73,000-
RPM & 45 KVA Kirloskar Green make Alternator rated at 00
3Phase, 415 Volts, 50 Hz; 0.8 p. f. @ 1500 RPM both mounted,
and aligned on a common MS base frame complete with MS Fuel
Tank, MANUAL Control Panel, Residential Exhaust Silencer,
AVM Pads fitted on base frame,1 Nos.12 Volts DC Battery (KOEL
GREEN) with Battery Leads, 1st fill of Lube Oil and Coolant, all
housed in Sound Proof Acoustic Enclosure

2 Supply of 62.5 KVA KOEL GREEN SILENT DG SET comprising 4,28,000-

of Kirloskar make WATER cooled Diesel Engine model 00
4R810TA-G1 (CPCB NORMS II COMPLIANT) developing 83
BHP @ 1500 RPM & 62.5 KVA Kirloskar Green make Alternator
rated at 3Phase, 415 Volts, 50 Hz; 0.8 p. f. @ 1500 RPM both
mounted, and aligned on a common MS base frame complete with
MS Fuel Tank, MANUAL Control Panel, Residential Exhaust
Silencer, AVM Pads fitted on base frame,1 Nos.12 Volts DC Battery
(KOEL GREEN) with Battery Leads, 1st fill of Lube Oil and Coolant,
all housed in Sound Proof Acoustic Enclosure
TERMS & CONDITIONS

PRICE : - : Ex-Works, Freight EXTRA & transit insurance to customer a/c.

G.S.T : GST EXTRA @18%. However G.S.T will be charged as applicable at

the time of dispatch.

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DELIVERY: - 3-4 Weeks from the receipt of your Tecno-comercial clear order with
advance

STATUTORY VARIATIONS: All state taxes, duties, levies like Octroi, entry tax, WCT, GST
etc. and statutory variations or imposition of new taxes/duties shall be to purchaser’s
account.

PAYMENT: 25 % advance along with your confirmed order and balance by

D.D. Fav: INDUSTRIAL EQUIPMENTS CO., payable at
CHANDIGARH. Against Performa Invoice before dispatch Of D.G Set.

ERECTION: As the order is for supply of material, the Erection of the same (As per
drawing) including material Like Earthling, Cabling & connection with proper thimbling,
Civil Work, Exhaust Pipe & Unloading of D.G Set etc is not in our Scope, However, we will
undertake Commissioning of the set free of cost after you complete Installation work.

REVALIDATION: In case dg set not got commissioned within 6 months from the date of
invoice customer has to get the dg set revalidation on payment from KOEL
service dealer before calling us for commissioning.

CANCELLATION: All disputes are subject to Chandigarh jurisdiction only. In Case

of Cancellation of order, 50% advance or 10 % value of Order
(whichever is higher) shall be deducted as cancellation charges
alongwith GST paid on your behalf shall not be refunded.

WARRANTY : 2 years from the date of installation or 5000 operating hours or 30

calendar months from dispatch date whichever is earlier, subject to
sourcing of spares, consumables & services from Kirloskar
Authorized Service Dealer (KOEL CARE) and DG set installed with
proper Installation Guidelines.

VALIDITY: 10 DAYS.

Please note that the order should be placed on

M/s INDUSTRIAL EQUIPMENTS COMPANY, BARWALA, DISTT- PANCHKULA

(HARYANA). However all the correspondences should be addressed to our booking
office at KARNAL.

Detailed Technical Specifications attached.

Should you need any further clarification(s). Please feel free to contact the undersigned.

Thanking you,

Yours faithfully,

FOR INDUSTRIAL EQUIPMENTS CO,

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(RAJESH CHADHA)
BRANCH MANAGER
M -9812050509, 74045-10509

RTGS DETAIL: - INDUSTRIAL EQUIPMENTS COMPANY

HDFC BANK A/C NO.01070330000592
IFSC CODE.HDFC 0000107
BANK ADDRESS. SCO 78-79, 18-C, CHANDIGARH

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Our offices
Ahmedabad Kolkata
2nd Floor, Shivalik Ishaan 22, Camac Street
Near CN Vidhyalaya, Block 'C', 3rd floor
Ambawadi, Kolkata - 700 016
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12th & 13th floor Nariman Point
No.24, Vittal Mallya Road Mumbai - 400 021
Bengaluru - 560 001 Tel: + 91 22 6657 9200 (6th floor)
Tel: + 91 80 4027 5000, + 91 22 6665 5000 (18th floor)
+ 91 80 6727 5000 Fax: + 91 22 22876401 (6th floor)
Fax: + 91 80 2210 6000 + 91 22 2282 6000 (18th floor)
Fax: + 91 80 2224 0695
Block B-2, 5th Floor,
Chandigarh Nirlon Knowledge Park,
1st Floor, SCO: 166-167 Off Western Express Highway,
Ernst & Young Pvt. Ltd. Goregaon (E), Mumbai – 400 063
Sector 9-C, Madhya Marg, Tel: +91 22 6749 8000
Chandigarh, Punjab 160009 Fax: +91 22 6749 8200
Tel: +91 172 6717800
Fax: +91 172 6717888 15th Floor, The Ruby, 29,
Senapati Bapat Marg, Dadar (W), Mumbai
Chennai - 400 028, India
TPL House, 2nd floor Tel: +91 22 6192 000
No 3, Cenotaph Road
Teynampet NCR
Chennai - 600 018 Golf View Corporate Tower – B
Tel: + 91 44 4219 4400 Near DLF Golf Course
+ 91 44 6632 8400 Sector 42
Fax: + 91 44 2431 1450 Gurgaon – 122002
Tel: + 91 124 464 4000
Hyderabad Fax: + 91 124 464 4050
205, 2nd floor
Ashoka Bhoopal Chambers 6th floor, HT House
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Oval Office, 18, iLabs Centre, 4th and 5th Floor, Plot No. 2B, Tower 2,
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Kochi Pune
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NH-49, Maradu PO Panchshil Tech Park
Kochi, Kerala 682304, India Yerwada (Near Don Bosco School)
Tel: + 91 484-3044000 Pune - 411 006
Fax: + 91 484 2705393 Tel: + 91 20 6603 6000
Fax: + 91 20 6601 5900

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