Handicrafts Products in India

8/3/2019 Handicrafts Products in India

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A

PROJECT REPORTON

Showroom of handicraft products

IN

BATHINDA

SUBMITTED TO:

Prof. Bhawdeep Singh

SUBMITTED BY:Nisha Rani

Roll no.-2144

MBA-II

PUNJABI UNIVERSITY SCHOOL OF BUSINESS STUDIES

TALWANDI SABO

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CONTENTS

Introduction

Principal suppliers

Market segments Handicraft industry in India

Special efforts to this sector

Feasibility study

a) Market analysis

b) Technical analysis

c) Economic analysis

d) Ecological analysis

e) Financial analysis

Conclusion

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ACNOWLEDGEMENT

Preparing a feasibility report is never a unilateral effort, I wish to acknowledgement the

guidance and support of the professionals in bringing up a real picture of the concept of

this report is prepared.

There is always a sense of gratitude which one express to others for their help and needy

services which one renders during the various phase of life.

I am indebted to Prof. Bhawdeep Singh for their insightful annotation and assistance

throughout the project. Their unfailing enthusiasm and continuous guidance kept me

motivated and encouragement throughout the project report. I shall like to express my

gratitude towards all those who helped me out during of different stages of my project

report and encouraged me with their ideas and views, which were guiding and motivating

factor in completion of tedious task of this project.

They are in my eyes as a rich source of creativity, dedication and knowledge. Working

under them has been a lifetime experience.

Prof. Bhawdeep Singh

Nisha Rani

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INTRODUCTION

Handicrafts accounts for the Worlds imports consist of both genuine handmade

handicrafts and similar machine made substitutes. The handicraft sector is dominated by

the imports of works of art, carpets and wood ware followed by basket wares, embroidery

and the base metal decorative items. It encourages the private sector to set up world class,

environmental friendly, integrated textile complexes from yarn production to garment

making under roof.

PRINCIPAL SUPPLIERS: India emerged as the third largest supplier of handicrafts

after Hong Kong and Taiwan

MARKET SEGMENTS: The market for handicrafts is broadly segmented into two

sectors namely:

(a) Market for utility-cum-decorative items.

(b) Market for articrafts, i.e. the crafts of purely decorative & artistic in nature. The

importer wholesalers dominate the second segment. They normally import and

distribute handicrafts to retailers, department stores, boutique shops, especially

stores etc. They work on margin of about 50% on the landed cost. While theretailers margin varies from 100% to 200% on the wholesale price.

HANDICRAFT INDUSTRY IN INDIA:

The handicraft sector is one of the star performers among the thrust products identified by

the govt. of India for export promotion & growth.

In India, the office of the Development Commission for Handicrafts in the Ministry of

Textile group handicrafts as: Carpets, Art metal wares, Wood wares, Hand Printed textile

& scarves, Shawls as art ware, Zari goods, Jewellery, etc.

This sector besides providing for the economic and social needs of the craftsman

also plays an important role in earning valuable foreign exchange for the country.

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EXPORT DESTINATIONS:

Handicrafts are exported to more than 100 countries of the world. Major markets include

USA, Germany, Belgium, Japan, UK, France, Switzerland, Canada and Italy. These

countries absorb 90% of Indias exports of Handicrafts.

SPECIAL EFFORTS TO THIS SECTOR:

The small scale and cottage sector helps to solve social and economic problems of the

artisans by providing employment to over 6 million artisans which include a large

number of women & people belonging to weaker section of the society. In addition to the

employment, the sector is important from the point of view of low capital investment,

high potential for export & foreign exchange earnings for the country.

The Indian Handicraft has been facing stiff competition since the opening up of the

economy but it has faced the tough times. Although the share of the handicrafts is very

small in the World trade of handicrafts, but Indian handicrafts have been successfully

able to make a mark. The export potential of the Indian Handicraft industry can be rightly

judged with the kind of efforts that the Indian exporters are putting in. They are

continuously working on their strengths of price leaderships, good quality and innovative

designs. Simultaneously, the efforts are being taken to overcome their weaknesses and to

cash on the opportunities.

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FEASIBILITY STUDY:

The feasibility study of any project is concerned with five kinds of analysis, which are:

(a) Market analysis(b) Technical analysis

(c) Economic analysis

(d) Ecological analysis

(e) Financial analysis

MARKET ANALYSIS: It involves assessment of current market scenario, taking into

account the output of the product to be manufactured and the existing demand for it with

a view to establish whether there is satisfactory demand or not. For the market analysis of

setting up a Handicraft Industry in Bathinda region, a survey was conducted at handicraft

shops in Bathinda. For example: Javes at Sarabha Nagar, Punjab Handlooms. For

conducting the survey, various questions were asked:

(a)What are the handicraft products do you sell?

(b)What is your sale per annum?

(c)Where do you get the handicraft products?

(d)Which income group purchases your products the most?

(e)Which product is more in sale?

The survey conducted gave the following results:

The products, which Bathinda handicraft shopkeepers sell, are: Carpets, Cushions,

Pillows, Bed sheets, wall hangings, Khadi products, Paintings and wooden items like

book racks, CD racks, magazine racks, cabinets, baskets, candle stands, Photo frames,

Pen stands, boxes, Candle stands, Mirror frames, quilts and statues etc.

The most innovative wall hangings are for home decoration. They are made of cloth

patches with embroidery, mirror work and beads by the artisans of Gujarat. Beauty based

on simplicity and utility, Cotton cushion covers for home decorating made by block

printing artisans of Rajasthan. Each item is beautifully hand crafted and stringent checks

and controls at various stages ensure a consistent quality of the finished products. In fact

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a large number of the items have resulted from the specific and customized requirements

of our buyers. The wall hangings, carpets, cushion covers, paintings are more in demand

as the people of Bathinda are vary fond of these products. There are so many exhibitions

conducted at different palaces for the sale of various handicraft products. But the

shopkeepers do not have regular customers who buy the products regularly. So the

demand for particular product does not keep on increasing for the longer period of time.

People buy handicraft products not for regular use but just for a change or for their hobby

to purchase new things. Their principal customers are higher middle class people. The

higher income group people buy luxurious and traditional handmade paintings and wall

hangings. With the effect of modernization, the handicraft business is declining, but is

gaining profits. Their sales are good. They used to get their handicraft products from

Rajasthan and Gujarat since there is no well-organized handicraft industry in Punjab. So

the setting up of handicraft industry itself in Punjab will fail in Bathinda because it is

cheap for them to get the products transported from other states rather than to

manufacture here. They have suggested opening a showroom at mall road, Bathinda

because it is a busy market. This location will help in transportation of handicraft

products and it is a big market. The handicraft products are costly in nature. The prices of

various products are listed below:

Durries-Their price range from Rs. 200 to Rs 1000

Khes- Their price range from Rs. 150 to Rs. 600

Cushion covers- Their price range from Rs.200 to Rs.1500

Wall Hangings- Their price range lies between Rs. 200 to Rs. 2000

Handmade Paintings- Their price range lies between Rs. 500 to Rs. 4500

Quilts- Theai price lies between Rs. 350 to Rs. 1000

Khadi suits- Their price is Rs. 150 per meter.

Baskets- Their price lies between Rs. 70 to Rs. 200

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FINDINGS OF CONSUMER SURVEY

It was found from the rural and city women of Bathinda that the famous products of

Bathinda are carpets, Paintings and other household decorative items. Most of the city

women use machine made carpets. But no doubt they go for hand knotted carpets and

Khadi products, but they use occasionally or according to their fashion. Most of the rural

women use hand knotted Durries. The city women buy the Durries and Khadi products

not frequently but after 4-5 years. The demand for handmade durries is more in the rural

area as compared to the urban area. But the handloom weavers want their products to be

exported to other countries because the people outside India have tendency to buy the

Indian traditional and cultural values at more expensive rates as compared to that in

India.

TECHNICAL ANALYSIS: Important points related to technical feasibility are briefed

as under:

Size, Suitability, Cost of land: As there is no need to set up full fledged

Handicraft industry as a whole at Bathinda because handicraft products are easily

transported mainly from Rajasthan. As it is cheaper to get these products from

other states. I will not purchase my own land in Ludhiana as cost of land in

Ludhiana is very high. So I will take showroom at monthly rent @ Rs. 20,000

Raw material: Raw material required for the production of handmade carpets,

cushions, Khadi products etc. are cotton. The prices of cotton are declining these

days. Its price is about Rs. 45 per Kg. Some of the products will be produced in

the villages of Bathinda city like Khes, Durries, Cushions etc. and other

decorative items, paintings, wood wares will be taken directly from Rajasthan.

8
http://www.shalincraft-india.com/sculpture/krishna.htmlhttp://www.shalincraft-india.com/sculpture/krishna.htmlhttp://www.shalincraft-india.com/furnishing/asian-home-decor3.htmlhttp://www.shalincraft-india.com/furnishing/quilt-blocks.htmlhttp://www.shalincraft-india.com/furnishing/block-prints.html


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Manpower & Machines: The basic strength of the Handicraft industry is labour,

which includes highly skilled artisans or semi skilled artisans, which is very cheap

in India. There is no well-organized handicraft industry in Punjab. In villages,

people make small organizations, make products and sell it in the market directly.

The machinery required in the production of carpets are handlooms, weaving

machines, Charkhas and other hand other traditional hand aided machines.

ECONOMIC ANALYSIS: Handicrafts and craft villages have both economic and

cultural significance contributing to our national identity. Moreover, they create jobs

and regular income for laourers. Its easy to begin making handicrafts, as compared to

other jobs because they mostly use readily available materials and simple tools. These

jobs are suitable for all ages and skill levels including the elderly, women, children

and even the disabled.

Small initial capital with rapid turnover is one of the advantages of the handicraft

industry. This particularly applies to the outskirts of the city where the high speed of

industrialization and residents also find part time jobs. Craft is becoming more

attractive to both domestic and foreign tourists. Handicraft artists have been seen as

the core of the craft village. Their creative abilities are the essential means for the

villages growth. Handicrafts increase the artists pride in their work. In thehandicrafts sector about 32% of the outlay inspect of identified central schemes is

earmarked for the benefit of the scheduled caste, scheduled tribe and women artisans

with an allocation 15%, 75% and 10% respectively. The major schemes in which this

allocation is made are: training, design and technical development, marketing,

exhibition, publicity, survey and study, craft development centers, welfare and other

schemes. In Handicraft sector, women constitute a major segment of handicraft

workers i.e. around 45% of the total workforce. So the special attention is being paid

to ensure that large number of women artisans get benefit in all the development

schemes. So this sector helps in providing employment to women.

ECOLOGICAL ANALYSIS: In case of handicraft products, the wastage is very

less. There is no need to dispose the waste raw material because the raw material is

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never wasted. It is reused and recycled. There is no problem of power, fuel, water and

transport facilities in the area. These are available at reasonable cost. So handicraft

industry adds little pollution. It is an eco friendly industryand has little detrimental

impact on natural resources.

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FINANCIAL ANALYSIS:

PROJECTED INCOME STATEMENT

1st year 2nd year 3rd year 4th year 5th year

SALES 900000 1080000 1320000 1500000 1800000

Closing stock 4000 20000 25000 30000 35000

Total 904000 1100000 1345000 1530000 1835000

Expenses

Opening stock Nil 4000 20000 25000 30000

Purchases 229000 286000 335000 380000 455000

Rent 240000 243000 246000 249000 252000

Electricity Bill-Fixed 500 500 500 500 500

-Variable 10000 10500 11000 11500 12000

Telephone charges

-Fixed 500 500 500 500 500

-Variable 12000 12750 13500 14000 14500

Insurance charges 5000 5000 5000 5000 5000

Administrative

expenses

180000 180000 180000 180000 180000

Operating Profits 227000 357750 533500 664500 885500

Dep. On Furniture 10000 9500 9025 8574 8145

Dep. On Motor

Vehicle

80000 72000 64800 58320 52488

Profits before

Interest & taxes

137000 276250 459675 597606 824867

Interest on loan 40000 32000 24000 16000 8000

Profit before Tax 97000 244250 435675 581606 816867

Tax @ 35% 33950 85487 152486 203562 285903

Profit after tax 63050 158763 283139 378044 530964

Variable expenses are 25% of Sales.

Rent of Building increases Rs. 250 after year.

Depreciation on Furniture is 5% on W.D.V. basis.

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Depreciation on Motor Vehicles is 10% on W.D.V. basis.

PROJECTED BALANCE SHEET

1st year 2nd year 3rd year 4th year 5th year

CURRENT ASSETS

Cash in hand and at bank 315000 500000 740000 850000 1150000

Debtors 25000 28000 15000 18000 26000

Inventories 450000 343500 390325 594219 796852

Total Current Assets 790000 871500 114532

5

146221

9

1972852

Fixed Assets

Furniture 190000 180500 171475 162901 154756Motor vehicles 720000 648000 583200 524880 472392

Total Fixed Assets 910000 828500 754675 687781 627148

TOTAL ASSETS 170000

0

170000

0

190000

0

215000

0

2600000

LIABILITIES & CAPITAL

Owners Capital 100000

0

100000

0

100000

0

100000

0

1000000

Reserves & Capital 63050 221813 505002 883046 1414010

8% Secured Loan 500000 400000 300000 200000 100000

Creditors 136950 78187 94998 66954 85990Total 170000

0

170000

0

190000

0

215000

0

2600000

Repayment of Loan is Rs. 100000 at the start of 2nd year onwards.

PRESENT VALUE OF CASH INFLOWS

Years Cash inflows P.V.@ 10% Present Value Cumulative PV

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1st 153050 .909 139123 139123

2nd 240263 .826 198457 337580

3rd 357014 .751 268118 605698

4th 444938 .683 303893 909591

5th 591597 .621 367382 1276973

Present value of Cash inflows = Rs. 1276973

PRESENT VALUE OF CASH OUTFLOWS

Years Cash outflows P.V. @ 10% Present Value

Initial 500000 1 500000

1st

100000 .909 909002nd 100000 .826 82600

3rd 100000 .751 75100

4th 100000 .683 68300

5th 100000 .621 62100

Present value of Cash outflows = Rs. 879000

NET PRESENT VALUE: It is the difference between cash inflows and cash outflows.

Therefore NPV of Project comes to Rs. 1276973-Rs. 879000= Rs.397973

Therefore the project gives positive NPV and hence is acceptable.

DISCOUNTED PAY BACK PERIOD: Pay back period represents the period in which

the total investment pays back itself. The present value of all cash outflows and inflows

are computed at which the cumulative present value of cash inflows equals the present

value of cash outflows is the discounted pay back period.

The cumulative present value of cash inflows at the end of 3rd year is Rs.605698

and it is Rs.9095910at the end of 4th year. Hence discounted pay back period falls

between 3 and 4 years. To be exact,

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Discounted pay back period =3 years & 273302 / 303893

=3 years and 10 months

INTERNAL RATE OF RETURN OF THE PROJECT

The cash inflows of the project are discounted at a suitable rate by hit and trial method,

which equates the net present value so calculated to the amount of the investment. It is

the rate at which the present value of cash inflows is equal to the present value of cash

outflows.

Years Cash inflows PV @20%D.F. P.V. PV @25%D.F. P.V.

1st 153050 .833 12749

1

.787 120450

2nd 240263 .694 16674

3

.653 156892

3rd 357014 .578 20635

4

.512 182791

4th 444938 .482 21446

0

.409 181980

5th 591597 .401 23723

0

.328 194044

95227

8

836157

The present value of net cash inflows at 20% rate of discount is Rs. 952278 and at 25%

rate of discount, it is Rs836157 and present value of cash outflows is Rs. 879000. It

means IRR falls between these two discount rates.

= 20% + 73278/(952278-836157) * 5

= 20% + 73278/116121 * 5

= 23.155%

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LIQUIDITY RATIOS

CURRENT RATIO: It may be defined as the relationship between current assets

and current liabilities. A relative high current ratio is an indication that the firm is

liquid and has ability to pay its current liabilities in time.

Years 1st 2nd 3rd 4th 5th

Current Assets 79000

0

87150

0

114532

5

146221

9

1972852

Current liabilities 13695

0

78187 94998 66954 85990

Current Ratio 5.76 11.14 12.05 21.84 22.94

LIQUID RATIO: It shows the ability to pay short-term obligations as and when

they become due. Cash in hand and at bank are more liquid assets. Inventories

cannot be termed into liquid asset, as they cannot be converted into cash

immediately without sufficient loss of value.


Liquid assets 34000

0

52800

0

75500

0

86800

0

1176000


0

78187 94998 66954 85990

Liquid Ratio 2.48 6.75 7.95 12.96 13.67

ABSOLUTE LIQUID RATIO: It includes cash in hand and at bank.


Cash 31500

0

50000

0

74000

0

85000

0

1150000

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0

78187 94887 66954 85990

Absolute L.R. 2.3 6.39 7.78 12.69 13.37

LONG TERM FINANCIAL POSITION RATIOS

DEBT-EQUITY RATIO: It is also known as External-internal funds ratio to

measure the relative claims of outsiders and the owner against the assets of the

owner.


Outsiders funds 636950 478187 394998 266954 185990

Insiders funds 106305

0

122181

3

150500

2

188304

6

2414010

Ratio .599 .39 .262 .142 .077

SOLVENCY RATIO: This ratio indicates the relationship between the total

liabilities to outsiders to the total assets of the owner.


Total liabilities tooutsiders

636950 478187 394998 266954 185990

Total Assets 170000

0

170000

0

190000

0

215000

0

2600000

Ratio 37.47% 28.13% 20.79% 12.42% 7.153%

FIXED ASSETS TO PROPREITORS FUNDS: This ratio shows the

relationship between fixed assets and proprietors funds.


Fixed assets after

depreciation

910000 828500 754675 687784 627148

Proprietors funds 106305

0

122181

3

150500

2

188304

6

2414010

Ratio 85.6% 67.8% 50.1% 36.5% 25.98%

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RATIO OF CURRENT ASSETS TO PROPRIETORS FUNDS: This ratio

shows the extent to which proprietors funds are invested in current assets.


Current Assets 790000 871500 114532

5

146221

9

1972852

Proprietors

funds

106305

0

122181

3

150500

2

188304

6

2414010

Ratio 74.3% 67.8% 76.1% 77.6% 81.7%

INTEREST COVERAGE RATIO: This is calculated by dividing the net profit

before interest and taxes by the fixed interest charges. It is used to test the debt

servicing capacity of the business.


Net profit before interest &

taxes

13700

0

27625

0

45967

5

59760

6

824867

Fixed interest charges 40000 32000 24000 16000 8000

Ratio 3.425 8.63 19.15 37.35 103.1

PROFITABILITY RATIOS

OPERATING PROFIT RATIO: It establishes the relationship between

operating profits and sales.


Operating profits 227000 357750 533500 664500 885500Net sales 900000 108000

0

132000

0

150000

0

1800000

Ratio 25.22

%

33.13% 40.42% 44.3% 49.19%

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NET` PROFIT RATIO: It establishes the relationship between net profit after

taxes and sales. It indicates the efficiency, higher the ratio, the better is the

profitability position.

RETURN ON INVESTMENT: It shows the relationship between net profit after

interest and taxes and the net worth of the owner.


Net profit after interest

& tax

63050 158763 283189 378044 530964

Net worth 106305

0

122181

3

150500

2

188304

6

2414010

Ratio 5.93% 13% 18.8% 20.07% 22%

FINANCIAL LEVERAGE: It is calculated as:

Years 1st

2nd

3rd

4th

5th

EBIT 13700

0

27625

0

45967

5

59760

6

824867

EBIT-Interest 97000 24425

0

43567

5

58160

6

816867

Financial leverage 1.4 1.13 1.05 1.03 1.01

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Net profit after tax 63050 158763 283189 378044 530964

Net Sales 90000

0

108000

0

132000

0

150000

0

1800000

Ratio 7% 14.7% 21.4% 25.2% 29.5%


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OPERATING LEVERAGE: It is obtained by dividing contribution i.e. sales minus

variable cost, by the EBIT.


Sales 900000 108000

0

132000

0

150000

0

1800000

Less: variable cost

Variable cost @25% 225000 270000 330000 375000 450000

Electricity Bill 10000 10500 11000 11500 12000

Rent 240000 243000 246000 249000 252000

Telephone charges 12000 12750 13500 14000 14500

Contribution 6[=53000 783750 959500 109050

0

1311500

EBIT 137000 276250 459675 597606 824867

Operating leverage 4.76 2.84 2.08 1.82 1.59

Financial leverage 1.4 1.13 1.05 1.03 1.01

Composite leverage 6.67 2.84 2.08 1.82 1.59

COST OF DEBT: The cost of debt is the rate of interest payable on the debt.

Kd = Interest/Principal*(1-Tax rate)

Years 1st 2nd 3rd 4th 5thInterest 40000 32000 24000 16000 8000

Principal 50000

0

40000

0

30000

0

20000

0

100000

5.2% 5.2% 5.2% 5.2% 5.2%

Actual Interest on loan is 8%, but after paying tax it comes to 5.2%

BREAK EVEN POINT: It may be defined,as that point of sales volume at w3hich

total revenue is equal to total cost. It is a point of no profit, no loss.

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Sales revenue at break-even point= Fixed costs+ Variable costs.

B.E.P.= Total fixed cost/ P/V Ratio

P/V Ratio= Contribution/Sales * 100


Sales 900000 108000

0

132000

0

150000

0

1800000

Variable cost

Variable cost @ 25% 225000 270000 330000 375000 450000

Electricity bill 10000 10500 11000 11500 12000

Rent of Building - 3000 6000 9000 12000


CONTRIBUTION 653000 783750 959500 109050

0

1311500

Fixed cost

Administrative expenses 180000 180000 180000 180000 180000

Rent 240000 240000 240000 240000 240000

Electricity Bill 500 500 500 500 500


Insurance 5000 5000 5000 5000 5000

Dep. On Furniture 10000 9500 9025 8574 8145

Dep. On Vehicles 80000 72000 64800 58320 52488

Total fixed cost 516000 503000 499825 492894 486633

P/V Ratio 72.56

%

72.57% 72.69% 72.7% 72.86%

Break Even Point 711136 693124 678077 677983 667901

CONCLUSION:

At the end I would like to conclude that establishing a handicraft industry in bathinda will

be profitable business. There are more reasons that show it is profitable business because

today again handicraft products are in trend and its are demanded by a large number of

peoples and people used its for decorating their home. It also provides employment to

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labours. No doubt the project is having some weakness and there is some competition,

but if the analysis has been done it shows that it is profitable business to set the a

showroom of handicraft products there.

.

21

Documents

Handicrafts Products in India