Project Dates
First draft September 14, 2007
Project Photos
Project Financials
http://spreadsheets.google.com/pub?key=pwRdPi0mYDcLtrXGa5YBfTw
Project Details
The flour milling business is widely prevalent in rural & urban areas, where grains such as wheat and rice are ground. The traditional flour mill is a bulky machine which requires three phase power supply to run. Due to the combined cost of the flour mill and for the three phase connection, the cost of installing a conventional flour mill is high and investing in this business is not affordable to most people. For instance, cost of 3-phase flour mill is about Rs. 25,000-45,000, while the 3 phase electricity connection cost approximately Rs. 25,000, in addition to a requirement of about 200 sq ft. space for installing and operating the business. So the total installation and operating cost could reach up to Rs. 60,000- 1,00,000. Also, the need for three phase does not make it possible to install the machine at small villages where three phase connection is not always available.
This project is to diseminate a small capacity flour mill which runs on single phase power supply. Due to its small capacity, and ability to run on single phase power supply, the cost of the machine is much lesser than a conventional flour mill and makes it possible for smaller entrepreneurs to buy it and run it as a small business. Also, it becomes possible for these single phase flour mills to be installed in villages. The total cost of a single phase flour mill is Rs. 15,000.
Pre-investment Process and Investment Development
The investment procedure will be as follows:
1. The dealer identifies potential customers who are interested in buying the flour mill but cannot afford a one-time payment and require financial assistance.
2. S3IDF does a due diligence on such customers and selects only such customers who satisfy its pro poor criteria.
3. This selected list of customers is provided to the local bank for loan financing. The bank in turn does its due diligence of the selected customers.
4. S3IDF places a certain pool of money in the local bank, which will be utilized to provide partial guarantee to each selected customer for whom the bank will give loan. The guarantee amount will be a specified percentage of the loan amount.
5. The target number of customers to be provided with loan and the time period for which the pool of money will be placed in the bank will be decided at the start. If the numbers are not reached, the pool of money will be withdrawn.
Technology/product
The technology is from Navdeep products in Daman. While the machine was introduced by Navdeep in the year 1988, it made its advent in Karnataka only in 2000. The machine has a good distribution network throughout Karnataka. The machine presently has a 1-year warranty, with not much history of regular breakdowns. The machine is available in different capacity ranges such as 1HP, 2 HP and 3HP.
Project Size Details
From this project 10 poor entrepreneurs are expected to get bank financing for owning flourmills. From 10 machines, the total project cost is expected to be Rs. 155000.
Project Impact Details
The project will have 10 direct beneficiaries. The 10 beneficiaries will be the 10 entrepreneurs who will own the flour mills through bank financing. Each flourmill is expected to serve 50 customers. So, the project will have 500 indirect beneficiaries.
Estimated Pre-investment Costs
Total Costs – Rs. 24700
S3IDF costs
Personnel costs – Rs. 16700
Other costs – Rs. 8000
Total S3IDF costs – Rs. 24700
Partner costs
Personnel costs
Other costs
Total Partner costs
Returns for S3IDF Revolving Fund
Annual percentage returns for RF – 26%
Project Indicators
Investment indicators:
Investment size – Rs. 1,55,000
Revolving fund – Rs. 58,125
RF to investment size – 38%
Cost Indicators
Total pre investment cost – Rs. 24700
Pre investment cost/Investment Ratio – 16%
Impact indicators
No. of direct beneficiaries - 10
Investment size /no. of direct beneficiaries – Rs. 15,500
Project Risks
Project Owner/operator risk:
This is the risk of the entrepreneurs who will own the machines not running the flourmill business well and defaulting on the loan repayment. The 10 entrepreneurs will be selected through a robust selection process where, first the dealer selects potential entrepreneurs, these potential customers of flour mills and bank loans are then checked by the local bank. Once the bank checks them, S3IDF does a final check on the potential entrepreneurs. Only if the entrepreneurs are oked by S3IDF, will loan financing be provided to the entrepreneurs.
Market risk:
This is a possible risk. The entrepreneurs have been made aware of this risk, which would arise when there are too many flour mills and there is not enough business for them. As of now there is sufficient market for flour milling. This is a risk which could arise in the next 2 to 3 years.
Technology risk:
There is no technology risk as it is a commercially proven technology
Portfolio risk:
No portfolio risk
Mission risk:
No mission risk
Partners
Anand Distributors, dealer in Shimoga of Navdeep products, Punjab National Bank, Shimoga and the flour mill entrepreneurs
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