Indian Guar Hits Jackpot

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Thursday, July 26, 2012

India is native of guar or cluster bean where it is used as a vegetable. From hundreds of years Guar has been used as vegetable in India. It is also used as a cattle food, and as a green manure crop in agriculture. Guar gum comes from the endosperm of the seed of the legume plant Cyamopsis tetragonoloba; an annual plant, grown in dry regions of India as a food crop for animals. There are various grades of Guar gums pure or derivative. Guar gum is a white to creamy coloured, free flowing powder and free from extraneous matter. Its ability to suspend solids, bind water by hydrogen bonding, control the viscosity of aqueous solutions, form strong tough films have accounted for its rapid growth and use in various industries. For example guar gum is used in paper, textile, oil drilling, mining, explosives, ore flotation and other various industrial applications.          

The growing season of guar is 14 -16 weeks and requires reasonably warm weather and moderate flashing rainfall with plenty of sunshine. Too much rain can cause the plant to become more 'leafy' resulting thereby reducing the number of pods or the number of seeds per pod which affects the size and yield of seeds. The crop is generally sown after the monsoon rainfall in the second half of July to early August and is harvested in late October early November. The Guar is a naturally rain fed crop. Depending on the monsoon rainfall the total size of Guar crop varies from year to year. After harvesting, when the pods become dry through sunlight, they are beaten off and during this process, the seeds come out of the pods. The main areas of cultivation of Guargum in India are Rajasthan, Gujarat, Haryana, Punjab, Uttar Pradesh , Madhya Pradesh , Tamil Nadu , Maharashtra , Karnataka , Andhra Pradesh.

Varieties:

 

 

·         Hydroxy Alkylated Guar gum

 

·         Carboxy Methylated Guar gum

 

·         Oxidised Guar gum

 

·         Acetates of Guar gum

 

·         Cationic derivatives of Guar gum

 

·         Sulphated Guar gum

 

·         Guar gum formate

 

·         Guar gum acryl amide

 

·         Borate cross linked Guar gum

 

·         Reticulated Guar gum

 

Market Scenario

Guar gum prices have risen three times in the local market and five times in the export markets in 2011 following rising demand against low inventories. The strong demand from overseas markets, especially from oil companies, may take the guar gum prices to Rs 30,000 a quintal in 2012 from the prevailing Rs 23,000. The demand of guar gum by the crude oil industry has gone up four times since 2006. The total requirement of guar gum by the oil industry is estimated at 4,50,000 tonne in 2012. The country may face shortage of guar gum by 80,000 to 1 lakh tonne this year. According to the industry, the domestic crop output is expected to be close to 10 lakh tonne this year, of which Rajasthan will produce 8.4 lakh tonne. The total supply, including the current year's output and the carryover stock in terms of gum yield would be around 360,000 tonne, while the expected demand is 4,50,000 tonne, thereby creating a shortage of around 90,000 tonne. A 200% rise in demand for guar gum over past 12 months is driving demand within the beverage industry for effective replacements, according to US firms TIC gums, which has just launched such a project.

India is the world leader in production (80% of world production) of guar, which is grown in the northwestern parts of country encompassing states of Rajas than ( Jodhpur, Ganganagar, Sirohi, Dausa, Bikaner, Hanumangarh and Jhunjhunu dis tric ts ), Gujarat and Haryana and Punjab. India is famous for guar gum products and food additives. India is the major exporter of guargum to the world; it exports various forms of Guar products to a large number of countries. It is sold as a white to yellowish odourless powder, which is available in different viscosities depending on the desired one. The country has exported 4,03,654.79 MT of guargum to the world for the worth of Rs. 2811.83 crores during the year 2010-11.Major Export Destinations (2010-11) are United States, China, Germany, Russia, Italy and South Africa during the same period. Projected India production (Seed Crop + Carryover: 4.5 million + 3.0 million bags) is about 7.5 million bags of 100 kg each (splits/powder production potential of up to nearly 200,000 MT, although there is normally at least 1 million bags of carryover). Industrial application of guar gum includes the textile industry where guar gum's excellent thickening properties are used for textile sizing, finishing and printing. In the paper industry Guar is used as an additive where It gives denser surface to the paper used in printing. And in the explosive industry guar is mixed in Ammonium Nitrate, Nitroglycerine and Oil explosives, where it helps maintain the explosive properties of the product even in wet conditions. Demand for guar gum, cultivated largely in Rajasthan, has been rising ever since Western nations started using it as a controlling agent in oil wells. It facilitates easy drilling. The stupendous rise in its export, along with that of non-basmati rice, has propelled India’s overall farm export to Rs 82,480 crore in 2011-12, double the previous year.

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Ø  Introduction

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·         Properties

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·         Uses & Applications

 

Ø  Market Study and Assessment

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Along with financial details as under:

 

  •     Assumptions for Profitability workings

  •    Plant Economics

  •    Production Schedule

  •    Land & Building

            Factory Land & Building

            Site Development Expenses

  •    Plant & Machinery

             Indigenous Machineries

            Other Machineries (Miscellaneous, Laboratory etc.)

  •    Other Fixed Assets

            Furniture & Fixtures

            Pre-operative and Preliminary Expenses

            Technical Knowhow

            Provision of Contingencies

  •   Working Capital Requirement Per Month

             Raw Material

            Packing Material

            Lab & ETP Chemical Cost

           Consumable Store

  •   Overheads Required Per Month And Per Annum

         Utilities & Overheads (Power, Water and Fuel Expenses etc.)

             Royalty and Other Charges

            Selling and Distribution Expenses

  •    Salary and Wages

  •    Turnover Per Annum

  •   Share Capital

            Equity Capital

            Preference Share Capital

 

  •    Annexure 1:: Cost of Project and Means of Finance

  •    Annexure 2::  Profitability and Net Cash Accruals

                Revenue/Income/Realisation

                Expenses/Cost of Products/Services/Items

                Gross Profit

                Financial Charges     

                Total Cost of Sales

                Net Profit After Taxes

                Net Cash Accruals

  •   Annexure 3 :: Assessment of Working Capital requirements

                Current Assets

                Gross Working. Capital

                Current Liabilities

                Net Working Capital

                Working Note for Calculation of Work-in-process

  •    Annexure 4 :: Sources and Disposition of Funds

  •    Annexure 5 :: Projected Balance Sheets

                ROI (Average of Fixed Assets)

                RONW (Average of Share Capital)

                ROI (Average of Total Assets)

  •    Annexure 6 :: Profitability ratios

                D.S.C.R

                Earnings Per Share (EPS)

               

             Debt Equity Ratio

        Annexure 7   :: Break-Even Analysis

                Variable Cost & Expenses

                Semi-Var./Semi-Fixed Exp.

                Profit Volume Ratio (PVR)

                Fixed Expenses / Cost 

                B.E.P

  •   Annexure 8 to 11:: Sensitivity Analysis-Price/Volume

            Resultant N.P.B.T

            Resultant D.S.C.R

   Resultant PV Ratio

   Resultant DER

  Resultant ROI

          Resultant BEP

  •    Annexure 12 :: Shareholding Pattern and Stake Status

        Equity Capital

        Preference Share Capital

  •   Annexure 13 :: Quantitative Details-Output/Sales/Stocks

        Determined Capacity P.A of Products/Services

        Achievable Efficiency/Yield % of Products/Services/Items 

        Net Usable Load/Capacity of Products/Services/Items   

       Expected Sales/ Revenue/ Income of Products/ Services/ Items   

  •    Annexure 14 :: Product wise domestic Sales Realisation

  •    Annexure 15 :: Total Raw Material Cost

  •    Annexure 16 :: Raw Material Cost per unit

  •    Annexure 17 :: Total Lab & ETP Chemical Cost

  •    Annexure 18  :: Consumables, Store etc.,

  •    Annexure 19  :: Packing Material Cost

  •    Annexure 20  :: Packing Material Cost Per Unit

  •    Annexure 21 :: Employees Expenses

  •    Annexure 22 :: Fuel Expenses

  •    Annexure 23 :: Power/Electricity Expenses

  •    Annexure 24 :: Royalty & Other Charges

  •    Annexure 25 :: Repairs & Maintenance Exp.

  •    Annexure 26 :: Other Mfg. Expenses

  •    Annexure 27 :: Administration Expenses

  •    Annexure 28 :: Selling Expenses

  •    Annexure 29 :: Depreciation Charges – as per Books (Total)

  •   Annexure 30   :: Depreciation Charges – as per Books (P & M)

  •   Annexure 31   :: Depreciation Charges - As per IT Act WDV (Total)

  •   Annexure 32   :: Depreciation Charges - As per IT Act WDV (P & M)

  •   Annexure 33   :: Interest and Repayment - Term Loans

  •   Annexure 34   :: Tax on Profits

  •   Annexure 35   ::Projected Pay-Back Period And IRR