Strictly Private & Confidential Information Memorandum Sunshine Papers India limited Factory: Donthamuru Village, Balabadrapuram - Rajanagaram Road, Rangampeta Mandal, East Godavari District, A P , INDIA Corporate Office: 3rd floor Santhi Ceramics, Opp. Indian Overseas Bank Rayudupalem jn., Kakinada. Liaison Office: Rajahmundry January 2015 Paper Machine Tissue Machine Concept To Set up Export Oriented Tissue Paper Mill (EOU) to produce International standard Premier quality Specialty Tissue paper using imported primary & secondary fiber with latest and fully atomized paper machine. Project Scope Capacity : 15,000 TPA Tissue Manufacturing Facility Product : Tissue Paper in Rolls, Sheets & Converted Tissue Location : Donthamuru village, Balabadrapuram – Rajanagaram Road, Rangampeta Mandal, East Godavari District Estimated Project Cost : Rs 55 Crores ( US $ 9 million) Raw-Material Primary Fiber (Wood Pulp ) and Secondary Fiber (Recycled Fiber / Waste Paper) Gas for the Power Plant Future Strategy : Add 250 TPD Board Manufacturing Facility Promoters The Core Promoter Management team consists of professionals having vast experience in India and abroad in project mgmt, technology & engineering, fiber mgmt, marketing & commercial, etc. The core team has over 140 man-years of direct experience in general management, Paper Making, Paper Marketing Financial Management and networking T Raja Kishore Managing Director P. Venkat Reddy Director Finance T. Satya Prasad Director B. William Director - Admin Prasad Reddy Director V S T Mallikarjuna Rao Director Technical Location Land: The company has acquired 29 acres of land at Donthamuru village, Balabadrapuram - Rajanagaram Road, Rangampeta Mandal, East Godavari District. Advance Paid for another 9 Acres adjacent land and Registration is under process. Location Advantage: Proximity to the National highway, Railway Station & Airport (Rajahmundry) 25 Kms, Sea Port (Kakinada) 35 Kms. Abundant water available in the site and also near by lake and canal Effluent Disposal: Already built drainage is passing adjacent to the site, which facilitates for the disposal of effluent if any. Availability of trained man-power Proximity to Natural gas Raw-Material Raw-materials required are Primary Fiber (Wood Pulp / Virgin Fiber) and Secondary Fiber (Recycled Fiber / Waste Paper) for the paper unit and Gas / Coal for the Power Plant Wood Pulp The annual requirement of wood pulp is estimated at 3,000 tpa and this will be imported from Europe, North / South America, and Indonesia Waste Paper: Requirement of waste paper is estimated at 20,000 tpa .We shall procure waste paper from USA and Europe. Gas Efforts are on to secure 1500 mmbtu Natural Gas sanction. Ministry of Petroleum and Natural gas. referred the proposal to Bagyanagar Gas Authorities for further action. Product Mix Product Profile The paper machine will have an installed capacity of 15,000 TPA of Tissue paper. Soft tissue Soft Tissue for Conversion Hard Tissue 20 Tons per day 5 Tons per day 25 tons per day Company has the flexibility to change product-mix to cater to the changing market demand/ requirements from time-to-time to maintain and improve profitability. Marketing Arrangements Export – 70% Tissue Paper in Jumbo Reels and Sheets to Identified Prospective converters in Middle East & Africa Domestic – 30% Tissue reels/sheets/converted tissue packs through established distributors / convertors Market Scenario Global tissue paper business is $30 billion, and volume is over 20 million t. North America and Europe account for over 60% of consumption. World average per capita consumption of tissue paper is 3.4 kg. India’s per capita tissue paper consumption is dismally low at 0.01 kg as compared to China at 4.5 kg and 23 kg in North America. The Indian tissue paper market is at an inflexion point and is expected to grow at a CAGR of 20% in the next 3 – 5 years, with the organized segment growing even faster. This growth will be driven by increasing hygiene awareness, disposable income and deeper penetration of organized retail. World tissue paper demand is forecast to grow by 3.2%/yr up to 2010. The annual increase is about 780,000 tones, and the market is expected to reach 28.3 million tones by 2010. The growth corresponds to the combined capacity of 26 medium-size (30,000 t/yr) or 13 large (60,000 t/yr) tissue machines per year. Growth prospects are best in China and other Asia, where economic growth, rising standards of living, rapid growth of travel, hotel businesses and fast food chains all contribute to the demand growth. The eastern European market is also likely to grow clearly above average during the next 10 years. Product Usage Product Usage Tissue paper is a thin, strong, translucent paper used in sanitary products, such as toilet tissue, paper towels, facial tissue, kitchen towels and napkins At-home" Tissue market accounts for about 63% of the entire tissue market and away-fromhome" market, represents the remaining 37%. Tissue Paper targeted customers are wholesale to janitorial supply companies, hotels, offices, restaurants, schools, and the government. A small quantity of tissue is used in absorbent products (such as diapers, wipes, and feminine hygiene products) and is also used for wadding and as a base stock for waxing and wrapping. . Tissue paper consumption patterns vary between regions. Toilet paper is the main product in all regions except Middle East, where facial tissue dominates for religious and cultural reasons. Tissue paper is a consumer product, and branding is a vital part of its marketing. In addition to manufacturers' brands, the leading retailers have introduced their own private-label brands. In Western Europe, about half of all consumer tissue is sold under private labels. In some countries like Germany and Switzerland, the share of private labels is already well over 60%. In North America and many other regions, the share of private labels is much smaller, though gradually increasing. The consolidation and globalization of retail chains support this development Project Cost The total project cost is estimated at Rs 55 Cr. The total cost has been arrived based on the initial estimates by company’s Technical consultant and indicative quotations received by the company. A summary of the Cost of project is furnished in the table below: Project Cost Estimates Rs in lacs. Land 1000.07 Building& Civil Construction 613.17 Plant & Machinery (Imported) 1317.00 Plant & Machinery (Indigenous) 1011.30 Engineering Design 210.00 Misc Fixed Assets 68.46 Contingencies 311.24 Deposits 105.00 Preliminary and Preoperative Expenses 484.13 Margin Money for Working Capital 253.65 Total Project Cost 5458.01 Means of Finance The project is proposed to be funded at a Debt/ Equity ratio of 1: 2 and the financing pattern for the project is proposed as under: Means of Finance Rs. In Lacs Equity Promoters / Strategic Investor / Private Equity: Debt 1858.01 3600.00 Financial Institutions / Banks Total Project Cost 5463.68 Project Profitability Summary Profitability Statement INR Lacs 2016 2017 2018 2019 2020 2021 2022 Capacity MT 15,000 15,000 15,000 15,000 15,000 15,000 15,000 Total Production MT 5250 10500 12000 12000 12000 12000 12000 Capcity Utilization % 35% 70% 80% 80% 80% 80% 80% Net Sales Rs. 2715 5226 6392 6622 6754 6889 7027 Cost of Production Rs 1767 3823 4641 4826 4925 5026 5133 Cost of Sales Rs 1586 3616 4562 4809 4915 5016 5122 Profir before Interest Rs 976 1313 1496 1469 1488 1515 1540 Profit before Tax Rs. 705 729 961 1011 1110 1217 1309 Net Profit Rs. 705 729 961 1011 1110 1217 1309 NP as % of Sales % 26% 14% 15% 15% 16% 18% 19% Cumulative cash accruals Rs. 544 670 1177 1819 2567 3422 4669 BEP (%) of Installed capacity % 18.37 47.82 42.42 38.53 35.30 32.34 30.12 2.00 1.37 1.65 1.78 1.99 2.27 5.99 DSCR (Gross) DSCR Average IRR 2.31 21% Current Status Sr. No. Activity Expected Date Completion 1 Acquisition of Land Completed 2 IEM from Ministry of Industry No.765/SIA/IMO/2008 Dated14/3/2008 3 Project Technical Feasibility Study by APTICO Completed 4 Arrangement of Water Available 5 Temporary Power for Construction – 6 Registered with Vizag Special Economic Zone for 100% EOU Status Completed 7 Consent from AP Pollution Control Board Completed 8 Advance paid for additional land for future expansions Under process 9 Applied with concerned authorities for building and other constructions 10 Applied under single window clearance from Govt.AP for incentives, & Commerce vide letter Completed under process Under process Under Process of Project Implementation schedule Sr. No. Activity 1 Acquisition of Land Completed 2 Statutory Approvals Completed 3 Design & Engineering Completed 6 Building Construction May 2015 December 2015 7 Arrangement for Water Completed Completed 4 Machinery Indent May 2015 July 2015 5 Machinery Delivery July 2015 January 2016 8 Overhauling & Erection January 2015 March 2015 9 Recruitment of manpower March 2015 January 2016 10 Raw Material Purchase February 2016 March 2016 11 Trial Production April 2016 May 2016 12 Commercial Production June 2016 June 2016 onwards 13 Release of first batch of finished goods June 2016 Date Commencement of Expected Date Completion June 2016 onwards of Justification Tissue is a Specialty Paper and generates higher revenues Usage of Tissue Paper is growing at a rapid speed all over the World Per Capita consumption of Tissue paper in China, India, Africa and Rest of Asia is below 2 Kg as against per capita consumption of 22 kg in North America and 13 kg in Europe and Japan. This indicates significant growth potential for Tissue Paper in Asia, Africa and China New volumes to depend on imported fiber due to shortage of wood supplies in India and thus making premier grades of Specialty varieties such as Tissue paper generates higher revenues and project is more viable. Proposal Total Project Cost: 55 Cr, Equity: 18.5 Cr and Debt: Cr36 We Invite Promoters to invest 5 Cr and join us as co-promoters on mutually agreeable terms. In addition to the basic works done so far, we take the responsibility of arranging Cr Debt from Overseas funding / Indian Banks / Suppliers Credit from Machinery suppliers. Considered conservative workings such as highest possible manufacturing cost and lowest possible end product price for project profitability and under any circumstances profitability will be at par or higher than what is envisaged in the projections. THANK YOU Compared to using virgin wood, paper made with 100% recycled content Uses 44% less energy, Produces 38% less greenhouse gas emissions, 41% less particulate emissions, 50% less waste water, 49% less solid waste and of course 100% less wood. Think Eco-Friendly - Management, Sunshine Papers India Limited.