Hsbc Bank

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Hsbc Bank

Executive Summary

Having cost leadership from producing both vegetable and fish on pond that is by saving land the firm is expected to come into operation from year 2010.The basic production procedure of the firm is cultivating vegetables on raft and growing fish in the same pond simultaneously. Principle office will be located in comilla sadar, which will control and disseminate organic fish tilapia, tomato and lettuce produced under firm’s innovative production method.

Presently our market is full of these products but all of them are costly, formalin used, chemically reaped and clinically equivalent to toxic. Our product will serve to those who want organic product having quality, differentiated test and with speed but at reasonable or somehow lower price.

Firm is willing to develop an organic brand which will be cheap and available at a time. But initially firm target customers are tomato sauce producers, supper shops and other restaurant. After having economics of scale at a short period, firm will go for expansion.

No mention, as it is food market, it is large and will grow. Both traditional and organic producers are in the market, but firm’s innovative production procedure will make the firm different when cost is considered.

Innovative production procedure innovative labor management system, diversified marketing plan& development of organic brand will make us different from our competitors, substitutes and adjacent competitors. In contrast to all this, food processing firms and super shops will work as complementation and capability partners respectively. With complementary partner firm, we will go for future contract.

Among total Tk. 6050000 we seek Tk. 4050000 from debt sources which will allow us to take lease of 15 acres of pond area for 3 years uninterruptedly. Firm is considering redemption of debt after 3 years and then it will be an unlevered firm. But after 5 years firm will require debt to support its growth.

Firm’s current debt to equity ratio will be .67:.33. The firm is not going to pay any dividend until 4th year, to strength interest coverage ratio and also to build a strong equity base. In normal circumstances firm will have an NPV of Tk 4546485. Even in worst case firm has a positive NPV. The firm ensures payback of fund of within 2.5-3 years. Even threats are available from different sources this production procedure and products ensures a growing market.

Business Idea

1.1 Environmental analysis:

Agricultural sector and import by public & private sector are the only medium for our food supply & security. In Bangladesh, most of the farmers produce for their self-sustenance & market only the surplus production. Moreover population growth rate & declining rate of cultivable land is much higher than agricultural production growth rate.

The above situation leads us to initiate an agro-industry, which will ensure quality production for market in large scale & certainly ensure business. It is only recent, Bangladesh is experiencing it. Things are changing rapidly in Bangladesh. People are more concerned about the quality of the product, use of chemical in the product (especially formalin), color & toxic preservatives. People wish to have same product differently with speed, easiness & care.

Scarcity & costs of land has induced us to start a business that will produce organic fish & organic vegetable on same pond which is available in Bangladesh. We will ensure differentiated organic food which people can have with easiness & speed. Currently such demand is fulfilled only by the foreign suppliers which are imported mainly by various super shops. National organic producer are small in number. Cost leadership will help us to capture a large market share of the segment & also help us to grow.

1.2 Products & Services:

We are offering products to the market associated with different services. Like-

i. Organic bone-free processed Tilapia fish available on per kg box.

ii. Organic tomato

iii. Lettuce

1.3 Business Goals and Objectives

Short term goals

· Land savings by cultivating in water.

· To increase food supply

· Providing organic food

· Providing processed food

· Year long supply of off-season food.

· Initiating ease & speed to the customer

Long term Goals

· To create and develop agro branding

· Entering into Canned food industry.

· Franchising

Market potential

2.1 Customer Demographics:

Price risk is the main risk regarding our products. So we are very much willing to enter into future contract with our target customers. We are very much concerned that we do not have an established future market. But we may help to give it a formal shape.

Number Products Target Customer
1 Fish / Telapiah: Super shops
2 Tomato: Tomato sauce producer
3 Lettuce: Fast food & super shops

The upper & upper middle class of the large town are going to be our final customer through some kind of intermediary who are our actual customer. The product which will be more/surplus considering the target demand will be available in the traditional local market. Traditional market is full of products where chemical is extensively used. So being organic product we are going to have easy & large market share.

2.2 Competition & Competitive advantage:

To the consumer level, in general, organic food are more costly than available food. But we are going to provide less or equal priced organic product depending on market demand because we have cost leadership for using an innovative method.

Our direct competitors are the producers of the same goods. The main benefit of the competitors is that the current market is totally under their control even though they are supplying chemical used costly product. As our customers are directly responsive to their customer’s demand that is they will demand our product only if their customer demand it. As we are providing less costly organic food, both direct & indirect customers are going to change their buying behavior. Organic food producers are also our competitor but not directly on the items, which we are going to produce.

Competitor’s Strength:

· Current large market share

· Strong capital background

· Modern technology

· Diversified product

· Complaint handling

· Long time experience in the market

2.3 Pricing Strategy

As already mentioned, tomatoes will be produced under contractual based financing /future contract basis. Future price will be selected in advance. For fish it will be cost based pricing, on the other hand it will be value based pricing for lettuce.

2.4 Advertising & Promotional Strategy:

Current tomato sale does not need any advertisement. But for growth it is must. As the buyers are industrial, we will go for online services for providing sufficient information about us.

To ensure price insurance, marketing flexibility and also to set up barrier to new entry we are very much interested to enter into a future contract with the participants of our target customers. Future price will be set in advance considering the future market demand. Future contract will ensure high downward price protection, balanced profit opportunity and market flexibility.

2.5 SWOT Analysis:


  1. Organic Food
  2. Low price
  3. Irrigation cost saving.
  4. Less threat of overall loss
  5. Smaller loss in case of malice
  6. One pond providing an employment to one family

  1. Less production
  2. Offering only three items of a large food market
  3. Less capital
  4. Unskilled labor
  5. Higher transportation cost & time consuming
  6. Weak monitoring

  1. High Demand
  2. Quick growth
  3. Exploit several local market
  4. Agro branding

  1. People’s attitude toward foreign food
  2. Inability to fulfill future contract.
  3. Environmental vulnerability

Resource Requirement

The main resource required for this business is pond. We will take lease of several ponds that constitutes 15 acres (total). It is not single one rather at least 45 ponds which are scattered over an area. Our concentration will be comilla, as business field, as we have found at least one pond is available with a house.

Initially we will take lease of those ponds for 3 years making rental payment at a time, it will ensure uninterrupted access to those ponds.

We are not willing to use any labor from outside market, rather we will create an opportunity to any of the co-owner of the pond who is willing to work.

Actually we are making a family employment opportunity as the pond is near home any member of the employed persons family can work. It can be his wife, son or he himself. It will help to create women employment in turn. Women are always welcome to work. Moreover rather than wages they will be allowed a lump sum salary.

After pond preparation, approximately 600 raft, which are made of banana tree having a lair of soil, cow dung and water hyacinth will be placed on water covering 70% of the total pond area. 30% will be kept free to have easy access of sunlight in water. As we are covering 70% of the total pond area, we will cultivate tilapia fish in water, which is characterized by ability to survive in harsh condition, less sensitivity to sunlight and rapid growth. On the raft tomato will be produced which has a broader market over the year. Tomato requires 3 months to be marketable, whereas fish require 4 months . In the gap period we will produce lettuce on the raft and will have at least two production in a year;

All maintenance liability goes to the employed family who will be trained and monitor by a group of supervisor, supervisor will be skilled one and getting authority and responsibility for a given area.

We will offer bone free sliced fish to our targets for this we will manage a building having both storage and premises facility. Freezer, furniture, computer and delivery van are the primary fixed asset required.

4.0 Implementation Plan

The firm will start as an Pvt Ltd. Company, which reflects firms financial strengths and will also ensures tax exemption for five years. Registration from register of joint stock company will also allow firm different benefit allowed under act. Although target market is solely Dhaka based the full production process will be conducted in comilla due to its geographically and economical condition.

To reduce product loss risk firm ensures insurance of yearly payment of Tk 30000. Utility cost include security, power, water etc. Quality control will always be an issue as our total market solely depends on quality product.


· Disease may not be so widespread as area is scattered

· We can capture the market very quickly.

· Agro branding

· Focused production

Raft preparation

Vegetables will be produced on raft of which compost is an essential component.The compost is made up of azola, a good nitrogen-fixing plant & other readily available organic matter. It can also be made by decomposing water hyacinth, oil cake, treacle, husk & straw together. Organic compost like this can be made within 6-7 days. The advantage of using organic compost is neither does it make the water toxic nor does it harm the fish farming.

Seeds can then be sown. The technique used to improve the seed’s early development is to create round balls of compost comprising of decomposed water hyacinth and an organic fertilizer known locally as Tema. A couple of seeds are planted into each ball and kept in a shaded area while germination takes place. Once the seedlings have begun to grow they can be planted out onto the raft.

To protect the raft ducks, rats and other animals fencing can be set up around the perimeter of the raft using broken fishing nets or sticks as effective barriers.

Although rafts will not last indefinitely they can be reused and hauled to a shadier or sunnier spot.

4.2 Vegetable cultivation

Leafy or juicy vegetables can easily be cultivated on rafts throughout the year. The cool climate on the pond ensures off-seasonal production & it is appropriate for production of tomatoes. In our dual production, we are opting for cultivating tomatoes and lettuce on the raft on 70% area of the pond.

Seedlings can be sown directly onto the raft or else it can be planted into round balls of Tema and put in a shaded area. Afterwards they can be planted onto the raft. The tomatoes can be wrapped up with small poly bags when it grows to prevent it from pest attacks.

There is no extra hassle of irrigation as little water is needed in case of raft plantation. The banana rafts keep the soil moist. In circumstances (in summer or in hot weather) water can be spread manually with porous water pot. The raft can be accessed on foot. In case of deep water it can be reached by using a raft or a boat. No vegetable production will take place in heavy rain period.

We can get the first production of 24 tons of tomato from one hectare within 75-90 days after plantation. We will not use any harmful pesticides as it can be harmful for fish farming. Instead of pesticides we will use natural biological terms to prevent plants from insects (light bulbs or weeding).

4.3 Hatchery

After pond preparation, young Tilapias can be freed into the pond. The appropriate proportion will be to free 3000 fish fries in an acre. Fish food can be provided once every day. Handmade fish-food can also be made with husk, oil-cake, bran & treacle together. It needs to be assured that the fish are always free from disease or insects. Bamboo shoots or bamboo sticks (1 inch wide) can be dug down 1 feet to the water ground. This will help to keep the fish free from insects naturally when it moves under water. We can get the first production after 4 months. But for better growth of the fish we can collect about 450 fishes after 2 months. Cross seasonal nursing can be executed in case of fish farming.

4.4 Process

4.4.1 Fish food

Usually bran, husk, oil-cake, cow-dung, treacle are used as organic fish food. Fertilizers are spread in the pond for preparation as it creates a layer on the soil which is a good food for fish. Cow-dung & other organic composts can also be used for the vegetables as cow-dung which is a very favorite food for fish. Food can be provided by spreading or pierced packs set by the sides of the pond.

4.4.2 Fertilizers

Water-hyacinth, treacle, husk, hay (cut into pieces) can be used as organic fertilizers. The contents can be mixed all together & put under earth for (6-7) days. Afterwards it can be retrieved from underneath.

4.4.3 Irrigation

If the prodcution is done on the raft which floats on a surface of water then there is no need for additional water irrigation. Because the raft uses banana tree which is such a media that is itself moist & also water-absorbing. So it will itself absorb water from the pond’s upper surface. If additional water is needed then it can be provided manually. Porous water pots can also be used if necessary.

4.4.4Care & maintenance

Bamboo shoots or bamboo sticks can be used as a natural way to protect fish from insect attacks. 1 inch of the stick can be put underground & 1 inch should be kept above the surface (6 ft stick needed for a 4 ft water surface).Insects on the fish body automatically fall off while the fish moves under water.

5.0 Risk Assessment

In our country agricultural product suffer from two sources of risk. One is product destruction and another is price detoriation in value from

1)Quality detoriation

2)Price variation due to changing consumer preferences, supply condition and general business condition.

3)Demand risk:Demand for organic food may not be as high as we expected.

4)Economical risk: The project are based on the current market trends. Change in economic pattern may include substantial change in the projects.

5)Implementation Risk: The implementation of plan consists of the combined production of both fish and vegetables. In this situation high care must be taken, if it is not taken properly the firm may not prform at optimal lavel.

Risk Risk Management
1 Theft Providing the maintenance to the families who are the owner of the ponds.
2 High maintenance cost Covered by high production
3 Transportation Serving diversified market
4 Production hamper in rains Allocating the time for pond preparation
5 Prodcut distruction Arranging future contracts
6 Price fall Arranging future contracts

1.12 Financial Plan

We consider our debt to equity ratio as .67:.33. We will collect taka 4050000 from banking and non banking financial institutions. Where our initial cash requirement is 6050000. The rest will be supplied by the director of the firm in an equal proportion. Directors will be entitled equal dividend considering their share.

Taka 4050000 will be paid to the pond owner’s at a time at the beginning of the year. This method will help us to have an uninterrupted access on the property for 3 years. The equity fund will be used to purchase some computers, furniture, freezer, and a temperature controlled delivery van. The working capital constitute rest of the fund. A house with premises will also be taken as real estate lease by using equity financing.

The firm will use it’s retained earning to carry on it’s operation after the lease agreement is matured. Even though after several years the firm has a strong equity back up. The management is unwilling to pay dividend till the end of year4.

As it is a private limited company an also an agro based firm government tax exemption policy will facilated the operation of the firm at the starting year. More over government continued attention and care will help the firm to have debt from different sources at minimum rate which is now 10%-12% depending on sources of fund. We have considered rb=11% which is available from nationalized commercial bank. Repayment of debt after 3 years will make the firm an all equity firm, which indicates in case of growth we can manage fund easily from different lending sources.

Stress Testing Results
Case NPV IRR PB(Years) DPB(Years)
Base 4546485 31% 3.4 3.75
Best 8743893 48% 2.48 2.81
Worst 186579 15.50% 3.76 4.85


Pro Forma Financial Statements(Summarized)

Pro Forma Balance Sheet
2010 2011 2012 2013 2014
Delivery Van 900000 800000 700000 600000 500000
Furniture 67500 60000 52500 45000 37500
Freezer 180000 160000 140000 120000 100000
Computer 90000 80000 70000 60000 50000
A/C Receivable 2255200 5208000 6966000 5043150 5114550
Prepaid Rent 2700000 1350000 0 0 0
Cash 3237200 5201187 7826109 9477653 10349841
Total Asset 9429900 12859187 15754609 15345803 16151891
Equity & Liability
Equity 2000000 2000000 2000000 2000000 2000000
Debt 4050000 4050000 4050000 0 0
Net Income 882587 2591297 2510891 5333864 5313900
Retained Earning 882587 3473884 4484775 5318639
A/C Payable 840000 1080000 1080000 1440000 1440000
Interest Payable 445500 312200 164238 0 0
Loan Payable 1211813 1345112 1493074 0 0
Tax Payable 0 597991 982522.4 2087164 2079352
Total L & E 9429900 12859187 15754609.4 15345803 16151891
Pro Forma Income Statement
2010 2011 2012 2013 2014
Sales 7767400 10313600 10620200 13654300 13695100
COGS 2835000 3105000 3105000 3652600 3702658
Gross Profit 4932400 7208600 7515200 10001700 9992442
Salary 720000 720000 720000 756000 793800
Utility 30000 30000 30000 30000 30000
Insurance 30000 30000 30000 30000 30000
Training expenses 15000 15000 15000 15000 15000
Fuel 45000 49500 51975 57172 62890
Legal 20000 0 0 25000 0
Mobile Expenses 15000 0 0 0 0
Advertisement 30000 30000 30000 30000 30000
Depriciation 137500 137500 137500 137500 137500
Rental Payment 1350000 1350000 1350000 1500000 1500000
Loan Repayment 1211813 1345112 1493074 0
Operating Expenses 3604313 3707112 3857549 2580672 2599190
EBIT 1328087 3501488 3657651 7421028 7393252
Interest 445500 312200 164238 0 0
EBT 882587 3189288 3493413 7421028 7393252
Tax 0 597991.5 982522.406 2087164.13 2079352.125
Net Income 882587 2591296.5 2510890.594 5333863.875 5313899.875
Pro Forma Statement Of Cash Flow
2010 2011 2012 2013 2014
Net Income 882587 2591297 2510891 5333864 5313900
Depriciation 137500 137500 137500 137500 137500
1020087 2728797 2648391 5471364 5451400
?NWC 2457887 764810 23468.6 -1730180 79212
CFO -1437800 1963987 2624922.4 7201544 5372188
Investing Activities 1375000 0 0 0 0
Free Cash Flow(FCF) -2812800 1963987 2624922.4 7201544 5372188
Financing Activities 6050000 0 0 5550000 4500000
Net Cash Position 3237200 1963987 2624922.4 1651544 872188
Beginig Cash flow 0 3237200 5201187 7826109.4 9477653.4
Closing Cash 3237200 5201187 7826109.4 9477653.4 10349841.4
Stress Testing & Results
Base Case
Year 2009 2010 2011 2012 2013 2014
Cash Flow -4675000 -2812800 1963987 2624922 7201544 5372188
PVCF -2552843 1617743 1962333 4886155 3308097
NPV= 4546485
Worst Case
2010 2011 2012 2013 2014
Sales 7767400 10313600 10829280 11370744 11939281
COGS 2835000 3105000 3568297 4032176 4556358
GP 4932400 7208600 7260983 7338568 7382923
OE 3604313 3707112 3929538.72 4165311.04 4415230
EBIT 1328087 3501488 3331444.28 3173256.96 2967693
Interest 445500 312200 164238 0 0
EBIT 882587 3189288 3167206.28 3173256.96 2967693
Tax 0 597991.5 891568.568 893271.833 835405.7
Net Income 882587 2591296.5 2275637.71 2279985.12 2132288
Depriciation 137500 137500 137500 137500