BUSINESS PLAN

OF
2075

RUMA POULTRY FARM

MAJHAURA, BISHANPUR-7,
MAHOTTARI abc

18/8/2075
 Business Plan for Chicken Lover’s (Poultry Farming)

1. Executive summary:
The demand of Chicken meat is increasing rapidly, hence Broiler production
business become one of the most popular and income generating business in Nepal.
Due to high level of profit margin and turnover Ruma poultry farm plans to expand
its business upto 100% capacity. For that it needs total of Rs 15.7 million funds. its
planning to borrow Rs 5 million Loan from RBB, Jaleshwar and remaining will be
financed through self financing. The Farm is calculating and analyzing various
financial indicators to make decision regarding financing and investing activities.

The project has Positive NPV Rs 4.9 million, IRR= 18.2% Payback period is 4.15
years & BCR is greater than 1. These all indicators show that investing in this
project is profitable and value adding hence the Farm is concluded to expand the
business as per business plan.

2. History Of Poultry Farming In Nepal

Chicken is one of the most popular avian species in Nepalese societies. It provides
cheap protein from the meat and eggs. According to statistical information on
Nepalese agriculture, 25760.4 thousand fowl are present in the country and
16527.0 mt chicken meat is consumed in the country (SIONA, 2009110). As
poultry birds are non-ruminant: they mainly depend on crop grain (concentrate
feed). First improved poultry (Black Minorca Rhode Island Red and White
Leghorn) were introduced in Nepal by HMG, Nepal in 1957158 with donation
from Heifer International of America and government operated Central Hatchery
was established at Parwanipur with the help from USAID in 1960. That was
beginning of the industrial poultry farming in Nepal. Agriculture contributes 35.6
oh of national GDP and Livestock share 31.0% of Agricultural Growth Develop
Productivity, where the poultry contributes 8.0% of AGDP. Government of Nepal
has given emphasis on poultry sector with a vision of increasing employment
opportunities to support the poverty reduction of national target through promoting
commercialization, industrialization and making poultry business more
competitive in domestic as well as international (NPC, 2003).
The average hatcheries in Nepal are less efficient as compared to India. Chick
mortality rate and feed consumption per bird are higher while egg production per
hen and hatchability are lower in Nepalese hatcheries than in Indian hatcheries
(Bhurtel and Shaha, 2000). The commercial poultry industry in Nepal is growing at
a rate of about 15.0% per annum involving over 30.0 thousand farm families
directly and indirectly involved. The most important purpose of chicken keeping
was cash income from the sakes of chickens in the village of Myanmar (Henning,
et,al. 2007). In poultry industry feed represents about 70.0 percent of the total cost
and feed quality of the available feed in the market is often inconsistent (Shrestha,
et, aL.2005). A recent estimate shows that a total of 151.0 thousand MT of maize is
used to prepare compounded poultry feed in the country each year to feed almost
9.0 million commercial poultry bird. Poultry farming in Chitwan and others
districts are fast rising as an enterprise. Poultry farming has emerged as a major
income generation enterprise in agriculture sector over the last four decades. The
opportunities of direct and indirect employment have been a great help to the
largely unemployed population (Kaphale, 2005). About 78.0% of live chickens are
supplied from Chitwan district to other parts of Nepal. The popularity of chicken
meat are increasing among the people due to increasing awareness on nutritional
value of meat among the consumers and increasing income level. Per capita
consumption of meat in Nepal is about 8.0kg/year but urban consumption exceeds
10.0kg/year. The market price of chicken meat is determined by supply and
demand of live poultry (Maskey, 2005). There is a growing gap between supply
and demand. The main objectives of this study were to find out the opportunities of
poultry enterprises, its market situation and to recommend the appropriate policy
for sustainable poultry farming.

3. Scope of Poultry Farming In Nepal

Poultry farming has a big scope and marketing opportunities in Nepal. The
commercial poultry industry in Nepal is growing at a rate of about 15.0% per
annum involving over 30.0 thousand farm families directly and indirectly involved.
The poultry marketing is also increased day by day due to changed food habit of
eating meat and egg. As per Commercial Poultry Survey 2014-15” prepared by the
Central Bureau of Statistics (CBS), Commercial production of chicken meat in
Nepal stands at 114,058 tonnes annually, while egg output amounts to 1.20 billion
sets annually. A Nepali eats 4.1kg per chicken and 44 eggs annually
The average hatcheries in Nepal are less efficient as compared to India. Chick
mortality rate and feed consumption per bird are higher while egg production per
hen and hatchability are lower in Nepalese hatcheries than in Indian hatcheries
(Bhurtel and Shaha, 2000).
The global average chicken meat consumption is 12kg per person, while average
per capita egg consumption is 153 units annually, according to the Food and
Agriculture Organisation of the United Nations.
In the South Asia region, Nepal’s per capita chicken consumption is well above
India (2.3kg) and Bangladesh (1.4kg), but below Sri Lanka (4.9kg) and Pakistan
(4.3kg).

Nepal’s poultry industry has an annual turnover of Rs33.72 billion, producing

chicken meat worth Rs20.52 billion, eggs worth Rs9.13 billion and chicks worth
Rs3.60 billion. Sales of chicken manure amount to Rs453.72 million annually.
Chitwan is the largest producer of poultry products in the country, with the district
recording a turnover of Rs10.17 billion. It produces Rs1.97 billion worth of
chickens, Rs5.91 billion worth of eggs and Rs2.07 billion worth of fowl. Sales of
chicken manure amount to Rs213 million annually.
After Chitwan, Kavre, Dhading, Kathmandu and Kaski are other top chicken
producing districts. In terms of eggs, Chitwan tops the chart, followed by
Makwanpur, Nawalparasi, Dang and Bhaktapur.
Chickens are produced commercially in 64 districts in the country and 55,871
people are engaged in the business. According to the survey, 75 percent of
commercial chicken producers are making profits.
Commercial chicken production in Nepal started in 1974. However, between 2004
and 2013, the country saw a large number of farmers shifting to the
poultry business.
Government officials said despite snagging on bird flu outbreaks in the past, the
poultry sector has been expanding at a faster rate than expected. Chicken has
become widely popular as it is cheaper compared to other meat products. As a
result, the poultry market has been growing rapidly despite setbacks. It fulfils
around 13 percent of country’s meat requirement.
4. Introduction of Ruma Poultry Farm
 Introduction:
Ruma Poultry Farm is proprietorship farm established in 2069.02.08
with authorized paid up capital Rs 300000 for the purpose of
producing and selling Broiler . it is registered at Department of
cottage and small industry Mahottari. The proprietor of Ruma Poultry
was Mr Shivshankar Yadav at the time of establishment. As per
decision of department of cottage and small industry, mahottari in
2070.10.08, name of the proprietor changed to Mr Shambhu Yadav.
The farm is located at Majhaura bishanpur -7. It is operating smoothly
with high level of business growth. at the time of establishment its
total capacity per lot is only 100 broiler but within 6 years its
production capacity is 15000 broiler per lot and approx. 38000 broiler
annually.

 Corporate Vision: To become one of the largest poultry farm in

Pradesh no 2 by providing healthy Broiler product at reasonable cost.
 Mission: To produce large number of healthy Broiler at cheaper cost
and distribute to all District of Pradesh no 2 with competitive and
reasonable price.

 Objective: Our main objective is to produce large number quality

chicken and quality eggs at a reasonable price. We want fair profit for
the owners and reward the place to work for employees. We believe in
fair competition through customer satisfaction.

5. Legal Status: Ruma Poultry Farm has been registered in office of cottage
and small industry department, Mahottari on 2069.02.08 having registration
No 3340/258/068/69. it is also registered in inland revenue office, Janakpur
with PAN No 601659371 on 2071.10.09. it has to authorized capital Rs 3
lakhs.
6. Past Performance: Ruma Poultry Farm is operating since 2068.69 with
growing profit margin. As per audited financial report 2074.75 the Financial
indicator of Ruma poultry Farm is presented in Annex 18

7. Organization Structure, Building and Civil Structure

 It is Proprietorship family owned farm operating at Majhaura, bishanpur -7,
Mahottari. There are total of 6 sheds having 4 old and Two New shed.
Total Area of all sheds is around 15000 Sqft in plot no 2015 & 216 of
around 12 Katha land. The owner of is Mrs Dukhani Devi, mother of
Proprietor and Mr Lalbabu Yadav, Brother of Proprietor. the Two new shed
is made as modern style with donation where as old sheds where made with
traditional style having roof.

There are 7 Staff and One business supervisor under top to down
management style. The Organization Structure of Ruma Poultry Farm is as
follows.

Ruma Poultry Farm, Majhaura, Mahottari

Proprietor

Mr Shambhu Yadav

Poultry Supervisor

worker 1 8. worker 2 worker 3 worker 4 worker 5 worker 6

9. Climate & Location: Location of the business is affected by the nature

and types of business. This Poultry Farm is located at Majhaura , bishanpur-
7. There is sufficient water and electricity supply and cheap labor cost. The
farm Location is perfect from every aspect.
10. Financial Plan:
Although the farm is financially sound due to business expansion and higher
level of business growth it needs more funds to operate the business
accordingly.
To analyse financial aspect of this farm for 2075-76, I calculate and analyse
following financial indicators.

10.1 Source Of Finance: Total requirement of the farm is Rs 15.7 million

out of that Rs 5 million will be financed by Bank and remaining Rs 10.7
million will be finance by self. The Farm is planning to borrow loan of Rs
2.5 million Term Loan and Rs 2.5 million Revolving type loan from RBB,
Jaleshwar Branch to meet the financial need for further expansion.

SOURCES OF FINANCE

(Rs.'000)
SN Items Total Equity Bank
Amount Finance Loan
A Fixed Asset Investment 11632 9127 2505
100% 78% 22%
1 Land & Land Development 3600 3600 0
3 Building & Civil Works 5104 3216 1888
4 Machineries & Equipments 849 339 509
5 Furniture & Office Equipments 145 58 87
6 Vehicle 1900 1900 0
7 Pre-operating Expenses 35 14 21

B Working Capital Investment 4044 1617 2426

100% 40% 60%
C Total Investment 15676 10744 4931

10.2 Cost Estimation: Total cost estimated for 2075.76 to expand the
business is Rs 13.238 million. Out of that variable cost is Rs 12.206
million ie 91% and Fixed cost is Rs 1.031 million i.e. 9%. Total
production of Broiler at this level is estimated to be 34200 broiler
 annually. The estimated sales price per kg of chicken is Rs 180 so the
total sales for the fiscal year 2075.76 are Rs 153.9 million. The detail of
Cost is presented in Annex 02

10.3 Profit & Loss Estimation: The Farm is operating at above breakeven
point from the beginning. Estimated Gross Profit of the farm at 100%
capacity is 3.577 million annually while average Net profit is Rs 24.27
million. Net Profit to Sales Ratio is estimated to be 16% in average
stipulating that the business has high net profit margin. The details of
profit and loss is presented in Annex No 8

10.4 Working Capital Estimation: Average working capital requirement is

estimated to be Rs 4.89 million. While operating at full 100% capacity
the working capital requirement is Rs 5.049 million. Currently the Farm
is operating at below 50% of its total capacity hence to enhance
business to operate at 100% capacity level, the farm needs Rs 5.049
million working capital out of that its planning to finance Rs 2.5 million
from RRB Revolving type loan and remaining via self finance. For
more details refer to Annex 6

10.5 Financial Indicators for /measuring Project worth

 Payback Period: Simple Payback Period for the project Finance is
calculated as 4.15 Years that is acceptable period for the bank as
period of term loan is for % years and even revolving loan can be
renewed up to 5 years. Hence we can say the farm has capacity to
repay all there bank loans with in 4.15 Years.
 Break Even Point: Break Even Point of the Farm is 29% ie the farm
will be in surplus if it produce broiler more that 29% of its total
capacity ie 29% of 85500 =24795 broiler annually.
The farm's BEP is more sensitive to sales rather than change in fixed
cost and variable cost. If Fixed cost is increased by 10% BEP will be at
32% of production. it will be 44% if variable cost is increased by 10%.
If sales unit is reduced by 10% then the BEP in percentage will be
52%. The details of sensitivity analysis is given at Annex 17
 Net Present Value (NPV): Net present value of the farm is positive
Rs 4.9 million which stipulates that the farm has positive cash flow at
present price. The Project having positive NPV will be selected and
regarded as value adding project of financing. In other words, If NPV
 is positive, it means that the cash inflows from a capital investment
will yield a return excess of the cost of capital and so the project
should be undertaken. NPV table is presented in Annex 15
 Internal Rate Of Return: The internal rate of return IRR is that rate
of return, which the project is expected to achieve. it is discounted rate
at which NPV will be Zero. The Project having greater IRR that Target
rate of return, the project should be undertaken and accepted. This
Farm has IRR 18.2% i.e. more than target rate of return 16% and also
greater that Bank Interest Rate 10.5%. IRR calculation format is
presented in Annex 16
 Benefit Cost Ratio: If BCR is 1 it means the farm's cash flows NPV is
Zero. the farm having greater BCR ratio than 1 is regarded as more
profitable. Ruma poultry farm has BCR 1.14, that means its profitable
to invest in this project. BCR calculation schedule is in Annex 15
Conclusion: After analysing various financial indicator ie NPV, IRR,
BCR, BEP, PL, we reached to the conclusion to invest in the Ruma
poultry farm for further expansion to utilize its 100% capacity.