Detergents India Limited 205DIL’S PERSPECTIVE
In 1995 the detergents market was growing at 6.7 percent. HLL was outsourcing 2,300 MT from DIL. HLL
was expected to increase orders at a rate reflecting the overall growth in sales/market or at least maintain it
at 2,300 MT. The processing charge for 501 was Rs 1,400 per MT and DIL in turn would pay Rs 800 per MT
to its third party manufacturers like Jayanthi Detergents and Calcutta Chemicals. The decision to take up the
HLL indent essentially involves offloading the Shaw Wallace indent to a 3P manufacturer and allocating the
in-house capacity to HLL. In addition, DIL was evaluating the possibility of putting up a 1,500 MT detergent
cake plant and a 500 MT powder plant at Ambattur (Tamil Nadu) to cater to Shaw Wallace.
A. Putting up a 1,500 MT Cake Plant
It involves the following outlay:
Land & buildings Rs 56.lac
Machinery Rs 96.lac
Vehicles Rs 6.lac
Furniture Rs 5.lac
Total Rs 163.lac
Land and building are funded by a bank loan carrying an interest rate of 17.5 percent, and plant and
machinery would be funded by the deferred payment guarantee scheme of IDBI (@16 percent) which requires
that 10 percent of the investment requirement be brought in by the company. Interest on working capital was
expected to be 21 percent. The total annual interest payable amounts to Rs 398,116.60.
The break up of expenses per MT is:(in Rs)
Labor 175
Electricity 100
Repairs & maintenance 110
Consumables 45
Total Rs 430
Shaw Wallace pays DIL a processing charge of Rs 850 per MT.
So, total revenue for 1,500 MT = 1500 × 850 = Rs 1,275,000
Depreciation is calculated at the following rates:(In Rs)
Plant & machinery @ 10.34 percent 992,640
Building @1.88 percent 105,280
Vehicle @ 7.07 percent 42,420
Furniture @ 3.34 percent 16,700
Total 1,157,040
Revenues 1,275,000
Table contd.