Demand Assessment

Objective:

 Prepare estimates of demand for cellulose film based on the consultant's analysis and Planning Commission's estimate

 Suggest whether Nirmal Rayon Limited should set up a new plant to expand its capacity

Recommendations:

 MD is advised not to install the additional capacity as the method used by consultant uses lots of assumptions which does not provide any substantial basis and incorrect figures of growth rate for various end user industries.

 Current capacity of Nirmal Rayons together with other market player is around 9000. With letter of intent being offered to other players, some capacity addition in the industry with entry of some other players will take away some of the market share of these two players.

Rationale:

Rationale used to arrive at estimated demand for four major industry is tabulated as below:

Cigarette Industry Pharmaceutical Industries Textile Industry Confectionaries

* 1/4th of current consumption

* Increase in demand due to two main reasons

* Increase in the demand of cigarette

* Wrapping proportion also show an upward trend

* Growth projection at 5%

* Pharmaceutical industry is expected to grow at 10% in next 5 years.

* Factor favoring cellophane industry

* Change in packaging from tin and foils to cellophane.

* Average growth projection around 22%

* Single largest consumer of cellophane ( 1/3rd of cellophane)

* Threat from PVC an alternative for cellophane.

* Share of cellophane decreasing year on year

* Shows a very poor growth of around 1% for cellophane industry * Third largest consumer of cellophane

* Average growth is very low around 2-3%

* Proportion of cellophane usage is decreasing due to the threat from PVC

 In Exhibit A4, production capacity is greater than installed capacity for the year 1968 - 1971.

 Estimate of cellophane cannot be projected correctly by using the unreliable capacity.

 In Exhibit A6, unorganized sector growth numbers have not been calculated using the growth rate of 5 % from year 1974.

 A