zeitgeist iim indore business case

ZEITGEISTIndian Institute of Management Indore

Presented By:Shyam Naren J

Sriram S

Jatish V C

Presented at Ranniti, GLIM

Proposal to enter the rural off-grid solar lighting systems marketObjectiveObjective

ScopeScope Opportunities in Indian markets

MethodologyMethodologyMarket Scoping

Impact analysis

Triple Bottom Line

Market ScopingMarket Scoping

Source :Various Sources

Around 22 % of the world’s population lacks access to electricity

78%

22%

~ 23 % of this is from India, spread across 95,500 villages

Fuel Based solutions account for 20% of all lighting costs, yet only produce 0.1% of all lighting.

Existing solutions impose a huge cost on the environment(For e.g. Lanterns emit 190 million tonnes of CO2/year, )

Porter’s Diamond Model Porter’s Diamond Model

Demand Conditions

Firm Strategy, structure,

Rivalry

Support from

Related Industries

Factor Conditions

++400 million lack access+ CAGR of 30 %

+Low cost of labor++4-7 kWh/sq. m/day of solar radiation++ Government policies, subsidies

- Relative non availability of silicon.- low projected installed capacity + Presence of Global industries

- Little Entrepreneurship- Meager rivalry+ Relatively easy financing

Solar energy industry has high Globalization PotentialSolar energy industry has high Globalization Potential

Source : Various Sources

Cost Drivers

Customer Drivers

Competitive Drivers

Government Drivers

Over the last 9 years, price per Watt peak has fallen at a compoundedannual rate of 16.3 %

Large underserved market, Low levels of customization, facilitates transferable marketing with little local adaptation.

Relatively low, although PV manufacturers are expandingE.g. BP solar in India

High levels of interest shown by governments in the form of Legislations, norms and subsidies worldwide.

Strategic Fit with ALSStrategic Fit with ALS

Source : Various Sources

Economies of scope Synergy

Competitive ness

-Brand name- Distribution Channel - Skills and knowledge transfer

-Value chain activities- Common brand name

-Cross subsidization- Risk Mitigation

ALS

Potential to empower students, local entrepreneurs

People

• Lighting levels in classrooms are at 2% of western levels

•Empowering BOP entrepreneurs

•High correlation between lack of lighting and crime

rates.

Clean, sustainable, cost effective solution

Planet

•Steep learning curve, costs falling all the time

•Clean, renewable source of energy ( solar lighting

solutions emit 40 times less CO2 than incandescent

bulb of similar capacity)

•Dependence on scarce fossil fuels goes down

•ALS contributes 30% to ABS’s $5 billion

revenue (Based on lighting business

contribution for Philips company)

•Projected growth in current ALS business to

stay at 12% and profit growth to stay at 15%

ALS to contribute 30% to ABS and expected to grow at 12%

Assumptions

Profit of ALS stands at 241.91 million dollars in March 2010

Profit Loss Statement – Current Scenario

Income

In Million Dollars

Mar '09 Mar '10

12 Months12 Months

Sales Turnover 1233.25 1381.24

Net Sales 1233.25 1381.24

Other Income 77.31 86.59

Total Income 1310.56 1467.83

Expenditure

In Million Dollars

Mar '09 Mar '10

12 Months12 Months

Employee Cost 743.74 751.18

Other Manufacturing

Expenses73.58 89.77

Selling and Admin Expenses

128.53 129.82

Miscellaneous Expenses

53.75 50.16

Total Expenses 999.60 1020.92

Profit/Loss

In Million Dollars

Mar '09 Mar '10

12 Months12 Months

PBDIT 310.96 360.32

Interest 5.12 5.63

PBDT 305.84 354.69

Depreciation 61.06 67.17

Profit Before Tax 244.78 287.52

Extra-ordinary items

1.43 1.57

PBT (Post Extra-ord Items)

246.21 285.95

Tax 38.12 201.26

Reported Net Profit

208.10 241.91

Penetration levels of 200,000 households per year

Sales Targets

Supply of solar street lights to government

▪ Target of 4000 street lights across 50

villages over next 2 years

Solar lanterns to individuals based in villages

▪ Target of 200,000 households per year

Projected profit of 0.22 million USD/year from solar street lights

Solar Street Lights

Sales revenue (In INR) 50000000

Sales revenue (In dollars) 1111111.11

Sales revenue (In Million dollars) 1.11

Profit @ 20% Margin 0.22

Projected profit of 1.55 million USD/year from solar lantern

Solar Lantern

Sales revenue (In INR) 1000000000

Sales revenue (In dollars) 22222222.22

Sales revenue (In Million dollars) 22.22

Profit @ 7% Margin 1.55

Revenue growth YoY from 12% to 14.27%

Projected – Income/Expenditure - 2011

Profit & Loss account In Million Dollars

WITHOUT ADDITIONAL

INVESTMENTS

Expected Growth

SOLAR LIGHTING EXPANSION Expected Growth

Mar '09 Mar '10 Mar '11 Mar '11 12 Months 12 Months 12 Months 12 Months

Income

Sales Turnover 1233.25 1381.24 1546.99 1580.32 Net Sales 1233.25 1381.24 1546.99 1580.32 Other Income 77.31 86.59 96.98 96.98 Total Income 1310.56 1467.83 1643.97 12.00% 1677.30 14.27%

Expenditure

Employee Cost 743.74 751.18 841.32 Other Manufacturing Expenses 73.58 89.77 109.52

Selling and Admin Expenses 128.53 129.82 131.11 Miscellaneous Expenses 53.75 50.16 50.16 Total Expenses 999.60 1020.92 1132.11

Marginal profit growth to 15.64%

Projected – Profit/Loss - 2011

Profit & Loss

In Million DollarsWITHOUT

ADDITIONAL INVESTMENTS

Expected Growth

SOLAR LIGHTING

EXPANSION

Expected Growth

Mar '09 Mar '10 Mar '11 Mar '11 12 Months 12 Months 12 Months 12 Months

Mar '09 Mar '10 Mar '11 Mar '11 PBDIT 310.96 360.32 414.88 15.14% 416.66 15.64%Interest 5.12 5.63 6.20 6.20 PBDT 305.84 354.69 408.68 410.46 Depreciation 61.06 67.17 73.88 90.00 Profit Before Tax 244.78 287.52 334.80 320.46 Extra-ordinary items 1.43 1.57 1.73 1.73 PBT (Post Extra-ord Items) 246.21 285.95 333.07 318.73 Tax 38.12 44.04 51.29 49.08 Reported Net Profit 208.10 241.91 281.78 269.65

Marginal profit growth to 15.64%

Projected Return

Without Expansion With Solar Expansion

Assets 649.06 659.06

Sales 1546.99 1580.32

Profit 414.88 416.66

Capital 75.00 85.00

Ratios

Gross Profit Margin(%) 26.82% 26.37%

Asset Turnover Ratio 2.38 2.40

Return on Investment 63.92% 63.22%

References

Alternatives to Fuel-based Lighting in Rural Areas of Developing Countries

http://evanmills.lbl.gov/presentations/fuel_based_lightinggrocc.pdf

http://www.direc2010.gov.in/pdf/Off-grid%20Lighting%20in%20India.pdf

http://tvnz.co.nz/technology-news/solar-power-lighting-rural-india-3095795

http://www.theglobalist.com/rawmaterials/syndication/sample.htm

http://www.theenergycollective.com/robertrapier/47068/cleantech-

globalization-and-energy-independence

http://globalization-and-its-risks.wikischolars.columbia.edu/Chapter+VII

http://globalization-and-its-risks.wikischolars.columbia.edu/

Chapter+VII#cite_note-4

Thank You !