Annual Operating Plan of Electro Motors Pvt. Ltd. for FY 2020-21

Assignment Taken

Annual operating plan for Financial Year 2020-21

Case Understanding

The renewable energy in the automobile industry has a great potential in India. However, the market share of electrical vehicles is still low in the automobile sector. The Government of India is aiming to promote electrical vehicle usage. Hence, by 2030, government aims to target for adoption of 30% EVs. Our team of 8 has decided to incorporate a company with a share capital of Rs. 46 lakhs to enter into automobile business, regarding which a prototype electrical vehicle has already been designed and created by the engineers of our team as a college project during their engineering courses. The research work has already been performed by the company. The company can also arrange a loan of Rs. 60 lakhs on 16% per annum fixed interest, if needed.

BCS Solution Summary

The team of 8 members has decided to incorporate a company named Electro Motors Pvt. Ltd to sell electrical vehicle. The patent for the vehicle shall be registered. The company plans to outsource the manufacture of the electrical vehicles due to shortage of funds. The members have invested Rs. 46 lakhs, and shall borrow Rs. 6 lakhs 50 thousands in the month of February, 2021 to meet the expenditures of the incorporation and in the year of incorporation. The vehicle shall not be available for sale in the first year of operation, hence, the company shall focus its efforts on the market survey, determination of target market and marketing strategies during the year.

Solution

To commence the business of e-vehicles, our team has decided to incorporate the company named Electro Motors Pvt. Ltd. having its registered office in Bangalore.

The company’s vision is to “create neoteric electric vehicles at affordable prices offering the best quality”, while its mission is to “be a value provider in the emergence of renewable energy in the automobile sector by bringing neoteric electric vehicles to market as soon as possible”.

Overview of the Operating Plan of the Company for the Financial Year 2020-21:

For the first six months (April – September, 2020):

The Company, after registration, shall file for patent for the prototyped vehicle prepared by the engineers of the team in the month of April, 2020. The patent filing usually takes 3-5 months. Therefore, the company may be able to have its patent registered by the month of June – August, 2020.

While waiting for the registration of the patent, during the months of April to June, 2020, the surveys and market research shall be undertaken with regards to the company’s vehicle to identify the niche market for the vehicle proposed to be sold. The survey can also assist in analysing and suggesting improvements for the product design as per the requirements and consumer’s preference.

Owing to the fact that the initial funds available with the company aren’t sufficient to set up the factory for manufacturing the electrical vehicle in-house, hence, the company has decided to outsource the production of automobile parts as well as the assembly of such parts. Therefore, the manufacturers of various automobile parts will be approached to ask for the quotations for manufacturing the parts of the prototyped vehicle.

For the next six months (October, 2020 – March, 2021):

The patent of the prototyped vehicle would have been registered by the beginning of the second half of the Financial Year 2020-2021 and, hence, the company will be able to share the exact design specifications to receive the final quote from the manufacturer. All the quotations received shall, then, be analysed with respect to the cost, quality and other relevant considerations. Following the screening of all the quotations, the best quotation in every respect, shall be finalised and the contract shall be signed with the manufacturer by the year end, so, the manufacturing process can commence in the next year. The company shall also raise the loan amount available from the bank in the next year for signing the contracts for outsourcing. Further, the company shall also try to find angel investors to invest in the company to enable the smooth working of the company.

The marketing of the vehicle shall also be commenced after the patent has been registered while the contracts are being signed with the manufacturers. The company shall identify the target market for its vehicle. The marketing strategies, then, shall be decided keeping the target market in focus. The company shall also enable pre-ordering of the vehicle by the customer. The same can also be promoted by providing early order discounts to capture the market share and establish the customer base.

 

Projected Financial Plan for the Financial Year 2020-21:

Funds Available with the Company:

Equity Share Capital of Rs. 46 Lakhs: All the members of the team have contributed Rs. 46 lakhs, against which equity shares of the company have been issued.

Loan of Rs. 60 Lakhs: The Company can also arrange a loan of Rs. 60 lakhs at the rate of 16%, if the need arises. The company shall raise the loan of Rs. 6,50,000 in the month of February, 2021 to meet the expenses of the company in the year of its incorporation.

Preliminary Expenses for the Company:

Company Registration Charges: To start off the operations, the team need to register the company with the Ministry of Corporate Affairs. The registration of companies and application of other required documents (like PAN for company, DSC for directors, etc.) will cost around Rs. 40,000 to Rs. 70,000.

Patent Fees: As soon as the company is registered, it shall file for patent for the prototype electric vehicle prepared. The patent fees varies from Rs. 20,000 to Rs. 50,000.

Operating Monthly Expenses of the Company:

Rent of Workstation: The company has decided to acquire co-working space for 8 people at a monthly rent of Rs. 3 thousands per workstation. Hence, the total rent for the FY 20-21 shall amount to Rs. 2 lakhs 88 thousands.

Salary of the Members: The member of the company have decided to withdraw Rs. 50 thousands each every month. Therefore, the salary expense for the FY 20-21 shall be Rs. 48 lakhs.

Financial Expenses: The Company has raised the loan of Rs. 6 lakhs 50 thousands at the rate of 16% in the month of February, 2021. The interest expense on the same for two months shall be Rs. 17,333 for the financial year 2020-21.

Attached Projected Financial Profit & Loss for the FY 2020-21 and Cash Budget for the FY 2020-21 

(Note: All the figures mentioned in the budget are in Rs.)

Conclusion

The company is entering the electric vehicle sector, which is a new and growing market in India. The company is trying to grab the first move advantage in India. Though the company will not be able to manufacture and earn revenue in its first year, but the members are working to bring the product in the market. The company intends to capture the market with its innovative design and affordable prices. The company shall rely on the share capital introduced by the members, loan raised from the bank and further capital raised from angel investors and venture capitalists in the coming years.

Attached File Details

View Attachment file (Elector Motor Pvt Ltd - Budget.pdf)