NMO S4 SPRINT ONE | BUSINESS CASE SCENARIO - 02
Submission BCS
The EV Effect
Submission Date & Time: 2021-11-28 00:54:16
Event Name: NMO S4 Sprint One - I Business Institute
Solution Submitted By: Arvind Kumar
Assignment Taken
Financing and Ownership DistributionCase Understanding
In the energy segment of our economy, there is much scope in the renewable energy which solar or photovoltaic converted energy and electricity are going to lead most of the market. This capacity can be utilised in the automobile sector which consists of 2 and 3 wheelers vehicles. Number of registered vehicles in India is 230 Million and segment is still on boom. Conversely this will make us more dependent on fossil fuel. But in recently concluded COP26 summit, India has made a target of getting 50% energy from renewable energy. So, this will also lead our electric vehicle market. General Problems related to finance for a new entrant: Risk is the main cause of financing challenges. Investment in EV is considered a riskier class to finance than an internal combustion engine vehicle. This is so as risk associated with EV producing companies are different from a normal Automobile Company. • Asset risk is the risk that is associated with the financing of a vehicle. It includes risks related to technology, policy, manufacturing, and resale. • Business model risk is the risk that is associated with the use of a vehicle. It includes risks related to customer profile, expected utilization, and operations and maintenance. We also don’t know our prototype will work in the market or be accepted by customers. • Govt is supporting mostly on part of customer to purchase this electric vehicle but less attention is being paid to motivate and incentivise manufacture to research in this area. Given above risks, it is very much difficult to on-board investor to put money in our EV producing business.BCS Solution Summary
Though we were lacking of fund, we are able to manage our finance including money contributed by us, raising money from investors and taking loan from banks. For working capital, we have chosen bank as our primary source. Another area of focus was to distribute ownership among investor and promoters who are doing other services for our business, this we have decided to do away with things mentioned in the attachment. This attachment contains owner and equity distribution. To get external investment we have prepared a fund raising proposal that we would all be presenting before institutional investors. Other area of finance we try to leverage govt subsidies for setting up unit and manufacturing EVs.Solution
Proposal for Fund Raising.
Proposal Summary (Executive Summary)
As we want to enter into electric vehicle (Two and Three Wheelers) manufacturing start-up. We are needy of approx. ₹ 5 crores. We will utilising this amount to manufacture (assembling) and marketing our produced electric Vehicles.
Organization Description and History
We, LHARA, are new comer in the market. We don’t have any experience of producing EVs in the past. But we do have experience with our 8 promoters—Two of which are mechanical engineers, one electrical engineer, 2 team members have left their marketing jobs from reputed automobile companies. Rest 3 of our promoter has completed their professional degree. These all young entrepreneurs want to start their start-up together. Our company will have based in Bangalore India.
Project Description (Program Narrative)
Our operational area would be of manufacturing and assembling of parts related to EV’s except manufacturing of Lithium Batteries, which we are to purchase these lithium batteries from industries leading suppliers like Euclion Energy Private Limited, Bharat Power Solutions etc. After assembling all the parts of EVs, we shall market these vehicles for penetrating our market.
Project Timeline/Budget Timeline
All the activities will be commencing even as fund is raised. And Below mentioned are the way in which all initial funds will be spent:
|
STARTUP EXPENSES |
||||
|
STARTUP EXPENSE DESCRIPTION |
TYPE |
BUDGET |
PADDING % |
TOTAL |
|
Web Development |
Essential |
₹ 25,000.00 |
15% |
₹ 28,750.00 |
|
Domain Name |
Essential |
₹ 648.00 |
10% |
₹ 712.80 |
|
Hosting |
Essential |
₹ 2,400.00 |
5% |
₹ 2,520.00 |
|
Internet Security |
Essential |
₹ 5,000.00 |
5% |
₹ 5,250.00 |
|
Advertising |
Essential |
₹ 5,000.00 |
15% |
₹ 5,750.00 |
|
Digital Marketing Services |
Essential |
₹ 2,40,000.00 |
10% |
₹ 2,64,000.00 |
|
Office Cabin Rent (4 Cabin) |
Essential |
₹ 1,44,000.00 |
10% |
₹ 1,58,400.00 |
|
Cost of Producing hybrid Electric Vehicle |
|
|
|
|
|
Two Wheeler Scooty per unit |
Essential |
₹ 65,000.00 |
10% |
₹ 71,500.00 |
|
Two Wheeler Bike per unit |
Essential |
₹ 1,00,000.00 |
10% |
₹ 1,10,000.00 |
|
Market Research |
Essential |
₹ 5,000.00 |
10% |
₹ 5,500.00 |
|
Employee's Salary |
Essential |
₹ 24,00,000.00 |
10% |
₹ 26,40,000.00 |
|
Factory Rent (30000 sq. ft.) |
Essential |
₹ 96,00,000.00 |
10% |
₹ 1,05,60,000.00 |
|
Plant & Equipment's |
Essential |
₹ 1,00,00,000.00 |
10% |
₹ 1,10,00,000.00 |
|
Working Capital |
Essential |
₹ 10,00,000.00 |
10% |
₹ 1,33,58,400.00 |
|
|
|
|
Total |
₹ ₹ 3,82,10,782.80 |
As for timeline of the budget, it would take us around 7 months to set up and start assembling or manufacturing our electric vehicles.
Budget
|
Fund Raising |
||||
|
Sr. |
Expenditure Category |
Funds from other sources (Yearly) |
Source |
Total |
|
1 |
Working Capital |
₹ 1,33,58,400.00 |
Bank overdraft/ Cash Credit |
₹ 1,33,58,400.00 |
|
2 |
Plant & Machinery |
₹ 1,10,00,000.00 |
Bank Loan |
₹ 1,10,00,000.00 |
|
3 |
Other Expenses |
₹ 1,38,52,382.80 |
Equity |
₹ 1,38,52,382.80 |
Ownership Distribution:
For owner or Equity Dividation what we have decided is that as we are team of 8 people who are also Promoters of our company, we will issue equity as per capital contributed by us. Apart from this one of our marketing department person is to be acting CEO also, he will be entitled for Sweat Equity Shares, which are non-monetary benefit given to employee and owner of the company for their unpaid or foregoing salary—in our case ₹25000 per month salary--initially in order to set up a company. Rest of 7 of us will also get sweat equity share as compensation for our services. Later on we all can dilute our sharing holding and get ourselves rewarded for the same.
Equity share capital Distribution Table:
Total Equity Share Capital 100%
|
Category |
Holding Percentage |
Description |
|
Promoters (Team of 8 persons) |
75% |
Based on our contributed Capital, our services to set up company and being acting as Promoters |
|
Institutional Investor |
25% |
This includes International Angel Investor, Domestic Angel Investors, Private Equity Investors & Venture Capitalist. This will also be based on capital provided by each type of investor. |
Conclusion
Therefore, the scope of India’s EV market growth depends on availability of capital for original equipment manufacturers, battery manufacturer, Research & Development from battery producer and charge point operators as well as improvements to infrastructure and multiple options for consumers.Attached File Details
Video
https://youtu.be/XOjSRuCFunQComments
Article Type: Business Case Scenario, Case Study Solution Submission
Business Case Detail
Title: NMO S4 SPRINT ONE | BUSINESS CASE SCENARIO - 02
Type: Case Study
Stream: Management
Participant
I Business Institute Arvind Kumar is curious student with flair of solving practical problems and be updated of what is happen in the world. He has 11 month of experience. In his free time, he reads novels and play cricket.
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