Proposing the financial solutions for the SELCO India

Assignment Taken

To propose the solution regarding the financing of the organization with three broad objectives namely 1. Sources of Inflow 2. Sources of Outflow 3. Departmental Budgets and time line

Case Understanding

SELCO India is a social enterprise headquartered in Bangalore that offers solar-powered solutions to India's poor citizens for their needs. The core tenet and mission of SELCO is a very profound notion that by empowering the poor to become productive individuals, their economic circumstances can be significantly improved. One of the most significant challenges has been their lack of access to clean and cost-effective energy sources. Even in today's time, a majority of the rural population depends on ineffective sources of energy. SELCO made repeated efforts to address the issue by providing them access to clean and pollution-free solar energy. However, it becomes an economically unviable choice given the typical income of a rural household. After facing financial losses in the initial years, Mr. Harish Hande was able to restructure the business with the aid of the International Finance Corporation (IFC), the World Bank's commercial finance division in 2008. SELCO India continued to be a for-profit company, but Mr. Hande was able to find new investors who were more supportive of its objectives. Additionally, Mr. Hande was able to maintain his sales and service business, including its core of highly driven workers. Given India's diverse population, where 40 crore members of the low-income category are still unable to avail benefits of accessible and sustainable energy solutions, SELCO India needs to expand its reach. This gap necessitates that SELCO India's services be expanded and scaled up to provide the advantages of solar energy to more people. Without compromising its mission to serve India's underprivileged population, SELCO seeks to expand its business. Hence to achieve the proclaimed objective and the other expense to fund the business, we need to prepare a perfect solution with embeddings of downturn risk and managing of the inflows and the outflows of the funds.

BCS Solution Summary

We have considered to resolve the financial parameter of the scenario by inspecting 3 views that are Large Outflow of cash, small outflow of the cash and the only solution to bring the inflow to the company. We have categorised them in following Headings: C. Funds to cater the untapped 40 crore members to increase the customer base (Large Outflow) (Focused Group Discussion) B. Scheduled arrangement for the outflow without disruption (Regular Outflows) (Real World Approach) A. Solution to the Monetary Inflows for the company (Inflow) (PACADI Approach) We have tried to approach the entire perspective in different model to get a broad perspective and also recommended our suggestion for the same

Solution

The scenario demands three major objectives to be analysed in detail to get the proper functioning of the department that are:

C. Funds to cater the untapped 40 crore members to increase the customer base (Large Outflow) (Focused Group Discussion)

B. Scheduled arrangement for the outflow without disruption (Regular Outflows) (Real World Approach)

A. Solution to the Monetary Inflows for the company (Inflow) (PACADI Approach)

Let us approach in a reverse chronological order by first determining the cost of catering new participant for the process.

C. Funds to cater the untapped 40 crore members to increase the customer base

We approached this with the help of a focused group discussion trying to resolute what can be the target audience and the estimated time frame. With the brain storming session dwelling more to cater all the potential clients but with the financial constraints from my department the final count was achieved. We propose to allocate ₹ 2,00,00,000 to the marketing team for the tenure of 10 years of brand equity growth. With a favoured conversion rated of 15% we can achieve a target of 1.2 million clientele for the tenure of 5 years. The detailed breakdown for the marketing expense is listed below:

Serial No	Particulars	Budget
1	Advertising	6 million
2	Public Relation	1 million
3	Personal selling	8 million
4	Promotion and Post sale service	4 million
5	Buffer	1 million

With the huge budget of 20 million to the marketing team the estimation of the revenue seems to rise as the time progress. Also, the territorial expansion is now suggested to enhance the states but to explore the untapped area in the region. New proposed area in this region is as follow:
 

1. Bihar: Gaya, Patna, Chapra, Bhagalpur, Darbhanga
2. Kerala: Kochi, Pallakkad, Kozhikode
3. Maharashtra: Nagpur, Mahabaleshwar, Kohlapur
4. TamilNadu: Coimbatore, Thanjavur, Salem, Kanchipuram, Vellore
5. Andhra Pradesh: Nellore, Guntur, Vijaywada, Warangal

The following are the reason of selecting these areas specifically:

• The developing areas of the states
• Have small scale industries which supplies good to other larger organisations
• Willingness of the household to earn extra revenue

The HR team expense per year is ₹ 30,00,000

The detail breakup of the following is given below: Training cost of 10,00,000 and compensation of 20,00,000

With the Operational expense sorted now let us dwell down to the product portfolio and their expenses.
B. Scheduled arrangement for the outflow without disruption (Regular Outflows)

Let us first look at the present solutions being offered and the price of market for the same

Name of the Equipment’s	Cost
Solar Cooker	₹6500
Solar Stove	₹8500
Solar Powered Refrigerators	₹50000
Solar Mobile Charger	₹400
Solar Spice grinding Machine	₹35000
Solar Boats for coastal region	₹55000
Solar Atta Chakki	₹30000
Solar Powered Fodder cutting Machine	₹18000
Solar tile Cutter	₹3500
Solar Powered Axe	₹4000
Solar Food Warmer	₹20000
Solar Cooler	₹7500
Solar ATM	₹275000

 

Sighting at the present portfolio one of the most important parts is the planning of the disbursement schedules. The issue with the first proposal in first proposal out method is that the accounting for small transaction won’t be feasible. Hence looking at the market solutions available there are 2 solutions of disbursing the loans:
1. Minimum funding Amount Buckets: In this method we standardise a reasonable size of advances that comes in frequent time to us and then disburse them at a single point. This procedure is followed in banking system and this saves manual error as the confirmation is done for a small period of time

2. Disburse at particular time in Day: This works as the entire funding disbursement is done at a particular time in the day and any other application after the allocated time will be considered for the next disbursement cycle only.

From our groups perspective we would recommend to work with the Disbursement with particular time in day strategy as with our prior experience with unorganised sector we learned that the trust is key in their world. Hence with this strategy we can assure them that the disbursement would be at certain point and the funds can be collected anytime later than that.

The second perspective for this is the funding disbursing schedule. For this we suggest that the funding now must be differentiated in three products i.e., Small, Medium and Large based on the tenure the operation of the project will begin to generate cash flow. Hence, we would be having larger control over the construction of the project.

1. Solution to the Monetary Inflows for the company (Inflow)

Let us approach the case with PACADI approach signifying
P- Problem
A- Alternatives
C- Criteria
A- Analyse
D- Decision
I- Implementation

Problem: How can we get the monetary inflows for such an unsecured project

Alternatives: The various project financing solution that can be used

1. Unsecured Debenture
2. Convertible debenture (Rights of the project)
3. Fixed Return Bonds

The funds will be issue by categorising the risk of the projects in one budget and then floating the returns and risk components for the same fund. The implementation will be executed in the same funds’ brackets only to safe the stakeholder interest as well. Apart from the Retail and fund investor the schemes can be matched up with the upcoming government projects and the pitching can be done for the funding through them as well

The schedule shall be decided on the cashflow estimation of the project and the payback period should be defined for the project while lending the funding.

Conclusion

The business model does not allow to have a single fit solution to all the projects as the requirement of all will be different. Hence, we propose to raise funding under three buckets categorising on the basis of the risk and then lending this fund to various project in the same risk categorisation and earn the difference in the profit as the revenue for the firm. Additionally the firm must look for the government project funding that have synergies with our project.

Attached File Details

View Attachment file (Finance.pptx)

Video

https://youtu.be/15KBMPNgML8