Quarter Final S4 | Business Case Study/Scenario | New Age Air Quality Solution

Manoj Singh and Parth Mittal are college friends. Both  of them completed their B.Tech from Bengaluru (Karnataka).

After completion of their respective studies, Manoj started to work with an MNC in Gurgaon as an Air Quality Analyst, while Parth was employed with a shipping company, named, Patliputra Port Trust in Kolkata.

They both share a prized desire of improving the air quality of the atmosphere/environment.

Manoj who was closely associated with the R&D of his Air Quality company, had developed a concept of a hybrid product, which can monitor, manage and suggest the combinations to improve the air quality. This concept, which was developed by Manoj was far superior, compared to existing air purifiers, available in the market, which has limited scope of purification. Manoj used a hybrid concept, which means the system uses a combination of Natural Plants and Machines.

Finally, one day both Manoj and Parth resigned from their respective jobs and formed a Private Limited Company in Bengaluru, named, PM Clean Air Solutions Private Limited (PMCASPL). Both friends were Directors in the company with 50% equity stake with each of them.

The Authorised capital of the company was Rs. 2,00,000/- (Rupees Two Lakhs) only. While initial Paid up capital was Rs. 1,00,000/- (Rupees One Lakhs) only. Both Directors introduced Rs. 50,000/- each as initial capital in the company.

After few months of company formation, both Directors, further invested Rs. 5,00,000/- each in the company.

They then start with research to understand how different plants helps in absorbing bad pollutants from the atmosphere and helps in improving the atmosphere naturally.

Next 9 months involved rigorous hard work by both directors. These months were spent in further improving the concept, already developed by Manoj earlier. After a lot of struggle they both reach a stage when there concept was now ready to take shape of a final hybrid product.

The final product developed, consisted of 3 separate units of which two were physical units and one was software, which were all synced as one single device.

The units were known as:

• Air Sense: This physical unit will sense the air quality and will pass the data to the next unit, i.e. AQMS (Air Quality Management System). Air Sense is a 5 inch x 5 inch device which can be installed easily anywhere in a closed wall premises. Each Air sense can currently sense for an area of 1900 sq. ft. Multiple Air Sense device can be installed in a premise, depending upon the size of the location. Each Air Sense will pass data to the AQMS which is centralised server.

 

• Air Quality Management System (AQMS): This is the software unit. AQMS will analyse data received from Air Sense and will send suggestion(s) to users on how to effectively use a mix of Air Loop/purifier and Natural Plants. AQMS is a centralised server installed in a premises.

 

• Air Loop: This is the final physical unit, which acts as a purifier. Air Loop is 48 inch x 24 inch device. Each Air Loop can purify a closed wall area of 1500 sq. ft.

A total of 2 proto types were developed.

 

Cost bifurcation of Proto types

Items	Unit Cost (Rs.)
Air Sense	15,000/- (can be reduced to 70% on bulk production)
Air Loop	8000/- (can be reduced to 55% on bulk production)

 

AQMS, cost of development: Rs. 1,20,00,000/-

AQMS software will attract regular updates and maintenances expenses from time to time.

AQMS unit will not attract per unit production cost, like the other physical units (Air Sense / Air Loop).

 

Other overhead expenses that the company is currently incurring:

Heads	Monthly Cost (Rs.)	Yearly Cost (Rs.)
Salary of two Software Developer	150000	18,00,000
Salary of Web Designer	35000	4,20,000
Salary of Mobile App developer	80,000	9,60,000
Rent of Premises (Maximum seating capacity is for 10 people currently)	25,000	3,00,000
Salary of two Field Executives*	30,000	3,60,000
Two Directors Salary	1,00,000	12,00,000
TOTAL COST	4,20,000	50,40,000

 

*Salary of Field Executives: The 2 field executives were under management trainee in the company. Their training is now completed and they have been offered full time employment in the company with revised salary package.

Their revised salary for both field executives now stands at: Rs. 40,000 pm. each

PMCASPL decided to approach angel investors who would help them achieve their dream by contributing towards Capital required to set up the plant. After meeting and discussions with various investors, SAIF capital agreed to invest INR 10 Cr in their project for a stake of 5% in equity.

PMCASPL also visited the famous television programme for investment to share the idea of their project. The judges/host appreciated their project a lot and was ready to invest INR 10Cr. The distribution of the total amount was INR 5Cr towards capital contribution for a dilution of 5% in equity and INR 5Cr as a Term Loan for a period of 3 years carrying ROI @12% p.a

PMCASPL has hired your company as a consulting firm with the aim of providing valuable insightful inputs.

PMCASPL has allocated total budget of INR 10 cr. for the financial year 2022-23.

The budget will include:

• Setting up of a new production facility
• Total Marketing expenses
• Total Operational expenses
• Consultancy expenses of Rs. 5,00,000/- pm (Your consultancy firm has bagged this prestigious offer)