Business Proposal

CRESL
(Pay as you go model)

Interim Report
Contents
Executive summary............................................................................................................................................................................... 3
The Market ....................................................................................................................................................................................... 3
The Products ..................................................................................................................................................................................... 3
Management .................................................................................................................................................................................... 3
Objectives ......................................................................................................................................................................................... 4
Mission ............................................................................................................................................................................................. 4
Keys to Success ................................................................................................................................................................................. 4
Business concept .................................................................................................................................................................................. 4
Why is solar energy more important in India? ................................................................................................................................. 4
Product and services ............................................................................................................................................................................ 7
Solar power solutions ....................................................................................................................................................................... 7
Products............................................................................................................................................................................................ 8
Start-up Summary. ........................................................................................................................................................................... 8
Market .............................................................................................................................................................................................. 8
Marketing Plan ................................................................................................................................................................................... 10
Product : ......................................................................................................................................................................................... 10
Price : .............................................................................................................................................................................................. 10
Place : ............................................................................................................................................................................................. 10
Promotion : ..................................................................................................................................................................................... 10
Marketing Plan Process .................................................................................................................................................................. 11
Human resources ................................................................................................................................................................................ 12
Team ............................................................................................................................................................................................... 12
Organizational Structure ............................................................................................................................................................ 12
Pay Structure .............................................................................................................................................................................. 12
Other Benefits............................................................................................................................................................................. 13
Time Period for Payment ............................................................................................................................................................ 13
Permissible deductions ............................................................................................................................................................... 13
RISK COVERED UNDER SOCIAL SECURITY LAWS IN INDIA .......................................................................................................... 14
Financial Plan & Analysis: ................................................................................................................................................................... 14
Revenue Projections ....................................................................................................................................................................... 15
Break Even Analysis ........................................................................................................................................................................ 16

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Strategy Overview .............................................................................................................................................................................. 18
Vision .............................................................................................................................................................................................. 18
Competitor Analysis ........................................................................................................................................................................ 18
Strategy .......................................................................................................................................................................................... 20
Risk Analysis ....................................................................................................................................................................................... 22
Market Risk / Competitive Risk................................................................................................................................................... 22
Technology Risk .......................................................................................................................................................................... 22
Execution Risk ............................................................................................................................................................................. 22
Capitalization Risk ...................................................................................................................................................................... 23

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Executive summary

CRESL is a start-up company registered in Kerala as a private limited company, offering solar power
solutions.

The Market

The Indian solar energy sector has been growing rapidly, in the past few years, majorly due to
Government’s initiatives such as tax exemptions and subsidies. Due to technical potential of 5,000
trillion kWh per year and minimum operating cost, Solar Power is considered the best suited energy
source for India. Today the Solar power, has an installed capacity of 9.84 MW which is about less than
0.1 per cent of the total installed renewable energy of India’s~ currently total installed renewable energy
stands at 13,242.41 MW as per MNRE.
India's power sector has a total installed capacity of approximately 1,46,753 Megawatt (MW) of which
54% is coal-based, 25% hydro, 8% is renewable’s and the balance is the gas and nuclear-based. Power
shortages are estimated at about 11% of total energy and 15% of peak capacity requirements which is
likely to increase in the coming years.

The Products

CRESL, will supply, install and operate and maintain solar power systems . The company is offering Pay
as you go model( charges per Unit usage)

Management

CRESL is owned by few young professionals with rich experience in Operations, Banking, Engineering
and marketing field

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 Objectives

 To become the market leader of solar power solutions

 To quickly gain market penetration within the first three years.
 To develop a customer-centric organization based on cutting edge technology.

Mission

CRESLs mission is to become market leader of solar power solutions offering the highest quality
products and customer service while saving customers money and making positive contributions to our
environment.

Keys to Success

CRESL has identified three keys to success that help the company grow into a mature market leader:

 Providing cutting edge, reliable, and simple-to-install and maintain solar power systems.
 Broadening the market of solar power into a mainstream energy source.
 Designing and implementing strict financial controls

Business concept
India is density populated and rich in solar energy. Solar energy is more important in India because most
of the days (300-330 days per year) in India is Sunny. On only land area, The solar power reception is
5000 per watt-hours per year (Wh/yr). The daily average solar energy incident over India varies from 4
to 7 kWh/m2 with about 1500–2000 sunshine hours per year (depending upon location), which is far
more than current total energy consumption. India has a great potential to generate electricity from solar
energy and the Country is on course to emerge as a solar energy hub. The techno-commercial potential
of photo-voltaic in India is enormous. Solar Energy is attractive because it is abundant and offers a
solution to fossil fuel emissions and global climate change.
Why is solar energy more important in India?
The fossil fuels like coal, oil and natural gas cannot remain the dominant sources of energy forever.
Whatever the precise timetable for their depletion, oil and gas supplies will not keep up with growing
energy demands. Coal is available in abundance, but its use exacerbates air and water pollution
problems, and coal contributes even more substantially than the other fossil fuels to the build-up of
carbon dioxide in the atmosphere. For a long-term, sustainable energy source, solar power offers an
:Business Plan Project (BPP) 2013-14. Page 4
 attractive alternative energy in India. It is environmentally clean, and its energy is transmitted from the
sun to the Earth free of charge and there is no out come any toxic gases.

Kerala :
Kerala is a state which constitutes Sunny shoreline, caressed by perpetual bluish waves that adorn the

:Business Plan Project (BPP) 2013-14. Page 5

 endless beaches, with awe come green groves of coconuts that paint a shying borderline of natural
harmony. Kerala is a place of high lightning incidence when compared to most of the other parts in India
because of its weather patterns and the location of the Western Ghats. Higher population density and
vegetation density result in more casualties. Lack of awareness also aggravates the situation. The
average temperature in Kerala is 27.0 °C (81 °F). The temperature in Kerala normally ranges from 28°
to 32° C (82° to 90° F) on the plains but drops to about 20° C (68° F) in the highlands. Temperature
during Winter in Kerala is maximum of 28°C and minimum of 18°C. Avg Summer starts in February and
continues till May, the temperature during Summer in Kerala is maximum of 36°C and minimum : 32°C.
The Average temperature during summer and winter in Kerala is absolutely fits to use Solar Energy.

:Business Plan Project (BPP) 2013-14. Page 6

Product and services

Solar power solutions

We are targeting medium sized solar power installations (10KW – 100 KW) for, Shops and
Establishments, Corporate offices, Banks, Shopping mall where the day time use is high. Huge initial cost
of installation and doubts with ROI is a major roadblock in installing solar power. But the rising cost of
commercial electricity and the higher rate of electric usage about 1000 Units consumption is making the
solar energy solution as a viable alternative not only for the diesel generators as a backup, but also for
the main power source. The other challenge for the initial investment can be resolved through our
innovative pay as you go model, and tie up with financial institutions. We will work out a solution which
can address both the concerns of the initial cash outflow from the users and the risks involved in the pay
back of loan for the Banks.

:Business Plan Project (BPP) 2013-14. Page 7

 Products
CRESL offers supply, install, operate and maintain solar power solution to Shops and Establishments,
Corporate offices, Banks, Shopping mall with a power requirement of 10 to 100kw and the cost will be
charged against the actual usage. The rate will be at par with the GRID power. In future the company is
planning to start manufacture PV panels in its own facility so the cost can further be reduced

Start-up Summary.
CRESL is planning to rent out a office premises in the outskirt of cochin city. This office will function as
the main office for all marketing, operational activities. The office will be set up necessary infrastructure,
Testing and Maintenance facilities and equipment.

Market
Consumers (especially younger generation customers) do show a preference for energy produced from
renewable energy sources but invariably fail to purchase renewable energy in sizeable numbers.
Initial research done over the last 1 month helped us to identify the barriers to solar purchases, address
consumer concerns, and look at ways to provide solar power plant solutions with guidelines that should
be integrated into their overall marketing approach.

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 Based on initial discussions, there are four primary barriers to solar power plant adoption, and it is
mandatory that all these key barriers are addressed to increase adoption and accelerate the
implementation in the Kerala market.
Cost. Consumers are worried on the huge up-front costs and lengthy payback periods which are
deterring them from installing solar power plant at their apartments/offices.
Reliability. Concerns about its performances and capabilities on the reliability of solar panel
technologies. There is also some perception in the corporate industry that solar might not power the total
energy needs of the building/office.
Complexity. The time consuming and complex nature of purchasing and installing solar energy systems
discourages potential customers.
Inertia. The financial complexity and the perception that it is a long decision-making process to setup a
solar power plant results in some consumer inertia.
Though the consumers do understand the environmental benefits, these are not persuasive enough to
increase or accelerate adoption of solar power plants in commercial buildings/offices/apartments.
Therefore, the marketing program should create a connection with consumers through marketing
messages that would enhance interest and lead to further inquiry.
Marketing messages that are able to connect on a financial or value level are the ones which would
succeed.
Some of the steps to be taken to help identify the market/segment which needs to be focused are:
Market Segmentation by 3 categories:
 Geographic
 Demographic
 Psychographic
By understanding the needs of segment we can tailor the marketing mix to deliver what the consumer
values. Each segment will offer growth and profit opportunities, so the trick is to deliver the best offer to
the best segment(apartment complexes, commercial buildings, offices, etc.).

The goal of the market research would be to help identify the following:
- Products/Services and the consumer fit
- Consumer Profiles

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 - Consumer Characteristics
- Consumer needs and wants

Marketing Plan
The classic elements of marketing – the 4 P’s: Product, Price, Place, Promotion – offer a useful matrix to
assess the solar power plant program. Solar program initiatives should address each of the 4 P’s.
Product : We can evaluate the Product from the perspective of consumers’ rational and emotional attitudes
towards solar technology. These attitudes do play a large role in the purchase cycle. Consumer reaction to
solar technology (e.g., price, reliability, quality issues) helps identify the opportunities and the barriers.
Price : This is one of the biggest barriers for solar power plant adoption in the marketplace. The government
is helping to some extent in financing of such plants, and helps overcome the consumer price concerns.
Currently, financing options are increasing the access to solar power and enabling it to new groups of
consumers.
Place : Place through which the solar is sold, also is an area where solar programs have an important role
through their work with installers, developers, and suppliers. Building a strong service/supplier network is
critical in keeping up with rising demand; ensuring that consumers can easily find an engineer/installer to
setup/fix the solar plant within the shortest duration.
Promotion : This should be a primary focus so that it can increase the visibility of solar installations and
broaden the appeal. Using communications and promotional strategies to favorably present solar in the
marketplace and ensuring that the right messages are presented to the public will help build a stronger
market for solar technologies.
Through the lens of Product, Price, Place and Promotion, it is very critical to better understand the
customer through market research, have focused efforts on specific target customer bases (customer
segmentation), and address key messages to reach those audiences effectively and efficiently
(communications).
Improving the process of purchasing solar will not alone make a difference in overall sales if the price/value
equation has not been addressed. If consumers are not confident about the reliability of solar, improved
pricing alone will not matter. All elements must work together to motivate the target customer to take action.
Therefore, the development of a solar marketing plan must start with the consumer in mind.

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Conducting both quantitative and qualitative studies of these customer segments provided valuable insights
to help shape the development of smart marketing initiatives. While there is much to learn from these studies,
the key findings point to several essential elements for an effective solar marketing plan.
Based on these studies, the remainder of this report will
1) identify major market barriers,
2) detail smart marketing strategies to address each barrier, and
3) recommend action steps to implement a successful marketing plan.

Marketing Plan Process

Marketing Monitor and

Customer Barriers & Marketing Develop
Programs/Tac Evaluate
Research Opportunities Goals Budget
tics (4Ps) Sales/Results

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Human resources

Team
 The management would comprise 2 Managers- Marketing Manager and an Electric Supervisor.
 There is one Assistant marketing Manager, and one accountant.
 There are two highly skilled electricians.
 Initially Office will be in Cochin be in Cochin.

Organizational Structure

ELECTRICIAN
ELECTRIC
SUPERVISOR
Managing ELECTRICIAN
Director
MARKETING FIELD
MANAGER MANAGER

Pay Structure
 Managing Director-Rs.40000/- per month + profit share
 Marketing Manager-Rs.20000/- (Other benefits by way of performance linked benefits to the extent
of Rs.1000/- per kilo watt sold over and above the monthly target.)
 The Assistant Manager (Marketing) will be paid a monthly salary of Rs.12000/- (Other benefits by
way of performance linked benefits to the extent of Rs.1000/- per kilo watt sold over and above the
monthly target.)

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  The electricians will be paid Rs.10000/- consolidated (Overtime for a maximum of 40 hours per
month allowed) .
 Accountant will be paid a salary of Rs.8000/-.

Other Benefits
 CUSTOMARY BONUS
 GROUP LIFE INSURANCE
 CONVEYANCE CHARGES

Time Period for Payment

 Before expiry of 7th day after the last day of wage period

 Incase of termination of employment (including Closure)

 before the expiry of the second working day from the day on which employment is
terminated.

 Mode of Payment

o Will be paid by cheque or by crediting the wage in the bank account .

Permissible deductions
 Deductions for absence from duty

 Deduction for damage to or loss of goods expressly entrusted to the person for
custody

 Recovery of loans made from any fund

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 RISK COVERED UNDER SOCIAL SECURITY LAWS IN INDIA(*All covers to be applicable only after one year)

Risk Laws under which it is covered

Employees' Compensation Act, 1923
Employees' State Insurance Act, 1948
Employees' Provident Funds and Miscellaneous
Provisions Act, 1952
Disablement Payment of Gratuity Act, 1972

Employees' Compensation Act, 1923

Employees' State Insurance Act, 1948

Employees' Provident Funds and Miscellaneous

Provisions Act, 1952
Death Payment of Gratuity Act, 1972
Maternity Benefit Act, 1952
Maternity Employees' State Insurance Act, 1948
Employees' Provident Funds and Miscellaneous
Provisions Act, 1952
Old Age Payment of Gratuity Act, 1972
Industrial Disputes Act, 1947
Payment of Gratuity Act, 1972
Employees' Provident Funds and Miscellaneous
Termination of Service Provisions Act, 1952
Employees' State Insurance Act, 1948
Sickness Maternity Benefit Act, 1952

Financial Plan & Analysis:

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 Revenue Projections

CRESL
Revenue Projections
Years 1 to 5
(Rs)
Year 1 Year 2 Year 3 Year 4 Year 5
Product A
Number of Units 1,12,500 3,37,500 5,62,500 7,87,500 10,12,500
Price per unit 9 9 9 9 9
Total (Rs.) 10,12,500 30,37,500 50,62,500 70,87,500 91,12,500
Service B
Number of Customers 50 50 100 150 200
Fee per Customer 0 5,000 5,000 5,000 5,000
Total (Rs.) 0 2,50,000 5,00,000 7,50,000 10,00,000

Net Revenue 10,12,500 32,87,500 55,62,500 78,37,500 1,01,12,500

Revenues
by
Months &
Quarters
(Rs)
Months Year 1 Year 2 Year 3 Year 4 Year 5
Month 1 0 1,64,375 2,78,125 3,91,875 5,05,625
Month 2 0 1,64,375 2,78,125 3,91,875 5,05,625
Month 3 0 2,30,125 3,89,375 5,48,625 7,07,875
Total 1st Quarter 0 5,58,875 9,45,625 13,32,375 17,19,125
Month 4 0 1,97,250 3,33,750 4,70,250 6,06,750
Month 5 0 2,30,125 3,89,375 5,48,625 7,07,875
Month 6 0 2,30,125 3,89,375 5,48,625 7,07,875
Total 2nd Quarter 0 6,57,500 11,12,500 15,67,500 20,22,500
Month 7 1,01,250 2,63,000 4,45,000 6,27,000 8,09,000
Month 8 1,51,875 3,28,750 5,56,250 7,83,750 10,11,250
Month 9 2,02,500 3,28,750 5,56,250 7,83,750 10,11,250
Total 3rd Quarter 4,55,625 9,20,500 15,57,500 21,94,500 28,31,500
Month 10 1,51,875 3,61,625 6,11,875 8,62,125 11,12,375
Month 11 1,82,250 3,94,500 6,67,500 9,40,500 12,13,500
Month 12 2,22,750 3,94,500 6,67,500 9,40,500 12,13,500
Total 4th Quarter 5,56,875 11,50,625 19,46,875 27,43,125 35,39,375
Total for year 10,12,500 32,87,500 55,62,500 78,37,500 1,01,12,500
Assumptions taken:

25 shops/complex, 1 complex starting from Month 6/Year 1

Another 25 shops/complex, starting from Month 9/Year 1

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 From Year 2 onwards, minimum of 2 complexes added to customer base

1MW = 7cr
.6MW = 5cr
.1 MW = 68L
.05 MW = 45L

20 shops/complex = small shops = .025 MW = 25 KWh

1KVA / shop / day / connected load

per site =
25KWA cost < 20L (max 22L)
BE coming around 2.5 years (with Year 1 of customers)

Maint fee = INR 5000/customer/year

Break Even Analysis

1 Crore Investment from Founders + 4
Rs 50000000 Initial Investment Crore Bank Loan
Per KWp investment in
Rs 75000 equipment
Possible KWp with 5 Crore
666.6666667 investment
0.5 Efficiency
333.3333333 Net Capacity
10 Number of Usage Hrs/Day
Number of Working Days a
25 Month
1000000 KWHr / Year
9 Rate / Unit
Total Cash inflow per year,
Rs 9000000 if all units sold

Selling Price 9 per unit

Variable cost 0 Assumes negligible variable cost

Total Fixed cost Rs 50000000

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 Total Fixed cost after capital
subsidy @ 30% Rs 35000000

Break even sales units ~ 3888888.889

Typical units consumed by a
mall per month 12000 KWHr per month
Typical units consumed by a
mall per year 144000 KWHr per year
Number of malls that can be
serviced 7

Number of years to break Assuming all units are sold in first year
even ~ 4 itself.
* All amount in RS

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 Strategy Overview

Vision
Our vision is to be able to place a CRESL branded power plant powering every commercial
establishment in India and through that become the largest commercial solar power supplier in India.
We will do everything in our capacity to ensure reliable and stable power supply and excellent
customer service and support for our customers. We envision providing maximum return on
investment to the shareholder by increasing profitability through adopting new technology and
practices to minimise cost and maximise output.

The following will remain as our core values:

 High quality customer service to achieve customer delight

 Continuous improvements in service quality , value to the customer and share holder wealth
 Constant search for the most efficient and cost effective technology alternatives to deliver value to
both customers and share holders
 Strengthen the bondage between company and its employees so that each can contribute to the well
being of the other and jointly strive to achieve company goals and values

Competitor Analysis
Factor Solar Energy Strength Weakness Grid Electricity Diesel Genset Importance to
Customer
Renewable Stable and Customer Proven over time, Cost overruns due to 2
Energy product reliable worries about but lacks reliability. fuel price hikes, higher
Products reliability, cost Cost can increase maintenance
implications etc due to scarcity,
voltage fluctuations
High Initial Long term cash Huge initial Pay per watt and Big initial investment, 4
Cost, lower flows investment government life approx. 10 Ye,
Price variable cost, intervention on price High variable cost
life >25 Yrs

Good quality 25 Yrs Bad image due Reasonable quality Constant power 5
products warrantee to earlier with voltage output
Quality available and is available models being fluctuations and
used for major expensive and occasional failures
installations. low life
Constant power
A wide variety Global network
output Govt support No Choice. Has to Wide selection 3
available of supply may not be go with local available
Selection there long term provider

Factor Solar Energy Strength Weakness Grid Electricity Diesel Genset Importance to
Customer

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 Customised Good service Relatively new Mediocre Good service network 4
service due to network technology
Service competition

High reliability Constant and Dependent on Moderate with High Reliability 4

trouble free sun and hence frequent fluctuation
Reliability supply cloudy days, in voltage and
output is low supply
High Stability Stable power None Moderately Stable High Stability 4

Stability
Expertise Huge data None High High 1
required is low base available
Expertise as technology is from suppliers
proven and on internet
New N/A Relatively new Govt. backing Many reputed 3
technology and provides suppliers companies in place
Company new company credibility

Reputation Not a factor as Flexible Availability of Not a problem in Not a problem in most 2
we provide options to suit roof top space most cases cases
Location onsite service customer need and sun
Direct Can explain Will take time Established player Marketing through all 1
Marketing pros and cons to gain market and no marketing channels
Sales
Method and give share needed due to
personalised monopoly
options
Pay as you go No risk for Credit Pay as you go Outright purchase of 3
option with pay customer collection may options the genset and own it
Credit
Policies after use pose finance
overheads
Green energy. Green label will Need to Govt. department Proven technology, 3
Reliability help sale over overcome with its strengths as Highly reliable. Fossil
Image
image issue other channels scepticism proven one and fuel reliance and cost
about cost and weaknesses of overruns due to
reliability reliability, service imminent fuel cost
issues etc increases

:Business Plan Project (BPP) 2013-14. Page 19

 Strategy
To be consistent with our Vision statement, we will be fine tuning our strategy to deliver highest
return on investment to our customers and shareholders.

Solar energy is a sunrise industry and hence we choose this one, where you have a long
horizon of profitable period, and can achieve above average return on equity. There are good amount
of government support, which will reduce the cost (various tax breaks in imports and a 30% capital
investment subsidy on installations below 100 KWp capacities). The life of a solar panel is in excess
of 25 years (Manufacturers give a guarantee of 25 years with at least 80% efficiency). The photo
voltaic process does not require much maintenance and hence the variable expense is minimal. As
per the latest estimates, commercial solar installations with no subsidy can break even in less than 5-
8 years, even when you are giving electricity under Rs 9/ Unit of electricity.

When we analyzed the solar energy landscape (and used the competitor analysis above), we observed
a few points-

1. The number of players in the residential sector where the installed capacity per household is between
1-5 KWp is intense, with a lot of players. The competition is cut throat and you will get thin margins.
The cost of energy production in this segment is between Rs4 to Rs 6 per Unit, while the slab rate of
electricity for them starts from as low as Rs 2 / Unit. Also, the consumption peaks after sunset, which
makes lot of wasted energy. The image of company is a big factor in purchase decisions as well.
2. At the same time, for the small and medium commercial sector (Consumption will be between 20KWp
to 100 KWp and which includes corporate offices, shopping malls, Hospitals, large Shops and
Medium sized Businesses etc), the adoption is very less, mainly due to the huge capital investment
required for Solar and the scepticism about the ROI of such investments. At the same time, the cost of
electricity for this sector is in excess of Rs 9.5 per unit, which can go as high as Rs 16/Unit. When we
checked sources like MNRE website and other reputed sources, it is observed that the cost of
production of solar Photo-voltaic electricity at this level can be as low as Rs4/Unit. Even after
factoring in all the other costs, you can break even in 5-8 Years. You can expect a continuous cash
flow for the next 30 years with minimal variable expense. Also, besides the cost advantages, such
institutions also can save by moving away from backup power sources like Diesel generators,
inverters etc. The output is constant and without any fluctuations.

Our strategy is to provide pay per unit installations on the roof tops of such establishments. We will use a
modular design, which require zero piercing on the roof and an easy to assemble, dismantle and
upgradeable/down gradable capacity, which will enable us to service our customers according to their
needs.

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 We will take a small (around 10% of the cost) amount as a security deposit from the customers, which
will be returned towards the end of the contract term (minimum 5 years).

The rate chargeable will be less than the starting range of the commercial electricity. Also, we will be
able to run all load from 8 Am to 06:00 PM directly from the device and another 2-3 hours from the
stored power from battery. This will allow us to service 10-12 hours of their peak load from Solar, which
will enable us to utilize the full capacity of the power plant. This will benefit the customer by driving
down their costs and getting reliable and fluctuation free electricity. Also, this will maximise shareholder
ROI by efficiently utilizing the installed capacity to the maximum and thus high ROI.

Initially, all the components will be purchased from reputed suppliers. The installation will be outsourced
to minimize variable cost. The installed system will be inspected by the staff supervisor and will be
commissioned.

Once the annual installations go beyond 0.5 MWp, we will begin assembling and lamination of the solar
panel assembly and inverters. This will enable us to drive down the capital costs, and also will enable us
to service faulty solar panels and inverters in house to maximise useable life.

Our initial targeted markets will be Major cities in Kerala where such large establishments are located.
We will expand to rest of South India in another 4-5 years. We will expand to rest of India within 2-3
years from then.

In Kerala, our initial operations will be by outsourcing most of the work except maintenance, marketing
and book keeping/accounting. This will enable us to keep the variable costs to be in line with our sales.
Once the sales are consistently increasing, we will start the production of components etc.

For entering other markets, we will use a partnership approach, where the quality will be ensured by us
by constant monitoring, while many of the functions will be done by local partners, so as to use their
knowledge of the locality and connections. Like Maruti Suzuki, we will stipulate the maintenance process
and customer complaints will be taken up seriously. Quality will not be compromised and customer
complaints can lead to severe steps, including dropping the partnership. The contracts will have
provisions for this and penalty clauses.

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 Risk Analysis

Market Risk / Competitive Risk

As of now, the pay per use for small/medium commercial establishment is minimal or nil. So we will
not face much issue here. But once our model proves to be successful, there will be intense competition as
most of those who are in the sales market can come up to this segment. Also, at the same time, players in
the higher commercial category can expand to this sector.

Mitigation:By that time, we would have already started increasing our annual sales and hence can enter
in to the manufacturing of the components needed and thus can reduce the costs further. The company
image of quality and reliability also would have started building up. At the same time, we will also need
to strive hard to reduce the variable costs, avail low cost capital and should start negotiating with
suppliers to further drive down the costs. We would have started getting profits out of our early
investments, which can continue free cash flow for the rest of the usable period of the panels, and thus
can provide capital for further growth. This will enable us to offer a competitive rate due to lower cost of
capital.

Technology Risk
The solar photo voltaic technology is in place for the past 20 years and the current PV technology
has high reliability (25+ years useable life) and low cost. The cost is expected to drop another 35% in
another 3-5 years due to economies of scale. There is a risk that a new technology, which may be more
efficient or cheaper, can come and can cause the cost per unit to be less than our rates. Also, even though
the grid electricity charges are going up, some break thru can cause it to go lower than our rates.

Mitigation:We will need to constantly in touch with newer technologies and cost reduction techniques, so
that in such a situation, we can switch all new installations to one of these new technologies after
analysing the cost benefit ratio. Also, we will try to upgrade our existing installations in case if the CBA
of such an upgrade is proven to be beneficial. If we keep our break even as low as 4-5 years, we will be
safe on existing installations as we can respond to price pressures more effectively

Execution Risk
Major risks which can adversely impact execution of the plan are:

1) There is a risk that the required skilled resources will not be available at the estimated costs
2) Unavailability of components on time to install it
3) Issues related to service level not met for servicing and installation
4) Monitoring the usage

:Business Plan Project (BPP) 2013-14. Page 22

 Mitigation:We will be outsourcing all the installation activities and will also keep an option to add
additional service technicians other than the core supervisors and technicians on a per job basis. We will
provide them initial training and will get agreements on service levels, which will be linked to their
payments. Close customer feedback mechanisms will ensure good quality. To mitigate unavailability of
components, we will use efficient supply chain management mechanisms to keep inventory at minimum,
but have constant reorder points. We will have agreements with suppliers to supply on a timely manner
so that the risk can be transferred to them. For monitoring the usage and anticipated service, we will use
installation and usage remote monitoring using an installed mobile SIM at each site which will transmit
information about health of the plant and the usage.

Capitalization Risk
We are planning to invest an initial Rs 1 Crore from our side and will be looking for Bank loan of 4 Cr, as
we have more installations. Beyond the 5 Crore limit, we will be looking forward to raise the remaining
capital from Venture capitalists and later will be looking towards a public issue, once the market sentiment
towards this model is favourable. We have a risk that other than the founder’s investment, others might not
materialize.

Mitigation:As we are keeping the variable costs to the bare minimum, we can continue to operate and
generate cash flows from the initial investments itself. So cash inflow will not be stopped as in the case of an
outright sale of equipment. We will be also doing outright sale of solar plants to those who are willing to go
that route, so as to generate additional cash inflow. Along with this, we will offer a price guarantee for an
extended period for those customers who are willing to give a higher deposit and other price benefits, and
thus can unlock the capital faster. The deposits will be credited in their monthly bills from the 4th year
onwards and thus can remove the risk of huge cash outflows at the end of the contract period.

:Business Plan Project (BPP) 2013-14. Page 23