1. INTRODUCTION
1.2. Financing
handful having wireline internet connectivity, predominantly for the school/college staff and faculty only.
VayuConnect intends to bridge the wireless connectivity gap and provide inexpensive Wi-Fi infrastructure for schools and colleges in India (the target segment) and low cost internet services to the students of the target segment. VayuConnect plans to start its operation and project implementation in its home base, Mumbai, after which it may consider expanding to other markets. The company intends to develop ongoing relationships with the government (in particular, the Ministry of Human Resources and Development, India) and OEM/ODM providers for Wi-Fi infrastructure. In collaboration with the government, the cost of hardware can be subsidized, the benefits of which can be passed on to the target segment. VayuConnect intends to also develop long lasting relationships with wireless mobile telephony operators to get dedicated wireless bandwidth from their 3G/LTE sites, to be used as the source for Wi-Fi.
Not only would this help the colleges easily adopt the e-learning program, but also help the government increase the sales of their tablet PCs.
1.2. Financing
Mr. Abhishek is seeking to raise ₹ 6,000,000 from a bank loan. The interest rate and loan agreement are to be further discussed during negotiation. This business plan assumes that the business will receive a 5 year loan with a 10% fixed interest rate. The financing will be used for the following:
• Office furnishings
• Employee laptop computers
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• Company registration and permit fees
• R&D
• Software licenses 1.3. Mission Statement
VayuConnect’s mission is to become the recognized leader in its targeted market for IT installation and maintenance services. We view ourselves as partners with our customers, our employees, our community and our environment. We aim to become a regionally recognized brand name, capitalizing on the sustained interest in internet connectivity. Our goal is
moderate growth, annual profitability and maintaining our sense of humor.
1.4. Management Team
The management team behind VayuConnect is comprised executives with a commitment to quality, integrity and social responsibility. In particular, the CEO and founder of VayuConnect, Mr Abhishek Lahiri, has over 12 years of direct experience in operations, customer handling and has vast technical expertise. He also stands poised to earn an MBA with Distinction from the National Cheng Chi University International MBA program.
The Marketing Manager of VayuConnect, Mr Sameer Yadav, who has a successful import/export business between India and Taiwan, has vast experience handling government
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team from its inception. VayuConnect would employ one more marketing manager during the
second year of its operation, should the business generate revenue as per expectation.
1.5. Sales Forecast
Mr. Abhishek expects a strong rate of growth at the start of operations. Below are the expected financials over the next five years. These financial projections are based on economic conditions as of today.
Table 1 Proforma Revenue, COGS & Profit (normal economic condition)
2015 2016 2017 2018 2019
Revenue ₹ 64,997,766 ₹ 202,983,935 ₹ 380,225,368 ₹ 560,204,702 ₹ 761,465,702 COGS ₹ 59,463,390 ₹ 119,282,057 ₹ 143,863,034 ₹ 145,046,012 ₹ 146,397,812 Operating Expense ₹ 5,475,878 ₹ 8,580,961 ₹ 12,053,769 ₹ 15,263,445 ₹ 18,404,957 Earnings before Tax ₹ 58,498 ₹ 75,120,918 ₹ 224,308,565 ₹ 399,895,245 ₹ 596,662,933 Net income after Tax ₹ 40,949 ₹ 52,584,642 ₹ 157,015,995 ₹ 279,926,671 ₹ 417,664,053
₹ ‐
2015 2016 2017 2018 2019
Millions
Revenue, COGS & Profit forecast
Revenue COGS Net income after Tax
Figure 1 Proforma Revenue, COGS & Profit (normal economic condition)
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to political instability, economic recession or otherwise). In such a situation, proforma profit and loss (yearly) would be as follows.
Table 2 Proforma Revenue, COGS & Profit (severe economic downturn)
2015 2016 2017 2018 2019
Revenue ₹ 64,997,766 ₹ 173,718,593 ₹ 289,567,079 ₹ 409,710,481 ₹ 544,014,590 COGS ₹ 59,463,390 ₹ 95,490,252 ₹ 96,166,290 ₹ 97,011,545 ₹ 97,957,998 Operating Expense ₹ 5,475,878 ₹ 8,268,307 ₹ 11,053,186 ₹ 13,190,703 ₹ 15,608,715 Earnings before Tax ₹ 58,498 ₹ 69,960,034 ₹ 182,347,603 ₹ 299,508,233 ₹ 430,447,877 Net income after Tax ₹ 40,949 ₹ 48,972,024 ₹ 127,643,322 ₹ 209,655,763 ₹ 301,313,514
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2015 2016 2017 2018 2019
Millions
Revenue, COGS & Profit forecast
Revenue COGS Net income after Tax
Figure 2 Proforma Revenue, COGS & Profit (severe economic downturn) 1.6. Expansion Plan
The Founder expects that the business will aggressively expand during the first three years of operation. Mr. Abhishek intends to implement marketing campaigns that will effectively
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VayuConnect expects to see steady growth in business when its operations are established in cities like New Delhi, Bangalore and Chennai.
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2. COMPANY AND FINANCING SUMMARY
2.1. Registered Name and Corporate Structure
VayuConnect is registered in the city of Mumbai 2.2. Required Funds
At this time, VayuConnect requires ₹ 6,000,000 of debt funds. Below is a breakdown of how these funds will be used:
Table 3 Required funds
Payroll ₹ 3,400,000
Rental/Utilities/Warehousing ₹ 540,000 Pre-launch marketing & promotion ₹ 330,000
R&D/Software Licensing ₹ 748,000
Laptops ₹ 125,000
Furnishing ₹ 42,000
Total ₹ 5,185,000
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Figure 3 Use of funds 2.3. Investor Equity
Mr. Abhishek is not seeking an investment from a third party at this time.
2.4. Ownership
Mr. Abhishek owns 100% of VayuConnect.
2.5. Exit Strategy
If the business is very successful, Mr. Abhishek may seek to sell the business to a third party for a significant earnings multiple. Most likely, the Company will hire a qualified business broker to sell the business on behalf of VayuConnect. Based on historical numbers, the business could fetch a sales premium of up to 3 times earnings.
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3. PRODUCTS AND SERVICES
3.1. Wi-Fi infrastructure
Most commercial Wi-Fi infrastructures rely on an existing backbone of fiber-optics or on ADSL. Not only is it expensive to maintain fiber-optics, but fairly expensive to install as well, since they have to subterranean. ADSL connectivity is available only for subscribers staying within a certain kilometer radius from the ADSL hub, the quality of which is extremely unreliable owing to the poor maintenance of the land-line telephone network. VayuConnect plans to provide internet connectivity services which are not only reliable, but also has very good quality of service (QoS). VayuConnect’s target audience would initially be colleges under University of Mumbai. Most of these colleges are not government funded. They receive most of their funds from private trust based organizations.
VayuConnect incorporates a novel approach which dramatically reduces the cost of Wi-Fi infrastructure. Instead of relying on the expensive fiber-optics or ADSL connectivity, VayuConnect utilizes the existing 3G/LTE network and converts them to Wi-Fi. Each client of VayuConnect will receive only the highest level of professional services. A simplified architecture of the implementation is shown below.
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Figure 4 Simplified network design architecture
The Wi-Fi infrastructure has the following:
3.1.1. Wi-Fi router with indoor antenna
One Wi-Fi router can cater upto 20 users. Indoor antennae are used to boost the signal
coverage and reception.
3.1.2. 3G/LTE modem with outdoor antenna.
3G/LTE technologies allow the total throughput of the cell to be shared across multiple subscribers (i.e. individual users with unique SIM cards belonging to the same network operator, and served by the same cell). As an example, if the cell offers a total of 42Mbps, and there are 10 unique users under the cell, then each user would get 4.2Mbps. In our approach, each modem (with its own SIM card) represents a unique user (from the network operator’s point of view). In order to provide good quality of service (QoS) to 20 Wi-Fi users, two 3G/LTE modems are used.
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3.1.3. Aggregating routers
Data from the modems are aggregated (summed up) by this router before passing on to the Wi-Fi router, and vice-versa.
For any given college, there can be “N” number of students. A further simplified representation of the overall architecture is shown below.
Thus
Figure 5 Overall design architecture
Thus for every “N” students, VayuConnect would provide number of Wi-Fi routers,
number of 3G/LTE modems and 1 (one) aggregating router.
3.2. Internet connectivity services
VayuConnect would provide pre-paid internet connectivity services to its infrastructure end-users at prices far lower than those of the wireless telecom service provides. Low internet
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its client. The first year of purchase would be covered under the manufacturer’s warranty.
VayuConnect would extent the annual maintenance of the infrastructure after the competition of the first year for the next 4 years, which would cost only a fraction of the sales.
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4. STRATEGIC AND MARKET ANALYSIS
4.1. Economic Outlook
This section of the analysis will detail the economic climate, the internet industry, the customer profile, and the competition that the business will face as it progresses through its business operations. The current economic market condition in India is moderate. India’s economic growth slowed last quarter, holding below 5 percent. Gross domestic product rose 4.7 percent in the three months ended Dec. 31 from a year earlier, compared with 4.8 in the previous quarter. However, IT network installers operate with great economic stability as businesses will continue to require IT services despite deleterious changes in the general economy.
India recently went through a legislative assembly elections to elect their new Prime Minister.
The general outlook after the elections have been positive, with Indian Rupee appreciating in value with respect to the US dollar. With appreciating currency, we should see exports to become more expensive and imports to become cheaper. This should further help VayuConnect, as the company plans to import most of the hardware products.
However, this business plan considers an alternative scenario in case of an unfortunate case of
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4.2. Industry Analysis
As of Oct 2013, India has more than 205 million internet users, with 137 million (67%) of them in urban towns. 110 million users (54% of total internet users) use mobile internet, with 77% of them from urban towns. Indian online landscape is very different. With more than 205 million users, it makes India the third largest internet market.
Figure 6 Internet users in India
Independent survey by comScore that 37% of the total online audience in India are between the ages 15~24 years. This growth has caused a number of businesses in this industry to
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develop and expand, including commercial Wi-Fi service providers.
Figure 7 Demographic composition of internet users
As time progresses, Mr. Abhishek expects that the number of businesses operating within this market will continue to grow. One of the primary attractive elements to this market is that the demand for internet connectivity services is insulated from changes in the general economy.
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4.3. Competitors
India has one of the faster growing internet users in the world. Although competition in the wireline internet segment is becoming fierce, static wireless internet (static referring to limited mobility, such as Wi-Fi) is relatively growing on a slower pace. VayuConnect’s possible
competitors (direct or indirect) are:
4.3.1. Wireless telephony (3G/LTE) providers
Although the Wireless telephony (3G/LTE) providers have a significantly large presence pan India, they are indirect competitors to our company. Our target segment for internet connectivity services are students who would be using the “AAKASH” tablets. These tablets do not have 3G/LTE connectivity. The students, however, can have other smart phones (other than the “AAKASH” tablet) which may have 3G/LTE connectivity. They may use services from the wireless telephony (3G/LTE) operators for internet connectivity in their smartphones.
However, the students can take the advantage of the low cost wireless internet services offered
by VayuConnect even in their smart phones.
4.3.2. DSL and broadband providers
VayuConnect could face direct competition from DSL and broadband service providers. Few schools and colleges already have access to wireline internet, using one of the DSL and broadband providers. The schools and colleges may buy and install Wi-Fi routers by
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themselves, thereby eating into VayuConnect’s market share. However, there are severe
technical limitations to this approach.
It may not be always possible to increase the bandwidth of the DSL connection. Also, there can be limitations on the number of DSL connections on the same copper cable. In case of VayuConnect, the connection bandwidth is scalable, which means, should the demand for data increase, we can increase the number of 3G/LTE modems.
A simple Wi-Fi router attached to a DSL alone does not provide user access control. The end user (i.e. the students) would have freedom to visit any website of their choice, and consume unlimited amount of data until the DSL subscription runs out. The school/college would have to bear the cost of Wi-Fi connectivity. On the other hand, VayuConnect provides end-to-end solution for the schools/colleges and the students. The school/college also earns a portion of the revenue as the students use the Wi-Fi internet connectivity provided by VayuConnect (based on the profit-sharing program). VayuConnect’s infrastructure provides total access control to the schools/colleges and they can implement access restrictions to websites they deem inappropriate. VayuConnect also provides billable data usage to the students to limit and restrict the amount of data they can consume.
4.3.3. Commercial Wi-Fi service providers
Although there are very limited number of commercial Wi-Fi operators in Mumbai, they pose a direct threat to VayuConnect. Currently, the commercial Wi-Fi services are monopolized by
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competitive pricing. VayuConnect also plans to improve on its value proposition by investing in R&D.
4.4. Customer Profile
VayuConnect’s average cliental would be schools and colleges in Mumbai. Hardware service for the Wi-Fi infrastructure would be offered to such schools and colleges. Internet connectivity services would be offered to the students, staff and faculty of these schools and
colleges. The next section will elaborate in detail more on the concept of colleges in Mumbai.
4.4.1. Background
University of Mumbai is one of the first three oldest public state universities in India, located in the city of Mumbai in the state of Maharashtra. It is abbreviated as either UoM, standing for University of Mumbai or MU for Mumbai University. In its early days, University of Mumbai offered Bachelors, Masters and Doctoral degrees apart from diplomas and certificates in many disciplines. However, as the number of aspiring students increased, pressure from the government increased on the university to increase the number of student intake capacity.
However, since the infrastructure and the available real-estate was limited, the government allowed several private intuitions (viz. colleges) to be affiliated to the University of Mumbai.
These colleges would offer courses under the guidance from University of Mumbai. The students from these colleges would be awarded degree from the University of Mumbai.
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engineering, commerce, medicine etc) were migrated to these colleges. University of Mumbai offers advanced disciplines, such as masters and PhDs, and also highly specialized courses. As of today, most of the big universities across India have many affiliated colleges, thereby helping thousands of students to fulfill their dreams.
Although a few colleges in Mumbai are government funded (also called as government colleges), most of these colleges are funded by a private trust based organization. The student
fees for such “private” colleges are higher than the government colleges.
4.4.2. Schools and Colleges
VayuConnect’s average client would be schools and colleges in India. Initially, VayuConnect would be targeting government run colleges and colleges receiving funds from financially sound trustees. This business model assumes that in the first year of operation, there would be five government run colleges and one privately run college, all of which would be affiliated to University of Mumbai. The business plan also assumes that under normal economic conditions, the number of colleges interested in our proposal would increase to 10% by second year of our operation, followed by an increase to 12% for the following three years.
All the colleges mentioned here are affiliated to University of Mumbai. As of 2014,
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Table 4 Number of colleges interested in VayuConnect’s value proposition (normal
economic condition)
2015 2016 2017 2018 2019
Total number of colleges affiliated
to Univ of Mumbai 101
Total class rooms 2,340
Total students 424,478
% Colleges interested 5% 10% 12% 12% 12%
# Colleges interested 6 11 13 13 13
# Class rooms 117 234 281 281 281
# students 21,224 42,448 50,938 50,938 50,938
However, in case of severe economic downturn, this business plan assumes that the number of colleges interested in our proposal would increase to 8% by second year of our operation, and would continue to do so for the following three years.
Table 5 Number of colleges interested in VayuConnect’s value proposition (severe
economic downturn)
2015 2016 2017 2018 2019
Total number of colleges affiliated
to Univ of Mumbai 101
Total class rooms 2,340
Total students 424,478
% Colleges interested 5% 8% 8% 8% 8%
# Colleges interested 6 9 9 9 9
# Class rooms 117 188 188 188 188
# students 21,224 33,959 33,959 33,959 33,959
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colleges affiliated to other universities, such as University of Delhi. University of Delhi has
77 affiliated colleges.
4.4.3. Students
Most of the students in these colleges come from average income households. It is quite common in urban cities like Mumbai to see parents pay for their children college fees, which might be well above their daily means. This may be particularly applicable for students who are enrolling to professional technical streams, such as engineering or medicine. Parents for such students are likely to avail education bank loans in order to pay for their children’s education. It is traditional among Indian families pack lunch boxes for their children, and also provide them with some small amount of “pocket money” for their spending needs. The
students usually hold on to the pocket money until a significant sum is accumulated.
4.5. Government support
VayuConnect would create strategic collaboration with the government, in particular with Ministry of Human Resources and development (MHRD) in India. It would be in the best interest of the government to finds ways to encourage schools and colleges to adopt the e-learning program. The adoption of the program entails the schools and colleges to pay a
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would then be given to the students. Due to the low cost structure of the tablet PC, the specification for the AAKASH tablet includes only Wi-Fi connectivity. VayuConnect proposes that, with its value proposition, the company would be able to provide inexpensive Wi-Fi solution to the schools and colleges. In order to further reduce the price of the Wi-Fi infrastructure, VayuConnect plans to enter into a strategic collaboration with the Government.
VayuConnect would do several workshops to educate the government to the merits of this this collaboration. The Marketing Manager of VayuConnect, Mr Sameer Yadav, who has a successful import/export business between India and Taiwan, has many successful interactions with members of the government. VayuConnect, through its various marketing and promotion campaigns for its value proposition, would also help to promote the tablet PCs offered by the government. The collaboration would help subsidize much of the hardware
infrastructure needed for the Wi-Fi network.
4.6. OEM/ODM vendor for Wi-Fi infrastructure
VayuConnect plans to enter into a strategic partnership with D-link, Taiwan’s leading network infrastructure company, for its Wi-Fi infrastructure needs. D-Link would be the sole supplier for VayuConnect, supplying aggregating routers and Wi-Fi routers.
4.6.1. Why D-Link?
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had 33% global market share.
Figure 8 WLAN unit shipment in 2012
D-Link has manufacturing plants in Goa, with software and R&D centers in Goa and Bangalore. D-Link also has a dedicated customer service technical call center in Mumbai, which caters to India as well as the rest of the English speaking world. D-Link is a very well respected and trusted brand in India, with its presence in most businesses and households in Mumbai. D-Link is also listed in National Stock Exchange (NSE) and Bombay Stock
Exchange (BSE) in India.
4.7. 3G/LTE modems
VayuConnect would source the 3G/LTE modems from Xiamen Four-Faith Communication