Proposed to setup a 50 Lakh Bottle per month plant to manufacturer IV fluids in Kolkata (West Bengal). Viability of the project comes from 1. Freight Arbitrage (15% savings) 2. Higher capital turnover (15 % savings) 3. Superior product at lower cost (5 % savings).
Project is ready to be implemented in a months time of financial closures. Land, Equipment suppliers and Market identified. we should start commercial production in 12 months of financial closure.
Per bottle consumption is 1 Bottle per person per year in India. This is far lower than developed countries (10 B/P/Y) and hence domestic demand is growing at 15-20% annually. Our primary catchment (WB, NE, BH, OD, JH , West UP) has 40 crs population and a consumption of 2.5 cr bottles per month.
Product is essential medicine and prescribed by generic. Purchase decision is in the hand of hospital/ retailer, and hence a commodity in the pharmaceutical segment. Hence selling is price sensitive. Bringing down the cost will ensure sales of the product with limited expenditure in Brand building.
Problem or Opportunity
IV Fluids are low value, high volume items. Freight costs 25% of the product cost in eastern India (not having sufficient manufacturing facility), current product quality is low. Establishing a factory in Eastern part for this product will bring down the freight cost by 15%. we are planing to make the product by an innovative technology, in which the capital turnover is 2 times of existing factories and hence bringing capital cost (which is around 25% now) to 10%. Also the product is better in its sterility and looks.
Opportunity: Region only produces 5% of the demand and hence shipped from western India. We save 15% on the product cost. This product is among very few in pharmaceutical industry, prescribed by generic and hence selling the product by lowering cost and increasing retailer margin. thus getting to capacity utilization faster. Low cost of brand building. Demand is increasing 15- 20% annually.
Solution (product or service)
To setup a 50 lakh bottle per month IV fluid plant in Kolkata to serve primary market of eastern India, and then expand to other parts of India and export. Setup the facility in 12 months time and get to 90% capacity utilisation in 18 month of time.
Raise 16 cr RS as equity and 24 crs debt for a 40 crs capital cost and additional 4 crs for Working capital.
Baxter (bought Wokhardt)
Eurolife Health Care Pvt. Ltd
IVY Biotech Pvt. Ltd
Septy Pharmaceuticals Pvt Ltd
PDPL Info tec
Advantages or differentiators
1. Freight Arbitrage : Presently 95% of the product is shipped from northern, and western India to the eastern India. The product is a low value product with high volume. a 500 ML bottle ex factory is around 12 rs. And freight is around 3 rs per bottle. Production cost in east will be same as other part of India as raw material cost is almost same and bulk is water. So we save 15% on the freight or around 1.5 rs per bottle. with a production capacity of 50 Lakh bottles per month we save 75 Lakhs INR per month and the total capital of 40 crs is returned in 54 months just due to this.
2. Superior Product at Cheaper Cost: cost is 5 % lesser than PE (BFS) technology, as there is a wastage of 30% PE (plastic) in BFS. Also, Water for Injection (WFI), which is an input in the production, is being planned on Vapour compression technology in place of multi column, used presently. The product is better in Looks (bottle is transparent in place of Hazy (BFS) and better sterlised (121 * compared to 108 * in BFS)
3. High Capital turnover of this Technology as compared to the presently used PE (BFS) is 2 times. On an investment of 40 crs we are planning to produce 60 crs of goods annually, and with BFS technology an investment of 36 crs gives a production capacity of 20 Lakh BPM, 24 crs of goods yearly. Interest Dep Cost per Bottle: 1% Interest and 0.85% Depreciation on capital assumed monthly.
4. • Commodity Product, Technical Industry: Product prescribed by generic and hence Purchase decision in hand of retailer because of it, product is very price sensitive. IV Manufacturing Industry is sufficiently technical creating entry barrier. B2B product, hence less Brand pull helps in reaching sales target by reducing prices, and less expense in building brand.
Capital cost (land + Building+ Equipment + soft cost) = 40 crs INR (2 +5 +32+1)
Working capital Requirement : 4crs INR
Means of finance INR
Equity : 17.5 crs
Term Loan : 24 crs
WC loan : 3 crs.
Equity Promoter: 2,5 crs
Equity VC : 15 crs (with an option with promoter to buy back at 16-18% IRR)
Setup a high capacity, Latest technology Factory in a Geo strategic Location.
Bring down the Cost and Improve the product quality. Save on the Freight cost.
Do not experiment to much and use a proven technology for a commodity product, where demand is already there, Reduce venture risk. Once established and having sufficient cash flow enter New product range and Branded products.
Invest, Investors and own money with a responsibility and transparency.
Money will be spent on
Capital Expenditure to setup manufacturing unit. Primary Latest Machines.
Offer for investor
Investment of 15 crs Inr (2.5 Million $) sought with an buy back option with the promoter, @ 16- 18 % IRR. Expect to Buy back in 4 years time.