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Sample Investor Pitch

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This is a sample business plan for an investor pitch (of a leading mobile handset brand in India)....

This is a sample business plan for an investor pitch (of a leading mobile handset brand in India).

It captures all the requisite elements of a business plan that the VCs / PEs would be interested in.

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Sample Investor Pitch Presentation Transcript

  • 1. Micromax Mobile Devices Business Plan November, 2009
  • 2. Contents Company Profile Indian Handset Market Overview Micromax Value Proposition Business Model Competition Way Forward Capital Infusion: Disbursement Plan & Key Milestones
  • 3. , 2000 2005 1994 2009
    • Foray into telecom
    • Partnered with UCI for Embedded Tech Solutions
    • No. 3 player in Indian mobile handset market (by volume sales)
    • Company started and incorporated
    • Launch of mobile devices in partnership with Indian carriers
    Started its operations with design, development & distribution of fixed wireless terminals, Micromax has been in the Indian telecom industry close to ten years
    • Micromax has entered telecom industry with design and development of fixed wireless terminals (FWTs) for Airtel
    • Along with being the largest FWT vendor for Airtel, Micromax has also ventured into distribution
    • Leveraging its wireless terminals development and distribution experience, Micromax has started the mobile devices business as an OEM and has been successful in gaining significant market share, resulting in number 3 position among the mobile OEMs in India
    Source: Company Information, IDC - Indian Mobile Market Report
  • 4. Micromax Senior Management Team Classification by Functional Expertise Engineering & R&D 23% Sales & Distribution 18% Marketing 18% Finance 18% Other Support Functions 23% Source: Company Information, Industry Inputs Currently, the company has well balanced team with experienced professionals managing key functions of the organization Function Key Responsibilities Engineering & R&D
    • The engineering & R&D team is responsible for design and development of mobile devices
    Sales & Distribution
    • Sales & distribution team controls the distribution network and is responsible for sales of devices, both in retail & carrier partnership
    Marketing
    • Marketing team is responsible for brand building and other marketing campaigns during product launches
    Finance
    • Finance team overlooks the investments, key partnerships and vendor management
    Support Functions
    • Other support functions include HR, IT, SCM, legal and after sales service
  • 5. Contents Company Profile Indian Handset Market Overview Micromax Value Proposition Business Model Competition Way Forward Capital Infusion: Disbursement Plan & Key Milestones
  • 6. Number of Pan-India Mobile Services Licensees Incremental Mobile Subscribers Share (Jul - Oct ‘09) Others 77% Tata DoCoMo 23%
    • The number of pan-India carriers has increased significantly with a number of them already launching services, or having announced plans to launch by end of 2009
    • These new carriers have introduced price-based competition launching innovative tariff plans such as ‘Pay Per Second’ by Tata DoCoMo and CEP by Reliance GSM
    • This phenomenon is resulting in consumers procuring multiple SIMs, leveraging multiple tariff plans of different carriers to cater to their different calling needs, thus increasing the demand for dual-SIM enabled mobile devices
    Source: TRAI In 2009, the increase in the number of carriers has led to competition to acquire incremental subscribers, with many of them launching attractive tariff plans
  • 7.
    • Incumbent mobile operators with significant penetration in urban areas have started expanding into rural and semi-urban areas
      • ~ 40% of net additions of incumbent operators was from rural areas in 2009
    • Teledensity in rural areas is expected to increase from 11% in 2008 to 28% in 2014
      • Average number of handsets per household will grow from ~0.6 handsets in 2008 to ~1.45 handsets in 2014
    • Emerging Indian handset vendors are estimated to be selling 70% of their handsets in rural areas while the other 30% sales are from urban areas
    Wireless Subscribers Base Rural Vs. Urban – India (mn) 865 828 779 716 626 498 347 Source: Industry Inputs With carriers focusing on rural areas to increase their subscriber base, the share of mobile handset sales has also increased in these areas
  • 8. Global OEMs that currently dominate the Indian handset market are expected to face difficulties in sustaining their market share, especially in rural areas Indian Mobile Handset Market Share by Value (Oct ‘09)
    • Indian rural consumers with lower incomes prefer affordable devices with rich feature sets, such as the ones offered by Micromax
    • Rural consumers in India are also not as brand conscious compared to their urban counterparts, which further encourages emerging handset brands to target these consumers
    • None of the global brands have dual SIM devices, a key feature, in their product portfolios or roadmaps
    • Revenues and gross margins of the incumbent players are expected to decline due to increased competition
    Source: ORG-Gfk India Mobile Handset Report, Nov ‘09 Total Nokia Samsung Sony Ericsson LG Others
  • 9. Going forward, the Indian mobile handset market is expected to grow to 161mn devices by 2012, with sub USD 100 contributing to about 80% of sales Indian Mobile Handsets Market Projections (mn, 2009 – 2014)
    • The mobile handset market is expected to continue growing for the next few years
    • Driven by competition and features coming down the price curve, sub USD 100 devices are expected to contribute over 80% device sales
    • The sub USD 100 devices are also expected to contribute 80% of revenues and 68% of gross margins by 2012
    Source: Industry Inputs 128 137 148 161
  • 10. Contents Company Profile Indian Handset Market Overview Micromax Value Proposition Business Model Competition Way Forward Capital Infusion: Disbursement Plan & Key Milestones
  • 11. Micromax’s key strengths include offering affordable, feature rich handsets with wide availability and heavy marketing support Optimized Solutions Product Portfolio Micromax Key Strengths Marketing & Distribution Feature / Price Tradeoff Higher Channel Margins Brand Building Time To Market Source: Industry Inputs
  • 12. Micromax identifies and caters to the unique requirements of Indian mobile consumers Description Micromax Solution Long Battery Life Dual SIM FM Radio & Multimedia Key Requirements Source: Industry Inputs, TRAI, Company Information
    • There is a need for long battery life in mobile phones due to extensive usage and power supply issues
      • Indian mobile subscriber MoU is 480 mins, which is highest in the world
      • There is extreme shortage of power, especially in rural areas
    • Micromax offers mobile devices with extremely long battery life
      • Micromax X1i was the first device in India to offer 30 days of battery life in standby mode
    • With increasing competition among carriers and reduced tariffs & mobile subscription costs, consumers are opting for more than one SIM card, which is driving the demand for dual SIM devices in India
    • Micromax has a vast portfolio of dual SIM enabled devices
      • Up to 80% of device models in Micromax product portfolio are dual SIM enabled
      • Dual SIM devices contribute to 75% of revenues for Micromax
    • Mobile phone is the primary source of personal entertainment and multimedia content for a majority of Indian consumers
    • Micromax offers an extensive range of multimedia enabled mobile phones with rich features including high decibel audio output and wireless FM
  • 13. Also offering more features at significantly low price as compared to global brands Micromax X360
    • Positioning: Music phone - Partnered with MTV (content bundle)
    • Band: Dual GSM – Dual Band
    • Display: 240*320 pixel, 2.0 inches, 262k color QVGA
    • Camera: 1.3 Mega CMOS
    • GPRS / WAP / Bluetooth: Supported
    • Ringtones: 64 Polyphonic
    • Expandable Memory: MicroSD (upto 8 GB)
    Price: INR 3,558 (USD 77.4) Nokia 7210 Supernova
    • Positioning: Music phone with multimedia
    • Band: Tri Band
    • Display: 240*320 pixel, 2.0 inches, 262k color QVGA
    • Camera: 2 MP camera, 4x zoom
    • GPRS / WAP / Bluetooth: Supported
    • Ringtones: 64 Polyphonic
    • Expandable Memory: MicroSD (upto 2 GB)
    VS. Price: INR 4,587 (USD 99.7) With comparable specifications for basic features, Micromax often offers a compelling price benefit over leading global brands
    • Micromax offers comparable features at a lower price making them more attractive for price sensitive consumers
    • Micromax was also the first company to launch rich featured (QWERTY & 3G) devices at affordable prices
    • The primary target for these local handsets are non brand conscious consumers, especially in rural areas
    Source: Industry Inputs, Company Information
  • 14. Significantly short product development cycle and time to market offers a unique competitive advantage to Micromax over the incumbent players Comparison of Product Development Cycles of Micromax Vs Nokia (Months)
    • Micromax has been highly successful in identifying the requirements and leveraging its partner/vendor relationships, thus keeping the product development cycle short
    • Global OEMs product portfolio with device features, industrial design & form factor is finalized 12 months in advance, with little scope for modification
    • For the global OEMs, the product development cycle involves many processes in hardware & software development, quality checks and dependencies on component vendors at global level, which result in a longer time to market
    Micromax Nokia (Low Tier) Nokia (Mid Tier) Nokia (High Tier) Source: Industry Inputs, Company Information
  • 15. Micromax also invests significantly in distribution channel and 360 0 marketing, in order to ensure both channel support and consumer mindshare Distribution Channel Margins of Mobile OEMs Operating in India (%) 6% - 8% 8% - 10% 15% - 20%
    • Micromax leverages its experience from distribution of Airtel FWTs and Nokia enterprise devices for its mobile devices business
    • Micromax also offers high margins to its channel partners along with maintaining healthy relationships
    Marketing Strategy
    • Micromax employs a 360 0 marketing strategy as a part of its brand building efforts
    • Micromax has invested close to USD 12mn in marketing in the fiscal year ending 2009
    TV Print Outdoor Roadshows Exhibitions Events & Conferences Source: Industry Inputs, Company Information
  • 16. These efforts have not only resulted in constantly increasing sales for the company, but also in significantly high devices sell through percentage Monthly Import Volumes of Micromax Mobile Devices (‘000)
    • Devices shipments have been increasing constantly at the rate of 100K per month
    • Micromax devices also have high percentage of primary to tertiary ratio (sell through) of 1.15 as compared to the industry average of 1.6
    • The company apart from maintaining strong retailer & channel relationships, is also investing in carrier relationships and reverse bundling
    Source: Company Information
  • 17. Contents Company Profile Indian Handset Market Overview Micromax Value Proposition Business Model Competition Way Forward Capital Infusion: Disbursement Plan & Key Milestones
  • 18.
    • MediaTek (MTK) is a fabless (outsourced manufacturing) design house in Taiwan that specializes in designing low cost chipsets for entry level handsets
    • Micromax was among the early mobile device companies from India to partner with MTK and develop products based on MTK’s SoC (System On chip) solution
    MTK Handset Chipset Annual Shipment (mn Units) MTK Chipset Based Handset Exports from China (mn Units) Source: Industry Inputs, Company Information Micromax partners with a leading Taiwan-based chipset manufacturing firm, Mediatek, to power its devices with their unique solution
  • 19. The company has been able to leverage its MTK partnership to drive down the Bill Of Material (BOM) costs of its products BOM Cost Comparison for Micromax & Leading Global Brand of a Multimedia Phone (USD)
    • MTK developed a circuit board that could inexpensively integrate the functions of multiple chips, offering emerging handset vendors a platform to produce low-cost mobile phones
    • Micromax uses MTK’s solution in a number of its mobile devices leading to not only a significant cost advantage along with reduced product development cycle
    Source: Industry Inputs Component Micromax X310 Nokia 7210 % Delta (Nok/ MX) Baseband Module 20.59 28.49 38% Display Module (2.4”) 5.59 6.32 13% Power Management Module 1.47 1.79 22% Camera Module 1.32 3.45 161% Keyboard 0.88 1.21 38% Charger 0.59 1.35 129% Earphone 0.44 0.45 2% Speaker 0.29 0.32 10% Microphone 0.29 0.35 21% RF Transceiver 1.05 1.55 48% Vibration Motor 0.29 0.45 55% Plastic Casing 2.35 2.32 1% Others 4.41 6.43 46% Total BOM Cost 39.56 54.48 38%
  • 20. Focusing only on essential expenditure allows the company not only to grow the business, but also ensure healthy margins Micromax Expenditure Summary (FY ’09) Source: Company Information Note 1: Others include depreciation, amortization, interest & finance charges Micromax Mobile Devices Revenue Split (2009) Gross Margins 25% to 30% Other Expenditure 70% to 75%
    • Micromax maintains a lean operational costs structure, with purchase of capital goods contributing to a significant share of the expenditure
    • Distribution costs include channel margins and inventory price protection
    • Micromax enjoys relatively high operational margins in the mobile devices business compared to its global counterparts
    Total Expenditure Goods Personnel Sales & Distribution Admin Others 1
  • 21. Contents Company Profile Indian Handset Market Overview Micromax Value Proposition Business Model Competition Way Forward Capital Infusion: Disbursement Plan & Key Milestones
  • 22. Agility, responsiveness to consumer needs and cost efficiencies are the key advantages of Micromax over both global and Indian mobile handset brands Source: Industry Inputs, Company Information Very High High Medium Low Very Low Relative Position: Comparison of Various Strategic & Operational Parameters of Global & Indian OEMs Parameter Product Portfolio Distribution Network Brand Agility & Time To Market Responsive to Consumer Needs Cost Efficiency
  • 23. Contents Company Profile Indian Handset Market Overview Micromax Value Proposition Business Model Competition Way Forward Capital Infusion: Disbursement Plan & Key Milestones
  • 24. Going forward, Micromax plans to leverage its existing strengths to emerge as a leading Indian mobile handset manufacturer Description Future Plans Strong Product Portfolio Market Understanding Efficient Operations Key Strength Source: Company Information
    • Launched devices with innovative features such as dual SIM, 30 day standby time at affordable prices such as sub USD 100 QWERTY device, most affordable 3G device
    • Leading player in the feature phones segment
    • Launch innovative products in India with “first time ever” features
    • Strengthen the smartphone portfolio based on multiple OS such as Android & WinMo
    • Launch emerging computing devices such as MIDs, Netbooks, Embedded laptops
    • Strong retailer and carrier relationships
    • Comprehensive understanding of Indian consumer requirements
    • Leverage carrier relationships to enter the CDMA device sales and reverse bundling partnerships
    • Leverage the Indian consumer knowledge to bundle relevant VAS services, thus enhancing the consumer value proposition of the device
    • Quick product development cycle and time-to-market
    • Low BOM costs
    • Strong partner and vendor relationships
    • Build a manufacturing facility
    • Strengthen the R&D team
    • Partner with leading chipset manufacturers such as Qualcomm, Infeneon, etc to launch devices on 3G, CDMA, HSPA, etc
  • 25. Also expand into emerging industries and international markets 1 Mobile VAS End User Revenues (USD mn)
    • With the introduction of 3G in India, mobile VAS is expected witness significant growth in future
    • Micromax plans to foray into the VAS industry by initially offering innovative VAS services bundled with devices and then evolve into a dedicated business
    Source: Industry Inputs, Ovum Mobile Connections Report - 2009 Region-wise Mobile Connections Projections (mn, 2010)
    • Emerging markets such as Latin America and Africa not only have high potential, but also bear similarities to India in terms of market dynamics
    • Middle East being a high ASP market offers potential for revenue growth for Micromax
  • 26. Contents Company Profile Indian Handset Market Overview Micromax Value Proposition Business Model Competition Way Forward Capital Infusion: Disbursement Plan & Key Milestones
  • 27. Micromax intends to utilize the funding to grow the existing business as well as foray into new industries and markets Disbursement Plan for Capital Infusion Sought NPD 1 Marketing M’facturing Facility Intl Expansion Q2 2010 Q1 2010 Q3 2010 Q4 2010 Appointment of Brand Ambassador Monthly sales over 1mn units Launch of international operations VAS 3 foray Manufacturing facility setup No. 2 brand in India by sales & GRPs 2 Tentative Timelines for Key Milestones to be achieved in 2010
    • Micromax intends to build a complete R&D team for New Product Development (NPD) and also utilize the capital for foray into services and emerging computing devices business
    • Marketing strategy for 2010 includes the appointment of a leading Indian celebrity as the company brand ambassador and a number of highly visible campaigns
    • The manufacturing facility is planned with a capacity of 2 to 2.5mn units per month
    Source: Company Information Note 1: New Product Development; 2: Gross Rating Points; 3: Value Added Services Total Capital Current Business
  • 28. Thank You Prepared By – Jayanth Kolla E-Mail ID - [email_address] Mobile - +91-9873094602