This document summarizes financial projections for a company that produces and sells polysensors and sensor cartridges from 2008-2010. It projects increasing sales but declining operating margins over this period. Key metrics like ROE, sales to book value, EPS are provided. The document also outlines an investment strategy for the company that includes providing both equity and debt financing with terms like interest rates, required sales and ROE benchmarks. Manufacturing costs and assumptions about expenses, depreciation, tax rates and R&D spending are defined.
4. Assumptions 2008 2009 2010
Growth 20% 20%
Selling Price would not increase 187.5 187.5 187.5
Rise in COGS (%) 0% 10% 10%
Sensor Sale per Machine would decrease in years 12 11 10
Rise in COGS of Sensor (%) 0% 10% 10%
Sales Projection on Realistic basis 1000 1200 1440
Selling Price of Cartridge (it would kep reducing) 9 7.5 7
COGS of Sensor would increase 0% 10% 10%
We assume that investment in miscelleaneus assets on % of GP 8% 8% 8%
Depreciation WDV 25% 25% 25%
Valuation Pre Investment 2008 2009 2010
PAT 43,243 42,929 27,294
Depreciation 313 313 313
Cash Flow 43,555 43,241 27,606
Year 1 2 3
Discounting Rate 0.12 0.12 0.12
Discounting Factor 0.89 0.8 0.71
PV of Cash Flows 38888.73 34471.55 19649.63
Other expenses are taken as percentage of sale @2% 2%
Sum Of Present Values 93009.91
Purchase 30%
Value - Equity Err:502
5. Investment Strategy 2008 2009 2010
Equity 28000
Debt Commitment (with conditions) @10 % 50000 50000 75000
Rate of Interest 10% PLR+2.25% PLR+2.25%
We would embed a real option into the debt converting debt into equity within
a period of two years from the date of debt given but only till Dec 2011 as last
Valuation of company for converting debt into equity would be
Years 2008 2009 2010
Increment for Valuation in future years 40% 60% 80%
Valuation of Company for these years 130667 149333 168000
Example
Date of loan given Dec-08 Nov-09 Mar-10
Debt given 50000 50000 50000
Rate of Interest 10% PLR+2.25% PLR+2.25%
Exercising Right Valid Till Dec-10 Nov-11 Dec-11
Debt conversion in the following years 50000 40000 40000
Equity 38% 27% 24%
UPPER Cap on VC shareholding would not be more than 60% at any point of time
Investment Plan 2008 2009 2010
Equity 28000
Debt Commitment 50000 50000 75000
Key Benchmarks to achieve
Sales of minimum
Machines 800 960 1100
Sensors 6400 14080 22880
Minimum Level of ROE 30% 30% 30%
R&D expenses
Both the Products are to be evalued and stage of development would be considered
Rating of UNICEF would be takeninto consideration
Equity Dilution
Any stake dilution would not be permisible without the consent of VC
The VC would have "First right of Refusal"
THe Promoter cannot engage in any other business with the same kind of research
Any dealings with Bhat Bio- Tech India Pvt Ltd would have to be cleared from the director of VC
6.
7. Cost of Manufacturing
Annual Increase in Cost of Goods Sold* 10%
Sales & General Expenses as proportion of Cost of Goods
Sold 20%
Sundry Debtors as % of Sales 20%
Sundry Creditors as % of Cost of Goods sold 20%
Initial Assets (Testing Eqpt and Electrode Mfg Eqpt) 50000
Annual Rate of Depreciation 25%
Reducing Balance Method used for Depreciation
Tax Rate (Corporate tax) 35%
R& D Investment as % of Sales 10%
Interest Rates
Long term Debt 10%
Provision for dividend (Including CDT) 12.50%