1. NCC Telecom Pvt. Ltd.
Financial Projection
Report
Growth path for NCC Telecom Private Ltd.
Shashank,
B.Tech. Birla Institute of Technology, Ranchi
MBA, NITIE, Mumbai
2. Table of Contents
1. Executive summary ............................................................................................................................... 3
2. Market Analysis ..................................................................................................................................... 4
2.1. Residential market demand analysis ............................................................................................ 5
2.2. Commercial Market demand analysis........................................................................................... 7
2.3. Hospitality Market demand analysis............................................................................................. 9
2.4. City wise market analysis ............................................................................................................ 12
2.5. Demand Forecasting ................................................................................................................... 13
4.5.1. Time series projection......................................................................................................... 13
4.5.2. Qualitative methods ........................................................................................................... 14
4.5.3. Diffusion of innovations ...................................................................................................... 14
5. Technical Analysis ............................................................................................................................... 18
6. Strategy ............................................................................................................................................... 23
6.1. What markets would NCC Telecom would like to be in?............................................................ 23
6.2. What share would NCC like to have in each market? ................................................................. 24
6.3. What products/technologies does NCC Telecom require? ........................................................ 24
6.4. What geographies does NCC Telecom want to operate in? ....................................................... 25
6.5 What type of people and skills does NCC Telecom need? .......................................................... 25
6.5. What financial targets would NCC telecom wish to achieve? .................................................... 26
6.6. Strategy Formulation .................................................................................................................. 27
7. Financial Projections ........................................................................................................................... 28
8. Risk analysis ........................................................................................................................................ 30
9. Conclusion ........................................................................................................................................... 32
10. Attachments.................................................................................................................................... 32
10.1. Market Analysis ....................................................................................................................... 32
10.2. Revenue Projection ................................................................................................................. 32
10.3. Risk Analysis ............................................................................................................................ 32
NCC Telecom Private Limited Page 2
3. 1. Executive summary
NCC Telecom private Ltd. is pleased to provide this detailed Financial Projection Report (FPR) to
chart its financial future. The FPR enables the partner organization to review its financial
condition as it continues to offer exceptional product and services that meet its customer
expectations while continuously expanding into new markets.
The foundation of FPR focuses on a review of past financial trends along with forecasting a
realistic view into NCC Telecom’s financial future. Our financial issues and struggles demand a
“microscopic” assessment and analysis of current financial conditions, practices, and trends
along with “charting a course of action” that will enable the partner organization to have a well-
thought out and well-developed long term financial plan. The primary objective of the FPR is to
identify the potential business that can be created by taking proactive steps. Also, it provides
our partner organization the confidence that comes from making well informed, data-driven
decisions.
No one can predict the future with absolute certainty; however, the information contained in
this report will enable the partner organization and NCC Telecom to take proactive steps to
reap in the opportunity created by the new product line. This will be accomplished by applying
a logical set of economic assumptions to identify the future financial projections through
various strategies, and making a comparison among them and identifying the most suitable
strategy.
The FPR is based upon the analysis of home automation market in India. Depending upon the
current market position and the target market share of NCC Telecom, strategy was formulated.
Financial analysis of the strategy revealed the necessary investment amount along with the
timelines.
The FPR reflects the mission of NCC Telecom to become market leader in field of building
automation by providing fully integrated solutions, latest in technology with quality and
customer satisfaction as the only goal. The report is based upon the most accurate financial
data currently available. These initial figures indicate that NCC Telecom must implement
suggested strategy to take full advantage of the current product line.
NCC Telecom Private Limited Page 3
4. 2. Market Analysis
Market analysis would encompass, estimating the potential size of the market for the product
proposed to be manufactured and get an idea about the market share that can be captured.
Since home automation is a derived product drawing its demand from the newly constructed
real estate, we would be focusing on growth of real estate in India.
There can be two different ways of acquiring data required for analyzing the market size of the
product, i.e. primary source of information and secondary source of information. Primary
source of information refers to information that is collected for the first time to meet the
specific purpose on hand. However, secondary sources of information are gathered in some
other context and are already available. FPR for NCC Telecom would be primarily dependent
upon the secondary information sources. For estimating the supply of real estate in India, we
would be using the research reports of real estate consultancy firm, Cushman & Wakefield.
Excerpts from the research report of Cushman & Wakefield:
Cushman & Wakefield Research revisits the demand estimates post the economic crisis which
resulted in weakening business sentiments and demand contraction. The pan India cumulative
demand during 2009-2013 is estimated to be 196 million sq. ft. for office and 43 million square
feet for retail. While demand for the hospitality segment is likely to be over 690,000 rooms
nights, that for the residential segment is expected to be 7.5 million units for the period under
consideration.
The estimates for various asset classes were arrived at by considering variables which form the
primary demand drivers or major Demand Forecast influential factors of that particular asset
class:
Office: The variables considered for demand forecast are the Gross Domestic Product (GDP),
historical demand trend in the real estate sector and anticipated future commitments.
Residential: The growth in income, increase in the number of urban households, and the growth
in loan disbursement were some of the considerations for residential demand forecast.
Hospitality: The demand estimate for the hospitality segment, referred to as “Accommodated
Demand”, is computed based on the estimated supply and anticipated occupancy levels during
the years under consideration.
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5. Since NCC Telecom would be primarily targets three unique sectors, i.e. Residential, office and
hospitality. Among the residential sector, NCC Telecom caters to both the new homes coming
up as well as the revamped houses targeted through architects and interior designers. We
would be analyzing the supply of real estate in these three segments individually.
2.1.Residential market demand analysis
The pan India residential demand is estimated to be over 7.5 million units by 2013 across all
categories including Economically Weaker Sections (EWS), affordable, mid and luxury segments.
The residential demand for top seven cities is estimated to be 4.5 million units by 2013. Of the
total expected demand across India, 43% is likely to be generated in tier 1 cities, i.e., Bangalore,
Mumbai and NCR. Mumbai is likely to witness the highest cumulative demand of 1.6 million
units by 2013 due to various development projects and increasing urbanization in the city.
Hyderabad and Bangalore are likely to have the highest compounded annual growth of 14% in
the next five years. The affordable and mid segment category, likely to constitute 85% of the
total residential demand, will be the primary focus of most developers.
Based upon our experience at NCC telecom, we are making some basic assumption:
Average revenue realized per house installation = Rs. 1 Lakh
Level of penetration of home automation in Tier-I cities of India
o Mumbai: 1%
o NCR Delhi: 1.5%
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6. o Chennai: 0.6%
o Pune: 1%
o Hyderabad: 0.6%
o Bangalore: 0.8%
o Kolkata: 0.6%
City wise breakup of revenue in home automation market in Tier-I cities can be derived from
the combination of research report and our assumptions.
City-wise breakup per year
Penetration Revenue in Revenue through Total Revenue
City Million units level new homes architects (in Rs. Cr.)
Mumbai 0.34 1.00% 34 10.00 44.00
NCR 0.23 1.50% 34.5 10.00 44.50
Chennai 0.07 0.60% 3.96 3.00 6.96
Pune 0.09 1.00% 9 3.00 12.00
Hyderabad 0.06 0.60% 3.6 2.00 5.60
Bangalore 0.12 0.80% 9.6 5.00 14.60
Kolkata 0.06 0.60% 3.6 2.00 5.60
Rest of India 0.55 0.20% 11.08 5.00 16.08
Pan India 1.52 0.72% 109.34 40.00 149.34
Since, the research report contain the information regarding the newly constructed homes
only, we have estimated the market size of renovated homes on our deep knowledge of the
home automation sector. Also, the expected revenue realization from the renovated homes is
expected to be around Rs. 2 Lakh.
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7. City-wise breakup per year for renovated homes
Number of Number of Penetration
City architects projects level Revenue (in Cr.)
Mumbai 50.00 10.00 1.00% 10.00
NCR 50.00 10.00 1.00% 10.00
Chennai 15.00 10.00 1.00% 3.00
Pune 15.00 10.00 1.00% 3.00
Hyderabad 10.00 10.00 1.00% 2.00
Bangalore 25.00 10.00 1.00% 5.00
Kolkata 10.00 10.00 1.00% 2.00
Rest of India 25.00 10.00 1.00% 5.00
Pan India 200.00 1.00% 40.00
2.2.Commercial Market demand analysis
The pan India demand for office space is estimated to be 196 million sq. ft. by 2013, with seven
major cities accounting for approximately 80% of the total demand. Hyderabad, Pune and
Kolkata are expected to witness the highest compounded annual growth of approximately 28%
during 2009-2013, highlighting the growing prominence of tier 2 cities in the India growth story.
However, Bangalore is likely to have the highest cumulative demand of 34 million sq. ft.
through the period under consideration, followed by Chennai, owing to renewed interest from
the corporate sector, post the economic crisis. Established commercial centers, however, are
expected to remain slower in growth than their tier 2 counterparts. Cumulative demand among
the tier 1 cities of Mumbai, NCR and Bangalore will account for 42% of total demand, with
NCC Telecom Private Limited Page 7
8. Mumbai and NCR accounting for 24 and 25 million square feet of office space demand through
2009-2013, respectively.
Based upon our experience at NCC telecom, we are making some basic assumption:
Average revenue realized per office installation = Rs. 3 Lakh
Average area of office per unit of installation = 1000 Sq. Feet
Level of penetration of home automation in Tier-I cities of India
o Mumbai: 2%
o NCR Delhi: 3%
o Chennai: 1.5%
o Pune: 2%
o Hyderabad: 2%
o Bangalore: 2.5%
o Kolkata: 2%
City-wise breakup
City Mn sq. ft. Office units Penetration level Revenue (in Cr.)
Mumbai 5 5000 2.00% 3.00
NCR 5 5000 3.00% 4.50
Chennai 5.6 5600 1.50% 2.52
Pune 4.6 4600 2.00% 2.76
Hyderabad 3.4 3400 2.00% 2.04
Bangalore 7 7000 2.50% 5.25
Kolkata 2 2000 2.00% 1.20
Rest of India 8.15 8150 0.50% 1.22
Pan India 40.75 40750 1.84% 22.49
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9. 2.3.Hospitality Market demand analysis
The increasing contribution of in bound and domestic travel and tourism to the Gross Domestic
Product (GDP) of India has provided the necessary impetus for the growth of the hospitality
industry. According to the Travel & Tourism Competitiveness Report 2009 by World Economic
Forum, the contribution of travel and tourism to GDP is expected to be approximately 6% in
2009 and the real GDP growth for travel and tourism economy is expected to be at 0.2% in
2009 with a potential of increase to an average 7.7% per annum over the next 10 years.
The pan India accommodated demand for the hospitality sector is estimated to be over 690,000
room nights by 2013. Tier 1 cities are likely to drive the demand in the hospitality segment led
by NCR which is estimated to constitute 15% of the total demand by 2013, followed closely by
Mumbai at 14%. The upcoming Commonwealth Games in 2010 is one of the main demand
drivers of room nights in the NCR. Bangalore, however, is expected to register the highest
compounded annual growth of about 26% in demand, followed by NCR at 24% and Pune at
23%.
Tier 2 and 3 cities are also likely to generate demand for 242,000 room nights by 2013 owing to
various initiatives taken by the Indian government to promote commercial and tourism activity
in these locations.
Based upon our experience at NCC telecom, we are making some basic assumption:
Average revenue realized per Hotel room installation = Rs. 0.25 Lakh
Average occupancy rates in India = 61.76%
Level of penetration of home automation in Tier-I cities of India
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10. o Mumbai: 10%
o NCR Delhi: 20%
o Chennai: 10%
o Pune: 10%
o Hyderabad: 10%
o Bangalore: 10%
o Kolkata: 8%
City-wise breakup
City Room night in '000 Total room in '000 Penetration level Revenue (in Cr.)
Mumbai 20 32.38 10.00% 8.10
NCR 22 35.62 20.00% 17.81
Chennai 12 19.43 10.00% 4.86
Pune 6 9.72 10.00% 2.43
Hyderabad 12 19.43 10.00% 4.86
Bangalore 16 25.91 10.00% 6.48
Kolkata 6 9.72 8.00% 1.94
Rest of India 52.88 85.61 0.50% 1.07
Pan India 146.88 237.82 8.00% 47.54
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11. Summing up the market demand analysis from these four sectors for the year 2009-13 would
yield a comparative figure represented through histograms below.
New revenue opportunities per year
300
Revenue in Rs. Crore
250
200
150
100
50
0
Average
2009 2010 2011E 2012E 2013E
Business
Residential 73 82 92 104 113 92.77
Office 17.62 19.57 24.79 30.67 35.23 25.58
Hospitality 27 33 44 51 57 42.40
Renovated Homes 35 35 35 35 35 35.00
Total 153 170 196 220 240 196
The market size for the home automation products is shown with major contribution coming
from the newly built residential sector. Due to the lack of accurate figures for the renovated
homes we are taking a pessimistic figure, and assuming the renovated home segment to remain
constant. Residential, office and hospitality have maintained their ratios of revenue
contribution constant y-o-y and are showing a healthy growth rates. For years 2009-13 in
consideration, we determined the average revenue from these four sectors to determine the
breakup of market potential.
Revenue potential sector-wise
18%
47% Residential
22% Office
Hospitality
13% Renovated homes
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12. 2.4.City wise market analysis
Home automation market is prevalent across the Tier-I cities. Therefore, analysis of the market
size of these cities is important to determine the strategy for NCC telecom. Secondary sources
of market analysis yielded city-wise figures for real estate, which were analyzed to determine
the market-wise analyze for the Tier-I cities.
Revenue potential across cities
80.00
70.00
60.00
50.00
40.00
30.00
20.00
10.00
0.00
Mumbai NCR Chennai Pune Hyderabad Bangalore Kolkata Rest of India
Revenue potential from the Tier-I cities were summed up to determine the relative
attractiveness of the cities. Bigger the market sizes, more attractive it becomes for NCC
Telecom.
Residential Office Hospitality Total Weightage
Mumbai 44.00 3.00 8.10 55.10 25.12%
NCR 44.50 4.50 17.81 66.81 30.46%
Chennai 6.96 2.52 4.86 14.34 6.54%
Pune 12.00 2.76 2.43 17.19 7.84%
Hyderabad 5.60 2.04 4.86 12.50 5.70%
Bangalore 14.60 5.25 6.48 26.33 12.00%
Kolkata 5.60 1.20 1.94 8.74 3.99%
Rest of India 16.08 1.22 1.07 18.37 8.38%
Pan India 149.34 22.49 47.54 219.37 100.00%
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13. Rest of India,
8.38%
Kolkata, 3.99%
Mumbai,
Bangalore,
25.12%
12.00%
Hyderabad,
5.70%
NCR, 30.46%
Pune, 7.84%
Chennai, 6.54%
NCR Delhi shares the largest pie among all the top seven cities of India at 30.46%, followed by
Mumbai at 25.12%. NCR Delhi and Mumbai alone share more than half of the home
automation market in Tier-I cities, which themselves comprises more than 90% of home
automation market in India. This clearly shows that targeting these two cities would be of
prime importance for NCC Telecom. Rest of the five tier-I cities share a small pie of market size
ranging from 4% to 12%.
2.5.Demand Forecasting
After gathering data about various aspects of the market from the secondary sources of
information the secondary sources, an attempt has been made to estimate future demand.
Depending upon the information resources for the home automation sector which we have, we
would be using the following three methodologies:
1. Time series projection
2. Qualitative methods
3. Diffusion of innovations
4.5.1. Time series projection
Time series projection methods generate forecasts on the basis of an analysis of the historical time
series. Since we have a detailed data for a very short span of five years for forecasting, i.e. 2009-13,
usual methods of time series of projection would fail. Therefore based upon the lifecycle stage of real
NCC Telecom Private Limited Page 13
14. estate market in India, we are assuming a linear growth equivalent to the average market size of each
segment for given five years.
Basic assumptions of market growth
Assuming a linear growth of market
Average revenue added in residential sector in Rs. Cr. 975.00
Average revenue added in office sector in Rs. Cr. 202.50
Average revenue added in hospitality sector in Rs. Cr. 61.53
Potential Home Automation Market in India
35000.00
30000.00
25000.00
20000.00
15000.00
10000.00
5000.00
0.00
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
4.5.2. Qualitative methods
Qualitative methods rely essentially on the judgment of experts to translate qualitative
information into quantitative estimates. It involves soliciting the opinions of a group of
managers on expected future sales and combining them into sales estimate.
Almost all the figures related to market size have been verified by the executives at NCC
Telecom, who have decades of experience in the field of home automation market in India.
4.5.3. Diffusion of innovations
Diffusion of Innovations is a theory that seeks to explain how, why, and at what rate new ideas
and technology spread through cultures. Diffusion of an innovation occurs through a five step
process. This process is a type of decision-making. It occurs through a series of communication
NCC Telecom Private Limited Page 14
15. channels over a period of time among the members of a similar social system. The five steps are
categorizes as: awareness, interest, evaluation, trial, and adoption. An individual might reject
an innovation at any time during or after the adoption process.
For an innovation to succeed and grow, the rate of diffusion of innovation holds prime
importance. There are many factors leading to diffusion of innovation across society leading to
its success. These factors are represented in the schematic diagram mentioned below:
Since, the product offering by NCC Telecom through Digital Living is a revolutionary product in
the field of home automation, especially in India. Going by the theory of diffusion of innovation,
home automation market is expected to spread by a natural rate. Penetration growth rate
symbolizes the spread of innovation to common masses with time. Historically every innovation
in the field has suffered various diffusion rates. Based on their acceptance and product lifecycle,
we expect home automation market on to diffuse at particular rates.
NCC Telecom Private Limited Page 15
16. Penetration growth rates
Growth in rate of penetration of residential 20.00%
Growth in rate of penetration of office 22.00%
Growth in rate of penetration of hospitality 10.00%
Home automation market is dependent upon the electronics industry, which itself depends
largely on the level of innovation. Due to the continuous innovation in the field of electronics,
we expect the profit margins to decrease with time. Based upon our experiences at NCC
Telecom, we would expect the prices of electronic components used into the manufacturing of
Digital Living to depreciate, leading to decrease in the expected revenue from home
automation by around 8% per year starting from year 2013.
Penetration growth rates
Growth in rate of penetration of residential 20.00%
Growth in rate of penetration of office 22.00%
Growth in rate of penetration of hospitality 10.00%
Decrease in revenue due to technology
Decrease in price due to technology improvements 8.00%
All figures are in Rupees Crore
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18. 5. Technical Analysis
The Digital Living series provides a unique experience to its customers in a cost effective and
competitive way. The following chart shows a comparative analysis between major firms in the
field of home automation across the globe.
Core technology
Digital It is developed in current trend of Technology with mix of IP and RS 485 protocol at
Dreams required level, without any Native app it supports almost all browsers to use
automation from any of WIFI device.
On-Q Proprietary wired bus. Extremely reliable and constantly polls status of devices.
Difficult retrofit.
Lutron Proprietary wired bus. Extremely reliable and constantly polls status of devices.
Difficult retrofit.
Centralite Proprietary wired bus. Extremely reliable and constantly polls status of devices.
Difficult retrofit.
Clipsal Proprietary wired bus. Extremely reliable and constantly polls status of devices.
Difficult retrofit.
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19. Features DIGITAL DREAMS On-Q Lutron CentraLite Clipsal
Max number of devices per network 2048 248 64 (see 1) 4096 (see 2) 1024 (see 3) 200 24 48 255 255
NCC Telecom Private Limited
Dimmer Switches YES Yes Yes Yes Yes Yes Yes Yes Yes Yes
Can set default level for local operation of
YES Yes Yes Yes Yes
dimmer
Can set default ramp rate for local operation
YES Yes Yes Yes Yes
of dimmer
True Relay On/Off Switches YES Yes Yes Yes Yes Yes Yes Yes Yes Yes
Any switch can link to any other switch Yes Yes Yes Yes Yes Yes
YES No No No
(virtual n-way)
Switches report status when operated Yes Yes Yes Yes Yes Yes
YES No No No
locally
Yes Yes Yes Yes Yes Yes Yes
Keypads with status LEDs for each button Only with Back Lit Yes Yes
Devices are immune to FALSE activation Yes Yes Yes Yes Yes Yes Yes Yes
No No
from noise
Devices are immune to FAILED activation Yes Yes Yes Yes Yes
No No No No No
from noise
Switch and Keypad firmware is field Yes
YES No No No No No No No No
upgradeable
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20. Critical Retrofit Features
Features DIGITAL DREAMS On-Q Lutron CentraLite Clipsal
Retrofit "no neutral" devices Yes Yes Yes
No No No No No No No
(return through load or return to ground)
Shallow form factor for tight wiring spaces
NCC Telecom Private Limited
YES No No No No No No No No No
and wiremold boxes
Keypads that are also a dimmer for a local Yes Yes
No No No No No No No No
load
Note
Keypads that are also a relay for a local load No No No No No No No No No
(Not CFL)
Dual Load Switches No No No No No No No No Yes
RF "Stick-a-Switch" No No No No No No No No No No
Screw-in Dimmer module No No No No No No No No No No
Screw-In Relay module (for CFL bulbs) No No No No No No No No No No
2-pin Lamp Modules with local control
No No No No No No No No No No
(required for decorative lamp ext. cords)
Yes
3-pin Lamp Modules with local control No No Yes (see 4) Yes (see 4) Yes (see 4) No No No No
Lamp modules w/o or can disable local Yes
No No No No No No No No No
control function (to prevent self-activation)
Lamp modules w/o or can disable local
YES No No No No No No No No No
control circuit (to prevent CFL flicker)
Yes
Appliance modules with local control YES No No No No No No No No
Appliance modules w/o or can disable local Yes
No No No Yes (see 5) No No No No No
control function (to prevent self-activation)
Appliance modules w/o or can disable local Yes
YES No No Yes (see 5) No No No No No
control circuit (to prevent CFL flicker)
Outlet Replacement relay module NCC No No No No No No No No No
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21. NCC Telecom Private Limited
Look and Feel Features
Features DIGITAL DREAMS On-Q Lutron CentraLite Clipsal
True Rocker or Toggle (Top On/Bottom Yes
No Yes No
Off)
Rocker/Toggle Color Change Kits No Yes Yes No
Colour Selection YES
Standard Size (decora/accenti/?)
Yes Yes Yes
Dimmers have LED level bar No No No No No No
White LED with color change filters No
Programmable full spectrum LED No No No No No No No No No
Programmable bi-color or tri-color LED No No No No No No No Yes Yes
Brightness controlled/Dimmable LED Yes
Yes
Engraved label option Yes No
Double tap for fast on (or other special
Yes Yes Yes Yes
functionality)
Page 21
22. Other Features
Features DIGITAL DREAMS On-Q Lutron CentraLite Clipsal
Wired Tabletop Controllers YES Yes Yes Yes No Yes No
RF remotes YES No Yes Yes Yes No No No No Yes
RF Keyfobs No No Yes Yes Yes Yes No No No No
Wireless motion sensors No No Yes Yes Yes Yes No No NA No
Yes Yes Yes Yes
Wired motion sensors YES No No No No NA
NCC Telecom Private Limited
Companion switch available for use with YES No Yes No Yes No No No NA No
traditional traveler wires
Companion switch looks exactly like master YES NA No NA No NA NA NA NA NA
Any Switch can trigger a scene YES No No No No Yes No No Yes Yes
Solid State On/Off Switches No NA No Yes
Yes Yes Yes Yes Yes Yes Yes No
IR Bridge YES Yes
Permanent Device Addressing
No No No No Yes No No Yes Yes
(required for remote enrollment and remote
factory reset)
Assignable Device Addressing YES Yes Yes Yes Yes Yes Yes Yes Yes Yes
(required for simplified device reference in No No No No No No No No No
Reports load changes (bulb failure) No
Continuous device status polling (as opposed No Yes Yes Yes Yes Yes Yes Yes Yes Yes
event driven device status table which
to an Remote Link/Scene Programming YES No No Yes Yes Yes Yes Yes Yes Yes
Remote device enrollment YES No No No No No No No Yes Yes
Remote programming of local settings YES No No Yes Yes Yes Yes Yes Yes Yes
Remote factory reset / hard reset YES No No No No No No No Yes Yes
Remote device diagnostics YES No No Yes Yes Yes No No Yes Yes
Vacation Mode YES No Yes Yes Yes Yes No No No No
Timeclock functions YES No Yes Yes Yes Yes No No Yes No
Security Mode No No Yes Yes Yes Yes No No No No
Shade/Blind control YES No Yes Yes No No No No Yes No
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Conditional programming No No No Yes Yes No No No Yes No
No No Yes Yes No No No Yes No
Sequence programming YES
23. 6. Strategy
NCC Telecom Pvt. Ltd. as an organization has few desired milestones, which it would like to
achieve using its current potential capabilities. We would be translating NCC’s strategic
business plans into a set of drivers and requirements that our strategy will address:
1. What markets would NCC Telecom would like to be in?
2. What share would NCC like to have in each market?
3. What products/technologies does NCC Telecom require?
4. What geographies does NCC Telecom want to operate in?
5. What type of people and skills does NCC Telecom need?
6. What financial targets would NCC telecom wish to achieve?
6.1.What markets would NCC Telecom would like to be in?
NCC Telecom has been a leader in the field of intercom, video apartment and security systems
while in the realm of home automation products we have come with products such as video
door phones and security solutions and communication solution through the EPABX systems.
However very recently, we have started looking at developing a new product line of home
automation primarily due to following reasons:
Markets for intercom have matured
Venturing into newer products with much more promising revenue
De-risking our product offering to customers using multiple products
Intercom, video
apartment and
security systems
Home
automation
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24. NCC telecom would like to look into newer businesses of home automation which are more
promising as well as more in growth stage, thereby providing immense potential to perform.
We would like to take advantage of having the necessary product line for home automation
6.2.What share would NCC like to have in each market?
Observing the matured markets for Intercom, video apartment and security systems, NCC
telecom won’t invest further into this segment. Regarding the home automation market, we
would like to have a commanding market share in the regions of Mumbai and Pune. In the rest
of Tier I cities, we would like to have at least 15% market share.
Level of Digital Living presence
Year Mumbai NCR Chennai Pune Hyderabad Bangalore Kolkata
2009 0% 0% 0% 0% 0% 0% 0%
2010 0% 0% 0% 0% 0% 0% 0%
2011 20% 0% 0% 10% 0% 0% 0%
2012 20% 0% 0% 15% 0% 0% 0%
2013 25% 15% 15% 15% 15% 15% 15%
2014 30% 15% 15% 15% 15% 15% 15%
2015 30% 15% 15% 15% 15% 15% 15%
2016 30% 15% 15% 15% 15% 15% 15%
2017 30% 15% 15% 15% 15% 15% 15%
2018 30% 15% 15% 15% 15% 15% 15%
2019 30% 15% 15% 15% 15% 15% 15%
2020 30% 15% 15% 15% 15% 15% 15%
Above figures represents the targeted market share of NCC Telecom every year. Depending
upon our future experiences, we would revise our targets.
6.3.What products/technologies does NCC Telecom require?
Currently, NCC Telecom is competent in all the major technologies being currently used in the
field of home automation. However, large part of the technology development is dependent
upon its one of its directors. In order to cater future technology and product requirements,
necessary Research & Development structure needs to be setup.
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25. 6.4.What geographies does NCC Telecom want to operate in?
As analyzed in the market analysis segment, home automation business in primarily
concentrated in Tier I cities of India, which are in growth phase. A much bigger markets exist in
the Europe and America also, but in mature stages. NCC telecom would like to venture into
newer markets while enhancing reach in our current markets.
Increasing our Creating presence Increasing our
reach in Mumbai in newer Indian presence in Tier I
and Pune markets cities of India
Creating presence Increasing our
in international presence in foreign
markets countries
In order to accomplish that goal, we would be having a multi-pronged strategy, depicted
through the flow diagram. Our expansion strategy for venturing into newer markets would
primarily depend upon our previous experiences.
6.5 What type of people and skills does NCC Telecom need?
Currently NCC Telecom currently being a small sized company, with job profiles of its
employees being highly unorganized. In order to meet the manpower requirements for the
growing needs of the organization, large scale manpower needs to be recruited for necessary
profiles.
Sales in Marketing
Administration & HR Department
Manufacturing
Depending upon the size of the target market and our future experiences, we will recruit
necessary manpower in each area of operation.
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26. 6.5.What financial targets would NCC telecom wish to achieve?
NCC Telecom targets certain financial milestones which are imperative for further future
success of the firm. Our growth strategy involves different stages which are highly dependent
upon the success of our previous stages. Currently, we would be working on first stage of our
growth phase using finances from our consolidated reserves. However to fund further
expansion stages, we would require necessary external financing. We expect NCC Telecom
Digital Living series to achieve a billed order of at least Rupees 40 Crore by 2015.
Financial projections for NCC Telecom in Rs. Crore
45.0
40.0
35.0
30.0
25.0
20.0
15.0
10.0
5.0
0.0
2011 2012 2013 2014 2015
Billed orders Revenue Expected
Once the reliability and viability of NCC’s strength is proven with successive expansion into
newer markets, figures would be further refined.
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27. 6.6.Strategy Formulation
NCC Telecom has a very limited sales force which is active into selling and marketing of home
automation products. All the sales force is active in Mumbai and Pune region only, which have
been traditional markets for NCC Telecom. Moreover, the limited sales force has not been
active in all the sales transaction happening in Mumbai and Pune. We expect our presence of
only 20% of all home automation in sales pitch in Mumbai and around 10-15% in Pune.
Being a small sized company and the direct involvement of director in sales pitch has led to
high conversion rate of bids. NCC Telecom historically has a bid conversion rate of around 70%.
So, out of each 100 events of sales pitch, NCC Telecom gets business in around 70 events.
However with increasing size of the organization, we expect conversion bids to drop sharply.
Increasing competition in home automation segment would also lead to decreasing bid
conversion rate.
NCC Telecom is exposed to a very small segment of the home automation market in India. Even
though NCC Telecom has excellent sales leadership, it is having relatively small revenue
compared to its peers. We believe that expansion into newer markets with a much larger sales
force would create a much larger sales pitch opportunity. So even though our bid conversion
rate drops due to decreased monitoring, our overall sales are expected to shoot up drastically.
In order to accomplish that goal, we would be having a two pronged strategy:
Increasing our reach in Mumbai and Pune
Creating presence in newer markets
With increased sales force in Mumbai, we expect our reach to increase from 20% to 30% by
2014. Since Pune being a smaller market and NCC having a decent reach, we would not further
invest to increase our sales in that region.
We would establish our presence in the remaining Tier I cities, i.e. Delhi, Kolkata, Bangalore,
Hyderabad and Chennai. Adequate sales force with necessary infrastructure would be
established in these cities. NCC telecom expects to achieve a market share of 15% in these
cities by 2014. Depending on our experiences in these cities, further strategies would be
formulated for each city.
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28. 7. Financial Projections
The Financial Projections have been prepared on the assumption that the Effective Date is July
20, 2011, and are based on, and assume, among other things, which will be discussed
hereafter. We have used the historical earning figures to arrive at major assumptions for our
financial projections.
Actual Financial summary of Digital Living and NCC Telecom Ltd. combined
In Rs. Cr. Revenue Pending orders
Digital Intercom Digital Intercom Net profit Selling &
Year Living & VDP Total Living & VDP Total admin costs
2008-09 0 1.8 1.8 0 0 0 0.40
2009-10 0 2.5 2.5 4.17 0 4.17 0.50 16.90%
2010-11 1.09 2.73 3.82 7.6 0 7.6 1.00 17.24%
Some of the basic assumptions which can be derived from the historical figures are:
Profit margin for intercom & VDP market remains constant.
Profit margin for digital living market remains constant.
Marketing and administrative costs as percentage of market size to remain constant
with time.
Average marketing & administrative costs as percentage of market size 5.78%
Average profit margin from Intercom & VDP 21.11%
Average profit margin from Digital Living 38.87%
NCC Telecom doesn’t realize the booked orders in the year of their consumption as revenue.
Depending upon the nature of the client and project requirements, the time lag varies.
However, we have assumed the following revenue realization from the year of their bookings.
Realization of billed orders as revenue
0 1 2 3
0.00% 30.00% 70.00% 0.00%
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29. Major risks to our previous assumptions are:
Increasing inflation
Decrease in profit margins
In order to remove the vulnerability of risks to our estimates, we incorporate their effect while
forecasting the funding requirements.
Rate of inflation (leading to higher costs for the company) 4.00%
Percentage decrease in profit margins with time 1%
Expected profit margins
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
38.87% 38.48% 38.10% 37.71% 37.34% 36.96% 36.59% 36.23% 35.87% 35.51%
Since NCC Telecom would primarily expand in the field of marketing and administration, we
would be expecting our funding requirements based upon the expenses incurred to expand
them.
Funding requirement estimates
Percentage of Marketing &
Conversion Billed Revenue
Year
market Administration funding Net Profit
of bids orders Expected
harnessed required (in Rs. Cr.) expected
2009 0.00% 0% 0.0 0.0 0.00 0.00
2010 0.00% 0% 0.0 0.0 0.00 0.00
2011 5.81% 70% 8.0 0.0 0.66 0.00
2012 6.20% 70% 9.6 2.4 0.82 0.92
2013 16.26% 70% 27.4 8.5 2.45 3.22
2014 17.51% 65% 32.4 14.9 3.24 5.63
2015 17.51% 60% 35.4 28.9 3.98 10.79
2016 17.51% 55% 38.3 33.3 4.90 12.30
2017 17.51% 50% 41.2 36.3 6.03 13.27
2018 17.51% 45% 43.9 39.2 7.43 14.21
2019 17.51% 40% 46.3 42.1 9.15 15.08
2020 17.51% 30% 41.1 44.6 11.28 15.85
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30. 8. Risk analysis
NCC Telecom’s revenue forecasts are based on various parameters which have been
determined with inputs from our experienced directors. However, our forecasting must be
guarded against overstating customer size and revenue generation potential while avoiding
being too conservative. Performing sophisticated risk assessment and sensitivity tests on key
input parameters is a prudent solution to this forecasting dichotomy and thus reducing the risk
in planning, designing, and financing NCC Telecom.
Sensitivity tests are performed to determine the impacts of changes to key input variables.
However, in order to make informed decisions, it is imperative that input parameter
uncertainties are estimated and risk assessment is performed to quantify key input impacts on
the sales estimates and the probabilities associated with the long-term funding requirements.
Estimates for the key assumptions of our estimates have been suggested by our directors who
have long experience in this sector.
Scenario analysis of funding requirements to variations in the value of key assumptions
Key assumptions Pessimistic Expected Optimistic
Residential 10.00% 22.00% 30.00%
Growth rate of penetration in Office 10.00% 20.00% 25.00%
Market specific
Hospitality 5.00% 10.00% 15.00%
Decrease in price due to technology improvements 20.00% 8.00% 4.00%
Rate of Inflation leading to higher costs 8.00% 4.00% 2.00%
Residential 500.00 975.00 1500.00
Potential revenue addition in Office 100.00 202.50 300.00
Hospitality 20.00 61.53 100.00
Marketing and Administrative costs w.r.t. market
Firm share 20.00% 5.78% 3.00%
Specific
Decrease in profit margins 5.00% 1% 0.50%
Expected revenue from all three situations, i.e. pessimistic, optimistic and expected resulted in
net profit for NCC Telecom. This shows the expected revenue being assured and strong enough
to withstand deep shocks created by poor market condition.
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32. 9. Conclusion
Financial projection report has been created to provide insights into the future financial
position of NCC Telecom based upon the current financial position and the expected market
situation. It is an unbiased review of the expected future position that NCC Telecom would
achieve after following necessary steps for growth.
Wherever necessary assumptions were required, we have arrived after consultation with
people in relevant field. All the supporting files which were used to arrive at the conclusion
have been attached along with the output files, i.e. “Revenue projection” and “Risk analysis”.
10. Attachments
10.1. Market Analysis
10.2. Revenue Projection
Revenue
Projection.xlsx
10.3. Risk Analysis
Risk Analysis.xlsx
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