- Country: India
- Industry: Manufacturing
- Stage: Expansion/Growth
- Investment size: $8,000,000 / min. $800,000
We are a furniture manufacturer based in India, making outdoor furniture (hammocks) for export (100% EOU), as well as indoor furniture for the domestic market. The export oriented unit is 19 yrs old and the domestic unit is 8 yrs old.
Outdoor and Indoor Furniture Manufacturing Company: The export oriented division started in 1992 (19 years ago), whereas the domestic selling division started in 2003 (8 years ago). It is a family run business and hence shares are held within the family members. The two units achieved together sales of $5.7 mil in the last financial years.
The export market has been very well established. Main markets are North America, South America, Europe and the Far East. Major portion of the sales goes to North America. The domestic furniture division of the company has created a brand name in the fast growing Indian market . The key advantages are its vertically oriented manufacturing facility, low cost labor and buying power that makes it a high potential business.
Rationale for the deal
What is the current source of finance of the company?
State Bank of India (SBI): Provides facilities to the export oriented & domestic division of the company. SBI is the only banker in India listed in the fortune 500 companies.
How much funds company require and for what purpose?
The company looks at investment in various options. It is willing to look at customized options too, in case it is feasible for the company.
The company is looking at a loan of US$8.00 mil with an interest rate not more than 2-3 %. It would pay back the investment with interest in 10-years. Repayment would start from the 6th month. The company wants to substitute the current working capital loans with high interest rate with low cost interest loan (2-3%).
US$5.5 mil would be used to offset the current loans and balance US$2.5 mil would be utilized towards working capital and expansion. This would in effect help to reduce the burden on the interest. It would allow the company to be more cost effective and help it to further make the products competitively. While we expand the current facilities, there would be some gains on the direct cost and profits. Finally, the company would be able to generate more profit and viability of repayment of the loans would be stronger. Equity of the company (US$3.9 mil shares) would be mortgaged as security.
The company would raise US$8.00 mil in the form of investment which is repayable from 5th year onwards until the 10th year. With the same advantages mentioned above (Option 1), the company can offer ROI from 1st year onwards as follows:
Year 1: 6%/ Year 2: 10%/ Year 3-10: 15%.
Upon request we can forward you a complete business plan, financial information (balance sheet) for the past three years or more, registrations and all other inputs pertaining to the company. We have developed the business and its reputation with a lot of hard work. We would like to grow this business along with you. Our ambition is to make our company public limited in the next five years.
Use of financing
We are seeking an investment of US$8.00 (GBP£5) mil to replace the current expensive borrowings from the Indian banks and expansion of existing plant and machines. By this way we are more cost effective and competitive. This would help to increase our sales and profits. We would like to have the investment either as loan with the repay period of 10-12 years with interest rates in the rage 2-3 % or as Investment with return of 15-20% average. The capital will be paid back from 5th to 10 yrs.
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