- Country: India
- Industry: Manufacturing
- Stage: Expansion/Growth
- Years in operations: 5, Employees: 48
- Investment size: $2,000,000 / min. $1,250,000
- Type of investment: Equity
We are an automation company established in 2006, which specializes in material handling and SPMS. We need funding to open a new factory and grow our business.
Manipulators and assembly line conveyors are some of our expertise areas. We have our own design, manufacturing and commissioning facility which gives us an advantage to provide turnkey solutions to our customers. We are currently working in a small rented place which is our constraint for expansion.
When we started as a design company we were executing 3 to 4 design projects, but we realised immediately that customers were asking for turnkey solutions and not just design. Therefore, in order to to increase the scalability of our business we decided to go for complete end to end solutions for customers.
Since all these projects are capital intensive we had to have working capital in order to take these orders. We then had our first Investors in 2007, who provided us with the working capital required for starting up a small facility in rented premises. We gave them 45% stake in our company. That was a 3 year contract up to 2010. All the funds raised in the company were basically used for development of more than 20 products, training of engineers and participation in exhibitions in India as well as abroad. In the last 3 to 4 years we have successfully delivered more than 100 small projects and have created a name in the market. Unfortunately the Investors are from a Real estate firm and since they had lot of problems in 2010 they decided not to renew the contract because of their own financial troubles. This prohibited us from raising any further funds from our current investors for our new facility.
Since then we are running this company with our own funds, 70% of which are generated by the company itself from its sales and 30% are our own contribution. We have been taking only small projects or parts of projects due to our lack of infrastructure. We think that customers are ready to give us bigger projects if we establish our own bigger facility. We are also in talks with some European business clients who want to establish themselves in India and can also be our collaborators. We have also got a national level award for our company last year in the small enterprise category.
Our offer is to give the same 45% shares that were owned by the previous investors to our new investors for the above amount. The best part is that the previous investors are not demanding any premium on the invested amount and expect to just get back the initial amount which is approx. $5,00,000. The remaining amount from the new funding is to be invested in factory premises for the new facility. Recently we purchased land to establish this facility and the funds are already invested from our own contribution for the same. We are targeting to establish this facility till March 2012 if possible so as to serve orders for next financial year.
Our current competitor in the Indian market is Pari Limited. We would not say that we are better than them but we are at par. It is at our advantage that they are a very big company and are currently not manufacturing all the products by themselves but buying many of their products like manipulators from abroad which makes us price competitive since our products are made in-house and are at lower cost.
Currently as per our study, the market in India is so big that even if 5 more big companies like our main competitor enter it, everyone will still have their share of margin.
Rationale for the deal
We feel that even though our sales turnover has been very poor in the last 3 to 4 years, and this is because we always took variety of applications projects in different areas like Automotive, Consumer goods, Defence etc., we have a good record in terms of completing more than 120 small and medium projects in these years. Handling of such variety of projects never gave us the required sales turnover targets because each new project was treated like R&D and hence it required more time and learning than repetitive products would have required. We have now started getting repeat orders for projects and we can now concentrate on our expansion plans with this whole varied experience. This will give us an extra edge by not limiting us in a particular single area.
Use of financing
Funding is needed for establishing a new factory along with purchasing some machines so as to cater to the bigger projects on market. A part of funding shall be used towards repayment of the loan provided by previous investors.
Opportunity for the investor
Our current Investors are holding 45% stake in our company but their 3 year contract went over in 2010. Since then we have no other equity investors and have been running our company on our own funds. The amount payable to these investors is $500,000.
So, out of the total of $2,000,000 asked for this project $ 500,000 will be paid back to the previous Investors and the remaining amount shall be used for building infrastructure. We would be offering the new Investors the same amount of shares, i.e. 45%.
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