Introduction: People actively monitoring drinking water scenario in the country are well versed with quality problems in available drinking both in rural as also in urban areas. High dissolved solids (TDS), fluorides, hardness and micro organisms present in water used in large many villages as well as towns make it carrier of host of diseases & disorders like malaria, cholera, typhoid, arthritis, blood pressure, dental fluorisis, pre mature graying of hair and baldness, kidney stone, etc.  

Company Profile: Environment Planning Group Ltd (1984) a management consultancy firm providing services in water, land, agriculture, forestry and allied areas, entered water treatment in 1998 as franchisee of Thermax Culligan, Technologies and later of that Permionics (I) Ltd. Since 2002 we are working independently.

In 2000, we conceived a model to provide RO-purified drinking water on affordable terms to masses. We have introduced variations of the model in housing societies, villages, educational institutions, restaurants, shopping malls, etc. in Ahmedabad. Our schemes have been viable under each situation. Emphasis has been on cost cutting solutions to meet drinking water needs with minimal packaging.

We have our entrepreneurial RO-plants at an academic institution, residential colonies, Malls, commercial complexes, villages/slum resettlement colonies, etc. We also have backed similar schemes at other institutions like IIMA and IOC Colony, etc.where sponsors paid us for supply, installation and commissioning of the machine and allied equipment. In 2004, we launched our  model in 2villages in North Gujarat in partnership with International Water Management Institute Sri Lanka, an NGO operative in 20 countries. 

We recently entered in an agreement with WASMO (Water & Sanitation Management Organization, Government of Gujarat, India to put up our RO-plants in villages. Under this model, we target to sell mineral water in villages at 9-10paise per liter such that for just Rs.45-55p.m. a family of 5-6persons will have access to safe drinking water in villages. 

We have also tracked ion-exchange based resins/systems that can be used for selective removal of fluorides or arsenic prominent in North Gujarat and West Bengal respectively.     

Nonetheless, magnitude of the problem is magnanimous. Moreover public sector is not an apt body to handle the purification task. To be effective, it has to be in the hands of duly monitored private entrepreneurs having personal stakes in delivering good quality safe drinking water and supported by public institutions. 

Model: Under our model we seek from the sponsors, 50-100ft² space along with raw water and requisite power connection on chargeable basis. We seek space on terrace top close to overhead tank or on ground floor close to bore well. Space sought is invariably lying unused/not usable otherwise ever.  We design, assemble/procure Reverse Osmosis based water purification plant as per the raw water quality in the area. We install, operate and maintain our own RO-plant at our cost and earn by selling RO-purified, low TDS containing, soft, microbes-free water to willing occupiers within the Complex. We sell water at half its market price for comparable quality water. We DO NOT divert water outside for sale nor is there any minimum off take commitment sought from users in the complex.

Market Scenario: Need for consuming safe drinking water was always existed but it was never felt so strongly. Frequent recurrence of unheard diseases and disorders, ever increasing exposure to media, and above all fast depleting sources of potable water and all pervasive deteriorating quality of drinking are all the factors contributing to an upbeat mood in demand for safe & pure drinking water. Demand is coming up not only from posh, sophisticated, affluent consumers even in villages and small towns need for safe drinking water is rightly felt. In fact in Gujarat, GWSSB responsible for providing infrastructure for drinking water in the state has created its facility facilitating organization - Water & Sanitation management Organization – WASMO to enable rural masses have access to safe drinking water.

Technology: We use world tested technology Reverse Osmosis (RO) to produce potable quality purified water. Most packaged drinking water manufacturers like Kinley, Bisleri, etc. use the same technology wherein water is made to pass through membranes with pore size of 0.0001micron. Substantial pressure is applied for the task. Only pure, low TDS, soft water free from any diseases carrying germs and other micro organisms passes through. Impurities are retained in the reject water.

Plant Specifications: EPGL shall design RO-plant to match raw water quality of the selected location to generate output matching international drinking water standards. There is no national/ international certification available for processing plant but there prevail norms for classifying the product water.

Product Water Quality: Product water will free from suspended particulate and UV-sterilized to check any water borne diseases. It will be low on total dissolved salts (TDS) from up to 4000ppm in raw water to <300ppm and hardness to 50ppm (As per WHO in drinking water they should be <500ppm and 50ppm respectively). All other parameters like fluorides, chlorides, sulfates, nitrates, etc. will also be reduced to WHO norms for drinking water. These chemicals are responsible for escalating incidence of dental fluorisis, arthritis, blood pressure, kidney stone, etc. It may be noted that the standards set by BIS (formerly ISI) are far less stringent than the WHO norms. Thus, our product water will be healthy and comply with all national/ international quality norms for potable drinking water.  

Seeing the magnitude of the problem, differently put as market size, the facility is also proposed to be put up under franchisee model wherein EPGL will be the technical service provider as also equipment supplier while franchisee will be the entrepreneur putting in his money and be in-charge for day to day operation, sales, collections, etc.  Arrangement will be as follows:

Role of EPGL:

1. EPGL will procure and provide entire plant and equipment as per the model suiting a specific entrepreneur/local conditions. RO-plant will have feed pump with SS-impellor, sand filter, carbon filter, anti scalent dosing system, Grundfos / Calpeda brand of vertical high pressure pump, 1 or 2 nos. 4040 RO- membranes (for 250 and 500lph capacity respectively) along with control panel, pressure gauges, etc. Chilling units wherever included will have Kirlosker or Sriram Brand Compressor and SS304 storage tank/body. PVC sheets used in the kiosk will be from Syntax brand.
2. EPGL will assist entrepreneur raise bank loan to part finance the project as also complying with DIC requirements to avail of its capital subsidy scheme
3. EPGL will render technical maintenance including consumables like cartridges, chemicals, etc
4. EPGL will depute its personnel for preventive maintenance & trouble shooting on call

Role of Entrepreneur

a.       Entrepreneur will be made in-charge of the RO-plant for day-to-day running and will be responsible to supervise & make labor payments, water charges (if any) & power charges

b.      He will be responsible for plant operation, water sales and collections from customers.

c.      Franchisee will pay for the plant & equipment for his selected model out of following: 

EPGL’s Recurring Fees: Franchisee will retain the option to pay EPGL 10% of gross revenue or 3p/liter subject to a minimum of Rs.2000 p.m. and a maximum of Rs.5000p.m. for a 1000lph plant towards consumables & maintenance support. In addition, franchisee will bear travel & incidental expenses of EPGL’s technician’s visits to the plant for maintenance support.

Pricing: Pricing shall be kept reasonable and affordable as per the model’s cost plus criteria.  It is planned to have a launch price at 35paise per liter. Rates be reduced by 10% over the previous card (of 240liter entitlement) each subsequent card till the supply price comes to 15paise per liter by the 11-12^th card and the customer base reaches 500customers over a period of say 6-7months. Such a model will enable recovery of the basic plant capital within 6-8months and then make the water available at an affordable 15paise per liter say Rs.75p.m. for a family of 5-6persons. 

Unit Profitability from Franchisee’s Point of View:

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SlNo. Description                                                     Model 1000

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Total Investment (Rs. lacs)                                           3.50

Revenues:

Production of mineral at 8hour operation (Liter)    8000lpd 

Price (Paisa/liter) of non-chilled water                  15paise 

Gross revenue                                                   4.32lac

Expenses:

Salary & Wages                                                    0.48lac

Rent                                                                     0.24lac

Electricity                                                              0.24lac 

Raw water cost                                                       0.24lac        

EPGL’s support fees (@maximum level)     0.60lac

Total Costs                                                            1.86lac

Net Returns to enterprise and investment                 2.46lac

Pay back period                                                     21months

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A perusal of the above analysis reveals that the franchisee putting up a 1000lph RO-plant may earn an income of 18-20thousand per month with a meager investment of Rs.3.50-3.60lac. Net of state subsidy of 20%, his investment will be a meager Rs.2.80-2.90lac. Even for this sum, bank loan will be available against suitable security/ guarantor as per bank’s norms. 

The said analysis is based on the assumption that the RO-plant is operated just 8hours per day while technically these plants are equipped to run 20hours daily. Such a small duration of plant operation has been considered to ensure that the seasonal fluctuations do not jeopardize project profitability and errors are maintained on the higher side for costs. 

Production of 2000 or 4000 liter water daily will require just 200 and 400 households consuming 10liter water daily to exhaust the production. Any additional sales by way of increased hours of RO-plant operation will add to project profitability with a nominal increment in power bills. It may also be possible supply RO-purified water to bulk-users ex-plant. Even if the supply rates are much less for bulk buyers, it may be worth selling since recurring expenses in RO-plant operations are nominal.  

Franchisee model will work only for non-village situations since WASMO agreement prohibits EPGL to engage any other agency by way of franchisee, sub contractors, etc. Therefore, RO-plants in rural areas in Gujarat will be installed under full EPGL ownership. At other places, in urban housing societies, schools, colleges, commercial complexes, etc. the system will be under franchisee arrangement. 

Hello Deepinder,

As with the previous exercises, we have a very specific requirement for how this should be presented. The attached document gives you the guidelines and also two examples for the same. Please resubmit your Exercise 3.

Thanks

Ananth

Previously Ananth Balasubramanian wrote:

Hello Deepinder,

 

As with the previous exercises, we have a very specific requirement for how this should be presented. The attached document gives you the guidelines and also two examples for the same. Please resubmit your Exercise 3.

Thanks

Ananth

Dear Mr. Ananth,

Have tried to make my presentation in line with your guidelines. But I am sure there are going to be some improvements possible after you go thro' it. I am getting tempted to seek your feedback on the enclosed submission.

Kind regards.

Deepinder

Hello Deepinder,

The information you have provided in your business model seems good. But we need the information to be presented as a Fishbone diagram for the Income and Expenses sections. The critical success factors can be bullet points. Please refer the bushproof and aravind examples for the business model formats.

Thanks

Ananth

Also you can include the actual monetary values in the fishbone diagram if you like.