Foseco India Ltd

8/8/2019 Foseco India Ltd

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Q1 a . Explain business model, Derive the Cost sheet in Goldratt formula.

Foseco India Ltd.

Industry : Commodity Chemicals

Listed on BSE, NSE

52 weeks High/low : 400/199

Market Cap : 239.24 Cr.

Foseco has been associated with the metals Industry for over 75 years and today is acknowledged asa world leader in the supply of consumable products for use in the foundry industry with a presencein 32 countries and major facilities in Germany, USA, UK, Brazil, China, India, South Korea andJapan.

In April 2008, Foseco was acquired by Cooksons Group plc and is now a part of Vesuvius.

The company was founded by Eric Weiss in 1932 and quickly became established as a supplier tothe Foundry Industry, from where the name Foundry Service Company was derived.

Foseco India, a JV company between Greaves of India and Foseco of UK was incorporated inMarch 22, 1958 as Greaves Foseco. The technical collaborator Foseco UK holds 66.5%(as onMarch 31, 2003) stake in the company. Foseco India is the leading supplier of metallurgicalchemicals for the ferrous and non-ferrous foundry industry. The company's products are sold bothdirectly and indirectly to industries like Passenger Cars and SUVs, Commercial Vehicles,

Agricultural Machinery, Construction and general purpose steel, Textile machinery, two & Threewheelers. It's products also found usage in Steel, Petrochemical and food industry valves and pumps. Foseco India has two manufacturing facilities one located at Pune and the other one locatedat Metaupalayam, Pondicherry. It manufactures 400 different products for the metallurgicalindustry. The products are in the nature of additives and consumables and improve the physical

properties and surface qualities of castings as well as reduce costs of melting, moulding andcastings.

The company exports its products mainly to Middle East, Far East, Sri Lanka, Nepal, Kenya,Ghana, Bangladesh, Singapore & Taiwan. The company offered shares in Nov.'93 to get listed inthe stock exchange. In the year 2002, the Company has increased its installed capacity of Metallurgical Chemicals by 570 Tonnes(Tonnes per annum based on 2 Shifts). With this CapacityExpansion, the total installed capacity of Metallurgical Chemicals has increased upto 24830Tonnes.


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Key Resources Key Activities

CapacityQuality MaterialLabour and Energy intensive to

produceProduct Technology

Partner Network

Joint Venture betweenGreaves of India andFoseco of UK

Purchasing Raw material incost effective manner Managing Casting and

Tooling CostSequence of OperationsShortening lead timeInventory ManagementOntime Delivery

Never Ending supply of work R & DApplication Expertise

COST

VAL UE

Quality AssuranceWide Product RangeHigh Standard QualitySoundness, Surface finishing,Integrity & Dimensionaltolerance

Client relationship :

Effective Distribution SystemRegular ServicesEnsures supply of right

products to customers at righttimeGood credibility withcustomers and suppliersHigh rate of repeat ordersCleint Segment :

SAILTISCOMini mills like Mukund,Kalyani and MuscoFoundries like Ennorefoundries, Lakshmi Machineworks etc.

RE VENUES


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Cost Sheet in Goldratt format

In Rs. Cr.

2005 2006 2007 2008 2009

Gross Sales 132.58 146.62 176.72 168.21 185.03Excise duty 17.96 18.82 23.22 19.5 21.45Net Sales 114.62 127.8 153.5 148.71 163.58Other Income 1.03 1.04 0.4 1.2 1.39Stock Adjustment -0.04 0.2 0.77 0.9 0T otal Op erating Income 115.61 129.04 154.67 150.81 164.97Less : Total Variable C ost 73.02 82.51 99.31 99.32 109.54Raw Material 63.2 71.4 86.21 86.87 96.22Power n Fuel Cost 1.96 2.43 2.46 2.39 2.59Other Manufacturing Exps 7.86 8.68 10.64 10.06 10.73C ontribution ( Th roug hp ut) 42.59 46.53 55.36 51.49 55.43Less : Fixed Op eratingE xp enses 19.74 18.69 20.85 22.91 32.71Employee cost 8.24 8.16 9.84 11.57 12.73Misc Exps 1.36 2 1.56 1.34 9.99Selling and Admin Expenses 10.14 8.53 9.45 10 9.99EB ITD A 22.85 27.84 34.51 28.58 22.72Depreciation 2.26 2.17 2.65 3.19 6.68EB IT 20.59 25.67 31.86 25.39 16.04Interest 0.38 0.23 0.32 0.42 0.44EBT 20.21 25.44 31.54 24.97 15.6Extraordinary Items 1.24 0.68 0.01 0.31 0.19EBT after extraordinary items 18.97 24.76 31.53 24.66 15.41Tax 7.63 9.42 11.58 8.92 5.55E AT 11.34 15.34 19.95 15.74 9.86


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b. Create a financial template with next two years projections.

P&L a/c

Rs. In Cr. 2005 2006 2007 2008 2009 2010E 2011E

Sales Turnover

32.58 146.62 176.72 168.21 185.03 210.94 246.16 Excise Duty 17.96 18.82 23.22 19.5 21.45 25.31 30.52 Net Sales 114.62 127.8 153.5 148.71 163.58 185.62 215.64 other Income 1.03 1.04 0.4 1.2 1.39 1.65 1.97 Stock Adjustments -0.04 0.2 0.77 0.9 0 0 0 Total Income 115.61 129.04 154.67 150.81 164.97 187.27 217.61 Expenditures : Raw materials 63.2 71.4 86.21 86.87 96.22 105.47 120.62 Power and Fuel cost 1.96 2.43 2.46 2.39 2.59 3.16 3.69 Employee cost 8.24 8.16 9.84 11.57 12.73 14.51 16.94 Other Manufacturing Exps 7.86 8.68 10.64 10.06 10.73 12.23 14.28 Selling and admin exps 10.14 8.53 9.45 10 9.99 11.39 13.29 Misc Exps 1.36 2 1.56 1.34 9.99 11.39 13.29 Total Expe ns e s 92.76 101.2 120.16 122.23 142.25 158.16 182.11

EBITDA 22.85 27.84 34.51 28.58 22.72 29.11 35.50 Depreciation 2.26 2.17 2.65 3.19 6.68 8.15 9.44 EBIT 20.59 25.67 31.86 25.39 16.04 20.96 26.06 Interest 0.38 0.23 0.32 0.42 0.44 0.35 0.33 EBT 20.21 25.44 31.54 24.97 15.60 20.61 25.73

Extraordinary Items 1.24 0.68 0.01 0.31 0.19 0.21 0.25 EBT afte r Ext rao rdin a ry item s 18.97 24.76 31.53 24.66 15.41 20.39 25.48 Tax 7.63 9.42 11.58 8.92 5.55 7.34 9.17 EAT 11.34 15.34 19.95 15.74 9.87 13.05 16.31


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Balance Sheet

In Rs. Cr. 2005 2006 2007 2008 2009 2010E 2011E

Sou rce s of Fu nds:

Equity Share Capital 6.39 6.39 6.39 6.39 6.39 6.39 6.39Reserves and Surplus 36.46 31.73 38.8 47.35 48 48 48Net Wo rth 42.85 38.12 45.19 53.74 54.39 54.39 54.39

Secured Loans 0 0 0 0 0 0 0Unsecured Loans 12.14 11.5 11.29 11.12 11 11 11Total Debt 12.14 11.5 11.29 11.12 11 11 11

Total Liabilities 54.99 49.62 56.48 64.86 65.39 65.39 65.39

A pp licat io n of Fu nds

Gross Block 27.76 29.46 32.19 46.79 57.89 66.33 76.18Less : Accumulated Depreciation 13.91 15.34 17.3 19.01 Net Block 13.85 14.12 14.89 27.78 57.89 66.33 76.18Capital WIP 1.39 1.76 5.2 0.45 1.2 1.6 2.5Total Fixe d Asset s 15.24 15.88 20.09 28.23 59.09 67.93 78.68

Inve stme n t s 0.09 0.09 0.08 0.08 0.08 0.08 0.08

Inventories 7.1 7.29 8.59 8.14 8.96 10.21 11.91Debtors 24.96 32.8 38.19 34.77 38.12 43.24 49.23Loans and Advances 6.26 6.06 5.83 5.77 6.38 7.28 8.49Fixed Deposits 0 1.25 0 0 0.00 0.00 0.00Total Cu rre n t Asset s 38.32 47.4 52.61 48.68 53.45546 60.72828 69.6391

Current Liabilities 15.64 19.81 21.95 20.66 22.72 26.16 30.52Provisions 4.68 5.19 6.31 2.59 4.44 5.06 5.91Total Cu rre n t Liab ilit ie s 20.32 25 28.26 23.25 27.16 31.218 36.432

Net No n Ca sh Wo rking Ca pi tal 18 22.4 24.35 25.43 26.29 29.51 33.21

Ca sh a nd Ba nk Bala nce 21.66 11.25 11.96 11.11

Total Assets 54.99 49.62 56.48 64.85 85.46477 97.51913 111.9629


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Rat io s of Fo se co India Lt d. 2005 2006 2007 2008 2009 2010E 2011E

Current Ratio 2.95 2.35 2.28 2.57 1.97 1.95 1.91

Quick Ratio 2.60 2.05 1.98 2.22 1.64 1.62 1.58

Debt Equity Ratio 0.28 0.30 0.25 0.21 0.20 0.20 0.20

EBIT Margin 17.96% 20.09% 20.76% 17.07% 9.81% 11.29% 12.08%

ROCE 37.44% 51.73% 56.41% 39.15% 24.53% 32.05% 39.85%

RONW 26.46% 40.24% 44.15% 29.29% 18.14% 24.00% 29.98%

ROE 26.46% 40.24% 44.15% 29.29% 18.14% 24.00% 29.98%

Inventory Turnover Ratio 18.67 20.11 20.57 20.66 20.66 20.66 20.66

Debtors Turnover Ratio 5.31 4.47 4.63 4.84 4.85 4.88 5.00


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c. Calculate the Intrinsic Value.

In Rs. Cr. FCFE Projections 2010E 2011E

Net Income 13.05 16.31 Ca pital Expe ndi tu re -8.44 -9.85 De pr e ciat io n 8.15 9.44 Cha nge in n o n-ca sh Wo rkingCa pital 3.22 3.70 Total re inve stme n t 2.93 3.29 FCFE 15.98 19.60 PV Fa cto r 0.97 0.90 PV of FCFE 15.53 17.57

Equity reinvestment rate 22.46% 20.19% Dividend Payout Ratio Dividend 0 0 BV of equity 93.15 93.15 ROE 14.01% 17.51%

Expe cte d te rm inal growth 3.15% Te rm inal Value 247.20 PV of TV 221.57 Value of o pe rat ing A sset s 254.66

Ca sh a nd Ca sh Equ ivale n t s 42 Fa ir Value of Equ it y 296.66 Numbe r of sha re s out sta nding 6.3865 Fa ir Value pe r sha re 46.4521

High Growth

Te rm inal Yea r

Rf 6.50% 6.50% Beta 0.02 Beta Adjused 0.35 0.56 Rm 12.02% 12.02% Cost of Equity 8.4% 9.6%


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d. Which segment does business belongs to in terms of competitiveness.

As the customers are organizations who buy large volumes and value quality products and tend tohave good business and operational credentials switching cost is very high and if the clients switchover then it may be difficult for them because their earlier supplier knows in and out of their

processes and manufactures goods accordingly which may not be the case with the new supplier.Switching costs are a valuable competitive advantage because a company can extract more moneyout of its customers if those customers are unlikely to move to a competitor.Also Bharat Bijlee ltd. is a company that enjoys highest rates of repeat orders in the industry. Goodcredibility with its customers.


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Bargaining power of Buyers

Bargaining power of buyers is high as they buylarge volumes

Threat of new substitutes

Threat of substitutes is not much as they have closecustomer relationship . They keep a close track of theindustries theyre supplying and see how theyredeveloping and respond with our own plans to takeaccount of and supply future changes. In fact they areregularly talking to their clients, bringing them to their

plants to show them their manufacturing facilities.

Bargaining power of Suppliers

There are no substitutes for a particular input.Steep increase in cost of raw materials and energy anotable issue for manufacturers at present isrising cost fuelled byunfavourable exchangerate. The switching costfrom one supplier toanother is very high andalso they may have tocompromise with the

CompetitiveRivalry Betweenexisting players:Competition

between existing players is high asthere are many

players about thesame size ,thereis not muchdifferentiation

between playersand their

products

Threat of new Entrants

Although there is high initial investment and fixedcost there is competition in this industry The

Indian foundry industry is currently booming in a big way, so theres need for manufacturers relatedto the industry to increase their manufacturingcapabilities and this has resulted in a highlycompetitive market. In order to retain the marketshare in a growing market, which is still growing,Foseco is quoting, executing and delivering at anextremely competitive price.


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e. Business Arbitrage:

Business Arbitrage is starting a business seeing an opportunity and making super normal profits andthat super normal profits may disappear with the arbitrage .Business arbitrage is making profits by taking very little risk. It is a low risk and high uncertaintythat got the bounty. The barber is a classic example of Dhandho arbitrageur. Heads, he wins; tails,he doesnt lose much. This arbitrage mostly disappears, but while it lasted u can make super normal

profits.

Ke 8.4% 9.6% Kd 5% 5%

WACC 8% 8% Business Arbitrage (ROCE - WACC) 24% 31%

The Business arbitrage is calculated by deducting weighted average cost of capital from return oncapital employed. Looking at the current scenario it looks like company is able to provide goodopportunity for instances we learned in axis bank what is the business arbitrage for bank.


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h. Define a comparable character of this stock with following with your reasoning

a> A Cricketerb> A Movie A ctor/ A ctress

C om p arison wit h a C ricketer:In cricket for each new tournament or season the team selection takes and it is done by the selectioncommittee of BCCI in India (For example one of the member of the team is former Indian Cricketer Krishnamachari Srikant). During the selection process certain things of player taken intoconsideration and then selection takes place some of the following details are:

1) Current form of the player during the year and also their fitness.2) If he is Batsman how consistent performance is delivered by him in terms of runs. We

will check is current average along with Strike rate. And also No. of 50s as well as100s

3) If he is Bowler will check he is bowling record .i.e. no of wickets taken buy him and noof runs given him (run rate).

4) Even we need all rounder in the team so it is important to check the ability of few players in terms of Batting as well as Bowling.

Like cricketer selection we need to check certain details of stock in security analysis and portfoliomanagement to pick the stock, and they are as follow:

1) To select particular stock we will check the performance of the stock quarter on quarter basis or year on year basis. Like we said about the consistent performance we willcompare the returns of the stock regularly we will check the valuation ratio like EPS,PER, ROCE, ROE to understand the business arbitrage that the particular stock

provides.2) In Cricket nowadays we have some specialist player either for Test, 50-50 or 20-20

cricket for example Rahul Dravid and VVS Laxman for test where as Yusuf Pathan for 20-20 cricket. In same stock market does have specialist player but there movement is in

correlation of economic cycle For example in the current situation rupees is at all timehigh of one year which is hurting the sentiments of IT sector, but in future if rupee startsdepreciating then IT stocks will zoom and Commodity stock may suffer because of risein price.

3) All rounder in the team irrespective of situation or cricketing format he is ready todeliver results. We need such kind of stock in our portfolio now it depends on individualwhere his interest lies. For me the stock like GSK or from FMCG space which providehigh dividend are the best bets for all rounder one.

C om p arison wit h a Movie Actor:In Film industry the rate of actor varies according to individual achievement and success ratio.

For instances Patkar sir gave the example of Mr. Ranbir Kapoor that he received some few lakhs for film like Saanwariya , Bachna ae Haseeno and all, but after the success of movie like Ajab prem kigajab Kahani and Rocket Singh he started demanding acting fees in crores.

Likewise if a value investor finds that the stock even at its all time high will give good returns in thefuture he will not hesitate to add that stock in the portfolio. Also we said about success ratio of actor we need to check the Sharp ratio of the particular portfolio.


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Logo of the Indian Premier LeagueCountriy: India

Administrator: BCCI

Format: Twenty20

First tournament: 2008

Tournament format: Double round-robin and Knockout

Number of teams: 08

Current champion: Deccan Chargers

Most successful: Rajasthan Royals and Deccan Chargers (1 title)

Qualification: Twenty20 Champions League

Most runs: Adam Gilchrist (1081)

Most wickets: R. P. Singh (41)

Website: IPLT20.com

2010 Indian Premier League


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Gamblers in IPL

BCCI

Franchises

Sponsors

Players

Gambling Das h board

High

R

E

T

U

R

N

S

Low R I S K High Size of Revenues

BCCI

FranchisesSponsors

Players


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Q2 a. Business model of DLF IPL how is BCCI making money?

Business Model of DLF IPL

Where is the money coming from? Where is it going?

Money Source BCCI Franchisee PlayersSale of Media Rights $ 1 billion over a period

of 10 yearsSony

20% 72%(equallydivided)

8%(prize money)

Central Revenues Title Sponsorship of eventLicensed merchandise

40% 54% 6%(subject tofranchiseswish)

Money raised byfranchises

Selling AdvertisementLicensing productsMerchandise SaleAdvertisement on TicketsGate Money

20% 80% 0%(depends onthe whims of the franchises)

Franchise bid money MumbaiBangaloreHyderabadChennaiDelhiMohaliKolkataJaipur

Some heftyamount in thefirst year

Factors leading to success of IPL

IPL is a Cocktail of Sports, Entertainment and Business.

y Interest in crickety Involvement of Bollywood Starsy Business Tycoonsy Time Factor Twenty20y Betting


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b. If you are one of the franchisee, explain your own business model?

The business model of franchisee involves high amount of risk, because it is related toentertainment as well as sport and if your franchisee fails to give performance that the audienceswant then value of your team may go down or you may incur huge loss.So for me the businessmodel of the franchisee would be to provide consistent performance in all the season and themixture of the star or icon player. Even if the cost of franchisee is too high, my aim would be tocover the cost as well as good amount of revenue from the sale of franchisee after the end of contract.


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c. S elect your own team 16-players by defining value to each player (no restriction, choose thebest?

Sr.No Name of the Pla ye r Value Skill 1 Sachin Tendulkar $750,000 Batsman2 Kieron Pollard $600,000 All Rounder3 Prgyan Ojha $350,000 Bowler4 Jacques Kallis $650,000 All Rounder5 Robin Utthapa $500,000 Batsman6 Lasith Malinga $350,000 Bowler7 Harbhajan Singh $400,000 Bowler8 Zaheer Khan $500,000 Bowler9 Adam Gilchrist $600,000 Wicket keeper/All Rounder

10 Suresh Raina $475,000 Batsman

11 Kevin Petersein $625,000 Batsman12 Dale Styen $400,000 Bowler13 Yusuf Pathan $500,000 All Rounder14 Gautam Gambhir $450,000 Batsman15 Mark Boucher $350,000 Wicket keeper/All Rounder16 Chriss Hariss $300,000 Bowler

Total Value $7,800,000


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d. Chose your team of 16-players with restriction on the amount of foreign players to 8, andnot more than 2 from one country?

Sr.No Name of the Pla ye r Cou n t ry Value Skill 1 Sachin Tendulkar India $750,000 Batsman2 Kieron Pollard West Indies $600,000 All Rounder3 Prgyan Ojha India $350,000 Bowler4 Jacques Kallis South Africa $650,000 All Rounder5 Robin Utthapa India $500,000 Batsman6 Lasith Malinga Sri lanka $350,000 Bowler7 Harbhajan Singh India $400,000 Bowler8 Zaheer Khan India $500,000 Bowler

9 Adam Gilchrist Australia $600,000

Wicket keeper/All

Rounder10 Suresh Raina India $475,000 Batsman11 Kevin Petersein England $625,000 Batsman12 Shane Watson Australia $450,000 All Rounder13 Yusuf Pathan India $500,000 All Rounder14 Gautam Gambhir India $450,000 Batsman

15 Brendon Mcullum NewZealand $400,000Wicket keeper/All

Rounder16 Shane Bond NewZealand $400,000 Bowler

Total Value $8,000,000


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e. Explain what changed from step c to step d.

The important change was selection of player in question c we were free to select the choice of player we want, thus in my selection the only concern was not more than two player from onecountry. Therefore after looking at the team I found that I had more than two players from SouthAfrica thus I replaced Shane Watson to Dale Styen so that we have one more all rounder in the teamand it result into increase in the total value.

f. Explain similarities of this assignment with S ecurity A nalysis and PortfolioManagement.(e.g. S tock Returns, Volatility, Portfolio Construction, Risk/Return, S harpeRatio, etc)

The assignment does have lots of similarities with SAPM like to select the particular company fromthe stock market we need to see the valuation ratio like ROCE,ROI,EPS,PE ratios etc.

Even we also learnt that for particular portfolio if sharp ratio is high, the performance of the portfolio is consistent or excellent. Likewise to select player we need to see the performance of the player for instances player like Sachin Tendulakar and Jacques Kallis gives consistent performance,if we see their average in current season it is spectacular.

Portfolio Construction: Like in SAPM we try to select the stocks from diversified sector and that tothe best performing one, in assignment I tried to select the player in same manner for instanceThe combination of 6 All Rounder, 5 Batsman, and 5 Bowlers so that we can maximum bating aswell as bowling depth in the team.


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Q3 . Identify your key learning from following Books in terms of S A PM .

Th e Professional

In Th e Professional Subroto Bagchi gives us his knowledge, based on his lifelong experience, of what it takes to be a professional, what qualities you need to become a great professional, and whatare the challenges of the future a professional must be prepared for. Most importantly, he asks, andgives answers, to the toughest question every professional faces: Is what I am going to do now,faced with a difficult decision and multiple options, the professional choice to make?

In a world where a sub-prime crisis and a Satyam saga were incomprehensible; where the globaleconomic meltdown has affected the livelihoods of millions of people; where companies andindividuals are routinely revealed to have made unprofessional choices, The Professional providesthe explicit and implicit code of conductthe boundaries which separate a skilled individual from a

professional.

This book taught that one does not become a professional just by attaining professionalqualification. A professional strives for greater, though often the most simple of things. This book sums up what it needs to be a professional ideas and practices that are universally applicable.

Idli O rc h id and Will power

Idli, Orchid and will power starts with the childhood days of Mr.Vithal Kamat and flows in asequential manner throughout.

The writing style of Mr.Kamat is unique ,in the sense that his humour has many shades and cankeep you in splits for a period ,more than can be reckoned. The book tells us about his dad andmom,and you get an insight into his upbringing,it teaches us how an ideal parent and an ideal sonneed to be...very thought provoking. Those early days when work was hard and the going wastough. You are moved beyond reasoning when you read how an undivided family ,actually hingeson material gains,for the division so brutal in its tapestry,as can create a waterfall from your mountainous eyes. I was moved beyond reasoning..and learnt a lot from this book.

It tells you about Mr.Kamats almost innate sense of business,his relationships with hisemployees,his treatment of people as human beings,his love for Nature.

His father started as a small time restaurateur. Vithal, as an obedient and devoted son grew under his fathers tutelage. And enjoyed a deep and abiding relationship with his parents. He dreamt

big,very big.To become Indias biggest hotelier and overtake the Oberoi Group. nd he fulfilled hisdream by building the worlds best environmentally sensitive hotel -The Orchid which has woninnumerable accolades.

The young formative years when the six siblings and parents lived cramped in an one roomapartment, the family feuds, his affection for his youngest brother(the black sheep of the family)though misplaced and betrayal by friends and relatives which brought him to the brink of self-extinction. Perhaps his past karma saved him from near suicide and put him back on lifes journeywith hope and courage to fight the many battles which lay ahead of him. He acknowledges withgratitude that the blessings of his parents and support he received from his wife and children and a


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few friends were what really helped him to maintain his sanity and reach the zenith of his profession.

Vithal Kamat is a shining example for young people to emulate.Sincerity,hardwork,honesty,simplicity,self-confidence,a friendly and helping attitude,an open mind,creativity andan ability to face the toughest situations and most importantly the ability to dream big and toachieve the dreams is what this honest book is all about. Dont take the books title lightly. Themetaphor in the title of the book is very apt. His life is like an idli. Difficult to make butsoft,tasty,white,clean and enjoyable. His creation of a fivestar ecotel-The Orchid was anunparalleled success against the heaviest odds. And what saw him through was his willpower.

I too h ad a dream

Success is where vision couples with hard work. The author was the Chairman of National DiaryDevelopment Board and General Manager of The Kaira District Milk Union, which owns the

popular diary brand Amul. As the chief of NDDB he pioneered Operat ion Flood, a missionwhich aimed self-reliance in diary products.

Mr.Kurian started his career as a trainee engineer in TISCO. After attending a scholarship programin the US he was sent to Anand, a remote village in Western India. It was in Anand that Mr.Tribhuvan Das Patel, an associate of Sardar Vallbbhai Patel had started the Kaira District Milk Union, to avoid exploitation suffered by farmers in the hands of diary owners. Mr. Patel knew the

potential Mr. Kurien had, and entrusts him with the charge of the Diary. The rest is history.

In this autobiography Mr. Kurian narrates his vision about the development of farmers, whoaccount for nearly 70% of India, without whom the nation cant develop.

When I got the book I just happened to read casually the first page and it caught me right there! Icouldn't take my eyes off of it. While reading the book and going through the pages one can't help

but notice that here is a man talking straight from his heart, who has done everything in his life for his entire life from his heart and rest is history.

The book has very interesting anecdotes about Mr. Kurien coming in direct confrontation withrulers and ministers and civil servants at the highest levels and the outcome of each of suchconfrontation is joyous and a treat to the reader. It tells us about Mr. Kurien's encounters with allthe Prime Ministers of this country right from Jawaharlal Nehru, Shashtri, Indira, Morarji, Rajiv,

Narasimha or Sardar Vallabhbhai Patel and many more.

It is not just a book but takes the reader to a journey across time and people and the creation of acountry which imported most of its milk to the highest milk producer of the world! All because of the DREAM that this man shared with the farmers of Gujarat.


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Business Model of Dabbawala

C ost Structure

Key Resources Key Activities

y Transport : Bicycles,Suburban Trains, By foot

y Employee Workforcey Arrange substitute

employeey Close knit family of

dabbawalasy No sophisticated

technology

y Team work Timimgs

y Elegant Logisticsy Competitive

Collaborationy Accuracyy Speed Delivery

ValuePro po-sition

y Quality Servicey Home made foody On Time Deliveryy Punctualityy Cost Effectivey Door to Door Service

Client Segment :Middle Class Citizens

y Studentsy Small entrepreneursy Manangersy Mill Workers

Client Relationship:y New customers are

acquired thru referralsy Solicited by dabbawalas

on railway platformsy Ensures supply of right

tiffins (Accuracy )

R evenues


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Q4 c. Identify the key business variables that would define profits and returns?

The more-than-a-century-old Mumbai dabbawala is a phenomenon that can work only in Mumbaiand this service could not be duplicated anywhere else in the country, according to leaders of thedabbawalas.

They are also confident that despite the social changes that are taking place, this phenomenonwould thrive in the megapolis in the coming years.

Despite being semi-literate, they have developed their own coding system for the error-free deliveryof four-lakh lunch boxes (two lakh either way) and their error rate was a mere one in 16 milliontransactions! Even this was due to unforeseen circumstances.

They said the cumulative annual revenue generated by the dabbawalas was about Rs 36 crore.Irrespective of the distance, they charged Rs 300 per box per month, though in stray cases, theycharged a higher amount due to size or distance. They did not employ any sophisticated technologyfor tracking the movement of the lunch boxes and did not use any motor vehicle for transport. Other than the suburban train service, the transportation was done on pushcarts, cycles and by foot.

Because of all these variables they are able to bring down their cost an d make huge profits. Theywould also cater to a huge client base which keeps on multiplying by the number of office goersand school kids. With growing population, the demand for their service would only grow. Hence,even after 10-15 years the demand for their service would continue. This would lead to high

profitability and returns for dabbawalas.

The Dabbawala business was founded by Mahadeo Havaji Bacche who inaugurated The NutanMumbai Tiffin Box Suppliers Trust with a handful of illiterate employees and without any capitalinvestment. "Tiffin" was a nostalgic term used by British for "light food". However, people callthem Dabbawalas as they carry a "Dabba" meaning "box".

The most interesting fact is that these people do not use any modern technology, yet they havenever failed to deliver the lunch boxes on time - irrespective of weather, riots, floods, etc. with anerror coefficient of one in 16,000,000 boxes. This is more than Six Sigma - a quality that most

businesses strive to achieve.

A study conducted by Six Sigma concludes that excellent efficiency and reliability is achieved bythe Dabbawalas through competitive collaboration with team members and efficient management of logistics.

The Dabbawalas depend on teamwork and timing to complete their tasks. Once the customer leavesfor his/her office, the lunch is packed in a box that is color coded (provided by the Dabbawalas) bythe customer's home

-maker. This process should be completed by 9am. Once the lunch box is packed, it is transportedusing a combination of different transport modes: bicycles


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, local trains, and walking. The boxes are handed over to other team workers at different junctions.The entire city is divided into several areas, each area having a specific "box exchange point". Asingle lunch box changes hands three to four times in its journey to office and back home.


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