PSS Herbs IndiaBusiness Plan

Mission

• Be a one stop shop for a wide range of Indian herbs, herbal extracts, purified active ingredients and Ayurvedic formulations that enable holistic health.

• Provide customers with the highest quality of herbs and herbal products that are ethically and organically grown.

• Be recognized the world over for the inroads in research and development to leverage the combined knowledge of Ayurveda, Unani and Siddha in coming out with natural medications for disease conditions that are prevalent in the modern world.

The Team contd.• Vinoth Sankar - Chairman, CEO & Founder

– Hands-on experience in herbal export business

– Expertise on Supply Chain Management, Procurement, Manufacturing operations, Warehousing, Shipping & freight, Industrial commercial terms et al.

• Supported by PSS Jeyandran, a renowned herbologist with over 50 years of trading experience in the herbal business and an authority in herbal formulations

• PSS Jeyandran and Vinoth Sankar have been key contributors to the success of PSS Exports – A India based market leader with over 100 year history in the export of processed herbs

• The management team comprises of domain and business experts with hands-on experience in leading the business towards success

The Team

As of September 2013  

Name Title

Mr. Vinoth Sankar J Business Owner

Mr. P. Jeyendran Advisory Board (Herbs/Procurement)

Siddha Doc Advisory Board (Medical Formulations)

Ms. Madhavi CN Advisory Board (Business Development & Strategy)

TBD Global Sales Head

Dr. K. Anand Solomon Director – Herbal Extracts & API Division

TBD Director – Nutraceuticals Division

TBD Director – Herbal Formulations Division

Market Summary

• Multiple factors causing a major shift to herbal medicine

• “Herbal treatments highly lucrative in the international marketplace” – WHO – Developing Nations: 80% population depends

on traditional medicine for primary health care– Developed Countries: 70% of the population

use some form of alternative medicine• Global market forecast @ US$93.15 billion by

2015 Source: Global Industry Analysts, Inc

• Indian herbal exports market shows CAGR of over 20% for herbal raw materials and 25% for herbal medicines (currently at USD 0.3 B & USD 1.9 B respectively)

• The industry is largely unregulated

• Competing Countries: Japan and China

Opportunities

• Lifestyle health concerns on the rise. People keen on relief/cure through herbal formulations.– Reasons for the shift towards herbal medicines:

• Less expensive than medicines bought from an allopathic

pharmacy• Cost effective• No serious side effects like allopathic medicines• Growing awareness on the goodness of going herbal• Therapeutic effect and medicinal benefits

• High potential areas: Obesity, diabetes, heart disease, bone and joint problems. Hair loss, skin allergies and beauty products

• Markets’ desperate need for trusted & high quality products.

• Global markets implementing measures to control adulteration

• Competition: China is a key competitor but customers are concerned about China-based products as being low on quality

Opportunities contd.

• Geographies– US: GOI, in association with the Indian Consulate in NY

has set up an Ayurveda Development Board in the US to promote herbal exports and smoothen the process

– Europe: Costs less and takes less time to approve medicines as safe and effective under the "doctrine of reasonable certainty. There is NO inherent prejudice in Europe against molecularly complex plant substances.

– Developing Countries: Herbal remedies are increasingly becoming important due to their affordability and effectiveness

• An additional market from the competitive segment of allopathic pharma: Herbal extracts (API) widely in use in the allopathic medicines – 25% of allopathic medicines contain plant derivative -

WHO

Opportunities contd.

• The legal ambiguity in Europe and the US: Marketing authorization for the nutraceutical division in the highly regulated markets

• In-depth herbal knowledge of PSS core team that ensures high efficiencies

• Environment conscious markets: PSS satisfies this by procuring from those farmers who follow scientific methods of cultivation to offer high quality produce.

• Internet & Social Media: – Social analytics presents great scope to understand &

respond the customer needs – Marketing/sales activities generate better results with

reliable visualizations about the competitor strategy, market landscape and customer expectations.

– Increased business through Internet Marketing. – Relatively no/low cost promotion and international

brand image

Business Concept• Products are grouped under different divisions

based on the processing required and the manufacture process– Herbs Division: Provides dry form of medicinal

herbs and culinary herbs – Nutraceutical Division: Brings out products/

supplements that have high demand– Extracts Division: New lead compounds to be

developed as drugs and to valorize the traditional herbal medicinal products

– OTC Division: Creates herbal remedies & phytomedicines.

• A phase-wise approach to the entire business with capacity building strategy

• Profitability of individual divisions based on:

Efficient operations; Effective marketing; and Strong sales force

Business Concept contd.• Quality of manufacturing practices, product and

innovation strategies & compliance

• Entrepreneurial approach to facilitate personal contact, subcontracting, market access, appropriate labor pools, and access to common services.

• A lower overhead/labor cost structure

• Modernized to manufacture a wider range of higher quality and higher priced products for specific market segments

• Long-term partnership model to offset price/quality fluctuations in international trade

• Seek out niche markets that target high-end/high-value usage for PSS products

Business Concept contd.• Lead sales with targeted market communication

activities for pharma and cosmetic manufacturers, distributors, nutraceuticals and consumers

• Implement legal procedures and logistics that include packing, insurance, invoices, export documentation, etc.

• All the strategies, more so the marketing strategy would be determined through market research.

Competition

• Companies with better performance/ranking started making exports a major share of their total revenue. All others limited only to Indian domestic market

• Scope for growth limited for SMEs due to lack of adequate financial funds and other resources.

• Number of foreign-owned companies is relatively small, but those that are financially strong control about half of the market.

• Multinational companies responding to the regional markets nutritional preferences faster than local players.

• Extract manufacturers and suppliers to herbal product companies are leveraging on quality and timeliness as essential factors in being successful.

Competition contd.• Competitive products in Nutraceuticals segment: Fortified Cereals, Vitamin & mineral supplements, Additional supplements, Energy drinks and tablets, Foods to reduce cholesterol levels, Protein Powders, Probiotics and Sports products

• Competitive products in the OTC segment: Beetroot Complex, Concentrated Cranberry, Ginkgo Plus, Garlic Plus, Ginseng, Milk Thistle Plus

• Competitive OTC Brands: Vicks (VapoRub & Cough Drops), Amrutanjan (Pain Balm), Zandu (Pain Balm), Iodex (Pain Balm), Moov (Pain Cream), Itch Guard (Cream), Eno Fruit Salt (antacid), Halls (Lozenges), Dabur (Pudina Hara) etc.

• Indirect competition from allopathic medications

– Can be made to work as additional market opportunity for Extracts Division, since at least 25% of all allopathic medicines contain a plant derivative

Competitive Advantage

• There is a big competitive advantage for players in developing countries like India on the due to low cost of labor for harvesting

• Extensive domain knowledge of the Founder and the established name in international business

• Consistent quality from locally tested herbs at the core of each product. Products standardized in order to increase their authenticity in global market

• Product USP– Anti-ageing product that replaces the need for

botulax based injection therapy– Phyto-protectants - chemicals from plants that

are thought to confer protection against cancers and cardio-vascular disease

– Herbal based probiotics

Competitive Advantage contd.• Cost savings by optimization at various levels

makes the PSS process efficient and helps in creating products without a high markup price.

• Strategic, quality-oriented domestic sourcing approach for best quality herbs at best prices

• Product planning based on market research, internal R&D, competitor moves and industry changes and best practices

• Market differentiation that is both geography- and product based

• Operations & HR Strategy to ensure embodiment of accumulated resources

Competitive Advantage contd.• Core team of PSS Herbs have a long association

with herbal market due to which the business is based on:– Thorough knowledge of every Indian herb & those

associated with the science of Ayurveda– High level of competency in understanding herbal

components, properties, benefits and risks. – A very strong network (a key PSS asset) comprising of

leading suppliers, pharmaceutical manufacturers, trade associations, doctors, research associates, certifying bodies, distributors etc.

• Follows a greener and cleaner environmentally friendly process

Goals and Objectives

Short term goals • Sales goal of $120,000 during first year of

operation.• Customer base of 10 companies by the end of

first year• Increase sales by 15% during the 2nd year of

operation.

Long term goals

• Expanding the manufacturing unit by adding on a new location to meet the growing orders (business to grow by 100% in the next 5 years)

• International sales offices would be established in regions that have consistently shown high demand to contain costs in managing the transactions and tap into the market completely without rising the sales or operational expenses.

Financial Plan: Capital Expense

Capital Expense

Description Year 1

  (In USD)

Land 25000

Plant Setup 1016609

Machinery for Manufacturing 4293424

Permits, IPR and Legal 27108

   

Grand Total 5362141

   

Financial Plan: Operating Expense

Operating Expense

DescriptionYear

1Year

2 Year

3Year

4Year

5

  (In USD)

Plant Operating Cost10450

017533

3 22933322953

331416

7

Total Manpower Expenses 7490718267

3 26103726349

326569

3

Marketing & Selling Expenses 32942 85955 12639319568

728016

2

           

Operating Expense21234

944396

2 61676368871

486002

2

Total Expense55744

9044396

2 61676368871

486002

2

           

Depreciation Machinery (Straight line Method @ 10%)

536214

536214 536214

536214

536214

Amortization 0 6777 6777 6777 6777

           

Financial Plan: Sales Revenues

SALES REVENUES

Divisions Year 1 Year 2 Year 3 Year 4 Year 5

  (In USD)

Herbs Division 96940 472848 971129 1147633 1262396

Extracts Division 23275 446398 1142736 2397682 4656115

Nutraceutical Division 0 184763 599870 1631238 4060716

OTC Products Division 0 160413 571444 1590305 3696974

           

Total 120215 1264421 3285179 6766858 13676201

Financial Plan: Revenue Growth Rate (%)

REVENUE GROWTH RATE (%)

Divisions Year 1 Year 2 Year 3 Year 4 Year 5

   

Herbs Division

 

387.77 105.38 18.18 10.00

Extracts Division1817.9

3 155.99 109.82 94.19

Nutraceutical Division   224.67 171.93 148.93

OTC Products Division   256.23 178.30 132.47

         

Financial Plan: Breakeven Analysis & Profit/Loss Analysis

Breakeven Analysis (Simple Method)

Cash flow from Operations-

327256473 49227579 16010494336468868

0 768970741

           

Cumulative gross income-

327256473-

278028894-

11792395024676473

0101573547

1

Breakeven at 3 Years 5 Months  

Profit & Loss Analysis

Gross Income-

327256473 49227579 16010494336468868

0 768970741

Depreciation & Amortization 32172848 32579463 32579463 32579463 32579463

           

EBIT-

359429321 16648116 12752548033210921

7 736391278

Interest(100 % equity) 0 0 0 0 0

           

EBT-

359429321 16648116 12752548033210921

7 736391278

TAX 30%   4994435 38257644 99632765 220917383

           

Net Income-

359429321 11653681 8926783623247645

2 515473895

Cumulative Net Profit-

359429321-

347775639-

258507803 -26031351 489442544

           

All numbers in INR

Capital Requirements

• The financial requirement for establishing and expanding the business is $8.18 Million

Risks and Rewards

• Being an elaborate manufacturing setup, investment tends to peak in the initial year.

• Phased approach helps in realizing the revenues early and to achieve the breakeven by fully utilizing the interdependencies of the divisions to the company’s advantage.

• Value of the investment grows owing to the market penetration, IPR, market intelligence driven initiatives.

• A system-based approach is prosposed to business risk management.

Risks and Rewards: Benefit for the

Investor• PSS Herbs India is a total return investment venture that is

planned to provide high dividends along with the potential for moderate, long-term capital appreciation.

• PSS Herbs has a medium equity market capitalization, the returns are comparable to other small to mid-sized companies.

• Management is willing to negotiate any structure which suits the investor. The company is seeking an equity investor.

• Management will provide a seat on the company's board of directors.

• Investor will enjoy ROI in excess of that of alternative investments, as a privately held company, while providing investor liquidity of their investment by taking the company public at its earliest opportunity.

Note: According to Euromonitor International, India is becoming an attractive destination for investments in this sector.

Thank you

Vinoth SankarMobile: ++ 91 94884 24951 (India) &

++971 50 860 207 9 (UAE)vinoth7777@gmail.com

Skype: vinoth7777Twitter: @PSS_Herbs_India

http://www.pssherbsindia.com