XTRA  Power ALEX  BILL

BAILEY  GLENN

KYLE  JANSEN

MICHAEL  PETER

June  2013  

The  Decision  Making  Process

Increase  market  share  and  capacity  

Provide  New  Services  

Buy  Ba-eries  from  

Customer  

Marke8ng  Plan  

Conven7onal  Channels  

Online  Adver7sing  

Supply  Chain  Network  

Retailer  Rela7onships  

Create  Distribu7on  Network  

DLSP  

Expand  Produc8on  

XTRA  Auto  

Takeaways

Addi7onal  Considera7ons  

Implementa7on  

Recommenda7on  

Agenda Current  Situa7on  

Analysis  

Alterna7ves  

Recommenda7on  

Implementa7on  

Metrics  

Addi7onal  Considera7ons  

Q  &  A  

The  QuesFon  Asked

How  can  we  best  configure  our  supply  chain?  

Electricity  In  India

Unreliable   Inconsistent  flow  

Power  cuts  Demand  Exceeds  supply  

BaIery  Market  in  India

Rs  200  Billion  

Growing  by  25%  yearly  un7l  2015  

45%  

45%  

10%  

Industry  Structure  

Organized   Unorganized   Imports  

Indian  BaIery  Industry Lead  Storage  

Ba-ery  Industry  

Automo7ve  Ba-ery  64%  

Original  Equipment  

Replacement  70-­‐75%  

Industrial  Ba-ery  36%  

Telecom   USP/Inverter   Power  &  Railway  

Lead  Acid  BaIeries

70-­‐75%  of  Ba-ery  Market  •  Performs  during  power  cuts  (high  temperatures)  

Gap  between  demand  and  supply  •  Par7cularly  in  summer  

Lead  is  60-­‐70%  of  ba-ery  cost  •  India  imports  99%  of  their  lead  •  Gap  between  demand  and  supply  •  3x  India’s  produc7on  level  (1,642,000  MT)  

Fragmented  Market  

•  Exide  Industries  • Amara  Raja  Ba-eries  •  Luminous  Power  Technologies  

•  Su-­‐Kam  Power  Systems  

New  Standards  in  Manufacturing

Recycling  

Ba-ery  Collec7on  

Transport  

Storage  

Recycling  

The  Indian  Consumer BATTERY  DECISION  

Brand  Credibility  

Retailer  Recommenda8on  

Price  

Warrant  

Aker  Sales  Service  

TECHNOLOGY  USE  

Internet  Access  45%  

Smartphone  Adop7on  30%  and  Growing  

Mobile  Social  Home  

Internet  Is  Expensive  

Public  Wifi  Hotspots  

SMS  Payments  

RevisiFng  the  QuesFon

How  can  we  best  configure  our  supply  chain?  

Reality  Check    

How  can  we  best  compete  in  a  highly  fragmented,  underserved  market?  

SWOT  Analysis

Strengths   Weaknesses  

Opportuni7es   Threats  

SWOT  Analysis STRENGTHS  

• Demand  is  higher  then  current  supply  

• Diversified  ba-ery  offerings  • Long  standing  rela7onships  with  retailers  

• Ability  to  recondi7on  ba-eries  

WEAKNESSES  

• Unable  to  meet  current  demand  

• Small  market  share  

• High  inventory  holding  costs  

SWOT  Analysis OPPORTUNITIES  

• Rapidly  increasing  demand  for  lead  acid  ba-eries  

• Expand  recondi7oned  ba-ery  opera7ons    

• New  ba-ery  technology  

THREATS  

• Highly  fragmented  market  

• Compe7tor  bringing  new  ba-ery  technology  to  the  market  

• Current  compe77on    

Our  Company

XTRA  Power  Group  

XTRA  Power  Auto  Industries  

XTRA  Power  Energy  Systems  

What  do  we  currently  offer  our  customer?

Our  Products  • Inverters  • Solar  lanterns  • Uninterrup7ble  Power  Supply  (UPS)  systems  

• Ba-eries  • Open  shielded  • Heat  shielded  

33%  

62%  

5%  

PROPORTION  OF  BATTERY  REVENUES  

Open  Shielded   Heat  Shielded   Recondi7oned  

What  we  need  for  our  BaIeries

Lead  

• Terminals  • Plates  

High  quality  polypropylene  

Plas7c  container   75%  

23%  

2%  

COST  PERCENTAGE  Lead   Polypropylene   Other  Materials  

Our  Margins

0%  

50%  

100%  

150%  

200%  

250%  

300%  

Heat  Shielded  Ba-eries   Open  Shielded  Ba-eries   Recondi7oned  Ba-eries  

%  Margin  

Margin  for  Retailers   Our  Margins  

Where  do  our  customers  buy  our  products?

Retailers  • Only  touch  point  with  the  customer  

Our  Retailers 72  Retailers  in  New  Dehli  

51  Retailers  in  Northern  India  

123  Retailers  total  

Retailer  RelaFonship

• Wait  for  ba-eries  to  be  taken  away  and  recondi7oned  

Unhappy  about  

incurring  holding  costs  

Costs  Breakout

46%  

4%  

49%  

Direct  Costs  

Raw  materials  Packaging  

Logis7cs   52%  47%  

1%  Overhead  

Employee  Salaries  

U7li7es  

Marke7ng  Costs  

Direct  Costs   Overhead  

Projected  Sales  of  Current  Ops ('000s  INR)   2012   2013   2014   2015   2016   2017   2018  

Heat  shielded  ba-eries  

                     93,678    

                     89,957    

                 112,446    

                 140,558    

                 168,669     199,030     228,884    

Open  shielded  ba-eries  

                 100,055    

                 126,246    

                 157,808    

                 197,259    

                 246,574     308,218     385,272    

Recondi7oned  ba-eries  

                     14,294    

                     17,834    

                     22,293    

                     27,866    

                     34,832     43,540     54,425    

Others   119,978     126,000     132,300     138,915     145,861     153,154     160,811    

Total                    

328,005                      

360,037                      

424,846                      

504,598                      

595,936     703,941     829,393    

%  Change   10%   18%   19%   18%   18%   18%  

PotenFal  Sales Supply  Chain   Sales  

Current   18,000    Open   8,100    Heat   9,900    

DLSP  +  GI   38,160    Open   17,172    Heat   20,988    

Total  Replacement   43,200  Open   19,440    Heat   23,760    

Pricing  DistribuFon Suppliers Lead  Time Price  (avg) Price  DifferenceAvani  Int. 7 715Dolphin  Power 6 915Galaxy  Electricals 6 200Haley  Power 4 220Transport (per  kg/km)Cretto 12 1.6DLSP 4 2.35

28%

10%

47%

Suppliers Lead  Time Price  (avg) Avg.  Holding  CostAvani  Int. 7 715 11.52

Dolphin  Power 6 915 12.63 10%Galaxy  Electricals 6 200 2.76

Haley  Power 4 220 2.03 -­‐27%Transport (per  kg/km)

Cretto 12 1.6 0.04DLSP 4 2.35 0.02 -­‐51%

Estimated  WACC 12%(in  rupees)

CriFcal  Success  Factors Cri8cal  Success  Factor   What  We  Have   Sustainable  Compe88ve  

Advantage?  

Profitability   24%   No.  

Distribu7on   Currently  long  lead  7mes   No.  

Innova7on/  Recondi7oning  Capability  

Ba-eries  perform  under  extreme  opera7ng  condi7ons/  Technology  

Yes.  

Mee7ng  the  Customer’s  Needs    

Unable  to  meet  current  demand  

No.  

IntroducFon  of  AlternaFves Renew  opera7ons  with  Cre-o  and  focus  on  current  ba-ery  produc7ons  

Select  a  new  supplier  and  focus  on  current  ba-ery  produc7ons  

Extend  recondi7oned  ba-ery  opera7ons    

AlternaFve  1  –  Renew  OperaFons  with  CreIo  and  ConFnue  with  Current  baIeries PROS  

• Established  rela7onship  with  supplier  

• Li-le  opera7onal  change    

CONS  

• Unable  to  meet  the  increasing  demand  

• Will  not  sa7sfy  current  retailers  

• Con7nued  expensive  inventory  holding  cost  

• Will  not  op7mize  our  opera7ons  

AlternaFve  2  –  Select  a  New  Supplier  and  Focus  on  Current  BaIery  Products   PROS  

• Be-er  lead  7mes  

• Could  decrease  the  gap  between  supply  and  demand  

• Sa7sfy  retailers  complaints  

CONS  

• Complete  restructuring  of  the  supply  chain  

• Temporary  loss  of  sales  during  transi7on  period  •  Could  take  1  year  for  all  changes  to  take  effect  

• Increased  overhead  from  new  employees  

AlternaFve  3  –  Extend  RecondiFoned  BaIery  OperaFons   PROS  

• Market  has  extremely  high  margins  

• Take  advantage  of  high  demand    

• Increase  market  share  

CONS  

• Difficult  to  obtain  used  ba-eries  

• Nega7ve  customer  perspec7ve  of  used  ba-ery  quality  

EvaluaFon  of  AlternaFves Cri8cal  Success  Factor  

Renew  Opera8ons  with  CreYo  

Select  a  New  Supplier  

Recondi8oned  BaYery  Opera8ons  

Profitability   Moderate   High   High  

Distribu7on   Low   Moderate   Moderate  

Innova7on/  Recondi7oning  Capability  

Low   Moderate   High  

Mee7ng  the  Customer’s  Needs  

Low   Moderate   High  

The  Recharge  Plan

The  Recharge  Plan  

Provide  New  

Services  

Buy  Ba-eries  from  Customer  

Marke8ng  Plan  

Conven7onal  Channels  

Online  Adver7sing  

Supply  Chain  

Network  

Retailer  Rela7onships  

Create  Distribu7on  Network  

DLSP  

Expand  Produc8on  

XTRA  Auto  

The  Recharge  Plan  Timeline

Phase  1:  Year  1  

Phase  2:  Years  2-­‐3  

Phase  3:  Years  3-­‐5  

New  Services Phase  1  • Source  pick  up  agents  • Establish  price  for  buying  back  ba-eries  • Iden7fy  new  pick  up  loca7ons  • Criteria:  • Li-le  to  no  leasing  cost  • Convenient  to  large  popula7on  • Low  crime  zones  • Poten7ally  current  retailers  

Phase  2  • Pick  up  loca7ons  opera7onal  

Phase  3  • Begin  forming  an  R&D  department  

MarkeFng  to  Retailers:  Value  Service  and  Price

Aware  

Industry  Shows  Expand  Sales  Agent  Territory  

Know  

Con7nue  Training  Advocate  

Top  Dollar  for  Rechargeable  Ba-eries  

MarkeFng  to  Customers:  Value  Brand  &  Service

Aware  

Wifi  hot  spots  Pickup  loca7on  signs  English  &  Hindi  

Know  

Website  Infographics    

Advocate  

Bollywood  Escala7ng  Payment  

Supply  Chain  Management Phase  1  • Source  transport  op7on  • Contract  

• Nego7ate  with  DLSP  

Phase  2  • Operate  with  DLSP  • Source  other  suppliers  for  lead  • Criteria:  • Large  manufacturing  capacity  • Low  cost  logis7cs  • Inves7gate  automa7on  opportuni7es  • Evaluate  produc7vity  of  pick-­‐up  loca7ons  

Phase  3  • Possible  automa7on  of  ba-ery  repurchasing  process  

Expand  ProducFon Phase  1  • Inves7gate  leverage  current  manufacturing  capability  with  XTRA  Auto  division  

• Source  new  loca7on  within  current  facili7es  

Phase  2  • Establish  transfer  price  • Begin  producing  more  ba-eries  from  other  division  • Trade  between  two  divisions  

Phase  3  • Possible  sourcing  into  other  ba-ery  produc7on  facili7es  

Budget  (in  rupees) Addi8onal  Costs   Year  1   Year  2   Year  3-­‐5  

New  Services   350,000   440,000   550,000  

Supply  Chain  Mgmt   300,000   300,000   300,000  

Expand  Produc7on   200,000   250,000   315,000  

Marke7ng   100,000   100,000   300,000  

Total   950,000   1,090,000   1,465,000  

Supply  chain  management  relates  to  new  revenue  method  and  sourcing    Produc7on  expansion  includes  new  costs  of  sourcing  more  expensive  material  and  logis7cs  costs    25%  yoy  growth  expected  

Metrics •  Double  profits  by  end  5  Profitability  

•  Decrease  lead  7mes  •  Decrease  holding  costs  Distribu7on  

•  Double  capacity  in  5  years  Innova7on/  

Recondi7oning  Capability  

•  Sell  36,000  units  in  2018  Mee7ng  the  Customer’s  Needs  

AddiFonal  ConsideraFons   Will  lead  ba-eries  s7ll  be  relevant  in  upcoming  years?  • How  will  advancements  in  new  technologies  change  the  Indian  market?  

Could  we  reuse  lead  in  our  depleted  heat  shielded  ba-eries?  

Could  we  leverage  our  rela7onship  with  bike  retailers?  

Risks  and  MiFgaFons

Risk  

New  ba-ery  technologies      

Failed  nego7a7ons  with  DLSP  

Probability  

60%  

25%  

Mi7ga7on  

Con7nued  R&D  

Maintain  rela7onship  with  Cre-o  

Appendix    The  Decision  Making  Process  

   Takeaways  

  Agenda  

   The  Ques7on  Asked  

   Electricity  In  India  

  Ba-ery  Market  in  India  

   Indian  Ba-ery  Industry  

   Lead  Acid  Ba-eries  

  New  Standards  in  Manufacturing  

   The  Indian  

Consumer  

  Revisi7ng  the  Ques7on  

   SWOT  Analysis  

   SWOT  Analysis  

   SWOT  Analysis  

  Our  Company  

  What  do  we  currently  offer  our  customer?  

  What  we  need  for  our  Ba-eries  

  Our  Margins  

  Where  do  our  customers  buy  our  

products?  

  Our  Retailers  

  Retailer  Rela7onship  

  Costs  Breakout     Projected  Sales  of  Current  Ops  

  Poten7al  Sales  

  Pricing  Distribu7on     Cri7cal  Success  Factors  

   Introduc7on  of  Alterna7ves  

  Alterna7ve  1  –  Renew  Opera7ons  

with  Cre-o  and  Con7nue...  

  Alterna7ve  2  –  Select  a  New  Supplier  and  Focus  on  Curren...  

  Alterna7ve  3  –  Extend  Recondi7oned  Ba-ery  Opera7ons    

   Evalua7on  of  Alterna7ves  

   The  Recharge  Plan      The  Recharge  Plan  Timeline  

  New  Services  

  Marke7ng  to  Retailers:  Value  

Service  and  Price  

  Marke7ng  to  Customers:  Value  Brand  &  Service  

   Supply  Chain  Management  

   Expand  Produc7on  

  Budget  (in  rupees)  

  Metrics  

  Addi7onal  Considera7ons    

  Risks  and  Mi7ga7ons  

  Why  switch?  

Why  switch?   Secure  Supply  Chain  

  Increase  throughput  to  capture  more  market  

  More  sales  =  more  recondi7oning