BUSINESS PLAN ABC COMPANY

New venture Address TBD HYDERABAD, INDIA

Tel.: TBD E-mail: TBD 15.06.2012

1. THE BUSINESS 1.0 Executive Summary Given the vast opportunities in the field of defense offset business, it is high time to have a facility that would cater for design, development, manufacturing and supply of RF and microwave products and sub-systems, in order to capture larger segments of business out of the ongoing international transactions for large range of Defence equipment. In this business plan, it has been summarized that 100% turnkey solutions in this sector with all the manufacturing activities under one common roof would not only attract customers attention, but also would give the company a competitive edge over other companies in the same business. Details of technological breakthrough by effective collaborations with foreign companies is discussed in this business plan, which would not only boost the technological domain of the company, thereby capturing the market but also save time in establishment and ROI. It has been attempted to highlight in this business plan that in-house engineering capabilities are very vital in the sustenance of the company and it is going to be difficult to maintain the same level of competence for longer periods. Plans should be devised to start up with module level engineering capabilities and gradually expand them to sub-system and system level engineering.

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Business Proposal: To cater services to prestigious sectors of Indian Defence and Space in the field of RF and microwave products and sub-systems. To nurture the capabilities to establish microwave facility for assembly and testing activities including ESS labs as part of Tier-I manufacturing and to support engineering services (design & development activities), EMS activities, mechanical fabrication etc. as part of Tier-II manufacturing to capture the market attention and fulfill offset requirements of MoD.

1.2 1.2.1

Production Process and Development History of T/R modules: The LRDE story Initially the concept of TR modules and usage of these modules in various defense applications have been introduced by LRDE, Bangalore under the leadership of Dr. Revankar, Distinguished Scientist. These modules were first brought to form in India around the year 2000 by LRDE, in association with GAETEC as technology partner and ASTRA Microwave as industry partner.

1.2.2

How it started: These units were used for MPR project. ASTRA Microwave was given an order for around 2000 Nos. for production by LRDE. In parallel, the Indian govt. ordered bulk quantities from ELTA for their projects under the Defense offset clause. ELTA had divided the order on HELA for DTRMs and on ASTRA for DRMs. This programme is under execution currently and may get completed by the end of this year. System integration and commissioning are yet to be completed by ELTA.

1.2.3

Current strategy recognized and is planning to align four companies HELA, Data Patterns, ASTRA & Alpha Designs for mass production of these units.

1.2.3.1 With emerging and increasing demand for these TR modules in India, ELTA has

1.2.3.2 Meanwhile, besides ELTA programmes, ASTRA is actively involved in development and production of TR modules for Thales-France, and indigenously for CABS Bangalore and LRDE Bangalore. 1.2.3.3 Data Patterns is in nascent stages of development and production of similar TR modules for LRDE under LLTR (Low Level Tracking Radar) programme. 1.2.3.4 Alpha Designs is planning to execute production orders from ELECTRONIKA-Italy. 1.2.4 Market strategy vast manufacturing facility exclusively for production of TR modules so as to capture the entire Indian market. Additionally they are planning to have a R&D unit for development of the same units. 1.2.4.2 ASTRA is already into this domain backed up by Indian customers. This is the key reason for their continuous expansion plans and bulk orders from various customers. 1.2.4.1 Bharat Electronics Limited has supposedly spent around 60 crores and has established a

1.2.4.3 Data Patterns is also in the same line, while Alpha Designs has plans to build up. 1.2.4.4 HELA has got established capabilities for mass production of TR modules but not good enough to grab the market in this sector for the lack of initiation for development of the same units as and when the customer asks for. 1.2.5 1.2.6 Business proposition: Business propositions in this field demand an elaborate and detailed survey to quantify the business prospects over the years to come. Supplier chain: No new development. Almost all the suppliers are long-term players in the market. Most of the suppliers are from US and a few more from EU. 1.3 1.3.1 Market Structure and Analysis Target Market and Customer Base: The targeted market sector will be towards Defence Electronics, with mainstream of Radio Frequency and Microwave components, subassemblies, sub-systems and systems. Products under the anvil can cater for Electronic Warfare systems, Surveillance systems, ECM & ECCM systems etc. and a variety of other systems involving technological breakthrough and upgradation. Taking into account the provision of an offset clause in Defence production by the Ministry of Defence, a large business segment can be captured when business relationship could be established with global organizations who supply to Indian Defence. Any Indian company can get registered with the Ministry of Defence to become eligible to undertake such business. Many international players are keen to work together with Indian companies in order to satisfy these clauses viz., ELTA, Thales, Lockheed Martin, Sikorsky, Rafael, Boeing etc. Customer Base will include the three Defence services of the nation, Defence Labs working on development of such systems, Defence PSUs viz., Bharat Electronics Limited, Bharat Dynamics Limited, Hindustan Aeronautics Limited etc. and various other organizations engaged in homeland security, Intelligence, Dept. of Space etc.

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Competitor Analysis Direct competitors: Already established in the business. ASTRA Microwave Products Ltd. 1991 Very good Defence, Space, Telecom, Satcom --BEL ELTA, Thales 800 204 crores Hyderabad Chennai AKON Electronics Limited 1995 Good Defence & Space Subsidiary of AKON USA BEL USA, EU, Asia Pacific 120 125 crores Delhi Bangalore Alpha Design Technologies Limited --Good Defence, Software ELEKTRONICA --ELTA 500 TASL Group of companies (HELA) 2006 Good

Key parameters Established in Brand reputation Sectors covered Foreign collaborations Indigenous collaborations Export business Manpower Turn over for FY11-12 Location

Data Patterns Pvt. Limited --Good Defence & Space ------400

Defence ELTA --ELTA 54 70 Hyderabad

Indirect competitors: Looking for diversification Key parameters Established in Brand reputation Sectors covered Foreign collaborations Indigenous collaborations Export business Manpower Turn over for FY11-12 Location Avantel Limited 1991 Good Defence, Telecom, Space & Software L3-Narda SAC-ISRO Narda 150 60 crores Hyderabad Hyderabad New comer Skanda Aerospace Mistral Solutions 1997 Good Defence, Homeland security USA --------Bangalore VEM Technologies 1988 Very Good Defence ------800 300 crores Hyderabad Hyderabad New comer Kernex Microsystem s Limited

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Market Size and Potential

Defence Market and potential over the next few years Table: Comparative Statistics of Defence Budgets, 2011-12 & 2012-13 2011-12 Defence Budget (Rs. in Crore) Growth of Defence Budget (%) Revenue Expenditure (Rs. in Crore) Growth of Revenue Expenditure (%) Share of Revenue Expenditure in Defence Budget (%) Capital Expenditure (Rs. in Crore) Growth of Capital Expenditure (%) Share of Capital Expenditure in Defence Budget (%) Share of Defence Budget in GDP (%) Share of Defence Budget in Central Government Expenditure (%) 164415.49 11.59 95216.68 9.01 57.91 69198.81 15.33 42.09 1.83 13.07 2012-13 193407.29 17.63 113828.66 19.55 58.85 79578.63 15.00 41.15 1.90 12.97

Figure: Share of Defence Services in Defence Budget 2012-13

1.3.4

Competitive Advantage should be backed up by good financial strength and stability over at least the past 3 years and should be able to present to the stakeholders audited financial results for the same period.

1.3.4.1 Financial backing and stability of the company: The Company interested in investing

1.3.4.2 Engineering capabilities of the company: The Company should have technology oriented vision to drive itself to become a leader in the technological solutions and be backed up by strong and experienced engineering teams. 1.3.4.3 Brand name in the market: Brand reputation of the Company becomes important to fill confidence and attract investors in this sector and also promotes the Company towards business diversification to capture the market requirements. 1.4 1.4.1 Marketing and Sales Sales: Projects available at ELTA alone, which are being planned to be outsourced to India in the form of microwave modules and sub-systems is estimated to be worth of US$ 750 Million. Considering various established players in the market to share this business, if at least 25% is captured, estimated Sales over the next 3-4 years beginning 2013 could be around US$ 190 Million. 1.4.2 Marketing and Communication

1.4.2.1 Visiting the customers and inform them about the advancements. 1.4.2.2 Notifications in company website, journals and media 1.4.2.3 Communications plan to be devised to reach customers in advance. 1.5 1.5.1 1.5.2 1.6 1.6.1 1.6.2 Company Structure Management: Based on the business opportunities, team can be designed based on the product. Partners and Sponsors: to be discussed as per requirements. Risks Policy risk: As this business involves cross-country relationships. Business risk: This type of offset business has started some 7-8 years ago and there are many companies who have come forward to establish different levels of partnerships with many global companies viz., TATA with Lockheed, IAI, Sikorsky etc., Reliance Industries with Dassault, L&T with EADS, Mahindra Group with BAE Systems and so on.

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SWOT Analysis STRENGTHS: Financial stability Customer focus & relationship Brand name Foreign collaborations Export orders Strong vision and mission WEAKNESSES: Lack of expertise Lack of engineering background Space & infrastructure

OPPORTUNITIES: Offset business Domestic business based on technology Partnerships with foreign companies Business diversification Able alternate source for market share

THREATS: Late entry Competition with big players Government policies

2. THE FINANCIAL PLAN Investment Summary: Description Standard microwave manufacturing facility (assuming TR module manufacturing) Standard EMS facility (2 lines) Standard mechanical fabrication facility Software design tools for engineering Total Amount (in INR) 15 crores 10 crores 5 crores 2 crores 32 rores

3. FUTURE 3.0 3.1 Considering the pace at which the demand for these units is increasing, it is expected that the requirement will continue for the next 10 years. According to a survey, this vast requirement for development and production cannot be handled by ASTRA and Data Patterns only, but demands for more and more players to prove the capabilities and cater to the customer when demanded. 3.2 At this juncture, time is ripe for the company for grabbing the opportunities by attracting the customers sight by planning horizontal expansion of the facilities and venturing into design activities. 3.3 Customers are also looking at establishments of facilities for manufacturing arrays for easing out system integration aspects. 4. CONCLUSION 4.0 Nation is looking at indigenization of high technology parts and there are visionaries in the customer base who wish to see a complete line of Indian made products that could match any given international standard. 4.1 4.2 Besides production, maintenance of these units also plays a prominent role in keeping the systems healthy and functioning. Besides TR modules, there is enormous scope and business prospect in development of various microwave products, which could actually establish the company as a leading microwave company in India. *****