INSTITUTE OF RURAL MANAGEMENT ANAND

Financial Plan
Final Submission
On

InstaBuddy
(Easing lives with a touch)

SUBMITTED
TO
Prof. Rakesh Arrawatia
SUBMITTED BY:
Abhigyan Chaudhary (P39178)
Abhishek C (P39179)
Anirudh Goel (P39185)
Aviral Katiyar (P39190)
Suchetana Adhikary (P39229)
Table of Contents
ACKNOWLEDGEMENT: ............................................................................................................................................................ 3
Idea of Business Plan............................................................................................................................................................... 4
Business proposition and Need Identification ........................................................................................................................ 4
Mission ................................................................................................................................................................................ 5
Goals ................................................................................................................................................................................... 5
Objectives............................................................................................................................................................................ 5
Legal form of Ownership......................................................................................................................................................... 5
Industry ................................................................................................................................................................................... 5
Product .................................................................................................................................................................................... 6
Investment Plan ...................................................................................................................................................................... 7
Production and Sales Plan....................................................................................................................................................... 8
Estimation of Operating and Other Expenses:........................................................................................................................ 9
Financial Plan: ....................................................................................................................................................................... 10
Raising Capital ................................................................................................................................................................... 10
WACC ................................................................................................................................................................................ 10
Cost of Debt .................................................................................................................................................................. 10
Cost of Equity ................................................................................................................................................................ 10
Working Capital Estimation .................................................................................................................................................. 11
Cash Flow Projection (FCF Approach) ............................................................................................................................... 11
Investment Appraisal ............................................................................................................................................................ 12
ACKNOWLEDGEMENT:

We would like to express our deepest gratitude to IRMA for allowing us to be a part of its
flagship rural management program. Our sincere gratitude to Prof. Rakesh Arrawatia, our
Financial Management facilitator, for imparting his financial insights and guiding us throughout
this engaging course. Without his relentless guidance and advice, the initiation, execution of the
research for this financial plan, and completion of this report would not have been possible.
We hope you like reading the InstaBuddy financial plan report as much as we did making it..
Thank you!
Idea of Business Plan

In our developing economy where more and more people are migrating to the cities in pursuit of jobs and
education, it often gets difficult to avail everyday services at a click. Being in a new surrounding without
any support or contacts, one finds oneself in a helpless spot during emergencies. When the water pipes
leak or the electric connection goes haywire, or while seeking medical help, one has to knock quite a few
doors before finding a solution. During all these difficulties, InstaBuddy will be that one true friend
helping one get out of the tough situation in just a tap on the screen. InstaBuddy is a one-step solution to
all your daily needs, be it finding a plumber, carpenter, electrician or beauticians. We bring a highly
simplified platform where one can search for any of these services and the messiah will be at their doorstep
in no time. People who are new in the cities are also concerned about their safety when they avail for such
services as there is no background check being done for these service providers. InstaBuddy solves this
problem as well with complete police verification of every ‘buddy’ who will be associated with us in
providing door to door services to homes. These daily paid workers will also be benefitted drastically by
associating with us as they will know where the demand lies and will have a constant flow of work and a
stable income. The first phase of the service is to be launched in Ahmedabad, Baroda and Anand and then
further expanded to other tier 1, tier 2 and tier 3 cities in future. To make the business model more
sustainable and a going concern, vocational training will be provided to youths from smaller cities and
villages in future, who are in search of jobs at a nominal rate.

Business proposition and Need Identification

Instabuddy, an online marketplace for local services will provide customers an easy access to their day to
day needs. Be it a small water leakage or getting ready for a social function, Instabuddy will be an easy
solution. By the help of automated match-making technology, customers will just be a touch away from
the plumbers, electricians and other skilled labor force. The instant service at a reasonable rate will lead
to customer satisfaction. With the target market limited to Ahmedabad, Anand and Vadodara the focus is
to consolidate all the smaller unorganized markets of these services into a single organized market creating
a commonplace for customers and suppliers to interact. The list of services which our business aims to
provide are-

 Plumbing
 Carpentry
 Electric Repairing
 Electronic Repairing
 Beauty Services
All these services will be provided by trusted professionals who can be contacted through our mobile
application or website. Thus, with a motive to bridge this gap the business aims at providing better
solutions.

The idea is to redefine how local services and servicemen are being hired in India. For an individual in
India to search for a particular professional in the nearby area is extremely hard and time consuming,
specially, in tier 1, tier 2 and tier 3 cities. This sector is highly un-organized and the time spent on finding
these professionals is very high. To search for an electrician or a plumber, people have to ask friends,
neighbors or flip through yellow pages, which can be too tedious. The service charge of these professionals
varies a lot and the reliability can also be a matter of concern. This need gap is where our business will
try to fit in thereby providing door to door services.

Mission
Easing lives with a touch

Goals
Widening service base and increasing customer satisfaction through better and timely solutions thereby
increasing the value of both our customers and us.

Objectives
The objective of InstaBuddy is to make our customers consider us to be an easy solution by providing
them with best in-class services. Our company also aims to reflect a customer intimacy strategy where the
customer feels that their needs are heard, understood and met.

Legal form of Ownership

We are opting for the LLP (Limited Liability Partnership) type of business organization.

Industry

Indian e-commerce industry is expected to grow from US $38.5 billion in 2017 to US $200 billion by
2026. Increasing internet and smartphone penetration coupled with urbanization have triggered this
growth. Indian e-commerce revenue is projected to grow at an annual rate of 51% which is the highest in
the world. The government is supporting this sunrise industry injecting in funds and bringing in new
initiatives. Digital India, Make in India, Start-up India, Skill India and Innovation Fund has been few of
the endeavors by the Government to strengthen the e-commerce industry.

Technological innovations like digital payments, hyper-local logistics, analytics driven customer
engagement and digital advertisements have further boosted the growth of this industry.
India has a huge unorganized labor force that have low job security, no medical insurances, unreasonable
wages coupled with longer hours for lower wages and lean periods without any work.
There exists a dire need to organize this sector in a step-wise manner and creating a skilled workforce.

Product
Instabuddy mobile application or website will help in satisfying the customer’s day to day needs by
providing services from skilled professionals for example electricians, plumbers, carpenters,
photographers and beauticians. This is done through an automated match-making algorithm, depending
upon the type of service an individual require from a particular professional. If there is a requirement for
a plumber then the customer will have to define his exact needs like if he needs to module his bathroom
or he needs to get his particular plumbing needs. Along with the above details, he has to select his city,
his colony, and the time at which he will be available. On the basis of these details, Instabuddy through
automated match-making will find the best available plumber for the service. Once the match is fixed, the
plumber will arrive for the service at the mentioned time. After receiving the service, the consumer will
pay for it through our mobile application. We will transfer the payment received from the consumer to the
plumber in his bank account after deducting our service charges.

The service charges fixed for the nominal service of a particular professional is mentioned below:

Service Instabuddy
Professional Type of service
Charge commission
Plumber Repairs and Fixes ₹ 200 20%
Flush Tank
Plumber ₹ 400 10%
Installation
Kitchen/Bathroom
Plumber ₹ 500 10%
Sink Installation
Indian Toilet
Plumber ₹1200 10%
Installation
Western Toilet
Plumber ₹ 2000 10%
Installation
Plumber Other Installation ₹ 200 20%
Electrician Repair & Fixes ₹ 150 per hour 20%
Television
Electronics ₹ 500 20%
Installation
Electronics Television Repair ₹ 300 20%
Carpenter Repair ₹ 150 per hour 20%
Beautician Arms Waxing ₹ 200 per hour 20%
Beautician Leg Waxing ₹ 200 per hour 20%
Beautician Fruit Cleanup ₹ 600 per hour 10%

Assumptions:
The prices mentioned above are decided after the market survey conducted by our team.
Investment Plan
The following table is the estimation of initial capital investment needed for commensurate our business:
Table 1: Initial Investment

Type Cost
Website and mobile application ₹ 1,50,000
development
Website and mobile application ₹ 1,00,000
yearly maintenance
Hosting of website, database ₹ 30,000
server, mobile application
yearly hosting charges
Registering our firm for LLP ₹ 20,000
type
Marketing ₹ 4,00,000
Office rent yearly ₹ 1,20,000
Administrative Expenses ₹ 5,90,000
Including Salaries
Total ₹ 14,10,000

 Cost of equipment: The initial investment required for our business plan execution is presented
below:
 Economic life: We are considering economic life of our website for 2 years because as the business
will expand the sophistication of website will grow overtime.
 Amortization: we are calculating amortization of our intangible assets (website and mobile app)
by straight line method and amortization will be at the rate of 25% per year as per Indian
Accounting Standards.
 Per day service request: We will start with partnering with 2 plumbers, 2 electricians, 2 plumbers,
2 carpenters and 2 beauticians. Considering each one of them can work for 8 hours daily then the
average service request handled by each partner will be 6. The total service request handled by
them will be 60 per day.

Assumption:
Here we are taking the following assumption to simplify the calculation:

1. We are considering economic life of our website and mobile application as 2.5 years.
2. The other assumption that we are taking is that there is no capital investment in between the period
i.e from the starting of services to 5 years.
3. As we are new firm, we are not investing in any other firm so we are not considered here any
interest rate on investment. So, interest on investment in not taking into consideration.
4. The corporate taxes that is paid by the firm is 25% (as per latest taxation rules in Budget 2019-
2020) and hence we are not getting any tax benefit. So, it is not included in investment plan.
Production and Sales Plan
The service capacity per day and sales plan of the Instabuddy is presented in the tables below:
Table 2: Estimated Variables
Service Capacity per day 60
Service Capacity for first 6 months 185
Growth Rate of service capacity semi annually 200%
Variable cost semi-annually 20000
Tax Rate 25%
Investment 40,00,000
Depreciation/Amortization 25%
Semi-Annual Growth Rate of Revenue 100%
WACC 8.28%
Fixed Cost Growth 4.0%

As shown in the table capacity of our handling service request is 60 units which is based on our partners.
Price of our each service is set given in the table 1 in the product section by taking into consideration the
competitive pricing strategy and market survey. Variable cost comprises of cost of finding partners and
police verification cost on each partner. The police verification on each partner comes out to be Rs 1000
for which we have hired an employee, whose job is to get the police verification and help in day to day
operation in the office. Corporate tax prevailing in India is 25% as per latest taxation rule in budget 2019-
2020. Our industry is in service sector and we have targeted about 10% penetration in the Ahmedabad
city. Hence, the growth rate we are assuming to be 100% semi-annually for the next 5 years.

Assumptions:
1. We are targeting households who are in the middle class and higher middle class income group.
2. We have divided Ahmedabad into 5 zones and we will expand our service 1 zone at a time.
3. We have assumed that each of our partner works for 8 hours a day, where he handles around 6
service request each day. Our commission for each service request is 15% on average.
4. Each customer will directly pay us online where we will give our partner’s service charges on daily
basis at the end of the day.

Calculation of revenue for each semi-annual

= capacity of handling service request each day * number of days in a month *
number of months * average charges from each request * our commission

= 60 * 30 * 6 * 200 * 15% = Rs 3,24,000

 The table below shows the capacity utilization in unit’s terms and unit sales according to the 5
years of operations:

Table 3: Capacity and sales forecast

Capacity
Utilizatio
n per 10800 21600 32400 43200 54000 64800 75600 86400 97200 108000
period
1st 2nd 3rd 4th 5th 6th 7th 8th 9th 10th
Period Period Period Period Period Period Period Period Period Period
Overall 216000 432000 648000 864000 1080000 1296000 1512000 1728000 1944000 2160000
Service 0 0 0 0 0 0 0 0 0 0
Sales
129600
Revenue 324000 648000 972000 0 1620000 1944000 2268000 2592000 2916000 3240000

Estimation of Operating and Other Expenses:

The fixed costs for operations are as follows: Fixed cost for operation includes rent, electricity, labor cost,
transportation, maintenance cost, administrative expenses (salaries), other miscellaneous expenses,
depreciation. We contacted property owner to compute the rent per month for setting up factory which
came to be Rs. 80000. Electricity cost were computed after contacting with the manufacturers engaged in
this field which came to be Rs. 15000 per month. While according to the prevailing wage rate for labor,
labor cost per month came to be Rs.60000. Transportation cost involved commuting from Anand-Valsad-
Anand for procuring some of the raw materials and transportation cost incurred in supplying products to
distributer is Rs.25000. Maintenance cost of machinery was computed to be Rs.10000 per month,
administrative expenses would be Rs. 63000 and other miscellaneous expenses would come around Rs.
10000 per month which was computed after contacting with the relevant stakeholders who are involved
in manufacturing repellent. So, the total fixed cost per month will be Rs.279500.

Website and mobile application

semi-annual maintenance ₹ 50,000

Hosting of website, database server,

mobile application yearly hosting
charges ₹ 15,000

Marketing ₹ 2,00,000

Office rent semi-annual ₹ 60,000

Administrative Expenses Including

Salaries ₹ 2,65,000
 Interest @ 15% for 5 years calculated
semiannually ₹ 53501.54

Total Fixed Cost semi annual ₹ 6,18,410.31

Table 4: Fixed Cost

The variable costs for operations are as follows: Variable cost includes in making service
partners and their police verification. The cost of making service partner is assumed to be Rs 2000
and police verification for each partner is assumed to be Rs 1000
Table 5: Variable Cost
Variable Cost
Cost for adding
Particulars each partner
Making service partner 2000
Police verification 1000
Total 3000

Financial Plan:

Raising Capital
We are trying to finance our project through 20% debt and 80% through investment by partners.
Total investment needed – approximately 30 lakhs (investment + working capital requirement).
= (2500000 + 500000) = ₹30,00,000

WACC
To calculate WACC we need to calculate cost of debt and cost of equity i.e. 𝐾𝑑 and 𝐾𝑒 respectively:
Cost of Debt
The cost of debt is taken at 15% by looking at industry scenario of similar companies.

Cost of Equity
To calculate the cost of equity we have used 𝑅𝑚 and 𝑅𝑓 of a similar company Aarvi Encon Pvt Ltd
and have calculated our 𝛽𝑢 ,which is explained below.𝛽𝑙 for Aarvi was found at 1.5 for the year 2017
𝛽𝑙 for Aarvi in 2019 : - 0.5
D/E ratio for Aarvi: - 0.19 (calculated from financial statement of the company)
Tax rate: - 25%
𝛽𝑙
𝛽𝑢 = ⁄ 𝐷
(1 + (1 − 𝑡) ∗ 𝐸 )
 𝛽𝑢 = 0.5⁄
(1 + (1 − 25%) ∗ 0.19)

𝛽𝑢 = 0.43

To calculate 𝛽𝑙 for our firm we use,

𝐷
𝛽𝑙 = 𝛽𝑢 (1+(1-t) * 𝐸 )
= 0.43*(1+(1-25%)*0.2)
= 0.50
Risk free return Rf is taken as the 10 year government bond for which the return is 7.53% and Expected
market return Rm is taken as the average 10 year return of Nifty 50 which is 7.56%

Now, 𝑅𝑓 =7.53% and 𝑅𝑚 =7.56%

𝐾𝑒 = 𝑅𝑓 + 𝛽𝑙 (𝑅𝑚 -𝑅𝑓 )
= 7.53 % + 0.50*(7.56%-7.53%)
= 7.54%

The minimum WACC is obtained at 10% of debt but our requirement of debt is higher. Hence, we are
settling up with 20% of debt.

WACC = 𝐾𝑑 *𝑊𝑑 *(1-tax rate) + 𝐾𝑒 *𝑊𝑒

WACC = 0.15*0.2*(1-0.25) + 0.0754*0.8
WACC = 8.28%

Working Capital Estimation

We have no supply chain of production hence we are assuming our working capital estimation to
be 0.

Cash Flow Projection (FCF Approach)

1 2 3 4 5 6 7 8 9 10
Period

Service Requests in each

10800 21600 32400 43200 54000 64800 75600 86400 97200 108000
period of 6 months

Overall Service Sales 2160000 4320000 6480000 8640000 10800000 12960000 15120000 17280000 19440000 21600000
Revenue @ 15% margin 324000 648000 972000 1296000 1620000 1944000 2268000 2592000 2916000 3240000
V.C per service partner 3000 3000 3000 3000 3000 3000 3000 3000 3000 3000
Total Variable cost 30000 30000 30000 30000 30000 30000 30000 30000 30000 30000
Total Fixed Cost 643,502 643,502 643,502 643,502 643,502 643,502 643,502 643,502 643,502 643,502
EBITDA -349501.537 -25501.53699 298498.463 622498.463 946498.463 1270498.463 1594498.463 1918498.463 2242498.463 2566498.463
Depreciation 15000 15000 15000 15000 15000 15000 15000 15000 15000 15000
EBIT -364501.537 -40501.53699 283498.463 607498.463 931498.463 1255498.463 1579498.463 1903498.463 2227498.463 2551498.463
Tax 0 0 70874.61575 151874.6158 232874.6158 313874.6158 394874.6158 475874.6158 556874.6158 637874.6158
PAT -364501.537 -40501.53699 212623.8473 455623.8473 698623.8473 941623.8473 1184623.847 1427623.847 1670623.847 1913623.847
Pat + Depreciation -349501.537 -25501.53699 227623.8473 470623.8473 713623.8473 956623.8473 1199623.847 1442623.847 1685623.847 1928623.847
Cash flows -349501.537 -25501.53699 227623.8473 470623.8473 713623.8473 956623.8473 1199623.847 1442623.847 1685623.847 1928623.847
Present Value -322769.7466 -21749.72744 179287.0632 342333.0701 479388.9408 593476.5873 687307.7001 763313.5244 823671.8967 870331.7866
Assumption:

The investment which is done by the firm in the starting of the plant is also negative because it is also the
outflow by the firm.

Investment Appraisal

Weighted Average Cost of Capital (WACC) method is used to calculate the discounting rate of the project. The
cost of debt for bank loan is 15%. After identifying all cash inflows and outflows Net Present Value (NPV) and
Internal Rate of Return (IRR) were calculated. NPV of the project is ₹ 15,94,591.10. Since NPV is positive it
shows that the project should be considered. IRR of the project is 13.69% which is more than the weighted average
cost of capital. So, the project is profitable.
Table 8: NPV and IRR

NPV ₹ 13,94,591.10

IRR 13.69%