SAMTECH LIMITED – PITCHING FOR A BID1

The name of your company is Samtech Limited, and your head office is in Bangalore you’re your factory
located at Pondicherry. Your company turnover is Rs.36 crores per year and you have been growing at a
rate of 10% per year in a mature industry. Your company is 20 years old and has branch offices in
Mumbai, Delhi & Chennai. These places along with your factory and HO locations are your billing
locations where you have sales/marketing teams. You have service engineers in Chennai, Calcutta,
Bangalore, Delhi and Mumbai to provide onsite service to your customers.

Your Company’s motto is to be a complete power protection company. You manufacture and sell
Industrial Voltage Stabilizers, Isolation Transformers and UPS. You have several models in each of these
product categories and your company is also capable of providing customized solutions in case of large
orders. You manufacture the following models of industrial stabilizers -

Single Phase Models (230 volts) Three Phase Models (415 volts)
500 VA 3 KVA
1 KVA 6 KVA
2 KVA 9 KVA
3 KVA 12 KVA
4 KVA 15 KVA
5 KVA 22.5 KVA
7.5 KVA 30 KVA
10 KVA 45 KVA

Your company has secured ISO 9000 certificate and you have a nationwide customer base. You are
strong in the Government sector and some of the reputed customers that you have are – BEML, HAL,
BHEL, SBI, Karnataka Milk Federation (KMF) and Karnataka Soaps and Detergents. You also have rate
contracts from ISRO in Thiruvananthapuram and MRF in Goa.

You sell direct as well as through dealers and the direct to dealer ratio is 30:70. When customers
approach you directly, based on your understanding of the context, you decide whether to take the
order directly or route it to through the dealers. The physical distribution to customers and dealers is by
road, and the cost of transportation2, is typically absorbed by you. You have dealers in all state capitals,
and in big cities such as Baroda, Pune, Cochin and Madhurai. Your dealers not only sell your products but
are also well trained to install the products and to give after sales service.

From the factory the goods, especially the lower rated fast-moving models, are shipped to your
warehouses in different cities to ensure immediate deliveries to customers. This process is not a sale and
is called as Stock Transfer. The price at which the goods are transferred to the warehouse is called as
Stock Transfer Price (STP)3 .Your factory costing includes provisions for freight, insurance warranty,
dealer incentives and differential pricing such as cash and quantity discounts.

1
Bidding case prepared by Prof. Gururaj Kidiyoor for in-class exercise, ©, author 2019
2
This is about 1% of STP
3
Though it is not a sale, it is mandatory to declare the price as levies such as transportation and insurance are to be
computed on this price as the basis.
The pricing of your stabilizer products to the dealers is given below. All prices are in Indian rupees and do
not include GST which is 16%. However, they are inclusive of a profit margin 10% for you (on the landed
STP) while you bill to your dealers. The dealer price list is given below -

Single Phase Unit

Models Unit Price Three Phase Models Price
500 VA 3300 3 KVA 12100
1 KVA 5060 6 KVA 15620
2 KVA 7040 9 KVA 17600
3 KVA 8250 12 KVA 20350
4 KVA 9570 15 KVA 23100
5 KVA 10450 22.5 KVA 35200
7.5 KVA 13750 30 KVA 43450
10 KVA 16500 45 KVA 62480

All the models carry 18 months warranty and the cost of warranty is 2% per year of the landed Stock -
Transfer Price (STP) from factory to warehouses. (this price is excluding GST which is 16%).

Your recommended list prices are 12% above the dealer landed price. However, due to competition
dealers often end up selling at lower margins and hence the street price hovers around 7% margins for
dealers. Dealers seem to be OK with this as they get 2.5% as target achievement incentive (annual) and
cash discount of 1.5% on full advance payment. In addition to this, there is a quantity discount of 1.5%
for orders of more than 10 units at a time. All the discounts and incentives are computed on dealer
purchase price excluding GST.

Please see below the technical specifications of 3 phase models offered by you
Input Voltage Range 280-460
Output Voltage
nominal 400 v
internally settable to 420 v
Average Correction rate 25 v/se
Input frequency range 47-53 Hz
Output Voltage Regulation
1%
as + or - % of nominal voltage
Wave form distortion nil
Output voltage indicator meter Digital
Accuracy of meter 2 digits
Overload cut off at ( as a percentage of load capacity)
115%

Indications available Input present

(on the front panel) Output normal
Input High
Input Low
Output high
Output low
Overload
Voltage stabilizers are basically used to regulate and control the voltage and 3 phase stabilisers are used
for industrial applications. They are used with almost all equipment that require a regulated voltage
supply like computers, photocopying machines, CNC lathe machines, textile machinery, printing
machinery, packaging machinery, photo processing equipment etc.

Depending on the load various VA ratings are available - from 500 VA to 100 KVA and more. The price of
a 500 VA stabiliser could be around Rs.2000/- and for a 100 KVA stabiliser it could be in lakhs. Three-
phase models are also available in this category. These are the ones which take an input electric supply
of around 415 volts and regulate it to 415 volts. There are several industrial devices that require three
phase supply and hence industrial voltage stabilisers are also designed for this. Since the application is
critical, after sales service is very important to avoid machine downtimes. The AMC concept is also very
popular among buyers and most of the time the AMC rates are fixed during the buying phase itself
though AMC is applicable only after the warranty period is over.

Industrial voltage stabilisers are sold directly as well as through channels. Since these are available in
various ratings for different applications, such distribution arrangements make sense. The high end
stabilisers, 5-15 KVA in single phase and all three phase models are mainly sold direct. However, some
numbers are also sold by the dealers who operate in such segments and have technical competence to
market these products. These units are sold for use with photo processing equipment, CNC lathe
machines, printing machinery, textile machinery etc.

The stabilizer market is extremely competitive with many players operating throughout the country.
Most of them manufacture lower rated models. However, the number of manufacturers of 3 phase
stabilisers is also quite substantial. There is hardly any manufacturer with a national presence. Some of
the companies do have national level reach through channels but as the distance from their main area
increases, their dependency on the channels goes up. Though there are some companies that enjoy a
good brand name, most of the competitors are from unorganized sector especially in the single- phase
domain. The buyers value quality, reliability and after sales service. However, when it comes to buying,
they do not seem to give much importance to national brands. The price plays an important role but
quality, reliability, after sales service, additional features also are given due consideration.

Most of the established firms apart from stabilisers, manufacture and market other related products like,
Constant Voltage Transformers (CVT), UPS, Load Managers and Isolation transformers. Some firms
position themselves as a "power protection" or "energy management" companies rather than just a
"voltage stabiliser" company. Some reputed firms which manufacture only voltage stabilisers, offer the
entire gamut of stabilisers in domestic as well as industrial segments.

Your group is the marketing team based at Chennai area office. You have received a purchase enquiry
from Pragati Technologies Limited which has its head office in Chennai.

The purchase enquiry is given overleaf –

PRAGATI TECHNLOGIES LIMITED
NO. 2, VASANTHA ARCADE, Ph: 044- 62647627
KODAMBAKKAM HIGH ROAD Fax: 044 - 62647628
CHENNAI - 600 026 www.pragati.org

PURCHASE ENQUIRY
Ref: PTL/ENQ/2021-22/01 Date: 09.01.2022

To,

Dear Sir,

Please quote your best prices with your terms and conditions for the items mentioned below.
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Sl NO Description Qty
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1. Voltage Stabiliser - 45 KVA 3 phase with up to 50 nos

necessary indications
Output required: 415 volts
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The due date & time for submitting your offer is 19th January 2022. Submit your offer in a sealed
envelope superscribing the due date and time. However, you will have to make a presentation to us on
11th January 2022 in our office before you submit your bid.

Only manufacturers are eligible to apply.

Thanking you

Yours Faithfully
For Pragati Technologies Limited

Major General (Retd) Electric

(Purchase Manager)

Regd Office : 15, Haddows Road, Mumbai

Head Office : 2, Vasantha Arcade, Kodambakkam High Road, Chennai