A160 projects - Enterprise support transaction to provide infrastructure services at Puttur, Kundapur and other cities

Projects:

• Enterprise support transaction to provide infrastructure services (A160a) at Puttur, Dakshin Kannada District, Karnataka
• Enterprise support transaction to provide infrastructure services (A160c) at Sagar, Shimoga District, Karnataka
• Enterprise support transaction to provide infrastructure services (A160d) at Mysore, Mysore District, Karnataka
• Enterprise support transaction to provide infrastructure services (A160b) at Kundapur, Udupi District, Karnataka
• Enterprise support transaction to provide infrastructure services (A160f) at Raichur, Raichur District, Karnataka
• Enterprise support transaction to provide infrastructure services (A160h) at Davangere, Davangere District, Karnataka

Project Dates
First time draft – September 13, 2007

Project Photos

Project Financials
http://spreadsheets.google.com/pub?key=pwRdPi0mYDcLn6RaHFd72AQ

Project Details
This project is to develop multiple entrepreneurs in the state of Karnataka who will sell products in the infrastructure space to the bottom of the pyramid market. The customers of the products will be households and small businesses (petty shops, roadside hotels and bakeries). The products will be from one of the following sectors: telecom, energy efficiency, water, renewable energy, cooking and heating. To stock and sell the products, the entrepreneurs will be given working capital support from local banks. S3IDF will facilitate working capital support for the entrepreneurs from local banks by providing security in the banks in the form of fixed deposit. Wherever possible, the entrepreneurs will sell their products on a cash basis and where required financing for the products will be provided through local banks and micro finance institutions. In addition to providing the entrepreneurs financial support, S3IDF will provide business development assistance to the selected entrepreneurs.

To get scale economies, S3IDF could use its SPV, S3IDF Infra serve to buy products in bulk and then supply to the entrepreneurs. The products could include the following: pressure cookers, public coin phones, mobile phones, candle based water filters, LPG stoves, LED lanterns, solar lanterns, single phase flour mill etc.

Project Size Details
The working capital loan to be provided to each entrepreneur from a local bank will be between Rs. 100,000 to Rs. 200,000. It is expected that at least 10 entrepreneurs will be selected and supported for this initiative from July 07 to July 08. On this basis, the total project cost will be between Rs. 10 lakhs to Rs. 20 lakhs.
Details of the entrepreneurs are as follows
http://spreadsheets.google.com/pub?key=pwRdPi0mYDcKO-8IYnCCNAA

Project Impact Details
This project will provide employment to at least ten entrepreneurs
Each entrepreneur will reach an average of 20 customers in a month, in a year h/she will reach around 200 customers. So ten customers will reach 2000 customers

Estimated Pre-investment Costs
Total Costs – Rs. 432400

S3IDF costs
Personnel costs – Rs. 200400
Other costs – Rs. 40000
Total S3IDF costs - 240400

Consultant costs
Personnel costs – Rs. 160000
(two consultants at Rs. 10,000 per month for 8 months)
Other costs – Rs. 32000
Total Consultant costs - 192000

Returns for S3IDF Revolving Fund
Annual percentage returns for RF – 29%

Project Indicators
Investment indicators:
Investment size – Rs. 10,00,000
Revolving fund – Rs. 5,00,000
RF to investment size – 50%

Cost Indicators
Total pre investment cost – Rs. 4,32,400
Pre investment cost/Investment Ratio – 43%

Impact indicators
No. of direct beneficiaries – 10 (number of entrepreneurs)
No. of indirect beneficiaries – 2000 customers from 10 entrepreneurs
Investment size /no. of beneficiaries – Rs. 500

Project Risks

Project Owner/operator risk:
The risk of the entrepreneur who will be the project owner is the biggest risk of this project. The risk is that the entrepreneur misuses the support provided to him or proves to be incapable to deliver as per expectations. To reduce this, we will be following a rigorous selection process for selecting entrepreneurs. This will ensure only the most suitable are selected. Additionally, the support provided to the entrepreneur will be backed up by necessary legal documents so that immediate legal action can be taken if the entrepreneur does not go as per the agreed terms and conditions. Also, the performance of the entrepreneurs will be closely monitored on a regular basis (weekly).

Market risk:
Since we will be focusing on the bottom of the pyramid market, which is largely untapped, this risk will be less. In case at a particular location, such a risk arises, the products will be shifted to another location.

Technology risk:
We will be dealing only with such technologies where the risk is minimal. That is technologies selected will be commercially proven technologies

Portfolio risk:
No portfolio risk

Mission risk:
No mission risk

Partners
Entrepreneurs, local banks and manufacturers of products in the telecom, energy efficiency, water, renewable energy, cooking and heating sectors.

A169. Provision of pressure cooker at Laggare, Bangalore, Karnataka

Project Description/Concept
This project is a replication of an earlier project of supplying pressure cookers to poor households in Nayakanahatti village, Chitradurga. Pressure cookers are energy saving cooking devices and hence using them will reduce the consumption of LPG and kerosene. Laggare is a low income suburb in Bangalore city with a population of around 50,000. A large number of women in Laggare are employed in garment factories in Bangalore. A survey conduced with households at Laggare indicated a desire among the households with LPG and kerosene stoves to go in for pressure cookers. The households, although aware of pressure cookers were constrained by the initial investment necessary for owning pressure cookers. This concept is to help make pressure cookers accessible to the households by solving their first cost constraint by making it possible for the households to pay for the pressure cookers in monthly installments.

Project Financials
http://spreadsheets.google.com/pub?key=pwRdPi0mYDcJJYazL41_DFQ

Specific Investment Site
The project is for households at Laggare, a low income suburb in Bangalore city with a population of around 50,000 .. The distribution of pressure cookers and the collection of monthly installments will be done by a women entrepreneur, P H Manjula who does business of selling sarees for a living.

Partners Stakeholders
P H Manjula is the main partner for the project. The supplier of Nandi pressure cookers at Bangalore is another partner for the project.

Benefits and Beneficiaries
The direct beneficiaries of this project will be the women of Laggare. Using the pressure cooker will reduce the time taken to cook and also reduce the fuel consumption and hence fuel costs. Reduction in GHG emissions will be another benefit of the project.

Final costs and Financing Arrangements
The cost of a five liter pressure cooker is INR five hundred and seventy five. The project involves providing ten households with pressure cookers. The households pay an initial amount of INR seventy five and the remaining amount in four installments. The total cost of the project is INR five thousand seven hundred and fifty.

Various Risks
Market Risk: The market risk is for a lower cost pressure cooker coming in. This is highly remote as the sourcing of the pressure cooker has been done directly from the manufacturer. Also, it is very unlikely for any other provider to provide pressure cooker on a lease to purchase basis.
Organisational risks: This risk is that the entrepreneur, P H Manjula will not be able to run the business of selling pressure cookers and collect the installments. Due deligence of Manjula has been done and only then she has been supported. Also, in the first phase of the project the size of the project has been kept low to minimize the risk.
Portfolio risks: S3IDF has few such projects providing pressure cookers. Therefore, the portfolio risks for S3IDF is minimal from this project.

Conclusion
Operator’s Perspective: Since the Manjula knows the customers, the risk of non repayment of the lease is minimal. For manjula this is additional income and a potentially new business opportunity.
The Beneficiaries Perspective: Although the beneficiaries were aware of pressure cookers, they were not in a position to pay the full amount in one go. Providing lease finance helped them to afford the cookers.
S3IDF’s Perspective: For S3IDF, through this project, poor households are being provided with pressure cookers which are energy efficient and reduce the time it takes to cook. In this way the project fits S3IDF’s mission of providing infrastructure services to the poor.

A75t. Provision of transportation vehicle for transporting milk and goods in Chitradurga district

Project Photos

Milk being collected at Nayakanahatti milk collection center

Milk being loaded on to the collection van

The milk collection van

Project Dates
First draft August 24, 2007

Project Financials
http://spreadsheets.google.com/pub?key=pwRdPi0mYDcLGKpSLgpSWLw

Project Details
Transportation is a critical infrastructure need in rural areas. Transportation facilities are required for two primary purposes. One is to transport people as people need to move from the smaller dispersed villages to the larger economically active villages and town centers for finding work(labour), reaching markets for selling and buying goods and for accessing services such as health. The other need for transportation is to transport goods into and out of the villages. Due to the dispersed nature of the villages, low volumes from each of the villages, inability of the villagers to do the large investments for transportation vehicles and lack of financing for such investments, there is a shortage of transportation vehicles serving smaller and remote villages.

This project is to invest in a goods transportation vehicle to transport milk and goods. In the district of Chitradurga and in it, in the taluk’s of Challakere and Molkalmuru there are ‘milk routes’ in which milk is collected from various villages and delivered to the closest chilling station. Two routes in these taluks are open for sale, that is, the existing person doing the transportation wants to come out of the business. The reasons for this are multiple. The main reasons are the following:
The milk cooperative in Karnataka (Karnataka Milk Federation-KMF), which is the buyer of the milk, gives a minimum rate for transporting the milk. KMF makes a 15 days delayed payment which reduces the attraction for a commercial player
The business has a risk in that, the vehicle has to be run on all days of the year. The loss from a day’s absence needs to be borne by the transporter. To ensure that there is no absenteeism, old poorly maintained vehicles cannot be used.
The milk has to be delivered to the chilling center on time. Late delivery could mean rejection of the entire load. This means a disciplined transportation service, which is not easy for most people
The roads in the route are not very good. Due to this, commercial players are not ready to put their new vehicles on this route.

The route for which the vehicle will be put is the Gaursamudra-Nayakanahatti-B G Kere route. The total distance of this route is 134 km. The route covers the following villages-Gaursamudra, Chikhalli, Ullarthi, Karikere, Mirabayanahalli, Paramsagara, Talaku, Timapanahalli, Gajunahalli, Nayakanahatti, Mallurhatti, Kamadalgudi, Salahalli, Chikamalahole, Abbanehalli and B G Kere. The vehicle needs to do two trips in a single day. One in the morning which starts at 6.00AM and ends at the chilling station at 10.20AM and the other in the evening from 6.00PM to 10.20PM. The total amount of milk collected in one trip is around 500 liters. KMF, the buyer pays for the transportation at the rate of Rs. 5.8 per km.

To improve the utilization of the vehicle, the vehicle will also be used when it is free to transport goods to and fro from Nayakanahatti village to the main cities of Davengere, Challakere and Chitradurga. The vehicle will require two people, one driver and one helper

Due to the fact that transporting milk is not commercially very attractive, the difficult nature of the business, and the extent of financing required, there is a gap which S3IDF will help to fill. S3IDF’s SPV will initially invest in the project. The SPV will get a bank loan for the vehicle from the local regional bank, Pragathi Gramin bank.

Some important details:
Phone no. of Shimoga KMF - 08182-246161, 08182-246163
Person incharge of transportation in Shimoga - Nagendrappa - 9449867180. Spoken to him. Seems responsive

Project Size Details
The vehicle which will be bought is a TATA 407. This has a capacity of around 5.5 tons. The price of the vehicle is around Rs. 5,35,000 with registration. A deposit of Rs. 35,000 needs to be paid to KMF, which is refundable.

Project Impact Details
The transportation vehicle will benefit atleast 15 households in each village where it goes for milk collection. Therefore in total the project will benefit directly 240 households. With an average of 5 per household, the project will benefit 1200 people. Another impact of this project is that it will give continuous employment to two people, the driver and helper of the vehicle.
Doing this project has the potential to have multiple benefits. Once S3IDF understands the dynamics of this project, we can encourage more people to get into the dairy industry by assisting further investments in the dairy industry, investments from transportation to chilling units to a dairy.

Estimated Pre-investment Costs
Total Pre investment costs = Rs. 21340
S3IDF costs
Total Costs=Rs. 6340
Personnel costs=Rs. 3340
Other costs=Rs. 3000
Partner costs
Total Costs=Rs. 15000
Personnel costs=Rs. 10000
Other costs=Rs. 5000

Project Returns
The project returns are above 30% per annum. Since this is the first project, the actual returns could be different from what has been estimated. However, it should be greater than 25% per annum.

Project Indicators
Investment indicators:
Investment size – Rs. 5,70,000
Revolving fund – Rs. 3,13,500
RF to investment size – 55%

Cost Indicators
Total pre investment cost – Rs. 21,340
Pre investment cost/Investment Ratio – 4%. This is very good as our target is 10%.

Impact indicators
No. of direct beneficiaries – 1200 people(240 households)
Investment size /no. of beneficiaries – Rs. 475 per beneficiary

Project Risks

Project Owner/operator risk:
We are dependent on CRWCWS to run the project and CRWCWS in turn is dependent on the drivers and the helpers to run the project. This raises the operator risk. There is a risk that due to the negligence of the driver, milk is not delivered on time and we have to bear the losses. However, since CRWCWS has shown that it is capable to select good operators, we can take this risk. For managing the risk of accident or theft of the vehicle, the vehicle will be insured.

Market risk:
Once we get into an agreement with KMF, the market risk is minimal.

Technology risk:
No technology risk

Portfolio risk:
No portfolio risk as this is among the few transportation projects

Mission risk:
No mission risk as it is a pro-poor project. The vehicle helps poor households in small and remote villages

Partners
KMF, CRWCWS, PGB

Monitoring
Actual cash flows from the project till Dec 07
http://spreadsheets.google.com/pub?key=pwRdPi0mYDcIIpkVZ4AVCDw