Venture Capitalist Competition Avenues 08 held at SJSOM, Mumbai winning team

1. CREO CAPITAL PARTNERS, LLC
Polysense Aqua Pvt LTD
Venture Capital Funding Strategy
Team: LOLLAPALOOZA
College: S P Jain Center of Management, Singapore- Dubai
Hardik Doshi – GMBA (Investment Banking)
Navin Bafna – GMBA (Investment Banking)
Preet Sabharwal – GMBA (Investment Banking)
2008
CREO CAPITAL PARTNERS, LLC

2. Table of Contents
Company & Business ........................................................................................................................... 3
Strategy, Market and Products ............................................................................................................. 4
Nature of Business and Scope ............................................................................................................. 5
Management and organizational structure ........................................................................................... 5
Market analysis and sector assessment............................................................................................... 7
Need for potable drinking water in urban and rural area ................................................................... 7
Future growth of the sector and sustainability of growth, investments by government ................... 10
Current Water Quality Monitoring infrastructure in India ................................................................. 11
Future of conducting polymer technology and scope of development ............................................ 12
Competitors/Products & Services Portfolio......................................................................................... 13
Competitive Advantage ...................................................................................................................... 17
Customers .......................................................................................................................................... 18
Risks involved and Mitigation ............................................................................................................. 19
Financial Projections and Valuations.................................................................................................. 21
Projected Profit & Loss statement ................................................................................................... 21
Project Balance Sheet .................................................................................................................... 22
Cost of Manufacturing ..................................................................................................................... 22
Projected sales schedule and assumptions .................................................................................... 23
Estimated investments in Assets and Assumptions ........................................................................ 24
Ratio & Break Even Analysis .......................................................................................................... 24
Valuation before infusion of Capital ................................................................................................ 25
Investment Strategy ........................................................................................................................ 25
Exit Strategy.................................................................................................................................... 27
Control Provisions ........................................................................................................................... 27
Liquidation Preference .................................................................................................................... 27

3. Company & Business
The enterprise is in the process of developing a variety of products using innovative conducting
polymer technology. The product range would include water-testing kits (launch product), soil testing
kits, milk testing kits and various healthcare diagnostic kits. The products are indigenous, cost
effective, compact, portable lab-on-chip devices enabling digitised inputs and are computer
compatible for quantitative analysis. The technology
enables on the spot testing of samples and the
products can be easily enhanced to test for many
parameters in a single attempt. In case of water
testing kits, the network of Water pollution monitoring
boards itself provide a huge market but given the
possible challenges of dealing with the government,
PSPL also sees the NGO/NPO’s that are working
towards delivering potable water to rural households
as primary customers. In case of Soil testing kits, PSPL plans to reach farmers by marketing this
product to all the agri-clinics around India. PSPL also plans to approach all the big business houses
that provide soil testing services to farmers as a part of their rural initiatives. For healthcare
diagnostics, a hybrid sales model is being evolved.
The launch product, Polysense Aqua, is a system that tests water from natural sources for potability.
The system consists of a set of electrochemical sensors that measure conductance, salinity, pH,
chloride nitrate and total Dissolved Solids (TDS) in the sample and compare the values with
standards set by WHO. If all parameters are within accepted range, the sample is declared potable.
The operation is very simple, consisting of taking the water sample in the cup in which the sensors
are immersed. Once it is ready to start measurement, the instrument completes all measurements in
less than three minutes and displays the result. No skill is required of the operator. The company is in
the process of adding more sensors to this system. Sensors for fluoride, iron, ammonium and
potassium are ready to be incorporated. Sensors for arsenic and recoil are under development at
present.
The enterprise also plans to develop a system for testing soil for NPK, i.e., nitrogen, phosphorus and
potassium using the sensors already developed and adding a sensor for phosphorus
A range of biosensors has already been demonstrated in the company’s lab for glucose, urea,
triglyceride and haemoglobin. Proof-of-concept demonstration of an immuno-sensor and a short-

4. strand DNA sensor has also been done. These and similar sensors will be used to develop diagnostic
systems for healthcare. The measure electronics for this is in preliminary stage of development.
Strategy, Market and Products
The areas of intervention that best represent the innovation of the enterprise are Direct Services,
Indirect Health Services, Accessibility, Technology-Enabled Innovations, Water and Sanitation,
Manufactured Products.
Its effort is to combine the power of chemistry and microprocessor technology to develop products
that are capable of performing complex chemical and biochemical analyses and are yet low-cost and
user friendly. It is an attempt to convert technology developed in the institutions into useful products
for local needs. The enterprise will build systems that are presently not seen as an attractive market
by the private sector given the low return on investment and low profit margin for rapid tests.
Polysense Aqua -- system for testing water for potability -- measures six parameters in three minutes
without the need for a trained analytical chemist. There is no need to handle hazardous chemical
reagents, no hazardous waste to be disposed later and
can be used in the field. The system provides a
quantitative measure of the parameters that can be
printed or ported to a PC. Thus it combines the
performance expected from sophisticated instruments in
a laboratory with the low-cost of field kits.
The enterprise aims to remove the barrier of high cost
and high expertise that most comparable diagnostic
tools require and put the tools in the hands of common
people. PSPL's innovations will provide access to diagnostic systems that adhere to world standards,
to populations that have no access to proper medical facilities. Also, PSPL's innovations will enable
early treatment due to early detection and hence save precious income that is otherwise spent on
treatment.
Since the enterprise is an R&D driven company, it aims to bring out new products to address the
needs of our society.
Since 70% of people in India still live in rural areas and company is mainly targeting at the rural
segment for starting its business the company has huge expected customer base. Also the
distribution, sales & marketing strategy of the company should be more focused, planned and
superior to its competitors in order to reach out this huge customer base. Company has plans to
expand employee base and have dedicated divisions concentrating on sales and marketing one year

5. down the line. Also since the Polysense Aqua is relatively cheaper in cost capturing market pie
should not be difficult considering the adherence to planned strategy.
Polymeric Sensors Pvt. Ltd. (PSPL) is very focused on the benefits of its technology reaching India’s
rural and marginalized populations. While the population is PSPL’s target community, PSPL also
recognizes the need of establishing sustainable business models that would ensure rapid
dissemination and adoption of the technology. In the initial years PSPL would look forward to partner
with other business models rather than build its own model to reach the rural customer.
Nature of Business and Scope
The enterprise is in the process of developing a variety of products using innovative conducting
polymer technology. The product range would include water-testing kits (launch product), soil testing
kits, milk testing kits and various healthcare diagnostic kits.
Though the exact market size has not been estimated that would help the enterprise break even and
make profits, the enterprise is looking at a variety of pricing structures to ensure that its technology is
affordable and is disseminated to the masses. Given that it is building systems that will adhere to
world standards; it might consider selling its products to the developed world as long as the
enterprise does not have to slow down on its mission to serve the populations at the base of the
pyramid.
Company has got good technical expertise to come up with innovative products in future which is
very much necessary for sustenance. Also the company is in business in which cyclicality is less, a
lot needs to be done yet, and entry barrier is huge in terms of skills and government contacts. Hence
we can expect the stable cash flows and profitability in the long term provided the product is
successful.
Management and organizational structure
The Company is promoted by Professor A Q Contractor of IIT Bombay and Dr. Sharma Bhat of Bhat
Biotech Pvt. Ltd, both of whom have considerable experience in their field.
Professor Contractor has more than thirty years of research experience and has been involved in
research and development of chemical and biochemical sensors for the past fifteen years. His group
was the first to propose conducting polymer based biosensors in 1992 and he is the principal inventor
of a patent for generic sensors based on this concept and since then several chemical and bio
sensors have been demonstrated. Mr. Contractor’s competency in the field of sensors is an added

6. advantage to the enterprise. The water potability field is one in which the moment a new and cost
effective technology would come, all the others would become obsolete. Thus, it becomes very
important to have renowned and experiences members. Mr. Contractor is the most appropriate
person as he has the zeal and interest in the sensor technology field.
Dr. Bhat is an academic turned techno-entrepreneur who founded Bhat Biotech in 1994 and
established it as a viable and thriving business in the area of healthcare diagnostics. As PSPL also
plans to enter the healthcare domain, having a member who is experienced in the same would help
the enterprise get hold of various contracts with other firms, and will also help it to be able to spread
its operations abroad. In the organization while Prof. Contractor spearheads the research and
development activities, Dr. Bhat handles the manufacturing process and marketing.
The research team at PSPL is led by Dr. Archana Nath & Dr. Snehalatha Kaliappan, who has several
years of research experience from top universities in India and abroad in polymer electrochemistry. In
addition team of 4 interns is assisting the scientists in research work.
The enterprise plans to hire few marketing professionals by the first year end. The water potability
tester, Polysense Aqua will be out soon so the product needs to be marketed in the right way to the
right people. Once the other products are out in the market, the company plans to go ahead with
setting up of a manufacturing plant to reduce dependency on the suppliers. The enterprise plans to
hire a finance and operations team for the same and to also look into the other costing and procuring
activities of the enterprise.
Designations Educational Qualification 2007-08 2008-09 2009-10
Promoters/ Directors PhD 2 2 2
Senior Research Scientist PhD 2 4 4
Administrative Heads PhD/MBA 1 1 1
Research & Development Staff MSc, BSc 5 8 10
Technical & Administrative Graduation & 3 4 5
Total Number 13 19 22

7. Market analysis and sector assessment
Need for potable drinking water in urban and rural area
Water supply is crucial to urban and rural development. With rising population and scarcity of usable
and potable water, the water industry is expected to grow at higher pace in near future. About 226
million people lack access to safe water and about 70 per cent of population (about 640 million) lack
basic sanitation facilities. The water related diseases are claiming the lives of about 1.5 million
children (500,000 children due to diarrhoea alone) under 5 years and person-days lost in India are
estimated to be about 180-200 million a year. In developing
countries, of the 37 diseases identified as major causes of
death, 21 are related to water and sanitation. Water-borne
diseases are causing more than 4 million infants and child
deaths every year in developing countries. Hence the right to
have access to clean water is the basic need of every citizen of
India. World over drinking and bottled water is becoming a
commodity of interest and hence government and private
utilities are developing technologies to transport potable water.
For sufficiency, the water supply must be 'approximately 50
litres or the minimum essential level of 20 litres' for daily
individual requirements and the supply must be regular.
Affordability must be ensured in terms of the direct and indirect costs of securing drinking water. The
NCU considered 70 litres per capita per day ( lpcd ) as the absolute minimum and 90 lpcd as a
desirable level (with 110-120 lpcd as a more desirable scenario) to carry on life at a minimum
standard of hygiene. The major issue is connecting household with piped supply of water. The below
figures suggested that 65 to 70% of the population have their source of water as groundwater, quality
of which has deteriorated in recent times. According to recent survey done
Out of the 624 sites monitored, 53% showed the presence of ammonia; 14% showed the
presence of Coli form 27% were found to contain a high concentration of Fluoride & Nitrate.
The ground water, in almost every site monitored in Bhopal, Lalitpur & Udaipur, was found to
contain a high concentration of Fluoride.
The municipal water supplied in Ranikhet, Varanasi & Lalitpur showed the presence of
ammonia.

8. The ground water in Muzaffarnagar & Jhansi was found to contain a high concentration of
he
nitrate.
The municipal water supplied in Jaipur, Dehradun & Kurnool in most of the sites monitored
was found to contain coli form. In Udaipur & Bhopal, both ground water & municipal water
form.
used for drinking purposes, was found to be contaminated with bacteria.
In following cities, a continued occurrence of coli form bacteria in the drinking water were
bacteria
noticed – Nagpur, Dehradun, Jhansi & Bhopal.
Water collected from 69% of the sites monitored was found to be unfit for drinking, containing
ater
ammonia & bacterial contamination.
5% of the sites monitored showed the presence of Ca & Mg salts, Chloride, Iron & a high
amount of Residual Chlorine.
Water in 26% of all the sites monitored was found to be satisfactory.
ater
On the basis of the water quality data obtained using the Jal-TARA kit, all the sites h
TARA have been
categorised into 3 types varying in the level of purity of drinking water
Total Supply GW Total Winter Summer Monsoon
water
Purify before use 429 182 247 429 82 122 222
Check before use 33 17 16 33 9 12 12
Safe for use 162 74 88 162 46 40 76
Cumulative Water Quality for 28 Cities during different seasons

9. ’purify before use’ implies intensive treatment required for making water safe to use
’check before use’ implies simple treatment required for making water potable
’safe for use’ implies water can be consumed and is safe for drinking
Rural Urban
Source 1993 1998 2003 1993 1998 2003
Tap 15.5 18.9 18.7 72.1 70.4 70.1
Tube well, hand
pump 39.1 44.5 50.1 17.2 18.5 21.3
Well 39.1 31.7 25.8 9.2 8.6 6.7
Tank, ponds 2.2 2.1 1.9 0.3 0.8 0.3
River, canal, lake 2.4 1.7 1.3 0.3 0.1 0.2
Spring 1.4 0.9 1.7 0.2 0.1 0.1
Other 0.6 0.3 0.4 0.8 1.4 1.1
Percentage Distribution of Households by Principal Source of Drinking Water and
Sanitation in India: 1993-2003
The above statistics shows that almost in all seasons the majority of groundwater was found below
allowable potable limits and required purification before consumed. The declining quality of
groundwater due to pollution is posing health problems in India. About 44 million are estimated to be
health
affected by problems related to water quality excess fluoride, iron, nitrate, arsenic, heavy metals and
salinity. The low quality and poor standards maintained by the big names in the bottled wat and
water
soft drinks sector have been severely exposed in recent years in India. Despite common man paying
lot of money for procuring high quality purified mineral water the bottled companies could not
maintain the quality standards stated. Hence this causes the need for a water quality tester
instrument which is highly portable and at the same time economical. Considering all this parameters
Considering
a lot needs to be done to improve the potable water quality in India making the clean drinkable water
available to every citizen.

10. Future growth of the sector and sustainability of growth, investments by
government
According to World Bank water economy in India is poised to have turbulent future. Some of the
major problems that India is facing currently are crumbling water infrastructure and depleting
groundwater, growing water conflicts, changing environmental conditions, inadequate infrastructure
to support the growing demand. Compared to other developing countries like China, Brazil, Russia
the infrastructure and water storage capacity is remarkably low. The investments in water
infrastructure transformed the economic and social development of India. Water tariffs have been
kept low in country like India which leads to misuse of potable water in urban cities resulting into
scarcity in rural areas. Also the pollution control laws not being enforced strictly the corporate and
industrial sector negligently treat the industrial waste. The main issue is not the need for these
services, which are now universally accepted, but rather how can these be provided to everyone
cost-effectively, equitably, and promptly. With recent support from government and Supreme Court
reiterating the right to clean drinking water as fundamental right of citizen and insisting on everybody
to exercise their right, water industry is expected to see paradigm
shift and development in infrastructure in rural and urban India.
Unfortunately despite making laws and claims in recent five-year
plans allocations to the urban water and sanitation sector have
never crossed even 2 per cent of the Plan funds of the
Government of India since independence. The water sector is
facing a major financing gap. The annual requirements for
rehabilitating existing infrastructure alone is estimated to be around
Ras. 200 billion while the India Water Vision expects new investments – with very modest allowances
for sewage treatment – to cost about Ras. 180 billion a year. Annual allocations in the recent past
have varied between Ras 90 and Ras 170 billion a year. Though water is a basic necessity supplying
potable water has always been a low priority consideration for government. But government has
consistently increased the investments since the beginning of five year plan implementation and
there is high potential that this industry will gain importance in near future. Investments in water
infrastructure in India have resulted in massive reductions in poverty, and it is actually the poor and
landless who have been the biggest beneficiaries and this is one sector which has underperformed till
date and is poised to have mandate need of huge investment in future.

11. Plan period Total Outlay Percent Urban Per cent of
for
outlay UWSS of total population urban
sector outlay (million) population
17.3
First Plan (1951-56) 33.59 0.43 1.28 61.6 (1951)
Second Plan (1956-
61) 67.69 0.44 0.65 -- --
18.0
Third Plan (1961-66) 85.93 0.89 1.04 77.6 (1961)
Fourth Plan (1969-74) 159.32 2.82 1.77 -- --
19.9
Fifth Plan (1974-79) 392.46 5.49 1.40 107.0 (1971)
23.3
Sixth Plan (1980-85) 976.07 17.67 1.81 156.4 (1981)
Seventh Plan (1985-
90) 1797.42 29.66 1.65 -- --
25.7
Eighth Plan (1992-97) 4334.84 59.82 1.38 212.9 (1991)
27.8
Ninth Plan (1997-01) 7800.00 117.00 1.50 285.4 (2001)
Plan Outlays on Urban Water Supply and Sanitation (UWSS)
(Current Prices in Rs. Billion)
Current Water Quality Monitoring infrastructure in India
Indian rivers are polluted due to the discharge of untreated sewage and industrial effluents. The
Central Pollution Control Board (CPCB) has established a network of
monitoring stations on rivers across the country. The present network
comprises of 870 stations in 26 States and 5 Union Territories spread over
the country. The monitoring is done on monthly or quarterly basis in
surface waters and on half yearly basis in case of ground water. The
monitoring network covers 189 Rivers, 53 Lakes, 4 Tanks, 2 Ponds, 3
Creeks, 3 Canals, 9 Drains and 218 Wells. Among the 870 stations, 567
are on rivers, 55 on lakes, 9 on drains, 12 on canals, 4 on tank, 3 on and
creeks, 2 on pond and 218 are groundwater stations. The monitoring of
water quality at 257 stations is being done on monthly basis, 393 stations
on quarterly basis, 216 on half yearly basis and 4 stations on yearly basis. A comprehensive water
quality laboratory development programme has been completed by upgrading of 290 laboratories in
three categories. With government becoming more aware recently and with funding from World Bank
the investments are expected to go up in improving the water quality measurement system.

12. Future of conducting polymer technology and scope of development
The biggest advantage of conductive polymers is their compatibility. Conductive polymers are also
plastics (which are organic polymers) and therefore can combine the mechanical properties
(flexibility, toughness, malleability, elasticity, etc.) of plastics with the high electrical conductivities of a
doped conjugated polymer. Conductive polymers are used in flat panel displays using OLED, solar
panels and optical amplifiers. Conductive polymers have their application in wide range of fields such
as water industry, biological research, power
and energy, electronics and fiber optics.
Electro active Polymer
Market, 2007-2013 ($
According to a new market research report,
Millions)
Conductive Polymers, the global market for
2000
electro active polymers will reach 314.7 1500
Conductive
polymer($
million pounds in 2008. It is expected to 1000 million)
increase to over 409 million pounds by 2013, 500 ICP's($ million)
hence it reflects a CAGR of 5.4%. 0
2007 2008 2013
The market is broken down into applications of conductive polymers and inherently conductive
polymers (ICPs). Of these, conductive polymers have the largest share of the market. Estimated at
311 million pounds in 2008, this segment is expected to increase to 402 million pounds by the end of
2013, for a CAGR of 5.3%. Conductive polymers have been commercial for many years, and have
received increasingly more attention due to the growth of electronics devices vis-à-vis protection
against electrostatic discharge (ESD) and electromagnetic interference.
ICPs will account for 3.7 million pounds in 2008 and reach 7.9 million pounds in 2013, a CAGR of
15.8%. ICPs are still considered in the early stages of development, although this segment will
significantly increase its market share in volume and dollar value over the next 5 years. Many
scientists and corporations remain optimistic about ICPs, and hundreds of papers and patents on
ICPs are published each year. ICPs have started to slowly penetrate the traditional conductive
plastics market in electrostatic coatings. Capacitors are currently the largest ICP application, followed
by ESD, sensors, textiles and corrosion protection.
A great deal of research and development into conductive polymers has resulted from the continuing
proliferation of sensitive electronic devices, the need to protect them, and exciting new technologies.
Potential conductive polymer applications include electrostatic dissipation control, antistatic
packaging, light emitting displays, capacitors, electrostatic paintable plastics, corrosion-resistant
paints/coatings and electrostatic spray painting, and the list keeps on growing.

13. Electro active Polymer Market (Million Pounds/ $ Millions)
Electro active Million CAGR% $ Millions
Polymer Pounds
2007 2008 2013 2008- 2007 2008 2013
2013
Conductive 286 311 402 5.3 1,366 1,483 1,897
plastics
ICPs 3.2 3.7 7.9 15.8 146 170 361
Total 289.2 314.7 409.9 5.4 1,512 1,653 2,258
Competitors/Products & Services Portfolio
it is desired that water sources shall be subjected to regular monitoring and surveillance through
sustainable water quality monitoring system such as water quality field test kits for screening of large
number of sources. Significant chemical test parameters, for which, regular monitoring and
surveillance shall aim, may include Arsenic, Fluoride, Iron, Nitrate, Residual Chlorine, Chloride,
Alkalinity, Hardness and Aluminium. Some of the major players in the field of water quality monitoring
industry are Jal Tara by development alternatives, Orion Ph meters by Thermo Electron Corporation,
NCL, Indian toxicological institute and Toshniwal with Jal Tara capturing the major market share.
Most of the kits available in the market use common principle of titration with chemical solution. In
order to make the kit portable plastic bottle with chemical
solution is attached with kit which mixed the required
chemical solution with the sample that needs to be tested.
This type of testing method needs careful handling of
chemical and operator training also. Further this sensor
kits have shelf life after which the kit doesn’t display the
correct result and kit needs to be replaced. Polysense
aqua has got advantage over this traditional kit as it is
quantitative based, easy to use and requires less training. There are numbers of players in the
market such as Jal Tara kits by Development Alternatives group, Sumeet instruments & chemicals,
Ion exchange limited, Techno-as systems, Merck etc which produce kits measuring single or multiple
parameters. The most important parameters to consider for water testing kits are price, usability,
portability, overheads required, number of features, training requirement, scope of improvement,
methodology used in testing, accuracy, efficiency and cost per test per contaminants. Below are
some statistics showing comparison of competitive advantage and cost effectiveness of these kits.

14. Arsenic test kits
IEHS-china, Merck-HS and CIC-NCL are producing the most efficient arsenic water testing kit in the
NCL
market currently. Out of this IEHS-China is selling at price which is significantly lower as compared to
China
other two. Hence going forward Polysense aqua might face tough competition from Chinese and
oing
other imported kits.
Fluoride test kit
Ltec-BARC and JAL Tara kits are currently leading in the market as far as fluoride testing kits and are
BARC
most efficient. Ltec-BARC is available at low price in the market and has more efficiency.
able

15. Similarly CPCB-MP for iron and MERCK in Nitrate testing is leading in the market.
MP
Iron Test kit Nitrate Test kit
Below are statistics which shows the overall efficiency of kits available in the market. We can
conclude that different kits are specialised in different parameter testing and no combined package kit
is available which has higher efficiency in more than one parameter. If Polysense aqua can
accomplish this we expect that polysense aqua will have great demand in the market.
at
No. of Kits Effective Kits
S.No. Type of Kits Evaluated (%)
1 Arsenic Test Kits 9 33%
2 Fluoride Test Kits 15 27%
3 Iron Test Kits 13 31%
4 Nitrate Test Kits 11 18%
5 Chlorine Test Kits 9 44%
6 Chloride Test Kits 5 20%
7 Alkalinity Test Kits 2 50%
8 Aluminium Test Kits 1 100%
9 Single Parameter Kits 46 26%
Multiple Parameter
10 Kits 4 50%
Percentage of Effective Kits

16. Study indicates very low percentage of effective water quality field test kits available in the country for
community based water quality monitoring programmes. In order to strengthen CBWQM, following
recommendations could be envisaged:
Shelf-life study of existing water testing kits should be conducted to ascertain the useful life of
the kits.
Research and development efforts should be scaled-up and shall focus primarily on:
Reduction/elimination of the hazard involved in using the kits.
Enhancement of the technical efficiency of the kits.
Amelioration of the kits in terms of user-friendliness.
The cost of the kits may be rationalized.
Type / Name of Kit Parameter Cost (Ras.)
Kits made / sold by Development Alternatives
Jal TARA WTK-14 14 parameters 7913.00*
Jal TARA WTK-11 11 parameters 7238.00*
Jal TARA Mini Kit-I Fluoride 1220.00*
Jal TARA Mini Kit-II Nitrate 1474.00*
Jal TARA Mini Kit-III Iron 1475.00*
Jal TARA Mini Kit-IV Free chlorine 1138.00*
Jal TARA Mini Kit-V Arsenic 3073.00*
Jal TARA - Set of 10 tests Coli form bacteria 290.00* per set
Kits made / sold by Rakiro Biotech Systems Pvt Ltd.
Aquasol test Kits (drop titration kit) Fluoride 625
Aquasol test Kits (drop titration kit) Free Chlorine 240
Aquasol test Kits (color
Nitrate 700
comparison)
Aquasol test Kits (color
Iron up to 1.0ppm 825
comparison)
Aquasol test Kits (color
Iron up to 10.0ppm 800
comparison)
Bactaslyde test kit ( bacterial slide) Bacteria count 810
Kits made / sold by Ion Exchange (I) Ltd.

17. Easy Test Kit Iron 2840
Easy Test Kit Free Chlorine 1120
Easy Test Kit Fluoride 1120
Easy Test Kit Nitrate 1245
Easy Test Kit for potability of Water 8 parameters 13000
Easy Test Kit E coli 500
Kits made / sold by Sumeet Instruments & Chemicals
Arsenic Test Kit Arsenic 2500
Nitrate Test Kit Nitrate 3000
Fluoride Test Kit Fluoride 3200
Iron Test Kit Iron 3200
Multi Parameter Test Kit 10 parameters 11500
Hence the above statistics show that most of the product doesn’t provide a complete package of
features. Once has to trade off certain functions depending on the speciality of the instrument. There
is a need for a water testing product which can provide multiple features, ease of use, and
affordability in one instrument.
Competitive Advantage
As values are directly displayed on the LCD panel and require no complicated chemical
formulae for estimating
Portable
Battery operated
Low maintenance system
Data synchronization with computer provided
Sensitivity of the instrument is very good compared to its counterparts
Six parameters measured by one instrument
Doesn’t use chemical based methodology
Easy to use and can be used by layman
Use of most recent technology

18. Customers
Department of drinking water supply
Water pollution control board
Defence service
Educational institutions
Local Self Government
India has one of the biggest army in the world and hence even if polysense aqua is able sell units
equal 20% of the size of the army to the government it is a substantial achievement. Also Education
from service being available only to privileged is becoming a necessity transforming itself into a
profitable business. The total IT spending by the government and education sector in India was
US$1,734.4 million in 2006 and is expected to increase at a compound annual growth rate (CAGR) of
16.8% throughout the forecast period to US$3,770.8 million by 2011. India will have to significantly
gear up its academic infrastructure to meet the growing demand for educated professionals.
Education improvements are primarily funded by the government through its school infrastructure and
large union budget outlays. It has been laying stress on imparting quality education by increasing the
number of school and academic institutions. Subsidies are offered to people who want to start up
education institutions in order to promote the business. Many other schemes like Sarva Shiksha
Abhiyan focus at increasing the number of schools to provide access to larger population, improving
the infrastructure in existing school, increasing the enrolment rates and lower dropout rates. India has
very minimal infrastructure to store rain water as compared to China, Russia and US. With increasing
environmental uncertainty, rising water pollution because of industrial waste, degrading quality of
ground water government would require to increase the spending on water industry and improve the
water quality monitoring system of India. With this assumption we expect that new laboratories and
research institutions would be established in India which can again add to the customer base of
Polysense Aqua. Hence we expect that Polysense aqua will continue getting new customers and
adding to its customer portfolio. However we also fear that the kind of customers that polysense aqua
are targeting are mostly government institutions where the risk in winning the project is quite difficult
without political power. Also these institutions are severely infected by corruption and bureaucracy as
far as India is concerned.

19. Risks involved and Mitigation
Along with inherent risks of start-up we see following risks attached to the business:
Since production of the measuring instrument is outsourced, any delays on the part of the
supplier will cause a delay in delivery of the goods to our customers, which will in turn affect
our revenues.
Since most of the products will be sold to government agencies, if the revenue realisation from
these agencies is delayed, cash flow may be affected.
Since most of these products will be sold to the government agencies, which purchase through
an elaborate tendering process, the sales are likely to be lumpy.
The management team does not seem to have influential and powerful relations with the
various high officials in the government offices. This can prove to be one of the biggest
challenge and risk involved with investing in the enterprise. The reason for the same is that
India is a country where it is well known that various processes, regulations and formalities
can take ages to get completed if one is not in contact with the right people. Also, there exists
bias across various sectors in our country where special few are preferred over others.
Mr. Bhat founded the Bhat Biotech in 1994 and established it as a viable and thriving business
in the area of healthcare diagnostics. Thus there may be conflict of interest between the two
enterprises as both would be competing in the healthcare sector. It does not seem to be an
appropriate strategy to have a promoter who may have vested interests in the well being of
some other organization which is the competitor of PSPL.
The enterprise is aiming to tap the market of NGOs. Some of these organizations are small
and cater to the rural area. The risk involved here is that the enterprise might never be able to
realise this market as the various products would have to be provided to the NGOs at fairly low
and competitive prices. Also, other players in the market have tie-ups with the same, thus
making it more difficult for PSPL to be able to enter and have a substantial foothold.
Although the various innovative products have been mentioned in the plan, the biggest flaw is
that no information and comparative analysis has been provided about any product other than

20. Polysense Aqua. We have no information about the market potential, costs involved,
expenditure being incurred on these products as of today, and market competitors. This gives
the picture that the enterprise is backing only on the success of Polysense Aqua, which makes
this proposition very risky.
Since Mr. Contractor seems to be the person solely responsible with the research, design, and
implementation of the Polysense Aqua, it brings out the fears as to where would the company
head if he were to ever leave the company.
Although the enterprise has applied for patents, it is well known that implementation of same in
a country like India is a formidable task. The biggest example is the pharmaceutical sector.
Thus, the risk lies with the fact that once the Polysense Aqua is out in the market, its various
competitors are going to ape it. This might lead to price competition which may further force
PSPL to lower the price of its product. Another factor is the production of cheap products in
China. Although they might not have implemented the technology that Polysense has, it would
take them no time to do the dame once the PSPL’s product is out in the market.
Since PSPL does not have a manufacturing plant yet, it is heavily dependent on the suppliers,
which can prove to be disadvantageous from aspects like delay in delivery and cost.
It has been mentioned that the cartridge in Polysense Aqua equipment will have to be
replaced 15 times a year. If we calculate the total cost by including these overhead charges,
the cost turns out to be higher than that of other competitors like Jal Tara. One of the reasons
for the same is that PSPL still does not have a manufacturing firm.

21. Financial Projections and Valuations
(According to Researchers)
The below stated financial statements and considerations are as per our assumption that is
achievable and realisable. We have adopted a conservative approach to estimation of revenue and
profitability.
Projected Profit & Loss statement
PROFIT AND LOSS STATEMENT (in USD) 2008 2009 2010
REVENUES
Sale of Polysense + Sensors 295,500 423,000 550,280
EXPENSES
Cost of Goods Sold 161,000 252,120 363,145
Gross Profit 134,500 170,880 187,135
Sales and General Administration Exp 32,200 50,424 72,629
R&D Expenses 29,550 42,300 55,028
Depreciation 313 3652 6482
Other Expenses 5910 8460 11006
Operating Profit 66,528 66,044 41,990
Other Income 0 0 0
Profit before Interest and Tax 66,528 66,044 41,990
Interest 0 0 0
Profit Before Tax 66,528 66,044 41,990
Provision for Tax 23285 23115 14697
Profit After Tax 43,243 42,929 27,294
Provision for Dividend 313 313 313
Retained Earnings 42,930 42,616 26,981

22. Project Balance Sheet
BALANCE SHEET (in USD) 2008 2009 2010
SOURCES OF FUND
Shareholder's Fund
Share Capital – Promoters 2,500 2,500 2,500
Share Capital – VC 1,071 1,071 1,071
Share Premium 26,929 26,929 26,929
Reserves and Surplus 42,930 42,616 26,981
Net Worth 72,359 72,045 56,410
Loans Funds
TOTAL LIABILITIES 72,359 72,045 56,410
APPLICATION OF FUNDS
Fixed Assets
Gross block 1,250 14,608 25,927
Accumulated Depreciation 313 3652 6482
Net Fixed assets 938 10956 19445
Investments 0 0 0
Current Assets
Sundry Debtors 59,100 84,600 110,056
Cash in Hand & Bank 44521 26913 -462
Current Liabilities
Sundry Creditors 32,200 50,424 72,629
Net Current Assets 71,421 61,089 36,965
TOTAL ASSETS 72,359 72,045 56,410
Cost of Manufacturing
Cost of Manufacturing
Annual Increase in Cost of Goods Sold* 10%
Sales & General Expenses as proportion of Cost of Goods
Sold 20%
Sundry Debtors as % of Sales 20%
Sundry Creditors as % of Cost of Goods sold 20%
Initial Assets (Testing Eqpt and Electrode Mfg Eqpt) 50000
Annual Rate of Depreciation 25%
Reducing Balance Method used for Depreciation
Tax Rate (Corporate tax) 35%
R& D Investment as % of Sales 10%
Interest Rates
Long term Debt 10%
Provision for dividend (Including CDT) 12.50%

23. Projected sales schedule and assumptions
SALES SCHEDULE 2008 2009 2010 Assumptions 2008 2009 2010
Rate of Growth for Polysense 0.20 0.20 Growth 20% 20%
Price 187.50 187.50 187.50 Selling Price
would not increase 187.5 187.5 187.5
Rise in Cost (125 $) 0.10 0.10
Rise in COGS (%) 0% 10% 10%
Sensor sale Per Polysense 12 11 10
Decrease in
Rise in Cost (10 $) 0.10 0.10
Sensor Sale per
Machine 12 11 10
SALES SCHEDULE 2008 2009 2010
Rise in COGS of
Projected Sales (Units) 1000 1200 1440 Sensor (%) 0% 10% 10%
Polysense Selling Price 187.50 187.50 187.50
Polysense Cost 125.00 137.50 151.25
Polysense Revenues 187500 225000 270000
Sales Projection on
Realistic basis 1000 1200 1440
COGS 125000 165000 217800
Operating Margin 62500 60000 52200
Cartridge 12000 26400 40040
Decrease in selling Price of
Sensor Cartridge Selling Price 9 7.5 7 Cartridge 9 7.5 7
COGS of Sensor would
Sensor Cartridge Cost Price 3.00 3.30 3.63 increase 0% 10% 10%
Sensor Cartridge Revenues 108000 198000 280280
COGS 36000 87120 145345
Operating Margin 72000 110880 134935
Total Operating Margin 134500 170880 187135

24. Estimated investments in Assets and Assumptions
Investment in Assets (% of GP) 8% 8% 8%
New Assets 5322 13670 14971
Assets 1250 14608 25927
Depreciation 313 3652 6482
Net Assets 938 10956 19445
We assume that investment in miscellaneous
assets on % of GP 8% 8% 8%
Depreciation WDV 25% 25% 25%
Ratio & Break Even Analysis
Ratio Analysis 2008 2009 2010
ROE 59.33% 59.15% 47.83%
Sales/ Book Value 4 7 15
EPS assuming 1 share of 1$ 12.02 11.93 7.55
Operating Margin 46% 40% 34%
Overhead Expenses to Operating Exp 46% 56% 72%
Gross Profit/ Net Profit 32% 25% 14%
Return on Net Assets 60% 70% 73%
Current Ratio 3.22 2.21 1.51
Cash to Net Assets 62% 44% -1%
Break Even Analysis 2008 2009 2010
Sales 295,500 423,000 550,280
Variable cost 161,000 252,120 363,145
Semi- Variable Cost 38,110 58,884 83,635
Contribution 96,390 111,996 103,500
Contribution Per Unit 96 93 72
Fixed Cost 29,863 45,952 61,510
Break Even (Units) 310 492 856

25. Valuation before infusion of Capital
Valuation Pre Investment 2008 2009 2010
PAT 43,243 42,929 27,294
Depreciation 313 313 313
Cash Flow 43,555 43,241 27,606
Year 1 2 3
Discounting Rate 0.12 0.12 0.12
Discounting Factor 0.89 0.79 0.71
PV of Cash Flows 38888.72 34471.5531 19649.62
Other expenses are taken as percentage of sale @2% 2%
Sum Of Present Values 93009.90
Purchase 30%
Value – Equity 27902.97
Investment Strategy
Investment Strategy 2008 2009 2010
Equity 28000
Debt Commitment (with conditions) @10 % 50000 50000 75000
Rate of Interest 10% PLR+2.25% PLR+2.25%
We would embed a real option into the debt converting debt into equity within
a period of two years from the date of debt given but only till Dec 2011 as last

26. Valuation of company for converting debt into equity would be
Years 2008 2009 2010
Increment for Valuation in future years 40% 60% 80%
Valuation of Company for these years 130667 149333 168000
Example
Date of loan given Dec-08 Nov-09 Mar-10
Debt given 50000 50000 50000
Rate of Interest 10% PLR+2.25% PLR+2.25%
Exercising Right Valid Till Dec-10 Nov-11 Dec-11
Debt conversion in the following years 50000 40000 40000
Equity 38% 27% 24%
UPPER Cap on VC shareholding would not be more than 60% at any point of time
Investment Plan 2008 2009 2010
Equity 28000
Debt Commitment 50000 50000 75000
Key Benchmarks to achieve
Sales of minimum
Machines Sensors 800 960 1100
6400 14080 22880
Minimum Level of ROE 30% 30% 30%
R&D expenses
Both the Products are to be evaluated and stage of development would be
considered
Rating of UNICEF would be taken into consideration

27. Exit Strategy
The Exit strategy is designed with a perspective of 5 – 7 year of time frame. The company is too
small to be taken for an IPO.
Private Placement or Stake sale to other investors
Establishing the brand name for all the products and then exiting each one of them separately
Selling the investment to other big players
Other methods depending upon scenario and opportunities
Control Provisions
Two directors in the board
Any stake dilution would not be permissible without the consent of VC
The VC would have "First right of Refusal"
The Promoter cannot engage in any other business with the same kind of research
Any dealings with Bhat-Bio- Tech India private Ltd would have to be cleared from the director
of VC
Both the Products are to be evaluated and stage of development would be considered
Rating of UNICEF would be taken into consideration
Liquidation Preference
Drag along Right would be with VC
Tag along Right would also be with VC
In case of new entity entry into the business the Right of First refusal would be with VC