DESIGNING A FINANCIAL MODEL FOR MAHARASHTRA CSC PROJECT

AT M/S. BHARTIYA SAMRUDDHI FINANCE LIMITED

A Summer internship report submitted in partial fulfillment of the Degree of Master of
Business Administration of Thiagarajar School of Management, Madurai

By
SRIRAM B.S.K.
Reg No 1011081
Under the guidance of
Internal Guide : Prof. Subramanian, Finance Area
External Guide : Mr. Vikas Raut, Senior Manager, BSFL

Thiagarajar School of Management
Autonomous
(Affiliated to Madurai Kamaraj University)
Madurai 625 005
April June 2012
2

CERTIFICATE FROM COLLEGE Comment [a1]: Will be issued by TSM in TSM
letter head.
3

DECLARATION BY THE CANDIDATE

SRIRAM B.S.K.
Reg No 1011081
II MBA
THIAGARAJAR SCHOOL OF MANAGEMENT
MADURAI 5

I hereby state that the report entitled, DESIGNING A FINANCIAL MODEL FOR
MAHARASHTRA CSC PROJECT AT M/S. BHARTIYA SAMRUDDHI FINANCE
LIMITED was undertaken at M/s. Bhartiya Samruddhi Finance Ltd. in Hyderabad,
submitted to Thiagarajar School of Management, Madurai in partial fulfillment of Master of
Business Administration Degree is a record of original work done by me and no part of this
internship report has been submitted for the award of any other Degree, Diploma, Fellowship
or other similar studies.


Place: Madurai
Date:
Signature of the Candidate

(SRIRAM B.S.K.)

4

LETTER OF AUTHORIZATION Comment [A2]: Refers to Certificate issued by
Organization on completion of your Internship.
5



Adhavan.A.S. +91-9500346007
adhavemail@gmail.com
_____________________________________________________________
_
Career objective:
To work in a challenging environment where I can apply my
knowledge and develop my skills for the betterment and growth of my
organization with sincerity and commitment.

Academic Qualification:

Year of
passing
Qualification Institution % or CGPA
2013 MBA
Thiagarajar School of
Management,
Madurai
CGPA: 7.15
(till II
trimester)
2010 B.B.A
JAMAL MOHAMED ARTS
& SCIENCE COLLEGE,
Trichy
78%
2007 HSC
SRIRANGAM BOYS
HIGHER SECONDARY
Trichy
84%
2005 Tenth
MAHATHMA GHANDHI
HIGHER-SECONDARY
VIDYALAYA , TENNUR,
TRICHY-17

66%

Awards and Accolades:
Best v.c. award from P&G.
Four certificates for topper in U.G.
Highlights

Areas of interest

Financial accounting
Financial analysis

Quick learner

Fluent in English and
Tamil


References:

Prof. M. Subramanian,
Assistant Professor
(Finance Area),
Thiagarajar School
of Management,
Pamban Swamy Nagar,
Thiruparankundram,
Madurai - 625 005

Official email:
subramanianm@tsm.
ac.in
Cell: (0)99521-18297


Prof.M. Arunachalam,
Assistant Professor,
Thiagarajar School
of Management,
Pamban Swamy Nagar,
Thiruparankundram,
Madurai - 625 005

Official email:
arunachalamm@tsm.
ac.in
Cell: (0)94436-64470

6



Other qualifications and skills:
Hardware and networking from systec academy, Trichy
Typewriting lower.
Software known Microsoft office, Tally, spss.
Hindi Language certificate of prathmic
Industrial Exposure:
Industrial visit - LOYAL TEXTILES in Kovilpatti
Two years experience as Team leader in B.P.O.
One year experience as marketing executive in P&G distributor.
Extra Curricular Activities:
Interest in karathi, kabadi, foot ball etc.
Special interests:
Internet surfing, blogging.
Personal Information:
Name : Adhavan.A.S
Date of Birth : 31-03-1989
Fathers Name : A.sivasubramanian
Address : 6/25 palanichamy konar store,
Bharathi nagar, Tennur,
Trichy-17
Declaration:
I hereby declare that the information stated above is true to the best of my knowledge.

Madurai,
28-02-2012 (Adhavan.A.S.)
7

ACKNOWLEDGEMENT

I put forth my heart and soul to thank the management of ICRA MANAGEMENT
CONSULTING SERVICES LTD., CHENNAI for giving me the golden opportunity to
pursue my summer internship with them.
I also extend my deep sense of gratitude to Mr.R.Raghuttama Rao, Managing Director, ICRA
Management Consulting Services Ltd, for giving me the opportunity to undertake my
internship program. I am thankful to Mr. M. Sairam, Assistant General Manager, ICRA
Management Consulting Services Ltd.,) for the valuable suggestions, constant encouragement
and constructive criticism at every step of my internship.
I sincerely thank Dr. M. Naga Raju, Principal, Thiagarajar School of Management, for his
encouragement and Ms.S.Anjana, Assistant Professor, TSM for providing guidance and
valuable ideas which helped me to complete this project successfully.
Finally, I extend my heartfelt thanks to my friends and family members who have been a
source of inspiration and support during my internship.
8

EXECUTIVE SUMMARY


The purpose of the study is to understand the Market Preferences in the
Broadband Segment in South India. It also concentrates in finding the level of Broadband
penetration in each State. A market survey has been conducted in South India (Tamilnadu,
Kerala, Karnataka and Andhra Pradesh) for this purpose. It helps to identify the top players in
terms of their market share and also the most preferred brand. It helps to reveal the buying
behavior of the consumers while selecting a broadband connection from an Internet Service
Provider (ISP).
9

TABLE OF CONTENTS
CHAPTER TOPIC PAGE NO.
List of Table 10
List of Graphs 11
List of Figures 12

Chapter 1 Introduction 13
1.1 Nature and Scope of the Project 14
1.2 Implifications of the Study 15
1.3 Chapterisation 15

Chapter 2 Organizational profile and Review of literature 16
2.1 Profile of the Industry 17
2.2 BASIX Group 17
2.3 Bhartiya Samruddhi Finance Ltd. 18
2.4 Background of CSC 19
2.5 CSC Services 20
2.6 Review of Literature 23
2.7 Value Chain of BSFL + CSC 24

Chapter 3 Business Plan & Financial Model Development 25
3.1 Business Plan 26
3.1.1 Executive Summary 26
3.1.2 The Market 28
3.1.3 Strategies 28
3.1.4 The Management Structure 29
3.2 The Financial Plan 30
3.2.1 Financial Needs Summary 30
3.2.2 Revenue Model 31
3.2.3 Assumptions and Comments 31
3.3 Development of Model 32
3.3.1 Revenue Sharing 33
10

3.3.2 Market sales assumptions 34
3.3.3 Setup and Fixed cost assumptions 34
3.3.4 Rollout Plan 37
3.3.5 Individual CSC Financial model 37
3.3.6 Income Statement 38
3.3.7 Cash Flow Statement 39

Chapter 4 Analysis and Interpretation 40
4.1 Financial Analysis 41
4.1.1 Breakeven Analysis 41
4.1.2 Ratio Analysis 42
4.2 Business Process Mapping 43
4.2.1 Flowchart for CSC Commissioning 44
4.2.2 Flowchart for CSC Operation 45
4.3 Financial Interpretation 45

Chapter 5 Recommendation, Limitation and Conclusion 47
5.1 Recommendations 48
5.2 Limitations 48
5.3 Conclusion 48

Chapter 6 Bibliography 49

Chapter 7 Appendix 51
7.1 Work Diary 52
7.2 Financial Model 54
7.3 Breakeven Analysis 55
11

LIST OF TABLES
SL. NO. TITLE PAGE NO.
2.1 Parties involved in CSC 20
2.2 Value chain of CSC 24
3.1 Market Analysis 28
3.2 1
st
Yr Setup and Operating Costs 30
3.3 Revenue Share 34
3.4 Market Sales Assumptions 34
3.5 CSC Setup Cost 35
3.6 Cluster Office Setup Cost 35
3.7 State Office Setup Cost 35
3.8 IT Infrastructure Cost 35
3.9 HR Fixed Cost 36
3.10 Office Opex 36
3.11 CSC Portal Fixed Cost 36
3.12 Variable Cost 36
3.13 Rollout Plan 37
3.14 Income Statement for Year 1 38
3.15 Cash flow Statement for March 2012 39
4.1 Breakeven Table for the business 41
4.2 Ratio Analysis 42
7.1 Work Diary 52
12

LIST OF GRAPHS
SL. NO. TITLE PAGE NO.
4.1 Breakeven chart for the business 42
7.1 Revenue Mix 54
7.2 Expense Mix 54
7.3 Rollout Completion 55
7.4 Breakeven Chart 55
13

LIST OF FIGURES
SL. NO. TITLE PAGE NO.
2.1 BASIX Corporate Structure 18
2.2 CSC 3-Tier Structure 19
4.1 CSC Commissioning Flowchart 44
4.2 CSC Operation Flowchart 45

14




















CHAPTER 1
INTRODUCTION
15

1. Introduction
1.1 Nature and Scope of the Project
This internship project attempts to develop a financial model for the CSC business in
Maharashtra Nashik region. The product portfolio, forecasted financials, breakeven study is
also conducted on the prepared business model. Two technical analyses are done to decide
upon the ways to improve financial performance. In addition a commissioning flowchart and
a operation flowchart are designed to speed up the roll-out process.
Name of the Business: CSC Project in Nashik region (Nashik region includes Nashik,
Jalgaon, Ahmednagar, Dhule and Nandubar districts)
Services to be provided: Both G2C (Government to Consumer) and B2C (Business to
Consumer) service
Nos of CSCs: 1,362 in Nashik region
Some of the B2C services: Micro credit, Micro insurance, Education loans, Micro
enterprise loans, etc.
Some of the G2C services: Issuance of certificates, land records, bill payments, ticket
booking, ePayments, etc.
Deliverables of the Project:
1. Financial model should contain initial CSC rollout model, services roll out model,
business revenues, expenses, projected financials and breakeven analysis by
considering all of the legal (in accordance to MSA), operational (actual field data)
constraints and field and past assumptions.
2. Model will be consisting of all G2C and B2C businesses, revenue sharing options,
multiband CSC productivity.
3. In addition I am also preparing a commissioning process flowchart for CSC which
will be helpful for a hassle free commissioning and completion during rollout.


16

1.2 Implications of the Study
This project gives the field managers a tool to understand how to improve the financial
performance, what corrective actions can be done to strengthen the cash flows. Also the
managers can view what amount of expenses will be incurred in addition for the extra sales
effort taken by the VLE. In addition, breakeven point is to be found for the companys
business. Also the commissioning (rollout) flow chart will be helpful to speed up the rollout
processes
1.3 Chapter Scheme
Chapter 1:
This chapter deals with introduction about the project which includes the Nature & scope and
implication of the project
Chapter 2:
This chapter deals with organization profile and review of literature
Chapter 3:
This chapter deals with the business plan and financial model and its development
Chapter 4:
This chapter deals with the Analysis and Interpretation of the financial model. Breakeven
Analysis is conducted on the financial model. It also covers the commissioning flowchart and
operation flowchart.
Chapter 5:
This chapter deals with the conclusions, recommendations and limitations of the project
Chapter 6:
This chapter contains Bibliography
Chapter 7:
This chapter contains Work diary, references, financial model & flowcharts
17


18










CHAPTER 2
ORGANIZATION PROFILE AND
REVIEW OF LITERATURE


19

2. Organization profile and review of literature
2.1 Profile of the Industry
Micro Finance Institutions is collection of small scale financial service providers serving at
the BOP (bottom of pyramid) population. They concentrate on population which has been
financial excluded in the traditional financial system and concentrate to up lift their
livelihood and empowerment. MFIs (abbreviation for Micro-Finance Institutions) operate on
both small scale credit and savings collection from the largely financial excluded population
who are in dire need of capital for their agriculture and non agriculture based livelihood.
Learnt from the highly successful Grameen Bank based in Bangladesh, many MFIs have been
started in India with their vision aligned to reduce poverty, improve savings of the deprived
population and to develop the BOP economics activities. As of March 2009, MFIs in India
has reached more than 22 million borrowers and had a portfolio outstanding (loan and credit
lended to the borrowers) in excess of $2.3 billion. The industries ROE (Return on Equity)
typically ranges from 20% to 30%.
From 2006 to 2010, the industrys CAGR for loan portfolio outstanding is 86% and for
number of borrowers is 96%. These figures are remarkable considering the higher interest
rate needed to be charged by MFI to achieve the last mile connectivity to the BOP. These
days, MFIs have started to provide non credit facilities to cater the growing need of other
services to their borrowers. The new services have made them attractive to grow in both their
current and newer businesses.
2.2 BASIX Group
History:
BASIX (or Bhartiya Samruddhi Investments and Consulting Service) is a livelihood
promoting organization founded in 1996 by Shri Vijay Mahajan, Shri Deep Joshi and Shri
Bharathi Gupta Ramola. It works with more than 1.5 million households and has presence in
19 states through its 244 unit locations. BASIX is a collection of different entities that work
in synergy to create a sustainable model for Microfinance in India.
The holding company is BASICS Ltd. It set up two fund based companies Bhartiya
Samruddhi Finance Ltd, a micro-finance NBFC in 1997 and Krishna Bhima Samruddhi Local
Area Bank Ltd in 2001.
20

Mission:
BASIX mission is to promote a large number of sustainable livelihoods, including for the
rural poor and women, through the provision of financial services and technical assistance in
an integrated manner. BASIX will strive to yield a competitive rate of return to its investors
so as to be able to access mainstream capital and human resources on a continuous basis.
Corporate Structure:

Figure 2.1: BASIX Corporate Structure
2.3 Bhartiya Samruddhi Finance Ltd.
Bhartiya Samruddhi Finance Ltd. is registered with the Reserve Bank of India (RBI) as a Non
Banking Finance Company (NBFC) and incorporated as a Company under the Companies
Act, 1956, through which credit and technical assistance is delivered. This is the flagship
company of the BASIX group.
BASICS Ltd earlier owned nearly 100 percent of Samruddhi with an equity base of Rs 4.5
crore at its birth in the year 1997. Samruddhi expanded its equity base to Rs 20.6 crore in
21

2001. The additional equity came from the IFC, Washington, Shore Bank, Chicago; Hivos-
Triodos Fund, Netherlands; the ICICI Bank and HDFC Limited from India. The investment
by BASICS Ltd was also enhanced to Rs 9.7 crore, bringing its share of Samruddhi holdings
to 49.5 percent.
2.4 Background of CSC
The CSC is a strategic cornerstone of the National e-Governance Plan (NeGP), as part of its
commitment in the National Common Minimum Programme to introduce e-governance on a
massive scale.
The CSCs would provide high quality and cost-effective video, voice and data content and
services, in the areas of e-governance, education, health, telemedicine, entertainment as well
as other private services. A highlight of the CSCs is that it will offer web-enabled e-
governance services in rural areas, including application forms, certificates, and utility
payments such as electricity, telephone and water bills.
The Scheme creates a conducive environment for the private sector and NGOs (in our case it
is BSFL which is a part of BASIX Group dealing with livelihood program for rural public) to
play an active role in implementation of the CSC Scheme, thereby becoming a partner of the
government in the development of rural India. The PPP model of the CSC scheme envisages
a 3-tier structure consisting of the CSC operator (called Village Level Entrepreneur or VLE)
the Service Centre Agency (SCA), that will be responsible for a division of 500-1000 CSCs
and a State Designated Agency (SDA) identified by the State Government responsible for
managing the implementation over the entire State.

Figure 2.2: CSC 3-Tier Structure
State Designated
Agency (for
Maharashtra SETU)
Service Center
Agency (for Nashik
BSFL)
Village Level
Entrepreneurs (at
1362 locations)
22

The CSC Scheme has been approved by Government in September 2006 with an outlay of
Rs.5742 Crore over a period of 4 years.
BSFL has successfully implemented CSC projects in Orissa, Tripura, Sikkim and Meghalaya.
BSFL has started to commission CSC centers in Punjab from March 2011 and from currently
BSFL has undertaken to start their CSC centers in Maharashtra. In Maharashtra, BSFL has
won license to setup CSC in Nashik Region which includes Nashik, Ahmednagar, Dhule,
Nandurbar and Jalgaon.
Parties involved in CSC Maharashtra
Sl Company Designation Responsibility
1 SETU SDA It is the bridge between DoT, GoM (Maharashtra
Govt.) and SCA regarding all CSC activities.
2 BSFL SCA Party responsible to setup and operate 1362 locations
of CSC in Nashik region for four years
3 BKSL Livelihood service
provider
Provides AgLEDS services
4 B-ABLE Vocation Training
provider
Provides Vocational training courses
5 Magnum Opus IT Partner Responsible to provide all IT support, to initial recruit
1362 VLEs, train them and develop CSC portal for its
operation
6 AVIVA / Royal
Sundaram
Insurance provider Provider of General and Life Insurance
7 DoT NeGP Provider Monitors the progress of NeGP implementation and
provides viability funding to the SCA
Table 2.1 Parties involved in CSC
2.5 CSC services
CSC will be providing both G2C and B2C Services for the benefit of rural areas. BSFL will
be extending its micro credit and other livelihood services via B2C channel to these CSC and
capture the rural market. Some of the key G2C services are
1. Land records
2. Vehicle Registration
3. Issue of certificates / Government schemes
23

4. Employment exchange
5. Ration cards
6. Electoral services
7. Pension schemes
8. Road transport
9. Public grievance
10. Utility / Telephone Bills (Government undertakings)
Some key B2C services of BSFL through CSC are
1. Micro credit
2. Micro insurance
3. Livelihood programs
4. AgBDES (Agriculture & Business Development Services)
In addition to these B2C services, BSFL is building tie up with other partners to market their
product through CSCs. Some of them are
1. Gautham Polymers
2. Hariyali Kisan Bazaar, Etc.,
Also, the CSCs can provide services like
1. Commercial Services
a. Digital Photos
b. Web surfing
c. Photocopy
d. DTP, Email / Chats
e. CD Burning, Etc.
24

2. e-Commerce / online services
a. Railway Tickets
b. Astrology
c. Matrimonial
d. Shopping
e. Resumes
3. Education Services
a. IT Education
b. English Skills Training
4. Entertainment
a. DTH - Community TV
b. Telemedicine
5. Business-to-Business services (B2B)
a. Advertising & Promotion Services
b. Data Collection Services
c. Research Data collection
d. Distribution Services
6. Banking Services
a. Loan application
b. Collection of deposits
c. Drawing money


25

2.6 Review of Literature
Financial Planning by Richard A Brealey & et. all. (Principle of Corporate Finance, 8
th

Edition McGraw Hill)
Financial statements not only help you to understand the past but they also provide the
starting point for developing a financial plan for the future. Here is where finance and
strategy need to come together. A coherent financial plan demands an understanding of how
the firm can generate superior long-term returns by its choice of industry and by the way that
it position itself within that industry. When companies prepare a financial plan, they dont
just look at the most likely outcomes. They also plan for the unexpected. One way to do this
is to work through the consequences of the plan under the most likely set of circumferences
and then use sensitivity analysis to vary assumptions one at a time. Another approach is to
look at the Implifications of different plausible scenarios.
Financial Modeling by Simon Benninga (Financial Modeling, 2
nd
Edition Cambridge MIT
Press)
Financial modeling is the task of building an abstract representation (a model) of a
financial decision making situation. This is a mathematical model designed to represent (a
simplified version of) the performance of a financial asset or a portfolio, of a business,
a project, or any other investment. Financial modeling is a general term that means different
things to different users; the reference usually relates either to accounting and corporate
finance applications, or to quantitative finance applications. While there has been some
debate in the industry as to the nature of financial modeling - whether it is a tradecraft, such
as welding, or a science - the task of financial modeling has been gaining acceptance and
rigor over the years.
26

2.7 Value chain of BSFL + CSC
P
r
i
m
a
r
y

A
c
t
i
v
i
t
i
e
s

Finance: Low investment cost, BASIX is trying to reach more number of rural customers with established
supply chain like CSC

Corporate Management: BASIX has the blend of both professional and NGO style of management. The
primary goal of business is to make money for sustainable growth and to cater the livelihood of rural population
through their timely intervention
Technology: BASIX is to partner with network and IT solution provider M/s. Magnum Opus for its IT
services, VLE identification, recruitment and training. MO will also develop CSC web-portal
Human Resource: Clear organization structure and dedicated team to overlook the commissioning part of
CSC. VLE will own and run the CSC, MO FX (Field Executive) will act as the bridge between VLEs and
BSFL & MO.
S
e
c
o
n
d
a
r
y

A
c
t
i
v
i
t
i
e
s

Sourcing:
1. For B2C services, BSFL and
Magnum will partner with many
businesses to establish their sales
activity
2. For G2C services, Maha e-Seva site
will be used to cater to the need
3. For BASIX services, BDX will
directly reach to the VLEs and collect
referrals and loan processing forms
4. BSFL will provide banking facility
to CSC
Operations:
1. VLE
operates from
the CSC
Center
2. VLE does
all his online
transactions
via special
B2C portal
and G2C
portals
3. BSFL BDX
collects the
offline filled in
application to
process BSFL
micro credit,
insurance etc.

Distribution:
1. Livelihood
Service
Providers) will
come to village
to provide
AgBDES
services
2. People can
directly come
to CSC to apply
for certificates
3. B-ABLE will
provide based
upon the batch
strength
Marketing:
1. VLE can
market their
services via
posters,
signboard
2. CSC also
gets approval
from Gram
Panchayat
3. CSC cannot
advertise in
newspaper for
advertisement
and at the same
time all its
services offered
must be
overseen by
SCA (BSFL)
Service:
1. Faster
delivery of
Government
services
2. No chance
of corruption
for speeding
up the process
3. Last mile
connectivity
for many rural
based
businesses

Table 2.2 Value chain of CSC
27














CHAPTER 3
BUSINESS PLAN & FINANCIAL
MODEL DEVELOPMENT
28

3. Business Plan & Financial Model Development
3.1 Business Plan
Business Planning is not just about producing a report. The work of writing, of thinking
things through is as important as the final document. The Business Plan is dynamic.
Each business and its personality are different and the Business Plan should reflect this.
Objectives of a business plan are
Is the idea viable?
It helps to think long term, not just about starting a business but staying in business.
Is the business going to be profitable?
Will the company require outside financing to start or operate this business?
What are the major bottlenecks?
It will help to anticipate problems.
Gathering information for the plan will increase the decision makers knowledge of
the industry thereby assisting you in making more informed decisions.
The plan raises questions that will help inspire solutions before a crisis occurs.
By identifying strengths and weaknesses, it reveals where the business will need
assistance.
Use the Business Plan as a guide to keep you focused and making progress during the
business start up phase.
Use the Business Plan to sell your business opportunity to potential investors,
employees and suppliers.
3.1.1 Executive Summary
BSFL wanted to expand its rural reach in Maharashtra region. After overcoming recession
period and slow growth of Microfinance sector in India, BASIX wants to diversify into safer
business and also into newer segments of market. One such initiative taken by BSFL was
29

bidding for a four year contract to run CSC centers in Nashik region of Maharashtra. BSFL
won the bid and Master Service Agreement (MSA) was signed on 07 Jan 2011. BSFL (SCA)
should implement CSC commissioning by 12 months period and by Jan 2012 all 1362 CSC
should be in operational condition.
CSC will cater to the needs of the rural and urban public. The major services which will be
provided to them are G2C services (like land, nationality, income certificates, etc), Insurance,
Livelihood services, Vocational training and Utility (B2C services). Due to the slower growth
in microfinance, credit services will not be provided by through CSC.
CSC will be owned by individual VLEs. They will own computers, furniture and all
necessary setup equipments for the CSC. Identification, recruitment and training of VLEs
will be done by M/s. Magnum Opus. They are the IT partners of this project with BSFL and
provide backend IT supports, datacenters, B2C service interactions, CSC portal and web
support.
The potential of the CSC is very promising. Number of G2C transaction for 1
st
year will be
36,77,400; for 2
nd
year will be 45,96,750; for 3
rd
year will be 55,16,100 and for 4
th
year will
be 67,41,900. Number of Insurance (General) policies sold for 1
st
year will be 61,290; for 2
nd

year will be 85,806; for 3
rd
year will be 1,22,580 and for 4
th
year will be 1,47,096
The projected PAT for 1
st
year will be Rs. 2.63crores; for 2
nd
year will be Rs. 5.01crores; for
3
rd
year will be Rs. 5.48crores; and for 4
th
year will be Rs. 6.47crores. The initial setup cost
for the project is Rs. 7.20lakhs (for the month April, May and June 2011).
VLE will get an average monthly commission of Rs. 3,761 for 1
st
year, Rs. 5,954 for 2
nd
year,
Rs. 7,395 for 3
rd
year and Rs. 9,267 for 4
th
year. Magnum Opus will get an average monthly
commission per CSC of Rs. 1,920 for 1
st
year, Rs. 2,588 for 2
nd
year, Rs. 3,069 for 3
rd
year
and Rs. 3,697 for 4
th
year.
Viability funding of Rs. 2,291 per CSC for 1112 CSC has been taken. Also the Non
refundable deposit collected from VLEs (Rs. 25,000) has been collected from VLEs.



30

3.1.2 The Market
Market Analysis:
During the business plan development phase, credit business was not taken in CSC model.
More focus was proposed to be given in G2C, Insurance and BASIX services. Below is the
table that describes the target audience for the business plan
Target Market for
1362 CSCs
Y1 Y2 Y3 Y4
Avg. Earning
Rs.
Activity
Ratio
Credit 0 0 0 0 0 0.75
G2C Revenues 300 375 450 550 20 1.00
General Insurance 7 10 12 15 600 0.75
Life Insurance 2 5 7 10 5000 0.25
AgLEDS 20 30 40 50 600 0.30
Skill Training by B-ABLE 1 8 10 12 2250 0.33
Utility Payments 300 350 400 420 5 0.60
Table 3.1 Market Analysis
Market Segmentation:
CSCs are going to be segmented into four categories based upon their population and location
A. Urban Areas = 138 CSCs
Except AgLEDS (Livelihood) all services will be provided
B. Semi Urban; Population above 5000 = 958 CSCs
All services will be provided
C. Rural; Population below 5000 and above 1500 = 151 CSCs
All services will be provided
D. Tribal; Population below 1500 = 115 CSCs
Only G2C and Insurance services will be provided
3.1.3 Strategies
Strategies include a step of decisions taken in order to achieve the goals of the business. CSC
strategies can be classified into Marketing strategy, Sales strategy and Strategic Alliances.
Marketing Strategy:
31

Product: G2C, B2C, Insurance, Livelihood services.
Pricing: Pricing according to the service providers. In order to attract sales during
seasonal period, service providers will provide attractive discounts.
Promotion: Both VLE and MO will get very good commission for their contribution of
work.
Place: Located in almost one in six villages in Nashik region
Sales Strategy:
Sales strategy is oriented toward the idea of arming the sales force with information so they
completely understand both the product and the market and can hit the ground running.
Magnum Opus will be using sales forecast software and will drive the VLEs to achieve the
sales target.
Sales team (initially a Magnum Opus sales representatives and a BSFL cluster manager) will
be divided by geographic territory and will be on a base salary plus commission structure.
Company will provide sales forecast for each and individual districts based upon the market
segmentation.
Strategic Alliance:
BSFL has strategically aligned itself with Magnum Opus and has agreed to share 25% of its
revenue with Magnum Opus.
3.1.4 The Management Structure
BSFL Structure:
BSFL will be having a three tier management structure. In first tier, there is a Zonal head
based in Thane. He is the top decision maker for the functioning and process parameters of
the CSC. He controls the product development, and will provide inputs for the business plan
team to develop the financial model. Revenue sharing agreement with be decided by the
Zonal head. He is the liaison officer with the IT partner M/s. Magnum Opus.
32

In second tier, State head is based in Nashik. He coordinates with Zonal head and all the five
individual cluster managers. He also interacts with DoT, GoM, SETU and MO. All proposals
signed for CSC are collectively administered by both State and Zonal head.
In third tier, there are 5 nos. of Cluster managers who are based in all five districts covering
Nashik region. They function as the bridge and direct functioning officer between BSFL and
MO. MOs field executive report to Cluster manager regarding the functions of CSC.
Magnum Opus Structure:
Magnum Opus will have four tier structures. In first tier, will be the top management who
will be the decision makers and will sign revenue sharing agreement and proposal with BSFL
In second tier, there will be five district managers based in five district offices, setup for
monitoring CSC in those districts. They will work in conjoin with BSFL cluster manager and
coordinate with the actual field executives.
In third tier, there will be IT and web support personnel. Also software and web portal
development team will be present. The work will be done centralized and only the support
team will be based in all the five districts.
In fourth tier, there will be 20 to 30 nos. of field executives. They start from VLE
identification, recruitment, training and commissioning of CSC. After commissioning, they
look after their allocated CSC and attend to the grievance of those CSC. They also actively
participate in sales promotion and are in charge to submit the CSC performance to the district
manager.
3.2 The Financial Plan
3.2.1 Financial Needs Summary
Investment funding is needed for capital expenses and operating expenses for the first year of
operation.
Particular In Rs. Type
Commissions given to VLE 2,47,95,083 Operating cost
Commissions given to MO 92,82,291 Operating cost
Recruitment and training 61,29,000 Setup cost
33

State Office CAPEX 4,00,000 Setup Cost
CSC Opex 32,12,000 Operating cost
Office Opex 14,04,000 Operating cost
Salaries 36,81,210 Operating cost
Depreciation 16,721 Non cash expenditure
Total 4,89,20,306
Table 3.2 1
st
Yr Setup and Operating Costs
3.2.2 Revenue Model
BSFL revenue through CSC will be brought in through G2C service sales, Insurance policy
sale, insurance policy renewals, Vocational training enrollment and B2C & Utility service
sales. Further avenues of revenue include extension of product offering in B2C services,
partnering with new service providers who deal with agriculture and rural products, gradual
rolling of microfinance products through CSCs, undertaking NABARD projects, providing
Sub-K services. For the first four years, CSC project is entitled to receive viability funding
from Govt. of Maharashtra.
3.2.3 Assumptions and Comments
1. There will not be any cluster office for this business. Cluster managers will be based
in MO District offices. No BDX (Business Development Executive) will be there to
monitor CSC. MO will provide their FX for monitoring CSC.
2. No credit business in CSC model. Only G2C, Insurance, Training, B2C and other
partner services to be provided through CSC. Revenue sharing between DoT, DC,
BSFL, VLE and MO for G2C has been fixed. Revenue sharing between BSFL, VLE
& MO for other services is yet to be approved by Zonal Head.
3. Urban CSC require 3 PCs, Rural CSC require 1PC. All PCs, furniture and other setup
equipments to be procured by VLEs. A flat rate of Non Refundable Deposit of Rs.
25,000 per CSC is to be collected from VLEs. No expense incurred by BSFL for CSC
infrastructure preparation.
4. Magnum will be the IT partner and VLE recruiter. Magnum will be paid Rs. 4,500 per
VLE selected. Magnum will be paid 25% of BSFL earning for both G2C and B2C
services. Magnum will be paid Rs. 500 per CSC per month for CSC portal charges.
34

5. No lease cost incurred for data servers and data warehouse. Zero IT investment from
BSFL. No software and consultants cost incurred by BSFL, because Magnum will
provide IT support.
6. Minimizing HR cost by having HR count at 11. 1 State Head, 5 Cluster Manager, 1
HR Admin, 1 Office boy and 2 Accountants. Recurring cost for State office was taken
from May-2011. Salary for State head was taken from May-2011.
7. Commission rates for BSFL earning for different services has been fixed and needs
approval from Zonal head. For ease of business plan development, sales forecast is
done year wise and price of the product has been averaged. G2C, Insurance and
AgLEDS will be rolled out from the 2
nd
month of CSC commissioning, while rest will
be rolled out from the 3
rd
month of CSC commissioning.
8. VLE commission for all services has been fixed at 60% of BSFL earning, and for MO
commission for all services has been fixed at 25% of BSFL earning. The commission
rates are subject to change with approval from Zonal head.
9. Since the market for CSC products is highly segmented, activity ratio is taken into
consideration to forecast figures on the conservative side. Sales forecast has been
taken based on sales data available in Punjab, Orissa CSC business and few changes
have been made to consider local assumptions.
10. Viability funding has been added to the revenue stream. Access fees (Non refundable
deposits) revenue has been collected from the VLEs. A flat deprecation of 20% is
provided for accounting purpose. Tax rate is 33%.
3.3 Development of Model
For any new capital investment or for entering into new business, the top management needs
to make very important decisions based upon forecasted data. For a complex business, it is
necessary to develop a business model and see whether the business can make profit, how
much would the cash inflow, when can the business breakeven, what are the services that
provide good cash flow, etc,.
The objectives of financial model are
1. Decision making purpose
35

2. For business simulation
3. Capital budgeting
4. Project crashing etc.
In order to prepare the financial model, the nature of the business is to be understood first.
The business flow & its process should be well defined. Since this is a new business, it is
required to make some fundamental assumptions based on experimental study or by past
experience. Also, since this is a PPP project, there is little restriction in operations and the
assumptions which we are taking should come within the acceptable limits.
Procedure:
1. Define the project parameters
2. Prepare the Rollout schedule
3. Prepare the framework for cost and revenue for an individual CSC
4. Prepare the Revenue projection for all individual services
5. Prepare the Expense projection for both fixed and setup expenses
6. Prepare the Income statement based upon the revenue and expense projections
7. Prepare the Cash flow statement
8. Prepare the Breakeven table for the business
9. Prepare the Breakeven chart for the business
10. Prepare Summary sheet for quick glance of PAT, revenue mix and expense mix for
the four years.
3.3.1 Revenue Sharing
Since this project involves a strategic partnership, franchise model (VLE), regulators and
various service providers, revenue sharing is a very important activity in financial model.
Revenue share for this model was based framed as follows
1. VLEs will be entitled to receive 60% of BSFL earning in all services
36

2. Magnum Opus will be entitled to receive 15% of BSFL earning in all services except
G2C (in G2C it will receive 25% of BSFL Earning)
Service Provider BSFL Earning
% of service
cost
VLE Earning
% of BSFL
Earning
MO Earning
% of BSFL
Earning
Credit BSFL 100.00% 60% 15%
G2C Revenues Govt. 80.00% 60% 25%
INSURANCE (General) -
Productivity
Royal
Sundaram
15.00% 60% 15%
INSURANCE (Life) - Productivity AVIVA 20.00% 60% 15%
AgLEDS BKSL 10.00% 60% 15%
Skill Training by B-ABLE B-ABLE 20.00% 60% 15%
Utility Payments B2C 100.00% 60% 15%
Table 3.3 Revenue Share
3.3.2 Market sales assumptions
Sales figures for the project were based upon experimental and field data obtained from
active CSC operations. Also Transactional database was provided by strategic partner who
had collected actual sales data from operational CSC in other regions of Maharashtra.
By consolidating those figures we made an assumption for all four categories of CSC. For
conservative purpose, activity ratio (percentage of CSC which will achieve the sales
assumption) was given for each of these services.
Table 3.4 Market Sales Assumption
3.3.3 Setup and Fixed cost assumptions
Setup cost of this project is incurred at four levels. The first level is the IT infrastructure to
support the data servers, warehouses, portals. The second level is the CAPEX needed to setup
State Office (1 no.), third level is the CAPEX needed to setup Cluster office (5 nos.) and the
fourth level is the CAPEX needed to setup all 1,362 CSCs. These assumptions were made
during the initial planning to prepare the Business Plan considering the model implemented
Market Sales
Assumptions
Y1 Y2 Y3 Y4 Avg.
Earning
(Rs.)
Activity
Ratio
Start of
Service after
rollout
Credit Services 0 0 0 0 0 0.00 N.A.
G2C Revenues 300 375 450 550 20 1.00 1.00
General Insurance 7 10 12 15 600 0.75 1.00
Life Insurance 2 5 7 10 5000 0.25 2.00
AgLEDS 20 30 40 50 600 0.30 1.00
Skill Training by B-ABLE 1 8 10 12 2250 0.33 2.00
Utility payments 300 350 400 420 5 0.60 0.00
37

in Orissa, Meghalaya. But unlike those states, the penetration of PC in villages is moderately
high in Maharashtra. Therefore the CSC Setup cost is not borne by BSFL and it is borne by
individual VLEs. This reduces CAPEX achieves breakeven early. Also in addition, having
M/s. Magnum Opus as our strategic partner into the business model, no cluster office will be
setup by BSFL. Therefore there is no setup and fixed cost involved in Cluster office for this
business. Recruitment cost of Rs. 4,500 is to be paid to Magnum Opus per CSC.

Particular Cost (Rs.) Comments
Computer & IT
Peripherals
93,717 Borne by VLE
Furniture 4,450 Borne by VLE
CSC Infra Preparation 2,450 Borne by VLE
Recruitment 4,500 Borne by BSFL, paid to
Magnum Opus
Total per CSC 1,05,117
Table 3.5 CSC Setup Cost
Particular Cost (Rs.) Comments
Hardware 60,000 No cluster office
Furniture 15,000 No cluster office
Infrastructure
preparation
25,000 No cluster office
Rent Advance 1,50,000 No cluster office
Others 40,500 No cluster office
Total per Cluster Office 2,90,500
Table 3.6 Cluster Office Setup cost
Particular Cost (Rs.) Comments
Hardware & Furniture 3,00,000 CAPEX to be allocated
Rent Advance 1,00,000 Paid
TPC Hardware 1,50,000 CAPEX not allocated
Software development 5,20,000 Borne by Magnum
Total 10,20,000
Table 3.7 State Office Setup Cost
Particular Cost (Rs.) Comments
Helpdesk Server 4,00,000 Borne by Magnum
Application Server 10,00,000 Borne by Magnum
DR Application Server 4,00,000 Borne by Magnum
Data Centre 12,00,000 Borne by Magnum
Disaster recovery 20,00,000 Borne by Magnum
Internet for DR 6,00,000 Borne by Magnum
38

Total 56,00,000
Table 3.8 IT Infrastructure Setup Cost
Fixed cost is incurred at three levels. The first level is the HR cost, the second level is the
Office Opex expenses incurred monthly and the final level is the CSC portal monthly charges
paid to Magnum Opus Rs. 500 per CSC.
Particular Cost (Rs.) Comments
State Head 96,800 1 no.
Cluster Manager 54,843 5 nos.
TPC Accountant 9,847 3 nos.
HR & Admin 14,695 1 no.
Office Boy 5,000 1 no.
Total 10,20,000
Table 3.9 HR Fixed Cost
Particular Cost (Rs.) Comments
State Office Rent 25,000 Borne by BSFL
Electricity 2,000 Borne by BSFL
Internet & Telephone 5,000 Borne by BSFL
Travel allowance 80,000 10,000 per CM
20,000 per SH
10,000 per HR
Others 5,000 Borne by BSFL
Total 1,17,000
Table 3.10 Office Opex Fixed Cost
Particular Cost (Rs.) Comments
CSC Portal Charges 500 Paid by BSFL to Magnum
Opus per CSC per month
Total 81,72,000 Yearly CSC Portal charges
Table 3.11 CSC Portal Fixed Cost
The variable cost is incurred at two levels. First level is the Commission paid to VLE and the
second level is the commission paid to Magnum Opus.
Particular % of BSFL
Earning
Comments
VLE Commission 60% Paid to individual VLEs
Magnum Opus
Commission
25% G2C
15% Rest
Paid to Magnum Opus
Table 3.12 Variable Cost

39

3.3.4 Rollout Plan
The SCA will be required to establish and operationalize CSCs in phases as per the time
schedule prescribed by the Government of Maharashtra / SETU Maharashtra. The SCA shall
set up and operationalize the CSCs at its own cost and expense within 12 months in phases
from the Effective Date, as per the Deliverables outlined in the RFP (Request for Proposal)
document. The SCA shall operate and manage the CSCs for four years from the date of
operationalization (Rollout plan was started from July 2011) of all CSCs in the SCAs
division or 5 years from the date of signing the MSA (Master Service Agreement was signed
on Jan 7
th
, 2011), whichever is earlier.
Month July August September October November December January February
Nashik 15 30 40 55 55 55 62 86
Dhule 15 20 25 30 30 11 5 0
Jalgaon 20 30 35 45 35 48 48 51
Ahmednagar 0 10 30 45 50 56 55 80
Nandurbar 0 10 20 25 30 30 30 44
Cumulative
Total Comp.
50 150 300 500 700 900 1100 1361
In % 4% 11% 22% 37% 51% 66% 81% 100%
Table 3.13 CSC Rollout Plan
3.3.5 Individual CSC Financial model
In order to develop the financial model, two methods can be used. The financial model which
is currently used in this project is 8
th
modified and has been considered for Business plan
proposal. In both the methods we require Microsoft Excel 2007.
In first method, we need to list all revenues in separate sheets, all expenses in separate sheets
and link them to the master financial statements. In second method, we will list all the
revenue and expense for an individual CSC in a single sheet and link the same to the master
financial statements sheet. It has been found that this method is far more easy to track
formula bugs and for understanding. While development, we followed Method 1 up to 4
th

model. Method 2 was followed for the successive models.
Individual CSC financial model consists of Revenue earned from the services sold by an
individual CSC, the expenses which it is incurring. The revenue consists of all services like
G2C, B2C, Insurance, B-ABLE Training, AgLEDS etc. The expenses incurred by an
individual CSC consists of the CSC Portal charges paid to Magnum Opus, Commission given
40

to VLEs, Commission given to Magnum Opus, Tax. Also monthly averaged revenue from
each of these services are found out and mentioned. In addition the VLE commission from
each of these individual services is also found out and mentioned in the model. Following
details are mentioned in this model
Revenue and expense per CSC
Commission to VLE & MO per CSC
Cash flows per CSC
3.3.6 Income Statement
Income statement is a company's financial statement that indicates how the revenue (money
received from the sale of products and services before expenses are taken out, also known as
the "top line") is transformed into the net income (the result after all revenues and expenses
have been accounted for, also known as the "bottom line"). It displays the revenues
recognized for a specific period, and the cost and expenses charged against these revenues,
including write-offs (e.g., depreciation and amortization of various assets) and taxes. The
purpose of the income statement is to show managers and investors whether the company
made or lost money during the period being reported. Here data are taken from the Individual
CSC sheet and linked with rollout plan and the actual revenue stream is found out. In the
same way, we should also calculate the expense actually incurred by BSFL for this business.
Income Statement As on 31
st
Mar 2012
Revenues (Rs.) - As per rollout
G2C Revenues 3,08,35,200
Insurance 54,59,062
AgLEDS 31,79,880
B-ABLE 7,94,970
Access Fee 3,40,50,000
B2C - MO 57,81,600
Viability Funding 83,02,584
Total revenue 8,84,03,296

Expenses (Rs.) - As per Rollout
Commissions given to VLE 2,47,95,083
Commissions given to MO 92,82,291
Recruitment and training 61,29,000
State Office Setup 4,00,000
CSC Opex (CSC Portal) 32,12,000
Office Opex 14,04,000
Salaries 36,81,210
Depreciation 1,92,432
Total Expenses 4,90,96,016
41


PBT 3,93,07,279
Tax @ 33% 1,29,71,402
PAT 2,63,35,877
Table 3.14 Income Statement for Year 1
3.3.7 Cash Flow Statement
Cash flow statement is a financial statement that shows how changes in balance sheet
accounts and income affect cash and cash equivalents, and breaks the analysis down to
operating, investing, and financing activities. Essentially, the cash flow statement is
concerned with the flow of cash in and cash out of the business. The statement captures both
the current operating results and the accompanying changes in the balance sheet. As an
analytical tool, the statement of cash flows is useful in determining the short-term viability of
a company, particularly its ability to pay bills.
Cash Flow Statement 01 Mar 2012 to
31 Mar 2012
Opening Cash 1,00,000

Cash Inflows
Revenues 1,23,11,146

Cash Outflows
Operating Expenses 84,88,646
To Reserves 38,22,500

Closing Cash 1,00,000
Table 3.15 Cash Flow Statement for March 2012
42

















CHAPTER 4
ANALYSIS AND
INTERPRETATIONS
43


4. Analysis and Interpretation
4.1 Financial Analysis
Financial analysis is done to assess the viability, stability and profitability of a business, sub-
business or project. It is performed by professionals who prepare reports using ratios that
make use of information taken from financial statements and other reports. These reports are
usually presented to top management as one of their bases in making business decisions.
Continue or discontinue its main operation or part of its business
Make or purchase certain materials in the manufacture of its product
Acquire or rent/lease certain machineries and equipment in the production of its goods
Issue stocks or negotiate for a bank loan to increase its working capital
Make decisions regarding investing or lending capital
In this project, both breakeven and ratio analysis is conducted.
4.1.1 Breakeven Analysis
In economics & business, specifically cost accounting, the break-even point (BEP) is the
point at which cost or expenses and revenue are equal: there is no net loss or gain, and one
has "broken even". A profit or a loss has not been made, although opportunity costs have
been paid, and capital has received the risk-adjusted, expected return. Refer breakeven chart
for breakeven analysis.
Month Apr 11 May 11 Jun 11 Jul 11 Aug 11 Sep 11
Revenue
- - - 16,08,427 51,83,708 1,10,84,271
Expense
1,25,430 4,70,715 7,20,931 15,64,377 34,09,571 63,31,428
PBT
(1,25,430) (4,70,715) (7,20,931) 44,050 17,74,137 47,52,843
TAX 33%
- - - 14,537 5,85,465 15,68,438
PAT
(1,25,430) (4,70,715) (7,20,931) 29,514 11,88,672 31,84,405
Table 4.1 Breakeven Table for the business
44


Graph 4.1 Breakeven Chart for the business
4.1.2 Ratio Analysis
Ratio Analysis is a tool used to conduct a quantitative analysis of information in a company's
financial statements. Ratios are calculated from two consecutive years for this financial
model.
Ratio Analysis
31 March
2012
31 March
2013
31 March
2014
31 March
2015
Incr.
%
for
2012

2013
Incr.
%
for
2013

2014
Incr.
%
for
2014

2014
Revenues


G2C Revenues 3,08,35,200 9,80,64,000 11,76,76,800 14,38,27,200
218 20 22
Insurance 54,59,062 3,14,62,200 4,18,40,640 5,74,08,300
476 33 37
AgLEDS 31,79,880 1,32,38,640 1,76,51,520 2,20,64,400
316 33 25
B-ABLE 7,94,970 1,94,16,672 2,42,70,840 2,91,25,008
2342 25 20
Access Fee 3,40,50,000 - - -
-100 0 0
B2C MO 57,81,600 1,71,61,200 1,96,12,800 2,05,93,440
196 14 5
Viability Funding 67,85,942 3,05,71,104 3,05,71,104 3,05,71,104 350 0 0
Total revenue 8,68,86,654 20,99,13,816 25,16,23,704 30,35,89,452
141 19 20
Expenses


Commissions given to VLE 1,95,15,154 8,59,92,322 11,30,12,222 14,12,57,923
340 31 25
Commissions given to MO 73,08,549 3,06,50,720 3,93,66,976 4,88,25,521
320 28 24
Recruitment and training 61,29,000 - - -
0 0 0
State Office Setup 4,00,000 - - -
0 0 0
CSC Opex (CSC Portal) 25,31,000 81,72,000 81,72,000 81,72,000
222 0 0
Office Opex 12,87,000 14,04,000 14,04,000 14,04,000
9 0 0
Salaries 32,60,957 46,22,783 46,22,783 46,22,783
41 0 0
Depreciation 1,75,711 1,97,775 1,94,533 1,91,344
12 -1.6 -1.6
Apr May Jun Jul Aug Sep
Revenue - - - 1,608,427 5,183,708 11,084,271
Expense 125,430 470,715 720,931 1,564,377 3,409,571 6,331,428
-
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
R
e
v
e
n
u
e

a
n
d

E
x
p
e
n
s
e
Breakeven Chart
45

Total Expenses 4,06,07,371 13,10,39,600 16,67,72,514 20,31,86,571
222 27 21
PBT 3,65,15,729 7,88,74,216 8,48,51,190 10,04,02,881
116 7 18
Tax @ 33% 1,20,50,191 2,60,28,491 2,80,00,893 3,31,32,951
116 7 18
PAT 2,44,65,539 5,28,45,725 5,68,50,297 6,72,69,930
116 7 18
Table 4.2 Ratio Analysis
4.2 Business Process Mapping
Business process mapping refers to activities involved in defining exactly what a business
entity does, who is responsible, to what standard a process should be completed and how the
success of a business process can be determined. Once this is done, there can be no
uncertainty as to the requirements of every internal business process. A business process
illustration (flowchart) is produced. The first step in gaining control over an organization is to
know and understand the basic processes.
A business process is a collection of related, structured activities or tasks that produce a
specific service or product for a particular customer or customers. There are three main types
of business processes:
1. Management processes like Corporate Governance, Strategic Management
2. Operational processes like Purchasing, Manufacturing, Marketing, and Sales
3. Supporting processes like Accounting, Recruitment and Technical support
In CSC business process two flowcharts were prepared. Currently in rollout stage,
recruitment, setup and commissioning of CSC is the most important process that needs to be
modeled. After rollout, the operation processes are needed to be modeled. Both have been
modeled in form of activity diagram (flowcharts)
46

4.2.1 Flowchart for CSC Commissioning

Figure 4.1 CSC Commissioning Flowchart

47

4.2.2 Flowchart for CSC Operation

Figure 4.2 CSC Operation Flowchart
4.3 Financial Interpretations
Seeing the financial projections of this business model, it can be well understood that this
business starts making profit right from the first month of its rollout. Since almost no high
CAPEX IT infrastructure is incurred by the company, it has very less investments in place.
And with its strategic partner Magnum Opus delivering all the IT support and web based
applications, BSFL is ready to share its earnings with it and pay a monthly fixed charge for
the CSC Portal.
The rollout starts from July and the revenue that will be generated from the months
operation will be Rs. 16.08lakhs. The expense that will be incurred in that month is estimated
to be Rs. 15.64lakhs. The company would have received Rs. 12.5lakhs as Access Fees (non
refundable deposits) from the VLEs and would have paid Rs. 2.25lakhs to Magnum Opus as
Recruitment fees. The PAT stands at modest Rs. 29,514 figure. At the end of first year, the
revenue for first year 2011 2012 would be Rs. 8.84crores, expense would be Rs. 4.90crores
48

and the PAT would be Rs. 2.63crores. Rollout would be completed by the month of Feb
2012. And the company would have received Rs. 3.40crores from the VLEs. The Viability
fund which is received from the Govt. would be would be Rs. 83.02lakhs. The recruitment
cost paid to Magnum Opus would be Rs. 61.29lakhs. The commission paid to VLEs for the
year is Rs. 2.47crores and to Magnum Opus is Rs. 92.82lakhs. A VLE will receive Rs. 3,761
as his monthly earning from this business.
The revenue for the second year 2012 2013 would have been to Rs. 20.99crores a jump of
141%. The operating expenses also would have been increased to Rs. 13.10crores a jump of
222%. The increase in expenses is more than increase in revenue because the non refundable
deposit collected from the VLEs is single time revenue and it does not feature in the second
year. Therefore there is a drop in the growth figure comparing the expense. A VLE will
receive Rs. 5,594 as his monthly earning from this business which is a jump of 58%.
The revenue for the third year 2013 2014 would have been to Rs. 25.16crores a jump of
19%. The operating expenses also would have been increased to Rs. 16.98crores a jump of
27%. A VLE will receive Rs. 7,395 as his monthly earning from this business which is a
jump of 24%.
The revenue for the fourth year 2014 2015 would have been to Rs. 30.36crores a jump of
20%. The operating expenses also would have been increased to Rs. 20.70crores a jump of
21%. A VLE will receive Rs. 9,267 as his monthly earning from this business which is a
jump of 25%.
Even though this business model is different from those followed from Punjab, Orissa, etc.
the company has managed to earn profit right from its first month of rollout. This can be
achieved only by reducing the CAPEX expenditure, sharing the revenue with strategic
partners (who invest in CAPEX) and by developing simple and effective business model.
49















CHAPTER 5
RECOMMENDATION,
LIMITATION AND CONCLUSION
50

5. Recommendation, Limitation and Conclusion
5.1 Recommendations
Even without Credit in this business model, BSFL has managed to show profit in this CSC
business. But with micro credit and livelihood as its core competencies BSFL should start
lending micro credit through this CSC network. With all network communication and faster
information and cash transactions, CSC network might be the next revolution in micro
finance industry. BSFL should be the front runner in this endeavor and by starting to lend
money through CSCs, BSFL can try to reduce the operating expenses of Credit business and
introduce loan products a highly competitive rates than that of the competitors
5.2 Limitations
This study is limited to the business model developed for Nashik region. The cost, revenue
assumptions, rollout plan was specially designed for Nashik region and if it is needed to be
extended to other location, assumptions would be needed to change. Also the sales
assumptions for the business model are limited to this business model.
Also the financial model itself has few limitations. The calculation of depreciation and fixed
asset are both linked in a circular reference. Enable iterative calculations in Formulas Excel
Option to calculate those figures.
5.3 Conclusion
The outcome of this project has been achieved. The business income statement has been
prepared, the cash flow statements, also the commission sheet has also been prepared. Since
all the excel sheet are linked with formulas, we can change the sales assumptions and see the
corresponding change in income structure. This helps in setting sales targets which can be
communicated to individual VLEs. This financial plan serves a financial calculator to see the
change in outcome in change in assumption.

51


















CHAPTER 6
BIBLIOGRAPHY
52

6. Bibliography
1. Principles of Corporate Finance, by Richard A Brealey et.al.
2. www.csc-india.org
3. www.investopedia.com
4. www.bplans.com
5. www.mit.gov.in/content/common-services-centers
6. MSA Master Service Agreement signed between BSFL and SETU, Maharashtra
7. RFP Request For Proposal (bid document by BSFL)
8. Revenue Support system by GoI and GoM
9. Magnum Opus Proposal













53














CHAPTER 7
APPENDIX
54

7. Appendix
7.1 Work Diary:
Date Description of Work Remarks
Guide Signature
(Fortnightly)
01-06-2011
Reported to Ms. Madhurima Nag (HR) and to our Project Guide
Mr. Sharad Venugopal
Comp.

02-06-2011
Project allocated. On Common Service Centers. Location is
Nasik, Maharashtra. Read MSA (Master Service Agreement) of
Maharashtra CSC Project for Nashik Division
Comp.

03-06-2011
Gone through the Business and financial model of Maharashtra
CSC Project
Comp.

04-06-2011
Read the RFP (Request for Proposal) of Maharashtra CSC Project
for Nashik Division. Prepared the KRAs and Deliverable for the
proposed project
Comp.

05-06-2011 Holiday Holiday

06-06-2011 Going to Nashik Travel

07-06-2011
Reporting to Nashik State Office. Met with Mr. Vikas Raut, Mr.
Shadanan (B-ABLE) and 4 BDExs. Had discussions with them
regarding the progress of the CSC
Comp.

08-06-2011
Worked on the Excel framework. Met with Mr. Vikas Raut and
discussed upon the possible product portfolio for the CSCs
Comp.

09-06-2011
Listing out the product portfolio, assumptions for the financial
model
Comp.

10-06-2011
Showing the Excel financial model and get the suggestions and
recommendations from Mr. Vikas Raut
Comp.

11-06-2011 Holiday Holiday

12-06-2011 Holiday Holiday

13-06-2011
Met with Mr. Anand Naik, GM (West) at Thane office and got his
inputs and ideas for the internship
Comp.
14-06-2011
Resumed duty at Nashik office. Working on the initial version of
the financial model
Comp.
15-06-2011
Working on the draft version of the financial model. Assumptions
taken from Actual CSC financials for the yr 2010 2011. Data
obtained from Ms Sangeeta
Comp.
Date Description of Work Remarks
Guide Signature
(Fortnightly)
55

16-06-2011 Working on the four category model Comp.
17-06-2011 Work continued Comp.
18-06-2011 Completion on the draft model and mailed to Mr. Sharad Comp.
19-06-2011 Holiday Holiday
20-06-2011
Completion of the first modified model (it incorporates all the
changes in assumptions)
Comp.
21-06-2011
Completion of the Second modified model (it incorporates the
four categories of VLEs)
Comp.
22-06-2011 Working on third model Comp.
23-06-2011 Work Contd. Comp.
24-06-2011 Working on fourth model Comp.
25-06-2011 Work Contd. Comp.
26-06-2011 Holiday Holiday
27-06-2011 Work Contd. Comp.
28-06-2011 Work Contd. Comp.
29-06-2011 Working on the Flowchart Comp.
30-06-2011 Working on the fifth model Comp.
01-07-2011 Work contd. Comp.
02-07-2011 Work contd. Comp.
03-07-2011 Holiday Holiday
04-07-2011 Work condt. on fifth model Comp.
05-07-2011 Work contd. On Sixth model Comp.
06-07-2011 Work contd. On seventh model Comp.
07-07-2011
Completion of CSC Commissioning and Operations flowcharts
and mailed the Business plan to Mr. Anand Naik for approval
Comp.
08-07-2011
Completion of Rollout plan (block wise and district wise) and
mailed to Mr. Anand Naik for approval
Comp.
09-07-2011
Completing the project report and sending the ecopy of the
project report to Mr. Vikas Raut, Mr. Sharad Venugopal and
Internal guide Prof Subramanian and HR
Comp.
10-07-2011 Holiday Holiday
11-07-2011
Final presentation to Mr. Vikas Raut and Ecopy sent to Mr.
Anand Naik, Mr. Sharad Venugopal and HR
Comp.
Table 7.1 Work Diary
56

7.2 Financial Model
7.2.1 Summary Refer Excel Printout
7.2.2 Assumptions Refer Excel Printout
7.2.3 Revenue Sharing Refer Excel Printout
7.2.4 Rollout and Manpower Plan Refer Excel Printout
7.2.5 CSC Maharashtra Business Plan Refer Excel Printout
7.2.9 Revenue Mix

Graph 7.1 Revenue Mix
7.2.10 Expense Mix





Graph 7.2 Expense Mix



0,0%
10,0%
20,0%
30,0%
40,0%
50,0%
Revenue Mix
Y1
Y2
Y3
Y4
0,0%
50,0%
100,0%
Expense Mix
Y1
Y2
Y3
Y4
57

7.2.11 Rollout Completion

Graph 7.3 Rollout trend
7.3 Breakeven Analysis
7.3.1 Breakeven Chart

Graph 7.4 Breakeven Chart
0%
20%
40%
60%
80%
100%
J
u
n
/
1
1
J
u
l
/
1
1
A
u
g
/
1
1
S
e
p
/
1
1
O
c
t
/
1
1
N
o
v
/
1
1
D
e
c
/
1
1
J
a
n
/
1
2
F
e
b
/
1
2
Rollout Completion
Percentage of Rollout
Apr May Jun Jul Aug Sep
Revenue - - - 1,608,427 5,183,708 11,084,271
Expense 125,430 470,715 720,931 1,564,377 3,409,571 6,331,428
-
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
R
e
v
e
n
u
e

a
n
d

E
x
p
e
n
s
e
Breakeven Chart