The client is a European manufacturer of components for wind turbines with over three decades of experience. The client is a TIER 1 supplier to leading OEMs globally. The client has manufacturing facility in the US and in EU and contract manufacturing in China. As renewable energy installations boom in Asia, Client wanted to enter the Indian market.
India being a growing market for wind energy, offered significant opportunities for the client’s business, who wished to enter the market by setting up a local manufacturing facility.
However, the market has had many misses – the volume of the market has been lumpy, the tariffs have declined, regulatory regimes has not been stable, and some of the customers in Indian market are known to delay payments.India being a growing market for wind energy, offered significant opportunities for the client’s business, who wished to enter the market by setting up a local manufacturing facility.
The client reached out to MEC Intelligence to build a business plan for investing in the Indian wind market. The focus was to assess sensitivity to cash flow and identify levers to ensure profitability. In addition, the client wanted to understand how he can do business in India and the kind of organization structure needed.
MEC did a workshop to understand the client assumptions and level of commitment of senior management in investing in India. In the workshop, MEC provided the client with the financial performance and business model of Indian supply chain to create a quick framework for discussions.
MEC realized that one of the key reasons for shifting to India to avoid costs in current manufacturing set up and tap the India growth story. However, the costs escalations were still 3 years away. MEC shared insights on inflation to support an informed discussion on objective. It was realized that India should be leveraged where it is best fit set-up for the business and cash flow sensitivity to execution will be essential in realizing the profits.
The study was segmented into two parts:
What is the best supply model to serve Indian and EU customers?
- What is the capacity to be realistically targeted in EU and in India?
- Whether manufacturing in India is an attractive business case vs import per product? How much would the export cost?
- How does this change in year 5 and year 10?
- Whether supply chain and logistics are suitable for the attractive products?
- What are issues working with stakeholders in India? How should they be managed?
- What partnerships are needed? Which are the customers to follow?
- What are the risks to cash flow due to delays, and government miss?
How to ensure pay back in India?
- Should one build or buy a factory? What is the cash requirement?
- Can contract manufacturing be explored to lower the investment risk?
- Does regulatory regime prefer manufacturing, where should the manufacturing plant be located based on regulations, customers location, incentives?
- Where should the talent be sourced from?
- What are the regulatory incentives that need to be managed?
- What are the marketing, HR, tech transfer expenses?
- What are the KPI and organization structure?
A full KPI map was prepared with detailed cash flow analysis. All risks were mapped, and mitigation mechanisms were suggested.
Based on our recommendations and interactions with the board, the client is currently in process of establishing itself in India. The fact-based analysis conducted by MEC Intelligence helped the client time its entry in to the Indian wind market at the most opportune moment.