Construction (EPC) Firm

I: Your client is an EPC player looking to get into solar manufacturing. Design a strategy and provide inputs to the client on whether they should get into solar manufacturing or not.

C: Before starting with the case, I would like to confirm if I have the right understanding of the problem statement. An EPC client wants to enter the solar manufacturing business and needs me to provide inputs on whether they should enter or not,

I: Yes, that is the correct understanding

C: What is an EPC player? What are the objectives of entering? 

I: The client is an Engineering, Procurement, and Construction company. They want to grow their revenue and enter into the clean energy business since it is the future.

C: In which sector does our client want to enter? How many competitors are there in the sector? What is the market size?

I: Our client wants to enter the solar module manufacturing business which currently has 3-4 other companies. India is producing 200 GW of power through solar. 

C: I will be looking into the client-side and market side. On the client side I will look into financial, and operational feasibility, and government regulations. I will look into revenue and costs in financial feasibility.  In operational feasibility, people, processes, and technology will be looked into. Is there any particular side you want me to look into?

I: Let’s look into financial feasibility. The cost of a module is Rs. 20/watt. A single panel has 500 watts of power. What price should be set for a 50% margin?

C: Manufacturing cost would be 20*500= Rs. 10000 and with a 50% margin, the selling price should be Rs. 15000 per panel.

I: The client has an annual maximum capacity of 1 GW. They have made an investment of Rs. 5000 Cr. Calculate the sales they need to do in GW and in how much time they will be able to achieve the breakeven point.

C: Our client will be able to make Rs. 10000 profit on 1000 W. So, on 1 GW, they will be making Rs. 1000 Cr. worth of profits. Hence, it will take them 5 years to reach the breakeven point

I: What are the factors that you will consider for manufacturing location?

C: I will consider labor availability and rates, power, land, natural resources, logistics, supplier base, customer base, and laws prevalent in that state.

I: What are the risks involved?

C: Risks can be classified into 2 categories- internal and external. In internal risk, we could have the failure of machines, labor strikes, and administrative issues will be considered. In external, competitors, substitutes, new entrants, govt regulations, suppliers, and socioeconomic factors will be considered.

I: Thank you, I think we are done.