COOL X Solar Powered Air Conditioner HOTHEAD RESEARCHERS

COOL X Solar Powered Air Conditioner HOTHEAD RESEARCHERS Rajini, Sriram, Mani, Avi & Vinod 4 th July 2003

Problem Statement Hothead Researchers have just obtained a patent for their path-breaking invention of a heat pump which can effectively work as a solar powered air conditioner at sizes as small as a domestic unit. While other potential applications can be developed further, the dilemma before them is whether to try and launch an a/c on their own or to license out the technology and the patent…

PLC / TLC *The technology for Solar Cell power is considered to be at a steady growth phase. *The new concept product is at an inception stage. PLC

UNCERTAINTY FACTOR Attribute Weightage Rating (1 to 10) Total 20% 8 1. 60 Performance 30% 4 1. 20 Competing Technology 20% 3 0. 60 Life Span 30% 8 2. 40 Total 100% Technology Confidence * Uncertainty Factor: 42% 5. 80*

Appropriability New Technology Existing Technology Attribute Wtg Rating 1 to 10 Impact Power Saving 50% 8 4. 0 3 2. 4 Remote Operation 10% 9 0. 9 2 0. 2 Maint. Cost 10% 8 0. 8 5 0. 5 Alt. Usage 10% 2 0. 2 Mfg. Cost 20% 3 0. 6 8 1. 6 Total 100% 6. 5 4. 9

Estimated Market Size & Investment DEMAND SCENARIO: • Estimated Demand of Organized Market over next 5 years: 10 million units • Estimate of Hothead market share (10%): 1 million units • Estimate of Export sales in 5 years: 0. 25 million units • Total sales expected: 1. 25 million units • Sales turnover @ Rs 10, 000 per unit: Rs 12. 50 billion • Estimated profit @ 10%: Rs 1. 25 billion INVESTMENT SCENARIO: • Likely investment: Rs 25 billion • Equity investment: Rs 2. 50 billion • Investing capacity (self): Rs 0. 10 billion

Strategic Options • SALE OF PATENT FOR LUMPSUM AMOUNT Hothead Research might look for an MNC customer to buy the patent for an outright fee (benchmark 25% of commercial profit of IP, i. e. Rs 3. 5 to 4 billion). • IDENTIFY A POTENTIAL JV PARTNER The partner should be able to bring in the financial resources. HR can target a value of say Rs 4 billion as their technology input, invest Rs 1 billion and expect total 20% equity. • LICENSING OF PATENT The patent could be licensed for specific use against a fee-cumroyalty arrangement. (Rs 1 billion + 2% royalty on sale)