Citizen International Ltd is proposing to raise 1 crore rupees of venture capital funding for its hosiery business. The company was formed in 2011 and manufactures and distributes men's innerwear and plans to enter women's wear. It currently has assets of 1.5 crore rupees and produces 10000 boxes per month that it aims to increase to 20000 boxes with the new funding. The venture capital would provide needed working capital and help fund expansion to 25 new branches while receiving 50% of profits beyond the initial 10000 boxes sold per month.

1. Proposal for Venture Capital in Hosiery
Segment

2. About the Management
• Citizen International Ltd has been formed in Nov 2011.
• The Management is headed by Jaideep Banerjee ,
Chairman , who is an IIM Calcutta Alumni and an
Associate of Indian Insurance Institute.. He has served
LIC of India for 14 years and Aditya Birla Financial
Services for 7 years, lastly as Regional Manager of BSLI.
He has also been a member of Insurance sub
committee of Bengal Chamber of commerce.
• Mr Nasib Jha , who has worked in Standard Chartered
Bank , Met Life Insurance co ltd and Birla Sun Life Ins
Co Ltd , is the Managing Director of the company

3. Company Office
Premise
The company has it’s
registered office at 4/1/1
M B Road, 1st Floor, Near
Birati Crossing , Opp to
Kolkata Airport having a
total area of around 2400
square ft, wholly owned by
the company. It plans to
open it’s first of the chain
restaurant in the front of
the said office premise

4. Flagship product –
Men’s innerwear
The company is into
manufacturing and
distribution of hosiery
products including men’s
innerwear ( vest and brief).
The company will soon
enter into women’s
innerwear ( Lingerie )
industry. Company is also
coming up with it’s Jeans
and T Shirt in a month’s
time

5. Why Hosiery Industry
• The Management decided to take up a very low risk industry as
flagship project. Hosiery industry is a very low risk industry as :
• a) The yearly sale in the industry is more or less uniform,
unlike the rest of the garment industry here in India where the sale
highly fluctuates with festival period.
• b) Style does not get obsolete
• c) Month of package does not bear that much of importance.
• d) Demand of product exceeds supply
• e) Absence of multinational.. Few players are there, but they
operate only in ultra premium segment , where we do not target to
penetrate initially
• f) The industry offers a good scope to export. We have existing
contacts at Dubai and Singapore
• d) We already have a distribution network for selling hosiery
products

6. Present Asset Size of the company
• Land and Building : 93 lacs
• Furniture and fittings / computer / software –
12 lacs
• Hosiery Rawmaterials and stocks – 27.50 lacs
• Franchisee product ( Reebok ) – 15 lacs
• Company formation etc – 2.5 lacs
• Total 1.50 Cr

7. Where the company stands now
• 1) Company formed and started operation from it’s wholly owned Office
premises..
• 2) HO furnished and both backoffice and distribution team recruited..
• 3) Has tied up with Reebok to sell it’s Garment and apparels
• 4) Has been into manufacturing of grey cloths required for manufacturing hosiery
items through time sharing concept. Has it’s own designer , cutter and master for
stitching..
• 5) Has already done it’s designing and packaging ready.
• 6) Two varieties of vest including one premium designer variety have hit the
market . Two varieties of brief ( double coloured ) in five colours have also hit the
market in attractive packaging. Total 10000 boxes have already hit the market
• 7) We are negotiating with the departmental stores for selling our products.
• 8) We are on the verge of giving advertisement for appointment of distributors.
• 9) We have made our team ready to open 25 Branches immediately to do retail
selling and distribution of the products.
• 10) We are coming up with Jeans and T Shirts very shortly
• 11) We will foray into women’s garments from April 2012.

8. Company’s immediate Fund Requirement
• Company has already produced stock of 10000 box (
vest n brief ) worth 2 m7.5 lacs ( raw material cost ,
sale price 40lacs ), which has hit the market
• Company has a demand of 20000 boxes in Jan 2012,
which involves a total cost of 50 lacs ( breakup given
later )
• Three months working capital of 1.50 Cr is the
immediate requirement. With 25 stockpoints of 1 lac
investment , it requires another 25 lacs infusion. Out of
1.75 Cr, 50% of the stock , is 75 lacs will come from
advance from the distributors.
• The remaining 1 Cr is proposed to be obtained from VC
route.

9. Fund required for producing 20000
boxes of vest n brief
• Cotton / Daga : 12 000 kg ( 12 ton ) – 24.00
lacs
• Knitting machine rental with labour - 1.8 lac
• Bleaching and dyeing - 6 lacs
• Cutting and steaching - 10 lacs
• Elastic and stickers etc - 3 lacs.
• Packaging - 5.2 lacs
• Total 50 lacs

10. Why opt for Venture Capital
• 1) Promoter’s capital : Promoters have already put in a capital of around 1.5 Cr .
Infusing further capital immediately is not possible ..
• 2) Floating equity shares : Company will not do as the same will dilute promoters’
stake.
• 3) Bank Finance : Company has pledged the office premises to get some bank
loan. Company is not in a position to provide any further collateral required for
project loan.
• 4) IPO : The company has made this the objective of the company. The books of
accounts are being maintained accordingly. Company plans to achieve this feat in
3 years time.
• 5) Preference share / debenture through market : A very costly proposition .. is
the last option..
• 6) Venture capital : Here the company goes into profit sharing mode. The
company also gets the management expertise of the investing company also,
which watches the utilisation of fund. That serves as a watchdog also. The
company may get the benefit of the entire distribution chain of the investing
company also to distribute it’s product.

11. Why should a venture capitalist invest
• 1) Any industrial having surplus fund, looking to come into a new
industry has three options :
• a) Starting a new venture afresh :
• 1) Here it will take all the time to do the ground work, which has already
been done in case of VC.
• 2) Here the company has to recruit suitable people to run the show. That
will involve fixed cost.
• 3) Here also the higher management needs to control the functioning of
the people running the business, the highest management of the big
company hardly finds time to look into the functioning.
• 4) In case the parent company faces any problem , this venture is
also likely to face problem..
•
• 2) Purchasing existing company doing the business:
• 1) Usually the cost of acquisition of these companies is very high
• 2) It is very unlikely that the company purchased will be a good one

12. Proposed Profit for the venture capitalist
• Breakeven is achieved by selling 10000 box. Thus profit on first
10000 box : NIL
• Share of profit for Sale of more than 10000 box ... 50% of the
profit.
• Expected sale from the next month : 20000 box to start with ,
which should have a 20% growth every month.
• Thus , the expected sale in the year end 60000 box by the yearend
( very conservative ) .
• Thus average sale during the first year : 40000 box per month
• Profit to be shared @ 50% for 30000 box pm from 1st year
• Profit from 30000 box ie 3 lacs piece is 18 lacs...50% of which
comes to 9 lacs per month...
• Thus, yearly profit 9 lacs x 12 = 1.08 cr => 1 Cr approx.
• Thus , the proposed profit is 100% pa

13. Control in the Hand of the Venture Capitalist
• The venture capitalist may put a director in the
company for every 1 Cr they invest in the company.
• The directors have full right to see the usage of the
fund deployed ..
• The VC fund can be deployed only for production of
hosiery ie raw material , packaging and opening of
stock points
• NO FUND WILL BE USED FOR THE PURPOSE OF
RUNNING OFFICE , SALARY OF DIRECTORS OF STAFF OR
ANY OTHER HEAD NOT ASSOCIATED WITH THE
PRODUCTION OF HOSIERY

14. Exit Route
• The capital invested through VC will be most invested
in the inventory ie working capital for 3 months of the
company, which is basically current asset of the
company.. Hence the capital invested is fairly liquid.
• We foresee a minimum gestation period is one year
for which the capital needs to be in the business.
However , the capital may be kept in the business as
long as the venture capitalist wants. ..
• The terms and condition of the VC will be decided by a
MOU , jointly executed by both the companies and will
be governed by the terms and conditions laid down by
ROC for raising venture capital

15. BE A PART OF THE JOURNEY ….