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

UNCERTAINTY FACTOR AttributeWeightageRating (1 to 10) Total Technology Confidence 20%81.60 Performance30%41.20 Competing Technology 20%30.60 Life Span30%82.40 Total100%5.80* * Uncertainty Factor: 42%

Appropriability AttributeWtgRating 1 to 10 ImpactRating 1 to 10 Impact Power Saving 50% Remote Operation 10% Maint. Cost 10% Alt. Usage10%20.22 Mfg. Cost20% Total100% New TechnologyExisting Technology

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 Rs 10,000 per unit: Rs billion Estimated 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-cum- royalty arrangement.(Rs 1 billion + 2% royalty on sale)