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Business Plan

GREEN GAMBLING

Business Plan GREEN GAMBLING Submitted By: Ankur Dutt (PGP26076) Tanu Gulati (PGP26177) Vaibhav Kukreja (PGP26181) 1

Submitted By:

Ankur Dutt (PGP26076)

Tanu Gulati (PGP26177)

Vaibhav Kukreja (PGP26181)

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Table of Contents

I.

Purpose………………………………………………………………

3

II.

Opportunity…………………………………………………………

4

III.

Concept ………………………………………………………………7

A. Product Description

B. Methodology

C. Strategic Advantages

D. Concerns

IV.

Market Potential ……………………………………………………10

V.

Financial Analysis…………………………………………………

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VI.

Role of Government…………………………………………………15

VII.

Conclusion……………………………………………………………15

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I.

Purpose

Green gambling is a concept similar to plain gambling but involves equity in green and social projects instead of money. In other words, via this mode of gambling people will either bet for ownership in a green project (eco friendly) or invest (full or surplus accumulated through gambling) in a social cause.

The primary purpose of starting this business venture, which is a green casino, is to help garner monetary support for upcoming green projects in India. The secondary purposes which the venture is expected to serve are:

1) Legalize the concept of gambling by making it a more constructive exercise as per the new format

a. doing so reduces the scope of the underworld to exist

b. revenues would then go to the government instead of the black economy

2)

3) Encourage gamblers, especially problem gamblers to switch to green gambling while

Provide a socially responsible form of entertainment to wealthy individuals

discouraging people from going abroad to gamble away Indias wealth in foreign land 4) Provide multiple options of investment to the winning party(s) such as partnership/ownership in green ventures/projects, investment in social causes and investment in infrastructure projects 5) Provide an incentive even to the losing party(s) by giving away a certificate of

appreciation for giving away their money for a good cause/project Contribute to the overall economy of the country by providing employment opportunities

(direct as well as indirect), promoting spending in associated businesses (such as food and beverage, transportation taxis, etc.), paying taxes to the government and promoting tourism 7) Encourage entrepreneurship in green gambling and bring healthy profits for the casino/gambling industry as well The fact that rich and wealthy individuals prefer to spend money on activities that give them pleasure and entertainment is being exploited by this concept of green gambling. Conventional gambling, which otherwise has more harmful consequences, will be used in a more constructive format while retaining the thrill associated with the game.

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6)

II.

Opportunity

Irrespective of how one feels about the IPL, the fact is that it provides three hours of excitement and entertainment to millions of cricket enthusiast worldwide. There is a demand for such a form of cricket and the IPL capitalised on this passion.

Going by the above example of IPL, which changed the format of cricket and turned it into a huge success, green gambling proposes to change the format of gambling. Irrespective of how one feels about gambling, it does provide entertainment to gambling enthusiasts worldwide and there is a demand for this form of entertainment a demand which the green casino wishes to capitalize.

It is rumoured that thousands of crores are wagered on every single IPL match and that it is a transnational industry. What is, per se, wrong with betting is the fact that it has not been legalised to collect some taxes. Casinos are a rage world over. Instead of acknowledging the desire to gamble and providing safe institutional machinery, we whine about it.

Scope and Need for Green Projects in India

India is heavily dependent on fossil fuels for its energy needs. Most of the power generation is carried out by coal and mineral oil-based power plants which contribute heavily to greenhouse gases emission

The average per capita consumption of energy in India is around 500 W, which is much lower than that of developed countries like USA, Europe, Australia, Japan etc. However, this figure is expected to rise sharply due to high economic growth and rapid industrialization. The consumption of electricity is growing on the worldwide basis. Energy is a necessity and sustainable renewable energy is a vital link in industrialization and development of India. A transition from conventional energy systems to those based on renewable resources is necessary to meet the ever-increasing demand for energy and to address environmental concerns.

India has huge potential for producing electricity from renewable sources. Our achievement so far is about 10406.69 MW, as against global installed capacity of approximately 200000 MW of renewable electricity generation. While India’s achievement is commendable, it is necessary for us to keep pace with the fast growth in developed countries.

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India’s varied geophysical layout levels makes it possible to cater to a variety of projects. For example, wind farms in the South, geothermal and small hydroelectric projects in the North and North-East and solar power in central and south could be further developed.

According to estimates, India receives 5000 trillion KW equivalent of energy per year through solar radiation. Just one per cent of the country’s land area can meet its entire electricity requirement till 2030. Indian green industry is still in nascent stage. Scientific surveys are being intensified to identify specific viable and potential sites for tapping wind power. A recent study undertaken to re-assess the potential, places it at about 45,000 MW. Assuming a grid penetration of 20%, a technical potential of about 9,000 MW is already available for exploitation in the potential States. 160 sites have so far been identified in 13 States. Survey work is in progress in 24 States / UTs. The States of Rajasthan and West Bengal have also shown wind potential recently.

There are three imperatives that necessitate a transition to a sustainable energy system in the 21st century:

Climate change and its potentially disastrous consequences

Peaking of production, depletion and extinction of fossil fuels, and

Energy Autonomy/ Independence

There is a growing world-wide concern of increasing carbon emissions and the need to develop clean energy projects. Also, we know that government hardly delivers on promises made in policies. This is the time when action is required and all initiatives in this particular direction should be undertaken at their earliest.

Mapping of resources, more investment in R&D and adoption and commercialization of clean technologies is obviously the next step forward for India” INFA

Growing number of High Networth Individuals in India

The need for investment in various green projects can be met by involving the wealthy class of individuals - businessmen, entrepreneurs, young blue collar workers, etc.

According to the World Wealth Report recently released by Capgemini and Merrill Lynch Wealth Management, most countries in the world have increased their HNI (High Net-Worth

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Individuals) count. While, India has more than doubled it maximum compared to any other country in the world.

it – maximum compared to any other country in the world. Presently very few casinos in
it – maximum compared to any other country in the world. Presently very few casinos in

Presently very few casinos in India

Gambling is illegal in all but two states in India and the underground nature of the operation means it is largely controlled by organised crime gangs. Those criminal overlords are some of the most powerful figures in Indian society.

India's burgeoning online audience, however, offers an opportunity to drive change. Online gambling is now allowed in the Himalayan state of Sikkim, with British firms Betfair and William Hill having bid for licences.

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There are 5 listed land-based gambling casinos in Goa.

1. Cidade de Goa Beach Resort and Goldfinger Casino, Vainguinim Beach, Goa

2. Holiday Inn Resort Goa (with Casino), Mobor Beach, Cavelossim-Goa Awaiting

3. Majorda Beach Resort and Treasures Casino, Majorda, Salcette, Goa

4. Ramada Caravela Beach Resort and Casino Goa Nugget, Varca Beach, Salcete, Goa

III.

Concept

Green Gambling

Green gambling is a concept similar to plain gambling but involves equity in green and social projects instead of money. In other words, via this mode of gambling people will either bet for ownership in a green project (eco friendly) or invest (full or surplus accumulated through gambling) in a social cause.

Product Description

The concept of green gambling would work in the following fashion:

Economically viable ideas will be invited from people and those available with the govt.

These ideas will be carefully examined by panel of experts for confirmation of economic viability. Government can play a role here

After listing of projects, categorization of projects will be done on the basis of sector.

Specific area of investment interest will be specified beforehand by the players. This would provide convenience and space to investors.

Giving an option to the rich and wealthy to hold stakes in green projects and invest in social causes.

Other options of investment such as funding of infrastructure projects, Schools, Hospitals , etc, could also be made available to players upon collaboration with government

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All participating parties would be given an incentive in terms of tax benefits on the money invested via green gambling

To encourage participation in green gambling further, winner would be given an option to take home the cash with which he/she played in the first place and invest the extra earnings

Over a period of time, the concept of Green-Casinos and Green gambling would be extended to the online format and dedicated portals would be developed to facilitate online Gambling.

Methodology

Money required will be broken into small units.

Example

Assume INR 65 million is required for a project X taken from sector C. Break into 6500 units each of INR 100,000.

Distribution of these units to those investors who had registered for the sector C.

to those investors who had registered for the sector C.  Collection of INR 65 million

Collection of INR 65 million or less in this way.

And then commencement of project depending on collection amount.

Collection of INR 65 million or less in this way.  And then commencement of project

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Invite players to start gambling.

8% of the ownership to idea giver, 7% to gambling house owner.

of the ownership to idea giver, 7% to gambling house owner. Players will gamble for 85%

Players will gamble for 85% or less equity in the project. Gambling will take place among groups which can differ in size. Value of unit is not to be changed with time to prevent speculation. Public trading can be allowed once the project gets completed. Value of units linked to profit of the project.

Strategic Advantages

Promote moderate addiction, since no cash is directly involved.

Gambling money will be diverted to constructive purposes.

Other advantages offered by this form of gambling will be additional casinos leading to employment generation and increase in the revenues of the industry.

This would provide opportunity to the government to garner investment in green projects while regulating problem gambling.

Green gambling is a business model that substitutes the need for conventional venture capitalists.

It would encourage entrepreneurship as well as drive R&D in the green sector.

It would help in boosting tourism in the country

It would lead to a reduction in Black Money by allowing people with such money to come out and invest in social causes.

It would prevent the outflow of billions of rupees that India loses every year to countries such as Hong Kong, Thailand, Singapore which Indians visit for gambling purposes

Key Concerns

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Will this involve enough social gamblers?

How to deal with IPR issues arising out of this exercise?

How will we tap the people who gamble not just for the thrill but for the immediate monetary returns?

Opposition from conservative sections of the society

Cost concerns arising from online gambling Since setting up of a Casino requires a huge capital investment (to the tune of hundreds of millions of dollars), the threat posed by substitutes such as online gambling portals would be significant.

IV. Market Potential

The number of millionaires in India rose 22.7 percent to 130,000, the highest year-on-year increase in the world, followed by a 20.3 percent growth in China. According to Ernst & Young’s estimate - China and India will become the most attractive countries for investment in renewable energy projects by 2012.

India’s varied geophysical layout levels makes it possible to cater to a variety of projects. For example, wind farms in the South, geothermal and small hydroelectric projects in the North and North-East and solar power in central and south could be further developed.

According to estimates, India receives 5000 trillion KW equivalent of energy per year through solar radiation. Just one per cent of the country’s land area can meet its entire electricity requirement till 2030. Indian green industry is still in nascent stage. Scientific surveys are being intensified to identify specific viable and potential sites for tapping wind power. A recent study undertaken to re-assess the potential, places it at about 45,000 MW. Assuming a grid penetration of 20%, a technical potential of about 9,000 MW is already available for exploitation in the potential States. 160 sites have so far been identified in 13 States. Survey work is in progress in 24 States / UTs. The States of Rajasthan and West Bengal have also shown wind potential recently.

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V.

Financials

Data gathered from various sources

Total number of millionaires in India = 130,000

Break up of millionaires in India

Income groups in India

Percentage of total millionaires

US $1-$5 million

39%

US $5-$10 million

27.5%

US $10-$20 million

19%

US $20-$50 million

11%

US $50 million and above

3.5%

Total = 130,000

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Source: Study conducted by Mckinsey And Company

Break up of interest in green projects

Income groups in India

Percentage of group interested in green projects

US $1-$5 million

17%

US $5-$10 million

13.5%

US $10-$20 million

14%

US $20-$50 million

15.4%

US $50 million and above

16%

Above data has been interpreted from online surveys by NPD Online Research

Average cost of a green project = $1.35 million (Source: MNRE site)

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Casino revenues from 17 locations for revenue breakup

Department

Amount (in $)

Percent

Gaming

898,614,868

53.9%

Rooms

324,500,710

19.4%

Food

221,035,655

13.2%

Beverage

85,772,484

5.1%

Other

138,563,542

8.3%

Total Revenue

1,668,487,261

100%

Key Assumptions

Distribution of the ownership in the project has been assumed as following:

the ownership in the project has been assumed as following:  Independence of variable A i.e.

Independence of variable A i.e. percentage of group interested in gambling and variable B i.e. percentage of group interested in green projects

Income groups in India

Percentage of

Percentage of

Percentage of group willing to green gamble (column 2 X column 3)

group

group

interested in

interested in

gambling

green projects

 

(A)

(B)

US $1-$5 million

32%

17%

5.44%

US $5-$10 million

29%

13.5%

3.91%

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US $10-$20 million

38%

14%

5.32%

US $20-$50 million

44%

15.4%

6.77%

US $50 million and above

49%

16%

7.84%

Revenue from Gaming

Income groups in India

Percentage of total millionaires

Percentage of group willing to green gamble

Percentage of net worth willing to spend in gambling

Net amount

willing to

   

gamble

US $1-$5 million

39%

5.44%

2.2%

$181.7million

US $5-$10 million

27.5%

3.91%

2%

$205.8

million

US $10-$20

19%

5.32%

1.6%

$315.3

million

million

US $20-$50

11%

6.77%

1.4%

$474.3

million

million

US $50 million and above

3.5%

7.84%

1%

$356.7

million

Total = 130,000

100

   

$1.533 billion

Total Gambling amount = $1.533 billion

Cost of a green project = $1.35 million

No of green projects gambling amount can support = 1130 (approx)

Total number of casinos = 15 (in major cities)

Total Revenue (from all sources)

Department

Percentage of income contributed

Amount contributed

Gaming

53.9%

$1.533 billion

Rooms

19.4%

$ 551.7 million

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Food

13.2%

$375.4 million

Beverage

5.1%

$145 million

Other

8.3%

$236 million

Total

100%

$2.844 billion

Cost analysis

Fixed costs per casino

$130 million

Variable costs per casino per year

$81 million

Total costs per casino

$ 211 million

Total costs for all casinos

$3.165 billion

Breakeven point analysis

Growth in Revenue

22.7 %

Growth in costs

10%

Breakeven point for a hotel casino will occur after n years where n can be computed by the following calculation

Assuming 7% share of casino owner in the green projects and mark up of 7% on other sources of income, the equation becomes

Total income from gaming income (average period is 5 years) = $1.533 billion*0.07/15 = $7.15 million

Total income from other sources = $1.311 billion*0.07 = $6.118 million

After calculation, breakeven point comes out to be around 7.5 years

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VI.

Role of Government

Government of India can make the idea more attractive by facilitating with

Capital assets such as land on lease.

Machines and building material at low cost.

Help in creating the potential network i.e. of corporate world.

By giving tax incentives to investors and the one winning the money.

Tax holidays can be given to such green projects.

VII. Conclusion

Green gambling is really viable and attractive. The idea can be implemented with the proper support and involvement of government and active participation from the public and corporate sectors.

Certainly green industry has a bright future and gambling is a big industry in most developed economies, therefore, marrying the two at an early stage of a developing economy could bring significant returns for the country and both industries.

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