Visitors these days to St Paul’s school in Hyderabad or Basaveswara College in Bangalore, or any of the growing number of educational institutions across southern India, notice bright rows of solar-powered lamps that have switched off hundreds of energy-guzzling tube lights that the campuses previously employed. Helping them in this transformation to cleaner and greener lighting is Shuchi Energy Ad Promotions, a Hyderabad-based start-up that has shrewdly combined the lure of solar lighting with the business opportunity in ad signages. The company puts up the lights and gets signage rights in return. Hundreds of kilometres away, just outside Pune city, Span Pumps has begun a mission. While big companies are busy bottling mineral water for the urban elite, this company has set out to provide villagers the means to get clean water. It makes deep well pumps and water purification systems. Shuchi and Span are just two examples of hundreds of innovative companies, driven by entrepreneurs who have the pulse of the nation and building businesses that usher in a cleaner environment. They have broken out of the mould of the traditional businessman who thinks of environment protection as something of a Gandhian struggle unfit for commerce and an added expenditure to be delayed as much as possible. They have seen a business opportunity in embracing cleaner technologies and helping companies harmonise their businesses with nature. Happily for India, they are also earning carbon credits, popular business assets representing the amount of carbon emissions that one has helped save. Start-up activity to exploit the potential of carbon credits and clean technology is set to explode in India, says Green Ventures India director Vinay Bharathwaj. Green Ventures India is a subsidiary of New York-based asset management firm Green Ventures International. The latter recently announced a $300 million India-focused fund aimed at renewable energy projects and supporting trading in carbon credits. Founder and CEO of Emergent Ventures India (EVI) Vinod Kala, says he realised in 2004 that there is huge business potential in environment. So, he turned the focus of his company, which used to serve software companies with financial and management incubation services, to carbon credit advisory services. It also helps implement the globally backed clean development mechanism (CDM) programme, ranging from project origination to assistance with project implementation and the monitoring and delivery of certified emission receipts (CERs) and voluntary emission receipts (VERs) in the domestic and international carbon market. It also helps companies achieve carbon neutrality, which represents the net zero emission status. In perhaps a reaffirmation of the commercial credentials of this shift, Infrastructure Development Finance Corporation invested Rs 40 crore in EVI recently. This is a rare feat, as sufficient VC support or angel investing and capital pump-ins for greener ideas, clean technologies and sustainable development concepts in India are still a far cry. Mr Kala says financial investors are increasingly looking at green technology as profit opportunity than only a morally right thing to do, but there are dozens of entrepreneurs who have found the capital expenditure involved in such projects overwhelming and funds too hesitant to invest in them.
Many investors worry not just about the capital intensive nature of the project but also what they see as the fragmentation of the market and the long spans it could take to see return on their investments. ”India is a relatively nascent market for clean technology and the entire carbon credit market,” says managing director of Canaan Partners Alok Mittal. “Though there are a lot of project deployment happening in the space, innovation on technologies by entrepreneurs is still lacking. Plus, countries like Germany are offering heavy subsidies as compared to their Indian counterparts. Therefore, we do not see a lot many VCs investing in projects, but investments are definitely feasible in product and technology companies behind clean energy and carbon credits.” His fund is yet to invest in clean technology deployment projects, but is searching for opportunities, he says. But Mr Mittal’s view on entrepreneurship in this market will increasingly become less true, if stories of innovation sprouting from across the country are any indication. So, some venture capitalists such as Green Ventures have moved ahead with investments in the sector, despite the usual regulatory apathy that a sunrise industry goes through. “There are enough opportunities for entrepreneurs within this space, but its the policy framework for the industry that is not conducive for fostering such start-ups ventures in the country,” says country director of New Ventures India Suneel Parasnis. The firm focuses on clean technology and renewable energy projects. He also complains about the lack of income tax exemption for such projects. New Ventures so far has managed to secure $13 million funding for start-ups in clean technology space. “The market drivers have just started to churn in the country and it would take at least another 3-5 years for more entrepreneurs to enter this space,” Mr Parasnis says. As a sign that clean technology-related ventures is poised to take off in the country, UTI Ventures, in 2007, invested nearly $8 million in Pesco Beam Environmental Solutions, a firm involved in waste-oil recycling and alternate energy systems, while IDFC PE invested Rs 35 crore in Ahmedabad-based Doshion, a water management company. US-based Kleiner Perkins Caufield and Byers, the VC that funded Amazon.com and Google, too, has shown its interest to actively invest in clean-technology companies in India. Among others who have shown interest in investment in this segment in India are big names like Draper Fisher Jurvetson India, Lightspeed Venture Partners, Nexus India Capital Advisors and NEA-IndoUS Venture. Like any asset, carbon credits are also traded globally. And like any asset, they have attracted traders, dealmakers and intermediaries. “We have to look beyond CDM advising to unleash the huge potential of carbon credit services,” says Ernst & Young partner Sudipta Das. This, by itself, is an entrepeneurial opportunity. The Multi Commodity Exchange of India (MCX) was among the first to sense the trading potential of carbon credits in India. Now, about 6,500 tonne of carbon credits are being traded on MCX each day. “It is for sure many carbon credit generators are showing lot of interest to participate on the exchange platform,” says managing director and CEO of MCX Joseph Massey. “The US and the EU have asked both India and China to reduce their baseline emissions, which should get implemented by 2020,” Mr Bharathwaj says. “Once that happens and the government adopts more stringent policies for curbing carbon emissions, clean technology ventures would assume greater importance in the country and as a result there would be more investment interest within the sector.”
(With Ritwik Donde)