He came to India with a foreign venture, and then went on to take an Indian enterprise into foreign lands. In 1998, a 35-year-old Englishman helped the Hong Kong-headquartered Jardine Matheson Group set up its Indian operation. Six years later, the man who was a special advisor to former British prime minister John Major, joined the Tata group with a mandate to globalise it.
After leaving the Tatas in 2009, Alan Rosling today is at ease in India. “Where in the world will you find entrepreneurs of the kind that exist here? India is where the growth is and the opportunities are,” says Rosling, who first visited India three decades ago when he was a student at Cambridge.
It was one of India’s many professionals-turned-entrepreneurs who convinced Rosling to go down the same road. Three years ago, Ardeshir Contractor, a former head of KPMG’s investment banking activities in India, who was blueprinting a solar energy start-up, drew Rosling into the project. Today, the 49-year-old British citizen is chairman and executive director of Kiran Energy Solar Power (KESP), and Contractor its MD and CEO.
KESP has set up 25 MW of capacity across Gujarat and Rajasthan. Another 50 MW will be up and running in Rajasthan by year-end. The plan is to go up to around 250 MW by 2014, making KESP one of the largest solar power companies in the Asia-Pacific region, says Vishal Gupta, partner at Bessemer Venture Partners, a private equity (PE) firm that has invested in KESP. Two notable players in this space who have received venture investment are SunSun Lighting and Aegis Petro of China.
In 2010, three PE funds—New Silk Route, Bessemer and Argonaut—invested $45 million in KESP; a year later the trio put in another $10 million. Together, they hold nearly 80 per cent stake in KESP, reveals an investor who did not want to be named. Most of the balance is held by Contractor and Rosling. The management team holds a small stake too, says the same investor requesting anonymity. Contractor declines to divulge the shareholding pattern. “It’s not public,” was his response.
“KESP was among the early movers in this sector, with aspirations to become one of the leading solar power developers,” says Darius Pandole, partner at New Silk Route Advisors. “Contractor and Rosling constituted a qualified and credible team.” That could translate into a leadership position. It has also developed strong relationships within the industry—as is evident in a joint venture with the Mahindra group—adds the New Silk Route partner.
Mahindra Solar One, in which KESP owns 76 per cent and the Mahindra group the rest, gives Rosling and Contractor credibility to talk to banks. External funding doesn’t come easy to start-ups that do not have a big balance sheet to lean on. Banks and financial institutions in India are more willing to finance, say, a road project than a solar power unit. KESP, however, has managed to raise money from domestic lenders like State Bank of India and IDFC as well as foreign institutions like IFC, US Exim and DEG.
Backed by a government subsidy and abundant availability, the solar energy sector promises to grow fast in India. Capacity is expected to go up to 22 Gigawatt (1 GW is equal to 1,000 MW) by 2022, predicts a Care Research report dated June 19. Some estimates are even more optimistic. Rosling says the capacity may go to 25 GW by 2020 if the government’s goal to produce 3 per cent of power from solar is fulfilled. Curent capacity in India is 1 GW.
The solar market can be broken down into three clusters: one has conglomerates like the Tata group, GMR and Lanco; another has foreign firms like SunEdison; and the third has local companies like KESP, Delhi-based Azure Power and SunBorne Energy of Haryana. Professionalism will differentiate KESP from the rest, says Rosling.
A tipping point in solar is coming, both Contractor and Rosling believe, and it will soon be a commercially viable proposition without a high degree of subsidy. “The basic belief behind KESP is that solar will in a few years become a directly competitive renewable energy source. It will attract significant investments. When it happens, along with government utilities, retail individuals will also become customers,” says Contractor, an engineer by training.
“In a few years, solar will replace every energy source,” adds Rosling. Contractor and Rosling complement each other, says Bessemer’s Gupta. While Contractor looks after the financing, engineering and maintaining relationships with the state authorities, Rosling takes care of business development.
Blowing in the wind
Sumant Sinha made headlines eight months ago when global PE giant Goldman Sachs committed Rs 1,000 crore to his little-known firm ReNew Power Ventures. The largest PE investment in India’s burgeoning renewable energy sector was all the more remarkable because ReNew had no capacity on the ground when the deal took place. But the plans on paper are impressive: Sinha can set up capacity up to 500 MW (Rs 2 crore of equity plus Rs 4 crore in bank loans is required to set up 1 MW of wind power) without further equity dilution.
Of course, for that investment, Sinha had to part with a controlling stake in his start-up. That didn’t matter much to the 48-year old finance professional-turned entrepreneur. On the contrary, he says, it saves him from looking around for funds. “It’s extremely difficult to be in the market continuously to raise money,” says Sinha, sitting in his 33rd floor Breach Candy residence in south Mumbai that overlooks the Arabian Sea. Also, the fund-flush situation helps ReNew get good partners, quality people and easier access to bank loans, adds the ex-Citibanker.
Sinha, son of former finance minister Yashwant Sinha, has shifted ReNew’s headquarters from Mumbai to New Delhi as, he says, the capital offers an environment that is more conducive to renewable energy and brings him closer to his family.
Sinha and his 50-odd colleagues are working overtime to establish ReNew as a quality wind-energy player in the country. He has set up a capacity of 25 MW in Gujarat, and is selling most of it to the state distribution arm and a small quantity to Phillips India. He refrains from forecasting his company’s targets, adding execution is a challenge in India. The company’s website, however, says total capacity will go up to 1 GW by 2015.
Although Sinha’s focus is on wind now, he will get into solar, which he thinks is the future. For the time being, though, wind is more mature in India from the technology and regulatory points of view, he adds. Wind is cheaper than solar too, by about 25 per cent. India is the world’s fifth-largest wind power market with an installed capacity of 48 GW. Last year, it added 3,000 MW of wind power, the third-highest addition after China and the US. The production target for 2020 is 102 GW, or 8 per cent of the country’s total electricity demand.
Sinha gathered knowledge on the windpower industry when he joined the country’s largest wind-turbine maker Suzlon Energy in 2008. As COO, he observed Suzlon chairman Tulsi Tanti from close quarters. Before that, he experienced the pain and pleasure of working with a start-up—one in which funds were not a constraint—when he headed the Aditya Birla group’s retail foray. “From (chairman Kumar Mangalam) Birla, I learnt how to stay focused on longterm strategy, while Tulsibhai showed me the passion and energy of a first-generation entrepreneur,” recalls Sinha.
Sinha joined Suzlon partly because he was lured by green energy; he decided to take the entrepreneurial plunge towards the end of his stint when he foresaw some regulatory changes were in the offing that would help independent power producers (IPPs).
In April, the government withdrew accelerated depreciation, paving the way for more participation of IPPs. Accelerated depreciation is an accounting practice that allowed companies to reduce their tax liability by front-loading depreciation of a project up to 80 per cent in the initial years. It was meant to encourage investment in the wind power sector, but ended up as a ploy for many to bring down their tax burden. “Sumant Sinha was an extremely effective COO for our business,” says Suzlon chairman Tulsi Tanti. “When he told me that he wished to begin his own company, I was delighted; for an entrepreneur to have encouraged someone else to become an entrepreneur is extremely fulfilling.”
Goldman Sachs, which has two representatives on the ReNew board, has expertise in renewable energy, with worldwide investments of $1.5 billion in the sector. Ankur Sahu, co-head of private equity, Goldman Sachs Asia, says ReNew stands out as an example of Indian entrepreneurial excellence. “We look forward to teaming with the management, both financially and operationally, to help the company become a leader in India’s renewable energy sector,” adds Sahu.
Let there be light
The man who headed General Electric’s (GE’s) business in India, Sri Lanka and Bangladesh and later, as India head of GE Aviation Services, arranged for $1 billion in financing to seed a fledgling airline sector, has converted into a cleantech entrepreneur. Tejpreet Singh Chopra set up multi-source renewable energy company Bharat Light & Power in January 2010. Eighteen months later, in September 2011, he obtained funding from early-stage investors Draper Fisher Jurvetson and VenturEast. These investors brought in Rs 53 crore, or $10 million, for a 39.2 per cent stake in Bharat Light & Power, according to data collated by Venture Intelligence, a research service focused on private equity and mergers & amalgamation activity. A VenturEast official confirmed the deal on condition of anonymity, although Chopra declined to participate in this feature and Draper Fisher Jurvetson could not be reached.
Arun Natarajan, CEO of Chennai-based Venture Intelligence, confirms the deal. “The investors have a minority stake in Bharat Power initially, which may go up if the company chooses to raise more money,” points out Natarajan.
Chopra’s company has also made bids for Lanco Infratech’s wind-power assets and DLF’s wind-power business, as confirmed by an official close to the deal, on condition of anonymity.
