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August 02, 2010

Cleantech Investors Set Sight on Solar, Water Related Cos.

Catalyzed by new government policies favouring Solar Energy and multiple demand-driven opportunities for water-related companies, Private Equity & Venture Capital firms are focusing keenly on these Cleantech sectors, reveals a new report from research firm Venture Intelligence.

Private Equity and Venture Capital surveyed recently by Venture Intelligence, a leading research firm focused on Private Equity and M&A deal activity, selected chose Water & Wastewater Engineering, Energy Efficiency, Waste Management & Recycling, Energy Infrastructure, Pollution Control and Cleantech in Manufacturing/Industrial Environments as among their favourite sectors within the industry. The survey results are published in the in the newly released report from Venture Intelligence titled “Private Equity Pulse on Cleantech”.

In addition, expert articles by both PE/VC investors and advisory firms in the report, point to rising investor interest in solar energy. Citing how the accelerated depreciation incentive has helped India to become one of the top players in wind energy, Parag Sharma of KPMG says the new government policies relating to Solar Energy are set revitalize that sector. “The large solar capacity addition plans by centre and state governments ensure that there is a lot to play for and for a lot of players,” he writes. Rama Bethmangalkar and Siddhartha Das of VC firm Ventureast point out that, with technology rapidly bringing down the cost, there are already many applications - be it powering remote villages, cell phone towers, or street lighting - where solar already is the least expensive source of power. Kalpana Jain and Sandeep Negi of Deloitte highlight how with the launch of the National Solar Mission, provides an investment and revenue generating opportunity of over US$ 40 billion across the solar value chain from polysilicon manufacturing to generation.

The article by Shivani Bhasin, CEO of PE firm India Alternatives, points out how, from a private equity perspective, Cleantech presents both “good news and bad news”. The “good news” is that the market is huge and growing fast. The installed generation capacity from renewable energy has increased over ten-fold during the last decade and will continue to grow steadily, leading to an investment requirement of US$20 Billion over the next few years. The “bad news” is that certain aspects of Cleantech are still reliant on government subsidies and the gestation period for Cleantech projects may be longer than the average holding period of private equity funds.


The Aloe Private Equity article on the waste management and recycling opportunity points out how, as nearly 10 million Indians subscribe to a new mobile phone line every month, the amount of waste batteries will become tremendous. A battery is made of very valuable materials, and new techniques are emerging to recover the maximum proportion possible. The article also says that it is important to integrate and capitalize on existing systems while building the waste management models of the future. One should not see the informal sector as a direct competitor to a formal sector in its infancy, but rather as the basis on which to start a comprehensive scheme, able to access a very wide market more rapidly.

Writing on the carbon credits opportunity, Ritesh Banglani of VC firm IDG Ventures India points out how while India’s role in the carbon market is currently very small compared to the size of its economy and its power industry, its registered carbon credits is expected to grow to 33% by 2012, by when it is also expected to be the world’s fastest growing CER supplier. In addition to the global carbon trade, a large domestic market is expected to come up in the next 5 years with the introduction of two new domestic cap-and-trade programs. Banglani feels there are several significant opportunities for Indian services companies in every part of the carbon value chain - from Carbon Advisory to IT Services for the segment.

In his interview in the report, Sagar Gubbi of Ecoforge Advisors says the sectors within Cleantech that are likely to generate the most interest among investors include Renewable Energy generation projects, particularly grid-connected Small Hydro, Wind, Biomass and to a smaller extent Waste-to-Energy and Solar PV projects. He points out that the opportunities for start-ups is more in providing services that feed into renewable energy generation, off-grid renewable energy and in the green lighting sectors.

In her article, Charandeep Kaur of Trilegal points out the key regulatory changes that private equity investors in the solar sector should watch out for. She also highlights how the newly introduced Renewable Energy Certificates (RECs) mechanism would be changing the economics of renewable energy projects.

For the convenience of entrepreneurs, the report provides a listing of investors and advisory firms with a special focus on Cleantech.

The report can be downloaded from http://www.ventureintelligence.in/pepulse_cleantech.htm

About Venture Intelligence

Venture Intelligence, a division of Chennai, India-based TSJ Media Pvt. Ltd., is the leading source of data and analysis on Private Equity, Venture Capital and M&A deals in India. Our products include Databases, Newsletters and Reports - all focused on tracking deal activity in India. For more information, visit http://www.ventureintelligence.in