Seizing India's Sustainable Investment Opportunities

The New Ventures India community recently convened its annual Investor Summit to discuss small and medium enterprises (SMEs) and the opportunities and obstacles investors face.

The Coaches Network, a group of private advisors from some of the leading institutions in India, met with the New Ventures companies individually to analyze how they may capture opportunities and overcome any barriers that are present in this economy. Meanwhile, the New Venture India’s Green Investor Network, a platform for investors to interact with sustainable enterprises, discussed the New Ventures India activities and pipeline development.

The Green Investor Network also participated in a presentation and discussion around findings from two of the World Resources Institute’s publications. The first publication–Powering Up: The Investment Potential of Energy Service Companies in India–focuses on the Indian energy service company (ESCO) industry, which can play a major role in realizing energy efficiency opportunities. The second presentation focused on a soon to be released WRI publication on the potential for concentrated solar power.

Secretary Dinesh Rai of the Ministry of Micro, Small and Medium Enterprises (MSME), released Powering Up to the Indian public for the first time at the Inaugural Session of the Investor Summit. The publication provides the first quantitative and qualitative look at the market potential of the Indian ESCO industry by analyzing the energy efficiency scenario in India, market data from over 90% of the identified Indian ESCOs and comparisons of the Indian industry to the ESCO industries in Brazil, China and the United States.

Following this presentation, WRI and CII-Green Business Center held a press conference for the publication’s launch. Many members of the press asked questions about India’s energy efficiency industry and the role of the energy service company (ESCO) industry in realizing their tremendous potential for growth.

At the press conference, Dr. Datta Roy, CEO of DSCL Energy Services, discussed how ESCOs could help the small and medium enterprises (SMEs). Dr. Roy pointed out that it can be difficult to approach SMEs on an individual basis because of an owner’s lack of time to focus on energy costs on top of all other aspects of the enterprise. For ESCOs to penetrate the SME sectors, he said, they need to do so at a SME cluster level, prove a technology, process, or product that will bring energy savings and provide this via an ESCO model.

A SME cluster is a geographical concentration of enterprises producing complimentary products. Typically, within a SME cluster are a number of enterprises with similar opportunities (energy saving measures) and barriers (cost competitiveness of goods). If an ESCO can implement a successful project in one or two SMEs within a cluster, reduced market development effort is needed for the rest of the cluster.

WRI is currently in discussions with a number of Indian banks to explore setting up a customized financing mechanism to fund these kinds of SME projects. Not only will WRI be aiding the banks with the introduction of a new financing mechanism, but also with their implementation of the mechanism to its customers within SME clusters. This financing mechanism is needed to overcome a few of the major barriers for these kinds of projects such as the exclusion of soft costs for financing.

In addition, the NVI community gathered for its annual Steering Committee meeting, providing a guiding direction to the program for the year to come. Included in this committee are India’s largest investors in small to medium enterprises (SMEs) and other stakeholders in India’s entrepreneurial and business sector.

The event concluded with a panel discussion on the impact of the financial crisis on sustainable investments in India. The panel brought together investors from ICICI Bank, Sequoia Capital, IEP Advisors Private Limited, the Acumen Fund, and New Ventures India enterprises such as Sumaya HMX and Conserve HRP. Participants remarked that the markets had been experiencing an increased volatility not seen in their lifetimes, citing bank interest rates and the Indian stock market as examples.

However, one panelist said their fund had been able to withstand the fluctuations through its focus on energy efficiency and natural resource companies–a fact that confirms the investment case for the kind of high-growth sustainable enterprises that New Ventures supports.