Green Tech Investment in India – Is it really happening?

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Today is ‘Earth day’ and an apt time to look at state of green tech investments happening in India.

First, a quick look at the US market:

• In 2007 venture investment in the alternative energy market in North America and Europe was $5.18 billion, compared with $3.6 billion the previous year.
• The number of financing deals in the industry increased 15 percent last year to 268, and the average deal size rose 20 percent to $14.7 million,
• Energy generation companies were the biggest recipients, racking up financing of $2.75 billion,
• Second on the list were energy storage companies with $471 million in funding, followed by transportation firms with $445 million.
• Energy efficiency companies were fourth on the list with total financing of $356 million, and recycling & waste companies were number five with $291 million,
  [source]

Rising oil prices, growing concerns/awareness over carbon emissions are resulting in increased opportunities for greentech, as companies are looking to cut costs on power usage etc.

Back home, Vinod Khosla is very bullish about the green tech and is expecting innovation in this space.

“The single biggest challenge in cleantech is really a lack of technologists here. No self-respecting Ph.D. graduate in the last 10 years has studied energy,” ..”That’s where engineers and technologists in India can complement [the industry]. They are actually doing what they were trained to do.”

Market Opportunity

Massive $20 trillion will be invested in energy sector until 2030. It is likely that most of these investments will go into low carbon sectors as various and large portion of this investment will go into developing Asian nations, particularly India and China

As per United Nations, 979 CDM (Clean Development Mechanism) projects worth US$18 billion are currently registered in the world. Of this, 62 per cent or 611 projects are registered in Asia, mostly in China and India.[source]

The “Green” India story:

• UTI Ventures, a private equity firm, invested $8 million in Pesco Beam Environmental Solutions, a firm involved in waste-oil recycling and alternate energy systems,
• IDFC Private Equity had invested Rs35 crore in Ahmedabad-based Doshion, a water management firm, in the second half of 2007.
• Tribi Embedded Technologies receives Rs. 10 CR VC Funding from Sequoia Capital (designs devices for motor control and industrial automation – offers upto 25% reduction in energy consumption,)
• Nexus India Capital invests Rs. 12 Crores in Suminter India Organics (exporters of organically grown agro produce)
• Canara Bank invests Rs. 4.5 Crores in Natura Fibretech (coir (coconut-fiber) composites and other innovative materials that serve as an alternative for timber in the construction sector)
• ICICI Bank invests INR.49.9 Million in HMX Sumaya (environmentally-friendly HVAC solutions)
• Launch of focused funds like newventuresindia

Significant constraints on GreenTech investments are: Long gestation period, High risk/Low return and lack of government subsidies – essentially this is a very long term play and may not give a near-term RoI to VCs.

But at the same time, this is a rising industry and indian VCs are looking actively in investing in green tech sector in India.