India Inc, VCs cash in on alternate energy biz

By Katya Naidu , CNBC-TV18:

 

Crude volatility seems to be here to stay. The fact that oil is a finite resource is becoming more and more evident. India is tapping into a billion dollar business opportunity to make alternate energy and venture capitalists are joining the rush too. 

 

The alternate energy business has attracted corporate majors like the Tatas , Reliance Industries and Anil Dhirubhai Ambani Group and even players like Moser Baer and Hyderabad based Solar Semi Conductors. It's the sunrise sector of the alternate energy that has got India Inc electrified.

 

With a growth rate of around 15 percent year-on-year, experts say that this sector has a market size of 2.5 to 3 billion dollars. The participation will only increase.

 

Tulsi Tanti, Chairman, Suzlon Energy said, " The government is taking huge initiatives to encourage renewables. Recently the Prime Minister has set a target that by the year 2010, 5% energy would come from renewables and for subsequent years 1 percent should be additional. So by 2020, 15% should be from renewables.

 

Venture capitalists are also betting their money on alternate energy companies. Last year, approximately 288 million dollars was invested in this sector in venture capital and private equity.

 

Sensing a prospect, Yes Bank in partnership with US based PE firm Global Environment Fund has launched a 300 million dollar fund for South Asian markets. 70% of this fund is dedicated to India.

 

Somak Ghosh, President-Corporate Finance, Yes Bank said, "We believe the potential is quite high and attractive primarily because many of these companies are not yet at a stage where they can access money from the public IPO market."

 

We believe there are a sufficient number of companies that can take in the first or the second round of private equity investment.

  

The bank is already looking at investing in four companies in solar, hydropower and biomass sectors in India to invest in the range of 9-15 million dollars. The bank is also looking at raising a venture capital fund with a size of about 100 million dollars for the renewable energy sector, later this year.