Indore-based EKI Energy Services, founded by Manish Dabkara, listed its shares on the SME platform at the BSE in April at Rs 140 apiece. It now trades at Rs 6,400 each driven by a surge in the carbon credit market.
The 12-year-old carbon credit developer and supplier formed a joint venture with Shell Overseas Investments BV, a unit of Royal Dutch Shell plc, last week and hopes to close 2021-22 with a revenue of Rs 1,500 crore as against Rs 190 crore reported a year back.
Dabkara, who is also the chairman, managing director and chief executive officer of the company, spoke to Moneycontrol about the growth plans and how a timely listing has helped the company. Excerpts from the interaction:
Shell has told me that you would be the spokesperson for this joint venture. What does this transaction mean to your company and what is the plan regarding this JV?
This JV will invest in nature-based solution projects. These projects help absorb carbon dioxide with the help of restoration and protection of forests, adaptation of sustainable agricultural practices, adaptation of organic farming practices, and developing mangroves along the seashore.
The JV will put the projects on ground first and then develop them as carbon credit projects, to sell credits in India to companies trying to be ‘net zero’. If the government allows under Article 6 (2015 Paris Climate Agreement) or under the voluntary programme, then we may sell it in the international credit market as well.
There is no cap on the number of projects we will work on. The primary focus will be India and the nearby nations. So, there is no investment limit. Shell is looking for 120 million carbon credits across the world every year.
The India JV will aim to get as much share of that as possible. We have 25 projects lined up, of which five-six are already approved. Shell has given exclusive rights to this JV. Whatever they invest in India in the nature-based solutions, will be through this JV.
What is the scale of nature-based solutions projects that you are aiming for?
As I said, we are looking at developing as many projects as possible, there is no cap on that. Although we have not invested in these projects so far, we are on the ground working on projects related to cultivation of bamboos, developing forests, adaptation of organic farming and projects by Farmer Producer Organisations (FPO).
We are giving them advisory services to get registered under various international greenhouse gas mitigation programmes. Once the JV is in place, all these businesses will be moved to it. The on-ground project development work will be done by the JV or with partnerships with FPOs and NGOs (non-government organisations).
The carbon credit registration will be done by the JV. The investors could be a few private organisations, impact funds, Shell, among others. Shell has the intention to develop the projects with its own funds and EKI has also earmarked some funds but we are open to work with other funds across the world. The first right to invest would be with Shell and EKI, then we may get other investors.
EKI has had an interesting journey since the listing. There is a lot of curiosity about what has triggered the rise in share prices. Give us some background of the company.
I don’t have a business background. My father is a retired civil engineer from the irrigation department. After working for a year after my MTech degree, I felt there was a great opportunity for consultants in the climate change space, and started an advisory service.
I founded a proprietorship firm in 2008, EnKing International, after which we set up EKI Energy Services in 2011. Till 2016-17, we focused on advisory services across the globe on project registration and verification. But we saw that the major problem among clients was selling of carbon credits so we set up a trading desk in 2016-17 to find buyers and then matching them with sellers of the carbon credits located in developing nations like India. We expanded our footprint to 18 countries. We got listed in April 2021.
What is driving the growth?
The carbon credit market was at its peak between 2005 and 2011, but due to the low interest from the US to sign the Kyoto Protocol, this market started to shrink. From 2012-13 to 2020, the carbon credit market went through a low phase, but during this period, we had developed various projects and accumulated many credits to be sold in international markets.
Earlier in 2021, US President Joe Biden signed the Paris Climate Agreement, and the carbon credit market started picking up. In May-June, right after we listed, the carbon credit market exploded and our topline and bottomline surged. We were the only listed entity in the carbon credit domain, so it created high traction among investors which are active in the carbon credit, environmental commodities, and climate change domain.
As is the case with any commodity which has more buyers than sellers, carbon credit prices are rising and our stock is moving as we are well placed. Between 2017 and 2020, we supplied around 100 million credits in the international market. This fiscal year, we hope to supply 100 million carbon credits. We are expanding in international geography, adding to the team and hope to have a high volume of carbon credits in the next two to five years.
The Shell JV will help us a lot, since we are the majority owners, the topline and bottomline will get consolidated with EKI.
Given the revenue growth you have seen so far in FY22, what is the annual revenue guidance?
In the first two quarters of FY22, our revenue was around Rs 634 crore. Our revenue in the first quarter alone was Rs 193 crore, which was close to our annual revenue of Rs 191 crore in FY21. We expect stronger demand for carbon credits going ahead which will add to the topline and bottom growth.
We should be able to report more than Rs 1,500 crore revenue in the current fiscal, driven by a pick-up in volume, and better prices of carbon credit.
What kind of challenges do you foresee in these nature-based projects since it entails working on land and dealing with different agencies?
It will be very challenging because so far we were working on projects which were already set up. For instance, we are working with the Adani Group, Acme, ReNew Power, etc on projects where they have selected the projects, technology, land, and service providers or data collection agencies. The challenge now would be because we will be working with thousands of farmers and FPOs to have a single project of a sizable size.
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