Funds back India’s rising cleantech sector

IDFC moved first, announcing on August 8 that it would invest $18 million in clean energy producer Green Infra. The funds will be used to bolster the company’s existing wind, solar, small hydro and biomass businesses. IDFC originally incubated the company in 2008 and has already invested INR3.6 billion ($80 million) in it.

Green Infra has ambitions to be one of India’s largest independent power producers, and is looking to raise an additional $150-200 million over the next 18-24 months, Raja Parthasarathy, managing director of IDFC, tells AVCJ. The company is planning a public listing for 2013.

One day later, IFC committed $15 million to biomass power firm Shalivahana Green Energy, with the funds also to be used for domestic expansion. It is the latest in a string of energy deals made by IFC over the last year, including a joint $50 million investment in hydroelectric power Bhilwara Energy, with Indian investor FE Clean Energy, and a $16 million loan to Gamesa Wind Turbines to fund the construction of a turbine-manufacturing facility.

Such investments are only getting more prominent in the market, which also sees ample support from the government to encourage such investments. According to the UN report, published in July, India was the world’s eighth top market for renewable energy investments in 2010, with total transaction values rising 25% year-on-year to $3.8 billion. The bulk of money went into wind projects, the report noted, which garnered $2.3 billion worth of investments, followed by $400 million each for solar, and biomass and waste-to-energy.

Parthasarathy says that the vast majority of private equity funding has been funneled into India’s power generation space because other areas of cleantech – classified as emerging technologies and high-end R&D – are largely untested and unfamiliar to investors. While a flood of investments has caused valuations for the energy generation sector to “become stretched for new entrants,” the ample opportunities available is still reason enough to invest.

“It seems like an opportune time for funds to be investing in the sector. The government has been supportive to the sector’s growth and the demand-supply gap continues to widen as reliance on conventional energy is called into question and issues regarding land acquisition remains,” Parthasarathy says. 

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• Topics
• Infrastructure
• Infrastructure
• South Asia
• IDFC Private Equity