Tata Capital, IFC set up JV for climate change biz

Looking to tap growing potential in the area of climate change, Tata Capital and International Finance Corp have set up a joint venture that will offer financing as well as advisory services to entities pursuing green initiatives.

Tata Capital currently holds 80.5% in the joint venture -- Tata Cleantech Capital Ltd -- while the rest is held by International Finance Corp (IFC), a part of the World Bank group.

"Initially, we will be investing about $16 million. We expect to see an investment of $100 to 120 million in the next four to five years," Tata Capital Managing Director and CEO Praveen P Kadle told reporters here today.

Announcing the formation of Tata Cleantech, he said the new entity expects to register business of around $750 million in the next four to five years.

Tata Capital and IFC today inked an agreement for the joint venture, which is anticipated to officially start operations from April next year.

Tata Cleantech will offer financing and advisory services to small and medium enterprises (SMEs) and large corporates in India that are involved in climate change initiatives.

"By helping establish India's first green finance company, we will reach small and mid-sized companies that are committed to promoting clean technology," IFC Executive Vice-President and CEO Lars H Thunell said.

The joint venture will focus on energy efficiency for SMEs, renewable energy generation and water management projections. In due course, Tata Cleantech will also look at areas such as sustainable agriculture and smart grid projects, besides clean transportation and pollution control.

To be headquartered in Mumbai, Tata Cleantech would also explore partnerships with various entities, including multilateral agencies.

According to Kadle, Tata Capital might induct strategic investors into the company, especially players in the area of climate change.

"We are looking to bring in a third investor, hopefully by April next year at the latest," he said.

"With another investor, both our stakes would get diluted but the shareholding ratio in the company would remain at 80:20 between Tata Capital and IFC," he added.

Kadle noted that Tata Cleantech would leverage Tata Capital's network and extensive corporate customer base.

"IFC's experience and expertise in offering lending and advisory services in clean tech sectors will be an added asset to the new company," he added.