VC funds vote for clean tech

Indian clean technology (cleantech) businesses are finally catching the eye of the investor community. New Ventures India (NVI)--founded by World Resources Institute (WRI) and CII-Godrej Green Business Centre--aims to fund 50 entrepreneurs in this segment by 2010 with a target investment of $250 million (around Rs 1,200 crore).

In the last two years, NVI has supported and mentored 20 firms in cleantech, off which nine have got funding totalling $20 million. The forum, which has 17 member investor team is also planning to increase this to 40-50 in the next few years. Some of the investors include Nexus India Capital Advisors, Sequoia Capital India Advisors, and Acumen Fund.

“These funding have been in the form of equity participation as well as loan. The biggest change that we have seen is that till 2006 investing in cleantech firms was considered to be a philanthropology. But now we see the interest in terms of a business module,” said S Raghupathy, Senior Director and Head- GBC, CII.

Another instance is of ICICI Bank. Sanjeev Mantri, general manager at the bank said that ICICI Bank has funded so far 15 small and medium enterprises in renewable energy segment and is actively looking for financing firms in the carbon credit sector.

Dr Saurabh Srivastava, Chairman Indian Venture Capital Association (IVCA) and NVI Coaches Network, said, “The commercial investment in cleantech sector has gone up. Moreover, in the last 6-9 months the number of idea that we have received is amazing. But unlike the US where the Angel investor community is strong and is available for mentoring and advice, the same is not happening in India.”

Venture capital and private equity cleantech investments in India more than doubled between 2006 and 2007, with investment activity growing from $140 million in 2006 to $290 million in 2007, a 107 per cent increase, says a report by The Cleantech Group. Between 2006 and 2007, the research recorded 28 venture investments/project finance transactions. According to the group, India in particular is showing substantial growth in clean technology, with 2007 investments up 58 per cent from 2006 and continued growth in the first half of 2008.

The Government of India (GoI) is also doing its bit. For the 11th plan the Department of Scientific and Industrial Research (DSIR) has been allocated Rs 100 crore to fund start-ups to promote scientific and social entrepreneurs. “So far we have received 32 applications and by the end of next month we will decide on the funding aspect,” said Dr A S Rao, Adviser/Scientist, GoI, ministry of science and technology, DSIR.

However, the VC and PE community are concerned about investment in cleantech due to the current financial turmoil. Tessa Tennant, independent director, Calvert social investment fund said that due to the financial crisis the focus of government globally to support these initiatives get sidelined.