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Tapping Into India's Energy Efficiency Bonanza

Tom Burroughes, Group Editor , 17 July 2020

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We talk to an organisation involved with what it says is the fast-growing market for the low-emission energy sector in India. The country has been rapidly industrialising, raising demand for energy and also concerns about pollution and sustainability. And that creates investment opportunities.

The market for energy efficiency is already a hot area, and a UK-based outfit predicts that India is full of promise for this market segment. 

EnergyPro Asset Management, a UK company focused on producing energy without environmental drawbacks, recently said it was seeking to raise £2 million ($2.51 million) in working capital as part of its drive to open up investors to India’s $12 billion energy efficiency market. 

UK investors can tap into the story via an Enterprise Investment Scheme. The £2 million sum comes under the EIS umbrella.

Energy efficiency is a notable trend, although not without controversy considering the debate about where nuclear energy fits into this, for example. 

India’s importance as a major economy is only likely to grow, particularly as Western countries’ relations with China turn cooler for a variety of reasons. Historically, the UK has strong ties to India.

This news service recently spoke to the EPAM team about its business. (Editor’s note: the acronym EPAM is not to be confused with the US-based software services firm EPAM.)

Please give some background about the firm.
The company was created in early 2017 as a spin-off from our consultancy company EnergyPro Ltd. It was created specifically to hold a share in the Joint Venture with Energy Efficiency Services Ltd (EESL). EESL had engaged EnergyPro Ltd to assess the UK market and identify acquisition opportunities, driven by its strategy of international expansion out of India and the need to identify technologies and approaches that could be used in the Indian energy efficiency market. The company currently has a staff of four in the UK. Its main asset to date is the share in the JV with EESL. 

The £2 million EPAM fundraise relates to working capital for EPAM to finance the resources (in-house and associates) required in the UK and India to originate, analyse and transact opportunities.

For the investments into technologies and companies, we will look into using any appropriate tax efficiencies and concessionary funding available from both UK and Indian administrations, but these investments will not fall under EPAM’s clearance.

What sort of rates of return do you hope/expect these investments to generate?
Projects in the specific energy transition sectors we are focused on are likely to achieve above market rates of returns as they are in high growth markets and relatively neglected compared with ‘mainstream’ generation projects such as renewables. 

We believe that every investment should deliver not only strong financial performance but also solutions to the world’s most pressing social and environmental challenges, and that ‘impact’ is becoming the third dimension of investing, alongside risk and return. All of our projects will be designed to maximize impact and we will measure and report on impact as well as financial returns.

How do you deal with currency fluctuations between sterling and the Indian currency?
EPAM’s costs are primarily in UK sterling, so the exposure to forex is dealt with through contingency in the model. Individual investments will have bespoke forex considerations as part of the risk management strategy.

What sort of measures does the firm use to decide on investments?
Investment opportunities are screened according to how they fit known needs in India, technological maturity (ideally TRL 8 and above), team and potential impact.   
A typical engagement would have a defined output in India capable of achieving about a £25 million capital investment and/or about a £10 million annual revenue target in three years.  Where applicable, it should be adaptable to the Make in India programme with intellectual property that exists and is defensible in the region.

All opportunities are assessed for impact as well as financial performance at the evaluation stage and data collection and measurement is built into the transaction structure. 

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