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India ranked fourth globally in solar power generation in 2021. According to India Brand Equity Foundation (IBEF), the country’s solar installed capacity increased from 2.63 GW in March 2014 to 49.3 GW by the end of 2021.

Large solar projects may be under way, but the residential and small business segments often encounter challenges such as the non-availability of affordable financing options to set up rooftop solar installations.

Chennai-headquartered Welfund has created a digital marketplace to bring together all the stakeholders — financial institutions; engineering, procurement and construction (EPC) companies; and the consumers — to enable easier installation of rooftop solar projects.

The climatetech startup was founded in May this year by Shankar Sivan, an IIM Indore alumnus.

Welfund is currently processing about 159 MW of rooftop solar projects across India, with a value pegged at Rs 765 crore. The startup raised an angel round of funding from Refex Capital this year.

Before founding Welfund, Shankar was closely associated with strategy and operations at Sun Edison, an India-based rooftop solar company.

Given his first-hand experience in the solar energy industry, Shankar realised that residential and small business segments were not making much progress in tapping solar energy, which cuts power bills and contributes to a greener environment.

Challenges along the way

According to Shankar, the two main reasons for slow adoption of solar energy are lack of enabling policies by state governments and the high cost of financing for such projects.

He says, “The interest cost on a loan for rooftop solar projects for any residential complex or small business is in the range of 18-20%, much higher than a typical home loan.”

Financial institutions do not have the provision to provide loans to companies that cater to rooftop solar projects, and even if they provide the loan, it falls under the commercial category, attracting higher interest rates.

Very few financial institutions provide loans for rooftop solar projects, and the duration of repayment is very limited (usually about four years).

On the other hand, EPC players do not want to cater to this segment as the economics of setting up a small-scale rooftop solar project does not work in their favour. Typically, solar EPC companies assist their customers in procuring loans.

Marketplace model

Given these challenges, Welfund has created a marketplace model that connects all these stakeholders and where everyone benefits.

Consumers, including residence owners and small businesses, can upload requirements on the website, and Welfund offers financing options at interest rates equivalent to a home loan.

Financial institutions like banks and NBFCs also get access to a large customer base through Welfund, which verifies their requirements as well. EPCs are provided with job contracts to set up these rooftop solar projects.

“We are onboarding customers largely through the digital route and we also help financial institutions participate in funding such solar projects,” says Shankar.

Welfund is now close to signing partnerships with five financial institutions. It has partnered with loan distributors such as Yubi, Andromeda, Loanwiser, and DealsofLoan. It is processing about 85 loan applications at present.

The startup has also built a network with over 200 EPCs, with 48 registering on the platform.

Welfund provides asset and maintenance services for solar projects, and guarantees a buyback facility in case they become non-performing assets.

As of now, the climatetech startup is onboarding customers through the EPC channel.

Alan Babu, Managing Partner, Smart Solar Homes, says, “With Welfund as our partner, our leads-to-sales conversion has gone up from 1.5% to 5%. We are more confident in our sales pitch as we know Welfund will facilitate affordable loan offers.”

Welfund currently has a team of about five people. The company sees direct competition from Electronica Finance, the only other company that offers loans to residential complexes and small businesses. Other companies typically provide financing to larger solar energy projects.

Business and the way ahead

The startup works on a business model where it gets a certain percentage as service charges from the customers on the successful closure of every loan. It is yet to register revenue.

“Our main goal is to increase the use of such sustainable assets through financing,” Shankar says.

As part of its future plans, Welfund plans to enter the space of solar water pumps, primarily used in the agriculture sector. It is also eyeing the energy monitoring segment.