As climate change makes summers hotter and winters colder than ever before, energy demand continues to rise every day.
According to an India Energy Outlook analysis, India’s energy demand is projected to increase by almost 50 percent between 2019 and 2030.
With increased awareness, there is now a preference to generate energy from cleaner sources like solar or wind. This also creates an opportunity for people to participate in the energy story of the country as investors.
This is the goal of Mumbai-based Artha Energy Resources. The startup’s platform allows investors to invest in renewable energy projects with a ticket size as low as Rs 20 lakh.
The background
Artha Energy Resources was founded in 2013 by Anirudh Damani and Nitish Mehta. Animesh Damani, Anirudh’s brother, joined the startup in 2017 as a managing partner.
Anirudh was in the energy distribution business in the US, which involved sourcing power and selling it to commercial industrial users. Having gained considerable experience, he decided to return to India in 2011 and foray into the renewable energy segment.
This was also the time when renewable energy was starting to get a foothold in the country, and the government also started introducing various policy initiatives. While the energy industry in India is overwhelmingly dominated by the public sector, both in the generation and transportation of power, generation still has some private producers.
The renewable energy sector was also seeing tremendous growth with numerous players like ReNew Power, Greenko, and Azure Power involved in solar and wind energy generation.
Given this environment, Artha Energy took a different approach. It started by mapping the entire renewable energy scenario in India in terms of demand and supply.
Animesh tells YS, “The regulatory framework was challenging and there was opaqueness in information.”
This meant that there was no in-depth mapping of various energy generation parameters, such as where energy was being generated, how it was transported, who was consuming it, what were the rates, contracts with the government etc. Artha Energy spent a good four to five years mapping this data.
Animesh says the database it created gave the team insights into the country’s energy scenario, and they used this intelligence to provide its customers with cost-effective and efficient solutions.
“We could now recommend optimum projects for our clients, based on inputs from our knowledge base,” he adds.
Citing an example, he says if someone wants to put up a rooftop solar project in a particular city, Artha Energy can simulate all the options from their database and provide the optimum solution. He also claims their error rate is just 0.2 percent.
What it does
The company started by doing consultancy engagements, especially for renewable energy developers based out of North America, and developed projects worth 250 MW across India, Sri Lanka, Nepal, and Japan. These are spread across solar, wind, hydro, biomass etc.
Artha Energy began with a windmill project and later entered the rooftop solar segment, which now constitutes around 90 percent of its business. It is involved in consultancy, engineering, procurement, and construction (EPC), as well as maintenance and operations of projects.
The startup’s clients are mostly industrial and commercial businesses.
Today, Artha Energy is present in over 11 states, predominantly in the northern and western parts of India. It has implemented 250 MW of projects through the consultancy route, 45 MW in EPC, 55 MW in operations and maintenance, and about 10 MW that the startup owns.
The company has also built its own software stack to monitor renewable energy projects. As the next step, it will look into the energy monitoring or consumption at the individual unit level.
Attracting investors
Artha Energy is now expanding its role to bring more investors into the renewable energy segment through a separate division called Renewshare, launched in January this year.
“We aim to make renewable energy projects more accessible to HNI (high net-worth individual) investors and bring domestic capital back to the sector,” Animesh says.
Under this, Renewshare sets up a special purpose vehicle (SPV) for these projects–this is like a portfolio of assets and investors can own part of the SPV. Given the high cost of setting up renewable energy projects, this allows investors to become part owners.
Animesh says they would be managing the projects end-to-end, and once the cash flow starts coming in, it would provide returns to investors based on their ownership. He claims that company is a profitable operation.
As renewable energy projects are more long term in nature, the startup says it can rely on predictability.
In these SPVs, the company plans to put around 10-20 percent of its own capital to give insurance assurance. It also plans to look at creating a liquidity pool for investors who can exit anytime they like.
According to Animesh, Artha Energy has over Rs 7 crore in assets under management (AUM) in Renewshare, and claims that it has received over Rs 10 crore commitments from investors.
“We would like to present a fixed income asset class with a return of 12-14 percent,” Animesh says.
Artha Energy has grown primarily through internal accruals through its cash flows, and has not raised any external funding while claiming to be profitable.
According to Animesh, the startup has grown about nine-fold in revenues in FY22 when compared to FY21, and is looking at seven-fold growth in this current financial year. It plans to add about 7-8 MW of energy this year.
The major challenge that Artha Energy sees is largely on the regulatory front, as the market for renewable energy in India is still maturing.
Animesh says, “We will focus on Renewshare as a model but these are still early days for renewable energy emerging as an alternate investment class.”
Artha Energy Resources faces competition from others like Vikram Solar, Orb Energy, Suryauday etc.
According to the Ministry of New and Renewable Energy, India’s solar capacity increased from 2.6 GW to more than 46 GW in the last 7.5 years. Renewable energy has a share of 26.53 percent of the total installed generation capacity in the country.
