𝐀 𝐬𝐮𝐦𝐦𝐚𝐫𝐲 𝐟𝐨𝐫 𝐈𝐧𝐝𝐢𝐚𝐧 𝐂𝐄𝐎𝐬
In the last month alone, at our climate tech consulting division (EAI), I have been approached by CEOs of about 10 mid-sized Indian firms (Rs 1000-3000 crores annual revenues, industries ranging from textiles to food to auto), seeking my suggestions on investing in 𝐠𝐫𝐨𝐰𝐭𝐡 𝐨𝐩𝐩𝐨𝐫𝐭𝐮𝐧𝐢𝐭𝐢𝐞𝐬 within clean energy – in solar cells, wind turbines, biofuels, Li-ion battery cells, electric vehicles…
Mid-sized companies have unique challenges and opportunities in climate tech investments, different from those for very large firms (Reliance, Tata…) and those for small businesses.
This brief post is a summary of my initial suggestions to them.
Every vertical has specific characteristics – wind turbines cost a minimum of about Rs 10 crores and are 100% B2B while electric scooters could cost as little as Rs 50,000 but are B2C leaning – but there are certain common aspects that top management of Indian companies should consider before making major investment decisions.
These are even more important for mid-sized companies NOT relying purely on government policies or selling solely to central or state governments.
I list three aspects for these firms to consider:
𝐎𝐍𝐄 – 𝐋𝐎𝐍𝐆 𝐓𝐄𝐑𝐌 𝐕𝐈𝐄𝐖 – Most sizable climate tech investments will need a long-term view for success. Perhaps this is obvious, but it was not to some CEOs. I’d suggest a 15 year perspective, 20 will be nicer. You can’t plan everything now, but be prepared to grow the business for that long.
𝐓𝐖𝐎 – 𝐌𝐔𝐋𝐓𝐈𝐏𝐋𝐄 𝐁𝐔𝐒𝐈𝐍𝐄𝐒𝐒 𝐌𝐎𝐃𝐄𝐋𝐒 – Some climate tech “products” are technically commodities – solar power generation, for instance. But if you wish to build growth businesses in these products, look for different models and markets outside of stuff like long term PPAs ( Eg: a 20 year PPA for solar power at a rock-bottom tariff). The “Low risk = Low returns” force of gravity exists for climate tech too.
𝐓𝐇𝐑𝐄𝐄 – 𝐃𝐈𝐅𝐅𝐄𝐑𝐄𝐍𝐓𝐈𝐀𝐁𝐈𝐋𝐈𝐓𝐘 – Going beyond new business models, choose opportunities with potential to be differentiated on tech and solutions. Climate tech does provide such differentiable opportunities but you need to work hard to identify those that are optimal for you – one hint: look for unsexy opportunities in component and sub-component production.
While adding premium value (and returns) requires many different actions, I feel the above three are fundamental pillars that CEOs of mid-sized Indian firms should consider before making sizable investments in climate tech.
India’s (and global) massive energy transition is an excellent opportunity for hundreds of Indian mid-sized businesses to leap into the next orbit, but please choose the 𝐫𝐢𝐠𝐡𝐭 𝐨𝐩𝐩𝐨𝐫𝐭𝐮𝐧𝐢𝐭𝐲 𝐟𝐨𝐫 𝐠𝐫𝐨𝐰𝐭𝐡 – not just topline.
All the super best!
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