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Powering A Global Renewable Energy Platform | Sanjeev Aggarwal @ Amplus Solar
153 Plays3 years ago
In this episode of Founder Thesis, Akshay Datt speaks with Sanjeev Aggarwal, Founder and CEO of Amplus Solar, Asia’s leading distributed company, supplying clean energy solutions to Commercial & Institutional customers.
An alumnus of IIM Ahmedabad, Sanjeev has spent more than a decade in the power sector. As part of his career, he has served various roles and responsibilities, including project financing and development. Prior to Amplus Solar, Sanjeev served as the Managing Director of the AES Corporation, where he had set up AES's national business development office. Post that in 2010, he founded Amplus Solar, and through guarded optimism and sharp rationality, he has managed to scale Amplus Solar to become an entity worth 2700 crores.
Today, Amplus Solar is one of the leaders in distributed solar with a portfolio of 1+GW solar assets across India, Malaysia, and the Middle East. It was acquired by PETRONAS Group, a top Fortune Global 500 corporation in 2019.
Please tune in to this episode to hear Sanjeev speak about his journey and learn how he strategically built Amplus Solar!
What you must not miss!
- Detecting gaps in existing solutions: learnings as a professional
- Customer acquisition strategy
- IoT devices for scaling business
- Expansion plans into the energy transition sector
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Transcript
Introduction and Shoutout
00:00:00
Speaker
Before we start today's episode, I want to give a quick shout out to Zencaster, which is a podcaster's best friend. Trust me when I tell you this, Zencaster is like a Shopify for podcasters. It's all you need to get up and running as a podcaster. And the best thing about Zencaster is that you get so much stuff for free. If you are planning to check out the platform, then please show your support for the founder thesis podcast by using this link, zen.ai slash founder thesis.
00:00:27
Speaker
That's zen.ai slash founder thesis.
Meeting Sanjeev Agarwal
00:00:32
Speaker
Hi, this is Sanjeev Agarwal, founder and CEO of M plus energy solutions, which is a renewable energy platform.
00:00:48
Speaker
Our guest today belongs to the rarest of rare breed of founders who have built and scaled a business all the way to a handsome cash exit for its investors. Sanjeev Agarwal decided to quit his job because of a fundamental problem he saw in how India's power sector works. But having an insight does not lead to a business and it took him many years and multiple pivots to finally discover product market fit with Amplus Solar, which is Asia's leading rooftop solar power generation company.
00:01:17
Speaker
And in 2019, his persistence paid off when Empress Solaar was acquired by the Malaysian petroleum giant Petronas for Rs 2,700 crores. Here Sanjeev telling Akshay Dutt about his amazing journey of building and scaling up Empress Solaar.
Early Career in Power Sector
00:01:34
Speaker
From the campus placement I got placement in SBI Capital Markets, which was the investment banking subsidy of the State Bank of India. And we started working straight away on the project financing of power projects. So that was the initiation into the power sector. So the first job sometimes is often it is beyond control what type of job you will go at.
00:01:53
Speaker
you will get but over profile you will get in the company where you join. So it became more like a probably something which was scripted in some sense that okay you will start working in the power sector and you will start working on this over thing and then one thing led to another and I continued working in the power sector on various things right from project financing into project development into the
Entrepreneurial Journey Begins
00:02:15
Speaker
consulting side and finally 2010 after going through four or five jobs by that time we started
00:02:22
Speaker
So like you would be working with the like government companies or like private infrastructure players for their project development? So project development was happening with the last job which I did well with AES. AES Corporation is one of the largest IPPs in the world and the US-based company listed on real estate stop exchange a fortune 200 company
00:02:45
Speaker
So I was heading for India Business Development from 2004 to 2010. And between SBA Cabs and AES, I worked also with Crystal, heading their power practice consulting. I also worked in Europe on some of the power trading assignments. So these were like some couple of the things that I did between those 15 years. So an IPP is an independent power producer. And they would be selling to the DISCOMs.
00:03:10
Speaker
the state-owned distribution companies as the generators. So what made you feel that you want to quit your job and take that risk of starting up becoming an entrepreneur? I think two things which sort of always reasonably excited me was that one,
00:03:31
Speaker
that you find that you want, you're not always happy with the workplace because you are finding that there are a lot of policies which are not to the liking of people. So can you create a very differentiated workplace where people really like to come and work? So that is one of the things. The second thing is that while you have done whatever you've done in the job,
00:03:51
Speaker
Is it happening because you are getting the strength of an organization or is it happening partly because of you also?
Navigating Entrepreneurship Risks
00:03:58
Speaker
So is it best of yourself? Do you want to go out and try that? Am I a reflection of the car that I'm carrying or am I a reflection of myself?
00:04:07
Speaker
But in 2010, the whole concept of quitting a job and starting up was not socially acceptable also. And I'm sure you would have been married by then with some family commitments also. How did you justify to people around you that what is it you want to do and why you're taking that risk?
00:04:27
Speaker
So I don't think I have to really justify it to anyone. I think it's more like when you're taking the decision, obviously you have the family commitments and you want to make sure that whatever your kids are there, you are able to take care of those. So I was reasonably sure that I will be able to take care of those things for say like next two years. Either I make it work in next two years or do I have enough skills, enough experience to go back
00:04:51
Speaker
into the job market, take a job. There's no certainty that you will ever succeed. You don't need to be heroic, you don't need to be saying, no, no, I'm going to change the world. You need to be practical about the whole thing and saying that, okay, I will go ahead and try it and I've got some sort of a financial cushion.
00:05:09
Speaker
to handle these next two, three years. And during this period, if we are successful, great. If you're not successful, what is my backup plan? Will I be starving to death after that? If I'm feeling, or will I get a job back? So with a 15 years of experience and a good educational background, you can be reasonably assured that you may not get, you may not find a job of a hundred percent.
Direct Power Supply Opportunities
00:05:30
Speaker
You may find a job of 70%. Is that 70% enough for me to survive? Yes, it is. It's great for Goed.
00:05:36
Speaker
Okay. And what was the opportunity you saw that you wanted, that made you feel that, yes, I can build a business in this space. I see this opportunity. I think the opportunity was there that having seen the distribution companies and the power sector for last 15 years, one of the things which was continuing and still continues is about the financial condition of the distribution companies. They don't make enough money.
00:06:01
Speaker
they spend more on their expensive side than what they make on the revenue side. In some form, they are like a... Something by the government. In some form, they are slow form of e-commerce. E-commerce is faster and these guys look like a slow owner, right?
00:06:16
Speaker
So in some form they continue to spend more than what they were earning and they continue to do that. So if you want to work in that industry where your off-taker is not able to make your ends meet, you can't survive with a supplier. You are in the bad news. So therefore what will you do? So what you want to do is to find out the customers who can actually pay for it. Who are those customers? So we said like, okay, there are customers, there are consumers, large consumers.
00:06:44
Speaker
who want to purchase power directly. And there is a regulation, there is a regulatory system, there is a policy framework which actually enables that. Can we actually make it happen by supplying electricity directly to some of these customers and say that, okay, now I am your supplier, I'm also part of your supplier, and I will give you power cheaper than what your alternate cost is. Obviously, it makes huge sense for them to purchase from us, but the challenges still remain to manage the regulatory and the policy framework around that.
00:07:11
Speaker
That was the business opportunity in my mind, reaching out directly to the customer. Was this allowed in black and white that an IPP or independent power producer can directly sell to, let's say, large manufacturers or large power-consuming companies?
00:07:31
Speaker
Yes, this was there. Under the 2003 electricity act, there is a provision for providing open access and purchase of power directly. But often the frameworks are there, but you need to get them really implemented. And how would it be implemented? It's just about running a line from the IPP to the plant.
00:07:52
Speaker
Yeah, so it sounds very simple that you can set up a power plant, you can set up a transmission line and start giving electricity to them. But in practice it is much more difficult because you are like working with an incumbent utility.
00:08:06
Speaker
and the customer is already buying from there. So what you're trying to do is to take away some of their customers who are high paying customers. And therefore you will find quite a bit of the regulatory hassle. So you need to create a full framework to make it work alongside. You can't simply say that I will be here and I will be fighting with you and I will be supplying electricity. So that cannot happen. Tell me what exactly you need to do to make this kind of a commercial arrangement work out.
00:08:34
Speaker
So the I think the fortunately one thing which happened in the renewable space the government also became little more tolerant of promoting the renewable energy and said that if you want to supply renewable energy we will provide you some extra regulations which can make this happen. So the regulations happened in that sense that you can set up the rooftop plants you can do the net metering of those plants
00:08:58
Speaker
You can set up open access, large plans. You can use our transmission system to transmit the electricity. So those types of ignitions came into effect during that period. And that's how our customers were actually able to procure electricity for us. Okay. So your original concept when you quit was that you want to figure out a way for an IPP to
00:09:21
Speaker
supply and like you wanted to be like a platform that works with IPPs on one hand and large consumers on the other. I know you wanted to set up your own IPP. Own
Switch to Renewable Energy
00:09:31
Speaker
IP, not like a trader. Okay, so when did you figure out that you need to pivot into renewable and you know tell me that journey like you know from launch to making that pivot.
00:09:43
Speaker
So, 2010 was the time when M plus was started. Initially, I was working on coal-based plants because coal was the flavor of the season and that was the only thing which I actually knew. So, we were working on some like a 100 megawatt, 200 megawatt type of whole plant and saying that, okay, sell to this steel mill. We'll sell good refinery or we'll sell to a cement plant. So, can there be these smaller plants? But these are either within their campers, we sell electricity to them. But
00:10:12
Speaker
This is 2010 after that there were no new old plants which are allowed because the cold linkages were never given up like this was an on paper plan you made like when you say you were working on your bank with you made like a project plan and then you would have gone to a bank.
00:10:27
Speaker
We just went out, but not to the banks. When you go first to the customers, you try to find out where the plant can be set up, how we will get old, et cetera. Because if everything looks proper, only then you go to the bank. Banks are not going to let you on day one. There has to be a putback for that. So that was thinking during, say, initial six, nine months, and that very quickly it was allowed because whole thing completely imploded as of the whole thing.
00:10:55
Speaker
Because there was no access to coal. Access to coal is the key thing too. I'm going to stop at coal linkage allocation because of various controversies around that time. Yeah, there were some scammers around coal procurement. Coal blocks were allocated and there were a lot of controversy and disputes around those things. And the government said, we are not giving any further coal allocations unless this dispute is resolved.
00:11:23
Speaker
In between, so around 2011, the new thing which came in town was a Reliance Announcement of a big gas finding in EG-6 basin. So I said like, okay, this looks like a good opportunity, so why don't we set up a gas-based plant? The cold is not happening. So I started working on a gas plant and developed probably one of the last plants in the, which were being set up for the gas.
00:11:48
Speaker
So we had the landfill clearance, we had gas allocation, but suddenly the gas vanished. So reliance announced, we miscalculated and the gas is not there. So probably another six, nine months were spent on that thing. And then you... All this while you were essentially like a solo entrepreneur, like this would have been like... Not exactly solo, I won't say solo. So I always had few people, two, three people, but
00:12:13
Speaker
very specific to the technology, very specific to the type of thing that we were doing. So when I was working with the coal plants, so we had people who were experiencing the coal side, technical side. Some people were working on the technical side. Some people were experiencing the gas side. So because I'm not a technical person myself despite being in here.
00:12:32
Speaker
So we need, and particularly when you're going out to the investors and to the banks, you need to have a full team with a full capability. You can't say that I am the only one who will pull the whole thing through. Nobody will need you. I hope you're not a, unless you are in a lambask.
00:12:48
Speaker
So I think, I don't think even Elon Musk started alone when he started people or whatever. Things happen over a period of time. Then after gas, it was, it was more moving towards renewables. So wind was the first thing that we tried and wind was, we saw a little more success than the first two ones. The coal didn't happen. Wind, gas saw a little bit of success. Wind saw a little more success that at least the gas, gas remained on paper or did you like actually
00:13:18
Speaker
No, so the
Rooftop Solar Projects
00:13:19
Speaker
project got all the approvals, etc., but then it remained on people. And then you then pivoted toward wind. Wind was getting more traction from the investing community, from the private equity investors and all that. So wind did even more work and it almost reached to the extent of getting a $200 million commitment from a large private equity fund.
00:13:41
Speaker
and then it looks like now things are sorted that are like we found that but probably you never know the latter and that is the time when I had Guru Indar join me. Guru was working with me in the AAS and then he had more experience and renewable than I had so obviously it was a it was a good thing to have him on board but unfortunately wind also could not happen.
00:14:05
Speaker
Because I think the issue became more like the timing issue. We ended up investing quite a bit of money in preparing or like trying to do a buyout of a wind project. And the final commitment from the private equity fund that we are speaking with did not happen.
00:14:21
Speaker
It led to quite a bit of a financial setback also. But then he said, it's probably not prudent to be completely dependent on the external capital providers to do something that you want to do. You need to take four steps and show things on the ground.
00:14:38
Speaker
before people can completely trust you and give you the value for that. That's how we move finally into the rooftop projects. So rooftop projects by definition are very small and one can actually with a 50 lakh rupees type of capital one can set up a plant.
00:14:53
Speaker
So that's how we started. So we collected some almost two crore of rupees from various friends and family and loan resources, whatever left and said, OK, let's set up two crores of this money. That is the four or five crores from the banks and do the initial one or two megawatt. And I think that that became a little bit of a turning point and also mix of various things, including that the pricing of
00:15:17
Speaker
solar was coming down. There was more desire from the government side to promote solar and the companies and the corporates are looking to procure more renewable energy. So a lot of things have to fall in place. And then these things started falling in place and then you had to finish it. Like one question here. You said pricing of solar started coming down. How is that a plus? Because that would mean your realization
00:15:43
Speaker
Yeah, because you're selling to the customers directly and the customers will always compare it with the alternate cost, right? So if my alternate cost is cheaper than what the what the grid cost is, if I'm giving them super cheaper than the grid cost, then only it makes sense for that. And why was pricing coming down? So it was more like the economies of scale in the module manufacturing in China.
00:16:01
Speaker
So the cost of the investment needed to set up the plants was getting lower and lower. You don't have to invest so much upfront money to set up. If you really look at between 2011 and 2017-18, the costs of solar models came down to almost 80%.
00:16:17
Speaker
So it was on a downward slope at that time. So it started making sense for customers to buy this electricity directly from us. And we said, you don't need to worry about the technology risk. You don't need to worry about the capital risk. You consume your electricity in the format that you have been doing it. And we will take all these
Innovative Business Model
00:16:34
Speaker
risks. We'll set up the plan for you. And we will just sell you the electricity and the long-term contract. So it is like a no-brainer type of thing if you look from a customer perspective that is not taking away anything from me. I don't have to impose anything.
00:16:48
Speaker
Did you discover this model right in the first project you did or was this like an evolution?
00:17:01
Speaker
What was the first project? Tell me the story of the first project. Who was the customer? The first thing we did was with an engineering college in Nagpur, college called Ranswari, GH Raisoni Engineering College. And the promoter there, Sunil Raisoni, is a fairly forward-looking person. And he had been thinking about solar.
00:17:21
Speaker
we should do solar and we shouldn't because like it's in the newspaper, people read it and do a progress. People will also realize that they came to something about it. Then somehow through connect, we reached out to him and then I told him that we will do this thing for you and you don't even have to spend your money. So he liked the idea and we started setting up the first plant, which was like a hundred kilowatt. So for him, he will continue as a OpEx model. He just needs to pay per unit consumed. Plus he needs to give you space. He would not charge you for space, right?
00:17:51
Speaker
It's as free as he can charge from us, but then we'll charge him back. What's that? Okay. Okay. Okay. The OpEx will go up for that. And like, did you have, I mean, what is the way in which this arrangement happened? Is it like a cost plus kind of a negotiation on what is the price per unit? It's more like a negotiation, which is bilateral negotiation. It's more like a buyer and seller type of thing. What do you think is the value of the whole thing? And you will have various methods of triangulation of the whole thing that
00:18:20
Speaker
what makes sense you will think okay this is what if i have to set it up this is what will cost me if i'm buying electricity from there this is what is going to cost me if i know correctly this is the capital cost how much returns he is making so you'll do all those calculations mentally and not like a open book type of thing that i actually tell you might cost but that doesn't matter to them
00:18:42
Speaker
as long as it's cheaper than bread, that I mean, that would be the big thing. But you know, the might of the buyers, you always try to back calculate. So and like your own savings must have got totally used up by this time, right? So those three years in which you were trying to do gas and wind and coal. Yeah, so borrowings were full swing. Okay. But you didn't want to give up like it could have happened, right? Like,
00:19:08
Speaker
It could have happened. If it didn't happen, it could have happened in the sense that you always look at the next day and see if there is a progress happening. Is it worthwhile to continue or are you saying that it doesn't happen? And then you take the plan to other people that this is what we are doing. Are you willing to invest some more money? If you continue to see that progress, that gives you that confidence that you are probably on the right track.
00:19:29
Speaker
I guess solar as an industry also was getting a lot of action in those days and therefore there would have been investors like in terms of the angel investment that you got there would have been some like positive interest because of the solar. Yeah also obviously people want to understand the industry that you're working in and when they're looking at is the whole as an angel investor they probably don't know the whole brass tacks about whether they go by what you're telling them. Now
00:19:57
Speaker
It depends on your own honesty and transparency what you are really telling them. People need to trust you. That becomes really the important point there because the same story can be told by two people.
Expanding Client Base and Scalability
00:20:09
Speaker
One, people will invest, other people will not invest. And that's where the open comes about.
00:20:15
Speaker
So this college in Nagpur, so like, you know, what kind of revenue started once you implemented this? How much did this cost you? Like, this is like more revenues. Like investment was some 75 lakhs or 80 lakhs. And probably the revenue one will make out of that project will be say 15 lakh rupees a year. So this is 50. That's not something which is going to be super helpful.
00:20:41
Speaker
What do you feel like? Maybe like more like 10-12 lakhs. It's not super helpful for me. Continuity perspective is like it, but you have it 15 years on track now.
00:20:50
Speaker
and you do like four or five contact like that, you can go out and show to the investor that this is a proven model. The proof of concept is there, and there is a large market which can be handled through this particular model. And that became the pitch home power. And that's how we finally were able to get the investment done by I2. Okay. So after this Nagpur College project, you got the investment? We got a few more projects. We did with Domino's, we did with Elton, we did
00:21:19
Speaker
Doctors would have been there manufacturing setup or something. Then it happened for, I think we were talking to Yama at that time, we had Harry Potter. So there are four or five good names. So that gave the confidence that people who are high quality customers are interested in buying it. And there is a sort of a
00:21:41
Speaker
solution which has been implemented and which can be implemented. There are multiple pieces of the puzzle you
Focus on Long-Term Sustainability
00:21:50
Speaker
need to solve. One is, of course, you need to convert a customer who agrees to the project. Then you need to execute in terms of that whole project management to set up a plant. And then you need to have a successful commercial arrangement in place. Tell me about each of these pieces.
00:22:09
Speaker
What was your strategy to get customers? How hard or easy was it to do that execution of the project once it came in? Were things available off the shelf? Was the ecosystem in place or did you have to do a lot of things from scratch? I think from the customer perspective, you have to reach out to many customers to take time to decide. You need to have a good pipeline of customers to really do that. In those times, it was like the
00:22:36
Speaker
only the more progressive customers will go for it because for people it was a very very new thing and lot of customers will actually come back and say like
00:22:45
Speaker
Oh, okay. So you're going to set up a plant for me and you're going to charge me less than that. And I don't have to pay anything for that. So what is the catch? Sounds to be true. So what is the catch there? Because people didn't understand how the whole thing that, and then they will go back and this is not something which is on the priority list for them to get it implemented because they are anyway getting the electricity.
00:23:09
Speaker
So, is it going to make a difference to their life? Probably not. So, they will take their own sweet time to decide and you have to be literally on their toes to say like, okay, now we need to decide and you have to keep on following is like a typical sales process. So, obviously, it's not something which you can do on day one.
00:23:28
Speaker
and expect things to happen very, very fast. So there has to be one set of people who are on the business development side or the sales side. And then we will find once the project has been signed up, you need to find out who are the people who are going to execute it. So execution will also have multiple challenges right from designing of the plan, from the procurement of the equipment and then constructing the whole thing and then finally operating it. So you need to have people who can potentially take care of that aspect.
00:23:55
Speaker
And then we will have people who are going to also finance. So you need to also go back to the banks and get your whole project financed.
00:24:04
Speaker
So multiple things, it's like a full business. You can't say that I will do this, I will not do this, etc. So it's a full organization that you have to build around this. So every project needs to be financed. Like you would not use your own equity capital for... You have to use the equity to construct the plant, but eventually you also need to make it to the banks.
00:24:29
Speaker
to get the funding done because with 100% equity, things may not be as attractive. Okay. And it will scale very slowly then because then you are constrained by how much equity you have. Correct. And your returns will always be suboptimal.
00:24:45
Speaker
Okay. And so what you explained to me the commercials for that first college project, it seems like the payback starts only after about eight years, like you spent 75 lakhs. So you will probably just recover the money in the first six, seven years, and then you make your returns. That sounds low. Or is it the knob? Or like,
00:25:10
Speaker
That's normally the norm in the infrastructure projects. So typically the contract periods are 15 to 25 years. Depending on the contract duration, your payback will vary from five to six, seven, eight years. And then you actually make that balance. So infrastructure projects by nature are like long-term revenue projects.
00:25:29
Speaker
That's the whole thing that you have a long-term thing, but you always look at the full duration IRR. You don't look at what it looks like in posterior second year. The assumption being that the whole contract will last. There's basically for investors who want long-term low-risk opportunities, because once you've installed a physical infrastructure, then that's not going anywhere. The customer can't just replace you, so your commercial risk is much lower.
00:25:54
Speaker
Correct. That's the basic premise of the whole thing. Of course, assumptions in some cases will not be that true. Okay. So tell me about the first institutional fundraise then when that happened. Like what scale were you at? What was the installed capacity? I guess growth for you would be measured in terms of megawatts of capacity, installed capacity. Like what are the metrics you would show to investors?
00:26:17
Speaker
Yeah, I think the capacity is one parameter, capacity is one parameter and obviously you need to ascertain at the project level that every project remains profitable because every project is a unit by itself. So you will keep on growing that thing and then I think it goes to something like two megawatt when we got the funding round done by I2 Capital which was the private
00:26:40
Speaker
But before that, we also used some debt from Reliance Capital before even they came in. Everything was sort of proven at that time that there is a customer who wants to buy the solution, there is a banker who wants to fund it, there is an implementation which is possible. So when you are going to the investor, you need to show all the things that this is a doable thing. And how much did you raise from iSquared?
00:27:01
Speaker
So we went to them to raise around 20, $25 million. And they came back, we want to give you $150 million. Wow. Nobody says no to that. But I just wanted to understand. Why do you want to actually commit
Scaling with Strategic Investments
00:27:21
Speaker
more? I think the couple of reasons that they said that we want to build this as a reasonably large platform.
00:27:27
Speaker
And second that I think we trust the team that you will be able to do a good job. So you don't want you to keep on coming back or going to other people for raising money at future date. So probably there is this thought like this a too good an opportunity. So why don't we just put all our money there rather than somebody else.
00:27:43
Speaker
So, I squared is what? Is it like a typical VC or is it more infrastructure? One is an infrastructure fund, which is based out of US. At that time, it was around $3 billion. Now, they're close to $20 billion. It's really large now.
00:27:58
Speaker
Okay, and I guess that that would have meant that they would have got a majority stake or something like that when they put it. Yeah, of course. So I think that was one of their key drivers that obviously these guys are coming with like a 2 crore of capital equity capital and I'm putting 1000 crores. Balances are the
00:28:20
Speaker
are completely treated in their favor. But at the same time, the way you balance is because you are going to run the whole thing. So the success of their money depends on your efforts. So you have to find out a balance between the two. Right. Okay. So tell me how the trajectory changed then once that deal got signed, you know, tell me the story from
00:28:42
Speaker
Yeah, so the couple of things happened one thing happened was that one thing that happened was one thing that actually happened was that provided access to the capital and that made it feasible for us to really go out in the market with much more confidence.
00:28:58
Speaker
Because earlier we were always thinking about where the capital is going to come from. Second, it became easier for us to get and hire more people to build in-house capabilities. Some of the things which you are getting out shows that at that time you could build some of those things as the in-house capability.
00:29:15
Speaker
heard I squared as a firm, I think is a great investor and they brought in quite a bit of corporate governance and the best practices which helped the company to really
Technological Integration
00:29:27
Speaker
scale up. It's not like a really dumb capital type of thing. What were those things that were getting outsourced which you wanted to bring in-house? Give me an example.
00:29:35
Speaker
For example, the construction capabilities, some of the procurement capabilities, things like that. So whatever you want to build and select what are the capabilities that we need internally to scale up those types of building the internal monitoring systems, like how can we really evaluate the performance of all our plants, those types of things.
00:29:54
Speaker
OK. Tell me about the technology that goes into setting up a plant. There is, of course, the physical infrastructure. You would need those photovoltaic receptors, I guess, that they're called, which absorb the sunlight.
00:30:09
Speaker
Okay, so just talk to me about the whole, you know, for an outsider who doesn't understand how this works, like, you know, how, how sunlight is converted into electricity, how that electricity is. I can tell you all the scientific and the technical thing around it, but essentially these are like the photovoltaic cells.
00:30:28
Speaker
So as the irredation of the sunlight falls on these cells, so there is a movement of these electrons within that thing and that starts creating an electric current and that electric current is captured and then you, this is generated in the form of DC power, then you use an inverter to convert this into an AC and then AC power is something which you consume in your house's day. So it's as simple as that.
00:30:58
Speaker
If you like to hear stories of founders then we have tons of great stories from entrepreneurs who have built billion dollar businesses. Just search for the founder thesis podcast on any audio streaming app like Spotify, Ghana, Apple Podcasts and subscribe to the show.
00:31:18
Speaker
But you would have put in IoT devices which would be giving you data to help you optimize utilization or even for the billing. So tell me about those pieces of technology in this. I think those are the important pieces when you're trying to do anything at scale.
00:31:37
Speaker
So this business who also we were expecting was to become at scale because of the simple reason why we are working in a distributed format of non working with a lot of customers. Then you need to have a system where you are able to scale up with the help of technology and not necessarily depend on the manpower because that's like a absolutely unworkable thing.
00:32:02
Speaker
that is not going to take you very far. So the first thing or the thing that we started doing from the very initial stages was to implement the ERP system, implement the monitoring system to reduce the overall
00:32:17
Speaker
Humor power dependence. Put all our systems and processes in that format that you are actually able to implement the plants in a schedule which is completely monitorable. We are able to monitor the performance, monitor the progress of the construction of the plants and to do that with a minimal amount of manpower.
00:32:35
Speaker
Those were the things that we started putting the ERP systems and the IoT systems in the plant so that we could actually scale it up. Of course, there are many, many details in that one and probably not really, may not be that much of interest to your listeners, not too many, and there's already details also, a lot of details there.
00:32:56
Speaker
Basically, this investment would help you to reduce time and money. Basically, to scale up the business. Now, scaling up the business is one part that one can keep on setting up the plants in a very manual and with a brute force type of a thing. I keep on growing it linearly. One project I get, I put four people in it.
00:33:19
Speaker
I get next one, I put another four people. Or can I do 15 projects with say 10 people? So that's where the management comes into picture. So there can be two ways of using the using the capital. One, to just put it very linearly and not so efficient manner. Another is to use some of the system processing technology to make it very, very efficient.
00:33:39
Speaker
And how did you make it efficient? System processes. So you put the teams, team structures, the systems, the technology part of it. So everything has to work as like a full jigsaw puzzle or like a Glock one thing. So everything fits into each other. So I say good moods of the people and technology that you need to create along with the processes so that people can actually implement it.
00:34:06
Speaker
Without essentially like like you would have created like a playbook for installing a new project and and therefore that playbook could then be digitized into a workflow and then it was just about checking each step this step done this step done this step done and whenever there's a deviation it would show up in some sort of a report that this is beyond you're able to see what is happening which are the project which are coming behind those types of things so you start managing by exceptions or managing by route
00:34:33
Speaker
And how do you do maintenance of a plant? Like once a plant is set up, does it need maintenance? How does that happen? Of course, the plant needs maintenance. So there is like a very basic type of a cleaning that needs to be done of the panel. That's one part of it. To maintain that the panels are able to absorb as much irritation as it can, because ultimately that is your raw material. And if there is dust on the panel, you will not be able to absorb it. The second part... This would be like a daily cleaning, what you're talking about.
00:35:02
Speaker
Not really, we need to do it at some set frequency and that's where again we use the IoT in that thing to actually monitor how much loss is happening because of the dust and what is the cleaning cost and what is the cleaning cost. At some stage these curves cross each other so that is the right frequency to go for any particular plant.
Acquisition by Petronas
00:35:22
Speaker
You can't simply say I will start cleaning it every day because the cost becomes too high or I will not clean it for two months because the cost is high
00:35:29
Speaker
but then the loss may be too high. You'll start using technology in that format. Okay. You were telling me the other things needed for maintenance. So when is this like cleaning the dust? One of the other things is that you have productive maintenance to make sure that all your cables, connectors, your structures, etc. are intact and do a six-monthly testing of those things, those benefits. Okay. And this would be a manual process, obviously, this kind of six-monthly testing.
00:35:55
Speaker
Yeah. So that will be preventative maintenance will be more like a silly driven that, okay, this is a checklist to be checked for people to go and do it. Again, the use of technology so that people are routinely informed that now you need to go to this plant and to go to this plant. Then once you go to the plant, fill this checklist. So only these, these are the two things which are needed for, from a maintenance perspective. Yeah. Unless there is something other thing happens, like some major breakdown somewhere, some inverter is pumped or things like that.
00:36:22
Speaker
Okay. The electrical failure, like the equipment failure, basically. Yeah. The equipment failure, then that's a different issue. Okay. So tell me the growth part then once I squared invested, like, you know, you had, you told me two megawatts said that. 2015 in June, May, June. And then from that point, we kept on growing. I think the first year we were like some 20, 30 megawatt, probably 30 or 40 megawatt.
00:36:50
Speaker
and the next here we can use some 80 megawatt.
00:36:54
Speaker
And the third year we started setting up the larger projects and then you're like crossing almost 200 megawatt. And by 2018, we were in the job of around 300 megawatt. And that's when the discussions with Petronas started happening. In between also there were some of our potential buyers, but Petronas was the most serious one. Then we started discussing with them. They started discussing around somewhere mid of 2018 and took
00:37:21
Speaker
almost nine months to complete the whole thing by 2019 March. And with that time, we're like 175 megawatt. So because I squared was private equity, so it was very clear from very early days, I guess, that eventual goal would be for an exit for them, right? Like, is that why the talks were happening around the sale? I mean, the IPO could also have been one route or staying private with I squared also could have been one route. Like, why
00:37:49
Speaker
Why was this option getting explored? Eventually, private equity by definition remains something which they need to return capital to their own investors, to their own LPs. So they have to exit at some point. Now what the right kind of exit is depends on the type of business and the type of industry and the opportunities that are there.
00:38:14
Speaker
From a complete perspective like mplus probably you need to find out a whole of your own. So whether it happens as a standard one or whether it becomes by merger with a strategic player.
00:38:30
Speaker
I think to make it home of your own, you need to become fairly large and do an IPO etc. Those options always remain open. But at times if you find somebody who can provide you enough capital to continue your growth and also maintain your independence and identity, I think that's not a bad out.
Client Targeting and Risk Management
00:38:50
Speaker
So yeah, I was saying for Petronas, the idea must have been to diversify into green energy. Yeah. So if you look at from Petronas perspective, we say oil and gas company and said fossil fuel company, there's been significant movement towards all of the large companies to do something about the climate change. And so much more pressure on the oil and gas companies, whether you look at a shell or a turtle or Petronas or anywhere else.
00:39:17
Speaker
And so people are being forced by their shareholders and the finances that you have to do something. And that's where I think Petrelow has also took a call that we want to go ahead with this thing. And then they decided that we want to do renewables. So they looked around across Asia, zero down on India, probably they met some 20 companies in India. And then finally,
00:39:38
Speaker
zero down on M plus that this is a transaction that we want to do. Okay. And so, you know, what are the kind of customers who are, you know, from the two watt to 300 megawatt journey when Petronas acquired, you must have figured out like, who are the customers who are most likely to go for this kind of an arrangement? You know, what are those key factors which make it a successful arrangement for a customer? So tell me about that, like,
00:40:06
Speaker
I think the type of customers that typically you will find in this segment are the multinational companies. Because for them, the green energy is one criteria, one important criteria for them to show that they are again doing something about the renewable energy or the carbon offset. So those are the initial adopters. But as the things became more commonplace, some of the larger Indian companies started coming into the picture, saying that we also are open to this thing.
00:40:34
Speaker
But from our customer base, probably it's still 70, 75% electricity sold to multinational markets. Okay. Okay. So the green tag is like the biggest factor to drive sales, like companies which want a green tag. Green tag is something which starts to, like that's where people really start to look at this thing.
00:40:59
Speaker
But then as it moves down to the operations people and the people who are handling the Q&L, for them the cost also is a parameter. So if I say that I will give you green energy, but I will charge you one to be more, there are no takers. Yeah, yeah, yeah. But if I say I'll give you green energy and you say one to t, there are many takers. Let's move that.
00:41:23
Speaker
I mean, what I'm wondering is if, as a business, I am saving money for free, literally. I mean, there is no capital outlay from my side, which is needed. Then why isn't this a much more common place? So it is getting common. It was like for various reasons, people were not adopting it. So some of the reasons people have been thinking about, will it get further cheaper?
00:41:51
Speaker
Will it get cheaper? That is one reason. Second reason, lot of the Indian companies don't end up doing it, should we do it ourselves? Oh, okay, okay. I want somebody else making this money, should we do it ourselves, right? And I think these are the two main reasons, apart from just the simple management inertia. Because not on the quality list.
00:42:15
Speaker
Right. Your clients would have to be like large enterprise clients only. Those are the kind of clients which you would focus on, right? Correct. From our perspective, from the security of our investment perspective, that is important. Like what is the size of companies that you would typically focus on?
00:42:31
Speaker
We don't go by the size of the companies we go more by the rating of a company, not so much of the credit rating, credit rating is one part of it. We go something completely internally which is like the creating a credit profile of every customer and saying that this is something somebody is acceptable to us or not.
00:42:49
Speaker
So because this can be all the one criteria, we don't even look at the, whether it's a profit making or loss making.
Growth and Adaptation During COVID-19
00:42:56
Speaker
For example, if you look at someone like an Amazon in India, it's a loss making entity. So if I put one simple criteria that completely should be making profit, then you never end up doing for Amazon. But can we do for Amazon? Absolutely yes. There's no single answer there.
00:43:14
Speaker
So, why do you do this due diligence? Did you burn your fingers where some customer became an... Not to avoid burning the fingers, to avoid burning the curtains. This is pretty obvious that you are setting up the plant for someone which is dedicated for them. And if this person doesn't pay you, then what do you do?
00:43:38
Speaker
Because your payback will only start after 7-8 years. Even if it doesn't pay, then who is at risk? We are at risk. We want to make sure that this guy is good in terms of his corporate governance, his own business is strong and he has all the intentions to pay.
00:43:58
Speaker
And then obviously you sign a contract where your worst case scenario won't go for a legal route, but you don't want to take that route. Right. So what if a business goes bankrupt when you have an arrangement with them, then is it like pay for use only? So if they stop using, if they stop drawing electricity, then. Well, if they, if they go out of the business, right. Or if somebody's business gets shut down.
00:44:23
Speaker
So we always tell them that we are your partners. So if you are shutting down your business in India, and you have no other place to relocate this plant, then we are happy to let you go off free of cost. We'll take away your block. So that's where our diligence comes into picture to make sure that these are the guys who will remain in business.
00:44:46
Speaker
So how did things change once Petronas came in? And Petronas is now fully owned by Petronas? And how much did they value Amplus at? So I can't really tell you, but it's in the public domain. So tell me the story once Petronas came in. How did things change after that?
00:45:15
Speaker
I think one of the things which Petronas liked about M plus was the overall work culture. And we take a look back in the work culture in terms of how people are treated and how people are given the responsibility here. So we have some of the very interesting practices like we had like unlimited leap.
00:45:38
Speaker
We had no check-in check-out time type of thing. No fixed period. Things like, okay, you can work from home as many days as you want. This is like on pre-COVID, I'm talking. Not post-COVID. COVID has been very shocking. These are the things that are happening at that time. So we literally had no leave register. So for someone like Petromance, it was like a good culture shock.
00:46:01
Speaker
But at the end of the day what they started liking about the company was that in the company everybody was so empowered. Everybody was so much aware of what's happening. They said that this is the company which will really grow.
00:46:13
Speaker
And there's more something where you feel most comfortable in terms of the culture. Because business, many companies do. But where do you get the right culture? Okay. And that 300 megawatt with Petronas acquired, what is that number today? Did you continue to grow during COVID or I'm assuming? Yeah, we just continue. But we are now over, I think, 1100 or 1100 of megawatt. So it's almost three times how Petronas came in. Wow. Okay. That's like massive growth, like in the last two years, basically.
00:46:43
Speaker
Yeah, last three years. So we continued with our own thing and I think during covid etc didn't really impact us that much because we kept business largely as much normal as we could. But I think I have a firm belief that you just can't stop.
00:47:05
Speaker
You have to find out the opportunity during these times also, because there is a way to do business. Either you can just sit back and start blaming the world, okay, Chinese have put the COVID here and this is happening. The government is not doing this. The government is not giving us money. Or you find out a way to do this. So how did you change the way you do business to deal with the COVID situation?
00:47:33
Speaker
So I think the initial few days were little, suddenly because the lockdown, like many other things was very sudden. And therefore what we immediately started getting the, at least the top 20% of the teeth together onto the, onto the zoom calls and started discussing about what can be done now that you can't really move out of the house. So we started working on some of the
00:47:57
Speaker
We are spending internal systems and processes that can be make them more efficient during this period of whenever it lasts. Till we are not even allowed to go home. So we will start working on some of those things which would not happen during those normal times.
00:48:15
Speaker
Those things started taking shaping up. Some things started getting automated. Things started happening. People still remain like on a, I think we used to have like almost two or three times in a week, the phone calls. People were having the calls in their own smaller groups. But things kept on moving, didn't stop. So whatever you could do without interacting with the outside world. So those things you fix.
00:48:41
Speaker
So whatever is in there. And then as things started a little bit opening up, we started moving out. Construction operations resume, electricity was also an essential commodity. So therefore, the movement was easier for our people. So things kept on moving. And from a consumer perspective, from the customers also started realizing that during this period, we need to find out every possible way of saving. So a lot of people from home,
00:49:10
Speaker
Solar was a little bit at the back of the burner, came in front. And they also started designating a lot of the whole thing. I think overall you have to find out and be in front of the customer with your solutions, even during the offer times. You have to find out what works. Okay. The customer demand did not see a dip. See the interaction obviously saw a dip, but there is a more receptiveness.
00:49:42
Speaker
Let's say, for example, there is a corporate park where your plant is installed. And because of COVID, there is work from home. And so therefore, ACs are not running, for example. So there is less power consumption. So what happens in such a scenario? That hit is yours, like the less power consumption? So we have this facility called network ring. So whatever electricity is being generated, it gets pumped back to the grid. So we get the credit of that.
00:50:11
Speaker
in the later period. Now, if there was no consumption for one year, that would have been a loss. But because things kept on going up and down, so that electricity got consumed eventually. But in some cases, like the educational institutions, like the colleges, schools, et cetera, which remained shut, there it became a problem. So in some of those cases, we had to let go of that electricity. Like when you send the power to the grid, you get paid for it?
00:50:46
Speaker
You are able to track this and then your customer will still pay you, even if they will not use it at that time. Yeah, they will use it sometime later.
00:50:58
Speaker
Is there an opportunity for excess power to also be sold to other customers or back to the grid? Like if there is a plant which is making more than what the customer needs, does that ever happen?
00:51:13
Speaker
That is not allowed in the root system. And do you also, so you don't really need to worry much about storage, right? Because whatever excess is getting produced will go to the grid and therefore that is. Yes.
Future Expansion Plans
00:51:29
Speaker
Right. Right. Yeah. It's like a virtual storage. Yes. That's right. Okay. Okay. Okay.
00:51:35
Speaker
And so what do you see happening today? Like, you know, that 300 to 1100 jump, is this largely driven by the cost cutting drive or is it that more companies are now getting environment conscious and there is that whole ESG drive? I think more of the ESG drive, more of the ESG drive, people are getting more comfortable with the technology, higher adoption rates. So we see like mix of everything.
00:52:04
Speaker
Okay, because I think ESG, is ESG significant in India? I know in the West, if you have ESG credentials, then as an organization, you can raise funds with lower rate of interest and your cost of borrowing comes down if you have ESG credentials because there are lenders who are willing to subsidize you for ESG. Is that the case in India also? Is ESG big in India? There are some funds which are like the ESG funds.
00:52:33
Speaker
Right? And so these ESG funds are investing and providing capital to the companies which have more focus on the ESG side. But I think it's a little bit of a difficult thing to measure. So the measurement of the ESG remains a challenge. But of course, the global and as well as in India, there is a good interest in the ESG type of way. And ESG goes beyond
00:53:01
Speaker
Just simple renewable energy.
00:53:04
Speaker
There's so many other things. So what do you think is in the roadmap for AMPLES now? What's the path ahead? Are you looking to also diversify outside India or into other spaces beyond rooftop solar? That has already started with Petronas. So even before Petronas, we had gone into Middle East. With Petronas, we obviously are able to provide more services in Malaysia, obviously ship.
00:53:32
Speaker
Of going forward, Protonas is also considering setting up a dedicated unit for handling the clean energy transition, which will include renewable, which will include electric mobility and hydrogen. Therefore, the opportunities for M plus also in India will be much larger.
00:53:49
Speaker
including things like getting into the utility scale, getting into green nitrogen. We are also doing some work on the electric mobility side. So these are the things which will keep on opening up. So we remain a more a player in the energy transition and not possibly with the student side. What are some of those projects you're doing like in mobility or in?
00:54:11
Speaker
like you know we are providing vehicles to our existing customers like amazon big basket etc saying that okay these are the electric vehicles that you're providing to you and service again in the sense then we are owning the things and we are giving it only to them or some third-party operators who provide service to them and this in itself is a pretty large business right like
00:54:34
Speaker
Yeah, so this is potentially can be a fairly large business as electric mobility becomes more common claims is important for a for a oil and gas company also to understand where their demand is shifting. But do you have aggressive plans for this because this by itself can become like a unicorn of its own in a couple of years. Yeah, so I think that the
00:55:00
Speaker
Plans are there depends on the ecosystem because the ecosystem also includes manufacturing of good quality vehicles. That ecosystem kicks in only then the adoption and the reliability will be of high level. Unless that happens, people won't be able to fund to a very large extent. And what are the other initiatives?
00:55:22
Speaker
Besides on the mobility. We are also working on the residential solar. So it becomes like even smaller plants. So we are setting up for the same like the household setting up on their doors and trying to see how can we give them a product which is more aesthetic as compared to the normal solar plant because this is not something like industrial use. This is something for an output.
00:55:47
Speaker
can we make it more like a lifestyle type of product and we also help them in getting more information about their energy consumption patterns and we make the housing more energy efficient. So those are some of the things which are working at the retail level. Okay, this would need like a very
00:56:06
Speaker
a different kind of an organization to deal with it, right? I mean, you would probably need to make it more self-service because I mean, if you were to maintain it, then that might become very expensive. Like, I mean, for you to maintain a one megawatt plant efficiency is much higher than maintaining like, you know, multiples.
00:56:24
Speaker
Yeah, so these residential plants we sell, we don't sign the PPA. It was something additional that we sell.
Podcasting with Zencaster
00:56:32
Speaker
We don't get into that electricity. And what is the cost of this?
00:56:42
Speaker
So it depends. I think the cost has been varying now. I think it's like per kilowatt around 45,000. And like say for a three-storey building, how many kilowatts would they need? Like regular residences. Depends on the cost drop available. It depends on the rooftop media available. We will consume much more than what the rooftop can support.
00:57:05
Speaker
Okay. And is there a government subsidy? The government has at least said that they want to give 30% subsidy for the residential. So that is available. Yeah. I think that is something which can be definitely available by the individual customers. So this becomes like Tesla has that division of proof of solar. So this would be like the Indian version of that.
00:57:27
Speaker
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00:57:48
Speaker
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00:58:12
Speaker
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