Harish Hande says small-scale, stand-alone solar installations are a better way of reaching poor, remote villages. That’s why he wants to seed and mentor local enterprises in this field
Harish Hande
Profile: MD of solar lamps company Selco Solar
His New Mission:
A fund that will seed other enterprises in sustainable energy
His Aim:
Replicate Selco’s experience and share best practices, technical knowhow and field experience
The Method:
• Look for entrepreneurs in states (Bihar, MP, WB, Rajasthan) where Selco is not present
• Selco’s senior management will mentor and groom these
entrepreneurs
• Raise money from philanthropic foundations and high net worth individuals around the world
In October 2003, Harish Hande travelled to London to meet his largest shareholder, Gaia Kapital. It owned 90 percent of Selco Solar, Hande’s commercial venture to sell solar lights to the rural poor in India. It was an extremely bad time for Selco.
Large government subsidies for solar energy in Germany and Japan had diverted supplies to these developed markets, driving up prices of solar panels by 47 percent. Selco’s customers couldn’t afford the price hike; sales were down by almost half and projections were looking worse. Gaia was unhappy and Hande was hoping that the meeting would ease some of the tension. What transpired next left him shocked.
According to Hande, the Gaia representative told him that he didn’t care, that he was expecting the same returns from Selco that he was getting from the wine gardens of France. Angry, Hande left the conversation midway and returned to India the same day. “I told him, I have no patience for you. Come to India and we will talk,” he says.
Hande is telling me this story on a particularly warm October evening. There is no air-conditioning in his modestly furnished office in Bangalore. The reason he is recounting this incident is because he is raising a $10-million fund, which will seed other enterprises in sustainable energy. He knows very well that running a for-profit business while looking at the larger social good requires a very delicate balance.
This year (ending March 30, 2012) Selco will clock revenue of Rs. 17 crore on which it will make a profit of Rs. 1.2 crore. It has so far sold solar lighting to more than 100,000 households, many of them in extremely poor hamlets. Thanks to a reversal in the subsidy programme, solar panel prices have come down to half of what they were in 2003. Hande believes the time has come for him to replicate the Selco model of decentralised energy—he says small-scale, stand-alone solar installations are a better way of reaching poor, remote villages, than using large, centralised thermal stations.
Through the fund Hande will invest and mentor other entrepreneurs around the country to start Selco-like ventures.
Hande is raising his first million dollar from Halloran Philanthropies, an organisation that among other causes, supports clean energy. This money will be used to seed the first five startups. Hande expects to make the first investment in February 2012. In time, he will fund 18-25 startups. Once they reach a certain stage and start becoming viable, he will connect them to bigger social funds like Aavishkaar.
He will be joined by Selco’s head of finance K. Revathi, who will manage the fund and COO Ashis Kumar Sahu, who will help him train the new entrepreneurs. Selco will not get anything from the new fund.
There’s a lot riding on this fund. “We have been criticising how funds are run, how ecosystems are managed, and we want to prove that our success is not one-off,” he says.
In 2006, at the height of the subsidy crisis, Selco had only two months of cash remaining and Gaia had told Hande to start retrenching employees. If Hande couldn’t raise money, he would lose control of the company or would have to shut it down.
Hande got a meeting with one of the world’s largest social investors. It was ready to sign a $1 million cheque, but had one condition: Selco should scale to a million households in the next few years. Hande refused the offer. Scaling up for the sake of it had never been his belief.
Hande now insists on doing a due diligence on funds before he takes any money from them. “People think we are being arrogant, but if they can do a due diligence on us, we also want to talk to their portfolio companies to see if they are happy after taking the money,” he says.
One way in which Selco balances its commercial and social objectives is by monitoring how many small systems (which typically go to the poorest customers) each branch is selling.
(This story appears in the 03 February, 2012 issue of Forbes India. To visit our Archives, click here.)