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Eyeing returns, private equity funds float own clean energy ventures

According to reports, IDFC Private Equity is looking for partners for Green Infra, a threeyear-young Delhi-based renewable energy company. Nothing unusual about it – after all, private equity investors do resort to mergers to create value – except that the promoter of Green Infra is none other than IDFC Private Equity itself.

The Mumbai-based firm is not the only private equity (PE) fund that has floated a start-up on its own. Others such as India Value Fund and Baring Private Equity Partners (India) have also turned entrepreneurs even as they go about their primary task of funding businesses for growth.

“Own ventures are solutions to fancy valuations promoters often ask for. They resolve the governance issues too,” says Rahul Bhasin, managing partner of Baring Private Equity Partners (India).

His firm has pumped in over Rs 100 crore to set up a clean energy company in Chennai, Auro Mira Energy. PE managers are also choosing to enter sunrise sectors – renewable energy is a hot favourite – in which they find it difficult to spot investment-worthy entrepreneurs.

IDFC PE, for instance, has grown Green Infra into a company with 165 mw of wind power assets in four states. The company has 300 mw of projects in various phases of development across various verticals, and a pipeline of 400 mw of projects.

IDFC PE is now looking to scale up further by either merging with a similar company in the renewables space or selling a stake to an investor and using the proceeds to fund expansion.

For IDFC PE, the decision to launch Green Infra was prompted by its failure to come across an entrepreneur with a vision for a large renewable power project. So it decided to launch a start-up with the objective of generating a total of 1 GW of solar, hydro, biomass and wind power, in phases.

“Our philosophy was to lay the foundation of probably India’s biggest renewable and energy-efficient company that will be selfsustainable under the stewardship of professional management, and capable of living up to highest standards of corporate governance,” says Satish Mandhana, MD, IDFC PE.

Lack of governance has emerged as the biggest worry in a PE investor’s relationship with promoters, particularly those of small to mid-size companies.

Liliput Kidswear, KS Oils and Subhiksha are three examples of companies in which PE investors fell out with the promoters because of alleged poor governance practices.

A year ago, India Value Fund set up Akshayini Oorja to build a portfolio of renewable assets and is targeting a capacity of 250 mw.

The company has built a management team comprising a chief operating officer, finance head and civil and electrical project development heads, amongst others, according to information

on the PE fund’s website. India Value Fund Managing Partner Vishal Nivetia was not available for comment.

A section of observers, however, wonders whether PE fund managers have the bandwidth to manage start-ups – and whether they should even be dabbling in own ventures.

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