Good Businesses 2014

Lighting up lives

Boond Engineering is using solar solutions to bring electricity to villages in central India

Trudging through the unpaved and pitch dark lanes of Rajepur village on a moonless evening, using our phones’ flashlight is enough to show us what living without electricity means for India’s rural poor. The lone kerosene lamp and solar-powered bulbs in some houses offer the only glimmer of light for this village in central UP’s Unnao district. It’s one of the 26,000 villages that does not receive electricity, even after 67 years of independence. In the stillness of the oppressively muggy night, a teacher conducts tuitions, explaining meanings of English words as groups of seven or eight children huddle around tables lit by kerosene lamps, straining to read in the dim, flickering light of the lamps. The incongruity of the situation strikes deep and fast. This is what Rustam Sengupta meant when he suggested that we stay till late evening during our field trip. “Then you’ll really appreciate what we are trying to do,” he had said when we were planning our visit. We do now.

The 33-year-old founder of Boond Engineering & Development, a New Delhi-based for-profit social enterprise that was launched four years ago, is doing his bit to overturn what decades of political apathy managed to achieve — denying 400 million Indians access to what is one of the most basic utilities of contemporary living. Choosing to focus on solar energy-based solutions to provide affordable power to off-grid villages, Boond has thus far managed to impact the lives of over 50,000 people in rural UP and Rajasthan.  

Learning curve

Sengupta, an engineer-MBA who worked as a consultant and investment banker in the US and Singapore, first thought of the idea when he came to India in 2008 as part of an INSEAD course on building social ventures. “I didn’t feel comfortable starting an NGO; and I knew it had to be a sustainable model,” he says. In March 2010 he moved back to India, staying in his native village Paushi in West Bengal’s east Midnapore for three months “talking to people about what they want”. He started Boond to tackle what he identified as the biggest challenge: electricity. “Boond is a metaphor. We believe that every drop of effort to provide energy to every household has a generational effect on the family’s quality of life,” he says. 

Solar power seemed an obvious choice. Sengupta first set up a shop in Paushi selling solar lamps sourced from Delhi. He then experimented with low-cost water purifiers before creating and selling a Boond Development Kit through NGOs in Rajasthan, UP, and in Ukhrul in Manipur, a tribal area near the Myanmar border. The kit contained a water purifier, solar lamp, mosquito net, three bars of soap and a tube of toothpaste. “We debunked this idea fast because people didn’t want these items bundled for them,” he says.

By this time, Sengupta had burned ₹7 lakh out of the ₹11 lakh cash he had set aside from his savings as seed capital for the business. Then in October 2010, Boond was selected as one of the winners in a start-up competition, receiving a ₹5 lakh grant to incorporate the business. CIIE, the incubation cell of IIM Ahmedabad, also stepped in soon after with another ₹25 lakh. In December, Sengupta had his first major hire in Tarun Kalra, who came on board as chief operating officer. An IT professional and consultant with senior-level stints at Zee Media and Xansa, turned serial entrepreneur, Kalra manages the sourcing alliances and operations for Boond. By the first quarter of 2011, two angel investors had come in, bringing another ₹25 lakh into the company.  

Power up 

With funds in hand, Sengupta turned his focus back to solar energy, looking beyond lamps this time. Boond did continue to offer solar lanterns for some time — initially sourcing, then contract manufacturing as per its own design from Delhi-based suppliers. So far, the company has sold 6,000 lanterns. But Sengupta recognises that rural consumers want more than just light. “A poor person should be able to flick a switch in his house and get power just like an urban consumer does,” he says. So far, batteries were the only source for running gadgets such as TVs and fridges, and had to be taken for charging to the nearest centre, usually in a large town. In late 2011, Boond installed its first solar home system of 40W at a flour mill in Kherwara block, Rajasthan. The system, which could run two CFL bulbs of 9W each and charge a mobile, was assembled from off-the-shelf components and cost ₹20,000. Installed with the help of local NGO Seva Mandir, Sengupta not only found his revenue model but also his CTO, Simran Grover, who was here on a fellowship programme.

Later models were cheaper — from ₹8,000 for a 20W DC home system to ₹54,000 for a 200W AC system — but still more than rural consumers could easily afford. Efforts to persuade regional rural banks (RRBs) to team up to finance the systems failed. “Sometimes their vision wasn’t aligned with us,” says Sengupta. Free distribution of solar products by NGOs and the government without adequate after-sales support too, had hurt their credibility. In 2012, he sought help from Selco’s Harish Hande, who was successfully running solar micro grids in Karnataka. Hande mentored and incubated the company through training and now sits on its board as a director. 

Boond’s offerings include systems designed for individual homes and for a community. Configurations start from 20W for two LED bulbs and a mobile charger and go up to 200W AC current systems that run just like inverters. The most popular is the ₹27,000, 40W DC single home system. This includes a set of solar panels on the rooftop, a charge regulator, and a cluster of batteries that supply the DC current to the home, and LED bulbs. The panels last for 20 years and batteries carry a five-year warranty. 

The company now has tie-ups with leading RRBs — Baroda Rajasthan Kshetriya Grameen Bank, Mewar Aanchalik Grameen Bank for Rajasthan and Grameen Bank of Aryavrat in UP. For customers, the upfront cost is reduced through a 40% subsidy under the Jawaharlal Nehru National Solar Mission of the ministry of new and renewable energy, with another 40% as the loan amount and 20% margin money. So, for a 40W system with a ₹10,800 subsidy, buyers shell out ₹5,400 to the RRB as down payment or margin money, with the remaining ₹10,800 settled through EMIs up to five years. In Rajasthan, where consumers are poorer, Boond arranges for micro loans of ₹4,000 and ₹6,000 for purchase of 10W and 20W systems. These are done through a grant of €22,000 it received in 2011 from the Netherlands-based Mr Keepi Foundation. There are around 600 of these installed across the state.

In Kanjaura village, local school teacher Vishnu Prakash Bajpai’s home is among the 15 households here that always get power, thanks to Boond. “There’s hardly any schedule of power cuts here. Power goes off for days, sometime weeks. The substation is far away and there are regular faults and disruptions all the time,” says Bajpai. Installing a Boond solar system in 2012 on his bank manager’s recommendation finally brought relief to the Bajpais and they now run a TV set (through a converter) with it, as well. The system comes with a one-year warranty, with five free service visits. Thereafter, users can opt to pay 2-3% of the invoice value towards annual service maintenance each year. 

Boond currently works through its branch locations — three in Rajasthan and two in UP. Each branch is led by a business manager with a couple of technicians and an administrative in-charge and caters to homes in a 25-km radius. They work with village entrepreneurs who are identified from within the local community and trained to assess needs of the residents for selling Boond solutions. The company has 27 full-time employees (21 are field staff) and 60 agents on ground who earn commissions of ₹100-500 depending on which system they sell. Rentals for the outlets that work as nodal sales and service offices for the area could be as low as ₹600 a month, with monthly salaries of around ₹5,000 for the store-in-charge. “Our operational cost for an outlet is less than ₹7,000 a month. If we sell three systems, we break even,” says Sengupta. 

Products are designed in Bengaluru and components are sourced from established industrial suppliers such as Alpex for solar panels and Artheon for batteries. Sunil Bhatnagar, director, Artheon Batteries, says his company supplies to Boond at a discount of 5-7% to support its solar-led mission. “We do this so they can pass on the benefit to the end-buyers. They work very closely with us, sometimes calling me late in the evening to discuss a customer problem from the site,” he adds.  

On the up-take

Central UP is considered among the most backward regions in the state and Unnao, with a population of over 3 million, is its worst example. The largest parliamentary constituency in India with 2.1 million voters, it suffers from high rates of unemployment and poverty. Unnao is also the most active hub for Boond’s initiatives. Over half its villages are un-electrified and those that are, get supply that’s at best erratic, with days or weeks without power. 

Para in UP is barely 1 km from the Unnao-Hardoi road, which receives power supply. Yet, this village hasn’t ever seen electricity supply, except when power lines and poles were installed a couple of years ago. “We got electricity for a month, and then the transformer was stolen,” says Bhanu Singh, a local farmer who’s getting the first pico grid charging station in Para installed at his home. With a central unit similar to a home system plus an energy meter, it generates 100W of 96V DC current that, in turn, is distributed to 25 homes through insulated cables. “People are excited about this, and everyone wants it now.” A newer invention, this involves a Bluetooth-based USB device that plugs into the home unit. Users bring this to the central unit for checking their account balance and recharging with the required amount. 

The grid, which costs ₹1.6 lakh, is among the 14 that Boond has installed so far. The village entrepreneur bears 20% of the cost, with a financier or funding organisation bearing the rest. Boond earns 15-25% as its fees from monthly revenue. Households pay ₹1,500 upfront to sign up for this service, and a monthly charge on prepaid basis. With an average of ₹300 per home, Sengupta says the entrepreneur can make ₹7,500 a month, of which he gets to keep ₹5,000. In Rajasthan, however, the pico grid system doesn’t make sense because of the low population density, with more distances between individual dwellings.

In the past four years, Boond has managed to light up over 7,500 households, of which 70% are in UP due to the support of RRBs here. The bulk of its installed base comprises solar systems sold directly, to around 5,500 homes. Another 500 are through sales and training to NGOs or CSR projects, which install and run these for free, while around 1,000 homes form part of its recent pico grid network. The company clocked a revenue of ₹2.3 crore in FY14, with a target of ₹5 crore for this year. With total investment of ₹3.5 crore, it is expected to break even this year. Close to 60% of revenue comes from the single home systems, with another 25% from smaller systems, and the rest from pico grids and projects in states such as Maharashtra, J&K and Bihar. Competition comes mainly from Tata Solar, which has a wide distribution presence across India, and a strong brand built over the years with the group’s credibility as an advantage. There are other local players and Chinese brands that sell solar products as well. 

Here comes the money

Last year, the Boond team approached impact investors for series A funding, to double the branches to 10, with five being added in UP alone, and expand operations within the two states within this year. While solar-powered water pumps are a new application Sengupta is considering, he adds, “Home systems will continue to be the most universal application. What will take precedence for us is research on more non-conventional approaches that are non-banking led,” he says. Solar energy will remain the focus. “We are product-agnostic but technology-specific. So we will not manufacture biomass energy systems, for instance.” 

Earlier this year, Boond received ₹1.7 crore from Milan-based Opes Impact, a fund that invests in early-stage social enterprises, providing them with what its executive president Elena Casolari calls “patient and understanding” capital. “We decided to invest in Boond not because it is a promising solar energy enterprise, but because it is a very unique social enterprise. Rustam and his team look at the energy poor as asset creators and we think their social impact model is very effective,” says Casolari, who visited UP last year to see Boond’s work on ground. 

It’s something that Audrey Selian, director of the Artha Initiative, a social impact fund associated with family investment trust Rianta Capital Zurich, agrees with. As an Artha Venture Challenge finalist in 2013, Boond received ₹30 lakh in funding, and another ₹60 lakh in fresh investments from a couple of angel investors. “They are a completely committed team and we think their approach — while not totally unique — is one that will be successful in their target market,” she says.

Sengupta is in no rush to ramp up operations and dazzle investors with numbers just for the sake of it. “My proposition is that we give it more time and come to a scale where we don’t raise prices.” The aim now is to fully saturate the markets it’s present in. Currently, Boond’s footprint covers Udaipur, Pratapgarh, Kota, Jhalawar, Baran, Bundi and Sawai Madhopur districts in Rajasthan and Unnao in UP, with plans to enter neighbouring Hardoi district as well.

Casolari finds the team’s measured growth philosophy a good fit as well: “They are very dedicated and stubborn about the objective of delivering solar solutions to very marginalised and deprived people, the ones neglected the most and we made it as a bound objective in our shareholder agreement,” she says.

Boond now plans to expand the pico grid model for the scale it wants to achieve in a shorter span. The flexibility of the system allows the company to reprogramme the control unit to handle larger loads by adding more solar panels, if demand goes up within a grid. Another model targets the commercial segment, and involves tying up with worker groups to provide affordable power and make the process chain more efficient. The first such initiative has been with Unnao’s Purica Dairy, with solar systems that power 325 milk collection and testing centres in the district. With each system priced at ₹35,000, the community model is Boond’s most profitable but requires a long gestation period. “It’s the hardest to sell. We first need to invest time in understanding the value chain,” he says. 

While there are many models of solar energy operational, there are enough villages to be lit up, says Sengupta. He grandly declares, “Darkness is my biggest competition.” More power to him.