24 Good Businesses 2012

Let the sun shine

ONergy sells customised solar power solutions to rural homes in East India

Tuesday, July 31, 2012:  For 55 year-old Gopal Ghosh, a resident of Bagnan, a hamlet of villages 55-km from Kolkata on the NH 2, the day was like any other working day. The head-honcho of a women’s welfare co-operative credit society, sits in the office and clears files, chairs meetings and oversees operational issues — just like any other day. In the evening as he approaches his home — just a kilometer away — it suddenly dawns on Ghosh that the day was actually witness to an extraordinary event.

That “Black” Tuesday, over 600 million people across North and East India experienced power outage for 10-18 hours due to a major grid failure. However, that evening Ghosh’s two-storey home was well-lit, glowing amidst an almost pitch-dark neighbourhood. About a month back he had installed a solar-based home electrification system that powers six LED lights and four fans. It cost him around ₹28,000. Thanks to the power outage, his small illuminated home had already become a talking point among neighbours. Ghosh now plans to run the entire two-story Co-operative Society Building on solar power, and has already installed a solar powered LED lamp in his spartan office room.

Ghosh was first sensitised to benefits of renewable energy in rural homes by two youngsters — Vinay Jaju (29 years) and Piyush Jaju (26 years) — in January this year. The Kolkata-based brothers run a for-profit social venture, ONergy, which offers renewable energy solutions for rural households. They had approached Ghosh to set up a Shakti Kendra or a renewable energy centre in the Co-operative Society Building. The Jaju brothers also pitched for training select members of the co-operative’s 23,000-strong self-help groups. After training, the ladies — from in and around Bagnan — go around 80-odd villages in the region to propagate the concept of renewable energy among rural households. They also earn a commission on each sale. This has given a fillip to many local micro entrepreneurs some of whom have taken to selling solar powered electrical systems and products on a full-time basis. ONergy takes care of installations, and any after-sales support through the Shakti Kendra.

In a first floor room  of the Co-operative Society Building, there is space enough for a table. On the table are stacked several packed solar powered LED lamps, lanterns, night lamps, an electronic testing apparatus, among others. Every week, ONergy organises road shows and demonstration camps showcasing the benefits of solar powered products targeting rural homes within a 30-km radius of each of its five centres. In little over a month, around 70-odd households in Bagnan use one or other ONergy product. Already 18 households have evinced interest for electrifying their homes using solar powered panels and lights. Typically, ONergy executives assess the energy requirements of each household, and solutions are tailored based on the family’s financial resources. ONergy helps by facilitating loans from banks and micro-finance institutions too.

Slugging it out

Typically, a rural household spends about ₹200-250 per month on kerosene and diesel to meet its energy requirements. Vinay did not want ONergy to be another “marketer” of solar powered products, but a solutions company that meets each household’s energy requirements. “To get the last-mile service delivery model right was vital for our sustainability,” concedes Vinay. He took cues from the business model followed by another successful venture in this domain — Harish Hande-promoted SELCO Solar Light. Hande himself took a keen interest in mentoring and guiding ONergy in its initial years.

In mid-2009, Vinay asked his brother Piyush to join the venture. Starting off with a seed capital of₹10 lakh — culled from their own personal savings and help from their mother — the brothers formally kick-started ONergy in January 2010. Over the next two years, ONergy touched the lives of over 50,000 people across 250 villages in West Bengal and parts of Orissa. The Jajus found that MFIs and co-operatives were more open to lending to BOP families. So in the first two years, 60% of ONergy’s sales of solar products and equipment took place through MFI lending, while the remaining was equally divided between institutional sales, and cash. Since early 2012 — following a RBI rap — commercial banks have become more open to financing such purchases. 

Another challenge for the Jaju brothers was to get equipment and vendor finance from banks to purchase solar equipment. “We positioned ourselves as a solution and service company. But banks asked for collateral and assets to secure the loan,” says Piyush, who takes care of finance at ONergy. In 2011, the duo raised around ₹30 lakh in the form of equity and debt from family. This was followed by another round of fund raising in early 2012 from internal accruals, international grants, and family sources. By March 2012, ONergy had raised funds worth ₹1 crore — 60% of which are already deployed. 

 Scaling up time

ONergy has set a target of reaching out to 500 families in Bagnan over the next three-four months. Just like the one at Bagnan, ONergy runs three other Shakti Kendra in West Bengal’s North and South 24-Paraganas districts, and one at Bolangir district of Orissa. Two more centres are slated to kick off at Shiuri and Cooch Behar by September this year. It typically takes around ₹5 lakh to set up such a centre and two years to break-even. Of the five operational centres, three have already reached break-even. ONergy notched up sales worth ₹78 lakh in FY12, and expects to clock a topline in excess of ₹2 crore in the current fiscal. In first quarter of FY13, sales of solar powered products and solutions touched ₹40 lakh. 

Vinay and Piyush want to reach one million people in rural India in the next five years. The plan is to take the Shakti Kendra count to 50 by 2016. Vinay expects ONergy to break-even in 2014 as revenues surpass the ₹3 crore mark.

The Jajus are in talks with investors to raise around ₹2.5 crore in growth capital, but its not coming easy. “Most investors are looking at double-digit returns while we are promising them a single-digit IRR,” says Piyush. Somewhere down the line, the founders and the prospective investors have to meet mid-way. Till then, for the brothers, securing energy needs of rural poor remains a means to an end not an end in itself.