While ‘Definite’ was the moniker of the last surviving trigger-happy gangster in Anurag Kashyap’s epic saga Gangs of Wasseypur, it is also a term that describes 33-year-old Arun Shenoy’s career trajectory perfectly. Right from his days in engineering he was clear that he wanted to create a company in the “green energy domain”. And every decision that he took then onwards was to ensure that he got closer to his goal. To pursue his interest in non-conventional energy, he moved to the US to get a master’s degree in building systems and geothermal energy.
After that he worked with ClimateMaster, the largest manufacturer of geothermal products. He then made the transition to Trane (acquired by Ingersoll Rand in December 2007), where his career path converged with that of 38-year-old Mandar Kaprekar, a veteran in the building and geothermal space. Since both had an entrepreneurial bent of mind and experience in the green domain, they decided to join hands to start Green India Building Systems & Services (GIBSS). Air conditioning, hot water and lighting systems account for 80-90% of the energy consumption in a building and this is precisely what GIBSS sought to address through its solutions. For each of these applications the duo planned to deploy in-house developed energy efficient technology.
So, in the case of air conditioning, they would offer geothermal solutions; hot water boilers would be substituted with co-generation systems; and in the case of lighting, fluorescent and halogen bulbs would be replaced with LED lamps. While the business plan was comprehensively thought through, executing it would put them through a painful two years.
Despite being recognised at the Indian School of Business where they were incubated, the first-generation entrepreneurs had no option but to rely on their own savings to power their start-up. Though the duo had initiated discussions in December 2008 to form a company, operations only began in April 2010. To bolster their savings pool of₹60 lakh, the founders participated in the TiE 2010 competition for start-ups at Hyderabad, and bagged the top prize — a funding of ₹25 lakh from Hyderabad Angels. While that did help, they again found themselves starved of working capital when they bagged their first major order. To tide over that they raised another ₹50 lakh through friends and family, but not before coughing up a usurious rate of interest.
Bread and butter
Although geothermal is the biggest money spinner for the company right now, lighting solutions is what the duo started with as executing a geothermal pilot required substantial capex. Kaprekar explains, “It was easier to build a lamp and show it to a prospective customer. A few doors opened and then we started pushing hot water solutions and then finally moved to geothermal.” However, lighting being a very competitive segment, the founders had to strive really hard to break into the business.
The French Consulate in Mumbai was their first client in the lighting business and since then almost every five-star hotel has availed of their lighting solutions. Shenoy says GIBSS started with an acute focus on the hospitality segment because that sector has high scope for cross selling. This ability to provide multiple solutions is also GIBSS’ unique selling proposition. It recently won a very competitive lighting order as it could bundle a hot water solution along with it.
The win, however, that Shenoy recalls with most pride is The Leela. Starting with one corridor at The Leela, Mumbai, it eventually won orders from all the Leela group hotels. He elaborates, “Most five-star clients will tell you, ‘energy savings is secondary, aesthetics is primary. If the guest feels a difference between walking into my conventional corridor and then walking into a GIBSS-lit corridor, then I am going to say no to you.’”
Time for jam
Though it was a door opener, lighting is today an integral part of GIBSS’ portfolio. But from a ticket size point of view, the order value in geothermal beats hot water and lighting solutions hands down. While the average order size for lighting is under ₹2.5 crore and that of hot water projects ₹3 crore, depending on how much cooling is required, a geothermal project could cost as much as ₹15-20 crore. Currently, GIBSS is executing two geothermal projects that are in excess of ₹10 crore each. Kaprekar says along with the hospitality sector, large data centers, R&D hubs and luxury apartments are natural catchment areas for selling geothermal solutions.
Since the short payback period and savings that arise are hard to ignore, clients are more than willing to sign up to implement the energy efficient solutions that GIBSS proposes. Kaprekar, who drives R&D, says, “We just ask the client if he would like to generate a couple of crore in additional cash without much effort.” Once the client is assured of the technical validity, a typical implementation lasts anywhere from five to 13 weeks depending on the project.
GIBSS, on its part, also makes it easy for potential clients to do business with it by offering innovative financing. These measures include a pay from savings model as well as a bank guarantee in case the assured savings do not come through. Shenoy, who is also the head of sales, says the business model has evolved over time. “During the initial years we pushed very hard to close orders, and that is also where the solutions developed; when you are hungry for orders, you think, ‘what else can I do to sell?’”
Its fast growth notwithstanding, GIBSS is facing the challenge of getting adequately trained geothermal talent. Kaprekar says the company is dealing with it through overseas hiring as well as by hiring local talent and putting them through a training program. The other perennial test is ensuring adequate working capital. To address that Shenoy says the company plans to raise more capital by December 2012. The last capital infusion GIBSS had was in December 2011 when investors, led by Sashi Reddi, poured in₹2 crore. GIBSS is targeting FY14 revenue of ₹75-80 crore with geothermal contributing about 50-60% and the rest being equally split between hot water and lighting. With respect to net margins, Shenoy acts coy and hesitatingly says they are a healthy double digit. “If investors read it, they may like it, if clients read it, they may not. We have to balance that concern,” he trails off.