India one of the best recyclers in the world

The green technology space is hotting up in India and private equity funds are getting excited about new companies here. Nikhil Menon & Ramkrishna Kashelkar speak to Vivek Tandon, general partner at Aloe Private Equity, about the funds’ plans for India and the sectors it’s keen to invest in.

What is Aloe PEs investment philosophy?
We are focused on investing in green tech. We always look at the environmental and social sustainability of all investments. Our goal is to find global technology leaders and to help them expand in India, China and Europe. The technologies are normally proven and tested and hence there is zero technology risk. Unlike most PE firms that have an average investment horizon of 3-5 years, we look for promoters and entrepreneurs to team up with us for 6-8 years to build solid global assets.

How are your investments in India shaping up?
We have three funds and are now investing from our second and third funds. These are focused on India and China. We typically do 6-8 deals per fund and the average ticket size ranges from $10-40 million. Aloe looks at product-based as well as service-based companies. The fund has two major investments in India today—Hyderabad-based Greenko Group, a renewable energy developer and producer, and Mumbai-based Polygenta, which has a disruptive PET recycling technology. Greenko has been listed on the Alternate Investment Market of London Stock Exchange and its current m-cap is over 12 times our initial investment cost.

While investing in a company, how much stake do you normally pick up?
We are majority stakeholders in most companies. Most people say Indian entrepreneurs are fixated on being majority stakeholders and are interested only in the valuation you give them. I don’t agree. Aloe has not had this problem. People confuse management control, profit share and ownership. Just because a party owns 60% of the shares in a company, does not necessarily mean that it has 60% of the profits and 60% control. We make a distinction between the three and are aware of the frustrations of promoters in having their ownership in a company diluted as the company grows. We recognise that as a company grows, the promoters should increase ownership of the business.

Do you look for entrepreneurs with relevant experience only?
Lack of experience in the particular sector is not such a concern but we don’t want to work with someone who just wants to jump on to the green bandwagon to make quick bucks. We have worked for 8-12 months with the promoters before we actually invested.

Within environment technology, what areas do you find interesting?
India is one of the best recyclers in the world—very little waste is discarded into landfill sites. Most waste generated in India is collected and recycled but in a disorganised manner and little technology is used to treat the waste. So most products produced from waste are of an inferior quality and are used as low value by-products. Aloe owns technologies that create high value products from recycled material. Take batteries for example. We have tech which can recycle batteries from mobile phones, laptops, electric cars into high-grade metals for use by battery makers as a direct replacement for lithium, cobalt and manganese. We will also start discussions with Indian firms to recycle steel dust generated by steel plants.

nikhil.menon@timesgroup.com

Vivek Tandon General Partner, Aloe Private Equity