The IFMR Trust, through its investing arm, Drinking Water Network Enterprise, has also invested in a project for water purification being set up by WaterHealth India Pvt. Ltd, or WHI, a subsidiary of WaterHealth International, Inc., which provides business solutions for accessing clean water.
“It is an interesting transaction in that we have provided a long-term loan of Rs20 crore to help WHI go from 20 water treatment plants to 300,” says Ananth. WHI will pay 15% interest on the loan amount every quarter and when the project becomes profitable, it will share 20% of the profits with IFMR Trust. “This is a risk-reward formula devised by us that allows the entrepreneur access to risk capital without the attendant hook of ownership, while the investor gets his fair share of profits or reward,” says Ananth, adding that entrepreneurs in the social sector typically lose out on large chunks of their equity ownership in the search for capital.
In the WHI project, IFMR co-invested alongside Acumen Fund India. “Co-investing is a very good model for social impact investing, it helps share best practices and it also allows us to share mistakes,” says Ananth.
Acumen Fund India, too, has leveraged the co-investment model well by partnering with the government-owned Hindustan Latex Ltd to invest in LifeSpring Hospitals Pvt. Ltd. As of now, LifeSpring Hospitals runs six 20-30 bed hospitals in Hyderabad and coastal Andhra Pradesh. “We will add 10 more hospitals this year and finally hope to take it to a total of 30 such low-cost hospitals offering specialized maternity care,” says Anant Kumar, chief executive officer, LifeSpring Hospitals, who expects his company to make profits as the volume of business increases with a greater number of hospitals.
In Bangalore, technology entrepreneur Sridhar Mitta, former chief technology officer of information technology firm Wipro Ltd, and now the managing director of outsourcing firm e4e Business Solutions (India) Pvt. Ltd, has set up NextWealth Entrepreneurs Pvt. Ltd to help social enterprises access technology, capital and market contacts.
To begin with, NextWealth put in seed funding of Rs25 lakh in the Masonic Blood Bank in the North Arcot district of Tamil Nadu to upgrade its technology backbone and create compliance records. The target was to help this non-government organization transform from a not-for-profit model into a well-run enterprise that generates profits. The first step towards this goal is to increase volumes by first increasing the number of donors.
“The idea was to do something for the donor, so when he comes and donates blood he gets a full health check report for free,” says Mitta. The service charges collected from a large number of customers are expected to generate higher revenues, making the venture profitable. “Once this efficiency comes in, the project will start making money,” says Mitta.
Next on his list is an investment in a start-up that is developing stem cell therapy for blood cancer.