Mumbai: IDFC Private Equity, the private equity investment arm of infrastructure financing firm Infrastructure Development Finance Co. Ltd (IDFC), has invested $10 million (Rs40 crore) in Emergent Ventures India Pvt. Ltd, a clean development mechanism (CDM) consulting company.
CDM is an agreement in the Kyoto Protocol that aims to reduce greenhouse gases by allowing companies in developing countries such as India to earn carbon credits from projects that reduce carbon dioxide emissions. The credits can be exchanged between businesses or bought and sold in international markets.
This is the first disclosed investment in a services company in the clean technology sector. Typically, investment in this segment goes into the technology side of the industry, such as Suzlon Energy Ltd, Praj Industries Ltd, Reva Electric Car Co. Pvt. Ltd.
Emergent Ventures may be a strategic investment for IDFC Private Equity as it could help it fund projects since one of its offerings to clients is structured finance. “We will leverage this investment to build capacity in this space,” said Satish Mandhana, managing director of investments at IDFC Private Equity.
IDFC Private Equity has been among the top investors in this sector. It has placed Rs350 crore ($87.6 million) into five companies in natural gas, solar and water (see chart) from its $440 million fund, which is now more than 75% deployed. Other funds investing in clean technology include Sun Group, Yes Bank Ltd, Draper Fisher Jurvetson India Advisory Services Pvt. Ltd (DFJ) and Lightspeed Advisory Services India Pvt. Ltd.
Yet, very few of the funds active in this space are focused on infrastructure. Luis Miranda, president and chief executive of IDFC Private Equity, says: “To us infrastructure is defined as anything that is a bottleneck in India.”
In 2004 Vinod Kala, managing director of Emergent Ventures, started the firm to help companies on the full process of choosing and executing a carbon credit project from doing the paperwork and financing the project to finding a technology partner. Now he said he has $70 million worth of carbon credits in the pipeline. And he plans to expand further with the IDFC Private Equity investment.
In 2007 he expanded into Pakistan, Thailand, Malaysia and Bangladesh and now plans to expand to other parts of Asia. By the end of the current fiscal year, Kala plans to enter Europe. He also plans to strengthen his engineering and financing services as well as carbon neutrality business, which helps companies measure their carbon emissions and find ways to curb it.