International Finance Corporation (IFC) is looking to invest $5 million in Infuse Capital, an early-stage fund focused on cleantech and sustainable energy enterprises. The fund is also backed by the Indian government and an arm of the British global oil & gas major BP plc, and will be managed by the (CIIE), a business incubator run by IIM – Ahmedabad.
The fund has already raised around $9 million and will look at a first close with finalisation of commitment from the World Bank arm. Current investors in Infuse Capital include BP Ventures (BP’s corporate venturing arm) and Indian government’s Ministry of New and Renewable Energy (MNRE) & Technology Development Board (TDB).
After the first close, Infuse Capital will approach financial institutions and “corporate houses who have strong interest in development of sustainable energy in India” to raise the remaining amount, said Infuse Capital CEO Kunal Upadhyay.
IFC, which is currently doing the due diligence, is looking to invest $5 million or 20 per cent of the fund’s total corpus. Over the last couple of years, the World Bank arm has been an active investor, backing India-focused renewable energy funds and also making direct investments in this space.
While its limited partner commitments include South Asia Clean Energy Fund and Aloe Environment Fund III, its direct investments are in Bhilwara Power, SunBorne Energy, Applied Solar and Azure Power.
“IFC has been actively investing in private equity funds that fit within its strategic priorities, like climate change. Infuse Capital also provides much-needed capital and incubation services to early-stage companies in the cleantech sector, where there is a dearth of funding and mentorship,” said Pravan Malhotra who leads IFC’s cleantech investments in South Asia.
Infuse will be one of the first bets by IFC on early-stage companies in the Indian cleantech space. Its parent body, the World Bank, has recently set up an incubator called(CIC).
Infuse Capital will look to invest in 15-20 companies, with amounts ranging from $200,000-$1.5 million. “We will follow a multi-pronged investment approach – investing in existing companies and also building ventures from scratch through incubation and entrepreneurs in residence (EIRs),” added Upadhyay. Infuse Capital has been set up as a SEBI-registered venture capital fund with CIIE Initiatives Pvt Ltd as the investment advisor.
Infuse will focus on startups looking at commercialisation of available technologies through innovative and scalable business models, rather than supporting R&D projects. The team has earlier worked on seed funding for startups like Aspiration Energy (a solar-thermal based industrial process heat company) and Ecolibrium Energy (smart grid and energy management technology).
Investors in India’s cleantech sector have mostly focused on execution play, especially in the renewable energy space. But they are now witnessing the emergence of new technologies and segments like energy efficiency.
“We are witnessing increasing activities of companies with innovative technologies or business models in the cleantech sector, but many are too early for IFC. We can still finance these companies, initially through Infuse Capital and then directly, at a later stage,” added Malhotra. IFC launched a $60 million Cleantech Innovation Facility last year, which would also look at co-investments in businesses with Infuse Capital.
In addition, there are also new business models which can be created around existing technologies as the Indian market provides a large opportunity. “One of the biggest beliefs behind this fund is that there is no dearth of cleantech technologies globally. We will look at the best innovations globally and create entrepreneurial solutions around them,” said Upadhyay.