Investors make a beeline for Indian CleanTech, solar energy lights up through early-stage funding

India is fast becoming a hotbed for climate action, and there exists a massive untapped opportunity to make climate entrepreneurship the driver for positive change. Investors are discovering the same, drawing a good part of funds to CleanTech and solar energy.

The Sustainability Mafia, a purpose-driven community of 60+ climate entrepreneurs launched ‘Sustainability Ventures’ aka ‘SusVentures’ – a venture creation program to create 100 climate action companies within three years, i.e. by the end of 2026.

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The inaugural cohort of SusVentures has been kickstarted recently in collaboration with the prestigious Birla Institute of Technology and Science, Pilani (BITS Pilani). In the first cohort, 50 student entrepreneurs from multiple engineering disciplines across the Hyderabad, Goa, and Pilani campuses of BITS Pilani have been enrolled into the program to build 14 startups in sectors like Circular Economy, Energy Efficiency, EV and Solar.

As per the India Venture Debt Report 2024, the third edition of its kind, there is an anticipated surge in CleanTech deals, as stakeholders predict this sector to attract the most venture debt funding in 2024. This shift underscores a broader trend towards sustainable and environmentally conscious investments, aligning with global priorities and investor interests in green technologies.

Billion-dollar funding for solar energy in 1st month of 2024

As per Tracxn’s Geo Solar Energy Report, India’s solar energy space secured funding worth US$1.55 billion in 2023, 9% lower than the US$1.7 billion raised in 2022. However, within the first month of 2024, this space has witnessed US$1 billion in funding, with Sukhbir Agro Energy raising US$1 billion in its private equity round in January 2024. 

The majority of the funding in this space comes from late-stage rounds. However, a decline in late-stage investments led to a subsequent drop in overall funding in 2023. Companies in this space attracted late-stage funding worth US$1.3 billion in 2023, a 23% decrease from the US$1.7 billion raised in 2022. 

A sharp surge was observed in early-stage funding, which rose six-fold to US$252 million in 2023 from US$39 million in 2022. Seed-stage funding in this space has raised a total of US$11.5 million in 2023, a growth of 58% compared to the US$7.26 million raised in 2022. 

The solar energy sector in India has witnessed a total of 39 US$100 million+ rounds to date, out of which 12 have taken place in the last two years. No unicorns have emerged from this sector so far. 

Among the cities, Delhi takes the lead in terms of total funding to date, followed by Gurgaon and Mumbai. Solar Energy companies based in Delhi have raised US$3.1 billion to date, followed by those based in Gurugram (US$2.7 billion) and Mumbai (US$2.3 billion)

Among the cities, Delhi takes the lead in terms of total funding to date, followed by Gurgaon and Mumbai. Solar Energy companies based in Delhi have raised US$3.1 billion to date, followed by those based in Gurugram (US$2.7 billion) and Mumbai (US$2.3 billion).  

There has been notable activity in terms of exits within this sector. The Indian solar energy sector has seen 43 acquisitions to date, of which 16 acquisitions were witnessed in the last few years, and 2024 has seen only one acquisition so far. Further, 49 companies have gone public to date, out of which three IPOs took place in 2023 and two in 2022. 

IFC, Villgro, and DFC are the most active investors in the Indian Solar Energy space to date. CIIE, Social Alpha, and Villgro are the top seed-stage investors in this space, while Acumen, CIIE, and FMO are the top early-stage investors. Axis Bank, British International, and KKR are the top late-stage investors in this space.

This week, IndiGrid, an Indian listed power sector infrastructure investment trust (InvIT), consummated transaction of 300 MW AC solar asset for an Enterprise Valuation of ~INR 15,500 million, exclusive of net working capital and cash adjustments, in line with the share purchase agreement that was signed in January 2024. With this asset addition, IndiGrid’s portfolio now consists of 19 solar projects across 8 states of the country with a total generation capacity of 1.1 GWp. IndiGrid’s total Assets Under Management now stands at ~INR 282 billion.

This acquisition has been funded through a combination of equity, internal accruals, and debt and will add ~INR 800 million of net distributable cash flow, to IndiGrid, every year. The net debt/AUM will be ~63% post this acquisition.

Energy Transition in India is progressing at a rapid pace as the country works towards achieving its Net Zero commitments. Renewable generation is strategically positioned to play a pivotal role in this journey in the coming years

Harsh Shah, Chief Executive Officer, and Whole Time Director of IndiGrid

Harsh Shah, Chief Executive Officer, and Whole Time Director of IndiGrid, said, “Energy Transition in India is progressing at a rapid pace as the country works towards achieving its Net Zero commitments. Renewable generation is strategically positioned to play a pivotal role in this journey in the coming years. RSUPL is a high-quality asset and will add accretive NDCF for IndiGrid.”

Govt. Push

The government of India has already started to focus on locally developing solar products by providing incentives worth more than US$3 billion in the last three years. States such as Gujarat, Rajasthan, Karnataka, and Tamil Nadu are already generating more than 9 MW of solar energy. 

Read more: Funding winter proves 2023 India’s lowest-funded year in last 5 years

The Indian government has set a target of net zero emissions by 2070. It also plans to diversify 50% of its electricity requirement to renewable energy by 2030. The government is giving a push to the deployment of renewable sources of energy, especially solar, through policies and incentives.

The government also encourages 100% Foreign Direct Investment (FDI) through the automatic route to promote solar energy within the country. These initiatives are expected to bolster solar energy companies and accelerate sectoral growth.