GOING GREEN FOR BIG RETURNS
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Oct, 16 2012

GOING GREEN FOR BIG RETURNS

Have you ever thought of making big profits from renewable energy? Are you puzzled? You needn't be as natural sources of energy have now become the hottest catchphrase in the world of business. Find out how green energy is deemed to be the next target ind

CALL it a eureka moment or blessing in disguise, solar energy has emerged as the newest rage and a perfect solution for people across the world in the midst of increasing concerns due to the scarcity of power resulting in recurrent power-cuts. In today's fast-paced life, there is a need for a reliable power back-up solution and an eco-friendly product.  In order to feed the ever-increasing demands, solar power generating systems/products are reckoned to be the future that would make a mark not only in India but also across the globe. It is said that the solar products such as solar water heaters, solar lanterns, solar home lights, streetlights, traffic blinkers, battery boxes and many others are set to popularise the non-conventional energy sources. Besides, the non-conventional energy sources are being looked upon as an effective solution to the depleting energy sources across the globe.

As consumers throughout the world become more receptive towards making use of greener concepts, the brands have started targeting various retail distribution models such as franchising and distributorship for retailing their solar products to government organisations, corporate clients and to consumers. Nowadays, solar energy has become the buzzword in the world of green business. For original equipment manufacturers, now it's time to tap the massive growth potential that the solar industry has by creating an ideal business opportunity for dealers, distributors and franchisees that are looking to cash in on a greener opportunity.

The question of what has essentially spurred the growth of the solar industry in India is no more a mystery. Elaborating on what has truly ignited the demand, T J Joseph, Managing Director, Anu Solar, says: “Increasing electricity tariff, the failure of the state grid, failure of conventional power sources to electrify India, not to speak of environmental reasons, have all forced the thinking to focus on alternative power solutions.”  The government has also started playing its part in launching new policies for augmenting the development of solar products to combat the everyday challenges in a unique way. Says T J Joseph: “The government policies, such as are prevailing in Karnataka, have also helped; interest subsidies by banks, mandatory law from April 2009 to use solar water heaters, monthly rebate of maximum Rs 50 on electricity bills, penalty on new buildings without solar water heaters, have all contributed to the increase in interest in solar energy. But there is a long way to go yet.”

Another solar-based company Emmvee Solar Systems Private Limited has more than 20% share in the Indian market for solar water heaters. “The main factors which have spurred the growth of the solar industry in India are economical viability, the need for alternative energy and for constant energy supply to face acute shortage of power in the country,” says D V Manjunatha, Founder & MD, Emmvee Solar Systems Private Limited.

As India is facing a severe energy crunch, Solid Solar by Gautam Polymers steps forward to offer business opportunities for entrepreneurs even as they endeavour to ease the energy crisis the country is facing. Their target is to provide rooftop solar power solutions for commercial and industrial enterprises that are facing massive power cuts and are dependent on diesel generator sets for their requirements. A captive solar power plant uses existing roof space and reduces electricity bills or diesel consumption by 30-40%.

According to industry reports, the total solar industry is estimated at approximately Rs 400 crore and likely to touch 18.7 million by 2022. Talking about the market share they have in India's solar industry, Joseph says: “Anu Solar is the largest manufacturer of solar powered water heaters in Karnataka and holds about 40% market share. Apart from solar water heaters, we also offer products like energy efficient LED lights and solar power generators. We are soon to start retailing solar goods through our chain of customer experience centres called Anu World, across India.”

Speaking about the current market trends in the solar industry in India, Sanjay Deshmukh, Founder & Proprietor, Madhuri Solar, says: “India has an opportunity to play a major role in global energy transfo-rmation. With significant technical and production resources, India can be a major supplier of solar PV cells and modules to meet the growing world demand. With the current pace of growth, India's solar industry could emerge as the fourth largest generator of solar energy in the world after Germany, China and Japan.”

Presently, India's solar industry is dominated by players like Anu Solar Power, Madhuri Solar, Solid Solar by Gautam Polymers, Neutech Solar, Lumex, a brand of Sri Subhadra Industries, India Solar Solutions, EPL India Ltd, Emmvee Solar Systems Private Limited, Kotak Urja and Kyocera Asia Pacific India Pvt Ltd.

Market statistics

  • India consumes 3.7% of the world's commercial energy making it the fifth largest consumer of energy globally.
  • The number of solar water heating systems is projected to grow at a CAGR of about 22% between 2011 and 2020.
  • The solar industry is growing at 40% p.a. worldwide, while in India the industry is growing at 500% p.a. A key factor is the launch of Jawaharlal Nehru National Solar Mission (JNNSM) in June 2010 that has introduced policies for capital subsidy and loans through banks.
  • Till now the total size of off-grid solar industry (solar lights & rooftop solar power plants) was approximately Rs 500 crore, which will grow to Rs 10,135 crore by the end of 2015. JNNSM has set long term targets for the off-grid solar industry which is all set to increase to Rs 50,000 crore by 2020. Considering this, Solid Solar aims to capture at least 10% market share of the growing off-grid solar industry.

Business models

The solar industry in India mainly operates through distributorship. On the other hand the model of franchising is slowly and steadily making its way into the market by offering several opportunities to aspiring franchisees and to dealers too.  On tapping the larger share of market, Anu Solar will be primarily targeting the urban locations through its franchise centres, while their rural plans will be driven more by direct and dealer sales.

In case of Solid Solar, they previously had a dealer / distributor model, but now they have exclusively adopted the franchise model that will carry a vast product range and give dedicated support for local sales and servicing.   Solid Solar will provide 40% subsidy and financing on its products through its franchisees. Also, they will be providing marketing support to their franchisees. The sales and service personnel of the franchisees will also be trained simultaneously.

Highlighting the training and business support they will render to their franchisees, Sanjay of Madhuri Solar says: “We provide complete technical training of all our solar products along with operational, sales and marketing training. There will be support visits every quarter for introducing new products to distributors and for ironing out any operational problem. Besides, we do state and national level marketing for our distributors and pass on the leads and investor queries directly to them.”

As for providing training to dealers and distributors,  Manjunatha says: “Dealers and distributors will be intensively trained about the products, their benefits and usage, all viable applications, the economical benefit, and very importantly about the installation and after-sale services. All trainings are being conducted in conformity with Emmvee's highest quality standards. Emmvee is undertaking regular marketing activities to support sales development.”

Before partnering with business associates/ franchisees, every company/brand follows different criteria. For instance, anyone with good sales and business management skills can become a distributor of Madhuri Solar. They have distributors who are working from home or doing the job as a part-time business. Investors with higher investment bandwidth are doing it full time as well.

Anu Solar targets active entrepreneurs with a passion for renewable / solar energy, who believe in the business potential of solar energy; possess good business acumen and ambition to be solar entrepreneurs.

Knitting a strong network

Anu Solar rolled out their expansion initiative nationally at the end of July. The experience centres are coming up shortly. Commenting on opening solar electronic product outlets, Joseph says: “The franchise plan is a major component of the brand expansion strategy. We will also be adding to the product and technology basket. In the first year, 10 centres will come up in metros and then 40 more in metros and tier II cities. Over a period of 10 years, we aim to open 200 customer experience centres with 2,000 POS, across the country. Most of these centres will be based on the franchise model.” Currently, the annual turnover of Madhuri Solar has reached to Rs 40 crore. They have 68 dealers/distributors spread across 45 cities of India. On extending their brand's network Sanjay Deshmukh is optimistic about having 100 dealers/distributors by March 2013. Plans are also afoot to expand their business in rural areas.

Currently, Emmvee boasts of having more than 250 distributors/dealers across the country. The company believes that India has a great potential for solar business, and to fill the need gaps, Emmvee has established its brand, Solarizer, very strongly in Bangalore, Karnataka and South India.

On extending their footprints, Manjunatha says: “The last few years have seen us entering the northern and eastern markets more aggressively. As for the rural markets, we will build on our existing presence to expand further.” At the moment, Solid Solar has 15- 20 dealers and distributors (approximately) in various states of India. When asked about the business model they prefer for spreading their footprints, Shubhra Mohanka, Director of Solid Solar said: “We will be relying on the franchise route and plan to appoint franchisees in each district of UP, Haryana,  J & K, Bihar, MP and Jharkhand.” For selling solar lanterns, solar home systems, solar power packs through bank financing, Solid Solar will also plan to target franchisees in rural markets.

Gaining from unique strategies

Whenever a new product is introduced in a market, aggressive brand promotion activities and campaigns are conducted so as to generate awareness among the masses. Franchising and distributorship models are recognised as unique business expansion strategies to popularise a brand in the market. In case of solar products, Anu Solar is the first solar product manufacturing company to come up with the idea of franchising all over India exclusively for solar powered products. Through their brand's chain of stores, Anu World will sell products ranging from solar water heaters to solar invertors and other commercial solar goods like toys, calculators, etc. Since their customer experience centres/stores will work on solar power, it will create awareness among the people regarding the advantages of solar products. Even to cement a stronger position in the market, the brands across the solar industry are taking advantage of promotional activities so as to generate the awareness among the masses about the benefits of using eco-friendly solar products. For instance, Solid Solar is looking at marketing strategies, including E-marketing (web marketing, digital marketing), print media advertising (newspaper ads), display vans, banners and canopies connecting various government bodies, NGOs, etc.

Tackling challenges

While introducing any new product or concept in the market, every industry goes through a series of intricacies. The solar products market in India is extremely nascent in terms of accepting solar products for daily usage.  Commenting on the challenges they had to face, Joseph says: “We faced many challenges initially because people were not aware of the advantages of solar products. Also, money was a constraint.  People considered solar products to be expensive because of the high upfront cost. Subsidies, coupled with the understanding that solar products have very low running energy cost, have helped matters. We also came up with a scheme called iHot in 2009, where we installed over 7000 solar water heaters in households across Bangalore on a pay-per-use model. The customers did not have to make any initial investment. This gave consumers a chance to experience benefits of solar products and in a sense it created a market that did not exist earlier.”

Regarding the initiative to create awareness about solar products, Sanjay Deshmukh says: “Educating the target audiences about the solar concept is tough. Since the initial cost is high, they need to be explained the long-term benefits of solar products. Frequent presentations and strong marketing have been able to get us through so far.” On the other hand, Shubhra Mohanka, Director, Solid Solar, says: “Solar requires high upfront investment from the end user but near zero maintenance cost. It is not a product that can be sold through showrooms or counters but requires a face-to- face interaction with the customer. We have countered these challenges in two ways - one, to lower the upfront investment for customers we have tied up with NABARD, all regional rural banks and the Ministry of New and Renewal Energy to provide 40% subsidy and easy financing of solar systems. Also, we do a lot of sales and marketing activities to create awareness about solar systems.”

What lies ahead!

As many players are entering the fray, the solar industry is all geared up for entrepreneurs to invest in.  And a fierce competition can only be survived by those players that will offer consistent and qualitative services on a par with the industry standards. On competing with other players, Shubhra Mohanka says: “We believe in increasing the current market share in the industry by strengthening our relationship with various financial institutions across various states and districts in India. Our product range is the biggest differentiator that makes it unique in the industry.”

Talking about the industry's future, Joseph says: “Our experience of over 20+ years will hold us in good stead both in understanding solar energy and in understanding the Indian consumer. Solar products are still new to the Indian market. If consumers are convinced about solar energy, there is a phenomenal opportunity for solar product players. Solar products will have to stand the scrutiny against other conventional energy powered products and win both on aesthetics and product performance. If that happens, there will be more business for all solar product players who are focused on quality. I will go so far as to say that we need to have more players in the industry to popularise solar energy.”

It's being widely anticipated by industry experts that in the times to come, the natural sources of energy are going to rule the roost and would offer a recession-free business opportunity to entrepreneurs for entering the retail business of nature-friendly products.

FRANCHISE FACTS

Company                             Investment (In Rs)          Area (In sq. ft)  RoI                                         Break-even

Madhuri Solars                  3.5- 4.5 lakh                        250                         106%                                     1 year

Solid Solar                           10-12 lakh                            500                         50% from 1st year            NA         

Anu Solar power              18-29 lakh                            600                         112%                                     >1 year

Emmvee Solar                   NA                                          100-2,000             20%                                        1 year

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