Opportunity, they say, lies in adversity. Manoj Sinha, CEO of Husk Power Systems, could well vouch for this adage when he recalls how he abruptly had to quit his plush job in New York to take over the reins of the company he co-founded in 2008.
Gyanesh, the co-founder and the main protagonist in Husk’s formation, resigned in 2013, shortly after they had raised money in 2012. Sinha, working in S&P Global in New York at that time, decided on shifting back to India soon after his departure.
He looks back at the time with a mix of relief and trepidation. “Investors pulled back the money since they were not getting the confidence. There were a lot of things that I had to figure out in just 6 months. We were losing close to Rs 50-60 lakh per month,” he avers.
But it was also, in his words, “the best learning experience” of his life. From 2016 onwards, the company’s revenues started seeing a steady 25-30% year-on-year growth.
This was an idea that had always been close to his heart. Growing up in Bihar, Sinha had been privy to the electricity hassles of the state that had crippled its development. Three friends, Manoj, Gyanesh and Ratnesh got together in 2007 to solve the issue that they had been home to since forever: access to electricity. The idea essentially being to provide electricity by using 100% renewable power with the help of decentralised mini-grids.
“Gyanesh and I pursued our Masters in Electrical Engineering in US and after working there for 6-7 years, we discussed solving some of the tough issues that people in Bihar faced every day. Lack of access to reliable electricity was pervasive and impacted 70 million people in Bihar. Therefore, it only seemed logical to embark on addressing this problem,” he reminisces.
Sinha was joined by another of his classmates, Chip Ransler, when he was enrolled at the Darden School of Business in the US to write a business plan for rural electrification. The four of them came together as a team in 2008 to form a company – Husk Power Systems – because the first mini-grid installed was powered by rice husk based biomass gasification power plant.
Mini grid, giant leap
The entire concept of solar PV mini-grids in India dates back to the ’90s in the Sunderban delta region of West Bengal and in the forested province of Chhattisgarh.
‘Mini Grid’ implies a system with a Renewable Energy (RE) based electricity generator (with capacity of 10KW and above), and supplying electricity to a fixed set of consumers via a Public Distribution Network (PDN). A ‘Micro Grid’ system is more or less similar to a mini grid but has a RE based generation capacity below 10KW.
India has committed that by 2030, 40% of installed power generation capacity is to be based on clean sources. It was also determined that 175 GW of RE capacity will be installed by 2022. This includes 100 GW from solar, 60 GW from wind, 10 GW from bio-power and 5 GW from small hydro power, the Ministry of New and Renewable Energy (MNRE) observed in its 2018 year-end review.
The Share of Renewable Energy in overall installed capacity in the country as on 31.10.2018
Filling the gaps
Husk is carrying this vision forward through its overall philosophy of renewable power generation. They have tried to address the gap felt by the rural poor population in states such as Bihar, Uttar Pradesh, Odisha, Jharkhand and the like.
“Large power providers focused on building 100MW-1GW scale Solar farm, which is great for the country, but it catered mainly to wealthier states. We filled that gap by providing 100% renewable power through the Hybrid mini-grid system. Combining Solar PV, biomass gasification and battery banks, rural households and businesses got access to 24/7 renewable power,” he affirms.
There is more. The company claims to be an innovator not just in its core competencies, but also in terms of enabling smart solutions for its customers. The effort has been towards catering to individual needs with a unique smart metering technology.
“We set our tariff scheme to serve customers as per their most critical requirements. For example, if a commercial customer uses power during daytime, we offer them a discount as solar PV is cheaper than battery. We tell them the various ways in which they can use electricity to maximize the benefits. Our commercial customers have reported increasing their net profit by 30-40% within twelve months of connecting to Husk mini-grid,” adds Sinha, the confidence palpable in his tenor.
Investors called it crazy
When the founders presented their plan of electrifying 10 million people in rural parts of India, investors thought of it more as a joke and a real crazy idea that would have been impossible to scale. Even their customers thought that a couple of youngsters have returned from the US and have a crazy idea of running a utility business in very remote areas in Bihar.
“When we started our company with the idea of generating power using mini-power plant of size 30 KW and run a local distribution network up to 2km to serve only rural customers, most people thought of it as a “charity/welfare” project. Nobody believed that customers will actually pay for the electricity service, let alone the company generate any profit,” he states emphatically.
But maybe this is a reaction that they all had anticipated. Sinha understands the doubts raised back then, questioning why anyone would think of starting a power and utility business serving bottom of the pyramid customers in a heavily regulated sector.
However belief finally found its way through when high risk taking social venture funds like Acumen Fund, IFC, LGT Ventures and Bamboo Capital offered equity capital in early 2010 to help them prove the business model. “Fast forward that to 2018, there are now 10s of companies like Husk that are trying to provide reliable power to rural parts of Asia and Africa. We were able to add strategic investors like Shell and First Solar in 2015 onwards to help us scale the business in India and East Africa,” adds Sinha as he looks back thoughtfully on their journey.
The total equity financing for them till date has been to the tune of US $25 million. They also received a small amount of debt financing to the tune of US $1 million.
Pitfalls along the way
Sinha faced other challenges along the way which slowed down Husk’s journey post 2012. Gyanesh left the company in 2013 and this sparked off a range of issues initially. “I came back to India while my wife continued working in New York. Neither the investors were happy nor the people in the team. Gyanesh had been the CEO from the start and there were atleast 300 people in the team at that time who had been handpicked by him. It was very difficult for me to ensure that everyone was able to look up to me as a leader who can take things forward,” he contends.
He remembers that time as being an incredibly insurmountable one since he was surrounded with multiple issues that had to be urgently dealt with, which also included restoring investor confidence in the firm.
Sinha faced an uphill task since he had never worked in India and had to start from adapting to the work culture in his own country. He realised within a span of 6 or 8 months that he had to reduce staff strength by half. “I had to personally give the bad news to many people and would get calls from anxious spouses of team members who were laid off. It was the worst period in my life but I got the best learning experience during this time. I became more empathetic. I feel I became a better human being after that,” he says candidly.
Eventually, he got his head around the issues that were impeding growth for the company and by 2016, a wave of revival was in sight.
Future for Husk
Sinha is clear that this is a path that he now wants to lead on his own. “Efficiency and professionalism is much easier if it is one person at the helm. Dealing with a co-founder is almost like dealing with a spouse. I did not want to deal with more spouses to fix the problems that we were facing,” jokes Sinha.
The road ahead has been mapped out. Husk aims to roll out 400-500 mini-grid sites in rural Bihar and Uttar Pradesh in the next five years as this will enable them to serve more than 100,000 households and businesses. Sinha says that this will also help them to eliminate 250,000 tons of CO2 starting 2021. “We aim to impact lives of 10 million people in Asia and Africa over the next 10 years,” he adds confidently.
Currently, the company’s distribution network is in India and Tanzania. In 2019, the plan is to include one more country in Africa.