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Investing in a RE asset can return twice of 10-year Fixed Deposit: RenewShare CEO Animesh Damani | Interview

Artha Energy Resources (AER) has launched RenewShare, a renewable energy (RE) investment online platform that enables fractional ownership of RE assets in the country

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Artha Energy Resources (AER) has launched RenewShare, a renewable energy (RE) investment online platform that enables fractional ownership of RE assets in the country. It has been launched as an autonomous investment platform to cater to investors interested in diversifying their existing portfolios by investing in the fast-growing RE landscape in India. According to a statement by the company, it has already achieved an initial AUM of Rs 7 Crore and an early investment commitment of Rs 10 Crore from investors, with RE assets spread across four cities.

In an e-mail interview FE Online, Animesh Damani, Founder and CEO, RenewShare, shares more details about the new investment option, risks and opportunities for investors in the RE sector. Edited Excerpts:

What are the investment opportunities in renewable energy for retail and small investors?

The current investment opportunities for small and retail investors in the renewable energy (RE) space are virtually non-existent. The only way to get exposure to the sector is by investing in listed equities of RE companies or an InVIT Co. Direct ownership of projects is not possible for retail and small investors due to the large upfront capital required.

What is RenewShare offering?

Renewshare is India’s first investment aggregation platform driving investments into RE assets. The RE segment carries the tag of being an extremely expensive asset class to own and manage independently. We, as an aggregator, aim to resolve this problem by facilitating bringing down the ticket size for investments.

A portfolio of renewable energy projects is bunched together thematically to become part of an SPV which is enlisted on the platform. Each SPV has a theme in which each asset stays true to the theme of that SPV. Investors can choose to invest in one or multiple SPV’s based on their preferences.

The minimum ticket size for investments is Rs 20 lakh.

Are you authorised by regulators to offer investment products?

We do not fall under the purview of any authorized regulator as we are functioning as an online platform. Investors must conduct their own due diligence before investing in the products offered on the platform.

How will you use the funds?

The funds pooled in by the investors flow to the SPV they have selected, and ownership interest is allotted as per the funds invested. The SPV in turn invests the funds into various RE assets. The returns from the RE assets are distributed to the investors based on their ownership interest. The platform charges a fee for facilitating the entire transaction and assisting the investors in the life cycle of their investment.

Why do you think RE could be a lucrative asset class?

RE Assets are long term projects that require a large upfront investment but then generate periodic returns over a very long period. A brand new RE asset can generate returns for 25 years depending on the tenure of its power sale agreement. The cost to maintain the asset is low and it is easy to monitor remotely. There are very few operational hurdles as the raw material is a natural resource.

To state numbers, the returns from a RE asset is generally around 11-12% which is comparatively higher than an A+ rated corporate bond and twice the prevailing 10-year FD rates from leading Indian Banks. If compared to the NIFTY 500 Index over the preceding 10 years, the returns from the RE segment, are only slightly lower.

How can small investors make the most from RE investments?

Due to the high-ticket sizes of RE assets, it is currently difficult to bring down the ticket sizes for a small investor. Their best bet would be to look at an InVIT Co or exposure to Equity.

What is the growth potential of renewable energy investment in the next five years?

It took the country 3 years to build the 1st GW of roof-top solar projects. Last year alone (a pandemic year), India added 1 GW of roof-top projects. To meet the government’s overall renewable energy target of 2030, the annual investment required to set up new renewable energy assets across solar, wind and hydro will be Rs 1.40 Lakh crores ($18 Billion) annually summing up to $90 Billion in just the next 5 years. These numbers are a clear indication of the immense potential that the RE investment sector holds!

How is the COVID-19 pandemic impacting RE investments?

The COVID pandemic has been a boon for the Renewable Energy segment in India, especially for the rooftop sector catering to the Commercial and Industrial (C&I) segment. India Inc. has finally woken up to smell the coffee and has started focusing on solarizing their roofs. The OPEX model has been quite common amongst industrialists.

Moreover, existing asset owners have a newfound appreciation for Renewable energy. While the first lockdown resulted in the complete closure of all industries barring essentials, renewable energy being a part of essentials, continued to perform well. The low maintenance nature of the assets that require only basic effort (just like cleaning your car and changing the oil), ensured that these assets kept running and generating revenues, while everything else was shutting down.

What are your findings of HNI investors’ risk appetite?

While every investor may have a varied risk appetite, as per our observations, most HNIs in India are conservative in nature with a high concentration of their portfolio in fixed-income products such as FDs, Bonds, etc. Most have exposure to real estate and some have exposure to equity markets either directly, or through PMS or mutual funds. Very few are involved in the PE or venture capital space.

We strongly believe that Renewables are a great fit for Indian HNIs and family offices as it offers strong returns, periodical cashflows and safety.

In terms of risks and returns, how RE investments compare to other options like Mutual Funds or crypto?

Crypto assets are an extremely volatile asset class with no physical asset backing the same. The returns can vary drastically within a day. Comparatively, Renewables are a physical asset and fixed income in nature as these assets generate revenues monthly. The variability only comes due to change in weather patterns. Even these weather patterns tend to even out over a 5-year period. For example, windmills are dependent on strong winds to generate power which is a common phenomenon during the monsoons. In some years one can notice a very high generation of power due to a strong monsoon and some years can be lower in case of a drought.

Compared to Mutual funds or the NIFTY 500 Index, the returns from Renewable energy assets are a tad lower over a 10-year horizon. However, equity markets are extremely liquid while renewable energy assets by nature are illiquid assets.

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