Mahindra War Room 2014 Energy Business Caselet

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MAHINDRA PARTNERS SECTOR ENERGY BUSINESS CASELET

Mahindra Partners is the internal incubator of new businesses for the Mahindra Group, supporting a portfolio of existing ventures across Retail, Logistics, Boats, Energy and Media, while constantly exploring new ventures. This caselet pertains to Mahindra EPC (Engineering, Procurement & Construction), which is one of the companies operating in the Energy business. BUSINESS BACKGROUND Mahindra EPC was started with the vision to be India’s leading Green Engineering, Procurement & Construction firm. It had a promising start in 2011 when it made its foray in the Solar industry and broke even within the first year of operation. The success story continued as it emerged as India’s largest Solar EPC player in the very second year of operation. Mahindra EPC’s quality execution and timely delivery of projects have been well-acknowledged by its customers as well as the Ministry of New & Renewable Energy (MNRE). The business was riding high on the boom in the Indian solar industry due to favorable policies, technology advancements and price reductions. However, Mahindra EPC realizes the risks of being in a a policy-driven business and hence has a clear focus on differentiation through innovation. Mahindra EPC ventured into Distributed Solar in its third year of operation and successfully launched a range of productized solutions like Telecom Tower Solarization, Diesel Generator - PhotoVoltaic (DG-PV) Hybrids, Solar Generator and Solar Water Pumps, apart from the existing Rooftop Solar PhotoVoltaic solutions. These products are powered by Mahindra EPC’s indigenously developed controller units, for which patents are pending. Till date, Mahindra EPC has a portfolio of 90 MW of projects, including 3MW of roof-top solar, 1000 telecom towers and pilot installations for DG-PV Hybrid, Solar Generator & Solar water pumps. LIVE CHALLENGE: MAHINDRA EPC BUSINESS STRATEGY Solar Energy has several advantages, particularly for India:

1. Solar Energy causes least of the environmental challenges compared to other renewable energy sources, such as Hydel or Wind Power

2. Solar Panels can also be installed across country owing to India having more

than 330 sunny days across major part of the country.

3. Solar provides a solution for the energy requirements of rural areas, households and agricultural needs, and is therefore highly relevant to India. Solar water

Mahindra War Room 2014 Energy Business Caselet

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pumps allow farmers to avoid loss of crop due lack of stable grid power or costly diesel power for irrigation.

4. Grid Parity in terms of cost for Solar and conventional sources of energy is reducing

Awareness programs and subsidy schemes launched by the Ministry of Non-Renewable Energy and State Governments have resulted in the installation of over 20,000 solar water pumps across the country, with the overall potential as high as 1,80,00,000 pumps. Decentralized power production will not just address the energy requirements but also help create an environment conducive for micro-enterprises such as agri processing, repair shops and battery charging. Pilot Projects under the aegis of CII and with support from Rockefeller Foundation have been initiated for fostering this sustainable economic development model. Power shortages are estimated to entail a GDP loss of US$68 billion (0.4% of the GDP), according to a report released by FICCI, in association with Booz & Company. Distributed Solar is a boon for the Indian Power Industry, currently plagued with high Transmission & Distribution losses, power generation deficits, poor grid connectivity and stability. It also reduces dependence on Diesel Generating units as an alternate source of power, thereby reducing operational costs as well as CO2 emissions. But, Distributed Solar has its own set of challenges - High Initial Investment Requirements, Constraints on space availability on rooftops (most commercial entities do not own their rooftop space) and Constraints of distribution, execution & service in remote locations. Parts of India (such as remote telecom towers, SMEs with unreliable grid etc.) are 100% reliant on Diesel Generator based power, leading to not only high cost of operation but also recurring subsidy burden on exchequer. With this background and based on evolving needs of India’s current demographic profile, evolve a detailed strategy for Mahindra EPC encompassing the following:

1. What kind of products and solutions Mahindra EPC should focus on as a part of its Distributed Solar strategy?

2. What should be the approach for distribution of these products and services? Should it be through Setting up own distribution channels, Tie ups with other players in industry, Collaborations with Local/ Village level entrepreneurs or any alternative approach to distribution?

3. What policy interventions will help drive the Distributed Solar market? How can Mahindra EPC as a responsible business help shape such an environment?

4. What business, financial & technological innovations can help Mahindra EPC create differentiation and stay of the competition?