We are foraying into energy storage and charging infrastructure: Rahul Mishra, CEO, Rays Future Energy
The private sector renewable energy player is betting big on retail stores for solar applications to boost revenue ten times over 5 years
Rays Future Energy, an arm of Gurugram-based Rays Power Infra, is mulling a foray into the new business areas of energy storage and charging infrastructure. The private sector renewable energy player is also betting big on retail stores for solar applications to boost revenue ten times over 5 years, Chief Executive Officer (CEO) Rahul Mishra tells Ankush Kumar in an interview.
What are the top focus areas of business for Rays Future Energy at present? How has the core business model evolved?
Rays Future Energy is a subsidiary of Rays Power Infra and has been focusing on growing the power sales business in the B2B segment, primarily the commercial and industrial (C&I) consumers through distributed solar solutions and utility-scale, open-access based solar power projects. The company is also focusing on bringing new technologies to offer energy solutions. Since inception, the company has executed over 180 MW of utility scale open access projects in the state of Karnataka and over 12 MW of distributed solar power projects across various parts of the country supplying power to over 25 C&I consumers. The company has commissioned some of its Karnataka open-access based projects in a record period of three months.
The aggressive bidding in the utility scale solar projects and the margins compression for EPC companies has made Rays Group look at diversification of business within the energy space and has led to creation of Rays Future Energy to focus on new energy initiatives. Rays Power Infra has executed 600 MW capacity projects under the self-development or co-development model. The company focuses on its project development and EPC capabilities and offers turnkey utility-scale solar power projects to international investors. In the past, the company has done similar projects of 70 MW in Uttarakhand for a French utility. Rays Power is an over Rs 550 crore company as of FY2017-18 and has plans to grow to become a more than Rs 5,000 crore company at group-level across all businesses on a consolidated basis in five years.
How do you visualize the capacity of your projects to grow?
Rays Future Energy will continue to focus on the B2B segment under both distributed and utility-scale, open-access based solar power solutions with overall capacity of over 150 MW for this year and 400 MW of capacity over the next 3-4 years.
Are you also planning to foray into new businesses within the solar sector?
We have definite plans to foray into new businesses, as the sector is growing and diversifying rapidly. In the rooftop segment, while we focus on B2B, we are now foraying into B2C retail shops as well with exclusive franchise stores. Here, we would sell design engineering kits through retail stores. In the residential segment, we would set up 3 kilowatts (kW) to 10 kW systems, up to 20KW in aggregations. The idea is to start rolling out energy products. Solar is the beginning. We are also looking at Internet of Things (IoT)-enabled energy management systems and storage solutions in the long run. Franchise owners will invest the capital to set up the stores. However, marketing and branding activities will be handled by us. We would start the first store in November 2018 and plan to establish up to 80 stores by 2020.
How do you evaluate the growth potential of the solar retail market in India?
There are unorganised players already present in the cities and now branded players will start coming in. Players like Trina Solar, Havells and Luminous are already present and a few others brands are expected to enter the market shortly. We believe an integrated player will have a larger impact on the business — a brand that can provide solar with IoT-enabled service, storage solutions and keep adding many other features to the overall offerings.
In the future, around 5-7 players will be able to distinguish themselves from the local aggregators. They will differentiate themselves in terms of quality, unique offerings, upgradation etc. We believe in being physically present and having a robust offline network that will substantially help us sell more as compared to following a centralized distributor model.
How do you plan to manage the inventories of the retail stores?
We will have several warehouses for managing stocks and then each channel partner and the franchise will have their own small stock with them. It is not a product to be picked from the shelf. I think anything between 14-21 days of delivery time for a system like this will be acceptable. We do not want to be too inventory-heavy. So, we will have minimal stock. Even a 4-5 MW of stock is big enough to start with.
What are the biggest business uncertainties for developers prevailing in the market today?
There are many projects affected by the recently announced 25 per cent safeguard duty on imports of solar PV modules and PV cells and it has severely dented the growth of the segment. People like us and many others had to manage off-takers and rethink their pricing strategies and ponder over whether we can absorb these costs or not. If you look at the Goodsand Services Tax (GST), there is still uncertainty over the applicable rate for solar power systems under composite supply contract for applicable charges to be 5 or 18 per cent. We have built projects and have already billed their invoices; uncertainty over taxes creates pressure on financials of the company. More clarity around these issues would have made it easier to manage the business. Today, we have to manage uncertainties first and then plan for business management, which is not an ideal position to be in, especially as a start-up in an industry which is in its nascent stage of growth.
How do you think the ongoing historic Rupee depreciation will impact business?
At this rate of downfall, nobody knows where the Rupee is headed. If there is a freefall from here, every developer will be affected very badly. Currency conversion is becoming difficult. If the situation persists, it will be very difficult for investors to take a call on what kind of exit assumptions they should consider. Any money which is going out now, compared to a situation where they are invested between Rs 60 and Rs 70 per dollar, there is already a 20 per cent cut on the investment value. Imports of modules and inverters for EPC companies have a big exposure. So, from a currency point of view the impact will be at multiple levels — from financing to debt and procurement, it affects everyone.
Can you share some details of the international projects executed by the company?
Rays Group has secured a 50 MW EPC project in Vietnam and we plan to increase this capacity to 200-250 MW in the near future. We are opportunistically looking at the South East Asian region, the Middle East and North Africa (MENA) and Australia. With all of this put together, around 40 to 50 per cent of our overall business will come from international markets in the future. Hopefully, our Indian business will grow at 20 per cent in a year. As far as the Africa market is concerned, it is still to live up to its promise but we expect the solar power market to grow significantly here and we are keeping a close eye on the developments. It is expected to be focused on distributed projects rather than large grid-connected solar power plants.
Are there any new areas the company is planning to foray into?
We are looking at both large and small scale storage. That sector is bound to grow because around 60 GW of solar grid that is coming up would need storage. Despite the growth of residential net-metering, a lot of storage capacity will be required. As Electric Vehicles (EVs) pick up we will figure out few solutions around battery applications for charging infrastructure. Commercial charging stations can be rolled out through our retail stores. Even three-wheeler batteries can be sold through our stores. For us, retail stores will account for a big part of business revenue in the long run.