120731 adb india and sri lanka market scoping study annexes
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INCLUSIVE BUSINESS MARKET STUDY
FOR INDIA AND SRI LANKA
FINAL REPORT:ANNEXES
DECEMBER 5,2012
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Contents
1 Inclusive businesses surveyed.......................................................................................................... 2
2 List of fund managers interviewed .................................................................................................. 6
3 List of donors interviewed ............................................................................................................... 7
4 Case studies of inclusive businesses ................................................................................................ 8
5 Deep dives on potential fund manager partners for ADB ............................................................. 24
6 Economic factsheet on low-income states .................................................................................... 27
7 Deep dives on priority sectors ....................................................................................................... 32
8 Government schemes relevant to ADBs fund............................................................................. 344
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1 INCLUSIVE BUSINESSES SURVEYEDCompany
name
Sector Presence in
LIS/NES/BothBOP Engagement model
C D E S
1Apollo Hospitals
(Reach division)Healthcare
2 3S Shramik - Div. SaraplastWater &
Sanitation
3 Aarusha Homes Pvt. Ltd. Real estate
4 Artisans Micro Finance Retail
5 Babajob.comTelecom, BPO &
IT
6 Bodhicrew Services Pvt. Ltd. Education
7 Carzcare Retail
8 Champion Agro LimitedAgri-business and
agriculture
9 d.light Design Inc.Energy (incl.
renewable)
10 Desicrew Solutions P Ltd.,Telecom, BPO &
IT
11 Desta Retail
12Drishtee Development and
Communication LtdRetail
13 Edubridge Learning Pvt. Ltd. Education
14 EkgaonTelecom, BPO &
IT
15 Eko India Financial ServicesTelecom, BPO &
IT
16 Eram Scientific Solutions Water andsanitation
17 Excellent Renewable Pvt. Ltd. Renewable Energy
18 Does not wish to disclose BFSI
19 Forus Health Pvt. Ltd.Healthcare (non-
pharma)
20 G. V. Meditech Ltd.Healthcare (non-
pharma)
21 Global Easy Water Products
Agri-business and
agriculture (incl.seeds)
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Company
name
Sector Presence in
LIS/NES/BothBOP Engagement model
C D E S
22 Glocal Healthcare SystemsHealthcare (non-
pharma)
23Gram Tarang Employability
Training Services Pvt. Ltd.Education
24 Greenlight PlanetEnergy (incl.
renewable)
25 Healthpoint Services IndiaHealthcare (non-
pharma)
26 Hippocampus Learning Centres Education
27 Hotel Saravana BhavanHospitality and
leisure/tourism
28 Industree Crafts Pvt LtdTextiles, garments
and handicrafts
29 InI Farms Pvt. Ltd.
Agri-business and
agriculture (incl.
seeds)
31ITC Limited, Agri Business
Division
Agri-business and
agriculture (incl.
seeds)
32 Jain Irrigation Systems
Agri-business and
agriculture (incl.
seeds)
33 Jaipur Rugs Company Pvt.Textiles, garments
and handicrafts
34 Jayashree IndustriesHealthcare (non-
pharma)
35Jk Paper Ltd, Plantation
activities, Farm Forestry
Agri-business and
agriculture (incl.
seeds)
36 Kanan Devan Hills PlantationsAgri-business andagriculture (incl.
seeds)
37 Lafarge India
Real estate and
construction (incl.
housing)
38 Logistimo IndiaTelecom, BPO &
IT
39 Medplus HealthHealthcare (non-
pharma)
40 Milk Mantra Dairy Pvt LtdAgri-business and
agriculture (incl.
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Company
name
Sector Presence in
LIS/NES/BothBOP Engagement model
C D E S
seeds)
41 Mobile WorksTelecom, BPO &IT
42Multi Commodity Exchange of
India, Gramin Suvidha Kendra
Telecom, BPO &
IT
43Piramal Water Pvt. Ltd. (brand
name: Sarvajal)
Water and
sanitation
44 Projects and skill development
departmentEducation
45 Prolific Systems & Technologies
Pvt LtdEducation
46Promethean Power Systems
Energy (incl.
renewable)
47Rangsutra
Textiles, garments
and handicrafts
48Rural Off-grid market
Energy (incl.
renewable)
49 RuralShores Business Services
Pvt. Ltd.
Telecom, BPO &
IT
50 SAVE - Saline Area Vitalization
Enterprise Limited
Agri-business and
agriculture (incl.
seeds)
51 SELCO Solar Light Private
Limited
Energy (incl.
renewable)
52Share
Banking &
financial services
(incl. insurance
and microfinance)
53Shree kamdhenu electronics
Agri-business and
agriculture (incl.
seeds)
54 Shriram transport finance
company limited
Banking &
financial services
(incl. insurance
and microfinance)
55Simpa Networks
Energy (incl.
renewable)
56 Source for Change, Piramal
Foundation
Telecom, BPO &
IT
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Company
name
Sector Presence in
LIS/NES/BothBOP Engagement model
C D E S
57Star Agri
Agri-business and
agriculture (incl.
seeds)
58 Swabhimaan Distribution
Services Pvt LtdRetail
59Tata Swach
Water and
sanitation
60Under the mango tree
Agri-business and
agriculture (incl.
seeds)
61Vaatsalya Healthcare
Healthcare (non-
pharma)
62Vortex Engineering
Telecom, BPO &
IT
63 V-Shesh Access Services Private
LimitedEducation
64WaterHealth India
Water and
sanitation
65WaterHealth International Inc.
Water and
sanitation
66 Waterlife India Pvt Ltd Water andsanitation
67Wonder Grass initiative
Real estate and
construction (incl.
housing)
68Zameen Organic
Agri-business and
agriculture (incl.
seeds)
69Ziqitza Health Care Limited
Healthcare (non-
pharma)
SOURCE: Results of survey conducted by Dalberg
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2 LIST OF FUND MANAGERS INTERVIEWEDFund manager Interviewee Focus on
IB?1
Sector
focus
Geographic
focus
Stage of
investment
1 Aavishkaar Vineet Rai Yes Agnostic India Early
2 Actis Ritu Kumar No Agnostic EM Growth
3 Acumen Fund (Has now left) Yes Agnostic EM Early
4 Aureos Capital
Nissanka
Weerasekara, Balaji
Srinivas
No (SME) Agnostic EM Growth
5 Bamboo Finance Eric Berkowitz Yes Agnostic India Early
6 Elevar Equity Sandeep Farias Yes Agnostic India Growth
7 Gray Ghost Marc Clayton Hand Yes Agnostic EM Early
8 IIP Varun Sahni Yes Healthcare India Growth
9 Imprint Capital Laura Spiekermann2
Yes Agnostic EM Growth
10 Indo-US Rajesh Raju No IT/ITES India Early
11 Lok Capital Vishal Mehta Yes Agnostic India Early
12 LR GlobalChanaka
WickramasuriyaNo Agnostic Sri Lanka Growth
13 NEA Vamesh Chovatia No Agnostic India Growth
14 Nereus Capital Jonathan Winer No Energy India Growth
15 PragatiNarayan
ShadagopanNo (SME) Agnostic LIS Growth
16 Rabo Equity Rajesh Srivastava Yes Agri. India Growth
17 Samriddh Fund Ananta P. Sarma No (SME) Agnostic LIS Early
18 SEAF Hemendra Mathur Yes Agri. India Growth
19 Song Advisors Has now left Yes Agnostic India Early
20 Zephyr Mukul Gulati No (SME) Agnostic India Growth
21 To be named Indika Hettiarachchi No Agnostic Sri Lanka Growth
SOURCE: Results of interviews conducted by Dalberg
1 Dalbergs assessment of overlap between fund managers current portfolio and ADBs target definition of
inclusive businesses, i.e., any business that engages the poor as consumer, supplier, distributor, or employee;
All fund managers mentioned in the list have some exposure to inclusive businesses, but ones marked Nohave a more indirect approach to targeting IBs.2
Interview confirmed, to be conducted
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3 LIST OF DONORS INTERVIEWEDDonor Contact point
1 KfW Rukmini Parthasarathy, Marcus Baer, Florian Arneth
2 Omidyar Network Ashu Sikri
3 DFID Bala Balasubramanian
4 Catamaran Ventures Arjun Narayan
5 SIDA Christina Wedekull
6 SD Tata Trust Sanjiv Phansalkar
7 Swedfund A. K. Nehru
8 IFC Sri Lanka Ehsanul Azim
9 CDC Group Guy Alexander
- NABARD V. Tagat
- SIDBI K. G. Alai
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4 CASE STUDIES OF INCLUSIVE BUSINESSESOur team has interviewed 15 businesses that would naturally fit with ADBs mandate of investing in
inclusive businesses. These businesses have delivered or are in a strong position to deliver both
financial and social return.
These case studies present an overview of the business and some key data points around its finances
(when disclosed) and impact achieved till date. More importantly, each case study highlights the
salient features of a companys model of engaging the poor, assesses its potential to create
sustainable impact, and outlines its key challenges to scaling. The case study also reflects on the
companys need for financing, and its preference for a particular financial instrument, if any.
Our sample of case studies covers a breadth of sectors, geographies, and modes of engagement, and
should present a collection of insights that could serve as a head start to developing a pipeline of
potential inclusive business investments in India and Sri Lanka.
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Inclusive Business Case Study Aarusha Homes
Affordable housing for migrants and low-income populations
Sector: Housing
Location of operations: Urban centers in South India
Year of establishment: 2007Turnover: $650,000
Extent of BOP engagement: 700 BOP consumers; 95 BOP employees
Background on Business
Aarusha Homes was started to address the lack of affordable housing options in Indias urban areas.
Each year, this problem affects millions of low-income migrants into the countrys major cities, often
forcing them to live in unsafe and unsanitary conditions. Aarusha provides low-cost accommodation
housing to these migrants and low-income individuals in Hyderabad and Bangalore. Aarusha charges
rents starting at INR 2,000 ($40) per person per month.
Mode of BOP EngagementBOP as Consumers
Aarushas primary mode of engagement with the BOP is as consumers of its affordable housing
services. The majority of Aarushas consumers are employees of entry point jobs, such as security
guards and facilities management staff. On average, a typical security guard earns around Rs 30
($0.60) per hour.
BOP as Employees
Aarusha Homes employs over 90 BOP individuals to work in its housing facilities. A portion of these
employees also live in Aarushas facilities, so they are consumers of this service as well.
Impact to date and future growth plansAarusha has served over 700 consumers to date, and employs over 90 BOP individuals.
With operations in two cities currently, Aarusha plans to begin operations in a third city (Chennai)
this year. In addition to providing rooms, the company also plans to add low-cost apartments to its
portfolio of products. This would capture some of the more upmarket value found in housing for
newlywed couples or young families.
Challenges
A key challenge of working in the housing sector in India is the occurrence of corruption. Property
developers often prefer for negotiations to happen off the books and for transactions to be made
in cash. As Aarusha has refused from inception to work under these circumstances, there is a limited
pool of professional developers with whom it could potentially partner.Aarusha has also faced similar problems with state governments. The company had initially
partnered with the government, to provide housing to low-income public workers. They had to
eventually stop the partnership when the government failed to pay them for this service. Aarusha is
still communicating with state officials to receive its due payment, but as they refuse to pay a bribe,
this process is consuming much of the teams efforts.
Source of financing to date and future needs
Aarusha was started with equity from its promoters, and later received $40,000 in equity financing
from Elevar Equity. To finance its working capital needs, however, Aarusha is looking to raise debt,
preferably at concessionary rates.
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Inclusive Business Case Study AISECT
Pan-India network of skills training centers for rural youth
Sector: Education (IT and vocational skills training)
Location of operations: Pan-IndiaYear of establishment: 19853
Turnover: Not disclosed
Extent of BOP engagement: 10,000 BOP micro-entrepreneurs; 1,000,000 BOP students
Background on Business
AISECT is primarily engaged in the areas of skill development and training. Having developed the
course content, AISECT operates a franchise model and leverages partnerships with universities,
such as the Indira Gandhi National Open University (IGNOU), as well as central and state government
skill-building organizations, such as the National Skill Development Corporation (NSDC). AISECT
trains its trainers and presents degrees and certificates to students upon completion of their course.
Mode of BOP Engagement
BOP as Consumers
ASIECTs primary consumers are BOP students from semi-rural and rural areas. In fact, 6,000 of its
10,000 centers are located in villages. Interestingly, despite its franchise model, AISECT has adopted
a flexible fee structure that takes agriculture seasons into account. Students may take a course at
one of AISECTs centers and pay the fee when their family has earned money from selling their
harvested crop.
BOP as Distributors
AISECT has franchised its model and standardized processes. In addition to training its vast network
of trainers, an internal team of 60-70 people conducts regular quality checks. The franchisee is
responsible for marketing efforts, and retains 70-80% of the revenue generated.
Impact to date and future growth plans
AISECT currently has 10,000 centers across 27 states and 3 union territories. The National Skill
Development Corporation (NSDC) is aiming to reach 500 million individuals by 2022. As their largest
partner, AISECT plans to grow rapidly through this partnership. Furthermore, the company plans to
enter the higher education rural BPO sectors.
Challenges
Key challenges faced by AISECT include the lack of infrastructure in the states in which it operates,
and an overall shortage of adequately skilled trainers.
Source of financing to date and future needs
AISECTs major partner to date has been the NSDC, which has supported the company with soft
loans (6-8% interest rates) to expand into other states, to meet staffing needs, and to develop
content and improve processes.
AISECT would consider accepting equity investments, however its current priorities are obtaining
new partners and expanding to new geographies.
3AISECT started as an NGO in 1985.
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Inclusive Business Case Study Aitken Spence Hotels
Chain of inclusive hotels in India and Sri Lanka
Sector: Tourism, Hospitality
Location of operations: Pan-Asia
Year of establishment: 2004Turnover: $2 million
Extent of BOP engagement: 7.2 million BOP consumers
Background on Business
A subsidiary of the Sri Lankan-based Aitken Spence conglomerate, Aitken Spence Hotels currently
operates a chain of 24 hotels and resorts in Sri Lanka, the Maldives, India and Oman.
Mode of BOP Engagement
BOP as Suppliers
Though it may be easier to supply inputs from larger suppliers, Aitken Spence purposefully partners
with local farmers to supply its resorts with agricultural produce. In order to ensure certain qualitystandards of its inputs, Aitken Spence trains local farmers on optimal management and preservation
of their produce. In addition, it provides them with the tools they may require, such as seeds,
fertilizer and crates.
BOP as Employees
Aitken Spence directly employs more than 2,000 local BOP individuals to work in its resorts as
facilities management staff, kitchen staff, and tour guides. The company absorbs local high school
graduates into its hotels, guaranteeing them a career path and steady income.
Impact to date and future growth plans
Though it may be easier to engage with more established and standardized suppliers of agriculturalproduce, energy and other inputs that are crucial to the operation of hotels, Aitken Spence has
purposefully chosen to engage the BOP communities in its areas of operation, thereby giving them
the opportunity to benefit as much as possible from the resorts presence.
Challenges
Like many other businesses in Sri Lanka, Aiken Spence is currently challenged with the high costs of
capital, preventing it from growing faster. Though foreign investors have expressed an interest in
the company, they prefer investment timelines that are not long enough to allow for returns (5 years
as opposed to the 8-10 years required to experience returns on investment).
Furthermore, the Sri Lankan government has not been investing adequately in the infrastructure
needed to accommodate the growing tourism industry.
Source of financing to date and future needs
As it is a subsidiary of one of Sri Lankas largest conglomerates, A itken Spence has benefited from
substantial internal reserves, and the ability to leverage its reputation to form joint ventures with
international partners.
The current cost of capital, however, is hindering Aitken Spences expansion plans, for which it
would seek loans at concessionary rates (6-8%). Given that a typical 500-room hotel costs
approximately $40 million to construct, Aitken Spence would look to receive investments between
$10 to $20 million.
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Inclusive Business Case Study Apollo REACH
Chain of super-specialty hospitals in rural and semi-urban areas
Sector: Healthcare
Location of operations: Pan-India
Year of establishment: 2008Turnover: $2.4 million
Extent of BOP engagement: 5,000+ BOP customers
Background on Business
Apollo Hospitals Group has owned and managed a network of hospitals and medical facilities in India
since 1979. In 2008, the Group launched a network of smaller satellite facilities, called Apollo REACH
Hospitals. Operating in underserved regions and offering super-specialty medical care at affordable
rates to people living at the BOP, Apollo REACH now manages 3 hospitals in rural and semi-urban
areas.
Mode of BOP EngagementBOP as Consumers
Apollo REACH, like most healthcare organisations, serves the BOP as consumers, increasing their
access to healthcare services. These consumers currently have to travel to cities for specialty
healthcare. Due to this additional step in the value chain, many patients remain untreated in the
villages. Apollo REACH attempts to bridge this gap. Each hospital houses 150-200 beds, 40 intensive
care unit beds, and 5 operation theatres. Each hospital also offers super-specialty medical services
(e.g., cardiology, orthopedics, neurosurgery, etc).
Impact to date and future growth plans
Apollo REACH has developed a model for establishing hospitals in rural or semi-urban areas that is
significantly more cost efficient than traditional urban hospitals. As a result, REACH hospitals cancharge 20-30% less than other major hospitals. One of the biggest drivers of Apollo REACHs
geographic expansion is additionality, since they would not enter areas where there are other similar
hospitals, or would offer services that other hospitals do not.
Apollo REACH plans to expand to 25 facilities in the next 2-3 years. Apollo REACH plans to grow its
revenues by over 20% annually. By leveraging a hub-and-spoke model, Apollo REACH has effectively
countered the challenge of limited talent in rural areas. Apollos plans for geographic expansion will
be centered around their established hospitals in major cities, to build in the flexibility of temporarily
shifting doctors from the cities to the villages on a needs basis.
Challenges
Scalability is Apollo REACHs major challenge. At the facility level, after reaching the saturation pointin terms of revenues, an increase infrastructure is required, i.e., increasing the number of beds. At
the chain or network level, the challenges are similar to those of other businesses lack of skilled
personnel, high CAPEX, and heavy burden of expensive debt.
Source of financing to date and future needs
Till date, Apollo REACH has been funded by equity from Apollo Hospitals and IFC.
Each hospital costs approximately $5 million to establish, implying that the initiative will need close
to $75 million in investment in the next 3 years. Of the total pool of investments coming in, Apollo
REACH would prefer 60% as debt, 25% as grants, and the remainder as soft loans with a 15 year
tenor.
Company logo
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Inclusive Business Case Study CIC Agri
Seed-to-shelf agricultural production company
Sector: Agriculture
Location of operations: Pan-Sri Lanka
Year of establishment: 1993Turnover: $67 million
Extent of BOP engagement: Over 20,000 BOP farmers
Background on Business
A subsidiary of one of Sri Lankas largest conglomerates, CIC Holdings, CIC Agri is a large agricultural
production company. It contributes to 6% of Sri Lankas overall agriculture-related GDP.
Mode of BOP Engagement
BOP as Suppliers
CIC Agri engages over 20,000 BOP farmers as suppliers of several agricultural products. These are
smallholder farmers, with less than 1 hectare of land. CIC Agri provides these suppliers withagricultural inputs (including seeds and fertilizer), and then buys the harvested product back from
the farmers at fair prices.
BOP as Employees
CIC Agri directly employs approximately 2,500 BOP individuals in its factories, processing units and
farms. Furthermore, it indirectly employs over 2,000 contracted employees.
BOP as Consumers
CIC Agris farmers are also consumers of its consultancy services, through which it advises its farmers
on how to optimize their yields and productivity.
Impact to date and future growth plans
CIC Agri directly impacts the lives of over 20,000 farmers, by guaranteeing them the highest possible
income for their crop. Farmers benefit from a guaranteed, fair income, and extension services on
how to improve the quality of their crop. Currently contributing to 6% of Sri Lankas total agricultural
production, CIC Agris impact on its supplier farmers is very significant and sustainable. It plans to
grow by 20% every year.
Challenges
Like many other businesses in Sri Lanka, CIC Agri is currently facing difficulties in obtaining affordable
financing. Furthermore, Sri Lankan agriculture faces a productivity problem. The productivity of
individual farmers is not optimal, and improving this requires a significant resources, to both educatefarmers in optimal farm management, and to invest in the necessary technology (such as machinery,
fertilizer, seeds, etc).
Source of financing to date and future needs
As a private subsidiary of a public holding company, CIC Agri has grown to date with its parent
companys internal reserves, loans from local banks and an equity investment by an Indian company
Due to its relationship with its parent company, CIC Agri would consider an equity investment with
caution. It would consider, however, commercial private equity investments from foreign investors.
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Inclusive Business Case Study DesiCrew Solutions
Rural Business Process Outsourcing (BPOs)
Sector: Business Process Outsourcing (BPO), IT
Location of operations: Pan-India
Year of establishment: 2007Turnover: $700,000
Extent of BOP engagement: 200 BOP employees
Background on Business
DesiCrew Solutions was started to bring white collar jobs to rural youth in India. As a Business
Process Outsourcing (BPO) company with 4 centers across Karnataka and Tamil Nadu, DesiCrew
creates attractive rural employment opportunities, thereby reducing the migration of educated
youth to urban areas. DesiCrews headquarter office receives orders from its corporate clients,
which are then assigned to one its 4 rural BPO centers, where the service is delivered. Desicrews
clients include domestic and international clients. Their early supporters include Infosys and HDFC
Life Insurance.
Mode of BOP Engagement
BOP as Employees
DesiCrews primary mode of engaging the BOP is as employees in its BPO centers. These employees
are originally from the surrounding rural areas, and are university-educated. They would previously
have had little choice but to migrate to nearby urban centers for skilled jobs offering a certain salary.
With the presence of Desicrew, however, they are able to stay closer to home and support their
families. Once hired, employees are trained in specific processes and IT skills.
Impact to date and future growth plans
Desicrew currently operates 4 BPO centers in Karnataka and Tamil Nadu, which altogether employ
approximately 200 people. Given DesiCrews transparent career path, employees can stay close to
home without having to sacrifice a fulfilling career. DesiCrew also has a positive impact on its
employees sense of personal satisfaction. When asked what they enjoy about their job, employees
point to the opportunity to manage small teams and directly engage with international clients.
At the community level, DesiCrews centers reduce the migration of educated and talented youth
away from rural areas and into large cities.
Challenges
A key challenge faced by DesiCrew is the need to keep costs low and standardized across its 4
centers. This would not only lead to greater profitability, but it would allow any order to be assignedto any of its BPO centers. Keeping its costs low is critical for DesiCrew to remain competitive in the
BPO market.
Source of financing to date and future needs
DesiCrew was incubated at the Rural Technology and Business Incubator (RTBI), associated with the
Indian Institute of Technology in Madras (IITM). As a result, it received seed funding of $10,000, and
then secured an interest-free loan from Villgro (another social incubator based in South India).
DesiCrew has since raised equity funding from an Indian venture capital fund.
Though it is currently able to receive raise debt against receivables to finance its working capital
needs, DesiCrew would look to raise equity in the future, to further scale its business.
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Inclusive Business Case Study Global Easy Water Products
Affordable drip-irrigation technology for smallholder farmers
Sector: Agriculture
Location of operations: Pan-India
Year of establishment: 2004Turnover: $3.5 million
Extent of BOP engagement: 41,000 BOP consumers
Background on Business
Started as a for-profit subsidiary of International Development Enterprises India (IDEI), Global Easy
Water Products (GEWP), sells affordable drip irrigation technology to smallholder farmers across
India.
Mode of BOP Engagement
BOP as Suppliers
Though it may be easier to supply inputs from larger suppliers, Aitken Spence purposefully partnerswith local farmers to supply its resorts with agricultural produce. In order to ensure certain quality
standards of its inputs, Aitken Spence trains local farmers on optimal management and preservation
of their produce. In addition, it provides them with the tools they may require, such as seeds,
fertilizer and crates.
BOP as Employees
Aitken Spence directly employs more than 2,000 local BOP individuals to work in its resorts as
facilities management staff, kitchen staff, and tour guides. The company absorbs local high school
graduates into its hotels, guaranteeing them a career path and steady income.
Impact to date and future growth plansThough it may be easier to engage with more established and standardized suppliers of agricultural
produce, energy and other inputs that are crucial to the operation of hotels, Aitken Spence has
purposefully chosen to engage the BOP communities in its areas of operation, thereby giving them
the opportunity to benefit as much as possible from the resorts presence.
Challenges
Like many other businesses in Sri Lanka, Aiken Spence is currently challenged with the high costs of
capital, preventing it from growing faster. Though foreign investors have expressed an interest in
the company, they prefer investment timelines that are not long enough to allow for returns (5 years
as opposed to the 8-10 years required to experience returns on investment).
Furthermore, the Sri Lankan government has not been investing adequately in the infrastructure
needed to accommodate the growing tourism industry.
Source of financing to date and future needs
As it is a subsidiary of one of Sri Lankas largest conglomerates, Aitken Spence has benefited from
substantial internal reserves, and the ability to leverage its reputation to form joint ventures with
international partners.
The current cost of capital, however, is hindering Aitken Spences expansion plans, for which it
would seek loans at concessionary rates (6-8%). Given that a typical 500-room hotel costs
approximately $40 million to construct, Aitken Spence would look to receive investments between
$10 to $20 million.
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Inclusive Business Case Study Greenlight Planet
Off-grid solar lighting products for rural consumers
Sector: Energy(renewable)
Location of operations: Pan-India
Year of establishment: 2008Turnover: Not disclosed
Extent of BOP engagement: 230 employees; 1,000 distributors; 1,000,000 consumers
Background on Business
Greenlight Planet sells affordable off-grid solar lighting products to BOP consumers in India and East
Africa. Their products include an award-winning Sun King lamp, priced at $17 (Rs. 850), and a Sun
King Pro for $32 (Rs. 1,600), the latter of which includes a mobile phone charger. Greenlight
currently has operations in 4 states in India (Bihar, Maharashtra, Odisha, Uttar Pradesh) and in
Kenya.
Mode of BOP EngagementBOP as Distributors
Partly due to the high costs associated with using existing distribution channels, Greenlight Planet
has created an innovative, decentralized distribution network that directly serves BOP populations.
Village-level entrepreneurs, Sun King Saathis, are recruited and trained by Greenlight district
managers and team leaders. Distributors are responsible for educating consumers on the benefits of
using solar lights.
Greenlight has found that successful distributors are not involved in any other entrepreneurial
activities, which ensures that they are motivated by the sales commission to maximize sales. Further,
they should be local, trusted and credit within the local community.
BOP as EmployeesGreenlights team leaders and district managers are village-based, and also belong to the BOP.
BOP as Consumers
Greenlights target consumers are BOP, rural populations with no or limited access to grid electricity.
Impact to date and future growth plans
Greenlight Planet generates impact on multiple levels. Customers have access to a reliable source of
clean energy, allowing them to be more productive during hours when there is no sunlight, and
reducing the environmental, health and safety risks of being dependent on kerosene lamps. For its
distributors and employees, Greenlight is generating increased income levels, and training them in
very relevant and useful entrepreneurial skills.
Greenlight plans to reach 10 million customers through 10,000 distributors by 2015.
Challenges
Greenlight Planet has been unable to access affordable, local working capital to finance its inventory.
Source of financing to date and future needs
Greenlights primary source of funding has been a $4 million Series A equity investment from its
angel funder and Bamboo Finance, a venture capital fund. In addition, it has received $250,000 in
debt funding from Deutsche Bank, the Lemelson Foundation and Ashoka.
Greenlight Planet would need $5-10 million in future financing, the ideal composition of which
would be 20% equity, 70% debt and 10% grant funding.
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Inclusive Business Case Study Industree Crafts Pvt. Ltd.Retailing handicrafts produced by rural artisans
Sector: Manufacture and retail
Location of operations: Pan-India, Asia
Year of establishment: 1996Turnover: $3 million
Extent of BOP engagement: 3,360 suppliers
Background on Business
Industree Crafts works with rural artisans and self-help groups (SHGs) to produce textiles, garments
and other handicrafts, which it retails under the Mother Earth brand across India. Based in a
desire to enable rural entrepreneurs, Industree creates new supply chains and retail channels,
connecting rural artisans to urban consumers. Though this model is not as efficient or lucrative as
sourcing products from factories, Industree prioritizes an improvement in livelihood opportunities
for the rural BOP.
Mode of BOP Engagement
BOP as Suppliers
Industree engages BOP suppliers as part of its core business operations. It assists in the formation of
SHGs and organizes rural artisans into cooperatives and associations. Industree then provides
collateral to these SHGs and acts as a guarantor for bank loans.
Almost 100% of the fabric used in Industrees products and 40% of all products made come from
SHGs.
As Industree expands, it also invests in supply chain infrastructure to facilitate collection of its
products from remote areas. Through its Foundation, the company identifies and creates new
"handicraft clusters, and invests heavily in training for quality and consistency. The companysupports the Foundation in financial and non-financial ways.
Impact to date and future growth plans
Industree currently works with 18 SHGs and 300 handicraft clusters across 9 states in India,
representing over 3,300 rural suppliers in total. By turning traditional art into aspirational lifestyle
products, Industree has improved the livelihood opportunities of thousands of rural individuals, and
has promoted entrepreneurship among its BOP suppliers.
Over the next three years, the company intends to work with 10,000 suppliers across the country.
Industree has aggressive growth plans and has recently started exporting to European markets.
ChallengesPrimary challenges faced by Industree include poor infrastructure in the states in which it operates,
the low availability of adequately skilled labour, and an unsupportive regulatory framework for early
stage companies in India.
Source of financing to date and future needs
In 2011, Industree received a $1 million equity investment from Grassroots Business Fund. The
company has also received a $200,000 technical assistance grant to be used towards customer care
training and brand building.
For their next round of fundraising, Industree will look to raise a further $6-7 million, largely in the
form of equity.
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Inclusive Business Case Study Jaipur Rugs
Hand-knotted carpets made by rural artisan women
Sector: Handicrafts
Location of operations: Pan-India
Year of establishment: 1999Turnover: $16.8 million
Extent of BOP engagement: 40,000 suppliers (weavers), 200 employees
Background on Business
Based in Rajasthan, India, Jaipur Rugs is a manufacturer of hand-knotted carpets. Jaipur Rugs directly
engages with a network of over 40,000 rural artisan weavers to make its carpets, which are then
exported to countries around the world.
Mode of BOP Engagement
BOP as Suppliers
Jaipur Rugs main mode of engaging the BOP is as suppliers. The company indirectly employs morethan 40,000 rural artisans to make its hand-woven carpets, which are then exported to over 30
countries around the world. Raw materials to make the carpets are provided directly to the carpet
weavers, along with design patterns and specifications. Carpet weavers make the carpets in their
homes, where they have looms, and the finished product is delivered back to the companys
headquarters. Each weaver is paid per square foot of carpet made.
BOP as Employees
In addition, Jaipur Rugs employs more than 200 full-time employees, most of whom are also from
low-income backgrounds. Though educated, these employees have been trained extensively to work
with advanced technological tools and to develop a valuable design-related skillset. At Jaipur Rugs,
these employees have been encouraged to take on more responsibility and to develop theirprofessional skills much more than they would have experienced in a more traditional company.
Impact to date and future growth plans
Jaipur Rugs has reached a network of more than 40,000 rural artisans across 6 states. It expects this
number to grow to 50,000 artisans within 3 years time. Its full-time employees will also grow, by
50% to a total of 300. In addition to providing these weavers with employment and a steady source
of income, working with Jaipur Rugs gives women greater autonomy within the household.
Challenges
With its very extensive network of rural artisans, Jaipur Rugs model requires significant logistical
organization to work efficiently. A continuous question asked by the companys management is howto further increase its operations and efficiency.
Furthermore, as significant resources are dedicated to skills training for the companys weavers, a
challenge has been to find the right partners that could develop literacy and entrepreneurial skills
among its weavers.
Source of financing to date and future needs
Started with internal reserves, Jaipur Rugs received a $1 million investment from the Grassroots
Business Fund. When considering future investors, Jaipur Rugs is conscious of partnering with
investors who have similar social priorities.
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Inclusive Business Case Study MAS Intimates
Innovative manufacturer of intimate apparel and sportswear
Sector: Apparel, Textiles
Location of operations: Pan-Asia
Year of establishment: 1986Turnover: Not disclosed
Extent of BOP engagement: 40,000 employees
Background on Business
Located in Sri Lanka, MAS Intimates is the regions leading manufacturer of intimate wear and
sportswear. It is the preferred supplier of apparel to global brands, such as Victorias Secret, Nike,
Calvin Klein, Ann Taylor, Speedo and Gap. A subsidiary of MAS Holdings, MAS Intimates employs
more than 50,000 youth from BOP backgrounds across Sri Lanka.
Mode of BOP Engagement
BOP as EmployeesMAS Intimates employs more than 50,000 individuals from BOP backgrounds, 80% of whom are
women. The majority of employees are from rural and semi-urban areas. They are often recruited to
work at MAS with minimal previous work experience and are trained in the skills required for their
position.
Impact to date and future growth plans
MAS Holdings currently operates 34 facilities in Sri Lanka, and 1 in India. When the company
started, it solely focused on manufacturing apparel for its clients. Since then, however, MAS has
captured increasing value along the entire production chain. The company now also produces
accessories, such as elastics, and lace, and manufactures textiles. Furthermore, it has also started its
own lingerie brand, calledAmante, whose products are currently sold exclusively in India.
MAS impact on its employees is multifold. In addition to the technical skills and steady source of
income gained by employees at MAS, the company strongly encourages the development of general
professional and life skills. Employees are encouraged to proactively think about their career
paths within the organization, and to pursue their interests, whether or not they are related to MAS.
To promote ownership and critical thinking among employees, small teams of workers have weekly
meetings to discuss how any challenges faced along the production line can be mitigated.
Challenges
A continuous yet relatively trivial challenge faced by MAS Intimates is the attrition of its employees.
Given Sri Lankas tight labour market and the presence of equally lucrative alt ernative job
opportunities, MAS workers are sometimes attracted to a more traditional office job. Attrition isan issue for the apparel sector as a whole, however, and given MAS very strong reputation as a
preferred employer, this problem is not very acute.
Another challenge is related to continuously maximizing efficiency. The pressure to minimize costs of
production as much as possible has become especially acute, as Western economies contract.
Source of financing to date and future needs
From its start in 1986 with just a few sewing machines, MAS has grown into one of Sri Lankas largest
conglomerates. It has grown with a combination of internal capital reserves, and several joint
ventures with American and European companies.
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Inclusive Business Case Study Shree Kamdhenu
Electronics Pvt. Ltd.
Technological products and solutions for dairy collectives
Sector: Information TechnologyLocation of operations: Pan-India, Asia
Year of establishment: 1996
Turnover: $1.3 million
Extent of BOP engagement: 40 BOP employees; 1.05 million BOP consumers
Background on Business
Started in Gujarat in 1996, Shree Kamdhenus product,Akashganga, addresses two core issues faced
by rural dairy farmers: accurately measuring the quantity of milk supplied by farmers to dairy
collectives; and determining the quality of milk supplied.
Mode of BOP EngagementBOP as Consumers
Shree Kamdhenu Electronics sells its microprocessor-based electronic measurement and quality
testing products to dairy farmer collectives. These innovative tools allow each farmers milk to be
measured for quantity and quality individually, making the entire process of milk collection
transparent and efficient. Earlier, milk from all the farmers was first collected into one container,
and then tested for quality. Farmers were therefore receiving a price for the quality of the
collectives milk, which offered no incentive for individual farmers to improve their own quality.
BOP as Employees
Over 50% of all people employed by Shree Kamdhenu Electronics belong to the BOP population.
Impact to date and future growth plans
With over 3,500 installations in 12 states across India, Akashganga has directly impacted over 1
million farmers and indirectly impacted over 4 million individuals to date. This product directly
impacts the lives of dairy farmers by ensuring that they are paid accurately for the quantity and
quality of milk they individually supply. Due to this and reduced wastage at the collection point,
farmers are getting a higher price for their produce, and have an incentive to supply better quality of
milk. The company plans to reach 1.2 million farmers and 100 BOP employees by 2015.
Challenges
A key challenge for Shree Kamdhenu Electronics has been raising debt, given the difficulties faced by
small businesses in India in securing affordable bank loans.At an operational level, the company also faces the challenges of operating in states with poor
infrastructure, the lack of an enabling business environment for early-stage companies, and at times,
a low willingness from customers to pay for their product.
Source of financing to date and future needs
Shree Kamdhenu Electronics has raised $190,000 as an equity investment from Aavishkar and
Grassroots Business Fund, $113,000 as debt, $95,000 in credit guarantees, and $10,000 as
promoters equity. Ideal future financing would take the form of soft loans and would be utilized for
launching new products for the dairy sector, building a factory and expanding sales across India.
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Inclusive Business Case Study StarAgri
Integrated post-harvest management solutions for smallholder farmers
Sector: Agri-business
Location of operations: Pan-India
Year of establishment: 2006Turnover: 300 Million INR ($5.7 Million)
Extent of BOP engagement: 500 BOP employees; 50,000 BOP farmers
Background on Business
StarAgri was started to address Indias vast, unorganized agricultural supply chain. It offers a host of
integrated post-harvest management services, allowing BOP farmers to derive more value from their
harvests. StarAgri directly engages with BOP farmers as well as corporates and processing
companies.
Mode of BOP Engagement
BOP as ConsumersStarAgri provides several services to BOP farmers, including warehousing, quality testing, and
collateral management services. The company also partners with several banks, enabling small-
holder farmers to receive low-cost loans. Upon storing their produce in StarAgri warehouses,
farmers are provided with a receipt, which is recognized by a wide range of banks (established
partners of StarAgri) as collateral.
BOP as Suppliers
Upon receiving orders for farm produce from Indian corporates, StarAgri procures this produce
directly from thousands of rural farmers. By removing middlemen from the process, StarAgris
farmers receive a higher price for their produce. Futhermore, StarAgris quality-based procurement
allows farmers to receive higher prices for high-quality produce (as opposed to traditional auctionsystems, where all farmers receive the same price per crop, regardless of quality).
Impact to date and future growth plans
With 750 warehouses spread across 10 states, Staragri has served more than 50,000 farmers to date,
and currently employs more than 500 people. It plans to reach 2.5 million farmers in the next 5
years. StarAgris range of integrated services allows farmers to exercise greater ownership over
value they earn from their produce. Previously, farmers had little choice but to accept the non-
transparent prices offered to them by supply chain middlemen. With StarAgri, farmers are able to
verify the quality of, and receive fair prices for, their produce. Furthermore, with its warehousing
facilities, farmers can store and better manage their produce and sell it when the market is offering
an optimal price.
Challenges
Initially, StarAgri had faced resistance from banks to recognise the warehouse receipts it would issue
to farmers, in return for affordable loans. As the number of its farmers grew into the thousands,
however, banks became interested. Another challenge is the need to educate farmers on the
advantages of engaging with StartAgri to manage their produce, which requires significant company
resources.
Source of financing to date and future needs
StarAgris launch was financed by its promoters equity totaling $2 million, and it has recently
received an investment of $30 million from IDFC, one of Indias leading infrastructure financingcompanies. In terms of working capital, however, it would look to raise $10-20 million in debt.
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Inclusive Business Case Study Vortex Engineering
Low-power and solar-powered ATMsfor rural populations
Sector: Manufacturing, Financial Services
Location of operations: Pan-India, Asia, Africa
Year of establishment: 2004Turnover: $2 million
Extent of BOP engagement: 7.2 million BOP consumers
Background on Business
Vortex has designed a rugged ATM specifically for rural areas, which are characterized by
intermittent power supplies. Vortexs innovative ATMs consume 90% less power than traditional
ATMs, and can therefore be solar-powered. Due to the subsequent lower costs of operation, these
ATMs can be financially viable with fewer transactions, and therefore are very suitable for
deployment in rural areas.
Vortex sells its ATMs directly to banks, which can then extend their financial services to rural
populations. Its clients include both public and private banks.
Mode of BOP Engagement
BOP as Consumers
Though Vortexs direct consumers are banks, the end beneficiaries of its ATMs are rural BOP
populations, who gain increased access to formal financial services. The majority of rural populations
in India live several kilometers away from the nearest bank branch, often requiring half a day of
travel to conduct financial transactions.
Impact to date and future growth plans
To date, Vortexs ATMs have increased access to financial services for approximately 7.2 million rural
consumers across India, including its lowest income states. The presence of ATM machines in rural
areas has a very significant impact on BOP consumers, including reduced time and money spent
travelling to the nearest banking center. Furthermore, more accessible ATMs lead to an increase in
rural savings.
In addition to India, Vortexs ATMs have been exported to other countries, including Nepal,
Bangladesh and the United Arab Emirates. Over the next 3 years, the company aims to reach 50
million consumers.
Challenges
The key challenge faced by Vortex is the initial reluctance by banks to adopt this innovative ATM.
Despite its design being very suitable for Indian rural areas, some banks view the product as too riskyand continue purchasing the more expensive but less appropriate ATMs from larger manufacturers.
Source of financing to date and future needs
Vortex was incubated at the Rural Technology and Business Incubator (RTBI), associated with the
Indian Institute of Technology, in Madras (IITM), where it received seed funding. Since then, Vortex
has successfully raised more than $12 million from various investors, including the IFC, Bamboo
Finance, Aavishkaar, Ventureast, and Tata Capital.
To fund the expansion of its business, Vortex would look to raise an additional $5 to $10 million. If
made available, it would devote technical assistance funds towards further research and
development.
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Inclusive Business Case Study WaterHealth
Affordable housing for migrants and low-income populations
Sector: Water
Location of operations: Andhra Pradesh
Year of establishment: 2005Turnover: Not disclosed
Extent of BOP engagement: 5 million BOP consumers, 10 distributors, 600 employees
Background on Business
WaterHealth combines the use of decentralized purification centers in partnership with local
communities to create a scalable and sustainable solution for processing healthy drinking water.
Through its solution, WaterHealth provides each person with up to 20 litres of safe drinking water
per person per day, at an investment of approximately $10 per person.
Mode of BOP Engagement
BOP as ConsumersWaterHealths primary mode of engagement with the BOP is as consumers of its affordable safe
drinking water solution. Beneficiaries of WaterHealths services would otherwise only boil water,
which doesnt remove any inorganic impurities.
BOP as distributors
WaterHealth engages village level entrepreneurs in a build-operate-transfer model, working closely
with the community. In the operate phase, the company engages locals who are often a part of
the BOP themselves to run the plant on a daily basis.
BOP as Employees
WaterHealth builds plants sustainably, by engaging the local population as construction workers.
Impact to date and future growth plans
WaterHealth is currently focused on building its presence in Africa, with the intention of building 25-
30 plants this year. Similarly, the company plans to expand to 300-400 plants in India. Within India,
WaterHealths corridor of interest extends from Rajasthan, Gujarat, Chhattisgarh, Andhra Pradesh
and Karnataka. WaterHealths expansion plans will remain in concentric circles, seen to be the most
effective model of geographic expansion.
Challenges
A key challenge for WaterHealth is competition from subsidized sources of water, and resulting
challenges with pricing. Government has adopted the approach of subsidizing water utilities. As aresult, these utilities lose money and their quality progressively deteriorates. Generating awareness
among consumers that have been spoiled by traditional water utilities in case they exist has also
been a major challenge.
Source of financing to date and future needs
Tata capital, IFC, and other strategic investors have taken equity positions in WaterHealth. The
company has a long line of credit from IFC at low rates of interest.
Given WaterHealths ambitious expansion plans, it will need a large amount of investment. It would
prefer most of its investments as grants, but is open to equity investment as well.
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5 DEEP DIVES ON POTENTIAL FUND MANAGER PARTNERS FOR ADBFigure 1: Fund manager snapshot Pragati India Fund
Figure 2: Fund manager snapshot Aavishkaar
Fund name Pragati India Fund I
Investors CDC, IFC
Vintage 2011
Total AUM $ 60 million
Avg. size of investment $ 6 10 million
Target IRR 25% +
Geographic focus Low-incomestates in India
Sector focus Sector agnostic
Social impact metrics employed
Pragati is a relatively recent financial-first, commercial fund and does not have explicit impact measurement systems. Since DFIs such as CDC
and IFC are LPs of the fund, Pragati follows strong ESG-oriented metrics.
StrategyFund details
Pragati believes the market for financing small-medium sized
enterprises in low-income states in India presents attractive financial
opportunities for private equity. Pragati underwrites companies for
being SMEs and not inclusive businesses, but it indirectly engages the
poor by investing in businesses that exist in deprived regions, employ
local populations, and invest in workforce developmentthus having
the potential for significant livel ihood creation. Although finding such
fundable opportunities remains a challenge in these geographies,
Pragati believes being close to the ground will generate strong deal
flow. To further address the risk of limited deal flow, Pragati chooses
to remain sector agnostic. The fund expects their investees to be
family run businesses, and look for strong corporate governance.
Key contact
N. Shadagopan
Sample
investment
JashEngineeringMfg. of equipment used in waste water treatment
SOURCE: Interview with fund; Dalberg research
Fund name Aavishkaar India Micro Venture Capital Fund
Investors CDC, IFC, FMO, KfW, NABARD, Rockefeller, others
Vintage 2005
Total AUM $ 120 million
Avg. size of investment $ 0.1 1 million
Target IRR 20-22%
Geographic focus Pan-India
Sector focus Sector agnostic
Social impact metrics employed
Several DFIs such as IFC, CDC, FMO, and KfW have invested in Aavishkaar; they expect regular reporting on ESG issues and private sector
development impact across its investments. However, Aavishkaars impact measurement systems are not based on GIIRS.
StrategyFund details
Aavishkaar was one of the first funds set up to provide equity finance
to early-stage inclusive businesses. The fund diversifies its exposure
across education, healthcare, agriculture, ICT, and energy. Although
Aavishkaar does not focus exclusively on low-income states, its
strategy of investing in rural areas where few other fund managers
are willing to go, ensures that over 50% of its invested capital has a
footprint on low-income states. Aavishkaar takes a venture-capital
style approach to develop sectors and industries in nascent
geographies. Aavishkaar has so far made 33 investments in pre-revenue companies, underwriting risks of limited experience of
entrepreneurs and lack of local enabling institutions, and has still
delivered strong financial returns.
Key contact
Vineet Rai
Sample
investmentVortex EngineeringDeveloper and mfg. of low-cost ATMs
SOURCE: Interview with fund; Dalberg re search; ImpactBase
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Figure 3: Fund manager snapshot Aureos
Figure 4: Fund manager snapshot LR Global
Fund name Aureos South Asia Fund
Investors CDC, ADB, Norfund, FMO
Vintage 2004
Total AUM $ 100 million (70% for India)
Avg. size of investment $ 5 10 million
Target IRR ~25%
Geographic focus India, Sri Lanka, Bangladesh
Sector focus Sector agnostic
Social impact metrics employed
Aureoshas a proprietary impact measurements framework, the Aureos Sustainability Index. Beyond this, Aureos also follows IFC performance
standards and is a signatory of UNPRI.
StrategyFund details
Aureos is a global investment firm with a portfolio of emerging
markets focused private equity funds. Aureos qualifies itself as a
financial-first fund manager, and focuses on SMEs across sectors. It is
one of the few fund managers currently focusing on Sri Lanka, and has
a strong track record of investing across South Asia. Although sector
agnostic, the fund plans to target infrastructure oriented sectors such
as manufacturing, transportation / logistics, pharmaceutical, and
healthcare in the short-medium term. Aureos follows ESG criteria
closely, and often uses such parameters as screening criteria, in
conjunction with capital intensity and level of regulation. Globally,
Aureos has completed over 270 transactions to date, and its exits
have realized IRRs of 30%.
Key contact
Balaji Srinivas (India), Nissanka Weerasekara (Sri Lanka)
Sample
investmentAsiri HospitalsChain of low-cost hospitals in Sri Lanka
SOURCE: Interview with fund; Dalberg research
Fund name LR Global
Investors CDC, ADB, Norfund, FMO
Vintage 2012
Total AUM $ 30 million +
Avg. size of investment $ 0.5 4 million
Target IRR 20-25%
Geographic focus Sri Lanka
Sector focus Sector agnostic
Social impact metrics employed
ESG is an important part of LR Globals investment strategy, especially given that they are targeting DFIs as their primary LPs. The fund
manager does not currently employ any other impact metrics.
StrategyFund details
Key contact
Chanaka Wickramasuriya
Sampleinvestment N/A
SOURCE: Interview with fund; Dalberg research
LR Global, the first formal institutional PE fund to be set up in Sri
Lanka in the current post-conflict environment, was spun out of the
Rockefeller office by former Aureos investment professionals, when
IFC provided an anchor investment of $10 million. LR Global plans to
invest in SMEs, where they believe exit strategies will be easier to
place, and will source deals in-house, as opposed to secondary
transactions. The focus on SMEs is not narrowed by an exclusive focus
on IB. However, many opportunities in LRs deal pipeline could qualify
as IBs by ADBs definition. Agriculture, tourism, and infrastructure are
priority sectors for LR Global, while they remain sector agnostic.
Further, LR Global will focus on investing in value chains of sectorswhere larger players operate.
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Figure 5: Fund manager snapshot SEAF
Figure 6: Fund manager snapshot SIDBI-VC
Fund name India Agribusiness Fund
Investors LIC, Omidyar,SIDBI, UBI
Vintage 2010
Total AUM $ 33 million +
Avg. size of investment $ 2 7 million
Target IRR 20-25%
Geographic focus Pan-India
Sector focus Agribusiness value chain
Social impact metrics employed
SEAF tracks IRIS compatible metrics such as employment, wages, benefits, training, suppliers, customers, taxes, community development,
formalization and corporate governance. SEAFs development impact reports are available online.
StrategyFund details
Key contact
Hemendra Mathur
Sample
investmentAbhayCotexCotton seed processing company
SOURCE: Interview with fund; Dalberg re search; ImpactBase
To create the India Agribusiness Fund (IAF), SEAF brought its global
expertise of investing in agribusinesses (40% of global portfolio in the
sector) and experience of investing in India through professionals
with 6 years of investment experience at Kotak. IAF is one of the
countrys few IB-focused sector-specific funds, and invests in SMEs
that operate in the Agribusiness value chain, except upstream players.
Typical opportunities that the fund considers are B2B businesses in
sub-sectors such as agricultural processing, implements, logistics, and
other post-harvest industries. SEAFs investment professionals
recognize the nascence of PE to this sector, and hence spend more
than 50% of their time on the ground, sourcing and monitoring deals.
Given a chance, SEAF would deploy TA for public or shared goods.
Fund name SamriddhFund
Investors DFID
Vintage 2012
Total AUM $ 60 million +
Avg. size of investment $ 1 5 million
Target IRR 15-16%
Geographic focus Low-income states in India
Sector focus Sector agnostic
Social impact metrics employed
DFID is currently training SIDBI-VC investment professionals on impact measurement, while the fund currently tracks employment. Given
already high transaction and deal management costs, SIDBI prefers simple metrics that investees can easily track.
StrategyFund details
Key contact
Ananta P. Sarma
Sampleinvestment FabIndiaRetailer of products handmade by rural craftspeople
SOURCE: Interview with fund; Dalberg research
SIDBI is a government owned financial institution providing debt and
equity to micro, small, and medium-scale enterprises in India. SIDBI
VC is a wholly owned subsidiary, which has set up the Samriddh Fund
with DFID. The funds sector agnostic investment strategy focuses on
SMEs in low-income states in India with potential to increase incomes
of low-income populations. SIDBI believes that an exclusive LIS focus
ensures that their SME investees are also IBs. The fund does not focus
on Northeastern states, however, due to a lack of enabling
infrastructure in those regions currently. SIDBI intends to encourage
its investees to enter LIS markets, and further help them by leveraging
its network within the government, if needed. Any returns over 14%that the fund generates are returned to their current investor, DFID.
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6 ECONOMIC FACTSHEET ON LOW-INCOME STATESFigure 7: Summary of key statistics on low-income states in India
SOURCE: Dalberg Analysis, UNDP, India Competitiveness Report-2011, IBEF, UNIDO
GDP growth rate
%
Odisha
Rajasthan
Uttar Pradesh
West Bengal
Arunachal Pradesh
Assam
Manipur
Meghalaya
Mizoram
Nagaland
Tripura
Bihar
7.2%
5.4%
6.3%
7.1%
3.7%
8.4%
6.2%
9.5%
14.7%
3.9%
8.9%
Chhattisgarh
Jharkhand
13.1%
10.8%
India average = 6.5%
6.6%
Madhya Pradesh 12.0%
Per capita income
$ (PPP)
1,885
2,967
3,068
2,797
India average = 3,694
2,708
1,865
3,408
3,033
1,707
2,377
2,717
1,804
1,824
2,673
1,272
82
39
7
19
84
82
38
198
340
251
67
48
194
862
504
Number of clusters
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Summary of key facts on low-income states in India:
State,
competitive-
ness ranking
Key facts Major industries Major clusters
Bihar
17 / 29
5 / 15 in
LIS/NES
Bihar recorded the second highest GDPgrowth among all the states
DFIs like IFC, DFID, Kfw, CDC & SIDBI haveBihar as one of their focus states
Bihar government is proactively givingpolicy incentives for Industries &
Investors
Agriculture: Tea,Rubber, Sugarcane,
Tobacco, Dairy,
Paper
Industries: Plastics,Transport
equipment,
Chemicals, Textiles,
Mines, Minerals
Manufacturing Textile sericulture Sugarcane Agro-based
industries
Chhatisgarh
12 / 29
1 / 15 in
LIS/NES
Chhattisgarh accounts for about 16 percent of the nations coal reserves and is
rich in other mineral resources such as
Limestone, Iron-ore, Copper, Bauxite.,
Chhattisgarh is presently one of the fewstates that has surplus power
The state offers a wide range of fiscal andpolicy incentives for businesses and
stands first among LIS & NES in the
competitiveness rankings
DFIs like IFC, DFID, Kfw,CDC & SIDBI haveChhatisgarh as one of their focus states
Agriculture: Foodprocessing
Industries: Mining,Minerals, Iron &
Steel, Cement,Power, IT& ITes,
Biotechnology,
Gems & Jewellery
Iron & steelancillary units
Castings & metalfabrication
Gems & Jewellery Textiles Aluminum
Jharkhand
21 / 29
9 / 15 in
LIS/NES
Jharkhand has around 40 per cent of thecountrys mineral wealth
DFIs like IFC, DFID, Kfw,CDC & SIDBI haveChhatisgarh as one of their focus states
Location Advantage: Closer to the portsof Kolkata, Haldia and Paradip and has
easy access to raw materials.
Agriculture:Rubber, Food &
beverages
Industries: Mining,Minerals, Iron &Steel, Engineering,
Chemicals,
Handloom, Plastics,
Printing &
Packaging, Tourism
Iron & steelancillary units
Engineering &fabrication
Auto components Textiles Casting & metal
fabrication
Madhya
Pradesh
14 / 29
3 / 15 in
LIS/NES
A large number of consumer goodscompanies have manufacturing bases in
the state because it is centrally located
and is equidistant to all major cities of
India
Madhya Pradesh has rich mineralresources and has the largest reserves ofdiamond and copper in India
State government is actively working withWorld bank, IFC, DFID and other DFIs on
host of developmental projects
Agriculture: Agriprocessing, forest
based industries
Industries: Mining,Minerals, Auto &
Auto components,
Textiles, Cement,Pharmaceuticals,
Minerals,
Manufacturing, IT
& ITes, Tourism
Engineering &fabrication
Auto components Textiles Food processing
Odisha
15 / 29
4 / 15 in
LIS/NES
Leads in iron, steel, ferroalloy &aluminium production. It also has a
strong base for coal-based power
generation
Has a stable political environment and isactively working with IFC, DFID and other
development organizations
Offers a wide range of fiscal and policyincentives for businesses
Agriculture: Agri-processing, Food &
beverages
Industries: Mining,Minerals,
Aluminum,
Handloom,Tourism
, Electronics, Iron,steel & Ferroalloy
Food processingindustries
Handloom Handicrafts Textiles Agro & Forest
based industries
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State,
competitive-
ness ranking
Key facts Major industries Major clusters
Rajasthan
15 / 29
4 / 15 in
LIS/NES
It is a natural corridor between thewealthy Northern and the prosperous
Western states of the country, which
makes it an important trade and
commerce centre
Rajasthan is one of the most attractivetourist destinations in India
Rajasthan offers a variety of unexploitedagricultural and mineral resources, which
is indicative of scope for value addition
and exports
Rajasthan s GDP growth rate fell from11% for the year 2010-11 to 5.4% for the
year 2011-12
Agriculture: Agri-processing
Industries: Cement,IT & ITes, Ceramics,
Mining, Minerals,
Steel, Chemicals,
Auto & Auto
components,
Textiles, Gems &
Jewellery, Marble
Ceramics Textiles Marble slates Auto & Auto
components
Food processing Gems & Jewellery
Uttar Pradesh
19 / 297 / 15 in
LIS/NES
Newly formed state government in UttarPradesh is seen as an industry friendlygovernment
Government is actively working withGates foundation, DFID and others
The state has witnessed highinfrastructural growth , which is seen as a
positive facilitator for industrial growth,
in the past few years
Agriculture: Agroprocessing, Foodprocessing
Industries: IT &ITes, Ceramics,
Mineral based
industries,
Tourism, Sports
goods, Leather
based industries,
Textiles, Handloom
& Handicrafts,
Auto & Auto
components
Engineeringequipment
Textiles Leather products Auto & Auto
components
Rice mills Foundry
West Bengal
20 / 29
8 / 15 in
LIS/NES
One of the most needy Low Income state Under the new government , the
erstwhile communist state is actively
looking for a larger role by the private
sector for its growth
It has a good geographical advantagedue to its proximity with sea ,North east
and other landlocked countries
Agriculture: Tea,Jute products, Agri
& Agri allied
industries
Industries: Mining,Minerals,
Petroleum &
Petrochemicals,
Leather, Iron &
Steel, IT, Auto &
Auto components,
Biotechnology
Engineeringequipment
Textiles Leather products Auto & Auto
components
Rice mills Foundry
Arunachal
Pradesh
28 / 29
15 / 15 in
LIS/NES
Undulating topography and varied agro-climatic conditions offer vast potential
for horticulture and growing a variety of
fruits, vegetables, spices, aromatic and
medicinal plants, flowers and mushroom
Central government is taking up manyinitiatives to improve infrastructure and
other amenities in the state
Agriculture: Cane &bamboo,
Horticulture
Industries: Art &crafts, Weaving,
Carpet weaving,
Wood carving,
Ornaments,
Tourism, Saw mills
& plywood, Power,
Mineral based
industries
Textiles Handicrafts Handloom Food processing
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State,
competitive-
ness ranking
Key facts Major industries Major clusters
Assam
22 / 29
10 / 15 in
LIS/NES
Assam is the largest economy of theNortheast region and is the most
industrially advanced state in the
Northeast India
Assam is rich in natural resources such asnatural oil and gas, rubber, tea, and
minerals such as granite, limestone and
kaolin
The state is rich in water resources. Otherpotential areas of investment include
power and energy, mineral-based
industries, tourism and crude oil refining
Agriculture: Tea,Food processing,
Horticulture,
Sericulture
Industries: Coal, Oil& Gas, Limestone,
Cement, Tourism,
Traditional cottage
industry
Tea Handicraft Handloom Food processing
Manipur
27 / 29
14 / 15 inLIS/NES
Manipur has significant potential forgrowing various horticultural crops
because of varied agro-climaticconditions
A wide variety of rare and exoticmedicinal and aromatic plants grow in
Manipur and Entrepreneurs get easy
access for processing and marketing such
plants
With 79.8 per cent literacy rate, Manipuroffers a largely educated workforce.
Good Knowledge of English is an added
advantage of the Manipuri workforce
Agriculture: Foodprocessing,
Sericulture Industries:
Tourism,
Handlooms,
Handicrafts,
Bamboo processing
BambooHandicraft
Handicraft Handloom Food processing
Meghalaya
24 / 2912 / 15 in
LIS/NES
Meghalaya is endowed with abundantnatural resources in terms of flora, fauna,medicinal plants, forests, coal, lime
stone, feldspar, quartz, sillimanite,
granite, industrial clay and uranium
Meghalaya has a literacy rate of 75.5 percent and a majority of local population
speaks and understands English
The state provides good support throughvarious central and State Government
agencies
Agriculture: Agroprocessing, Foodprocessing,
Horticulture, Dairy
& Livestock
Industries:Tourism, Mining,
Cement, Steel
processing,
Handlooms,
Handicrafts,
Hydroelectric
power
Foundry Handicraft Handloom Food processing
Mizoram25 / 29
13 / 15 in
LIS/NES
Mizoram contributes 14 per cent to thecountrys bamboo production; the
climate is ideal for setting up agricultural
and forestry produce-based industries
With a literacy rate of 91.6 per cent,Mizoram offers a highly literate
workforce. Knowledge of English is an
added advantage
With improving connectivity and theestablishment of trade routes with
neighbouring countries, trade facilitation
has improved significantly over the last
decade
Agriculture:Bamboo,
Sericulture, Food
processing,
Medicinal plants,
Horticulture
Industries:Tourism, Energy,
IT, Minerals &
Stones, Handlooms
& Handicrafts
Handicraft Handloom
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State,
competitive-
ness ranking
Key facts Major industries Major clusters
Nagaland
23 / 29
11 / 15 in
LIS/NES
Nagaland has a high literacy rate of 80.1per cent. Majority of the population in
the state speaks English, which is the
official language of the state
The state provides institutional supportthrough various central and State
Government agencies viz., North East
Council, Ministry of Development of
North Eastern Region and Nagaland
Industrial Development Council
Agriculture:Bamboo,
Sericulture,
Horticulture
Industries:Tourism,
Handlooms,
Handicrafts,
Minerals, Mining
Handicraft Handloom
Tripura
18/ 29
6/ 15 in
LIS/NES
Tripura is rich in natural resources suchas natural oil and gas, rubber, tea and
medicinal plants
Tripura is connected with the rest ofNortheast India by National Highway
(NH)-44. Improved rail, air connectivityand establishment of trade routes have
further facilitated the trade
At 87.8 per cent, Tripuras literacy rate ishigher than the national average rate
Agriculture: Tea,Rubber, Bamboo,
Sericulture,
Medicinal Plants,
Horticulture
Industries: NaturalGas, IT & ITes,
Tourism,
Handlooms,
Handicrafts
Handicraft Handloom Bamboo Leather
Sources: Dalberg Analysis, UNDP, India Competitiveness Report-2011, IBEF, UNIDO
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7 DEEP DIVES ON PRIORITY SECTORSFigure 8: Sector snapshot of water and sanitation
Figure 9: Sector snapshot of energy access
Key indicators across LIS & NES: Access to water and sanitation
NOTE: Data for Nagaland is N/A
SOURCE: MDG States of India Report 2010; WHO
93
82
52
81
77
83
95
91
33
Assam
Manipur
Jharkhand
Chhatisgarh
Bihar
60
50
Tripura
Meghalaya
80Mizoram
84
India avg.
75
Arunachal 93
West Bengal
Uttar Pradesh
Rajasthan
Odisha
M. P.
18
15
23
17
25
26
60
17
51
India avg.
94
98
66
96
70
89
% of population with
access to improved
sanitation
Keytrends and facts:
% of population with
access to improved
water sources
The Planning Commission has allocated
4.6 times the amount reserved for
improved sanitation in the 12th 5-year
plan (2012-17), amounting to $6.8bn
Government along with bilateral aid and
loans from multilateral development
banks loans have created successful PPP
models
Government of Indias Total Sanitation
Campaign (TSC) is operational in 578
rural districts with an outlay of $3.35bn;
for each sponsored project, the central
govt shares 60% of total cost, while thestate and the community contribute 20%
each
Key policies: JNNURM, National Water
Policy & other state policies
Other low-income States (LIS)Northeastern States (NES)
Key indicators across LIS & NES: Energy access
NOTE: Solid fuels include biomass fuels, such as wood, charcoal, crops or other agricultural waste, du ng, shrubs and straw, and coal.SOURCE: India Census, 2011
90
88
87
80
86
76
80
77
67
India avg.
Tripura 79
Mizoram 45
Meghalaya 83
Manipur 69
Assam 80
Arunachal 70
West Bengal
Uttar Pradesh
Rajasthan
Odisha
M. P.
Jharkhand
Chhatisgarh
Bihar 82
23
53
32
55
31
62
44
37
14
25
31
India avg.
16
62
19
% of people using
kerosene lamps for
lighting
Keytrends andfacts:
% of people using solid
fuels for cooking
Central government is taking up various
key initiatives such as Solar Mission to
electrify the off grid locations
Central government is focusing more on
Nuclear Energy & Solar Energy to
electrify the un electrified villages and
under electrified villages
Solar Mission is expected to create more
than 100,000 jobs and attract USD
820mn investment Central government has announced tax-
free bonds of USD 1.90bn for financing
projects related to power sector
Key policies: Solar Mission, Electricity Act
2003, Electricity Act During 2006,
Revised tariff guidelines, National
Biomass Cook stoves Initiatives (NBCI)
Other low-income States (LIS)NortheasternStates (NES)
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Figure 10: Sector snapshot of healthcare
Figure 11: Sector snapshot of education
Key indicators across LIS & NES: Healthcare
SOURCE: HRH Report I; Public Health Foundation of India; World Bank
7.5
6.0
7.1
4.0
2.7
4.9
3.9
4.1
4.0
2.8
Assam 3.2
Arunachal
West Bengal
Uttar Pradesh
Rajasthan
Odisha
M. P.
Jharkhand
Chhatisgarh
Bihar
6.1
India avg.
Tripura 5.3
Mizoram 2.5
Meghalaya 4.5
Manipur
5.7
6.2
5.8
5.0
2.8
2.8
17.9
12.3
7.4
India avg.
6.2
11.8
9.2
10.4
14.1
12.8
# Nurses per 10,000population
Keytrends andfacts:
# Doctors per 10,000population Healthcare is an increasingly attractive
sector for the PE & VC industry
Total expenditure on healthcare is
expected to increase to $81.2 bn by 2015
To meet domestic demand, India needs
$143 bn investments in healthcare by
2030
Government of India has decided to
increase expenditure on healthcare to
2.5% of the GDP by 2017, from the
current 1.4%
Government allots high priority to
proposals related to hospitals, life savingdrugs and equipment
Key policies