INCLUSIVE BUSINESS MARKET FOR INDIA AND SRI LANKA

FINAL REPORT: ANNEXES
DECEMBER 5, 2012

STUDY

ADB Inclusive Business Market Study for India and Sri Lanka Draft Report: Annexes

Contents
1 2 3 4 5 6 7 8 Inclusive businesses surveyed.......................................................................................................... 2 List of fund managers interviewed .................................................................................................. 6 List of donors interviewed ............................................................................................................... 7 Case studies of inclusive businesses ................................................................................................ 8 Deep dives on potential fund manager partners for ADB ............................................................. 24 Economic factsheet on low-income states .................................................................................... 27 Deep dives on priority sectors ....................................................................................................... 32 Government schemes relevant to ADB’s fund............................................................................. 344

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ADB Inclusive Business Market Study for India and Sri Lanka Draft Report: Annexes

1 INCLUSIVE BUSINESSES SURVEYED
Company name
Apollo Hospitals (Reach division) 3S Shramik - Div. Saraplast Aarusha Homes Pvt. Ltd. Artisans Micro Finance Babajob.com Bodhicrew Services Pvt. Ltd. Carzcare Champion Agro Limited d.light Design Inc. Desicrew Solutions P Ltd., Desta Drishtee Development and Communication Ltd Edubridge Learning Pvt. Ltd. Ekgaon Eko India Financial Services Eram Scientific Solutions Excellent Renewable Pvt. Ltd. Does not wish to disclose Forus Health Pvt. Ltd. G. V. Meditech Ltd.

Sector

Presence in LIS/NES/Both

BOP Engagement model C

D

E

S

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Healthcare Water & Sanitation Real estate Retail Telecom, BPO & IT Education Retail Agri-business and agriculture Energy (incl. renewable) Telecom, BPO & IT Retail Retail Education Telecom, BPO & IT Telecom, BPO & IT Water and sanitation Renewable Energy BFSI Healthcare (nonpharma) Healthcare (nonpharma) Agri-business and agriculture (incl. seeds)
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Global Easy Water Products

ADB Inclusive Business Market Study for India and Sri Lanka Draft Report: Annexes

Company name

Sector

Presence in LIS/NES/Both
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BOP Engagement model C
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D

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22 23 24 25 26 27 28

Glocal Healthcare Systems Gram Tarang Employability Training Services Pvt. Ltd. Greenlight Planet Healthpoint Services India Hippocampus Learning Centres Hotel Saravana Bhavan Industree Crafts Pvt Ltd

Healthcare (nonpharma) Education Energy (incl. renewable) Healthcare (nonpharma) Education Hospitality and leisure/tourism Textiles, garments and handicrafts Agri-business and agriculture (incl. seeds) Agri-business and agriculture (incl. seeds) Agri-business and agriculture (incl. seeds) Textiles, garments and handicrafts Healthcare (nonpharma) Agri-business and agriculture (incl. seeds) Agri-business and agriculture (incl. seeds) Real estate and construction (incl. housing) Telecom, BPO & IT Healthcare (nonpharma) Agri-business and agriculture (incl.
3

29

InI Farms Pvt. Ltd.

31

ITC Limited, Agri Business Division

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Jain Irrigation Systems

33 34

Jaipur Rugs Company Pvt. Jayashree Industries Jk Paper Ltd, Plantation activities, Farm Forestry

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35

36

Kanan Devan Hills Plantations

37

Lafarge India

38 39 40

Logistimo India Medplus Health Milk Mantra Dairy Pvt Ltd

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ADB Inclusive Business Market Study for India and Sri Lanka Draft Report: Annexes

Company name

Sector

Presence in LIS/NES/Both

BOP Engagement model C D E S

seeds) 41 Mobile Works Telecom, BPO & IT Telecom, BPO & IT Water and sanitation Education Education Energy (incl. renewable) Textiles, garments and handicrafts Energy (incl. renewable) Telecom, BPO & IT Agri-business and agriculture (incl. seeds) Energy (incl. renewable) Banking & financial services (incl. insurance and microfinance) Agri-business and agriculture (incl. seeds) Banking & financial services (incl. insurance and microfinance) Energy (incl. renewable) Telecom, BPO & IT      

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Multi Commodity Exchange of India, Gramin Suvidha Kendra Piramal Water Pvt. Ltd. (brand name: Sarvajal) Projects and skill development department Prolific Systems & Technologies Pvt Ltd Promethean Power Systems Rangsutra Rural Off-grid market RuralShores Business Services Pvt. Ltd. SAVE - Saline Area Vitalization Enterprise Limited SELCO Solar Light Private Limited

43 44 45 46 47 48 49

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Share

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Shree kamdhenu electronics

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Shriram transport finance company limited

55 56

Simpa Networks Source for Change, Piramal Foundation

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ADB Inclusive Business Market Study for India and Sri Lanka Draft Report: Annexes

Company name

Sector

Presence in LIS/NES/Both

BOP Engagement model C D E S

57

Star Agri Swabhimaan Distribution Services Pvt Ltd Tata Swach

Agri-business and agriculture (incl. seeds) Retail Water and sanitation Agri-business and agriculture (incl. seeds) Healthcare (nonpharma) Telecom, BPO & IT Education Water and sanitation Water and sanitation Water and sanitation Real estate and construction (incl. housing) Agri-business and agriculture (incl. seeds) Healthcare (nonpharma)

58 59

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Under the mango tree

61 62 63 64 65 66

Vaatsalya Healthcare Vortex Engineering V-Shesh Access Services Private Limited WaterHealth India WaterHealth International Inc. Waterlife India Pvt Ltd

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Wonder Grass initiative

68

Zameen Organic

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Ziqitza Health Care Limited

SOURCE: Results of survey conducted by Dalberg

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ADB Inclusive Business Market Study for India and Sri Lanka Draft Report: Annexes

2 LIST OF FUND MANAGERS INTERVIEWED
Fund manager 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 Aavishkaar Actis Acumen Fund Aureos Capital Interviewee Vineet Rai Ritu Kumar (Has now left) Nissanka Weerasekara, Balaji Srinivas Focus on 1 IB? Yes No Yes No (SME) Yes Yes Yes Yes
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Sector focus Agnostic Agnostic Agnostic Agnostic Agnostic Agnostic Agnostic Healthcare Agnostic IT/ITES Agnostic Agnostic Agnostic Energy Agnostic Agri. Agnostic Agri. Agnostic Agnostic Agnostic

Geographic focus India EM EM EM India India EM India EM India India Sri Lanka India India LIS India LIS India India India Sri Lanka

Stage of investment Early Growth Early Growth Early Growth Early Growth Growth Early Early Growth Growth Growth Growth Growth Early Growth Early Growth Growth

Bamboo Finance Eric Berkowitz Elevar Equity Gray Ghost IIP Imprint Capital Indo-US Lok Capital LR Global NEA Nereus Capital Pragati Rabo Equity Samriddh Fund SEAF Song Advisors Zephyr To be named Sandeep Farias Marc Clayton Hand Varun Sahni Laura Spiekermann Rajesh Raju Vishal Mehta Chanaka Wickramasuriya Vamesh Chovatia Jonathan Winer Narayan Shadagopan Rajesh Srivastava Ananta P. Sarma Hemendra Mathur Has now left Mukul Gulati Indika Hettiarachchi

Yes No Yes No No No No (SME) Yes No (SME) Yes Yes No (SME) No

SOURCE: Results of interviews conducted by Dalberg

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Dalberg’s assessment of overlap between fund manager’s current portfolio and ADB’s 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 ‘No’ have a more indirect approach to targeting IBs. 2 Interview confirmed, to be conducted
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ADB Inclusive Business Market Study for India and Sri Lanka Draft Report: Annexes

3 LIST OF DONORS INTERVIEWED
Donor 1 2 3 4 5 6 7 8 9 KfW Omidyar Network DFID Catamaran Ventures SIDA SD Tata Trust Swedfund IFC Sri Lanka CDC Group NABARD SIDBI Contact point Rukmini Parthasarathy, Marcus Baer, Florian Arneth Ashu Sikri Bala Balasubramanian Arjun Narayan Christina Wedekull Sanjiv Phansalkar A. K. Nehru Ehsanul Azim Guy Alexander V. Tagat K. G. Alai

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ADB Inclusive Business Market Study for India and Sri Lanka Draft Report: Annexes

4 CASE STUDIES OF INCLUSIVE BUSINESSES
Our team has interviewed 15 businesses that would naturally fit with ADB’s 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 company’s 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 company’s 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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ADB Inclusive Business Market Study for India and Sri Lanka Draft Report: Annexes

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: 2007 Turnover: $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 India’s urban areas. Each year, this problem affects millions of low-income migrants into the country’s 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 Engagement BOP as Consumers Aarusha’s primary mode of engagement with the BOP is as consumers of its affordable housing services. The majority of Aarusha’s 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 Aarusha’s facilities, so they are consumers of this service as well. Impact to date and future growth plans Aarusha 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 team’s 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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ADB Inclusive Business Market Study for India and Sri Lanka Draft Report: Annexes

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-India Year 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 ASIECT’s 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 AISECT’s 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 AISECT’s 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.

3

AISECT started as an NGO in 1985.
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ADB Inclusive Business Market Study for India and Sri Lanka Draft Report: Annexes

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: 2004 Turnover: $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 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 plans Though 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 resort’s 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 Lanka’s 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 Spence’s 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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ADB Inclusive Business Market Study for India and Sri Lanka Draft Report: Annexes

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: 2008 Turnover: $2.4 million Extent of BOP engagement: 5,000+ BOP customers

Company logo

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 Engagement BOP 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 can charge 20-30% less than other major hospitals. One of the biggest drivers of Apollo REACH’s 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. Apollo’s 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 REACH’s major challenge. At the facility level, after reaching the saturation point in 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.

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ADB Inclusive Business Market Study for India and Sri Lanka Draft Report: Annexes

Inclusive Business Case Study – CIC Agri
“Seed-to-shelf agricultural production company” Sector: Agriculture Location of operations: Pan-Sri Lanka Year of establishment: 1993 Turnover: $67 million Extent of BOP engagement: Over 20,000 BOP farmers Background on Business A subsidiary of one of Sri Lanka’s largest conglomerates, CIC Holdings, CIC Agri is a large agricultural production company. It contributes to 6% of Sri Lanka’s 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 with agricultural 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 Agri’s 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 Lanka’s total agricultural production, CIC Agri’s 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 educate farmers 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 company’s 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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ADB Inclusive Business Market Study for India and Sri Lanka Draft Report: Annexes

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: 2007 Turnover: $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. DesiCrew’s headquarter office receives orders from its corporate clients, which are then assigned to one its 4 rural BPO centers, where the service is delivere d. Desicrew’s clients include domestic and international clients. Their early supporters include Infosys and HDFC Life Insurance. Mode of BOP Engagement BOP as Employees DesiCrew’s 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 DesiCrew’s 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, DesiCrew’s 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 assigned to 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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ADB Inclusive Business Market Study for India and Sri Lanka Draft Report: Annexes

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: 2004 Turnover: $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 partners with 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 plans Though 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 resort’s 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 Lanka’s 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 Spence’s 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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ADB Inclusive Business Market Study for India and Sri Lanka Draft Report: Annexes

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: 2008 Turnover: 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 Engagement BOP 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 Employees Greenlight’s team leaders and district managers are village-based, and also belong to the BOP. BOP as Consumers Greenlight’s 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 Greenlight’s 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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ADB Inclusive Business Market Study for India and Sri Lanka Draft Report: Annexes

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: 1996 Turnover: $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 Industree’s 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 company supports 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. Challenges Primary 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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ADB Inclusive Business Market Study for India and Sri Lanka Draft Report: Annexes

Inclusive Business Case Study – Jaipur Rugs
Hand-knotted carpets made by rural artisan women Sector: Handicrafts Location of operations: Pan-India Year of establishment: 1999 Turnover: $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 more than 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 company’s 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 their professional 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 company’s management is how to further increase its operations and efficiency. Furthermore, as significant resources are dedicated to skills training for the company’s 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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ADB Inclusive Business Market Study for India and Sri Lanka Draft Report: Annexes

Inclusive Business Case Study – MAS Intimates
Innovative manufacturer of intimate apparel and sportswear Sector: Apparel, Textiles Location of operations: Pan-Asia Year of establishment: 1986 Turnover: Not disclosed Extent of BOP engagement: 40,000 employees Background on Business Located in Sri Lanka, MAS Intimates is the region’s leading manufacturer of intimate wear and sportswear. It is the preferred supplier of apparel to global brands, such as Victoria’s 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 Employees MAS 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, called Amante, 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 Lanka’s tight labour market and the presence of equally lucrative alternative job opportunities, MAS’ workers are sometimes attracted to a more “traditional” office job. Attrition is an 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 Lanka’s 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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ADB Inclusive Business Market Study for India and Sri Lanka Draft Report: Annexes

Inclusive Business Case Study – Shree Kamdhenu Electronics Pvt. Ltd.
Technological products and solutions for dairy collectives Sector: Information Technology Location 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 Kamdhenu’s 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 Engagement BOP as Consumers Shree Kamdhenu Electronics sells its microprocessor-based electronic measurement and quality testing products to dairy farmer collectives. These innovative tools allow each farmer’s 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 collective’s 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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ADB Inclusive Business Market Study for India and Sri Lanka Draft Report: Annexes

Inclusive Business Case Study – StarAgri
Integrated post-harvest management solutions for smallholder farmers Sector: Agri-business Location of operations: Pan-India Year of establishment: 2006 Turnover: 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 India’s 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 Consumers StarAgri provides several services to BOP farmers, including warehousing, quality testing, and collateral management services. The company also partners with several banks, enabling smallholder 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, StarAgri’s farmers receive a higher price for their produce. Futhermore, StarAgri’s quality-based procurement allows farmers to receive higher prices for high-quality produce (as opposed to traditional auction systems, 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. StarAgri’s 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 nontransparent 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 StarAgri’s launch was financed by its promoters’ equity totaling $2 million, and it has recently received an investment of $30 million from IDFC, one of India’s leading infrastructure financing companies. In terms of working capital, however, it would look to raise $10-20 million in debt.
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ADB Inclusive Business Market Study for India and Sri Lanka Draft Report: Annexes

Inclusive Business Case Study – Vortex Engineering
Low-power and solar-powered ATMs for rural populations Sector: Manufacturing, Financial Services Location of operations: Pan-India, Asia, Africa Year of establishment: 2004 Turnover: $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. Vortex’s 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 Vortex’s 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, Vortex’s 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, Vortex’s 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 risky and 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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ADB Inclusive Business Market Study for India and Sri Lanka Draft Report: Annexes

Inclusive Business Case Study – WaterHealth
Affordable housing for migrants and low-income populations Sector: Water Location of operations: Andhra Pradesh Year of establishment: 2005 Turnover: 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 Consumers WaterHealth’s primary mode of engagement with the BOP is as consumers of its affordable safe drinking water solution. Beneficiaries of WaterHealth’s services would otherwise only boil water, which doesn’t 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 2530 plants this year. Similarly, the company plans to expand to 300-400 plants in India. Within India, WaterHealth’s “corridor of interest” extends from Rajasthan, Gujarat, Chhattisgarh, Andhra Pradesh and Karnataka. WaterHealth’s 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 a result, 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 WaterHealth’s 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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ADB Inclusive Business Market Study for India and Sri Lanka Draft Report: Annexes

5 DEEP DIVES ON POTENTIAL FUND MANAGER PARTNERS FOR ADB
Figure 1: Fund manager snapshot – Pragati India Fund
Fund name Investors
Fund details

Pragati India Fund I CDC, IFC

Sample investment
Strategy

Jash Engineering
Mfg. of equipment used in waste water treatment

Vintage Total AUM
Avg. size of investment

2011 $ 60 million
$ 6 – 10 million

Target IRR Geographic focus
Sector focus Social impact metrics employed

25% + Low-income states in India
Sector agnostic

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 development – thus having the potential for significant livelihood 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.

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. Key contact
N. Shadagopan
SOURCE: Interview with fund; Dalberg research

Figure 2: Fund manager snapshot – Aavishkaar
Fund name Investors Fund details Vintage Total AUM Avg. size of investment Target IRR Geographic focus Sector focus 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, Aavishkaar’s impact measurement systems are not based on GIIRS. Key contact

Aavishkaar India Micro Venture Capital Fund CDC, IFC, FMO, KfW, NABARD, Rockefeller, others

Sample investment Strategy

Vortex Engineering
Developer and mfg. of low-cost ATMs

2005 $ 120 million $ 0.1 – 1 million 20-22% Pan-India Sector agnostic

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, it’s 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 prerevenue companies, underwriting risks of limited experience of entrepreneurs and lack of local enabling institutions, and has still delivered strong financial returns.

Vineet Rai
SOURCE: Interview with fund; Dalberg research; ImpactBase

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ADB Inclusive Business Market Study for India and Sri Lanka Draft Report: Annexes Figure 3: Fund manager snapshot – Aureos
Fund name Investors Fund details Vintage Total AUM Avg. size of investment Target IRR Geographic focus Sector focus Social impact metrics employed
Aureos has a proprietary impact measurements framework, the Aureos Sustainability Index. Beyond this, Aureos also follows IFC perfor mance standards and is a signatory of UNPRI. Key contact

Aureos South Asia Fund CDC, ADB, Norfund, FMO

Sample investment Strategy

Asiri Hospitals
Chain of low-cost hospitals in Sri Lanka

2004 $ 100 million (70% for India) $ 5 – 10 million ~25% India, Sri Lanka, Bangladesh Sector agnostic

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%.

Balaji Srinivas (India), Nissanka Weerasekara (Sri Lanka)
SOURCE: Interview with fund; Dalberg research

Figure 4: Fund manager snapshot – LR Global
Fund name Investors Fund details Vintage Total AUM Avg. size of investment Target IRR Geographic focus Sector focus Social impact metrics employed
ESG is an important part of LR Global’s investment strategy, especially given that they are targeting DFIs as their primary LPs. The fund manager does not currently employ any other impact metrics. Key contact

LR Global CDC, ADB, Norfund, FMO

Sample investment Strategy

N/A

2012 $ 30 million + $ 0.5 – 4 million 20-25% Sri Lanka Sector agnostic

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 LR’s deal pipeline could qualify as IBs by ADB’s 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 sectors where larger players operate.

Chanaka Wickramasuriya
SOURCE: Interview with fund; Dalberg research

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ADB Inclusive Business Market Study for India and Sri Lanka Draft Report: Annexes Figure 5: Fund manager snapshot – SEAF
Fund name Investors Fund details Vintage Total AUM Avg. size of investment Target IRR Geographic focus Sector focus Social impact metrics employed
SEAF tracks IRIS compatible metrics such as employment, wages, benefits, training, suppliers, customers, taxes, community development, formalization and corporate governance. SEAF’s development impact reports are available online. Key contact

India Agribusiness Fund LIC, Omidyar, SIDBI, UBI

Sample investment Strategy

Abhay Cotex
Cotton seed processing company

2010 $ 33 million + $ 2 – 7 million 20-25% Pan-India Agribusiness value chain

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 country’s 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. SEAF’s 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.

Hemendra Mathur
SOURCE: Interview with fund; Dalberg research; ImpactBase

Figure 6: Fund manager snapshot – SIDBI-VC
Fund name Investors Fund details Vintage Total AUM Avg. size of investment Target IRR Geographic focus Sector focus 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. Key contact Ananta P. Sarma
SOURCE: Interview with fund; Dalberg research

Samriddh Fund DFID

Sample investment Strategy 2012 $ 60 million + $ 1 – 5 million 15-16% Low-income states in India Sector agnostic

FabIndia
Retailer of products handmade by rural craftspeople

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 fund’s 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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ADB Inclusive Business Market Study for India and Sri Lanka Draft Report: Annexes

6 ECONOMIC FACTSHEET ON LOW-INCOME STATES
GDP growth rates ofon low-income states Figure 7: Summary of key statistics low-income states in Indiain
GDP growth rate % Bihar Chhattisgarh Jharkhand 6.6% 13.1% 10.8% 1,824

India
Number of clusters

Per capita income $ (PPP) 1,272 2,673

194 48 67 251
2,717 2,377

Madhya Pradesh
Odisha Rajasthan Uttar Pradesh 7.2% 5.4% 6.3%

12.0%

1,804

340 198
504

1,707

West Bengal Arunachal Pradesh Assam Manipur
Meghalaya Mizoram Nagaland Tripura 3.9%

7.1% 3.7% 8.4% 6.2%
9.5% 14.7% 8.9% India average = 6.5%

3,033 3,408 1,865 1,885
2,967 2,797 3,068 2,708 India average = 3,694
66

862

38 82 84 19 7 39 82

SOURCE: Dalberg Analysis, UNDP, India Competitiveness Report-2011, IBEF, UNIDO

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ADB Inclusive Business Market Study for India and Sri Lanka Draft Report: Annexes

Summary of key facts on low-income states in India:
State, competitiveness ranking Bihar 17 / 29 5 / 15 in LIS/NES Key facts Major industries Major clusters

• Bihar recorded the second highest GDP growth among all the states • DFIs like IFC, DFID, Kfw, CDC & SIDBI have Bihar as one of their focus states • Bihar government is proactively giving policy incentives for Industries & Investors

Chhatisgarh 12 / 29 1 / 15 in LIS/NES

Jharkhand 21 / 29 9 / 15 in LIS/NES

• Chhattisgarh accounts for about 16 per cent of the nation’s coal reserves and is rich in other mineral resources such as Limestone, Iron-ore, Copper, Bauxite., • Chhattisgarh is presently one of the few states that has surplus power • The state offers a wide range of fiscal and policy incentives for businesses and stands first among LIS & NES in the competitiveness rankings • DFIs like IFC, DFID, Kfw,CDC & SIDBI have Chhatisgarh as one of their focus states • Jharkhand has around 40 per cent of the country’s mineral wealth • DFIs like IFC, DFID, Kfw,CDC & SIDBI have Chhatisgarh as one of their focus states • Location Advantage: Closer to the ports of Kolkata, Haldia and Paradip and has easy access to raw materials.

• Agriculture: Tea, Rubber, Sugarcane, Tobacco, Dairy, Paper • Industries: Plastics, Transport equipment, Chemicals, Textiles, Mines, Minerals • Agriculture: Food processing • Industries: Mining, Minerals, Iron & Steel, Cement, Power, IT& ITes, Biotechnology, Gems & Jewellery

• • • • •

Manufacturing Textile sericulture Sugarcane Agro-based industries

• Iron & steel ancillary units • Castings & metal fabrication • Gems & Jewellery • Textiles • Aluminum

Madhya Pradesh 14 / 29 3 / 15 in LIS/NES

Odisha 15 / 29 4 / 15 in LIS/NES

• A large number of consumer goods companies have manufacturing bases in the state because it is centrally located and is equidistant to all major cities of India • Madhya Pradesh has rich mineral resources and has the largest reserves of diamond and copper in India • State government is actively working with World bank, IFC, DFID and other DFIs on host of developmental projects • Leads in iron, steel, ferroalloy & aluminium production. It also has a strong base for coal-based power generation • Has a stable political environment and is actively working with IFC, DFID and other development organizations • Offers a wide range of fiscal and policy incentives for businesses

• Agriculture: Rubber, Food & beverages • Industries: Mining, Minerals, Iron & Steel, Engineering, Chemicals, Handloom, Plastics, Printing & Packaging, Tourism • Agriculture: Agri processing, forest based industries • Industries: Mining, Minerals, Auto & Auto components, Textiles, Cement, Pharmaceuticals, Minerals, Manufacturing, IT & ITes, Tourism • Agriculture: Agriprocessing, Food & beverages • Industries: Mining, Minerals, Aluminum, Handloom,Tourism , Electronics, Iron, steel & Ferroalloy

• Iron & steel ancillary units • Engineering & fabrication • Auto components • Textiles • Casting & metal fabrication

• Engineering & fabrication • Auto components • Textiles • Food processing

• Food processing industries • Handloom • Handicrafts • Textiles • Agro & Forest based industries

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ADB Inclusive Business Market Study for India and Sri Lanka Draft Report: Annexes

State, competitiveness ranking Rajasthan 15 / 29 4 / 15 in LIS/NES

Key facts

Major industries

Major clusters

Uttar Pradesh 19 / 29 7 / 15 in LIS/NES

• It is a natural corridor between the wealthy Northern and the prosperous Western states of the country, which makes it an important trade and commerce centre • Rajasthan is one of the most attractive tourist destinations in India • Rajasthan offers a variety of unexploited agricultural and mineral resources, which is indicative of scope for value addition and exports • Rajasthan ‘s GDP growth rate fell from 11% for the year 2010-11 to 5.4% for the year 2011-12 • Newly formed state government in Uttar Pradesh is seen as an industry friendly government • Government is actively working with Gates foundation, DFID and others • The state has witnessed high infrastructural growth , which is seen as a positive facilitator for industrial growth, in the past few years

• Agriculture: Agriprocessing • 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

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 advantage due to its proximity with sea ,North east and other landlocked countries

Arunachal Pradesh 28 / 29 15 / 15 in LIS/NES

• Undulating topography and varied agroclimatic 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 many initiatives to improve infrastructure and other amenities in the state

• Agriculture: Agro processing, Food processing • Industries: IT & ITes, Ceramics, Mineral based industries, Tourism, Sports goods, Leather based industries, Textiles, Handloom & Handicrafts, Auto & Auto components • Agriculture: Tea, Jute products, Agri & Agri allied industries • Industries: Mining, Minerals, Petroleum & Petrochemicals, Leather, Iron & Steel, IT, Auto & Auto components, Biotechnology • Agriculture: Cane & bamboo, Horticulture • Industries: Art & crafts, Weaving, Carpet weaving, Wood carving, Ornaments, Tourism, Saw mills & plywood, Power, Mineral based industries

• Engineering equipment • Textiles • Leather products • Auto & Auto components • Rice mills • Foundry

• Engineering equipment • Textiles • Leather products • Auto & Auto components • Rice mills • Foundry

• • • •

Textiles Handicrafts Handloom Food processing

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ADB Inclusive Business Market Study for India and Sri Lanka Draft Report: Annexes

State, competitiveness ranking Assam 22 / 29 10 / 15 in LIS/NES

Key facts

Major industries

Major clusters

• Assam is the largest economy of the Northeast region and is the most industrially advanced state in the Northeast India • Assam is rich in natural resources such as natural oil and gas, rubber, tea, and minerals such as granite, limestone and kaolin • The state is rich in water resources. Other potential areas of investment include power and energy, mineral-based industries, tourism and crude oil refining • Manipur has significant potential for growing various horticultural crops because of varied agro-climatic conditions • A wide variety of rare and exotic medicinal and aromatic plants grow in Manipur and Entrepreneurs get easy access for processing and marketing such plants • With 79.8 per cent literacy rate, Manipur offers a largely educated workforce. Good Knowledge of English is an added advantage of the Manipuri workforce • Meghalaya is endowed with abundant natural 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 per cent and a majority of local population speaks and understands English • The state provides good support through various central and State Government agencies

• 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 in LIS/NES

• Agriculture: Food processing, Sericulture • Industries: Tourism, Handlooms, Handicrafts, Bamboo processing

• Bamboo Handicraft • Handicraft • Handloom • Food processing

Meghalaya 24 / 29 12 / 15 in LIS/NES

Mizoram 25 / 29 13 / 15 in LIS/NES

• Mizoram contributes 14 per cent to the country’s 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 the establishment of trade routes with neighbouring countries, trade facilitation has improved significantly over the last decade

• Agriculture: Agro processing, Food processing, Horticulture, Dairy & Livestock • Industries: Tourism, Mining, Cement, Steel processing, Handlooms, Handicrafts, Hydroelectric power • Agriculture: Bamboo, Sericulture, Food processing, Medicinal plants, Horticulture • Industries: Tourism, Energy, IT, Minerals & Stones, Handlooms & Handicrafts

• • • •

Foundry Handicraft Handloom Food processing

• Handicraft • Handloom

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ADB Inclusive Business Market Study for India and Sri Lanka Draft Report: Annexes

State, competitiveness ranking Nagaland 23 / 29 11 / 15 in LIS/NES

Key facts

Major industries

Major clusters

Tripura 18/ 29 6/ 15 in LIS/NES

• Nagaland has a high literacy rate of 80.1 per cent. Majority of the population in the state speaks English, which is the official language of the state • The state provides institutional support through various central and State Government agencies viz., North East Council, Ministry of Development of North Eastern Region and Nagaland Industrial Development Council • Tripura is rich in natural resources such as natural oil and gas, rubber, tea and medicinal plants • Tripura is connected with the rest of Northeast India by National Highway (NH)-44. Improved rail, air connectivity and establishment of trade routes have further facilitated the trade • At 87.8 per cent, Tripura’s literacy rate is higher than the national average rate

• Agriculture: Bamboo, Sericulture, Horticulture • Industries: Tourism, Handlooms, Handicrafts, Minerals, Mining • Agriculture: Tea, Rubber, Bamboo, Sericulture, Medicinal Plants, Horticulture • Industries: Natural Gas, IT & ITes, Tourism, Handlooms, Handicrafts

• Handicraft • Handloom

• • • •

Handicraft Handloom Bamboo Leather

Sources: Dalberg Analysis, UNDP, India Competitiveness Report-2011, IBEF, UNIDO

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ADB Inclusive Business Market Study for India and Sri Lanka Draft Report: Annexes

7 DEEP DIVES ON PRIORITY SECTORS
Figure 8: Sector snapshot of water and sanitation

Key indicators across LIS & NES: Access to water and sanitation
% of population with access to improved water sources
Northeastern States (NES)

Key trends and facts:
• 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

% of population with access to improved sanitation
Other low-income States (LIS)
17 18 15

Bihar Chhatisgarh Jharkhand M. P.
Odisha Rajasthan
52

93 82

• Government along with bilateral aid and loans from multilateral development banks loans have created successful PPP models • Government of India’s Total Sanitation Campaign (TSC) is operational in 578 rural districts with an outlay of $3.35bn; for each sponsored project, the central gov’t shares 60% of total cost, while the state and the community contribute 20% each • Key policies: JNNURM, National Water Policy & other state policies

81 77 83 95 91

23 17 25 26 60

Uttar Pradesh West Bengal

Arunachal
Assam Manipur 33 75

93
70

89

96

Meghalaya Mizoram Tripura

50 80 60

66 98 94

84 India avg. NOTE: Data for Nagaland is N/A
SOURCE: MDG States of India Report 2010; WHO

51 India avg.

Figure 9: Sector snapshot of energy access

Key indicators across LIS & NES: Energy access
% of people using solid fuels for cooking
Northeastern States (NES)

Key trends and facts:
• Central government is taking up various key initiatives such as Solar Mission to electrify the off grid locations

% of people using kerosene lamps for lighting
Other low-income States (LIS)

Bihar Chhatisgarh Jharkhand M. P.
Odisha Rajasthan

90 88 87 80 86 76 80 77 44 31 62 32 55 23 53

82

• 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 taxfree 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)

Uttar Pradesh West Bengal

Arunachal
Assam Manipur

70
80 69

19
62 25

Meghalaya Mizoram Tripura 45

83 14 79 16

37

67 31 India avg. India avg. NOTE: Solid fuels include biomass fuels, such as wood, charcoal, crops or other agricultural waste, dung, shrubs and straw, and coal.
SOURCE: India Census, 2011

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ADB Inclusive Business Market Study for India and Sri Lanka Draft Report: Annexes

Figure 10: Sector snapshot of healthcare

Key indicators across LIS & NES: Healthcare
# Doctors per 10,000 population
Northeastern States (NES)

Key trends and facts:
• Healthcare is an increasingly attractive sector for the PE & VC industry

# Nurses per 10,000 population
Other low-income States (LIS)

Bihar Chhatisgarh Jharkhand M. P.
Odisha Rajasthan

4.0 4.1 3.9 4.9 2.7 4.0 7.5 6.0 7.1

2.8 5.7 6.2 5.8

• 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

12.8
5.0

Uttar Pradesh West Bengal

14.1
2.8

• 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 saving drugs and equipment
• Key policies: National Rural Health Mission (NHRM), National Urban Health Mission (NUHM)

10.4

Arunachal Assam Manipur 3.2 2.8 6.2 17.9

Meghalaya Mizoram Tripura 2.5

4.5

12.3 9.2

5.3

11.8

6.1 7.4 India avg. India avg. SOURCE: HRH Report I; Public Health Foundation of India; World Bank

Figure 11: Sector snapshot of education

Key indicators across LIS & NES: Education
Gross enrollment ratio
Northeastern States (NES)

Key trends and facts:
Pupil to teacher ratio
Other low-income States (LIS)

• By 2020, India needs 800 more universities and 35,000 colleges to meet the demand

Bihar Chhatisgarh Jharkhand
M. P. Odisha

64 76 76 90 69 87 61 85 30 12 44 24 41 35 26

58

• The sector witnesses spends of more than $10.4 bn, which is estimated to grow at 18.0% annually • Key policies: Right to Education Act (RTE), and Foreign Educational Institutions Bill (FEIB) • RTE makes access to primary education a fundamental right and mandates 25% reservation for underprivileged students in schools • FEIB allows FEIs to setup multidisciplinary campuses and award degrees; it mandates FEIs to invest at least 51% of capital expenditure required and regulates the admission process, fee structure, period of operation

Rajasthan Uttar Pradesh West Bengal

Arunachal Assam

91 76

18 21

Manipur Meghalaya Mizoram Tripura

77 89 102 97

19 16 14 20

72 India avg.

30 India avg.

SOURCE: UNESCO; CIA Factbook; State Elementary Education Report Card, DISE (2010-11)

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ADB Inclusive Business Market Study for India and Sri Lanka Draft Report: Annexes

8 GOVERNMENT SCHEMES RELEVANT TO ADB’S FUND
Below we have highlighted some government programs that ADB should strive to work together with. The resources devoted to these schemes and programs also indicate the level of priority that the Government of India has assigned to the issue in question. Most of these programs are already large, and would benefit greatly from a complementary approach from other actors. The following brief descriptions of each such government program are meant to provide some background and overview.

NATIONAL SKILL DEVELOPMENT CORPORATION (NDSC)
NDSC is a not-for-profit company set-up by the Government of India under the Ministry of Finance. The Government of India holds 49% of the company, with the private sector controlling the remaining 51%.4 It is structured as a Public-Private-Partnership. The National Skill Development Fund that funds the activities of the NSDC is set up as a trust that is owned completely by the government of India and is run by professional fund managers. The trust can receive financial contributions from donors, private entities, governments (both central and state), financial institutions etc. The Prime Minister of India is the chairperson of the National Council on Skill Development. Set up as part of the National Skill Development Mission (NSDM), its primary objective is to promote the development of skills in the country. It does so by catalyzing the creation of large, scalable, forprofit vocational training initiatives. The NDSC provides funding to private sector initiatives and also enables support systems like quality assurance, information systems and training initiatives for the trainers. Its target is to contribute about 30% to the overall target of the NSDM of skilling / upskilling 500 million people in India by 2022. As part of its mission statement, the NSDC focuses on the underprivileged section of the society, backward regions and significantly on the unorganized and informal sector. One of the core operating principles of the NDSC is to target market failure and not compete with private financing. It does that mainly though funding innovations targeting labour market outsiders. The NSDF is the operating arm of the NSDC and was created with a corpus of $188 million (Rs. 995.10 crore).5 Currently, its corpus stands at $472 million (Rs. 2,500 crore) and it has made a commitment of $256 million (Rs. 1356.41 crore) till march 2012.6 Established in October 2009, the NDSC has so far trained 181,691 people and placed 144,238 people. So far, it has funded 32 training institutions and 4 sector skill councils. Skilling of India’s workforce presents a $22 billion opportunity.7

4 5

NDSC website “Coordinated Action on Skill Development”, Planning Commission 6 Business Standard, May, 2012 7 NSDC, May, 2011
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ADB Inclusive Business Market Study for India and Sri Lanka Draft Report: Annexes

NATIONAL INNOVATION FOUNDATION (NIF)
National Innovation Foundation – India (NIF) is an autonomous body under the Department of Science and Technology, India.8 It was set up in February 2000 at Ahmadabad to provide institutional support for scouting, spawning, sustaining and scaling up the grassroots innovations. NIF conducts a biennial national competition for grassroots green technologies developed by farmers, mechanics, artisans and others through their own genius without any recourse to professional help. NIF validates these innovations with the help of experts and ascertains the novelty in these innovations. If the innovation is deemed novel, NIF files a patent on behalf of the innovator. NIF also funds value addition initiatives in these innovations to upscale them and make them more useful for a larger segment of people. To determine the feasibility of the commercializing of technology, NIF conducts market research and test marketing. Those technologies which are found to be commercially viable are licensed to willing entrepreneurs. A Micro Venture Innovation Fund (MVIF) of $750,000 (INR 4 Crore), sponsored by Small Industries Development Bank of India (SIDBI) , supports the activities of prototype development, test marketing and pilot production by providing necessary capital in the form of loans. Since 2003, a total of 168 projects have received financial support through this fund.9 NIF is mandated to build a national register of ideas, innovations and traditional knowledge practices related to agriculture, plants, animal health, and human health. With the help of the Honey Bee Network, NIF has been able to document more than 150,000 ideas, innovations and traditional practices.

8 9

NIF website MVIF – online database of list of projects supported
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ADB Inclusive Business Market Study for India and Sri Lanka Draft Report: Annexes

JAWAHARLAL NEHRU NATIONAL SOLAR MISSION:
The Jawaharlal Nehru National Solar Mission (also known as the National Solar Mission) is a major initiative of the Government of India and state governments to promote ecologically sustainable growth while addressing India’s energy security challenges.10 The Mission has set an ambitious target of deploying 20,000 MW of grid connected solar power by 2022. It is aimed at reducing the cost of solar power generation in the country through (i) long term policy; (ii) large scale deployment goals; (iii) aggressive R&D; and (iv) domestic production of critical raw materials, components and products, to achieve grid tariff parity by 2022. The Mission has adopted a 3-phase approach - 2010-13 as phase 1, 2013–17 as phase 2 and 2017–22 as phase 3. An evaluation of progress, review of capacity and targets for subsequent phases, based on emerging cost and technology trends will be done at regular intervals during this period. The mission’s targets are:  To create an enabling policy framework for the deployment of 20,000 MW of solar power by 2022  To ramp up capacity of grid-connected solar power generation to 1,000 MW within three years – by 2013; an additional 3,000 MW by 2017 through the mandatory use of the renewable purchase obligation by utilities backed with a preferential tariff  To create favorable conditions for solar manufacturing capability, particularly solar thermal for indigenous production and market leadership  To promote programs for off grid applications, reaching 1,000 MW by 2017 and 2000 MW by 2022  To reach 15 million sq. meters installed solar thermal collector area by 2017 and 20 million by 2022  To deploy 20 million solar lighting systems for rural areas by 2022 So far, National Solar Mission facilitated a 62% increase in investments in solar energy in India to $12 billion during the year, the fastest investment expansion of any large renewable energy market in the world.11 NVVN, the nodal agency for solar projects, has selected 37 projects accounting for a total of 1,480 MW (32 projects – 5MW each; 1 project – 20 MW; 3projects – 100 MW each).

10 11

MNRE website The Hindu, June, 2012
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ADB Inclusive Business Market Study for India and Sri Lanka Draft Report: Annexes

NATIONAL RURAL LIVELIHOOD MISSION (NRLM)
The National Rural Livelihood Mission (NRLM) was launched by the Ministry of Rural Development (MoRD), India in June 201112. Aided in part through investment support by the World Bank, the mission aims at creating efficient and effective institutional platforms of the rural poor enabling them to increase household income through sustainable livelihood enhancements and improved access to financial services. NRLM has set out with an agenda to cover 70 million Below Poverty Line (BPL) households across 600 districts in the country covering 6,000 blocks, 250,000 Gram Panchayats and 600,000 villages through self-managed Self Help Groups (SHGs) and federated institutions. It supports them for livelihoods collectives for a period of 8-10 years. In addition, these BPL households are facilitated to achieve increased access to their rights, entitlements and public services, diversified risk and better social indicators of empowerment. NRLM believes in harnessing the innate capabilities of people and complements them with capacities (information, knowledge, skills, tools, finance and collectivization) to participate in the growing economy of the country. The key features of the NRLM are: (1) Social mobilization: Universal social mobilization through formation of SHGs under NRLM. The related mission is to bring every BPL household under the SHG network. (2) Institution building: Setting up SHG federations at various levels to nurture the SHGs; enable them to become good quality institutions, help SHG members in articulating their demands, enable collective action for getting their entitlements with various government departments, developing backward and forward marketing linkages, maintenance of accounts, conducting audits and documentation. (3) Financial inclusion: Based on the eligibility criteria, NRLM would provide financial support with intent to inject financial resources into the institutions of poor for meeting their credit needs for both, consumption purposes and also for investment in livelihoods promotion (4) Livelihood program: Major focus of the NRLM is to stabilize and promote existing livelihoods portfolio of the poor. The NRLM livelihoods promotion priorities are: a. 'Vulnerability reduction' and 'livelihoods enhancement' through enhancing and expanding existing livelihoods options and tapping new opportunities b. 'Skilled wage employment' - building skills for the job market outside c. 'Enterprises' - nurturing self-employed and entrepreneurs (for micro-enterprises) (5) Convergence & partnerships: a. Ensuring that states agencies (SRLM) develop partnerships with major government programs and build synergies to address different dimensions of poverty and deprivation b. Working in tandem with civil society organizations, industries, educational institutions, banks and other resource organizations who share the similar objectives

12

NRLM Website
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ADB Inclusive Business Market Study for India and Sri Lanka Draft Report: Annexes

INDIA INCLUSIVE INNOVATION FUND (IIIF):
India Inclusive Innovation Fund (IIF) is a $1 Billion fund setup in February, 2012 by the National Innovation Council, a division in the Prime Minister’s Office.13 This fund is setup as an effort to drive and catalyse the creation of an ecosystem of enterprise, entrepreneurship, and venture capital, targeted at innovative solutions for the bottom of the pyramid. The IIIF is built on the principle that innovative enterprises can profitably, scalably, and competitively engage citizens at the bottom of the economic pyramid and in doing so, provide goods and services that will transform their lives for the better.14 The fund proposes to invest in a new generation of Indian entrepreneurs who will build, and are in the process of building, world-class enterprises that focus on the problems of the poor, without compromising on economic success. In doing so, the fund will help create a new Indian model of innovation, one that bridges growth and equitability. The fund will support investment at different stages of the enterprise development cycle – from early stages, through later phases of scaling-up of potentially successful solutions and business models. The fund proposes to seek capital from a range of sources: seed fund contributions from the government and its agencies; contributions from various Indian public sector enterprises, banks, and so forth; and contributions from private investors, corporate organizations and investment firms. Crucially, the fund will also explore the possibility of establishing ‘soft’ incubation capacity and resources – expertise and programs that will support individual investee entrepreneurs and companies, in successful enterprise development and performance. This effort will address social impact objectives, by kick-starting an ecosystem of capacity-building around BOP-focused enterprises and entrepreneurship; and economic return objectives, by providing entrepreneurial teams with the capacities needed to successfully deliver on their ideas. The Government of India has announced an initial investment of $20 million (INR 100 Crores) in the fund.15 The fund is currently in the process of conceptualization, design, and development. It plans to start its operations once it has $100 million. Hence, it is actively scouting for $80 million from private sector and other non government agencies.

13 14

Times of India, Jan, 2012 National Innovational Council Website 15 Indian Express, November, 2011
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ADB Inclusive Business Market Study for India and Sri Lanka Draft Report: Annexes

RURAL INNOVATION FUND
The Rural Innovation Fund (RIF) is a fund managed by the National Bank for Agricultural and Rural Development (NABARD) to foster innovation in the rural sector. The RIF supports innovation in farm, non-farm and microfinance sectors that have the potential to promote rural livelihood opportunities and employment. The support the fund offers can be in the form of a loan, grant, incubation fund support or a combination of the three up to a maximum of $56,600 (INR 0.3 Crores). Individuals, NGO’s, community based organisations, self help groups, farmer’s clubs, Panchayati Raj Institutions and private sector companies can all apply for funding to the RIF. The preferred areas that the fund supports relate to agricultural productivity, rainwater harvesting and distribution of water, generation and distribution of energy, rural sanitation and waste disposal, managing common property resources, rural housing and habitat development, financial inclusion, rural tourism and rural health care. Since the inception of the fund in 2005, NABARD, through the RIF, has supported 455 projects till date with disbursements of $8.11 million (INR 43 Crores). In 2011-2012 alone, the RIF has disbursed $1.92 million (Rs. 10.18 crore) supporting 80 projects. 16

16

NABARD website
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