Clean fuel energy firm Nexgen Energia to set up 1,000 biofuel plants in next 5 yrs

Central government launched national policy on biofuel in 2018 with the objective of reaching 20 per cent ethanol-blending and 5 per cent biodiesel-blending by the year 2030. In an exclusive interview to Bizz Buzz Dr Piyush Dwivedi, Founder and Chairman, Nexgen Energia Ltd, on the emerging industry of biofuel production and the challenges associated with production and technology required. The company is also planning to take IPO route by 2025-26

We are planning to onboard 1000 partners for production, and 1000 partners for retail. Most of these partners will be in Tier 2 and Tier 3 cities. We are coming up with unit in Jind, in Haryana and Ambala, Punjab, and Baghpat and Khurja in UP. We are also going to Jhansi. In metro city, the land is too expensive. So, we have to see the feasibility of the project for the partners as well. We will also be going to Andhra Pradesh, Telangana, Tamil Nadu and then Karnataka in the coming year

We haven't done company valuation as of now. We are still in the establishment phase and we intend to reach Rs100 crores in the coming year. In another two to three years, we target to reach Rs500 crores

What was the thought process, while setting up the company to produce biofuel?

The company was incepted in 2019. The thought behind this was to promote the green fuel industry. Government of India had launched the Biofuel Policy in 2018, so seeing the huge potential and at the same time resolving the problem of the society, which is pollution, increased prices of fuel. All these factors encouraged us that this category is totally new and no big players are there. This is a category which can be developed. So, from both societal perspective and commercial perspective, this was an ideal business of future. Globally, the biofuel industry is growing. In India, the government has taken initiatives to make this category more lucrative and productive. So, this is why we got into this business and I think we did the right thing.

The company was set up before the pandemic. Did the lockdowns and restrictions cause any negative impact on the operations?

The company was officially set up on February 8, 2018, and of course, the pandemic hit us. Our business is into biofuel space, which includes Compressed Bio Gas (CBG) as well as green diesel. As we understand, we are expanding both production facilities and retail outlets to sellers. If I have to sell in the retail market, I need to have a production facility also. We started our own production facility which is already operational in Ambala. Shortly after starting CBG, we began refinery for green diesel also. But until you have the products, you cannot expand your retails. This is where pandemic hit us.

The other challenge during Covid that came in 2020 was - when we had to get sanctions and approvals from government offices to set up production plants and retail outlets. No Objection Certificates (NOCs) are required from 13 different government departments depending upon the location. So, during the troublesome period, there were challenges of people not being available, unfortunately we lost some government officials to Covid. So, all this delayed NOCs, construction.

But as of now, we are on track and we are getting good response from the market. We are expanding our network through franchise mode. All our partners are inquiring, they know where the future lies. We are still going slow on the franchise partnership.

What is the magnitude of the operations of your company today?

Government has the vision of making India energy independent by the year 2047. In 2018, government launched the biofuel policy, within which the intention is to set up 5,000 such projects all over India to produce CBG from waste. But things are moving at a very slow pace. The reason being, because the project sizes are very big, say for example Rs 100-150 crore. The production facilities which we are setting up has 100 tons processing capacity which will produce three tons of CBG and 150 tons of biofuel, the cost involved in setting this facility comes to around Rs 10-12 crore.

Our thought is to set up more small units and take the raw material locally, produce it locally and sell it locally. It will help in reducing the transportation cost, it will make the project more viable and boost district economy because sourcing and buying resources like cow dung, farm residual and other agri waste are all locally available. This will help in increasing farmer income, create local entrepreneur, create job in local areas.

So, how many operational units do you have in India?

Our first production unit of CBG is operational in Ambala and three more units are coming up in the same place. We have 300 poultry farms here so, there is enough waste generation. Another 15 plants are coming up in Uttar Pradesh, Punjab, Haryana, Rajasthan and Madhya Pradesh. We have a plan that in next 4 to 5 years to set up 1000 such units across the country.

What is the capacity of these units?

The capacity varies from 50 tons to 100 tons. And the incoming days, new plants will have capacity of 250 tons in terms of waste processing. For CBG production, you can say 1.5 ton to 5 ton daily.

Where there any other hurdles while setting up these units?

Other than obtaining NOC, the other hurdle was logistics, transportation of machineries. Labour which was working to set these units moved back to their villages. Approvals were also challenge. Also, a lot of people had applied for loans for lands, which was also delayed.

You mentioned that retailors are also a part of your expansion plan. How many retailors do you have as of now?

Our first green diesel pump is operational in Guna, Madhya Pradesh. And our CBG outlets are coming up with 70 partners for plants as well as retail outlets which include green diesel and CBG. We have thousands of applicants, but we are going phase wise with this process. We have already covered UP and Haryana, and now we are expanding to Maharashtra and Gujarat. The (production) model is such that the franchise partner will invest capital and build the infrastructure, we will assist in setting up the entire process and once the production is operational commercially, we will buy back CBG and biofertilizer at a fixed price and sell it through our retail outlets. It's an end-to-end solution for manufacturing and selling.

Have you set aside a target for next year, as to how many partners you will be onboarding?

We are planning to onboard 1,000 partners for production, and 1,000 partners for retail. Most of these partners will be in tier-2 and tier-3 cities. We are coming up with unit in Jind, in Haryana and Ambala, Punjab, and Baghpat and Khurja in UP. We are also going to Jhansi. In metro city, the land is too expensive. So, we have to see the feasibility of the project for the partners as well. We will also be going to Telangana, Andhra Pradesh, Tamil Nadu and then Karnataka in the coming year.

What is the company value as of today? Will you be launching any seed funding series to raise capital?

We haven't done company valuation as of now. We are still in the establishment phase and we intend to reach Rs100 crores in the coming year. In another two to three years, we target to reach Rs500 crores. Three years down the line we have a plan for IPO also, we are building the theme accordingly. It takes time for any outlet or any project to get established.