New Delhi, Aug. 18 -- A group of former officials from some of India's key energy-efficiency and climate institutions has set up Dhivegaa Energy Pvt Ltd, a New Delhi-based energy service company (ESCO) that will fund, install and maintain clean industrial heating systems for small and medium-sized factories at no upfront cost to clients.

"Primarily, we are an energy service company - very much modelled on the ESCO model," Saurabh Kumar, the company's co-founder and chief executive, told VCCircle. Dhivegaa was unveiled last week at an event in Pune.

Kumar was previously managing director of state-run Energy Efficiency Services Ltd (EESL) and later vice-president at the Global Energy Alliance for People and Planet. He has brought on board S. Vikash Ranjan, a sustainability specialist who has worked with the United Nations Development Programme and United Nations Industrial Development Organization, as CTO; and Bharat Bhushan, a former government official with three decades in public finance, as CFO and co-founders.

In addition, AK Asthana, an industrial energy-auditing specialist, is honorary advisor and Dr Ajay Mathur, a former head of the International Solar Alliance, TERI and the Bureau of Energy Efficiency who is now at IIT Delhi, advises the company as "a mentor" who will chair the board once Dhivegaa is capitalised.

Operating model

Dhivegaa's near-term focus is decarbonising the low-temperature (90-110degC) heating processes MSMEs run on gas-, diesel-, coal- or biomass-fired boilers, replacing them with electric heat pumps.

"We will invest in the heat pump, and whatever is the fuel saving... will be paid to us... over a maybe five-year period," Kumar said, confirming Dhivegaa - not the client - absorbs the upfront cost.

The company will keep the equipment on its books and maintain it through the contract term, then transfer ownership to the client. Its website cites a base-case 70:30 savings split in its favour, fuel-cost cuts of 30-40%, and emissions cuts of up to 69% depending on the fuel displaced; heat pumps range 25 kW-500 kW and reach up to 120degC, aimed at textiles, food processing, chemicals, pharma, dairy, leather, hotels and hospitals. MSMEs that don't want a shared-savings contract can instead pay upfront and use Dhivegaa purely for procurement.

The economics explain the reluctance it's trying to solve: a one-tonne-per-hour boiler - replaceable by a 25 kW heat pump - costs roughly Rs 3-4 lakh, Kumar said, against Rs 25-30 lakh for the heat pump. "That's the basic reason why MSMEs do not pick it up unfinanced," he said.

Funding

Dhivegaa hasn't named its backers. Kumar said it has "a bunch of investors" but that he can't disclose their names at the moment. He described a mix of institutional and high-net-worth capital plus non-bank finance companies as debt partners. Asked if the profile resembles the international impact funds he worked with at GEAPP, he agreed.

Kumar said Dhivegaa would require $3-4 million (Rs 28-38 crore) in equity and "about two or three times that" in debt in total first-year capital, adding that talks were open with some financiers while a broader pipeline was built.

Expansion plan

Dhivegaa is starting in three clusters given its size: Pune (auto components), Thane (textiles and auto), and another textiles-focused cluster. Kumar's target is 10,000 MSMEs in five years, with revenue anywhere between Rs 2,000 crore and Rs 3,000 crore.

He also estimated heating at roughly 40% of MSME energy use and said no comparable financed service exists today. He flagged open-access or group-captive power for converted clusters, plus future carbon revenue, as additional upside.

Kumar said Dhivegaa could expand beyond ESCO work - into areas like independent power production - but the near-term plan is to create a niche in the industrial decarbonisation space.

Separately, it has outlined plans for IoT-based energy management, demand-side optimisation, carbon-credit origination and climate advisory work, starting in Maharashtra, Tamil Nadu and Gujarat.

Published by HT Digital Content Services with permission from VC Circle.