How a banker ReNewed his career

“What happens to professionals like us is the better you do in your career, the harder it becomes to leave your career and do something on your own. The more you have to lose,” says Sumant Sinha, who quit a high-profile corporate career to start a venture on his own.

An alumnus of IIT-Delhi and IIM-Calcutta, Sinha joined the Tata Administrative Service, from where he went to Columbia University in the US for a master’s in international affairs. He was an investment banker for more than a decade, first with Citibank and then with ING Barings, in the US and London, UK, before he returned to India in 2002 to join the Aditya Birla Group as its Chief Financial Officer.

After little over five years in the Aditya Birla group, Sinha moved to Suzlon as its Chief Operating Officer. After two years with the wind-turbine manufacturer, Sinha decided it was time to move on and do something on his own. What else but float a company that would become an independent power producer of renewable energy.

He floated ReNew Power Ventures Pvt Ltd towards the end of 2010 and used the next few months to build his team, identify projects and start work on them.

Willing to take risk

What helped him make his decision to quit and start on his own? “I had worked enough for various people. What also helped was that I saw two very different types of promoters and felt that at some level running a business or creating value in business was possible for a lot of professionals provided they are willing to take the risk,” says Sinha, Chairman and CEO of ReNew Power, in his office in Gurgaon.

“Why should our background or experience prevent us from taking this risk?” Both at the Aditya Birla Group and Suzlon he had exposure to investment bankers and private-equity players. He was convinced that capital was available provided the idea and the team were good. “I had this thesis when I left Suzlon that capital in India was there. What was lacking was people with ideas to take advantage of that capital. And for these capital providers to find good managements to back,” says Sinha.

Shortly after he set up ReNew Power with his own funds, Sinha and his team began the task of raising capital. ReNew Power’s plan was to install and operate renewable-energy assets — wind to begin with and solar later — generate electricity, and sell it to the State utilities or any other buyer.

Renewable energy is a capital-hungry business and Sinha had to quickly raise funds if he were to get his projects off the ground. This was in early 2011, which was not the best of times to raise private capital because of the Euro-Zone crisis and problems in the US re-surfacing. But Sinha did not have any choice. “It wasn’t the ideal time to raise money. But we didn’t really have a choice. It was go and raise money and be successful or wind up the business,” he says.

Raising funds

Discussions with private-equity players followed and finally Goldman Sachs decided to invest Rs 1,000 crore in ReNew Power for a majority stake. Raising capital was among the challenges that ReNew Power had to face. First, says Sinha, there was a lot of risk in raising the funds. Not all private-equity players were knowledgeable about the sector. More importantly, they were not comfortable investing in start-ups, since they tended to invest in companies that had some size. ReNew Power was not a venture-capital type of opportunity since VCs invest smaller sums — about $5-10 million — whereas the green power business required huge capital. Also, most private-equity firms in India invest in companies where there is promoter assurance and such. “I was not in any position to give any of that. I was really looking for private equity with a venture capital mindset,” says Sinha, 47.

'Stint in west helped'

There was also the question of handing over majority ownership to an investor. It is a dilemma most entrepreneurs face. But, not so in the case of Sinha. “I am in this business to create value,” he says, “and if Goldman also believed in that, theoretically we were aligned.” He realised he was in a capital-intensive business, and there was no way he would be able to bring in all the funds required to retain control. “By the nature of the business, control was never something that I was mentally fixated on.” He believes his stint in the West helped him develop a value-creation mindset, “which is that if I am doing things the right way for the business and if I am the best manager to run the business, then all the respective stakeholders would be happy for me to run the business.”

ReNew Power has about 100 MW of operating wind assets and hopes to add a few hundred mega-watts every year. It will look at solar also and maybe other forms of renewable energy provided they are viable.

regulation

The biggest challenge that he foresees is the regulatory situation in the country, something that is unpredictable. “That is something that we can’t really do much about. That leads to delays and changes, but it always leads to a slightly unstable business environment,” says Sinha.

Is he not worried about failure? That is always there, replies Sinha, but quickly adds that the definition of failure keeps changing. A year back, that would have been to shut the business and write off the investments. Now it would have changed to falling short of the capacity originally envisaged or taking longer to add that capacity or the return on the projects being lower than anticipated. “If you are not prepared for failure as an entrepreneur and if failure hits you, it can be devastating. That is why if you have gone through it at some level in your life, it prepares you much better,” says Sinha.

Being an entrepreneur itself is a risky business, and you cannot be one in an area where everything is totally secure. “If somebody else has proven the model, then it is too late for you,” he says. It is also important for an entrepreneur to know some fundamental truths in the business before starting off. “You need to understand them from the gut. If you do, then you probably have a better shot at being successful than if you don’t,” he adds.

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