In 2021, the production of solar energy in India was ranked fourth worldwide. India Brand Equity Foundation (IBEF) estimates that the nation’s installed solar capacity has rise from 2.63 GW in March 2014 to 49.3 GW in 2021.

The residential and small business sectors frequently face difficulties, such as the lack of accessible financing options for installing rooftop solar installations, despite the fact that large solar projects may be underway.

In order to facilitate simpler installation of rooftop solar projects, Welfund, a company with its headquarters in Chennai, has created a digital marketplace to bring together all the stakeholders, including financial institutions, engineering, procurement, and construction (EPC) firms, and consumers.

IIM Indore alumnus Shankar Sivan founded the climatetech Welfund startup in May of this year.

With a value estimated at Rs 765 crore, Welfund is currently processing about 159 MW of rooftop solar projects across India. Refex Capital provided angel funding to the startup this year.

Shankar was closely involved with strategy and operations at SunEdison, a US-based rooftop solar company, prior to founding Welfund. Shankar realized that the residential and small business sectors were not making much progress in utilizing solar energy, which lowers power bills and helps to create a greener environment, as a result of his first-hand experience in the solar energy industry.

Challenges along the way

Shankar asserts that the absence of enabling policies by state governments and the difficulty in obtaining affordable financing for such projects are the two main causes of the slow uptake of solar energy.

The interest rate on a loan for rooftop solar projects is, according to him, “in the range of 18-20%, much higher than a typical home loan,” for any residential complex or small business. Distributed rooftop solar projects cannot be underwritten by financial institutions, and even if they did, the loans would be classified as unsecured business loans, which carry higher interest rates.

Rooftop solar project loans are offered by a very small number of financial institutions, and the repayment terms are very short (usually about four years). However, because lead generation is not profitable for EPC players, they do not want to serve the smaller distributed segment. In most cases, solar EPC companies aid their customers in getting loans.

Market-Oriented Model

Welfund has developed a marketplace model that connects all of these stakeholders and provides advantages for all parties in light of these difficulties.

Customers can upload requirements on the website, and Welfund offers financing options at interest rates comparable to a home loan. This includes homeowners and small business owners. Welfund gives financial institutions like banks and NBFCs access to a sizable customer base while also validating their needs. Job contracts are given to EPCs to set up these rooftop solar projects.

According to Shankar, “We are primarily onboarding customers digitally and we also assist financial institutions in participating in the funding of such solar projects.” Five financial institutions are about to sign partnership agreements with Welfund.

Currently, it is processing 85 loan applications. Additionally, the startup has established a network of over 200 EPCs, of which 48 have registered on the platform.

Welfund offers asset and maintenance services for solar projects, as well as a buyback facility in the event that they become non-performing assets. The climatetech startup is currently onboarding customers through the EPC channel. 

According to the company, it has no direct competitors in this segment, and that other loan marketplaces typically provide financing for business loans or boutique investment bankers provide financing services for larger solar energy projects.

Business and the way ahead

The startup operates on a business model in which it receives a certain percentage as service charges from customers for each loan that is successfully closed. It has yet to generate revenue.

Welfund intends to enter the market for solar water pumps, which are primarily used in agriculture, as part of its future plans. It is also interested in the energy monitoring market.