NewNet Investor Profile: Vivek Tandon, Aloe Group

20 August 2009

Vivek Tandon

Vivek Tandon discusses the importance of strong management, why he feels the recycling sector is underveloped, and the opportunities for investment in Asia.

Aloe Group manages a number of environment funds spanning Europe, China and India. The firm invests between €5m and €25m per company.

Vivek Tandon is the co-founder of Aloe Group. Prior to this, he co-founded several high technology companies including VICOM Group International. In addition, Vivek is vice-chairman of Allies Technology Group and sits on the boards of Maxsys, Recupyl and Greenko Group.

Why renewable energy?

‘In the beginning, we found that there were some very good and solid technologies used in the 1960s, 1970s and 1980s across Europe to clean up the environment, but since then, the market had moved on somewhat.

The market had now expanded into the developing countries and there was an opportunity to target these technologies and aid their development in these new growth economies. Following this we were approached by a number of LPs and investors who wanted us to set up a fund. The intention was to take this onto a larger level, whereby we were not just helping companies expand into these markets, but rather investing in them and growing them on a more substantial level.

We pursued this direction because there are very few long-term trends in this industry. In addition, there are fundamental technologies that are very important for companies and can potentially create a very good business model.’

Which particular sectors do you focus on?

‘In the early stages we were very focused on picking up assets in renewable energy. However, we are unlike most companies in that we are not focused on next generation technologies such as fuel cells. We have concentrated on fundamental technologies that exist in today’s industries, such as coal, biomass, biogas and those that work on improving them.

The sector we are most interested in today and going forward is recycling. We have made a number of investments, ranging from companies that perform battery recycling to glass bottle recycling. We have a vision in Aloe that what we are creating in this world is something we call ‘minds above the ground’. People spend a lot of money below the ground but we are looking at the waste that this produces. We take this waste and by applying very simple, good technologies that exist today, as well as new technologies whose development we are funding, we produce virgin-grade material at market prices.

The profit margins that we are seeing on our recycling companies are astronomical. It is a sector that has been significantly overlooked during the past ten years, however we were early movers and have built up a very good business and good investments.’

What type of investments do you look for?

‘We are very much growth stage. It must meet strict criteria. Firstly, it must be a proven product with customers who are already producing the product. Secondly, ideally it should have an interest in expanding into the Asia market where we have strong networks and contacts, although this is not essential.

We are typically looking to invest between €5-25m per company, although we will look at deals up to €100m if we team up with our limited partners.’

What are the advantages of investing in this sector in this industry?

‘There are a number. It is a very fulfilling job. At Aloe we are very adamant that we invest in sustainable environmental effects, so we look at both the social and environmental aspects and take it very seriously. We will not go and invest in companies that have rebranded an old product just to jump on the bandwagon. The people we hire now have a strong passion for this area.’

What challenges do you face?

‘There is a lack of understanding from investors in this sector. It is difficult to make the move from one sector to another. The bubble boom in this industry went far too quickly and I am pleased to see it has been rectified. That was a major problem for Aloe because although we were seeing a lot of deals through 2007-2008 we could not make any investments because the valuations were so erratic. The sales cycle is also far different to that of other sectors because in this industry they are significantly longer.

The final challenge is that this is an upcoming industry so you do not necessarily have the same calibre of CEOs and managers that one is used to in the other sectors. You need to start finding managers who fully understand the private equity market and how it works and that can prove quite difficult.’

Where are the best opportunities to be found going forward?

‘Asia remains of great interest to Aloe. Although there is also an economic slowdown there, the consumer spend by the middle class is still considerably higher than that of Europe. You need to understand that its focus is on the developing country but that it also looks looking at the local market. It is still a very interesting sector.’

How do you source good investment opportunities?

‘We have been in private equity for a long time. We have maintained good relationships and built up a good reputation. When we make an investment we look at it very much for the entrepreneur’s perspective. We have a very serious model where we keep the founder of a company because essentially it is their project and I believe that is a key value system. Everybody has a weakness, but the question is how to hire people around that person to overcome that weakness. This is a fundamental long-term aspect we want to retain.

We tend to look at a market and target sectors and then we will put a team together to research that sector to see who the best players in that market are, then approach them directly to put together a business plan. We work with entrepreneurs who have a product but want to learn how to grow a company and develop it further; on average it is over a ten to 12 month period.

Unlike most funds, Aloe will only invest in eight to ten deals per fund. Our management team will work full time with those companies once they have done deals.’

What makes you want to invest in a company?

‘The people are the biggest factor. You have to work together for a long time and you know that you will have to solve problems together so you need to have a great working relationship. This is the only constant when you make an investment. Whatever it is you have decided to invest in, you can bet that it will be different in nine months’ time.’

What opportunities are there to be had across Asia?

‘There are fantastic opportunities and we do a lot of business. In India we have a company called Greenko. that focuses on renewable energy development in India, which has a good return. We are also building a very big plant north of Mumbai. In India we are building a fund to target recycling in the polyester market and have just invested $20m.’

In your opinion, what effect is the financial crisis having on the industry?

‘We have to be careful, because when you are shutting down plants and making people redundant, spending money on creating cleaner products is unfortunately not a high priority. If you take carbon emission credits for example which is based on penalties for not meeting the requirements, I think there will be pressure on companies as they struggle to just make ends meet to even consider paying these penalties.

However, there are areas that will remain strong. Renewable energy in India is still a phenomenal sector. There is a shortage for energy in India and while in Europe energy is only really profitable because of subsidies, this is not the case in India. It is highly profitable even without subsidies. Recycling is also a profitable area, irrespective of the economy. Through the growth period, a lot of companies were focused on growing the company rather than concentrating on a product which would save the company money.

Companies are starting to look internally at ways of cutting cost and there are good, strong energy-saving and water-saving devices, for example, that can satisfy these criteria.’

What is the biggest issue facing the industry right now?

‘Everybody attempting to get into this sector which can result in artificially inflated valuations which can make things very tricky. Everybody gets carried away by the bubble so even if you are trying to be cautious it is difficult when you receive pressure from your investors who are watching others in the market.’

How will the market evolve?

‘From Aloe’s perspective on where we are focused, the environmental sector is becoming much more important, especially in China and India and other Asian countries. Currently in India, almost all the investments have been made in just the renewable energy sector. Now it is extending from the renewable energy sector across a wider range of environmental areas and the market there is maturing very well. It will catch up over the next five to ten years.

Whereas previously our model was taking a lot of European companies into Asia and expanding in that way, in the future I see it going the other way. Great technology developed in Asia and companies doing very well in Asia will acquire European companies and expand into Europe, even if there is a global slowdown.

Asia is no longer just a place for manufacturing, it is a place where new technologies are being developed. Companies there are strong as they have not gone through so much of a boom/bust cycle as Europe and there will be an important consolidation period now over the next four to five years.’

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Tags: biogas, biomass, cleantech, fuell cell, recycling, renewable energy, waste

This story was published on Thursday, August 20th, 2009 at 1:34 pm and is filed under investors, profiles. You can follow any responses to article entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

2 Responses to “NewNet Investor Profile: Vivek Tandon, Aloe Group”

Loc Tran says:

12 September 2009 at 3:59 am

Dear Sir/Madame,

My name is Loc Tran, I am the project manger of a Phuc Thien Long Company in Vietnam. We currently have a permit and plans for a Mechanization recycling plant based in Vietnam. The land area approved for use is 10 hectares. Mechanization is one of the best methods used to treat waste, it also produces renewable energy that can be transformed into heat, electricity and fuels for cars, as well as high grade agricultural fertilizer.

We know that your company has invested in many recycling plants around the world, if you are interested in expanding your recycling plants to Vietnam, please contact me directly on (84) 8 0972631779 or at this email address. I am more than happy to send your more information about our company and the project or set up a meeting with you to further discuss the project with you.

Kind regards,

Loc Tran

V.P Business Developer
Mobile: +84 (0) 972 631 779
Email: loctran.ptl@gmail.com
http://www.phucthienlong.com
Address: 9 Nguyen Thi huynh Street
W.8 Phu Nhuan District
HCMC, Vietnam
ENGR. STANLYMER Y. MULET says:

6 October 2009 at 1:17 pm

Mindanao, Philippines is open for all foreign investment. either land acquisition, rental, or joint venture. Ang Bagong Lahing Filipino Development Foundation Inc. is the sole owner of the Philippine Archipelago, inviting them to invest.