Waste king wants more

If you happen to be at Terminal 1 of Singapore's Changi airport, arguably one of the cleanest airports in the world, you wonder, Wow! How do they keep it so clean? But clean is not the point in Changi. Who keeps it that way is. In this part of the airport, it's an Indian company, Ramky Cleantech Services, that has the job of keeping everything spotless, and collecting and segregating waste. Operating in a technology-driven city state obsessed about cleanliness, the success of this subsidiary of Hyderabad's Ramky Enviro Engineers Ltd or REEL has sharpened the Ramky Group's global ambitions in waste management.

Says Ramky's Founder-Chairman A. Ayodhya Rami Reddy: "We are clear in our goal—to be a global player over the next few years with revenues of a billion dollars (Rs 4,600 crore) and to make the group a $5 billion entity." The Rs 2,500-crore group is also present in infrastructure, real estate, finance and investment, and venture capital. In the last fiscal, the turnover of REEL, the waste management business, was Rs 550 crore; Rami Reddy wants this to double in the current fiscal.

THE MOUNTAIN GROWS Set up India's first integrated hazardous waste facility in 2001. Set up first biomedical waste facility in 2000. Set up first integrated municipal solid waste facility in 2005. Operates 14 hazardous waste management units, including three abroad. Operates 16 biomedical waste units, including nine under SembRamky. Has 20 municipal solid waste management facilities across India. Has deals with states to set up 17 integrated recycling facilities. Has on hand 65-70 build-operatetransfer projects. Also does landfills and incineration work.

The Singapore presence, which accounted for just 15 per cent of REEL's turnover last year, can be traced back to 2004, when Ramky's strong presence in India's medicalwaste management business attracted Singapore's Sembcorp Environmental Management Pte Ltd or Sembcorp Enviro, which struck a deal for a 51 per cent stake in that Ramky unit to form SembRamky. In 2007, it was Ramky's turn to go to Singapore and set up a subsidiary that uses vacuum systems to suck out and dispose of household waste. Then, last year, when Sembcorp Enviro decided to sell its Cleantech division, Ramky grabbed the opportunity to scale up and landed the Changi contract.

Ramky Can't Wait
For all his global ambitions, Rami Reddy, 45, knows his biggest strength is India, simply because REEL is a leading provider of integrated environmental and waste management infrastructure in a country whose industries and urban landscape generate huge amounts of waste with very few organised players to handle it.

There is no inventory of waste streams or estimation of market size, government policies have developed in fits and starts, the enforcement mechanism is weak and awareness exists only in pockets of corporate India. Even so, REEL has big names like Sun Pharma, Mahindra & Mahindra and Alfa Laval as its clients, and handles everything from paint sludge, oil-soaked materials and expired chemicals to sludge from effluent treatment plants.

Here's its scale: REEL operates 11 hazardous-waste management facilities in India, 16 hospital-waste management facilities, including nine operated by SembRamky, and 20 facilities to manage municipal solid waste. It will be setting up 17 integrated recycling facilities for various civic bodies. REEL is also taking part in an initiative of ITC Ltd, the fastmoving consumer goods major, to recycle household solid waste in Andhra Pradesh.

So, it has no shortage of orders or business by way of build-operate-transfer or BOT projects. "Today, we have on hand 65-70 BOT projects to be executed and being executing, together valued at around Rs 3,500 crore," says Rami Reddy. But his biggest problem is that the Indian market is not yet mature. Compliance with environmental norms is poor, waste collection is not streamlined and companies like REEL have to face "socio-political issues and hurdles" as most such activities require interaction with public or government entities.

Take the handling of hazardous waste. "This requires continuous education at the industry level and close monitoring within the organisation. We are trying to ensure that our people focus on segregation of waste as it is typically wrong combinations that cause major accidents when handling hazardous waste," says Rami Reddy.

INDIA'S POTENTIAL... No overall data, but one report says urban India generates 100,000 tonnes of solid waste a day. Solid waste generated could grow at 10% a year. India's industry generates 6,232,507 tonnes of hazardous waste a year. Plastic waste accounts for 10,000 tonnes of municipal waste a day. An industry body report estimated e-waste in 2007 at 382,979 tonnes, including 50,000 tonnes of imports. ...AND RAMKY'S CHALLENGES Waste collection still an issue in India. No presence in small towns, rural areas. Waste accounts for 20 per cent of group sales. May have to spin off each business as separate firm. Developed markets hard to enter.

On the need to go abroad, REEL Executive Director M. Goutham Reddy says waste management is a $150-billion industry globally. In India, the potential is around $8 billion, but the organised sector has tapped just $500 million.

But REEL has its dreams of becoming a waste management powerhouse over the next few years, not decades. And the only way it can do this, as it learnt after successes in Singapore and Dubai, is to increase its global footprint by using its cost advantages and knowledge. For example, in Singapore, it offers a refuse vacuum collection system—in which kitchen waste is sucked out without any manual operations—at a cost 20 per cent lower than that of its competitors.

It is also implementing projects in Oman and Saudi Arabia, and has bid for projects in Jordan, Ethiopia and Gabon. It is looking at acquisitions in the United States, Australia and Europe to get technologies that make waste to energy conversion cost-effective or for converting municipal solid waste to biogas. According to Goutham Reddy, available waste-to-energy technologies' costing at Rs 12-13 crore per megawatt is not viable. But there is money in waste conversion: 100 tonnes can yield 1.5 MW hours of power.

What Next?
REEL'S latest focus is the business of recycling, reusing and recovering. It has applied for licences to set up facilities for such work at each of its 11 hazardous-waste management facilities. Each complex will cost around Rs 100 crore, and it plans four such in the metros in the first year and the remaining over the next five years. In Hyderabad, it is setting up a Rs 30-crore facility to segregate and dismantle electronic waste, from which it can recover precious metals. Getting energy from waste, and research and development are two other areas on which it is working.

Rami Reddy knows that key to his success in this space will be people and for this has built a team of 25 scientists headed by K.S.M. Rao, recruited from the National Environmental Engineering & Research Institute or NEERI, who will head a planned research institute. Through this, Ramky will expand its consultancy and training skills. "People coming out of colleges do not have the right kind of field experience or even classroom training in the environmental business," says Rami Reddy.

That apart, he has taken aboard some former bureaucrats who know the regulatory ropes, and a member of a state pollution control board, who has been put in charge of REEL's municipal waste management project at Hyderabad. Today, the chairman says, Ramky spends around Rs 10 crore a year on research. Some who have dealt with Rami Reddy and Ramky closely say part of the reason behind the aggressive growth of the group has been the political patronage that the company has received from select politicians.

Rami Reddy dismisses such talk. "Take the Pharma City project in Vizag. People say things like I got it because of the Congress government headed by YSR (chief minister Y.S. Rajashekhara Reddy, who died in a helicopter crash in 2009) while in reality I got this project during the Telugu Desam government of Chandrababu Naidu," says Rami Reddy. The Rs 600-crore Jawaharlal Nehru Pharma City project provides waste management infrastructure and services to industry.

Moreover, he says, he has put in place a structure headed by professionals and so projects are done solely on business parameters. But he does concede that waste management is a business where one needs to engage with government entities and he "cannot afford to antagonise any political party".

Rami Reddy's big plans will also mean big investments— Rs 7,000-8,000 crore. This, he says, could come from internal accruals, a dilution of the promoter's equity of over 90 per cent, private equity or even a public listing. Ramky's competitors are not idle. Take Neel Metal Fanalca Environment Management of the Rs 3,300-crore JBM Group of Delhi. "Waste management is a very important growth area for us and we have plans to grow significantly in the next three years within India," says Nishant Arya, Executive Director. His revenue target: Rs 500 crore within three years, from Rs 60 crore today.

Neel Metal Fanalca has the whole chain—from doorto-door collection to transportation from collections centres to landfills, segregation and recycling, landfill management; managing waste (composting, electricity production), handling and management of hazardous waste and even street sweeping and lawn mowing.

The opportunities are huge, as the organised sector handles only a minuscule part of the waste business, according to Ashish Chaturvedi, an industry expert and technical manager with GTZ, a German government agency, which, along with the Manufacturers Association for Information Technology or MAIT, brought out a report on electronic waste in 2008. "In e-waste, only 10-12 per cent is treated and in municipal solid waste this would be close to 20 per cent," Chaturvedi says. There are just a handful of big players in the formal sector and there is room for more, he says.

The issue is the poor performance on waste treatment despite lot of regulations in place. Chaturvedi says India has adequate regulations with norms for waste management and handling of hazardous, biomedical and municipal waste and the government recently released a draft policy on e-waste for feedback. What is needed, he feels, is greater focus on fixing responsibility on every agency involved so conflicts between ministries and departments are minimised and compliance improved.

Rami Reddy is not scared of the pace he is setting for himself. A workaholic whose day begins at 5 a.m. and ends at 11 p.m., he says: "Those who have known me closely say while I may be 45, I have put in the work of a 52-year-old." It doesn't look like it will take him very long to reach a billion dollars.