How 3 Gujaratis have come together to attempt to spin gold out of garbage

Topics Garbage | recycling

Women workers at one of the facilities segregating waste
Sandeep Patel is a serial entrepreneur and a Gujju-bhai by birth. Designing viable business models comes naturally to him and making money runs in his genes. A bit like Rumplestiltskin, no matter what you give him, he tries to spin it into gold. 

Before he settled on trash, Patel and his partner Ravi Patel ran several businesses with reasonable success between 2002 and 2011 – a travel agency, a BPO and training center, chemicals trading and carbon manufacturing. The last business exposed them to industrial waste and that brought to their attention waste.

In 2006, Patil had already registered a company - NEPRA - initially more as a reaction to what the founders could not accept: that almost all the garbage generated in their city was not recycled and in fact just ended up in a garbage dump or one of the mammoth land fills one finds outside most Indian cities. 

But as Sandeep’s natural instinct of finding a viable business model kicked in, they realized that the real opportunity lay in dry waste. Estimates show that urban India generates at least 62 million tons of municipal solid waste annually. Of this, only 20 per cent is treated and 50 per cent is dumped in landfills. If the same trend continues, it is estimated that by 2030, the landfills would triple. The size of the opportunity that stared them in the face was staggering.

Yet they knew that many businesses had tried to crack this space in the past and failed. If straw can be spun into gold, why can’t garbage? How come so many companies had tried their hand at this business but got nowhere? In most any other sector – be it telecomm, retail or FMCG - one can name one or two big players who are considered credible and large. In the waste management space, there have been a few large players with bad intentions and many small players with good intentions. As a result, no one player has so far captured the market.

From 2006 to 2009, the duo crisscrossed the country to understand the travails of stakeholders in the sector. They met hundreds of rag-pickers, transporters, wholesale waste dealers and recyclers to understand why no one had so far managed to convert dry waste into a viable proposition – one that works for all stakeholders, reduces the quantity of waste generated and creates wealth in the process.

NEPRA’s material recovery facility in Ahmedabad for tackling municipal waste
This Bharat Darshan helped them identify the main culprits. Ragpickers were largely disorganized, were paid way below the fair price for their efforts and didn’t live long enough to protest. Transporters were reluctant to commit as business was unreliable. One day there would be waste to transport and the next day nothing. Recyclers said that they didn’t get a regular supply of high quality material. If they set up a plant to recycle, it often functioned at less than full load as the right raw material was not easy to source. 

That’s when they understood that if they had to tackle this problem with any seriousness they needed to build a business model quite different from what others in the space had so far adopted. Moreover, to tackle it at any scale, they needed technology, technology and then some more technology before they had a smoothly functioning model and process in place.

Luckily for the duo, a third partner – Dhrumin (yet another Patel!) fell into their laps in 2011, even as Sandeep and Ravi were taking baby steps into the world of waste. This helped strengthen their team and also provided a renewed vigour.

During 2011-2013, the team started focusing its efforts to bridge the gaps they had found in the way the business functions, struggled to build its technology platforms that would allow them to bring in scale, hired local women to help with manual sorting and set up a sorting facility where the dry waste was transported, sorted and is kept ready to be sold to recyclers. 

But in May 2013, NEPRA suffered a severe setback. During the wee hours of the morning, the NEPRA workshop in Ahemdabad caught fire, taking with it all the stock of dry waste collected and stored for sale. The founders watched their hard work of a couple of years go up in flames. The fire – the source of which was never identified – set them back both monetarily and in spirit. Should they plod on was a question they grappled with for a bit. But when their employees – several of whom earned fairly small sums in terms of salary – offered to work without pay to help the company tide over its latest crisis, the founders were both touched and re-energised.

It took a few months for the trio to emerge from the ashes of the minor tragedy that befell their nascent enterprise but by then, the backbone of their business and a in house developed technology platform that allowed them to monitor the whole show from their control center was in place. 

What is NEPRA doing differently from other players who have tried to grab this market in the past ? Most companies work on the tipping fees model. In this, the municipal corporation in the area pays the company to lift the waste (usually mixed) and dump it into a landfill, a practice many in the space feel needs to be discontinued altogether. 

Says Avinash Pratap Singh, CEO of NGO Waste Warriors :”This defeats the very purpose”. He says that segregation is at the heart of the matter. Once segregated, wet waste can be composted, dry waste can be recycled and the remainder – which automatically becomes more manageable – can be dealt with as best possible.

How NEPRA’s model works is dry segregated waste is collected from homes, schools, malls, hospitals, hotels, restaurants everyday by collection vans run by registered drivers who are linked to their ERP app. They collect waste from registered rag pickers, input their items in the app and pay them a fair price. The entire process is monitored, live tracked and controlled from the company’s support office. The bags with waste are taken to the NEPRA facility and it is processed by its automated facility, using optical sorting and is prepared as a commodity as per the requirements of a recycler and sold. Institutions who work with them know their garbage will be collected daily, ragpickers earn at least 25-30 per cent more than they would in the unorganized market otherwise, drivers know they have a daily run to do and recyclers are assured of quality raw material on a regular basis. Almost 90 per cent of what reaches the material recovery facility can be recycled and the remaining 10 per cent is sent to cement kilns for burning. “Not even a single kilo we collect goes to a landfill”, claims Sandeep. None of the larger players in this space have attempted this so far. 

Vineet Rai, CEO of the largest impact platform Avishkaar and one of the biggest investors in the company says that the biggest differentiator for him is the fact that NEPRA took the “trouble to integrate rag pickers into its supply chain – something that was laborious, time consuming and in some ways thankless”. NEPRA’s model may not lead to “quick success” but in the long run, he sees segregation as the “only real solution” to a problem that has plagued us forever.

Skeptics however say that NEPRA like others is dealing only with the easier – and more lucrative - aspects of the problem. Dry waste is of high value and many companies have tried to make this into the main proposition. “To solve the problem from its root, any player must have solutions for all the types of waste generated including medical, sanitary and electronic”, explains Singh. NEPRA for instance refrains from collecting medical waste.
But what has fallen straight from heaven in NEPRA’s lap is the timing thanks to Modi’s Swaach Bharat Abhiyan (SBA). Municipal corporations – hitherto unknown for pro-activeness – have suddenly awakened. To the amazement of this writer, the founders say every other month they are approached by one of the municipal commissioners across various states. Can they help them clean up, they ask. Contracts have been firmed up with five cities (560 metric tons per day) already, Mumbai the latest to bite. In Indore – already ahead of the pack - a new 300 metric tons material recovery facility is under construction by NEPRA to tackle municipal waste. 

The plan and ambition however is to go pan-India. “We hope to be the first Indian unicorn in garbage”, says Sandeep, partly in jest. But to reach anywhere close to this milestone, it still has a long way to go. Total revenues this financial year will be around Rs 130 crore. The EBITDAR margin is between 15-18 per cent. So far, the company has raised a total funding of Rs 78 crore– its two main investors are Mumbai’s Avishkaar Group and Asha Impact. It is now planning to raise a round of funding of US $ 50 million to expand to ten cities. The total employee count is just over 350 but its rising fast. As they expand their footprint, they expect their numbers to rise sharply.

So, can NEPRA reach where no man has gone before or rather achieve what no company has managed before? If the resolve of the founders is anything to go by (see the video to meet the team), it may. But India remains an unpredictable trenching ground and separating the wheat from the chaff is easier said than done. Just like your trash.

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel