Capital for Climate:
The EV Lens


Capital for Climate: The EV Lens

Sustainable Mobility: The Debt Paradigm

Ravneet Mann, Head of Strategy and Policy, and Nandita Chauhan, Principal, Stride Ventures bring to light the catalytic role that venture debt can play in building scale and innovation within the growing electric vehicle ecosystem in India.

Q1: With the electric vehicle segment drawing major equity investments over the last 3 years, could you share with our readers your investment thesis for the sector, from the perspective of extending debt financing?

The EV sector in India is rapidly expanding, driven by government initiatives, like FAME 2, PLI Scheme for Automotive Sector and the recently launched Delhi Cab Aggregator and DSP Scheme targeting the EV 2030 Campaign and the 2070 net-zero commitment. This growth offers vast opportunities for startups to innovate through R&D and unique business models, specifically for the Indian market's unique needs.

Aligned with the government’s EV goals, which aim for a significant portion of new vehicles to be electric by 2030, Stride is poised to play a key role. Stride aims to provide comprehensive and institutional-level financial support to the EV supply chain nationally and also foster the global growth of Indian EV startups, enhancing scalability and inclusivity.

Stride Ventures is addressing underwriting challenges and developing innovative models to accelerate vehicle electrification by supporting the entire value chain with new-age financial solutions. Stride is already offering financial solutions across sectors like B2C, logistics, battery swapping, recycling solutions, ride-hailing and OEMs. Stride's extensive portfolio includes leading EV startups such as Lohum, Battery Smart, MoEVing, and BluSmart, positioning it at the forefront of tech-enabled underwriting.

This institutional and entrepreneur-first approach aims to empower EV businesses across India to create transformative business models and achieve impactful scaling. Stride Ventures and StrideOne are reshaping institutional financial support for the EV sector, enabling OEMs and driver-owners to expand and explore new growth opportunities.

Q2: Given the high level of innovation that the electric vehicle sector is seeing in India right from EV OEMs to charging solutions, what kind of solutions do you see lending themselves to receiving venture debt?

Stride firmly believes that innovation plays a crucial role in driving India's EV sector towards its projected goal of 16-17 million annual sales by 2030. Embracing innovation as our core approach, we focus on crafting unique solutions for startups, offering tailor-made solutions aligned with their specific business models. This approach not only supports scalability but also addresses the struggle of raising capital, allowing them to opt for founder-friendly and efficient financial solutions that ensure steady growth and protection against equity erosion.

Within our portfolio there are many such examples, where our financial solutions have supported startups to build sustainable businesses in tough EV market categories. BluSmart stands as a great example, leveraging financial flexibility within its models to forge an innovative path in the competitive Cab and Transportation Industry, challenging industry giants like Uber and Ola.

Stride's vision extends beyond mere debt financing. We are committed to supporting companies across the entire supply chain, integrating institutional lending into our repertoire of services. Our comprehensive suite of offerings, including Supply Chain Financing, Receivables Management, and other kinds of Working Capital Financing and non-credit services as well. This breadth of products enables us to deliver holistic and distinctive solutions to companies across the spectrum.

Looking ahead, our focus remains steadfast on fostering tech-enabled financial solutions that empower innovation in the Indian EV sector.

What are the aspects or criteria that you believe lenders need to look at, while extending debt to this sector, especially given the high level of technological innovation?

India is moving away from dependence on import of batteries and focusing on manufacturing and recycling, along with integrating technological innovations to their business models. The EV Market in India is estimated at USD 5.61 billion in 2023, and is expected to reach USD 37.70 billion by 2028, growing at a CAGR of 46.38% during the forecast period (2023-2028). In addition, India has at least a $2 billion EV Financing opportunity in the next two years. Given the capital intensive nature of businesses, leverage plays a crucial role in augmenting the scale and debt carries an inherent use case.

Assessing companies for venture debt involves looking at quality VC fund support. Lenders use the VC Debt Protection Matrix (debt-to-valuation or debt-to-equity raised) for this sector. Industry-specific factors for EV investments include battery chemistry, homologation, performance parameters, charging cycles, driving behaviors, charging networks, and route optimization.

The EV sector is constantly innovating and the value lies in a sustainable business model which can leverage the public infrastructure and policies along with the best financial solutions to support the capex heavy nature of EV businesses.

Q3: Stride Ventures extends customized debt solutions to its portfolio companies. What kind of debt financing structures do you believe are most suited towards the EV ecosystem?

In India's rapidly expanding EV sector, driven by government initiatives, Stride is set on overcoming underwriting challenges that arise with this growth. As startups rapidly integrate technology and unique business models to gain larger market shares, tailored financing solutions within the EV ecosystem have become crucial.

Stride's approach provides financial support through an institutional framework, by supporting startups across their entire supply chain. Stride through its various business verticals act as catalyst and enabler across all aspects, which includes powering the entire business with credit and Fintech solutions. Various financing structures offered by Stride group include venture debt by Stride Ventures which safeguards against unnecessary equity dilutions while StrideOne capex financing, working capital solutions, Supply Chain Financing, Driver loans through tieup financing structures, financing the standalone assets including vehicles, batteries, charging infrastructure and others in the EV value chain. This strategy aims to empower these startups to adapt their business models for global scalability, and empower the next era of born global EV startups from India. Stride isn't just about offering venture debt; we're committed to being there for companies and entrepreneurs throughout their EV journey.

By linking customized financial support with innovation, Stride strives to be the driving force that propels these EV startups toward sustainable growth. Our goal is to create an ecosystem where pioneering ideas seamlessly blend with robust financial backing.

Q4: Could you share a little more about StrideOne with us? Apart from financing solutions, does it also look at extending technical support and expertise to enterprises?

At StrideOne, we go beyond financing solutions. Our comprehensive financial services platform for Indian Startups and MSMEs is designed to address not only financial challenges but also provide technical support and expertise to enable an inclusive ecosystem. We enable last-mile players like vendors and suppliers, who are essential for the startup ecosystem, to grow alongside the unicorn startup.

Our product roadmap and go-to-market strategy are intricately woven to cater to the diverse needs of entrepreneurs. We pioneered tech-enabled short-term lending solutions for startups and expanded our offerings to MSMEs and also included non-credit solutions like Receivable Management.

In the realm of EV financing, we don't just provide on-the-balance-sheet financing; we empower gig workers to become electric vehicle owners. Our support extends to all EV categories like battery swapping or recycling and vehicles from 2-wheelers to heavy commercial vehicles.

Moreover, our product & technology teams are actively engaged in testing ‘Proof of Concepts’ (POCs) focused on various needs of the finance function of budding businesses. This means working closely with enterprises, identifying their pain points, innovating tailored solutions and delivering complete digital journeys from the ground up.

Our Business Teams support entrepreneurs by leveraging our credit domain knowledge, extensive product suite and a robust ecosystem of partners and advisors. In essence, StrideOne is not just a financial ally; we're a strategic partner committed to propelling businesses forward with a holistic approach of sustainable shared growth for all stakeholders that combines financial support, technical expertise, digital solutions and a deep understanding of the entrepreneurial landscape.

Q5: Stride Ventures has also supported Lohum Cleantech which is engaged in lithium-ion battery recycling. What has been your observation on this space in terms of revenue visibility and consistency?

Do you see a pipeline of such recycling enterprises being eligible to receive debt?

As the EV sector continues to boom, Stride foresees India’s potential as one of the largest generators of waste batteries worldwide.

India's lack of a major Li-ion cell producer compounds this issue, stemming from a shortage of raw materials and resulting in dependence on imports from China, Korea, and the U.S.

90% of the components of Lithium-ion batteries can be reclaimed and reused; This circumstance shows the potential of India's battery recycling industry. Shifting focus to recycling rather than relying solely on imports could render India self-sufficient in managing such batteries.

This shift carries multiple advantages, including improved waste management, reduced procurement costs for new batteries, and an efficient business approach. A report suggests that by 2030, the annual Li-ion battery recycling market in India could reach a value of $1 billion, approximately 22-23 GWh in size.

The Niti Aayog predicts that India's EV battery recycling market is set to expand to 128 GWh by 2030. Stride firmly believes that companies operating in this sector deserve support in Capex and Working Capital Financing as they will have to expand to meet the demand for EV batteries in the years ahead. This support is pivotal not only to address the impending demand but also to tap into the growing market for battery recycling.

Nandita Chauhan, Principal at Stride Ventures added, “As the EV sector witnesses higher peaks, precision in execution is critical to our vision of becoming global. Stride strives to continue with our founder's first approach of understanding the roadblocks faced by visionaries along with an in-depth understanding of the sector. Our honest endeavor lies in making an impact, agnostic of size, and moving us toward a cleaner and safer future.”

Ravneet Mann, Head of Strategy and Policy, Stride Ventures is responsible for building strategic partnerships for Stride within India & Globally to enable Stride's next stage of growth. Ravneet has more than 17 years of experience in Business strategy, and Investment strategy. Her earlier engagements include stints with Invest India and the Essex Lake Group. Ravneet is an MBA from the Indian School of Business and a B.A - Hons. Economics from St. Stephen's College, Delhi.

Nandita Chauhan is a Principal at Strides Ventures. She is an Investment Professional with 7 years of experience across various sectors in Startups, Corporates and NBFCs. She is an MBA from the IFMR Graduate School of Business - Krea University.

Background of Stride Ventures

Founded in 2019, Stride Ventures is a sector agnostic Venture Debt fund managed by veteran ex-bankers. The fund lends to growth-stage companies that are backed by institutional capital with a banking scope of lens. It follows a relationship driven approach to provide customised debt capital shaped by specific business requirements. Stride plays a strategic role in the long term journey of its portfolio companies through deep penetration in the banking and venture ecosystem.