Solar power franchise: How lucrative is the business model?

Various small and big companies are looking for dealers, distributors and channel partners to sell their solar rooftop solutions to customers

By Richa Chakravarty

The solar industry is not only flourishing in India but also offers some of the most promising business opportunities. On the one hand, the government is promoting this technology with widespread installations and the implementation of policies, while on the other hand, individuals and business houses are also trying their level best to harness this potential market. As a result, a number of business opportunities are emerging, and the latest one involves the solar power franchise.

Starting a solar power business requires knowledge about the industry, the available products, and installation expertise. For start-ups, it’s a business with minimum investments, yet one can earn handsome profits.

With the government’s solar rooftop policy expected to be announced soon, many enterprises are trying to harness this potential market, and are offering entrepreneurs franchise opportunities. Let’s find out how fair and safe this business is.

A new business opportunity
Various small and big companies are looking for dealers, distributors and channel partners who can sell their solar rooftop solutions to customers. One such company is New Dimensions Eco Projects Ltd, which had recently advertised in newspapers inviting dealers to join it to explore a new business opportunity by depositing Rs 200,000. The company has succeeded in getting 20 dealers from the Delhi NCR region. This business model, which has proven to be very benefical in the overseas markets, is called a franchise business opportunity.

This deposit money, taken as a security deposit, varies from company to company, and can range from Rs 200,000 to Rs 2.5 million, and is supposed to be refundable. By depositing a minimum of Rs 200,000, an enterprise can become an agent of solar rooftop solutions. Such dealers are required to have their own outlet from where they would operate.

“We are an MNRE supported company and we are the only one that provides solar power systems with 30 per cent government subsidy to the customers, in advance. Later, we take this subsidy amount from the government,” says Anil Bhatia, director, New Dimensions Eco Projects Ltd.

Explaining how this proposal goes, Anil Bhatia says, “We give all support to dealers who join us. They get all the marketing materials, training in marketing skills, support in setting up their outlet, and even placing advertisements in the media. Dealers are free to leave us any time and their deposit money is refunded.”

New Dimensions Eco Projects provides its dealer with a 1kVA demo connection (system) with solar panels manufactured by Tata Power Solar Systems and Aplex, and batteries from Exide. This complete set is worth Rs 135,000 and is supplied free to the dealers, purely for giving a demonstration to customers. For further sale or installations, the dealer has to buy the solar system from the principal company.

“We organise seminars and training workshops for dealers so that they can understand the products, learn how to market and sell them, and how to give a demo of the system to the customers,” informs Anil Bhatia. These dealers get 7.5 per cent commission on the products sold by them.

Pros and cons of this business model
The returns on investment (ROI) are the most important positive aspect of this business model. The principal company boasts of making profits within just two months. Another scoring factor for this sort of business is that the entire security deposit is refundable, unless there is a legal agreement signed by the two parties binding them to each other.

“This business proposal definitely works well if the principal company is not fraudulent. When an original equipment manufacturer (OEM) associates with channel partners, a thorough evaluation of the channel partner is done with respect to the credibility of the distributor, the volume of business that can be generated, the geographical location of the outlet and its overall compatibility with the OEM. A legally binding clause is also attached to any agreement signed between the two business entities. It depends from company to company and their working models. A legal bond can be as strict as a non-disclosure of agreement (NDA),” explains Raghunandan S S, senior vice president, Kotak Urja Pvt Ltd.

Echoing the same view, D K Varshnei, director, Saur Oorja Pvt Ltd, shares, “Earlier, only two types of business models prevailed in the market. In one, the principal company took on an authorised dealer and shared its profits on a percentage basis, or the principal company sold its products under distributorship prices. This business model is a new one and the catch in it is the refundable security deposit. It seems to be a smart way of earning.”

In short, promising and lucrative as this model appears, dealers need to do thorough research about the principal company before making an investment. They should also study the various solar power franchise opportunities available in the market and select the one which is fair and backed by good intentions.