Recycling companies stymied by unorganised players struggle to scale up

HYDERABAD: Indian waste management and recycling sector startups that attracted investors to pump in funds have not been able to scale up and spread their footprint widely, because the industry has been stymied by unorganised players who do not pay taxes, and lack of uniform norms.

The startups are seeking effective quality norms for recycled products and homogenous applicability of tax laws to plug leakages and impede unorganised players from reaping unfair gains through substandard products and tax evasions.

About half-a-dozen startups in the waste management and recycling sector were funded in the past eight months, including Hyderabad-based Banyan Nation, Bengaluru-based Saahas Waste Management and Delhi-based Kabadi Express. The industry’s prospects remain bright.

"All the dimensions that an investor looks at are available in this space — the need for such a startup exists, there is no large customer acquisition cost, and we have all of India to scale up," said Sreedhar Prasad, partner, E-commerce and Startups, KPMG.
The informal sector in India collects last-mile trash, leading to a 70% recovery rate, says Mani Vajipey, co-founder of plastic recycling startup Banyan Nation. However, the loop needs to be closed by value-added recycling. This is where Banyan Nation sees a role.

After starting out with waste management in 2013, Banyan Nation pivoted to closed-loop plastic recycling by the end of the year. They mapped out around 1,500 kabadiwalas in the city and started working with them, but couldn’t compete with the mom-and-pop recyclers who have small extruders, churning out low quality plastic.

“These recyclers are not registered, which means they are able to sell this low quality plastic at a lower price and yet able to make profits without paying their taxes,” said Raj Madangopal, co-founder of Banyan Nation. Till the sector gets organised and sees a level playing field, the duo urge the government to consider extending tax subsidies to the genuine, tax-paying enterprises.

There are around 90 waste management startups in India, according to investment data-tracking company, Xeler8. But these constitute only 21% of the clean technology industry.

“It’s not a glamorous job, but entrepreneurs need to go deep into this space to make sure that the waste doesn’t reach a landfill,” said Nagaraja Prakasam, an investor with the Indian Angel Network Impact, who has backed Saahas.

Founded by Wilma Rodrigues in 2013, Saahas focuses on organic waste management along with collection and recycling of packaging and electronic waste. It manages a total of 20 tonnes of waste per day in Bengaluru, Chennai and Hyderabad and Saahas’ clientele include residential communities and tech-parks.

Rodrigues says many tech-parks that have to comply with waste management rules only focus on waste disposal. “We lose out on customer base because they don’t comply with rules,” she said. Revenue is slowly tricking in for Saahas and Rodrigues says they would probably only break-even by the end of this year. The startup is in the process of raising a round of Series A fund.

Earlier this year, Banyan Nation raised $800,000 from Artha Capital and set up 20,000 square feet, plastic recycling facility in Hyderabad. The plant has a capacity to recycle 300 tonnes of plastic every month, but currently recycle 50 tonnes per month.

“We are in talks with big players from the world of consumer electronics, automobile and durable goods to become their plastic recycling partners,” said Madangopal. This, the duo think, could become a profitable model.