Q. Tell us about any interesting developments during your latest India visit.
Since we last spoke (about six months ago), there have been significant developments in India for us. We secured a substantial project with Tata Solar, adding to the renewable projects we discussed previously, which were worth around $20 million.

You might know the government’s PLI (production-linked incentives) plans for renewable energy have been approved, and we are in talks with all seven approved players.

On the semiconductor front, India’s manufacturing sector is witnessing a boost, attracting international players like Foxconn and Micron to establish semiconductor fabs. This presents a major opportunity for us. The government has also announced incentive schemes for the semiconductor sector, although the recipients are yet to be determined.

Additionally, we have been involved in the pharma sector in India, particularly in the south, where we have a successful track record in managing complex wastewater for companies like GSK and Pfizer. We recently launched an advanced zero-liquid-discharge plant for a company called Mother Earth near Bengaluru. With so much happening, India is keeping us incredibly busy.

Q. Give us a sense of how the fresh funding will help and tell us about the new investors.
We are seeking funding for geographic expansion, as we aim to become a global player. While we are already established in Southeast Asia, India, China, and Australia, we recognise the need to establish ourselves in Europe and the Middle East to compete on a global scale.

In addition to the geographic expansion, we will invest the funds in new product development. Our R&D team consists of highly qualified individuals, including PhDs from renowned universities. We are currently working on innovative products that have the potential to revolutionise certain water and water treatment applications.

Further, the funding will support our merger and acquisition (M&A) activities. Our company has grown significantly, with 900 employees now. We plan to acquire smaller companies in new geographies that possess an existing customer base, a track record of project execution, and compatibility with our technology and business model. This approach allows us to integrate their operations with ours and expand efficiently.

Our previous funding rounds raised approximately $200 million, and now we have secured an additional $225 million. The round was led by Centaurus Capital, the family office of John Arnold, and BoltRock, where Craig Huff is the main partner. Both are highly respected and practical long-term investors who align with our goals.

Additionally, we are in the process of finalising a second close with a group of strategic investors and sovereign wealth funds. We anticipate making an announcement regarding this in the coming weeks.

Q. The latest funding round also made you a unicorn. Does that make a difference?
It does. I mean, it’s just a number, but if you think about it, Gradiant is a new type of unicorn. We are not an undifferentiated fintech startup, which commands an unreasonable valuation. The valuation is, after all, 4x to 6x of our revenue, which is reasonable for us. And there has never been a water or wastewater unicorn.

And if you think about the market in which we have raised money, it makes the valuation even more significant because, in Q1 in 2023, in the US, for example, of the last 10 quarters, that was the lowest amount coming into late-stage investment, series D, series C investments.

So, to raise $225 million in a second close coming up in this environment at this valuation, and from very practical investors, speaks volumes about what we offer to the market and how important it is.

The valuation helps in some very practical ways. For example, our cost position negotiations with our suppliers, economies of scale start to kick in. Three to four years ago, we were so small we used to get squeezed by our suppliers. That’s no longer the case. We are able to negotiate better. Our hiring position, when we especially want to hire experienced folks from larger companies, is much better. So a significant milestone for us.

Q. Last time we spoke, six months ago, you were expecting to hit or even cross $200 million in revenue this year. Are you on track?
We’ll definitely cross $200 million. The first half is turning out quite good for Gradiant. It’s the best two quarters we have had in our history, and we only feel the next two quarters will get bigger. Our order book or our backlog has grown tremendously, including in India, but also in Southeast Asia. In the US, we have signed some meaningful projects.

Q. You mentioned working on entirely new products. Give us an example.
Something I’ve been working on for a year and a half, which I can speak about, is to be piloted this year is for the PFAS market. This new product targets these harmful PFAS (per- and polyfluoroalkyl substances) which do not degrade. It has significant public health implications. This is produced by or released into nature by companies which supply nonstick coatings and things like that.

We have developed, for the first time for any water company, a way to completely destroy this compound, which would otherwise remain in nature forever without degrading. Our method is called free radical oxidation, where we are able to completely destroy PFAS compounds. We have developed an electrode as part of an electrochemical system which produces such a strong oxidant free radical—such as the hydroxyl free radical—that it can destroy the PFAS.

Upstream of this, we will have a way of concentrating the PFAS because they tend to be diluted in our water streams—industrial waste waters, but also municipal waters and so on. So using that concentration method and the electrochemical method that we have developed in the novel electrode, we can destroy PFAS altogether.

There is no method currently outside of Gradiant, where it can be fully destroyed 100 percent. But that is ultimately the solution. Existing methods don’t solve the problem but minimize it to some extent. With our method, once the PFAS are destroyed what remains is trace amounts of carbon dioxide, and water, which can be further treated and reused.

Q. What are your top priorities in India over the next 12-18 months?
India is a high growth market for us. We will grow more than 50 percent this year and the next, in India. Therefore, we’ll be in excess of Rs500-550 crore in turnover in India in the next two years, which is quite sizeable for a fairly new company.

R&D is a priority in India as the country has excellent R&D talent and also very good IP laws, unlike some other jurisdictions that we work in. Therefore, we are setting up a global innovation hub in India. One thing we are planning to gravitate away from is currently we are headquartered in Chennai and most of our people are in Chennai. But we are finding a lot of business in Gujarat and other parts of India.

We are going to diversify out of Chennai. While we maintain a strong base there, we’re also going to set up something in Mumbai, Pune and Gujarat, perhaps directly, where a lot of our business lies in terms of an R&D focus in India.

India will also support and co-lead some of the initiatives including the PFAS product development. We are also working on a new technology for ultra-pure water. There are only two companies which can do ultra-pure water or supply the core equipment for it. One is GE (GE Water, which was bought by France’s Suez and in turn acquired by Veolia). The other is Evoqua Water Technologies (acquired by Xylem).

The technologies offered by them are older. Gradiant is very close to developing a product which can be a paradigm change in the cost of ultra-pure water production. We are talking not just parts per million, billion, or even trillion, but parts per quadrillion level purity. Applications include the semiconductor industry and pharmaceuticals.

Q. With all this, and the strong revenue growth, is an IPO at hand?
We have raised a substantial amount of money now, so that gives us a lot of runway. We don’t have to worry about any fundraising, private or public for now, which is ideal because we want to focus on the business for the next three, four years.

But, at the same time, we want to pay back our investors who have been with us patiently for the last ten years. There has not been a single discussion at the board level about Gradiant not growing fast enough or wanting an exit or anything like that. But we want to pay our investors back.

IPO is a good route, and honestly, you’ll be among the first in the media to know.

Source: Forbes India