How A Waste Management Company's Digital Transformation Drove Profitability

Sandeep Patel, CEO of waste-management company NEPRA, does not play by the book. Traditional in all other aspects of  life, his business decisions are anything but the norm. Aligned with this vision, NEPRA's latest strategic move was to offer a comprehensive range of solid waste management (SWM) services directly to cities, circumventing the struggling municipal corporations. This audacious step represents another move in a series of actions taken since the establishment of the business in 2011 by the founder and two co-founders, driven by their clearly defined goal of "cleaning up India".

But let's step back a bit to see how they got here. Covid-19  proved to be many things for many people, but for the founders of Ahmedabad-based NEPRA, it provided a much needed breather from the frenetic pace of things. In 2019 and through 2020, the company was charging ahead at full steam and growth seemed to be its only objective as new investors including Singapore headquartered Circulate Capital came on board, taking its total fundraise since inception to US $ 35 million. "We were in the relentless pursuit of growth, running fast and everyone was pushing from the back to run even faster without changing anything", Patel said.

Paused by pandemic

As NEPRA grew, so did the complexity of its operations. The founders found that new employees who joined across functions took weeks and even months to get a hang of the business and to fully grasp the operations. This made them realise how complex or complicated the business had become over a period of time.  

In the process of chasing unbridled growth, many little and big aspects that could help improve its own efficiency and productivity were being brushed under the carpet. Many teams were suffering from lack of information leading to communication gaps. These had multiplied as the business grew since data and information was not easily available or accessible.

The total halt that happened in February-March 2020 thanks to the pandemic provided both an opportunity and as things came to a standstill countrywide forced it to look inward at its own processes, systems and the possible shortcomings. How can we do this better, make things simpler was the question they asked themselves. 

Course correction

Very quickly, two clear answers emerged: first, it needed to change the way it did things, altering its DNA to become a digital first, the benefits of which it is now beginning to realise. The second was the amount of time they were losing because of the limited understanding of government entities due to the dynamic nature of the business. The founders made two crucial decisions: one, they will not overlook the power of technology and its ability to disrupt the game in every aspect and at every stage of the business, and two, they will eliminate baggage.

So  2021 and 2022 were all about digitizing anything they could lay their hands on. It maximized automation and IoT integration for process control and brought in operational data analytics for better decision making. "This may sound like a lot of big words but effectively this has allowed us to keep a simultaneous eye on different aspects of our operations from one location," said Patel. Data is not only collected but also analyzed better so this helps improve their operations and decision making. 

Through 2020, the NEPRA team worked 24x7 to ensure it could provide even the most basic information to its clients and organizations it worked with by putting all its data on the cloud. A central dashboard that tracks all its material recovery facilities (it has five including two in Ahmedabad) allows them to manage scale more efficiently. Costs in certain verticals reduced by 25 percent. This alone changed the trajectory of their business by pulling it from a loss making company into a profit making one. "We have seen a direct increase of almost 35 percent in our bottomline numbers such that today - in a sea of loss-making startups - we have turned profitable"said Patel.

Eliminating hurdles

Not only did the digital transformation show them the way, but it also revealed the significant amount of management time and bandwidth wasted on dealing with internal challenges and also handling queries and proposals from municipal bodies owing to complexities involved in this business. Hence, NEPRA founders chose a more hands-on approach and developed an Independent Model that helps in achieving standardisation across all the areas. They focused to work directly with businesses, commercial establishments, and large waste producers through business-to-business transactions, with minimum  involvement of municipal corporations. The government on Swachh Bharat and Waste Management made NEPRA their preferred partner in solving cities' waste problem and making zero waste to landfill cities a reality.  

NEPRA collaborates with cement and power plants like Vedanta and Tata Power, along with other major waste producers. One of their recent clients is the Electronic City in Bengaluru. Initially focused on cleaning up garbage, NEPRA has now expanded to become a comprehensive provider of sustainable solutions. They also offer advisory services to large waste generators. Additionally, they engage in on-site composting of wet waste for their industrial clients, who utilise it for gardening and landscaping.

Future plans for growth

Currently, the B2B segment comprises only five percent of the company's monthly revenues. They are hoping to grow this to almost 30 percent in the coming two to three years. Currently, 90 percent of its revenue comes through city-level operations in Public-Private Partnership (PPP) which might reduce to around 70 percent as business expands. "On a larger scale, we cannot bypass the municipal bodies but we are weeding out and trying to limit our working to the more proactive corporations,"  said Patel. It also intends to grow its household business over the next two to three years, beginning with cities where segregation happens at the household level. 

The company works with segregated dry waste with 70 urban local bodies, over 40 cement plants and other large waste generators and 30-odd recyclers across 28 states and five union territories. NEPRA's model stands out for empowering ragpickers, giving them a sense of agency and identity that goes beyond financial gains. Working with NEPRA allows ragpickers to access various government benefits, as the company actively educates them about their rights.

The two main investors - Aavishkaar and Singapore headquartered Circulate Capital - have been keeping a close eye on the company's growth including its scale operations to expand its reach across India. On the expansion front, things have been going well with new MRFs opened in Indore, Pune and Jamnagar, and plans to expand operations to many more cities in the next few years. Rob Kaplan, the CEO of Circulate Capital, one of the recent investors, said that their objective was to support the company with value addition beyond just "sorting" but also in creating new, innovative products. "We are leveraging our network of corporate investors to integrate NEPRA within their recycling supply chains and incorporating international best practices," he says. The company is now actively exploring other entities where its platforms can play significant role in improving their operations and helping them manage a fairly similar business model, and help identify ways to further optimize plastic waste recovery.

After many years of making losses, the company managed to turn profitable post Covid. In FY 2023, it registered a topline of Rs 152 crore and made a small profit. The target for the coming financial year is Rs 251 crore with an EBITDA target of around 12%. But the ability of the startup - like others of its ilk- to remain profitable are mostly outside its own control and stem from macroeconomic challenges including a clear downward trend in global commodity prices, which has in turn put pressure on selling prices of recycled materials. In addition, NEPRA has its own internal challenges involved in working closely with government bodies, where once you are in PPP, the full responsibility lies on private party's shoulder as anyone who has experienced this will testify. Post Covid, the race may be over for the small team of three founders supported by an army of over 900 employees (on and off rolls) but an ever changing goal post will ensure they always remain on their toes.