Fulbright US-India Series: Rajat Verma | CEO of Lohum Batteries

2022-08-17
Rajat Verma is the CEO of Lohum Batteries, which is an innovative company that focuses on the cell manufacturing and re-configuration of battery storage systems. Mr. Verma received his MS from Stanford and MBA from Harvard and is an alumnus from IIT Kanpur.
In this episode we discuss the energy storage landscape, how the supply chain is structured, and the steps India must take to become a stronger player in battery development.

Topics covered in this podcast:
  • Are investors going to hold off on new investments considering the Covid-19 situation?
  • Mr. Verma's and Lohum Batteries background introduction
  • How did Mr. Verma get introduced to the lithium-ion battery space?
  • What are first life, second life and end life use cases of batteries?
  • A detailed breakdown of the supply chain for battery systems Lohum's unique capabilities to process anode, cathode and re-configure cells
  • Does most of the battery cost stem from raw materials?
  • Will China dominate in this field and can India compete? If yes, what steps are needed?
  • What support has the Indian government provided and how can they improve?

Transcript


00:06 Karan Takhar
Hello everyone. This is Karn Thakar, and welcome to the Zenergy podcast. Over the past decade, India has done an impressive job of integrating renewable energy into its energy mix. For this Fulbright Podcast series, I sought to investigate the enabling factors and potential of India's global leadership in renewable energy, with a focus on solar. This Fulbright series is broken down into Four Seasons. This season, we look at the next set of key technologies and regulations integral to unlocking India's continued renewable energy success at the system level. It includes conversations with leading regulators and thought leaders across energy management, storage, transmission, and distribution. In this episode, I will be speaking with Rajat Verma, who's the CEO of low Hum batteries, which is a company that focuses on the cell manufacturing and reconfiguration of battery storage systems. We discuss the energy storage landscape, how the supply chain is structured, and the steps India must take to assume a global leadership position in the battery landscape. I hope you enjoy my conversation with Mr. Verma.
Thank you so much, Mr. Verma, for joining us today really appreciate you taking the time.

01:43 Rajat Verma
It's my pleasure.

01:44 Karan Takhar
Given the current situation, have you been able to establish any routines that have enabled you to stay productive during this lockdown?

01:53 Rajat Verma
Yes. So we identified a whole bunch of activities that we wanted the company to engage in, all the employees of the company to engage in, and in particular, we focused on a lot of asset-building activities, which could be done remotely, split them up across all the teams, across all the team members, and we do try to ensure that we all do a collective video call once a week do you do calls with all my OK. Leadership team once every other day. So we've been sort of progressing, tracking progress in a particular lot of things that you are unable to do during the normal course of business. It's much easier to do them at this point in time. One can step back. One can look at a lot of inefficiencies that existed in our processes and how those could be fixed. So that is putting together process logs, But it is putting together some IT system. Whether it is sort of going back and doing analysis or full data, whether it is in some new designs, those are also the activities that we've engaged in. So they've been a good time to talk to investors. So it's significant. This is a time when again, everyone has the ability to go deeper and understand our space better. So that's another productive activity that we've done, at least from a company's perspective.

03:11 Karan Takhar
So our investors.

03:13 Speaker 3
How are they?

03:15 Karan Takhar
Feeling about everything in terms of whether they are going to be holding off on new investments or what have you found just from those discussions?

03:26 Rajat Verma
My own sense is that most investors will continue to remain excited about the long-term fundamentals of India, and then particularly, most investors will do take early-stage bets. Those are bets which are supposed to play out over a much longer horizon. So from that perspective, we early-stage investors are not affected as much, particularly those were sitting on capital, those who are not obviously they have to or those who are sitting on mono funds, they obviously have to think a lot more about the existing investments and ensure that those samples remain viable, so the smaller funds probably will not invest for some time. The larger funds they continue to remain indifferent to what covid did, and then for slightly later-stage funds, the impression that we've got is late stage companies that are looking to raise a third or fourth round of capital, they probably will be hit harder. On a valuation front, even though investments will not dry up, I mean again, remember, for most investors and market which is not Pontio-friendly is always the best time to invest and take a greater stake in the organization, so in that perspective, obviously, it works out well for investors, but the list is safer that they have to sit on some capital for the whole thing to play ut to those without forcing who may be unfamiliar with your background as well as low hum's work. Can you please provide a little context for this?

04:53 Rajat Verma
Sure. So my own background, an engineer by training, I went to ID Kanpur post, Richmond to Stanford University, did a startup in the Bay Area, which eventually got bought out by HP Post, which went to Harvard Business School. I came back and did a bit of private equity in India, before which I started making my own personal investment across different segments in the country. Very early-stage investments have always been early-stage, right? That's what I enjoyed doing the most, and I started looking at inefficiencies that existed across different sectors in the country. One of the segments that particularly attracted me was electronic waste management, wherein I developed a fairly deep understanding of both the supply chain and the value chain that exists in the electronic waste sector of the country that is. While doing that, I started seeing a lot of lithium-ion batteries coming, batching the electronic waste stream, and that is what set me off, thinking about going deeper into the lithium-ion battery space, and that was the genesis of low hum.

05:47 Karan Takhar
And this was all between 2010 and 2015.

05:52 Rajat Verma
Yeah, 2010 to 15 is when I was deeply engaged in electronic waste and at the end of 20, roughly in 2016, is when I took a decision to start going seriously into the lithium-ion battery space.

06:05 Karan Takhar
So how did you get into the electronic waste base in the 1st place? Was that something you just always had a little bit of interest in, or how did that end up happening?

06:16 Rajat Verma
Sure, I've always been interested in sustainability and always wanted to look at organizations which are tackling various aspects of sustainable growth and also whether it is education, whether it is healthcare, whether it is cleantech, those personal segments which always intrigued me, or more because they ultimately make for a more sustainable lifestyle. Electronic waste management. It falls into the latter category of waste management, which is a critical requirement globally as we start thinking more and more about resource maximization about lower and lower environmental footprints. From all those perspectives, based management is supercritical and winning the waste management stream during my early analysis. In the private equity sector and got while doing private equity, I concluded that electronic waste management is almost more economically viable waste management stream out there simply because we're dealing with metals, to begin with, and metals fundamentally have a lot more intrinsic value than any other kind of organic or inorganic waste. So was the thesis behind it, and in India, we already we were. In the late 2000s, we started becoming the largest, largest consumers of electronic goods globally, necessarily that created a fairly large derivatives market, which is an electronic waste market. So that was how I came upon this sector bunch of entrepreneurs that started there. Tony, in the late 2000s, in this segment probably with the thief, is very similar to mine and you know, so started meeting them, and that's how I started going deeper into the sector and identify is identified this particular entity that I wanted to work with and started working closely with them in just solving both the business and the technology problems associated with this segment?

08:08 Karan Takhar
So then lithium-ion batteries happen to be a big component of their overall electronic waste segments in terms of there's a lot of lithium-ion batteries that were being thrown out, and nobody had any idea in terms of what to do with them. Is that what you're you essentially came to realize?

08:33 Rajat Verma
Yeah. So that was certainly the starting point that lithium-ion battery is very. While they're not the largest component of the electronic waste segment, they certainly a good it certainly is a good niche segment with an electronic wave. The realization was across many different aspects of 999 batteries. Number one, of course, they were being dumped. No one knew what to do with them, not just in India at that point of time. I mean, I'm talking about 2016. Global people didn't have any realistic solution for lithium-ion batteries. There is certainly problem #1. Problem #2 It was the Government of India, as well as a lot of governments all over the world, have started seriously thinking about electrifying the transportation fleet, and one big at least realization for us was electrification requires access to lithium-ion batteries. To make lithium-ion batteries, you need access to raw materials, which are empirical lithium cobalt and nickel graphite. And when you started looking at where those raw materials were concentrated all over the world, you realize it to be at a big, big disadvantage. So just from a geostrategic perspective, it is very important for us to start thinking about securing our raw material, and that's where recycling It seemed like one good way of trying to secure the raw material that is needed to make these batteries. Most importantly, as we started thinking about electric electrifying sheet, we also realized that batteries are one of the most expensive components of an electric way of an electric vehicle, here between 40 to 60% of the vehicles. So if you don't get your batteries right, you'll never get the industry right. An environmental concern certainly existed. There was a more critical geostrategic concern from which I wanted to tackle the recycling problem, and then of course, finally, when we started looking at what was happening in India at that point of time, we realized that very little work was happening in the primary lithium-ion battery space itself, so seemed like a good open space to look at battery as a solution holistically and so loam was born where in totals an idea behind the company was to provide a life cycle solution for batteries right from First Life, second life to end of life.

10:38 Karan Takhar
What exactly is the first time stuck in like third life?

10:42 Rajat Verma
So inline batteries are essentially made of cells, and those cells are no different from the pencil cells that you see in your remote control or any toys, etc. These cells are typically cylindrical in nature. Just to give an example, a Tesla car will probably have anywhere between 6000 to 8000 cells and then now. These cells are what ultimately have a first life, second life, or end of life. First life means when the cell has been primarily produced for the very first time, it goes into its first use case. The first use case could be a car. The first use case would be a battery pack for the storage sector, or it could be something else. But that first application, when the cell is new, when the solar phone come out of its production line, is what is known as a first slide case of the cell after the sun has sort of made its first life traveled the journey of the first flight or served the warranty period that may have been required in the original application it usually becomes. Not very viable for that particular application. So the cell is taken out, but the sun still has a lot of useful life left in it, still, a lot of useful work left in it, which is when you sort of look at the cell and we try to repurpose it for some other application where it could still be technically and economically viable. But repurposing is what? It is known as the second life of the sun. Repurposing could mean taking a cell that has been put into automotive use and moving it to storage, taking a son which has been put into maybe storage, and moving it into a low-speed electric vehicle. The whole bunch of ways in which you could repurpose, which largely has to do with performance and reliability issues once Excel has gone through its second life, which means it has limited slides in the second application, which could be probably three to five years, that's when it reaches its end of life at that point of time, the cell has very little capacity left in it. It largely becomes unviable for any use case, any application out there, which is when you recycle it, and recycling basically means you extract the elements of the cell, which, as I had mentioned earlier, lithium, cobalt, nickel, graphite, many so on and so forth.

12:46 Karan Takhar
OK, so loam is involved in the repurposing and as well as the recycling.

12:51 Rajat Verma
We will started our journey with repurposing and recycling. Over the years, as we speak today, we've evolved into also first Life battery pack manufacturers. So we also make battery packs using new cells that we procure from cell manufacturers directly.

13:07 Karan Takhar
What is that supply chain like? Does that primarily stem from China?

13:11 Rajat Verma
At this stage, yes, If you look at this, some manufacturing supply chain, we still start at the mines from where you draw the original chemicals that are needed to make the cathode and the anode Human cobalt and Lithium, cobalt, and nickel go into the cathode side, and graphite goes into the anode side. So you know, sourcing all these from different parts of the world. Lithium largely concentrated in South America, cobalt largely in the Democratic Republic of Congo, nickel is largely present in Southeast Asia, and graphite. It goes into silver lithium-ion cells is largely produced in China, so this is the sort of mining side of the supply chain. From here, the material goes for chemical processing to various cathode and anode manufacturer. Cathode and anode manufacturers are again largely concentrated in China and China, Korea. In Japan, that's the bulk of your cat food, and anode manufacturing takes place. Once we capture and the animals have been manufactured, or those chemicals have been created, then they go into the cell manufacturing process, and from a cell manufacturing perspective, almost 80% of global capacity sits in China today. So that's the basic supply chain that we work with India itself has announced, or in the Indian government has announced, it will come out with a scheme to incentivize companies in India to set up cell manufacturing facilities. We are hopeful that the scheme will be rolled out very quickly.

14:36 Karan Takhar
So after the cell is manufactured, then it comes to battery assembly plants, right?

14:44 Rajat Verma
That is correct. Battery assembly ultimately is a much more localized industry than the cell manufacturing side of it, and that's simply because it's the local players who understand the local demand and the local requirements much better, so everyone sort of brings themselves largely from China into the country and start understanding the need of the end customer and starts. Constituting a design for the end customer using those cells.

15:08 Karan Takhar
Loam is at the battery assembly stage but is potentially looking to get also involved in the cell manufacturing. Is that correct?

15:17 Rajat Verma
Well, so we certainly are in battery assembly, but we also like to call ourselves cell harvesters because that we do that from second life from used battery packs. So technically, at some level, we are providing a complementary solution to the cell manufacturing industry because we have the ability to reuse. So we harvest cells, and while we don't sell those cells. Right now, we have the potential to sell those cells to the market as well. So we like to think of opposing alternatives or not. Battery pack manufacturers and chemical extractors, those are the different roles that we play in the country. We certainly don't want to get into the primary cell manufacturing business because we do believe that's a very capital-intensive this that needs to be created and loaned as a company is more focused on developing technologies than in running a very large factory.

16:04 Karan Takhar
Oh, so you could potentially license 'cause you have because, just from my research at CW, an energy storage team was looking at the process for the anode, cathode, and then cell manufacturing, and it seems like a very technical full process, which developing the expertise for can take a lot of time, so it seems like loam has been able to potentially develop the technology side of it, which then could be licensed, is that?

16:34 Rajat Verma
Yeah. Oh, hand when he is here, right we do, you know, we have developed a whole bunch of technologies. We continue to work on developing more and more technologies today. We have the ability to put together a cathode material directly. You know, we do have the ability to supply the anode material or cell manufacturing of cell qualities, we have the ability to put together different kinds of battery packs for Indian environment conditions. So all these technologies have been developed. We run a pilot plan, but ultimately we just want to continue building our portfolio of technology as we grow and hopefully outsource the business of production to other players who are large manufacturers.

17:10 Karan Takhar
OK, wow.

17:10 Rajat Verma
We can run large manufacturing facility.

17:12 Karan Takhar
Wow. So in terms of like the economics of it so, does most of the costs within that supply chain stem from the raw materials itself or?

17:24 Rajat Verma
Yes, the raw material, the cell manufacturing process. I mean, today, if you look at the economics of an electric vehicle, like I said, 40 to 60% is that of a battery pack within a battery pack, and 70% of the cost for the pack is the cost of the raw materials that go into it, and then, if you sort of start looking at the raw material costs, you've got cathode. Which typically is 50% of the cost per node, which is 20% of the cost, and the separators and the electrolytes, which make up the remaining 30% of the cost of the raw material. Obviously, if you have a large-scale facility, then your plant amortization cost becomes much, much lower, and that's one of the reasons why I said the best players to carry out this business. For people who have the ability to set up billion-dollar, $2 billion plants, they are the ones who can bring down their cell production costs to the most optimal. In China today, we've got almost 200 MW powers of cell production capacity, whereas in India, like I said, and China has announced an additional capacity of another 1800 GW hours. So China expects to bring about 2000 GW hours of cell capacity online by 2027-28. In India, we are still talking about A50 Giga Watt hour capacity to come online in the next five yeah, that's and Needless to say, one has to compete with that kind of capacity available in China. One needs to run this business on at much larger scale.

18:41 Karan Takhar
I was reading that a Bloomberg article that stated how, in the same way, China captured the solar panel manufacturing supply chain or attempted to similarly dominate. In the energy storage supply chain. So don't to hear your thoughts on whether you think India will be able to compete and some steps that are required to be able to get there.

19:07 Rajat Verma
The other reason why we are very, very bullish and we are trying to incentivize we're trying to educate the government on recycling because if we get a recycling process right here on, the earliest movers globally have the ability to potentially become a recycling hub of the world, which means we have a potential to become one of the largest producers of raw material globally. But, you know, that's one thing in which most consistently lost to China in almost every sector, which is access to raw material. And this is one of those rare times where we may be able to start accessing the raw material very early in the journey of industry. So that's one clear reason why we are focusing heavily on recycling things we do. This will be a significant competitive edge for the country.

19:53 Karan Takhar
So just to understand a little bit, so after it's recycled then, loam home has the technology to extract the raw material In its most usable form Or how does that work exactly?

20:06 Rajat Verma
Yeah. So we do extract material form of lithium carbonate, nickel, manganese, and cobalt in the form of their respective sulfur. Graphite, of course, is pure graphite and all those can go back to at least two cathode and anode manufacturers who remember had mentioned are present not just in China, but also in Japan, Korea as well as in Belgium. These are some big hugs of cathode and anode manufacturing globally, so potentially that refining cathode capacity can also be built in the country and the people who are best positioned to make cathodes and anodes or People who have a relationship with the buying mining companies of the world and in this case we are saying this secondary mining, urban mining, whatever name you want to give, it can become a very, very critical source for recycling and they also have some very strategic advantages in terms of setting up large recycling hubs or large recycling facilities in the country simply because we are a low-cost nation recycling process fundamentally is a combination of its manual plus automated processes. And that manual component of disassembling a used battery pack is where India has a significant cost advantage over most of the parts of the world, so we can put that advantage that we have in this country to good use. If we stop taking over battery packs from all over the world and start producing our own raw material, there's enough supply globally, even today, to meet I10 to 20% electrification. Needs just at this stage. So you can only imagine if we do more of this, how significantly well will we be positioned to make our own battery packs or to use the cost of the battery packs and not be at the mercy of China in this particular industry?

21:39 Karan Takhar
So what is needed in terms of the pool? I know you've been talking to people in government both in India and US. Are you finding that there is a lot of Support within the governments to get behind this?

21:57 Rajat Verma
The government certainly has all the right intentions. I will not question the intent of the government. They have been very supportive of it, but the only difference is the intent needs to translate into very quick action and very quick policies. In China, these things happen in three months' time. In India, we take over two years to draft a policy, and I think that is what. Always ends up being the real issue in this country that while we may always have the right intent, it's just the speed with which we work that could serve on the back foot and my only requirement would be that. By the way, I don't need to go and tell anyone in the government or the merits of recycling. I don't think anyone in the government needs to get further educated on the recycling supply chain. I think all that knowledge, all that capacity, has already been developed within the government. You can move that into a policy which will incentivize on these things, whether it is enabling easier import of batteries, used battery packs into the country and front arriving recycling companies in the form of various subsidies or the government typically doesn't sell to other industries. Those things now need to become actionable and become some comprehensive policy. My own sense is one of the problems that we face in the government is we've got a lot of different model agencies which are all responsible in some discreet ways with this problem, but there's no one agency which assumes full leadership. So today, just to get this going, we're talking to the Central Pollution Control Board, the Ministry of Environment and Forests, the Department of Science and Technology, Meteo, Bureau of Indian Standards, just to name a few. So we don't have to say all the various state pollution control boards, which also need to be guessed, which need to get involved. You can imagine how much chaos can happen when so many disparate bodies are involved. So that is where I think if we had someone who did take central charge of this problem will be on the government side, then I think we have a much easier place to get this rolling at a much larger scale, and my idea is, I mean when I talk about scale, I'm talking about in 2015 forty years or two hours of cells have gone into production which are now available in the recycling waste stream. India, by next year, should have 40 GW hours in recycling capacity. That's the kind of growth and scale that we should be pursuing so as to make a meaningful dent in the business.

24:16 Karan Takhar
Thank you so much for your time, Mr. Verma. I really appreciate this.

24:16 Rajat Verma
OK. Thank you, and stay safe.

24:23 Karan Takhar

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