At Lightbox, we believe that in India the two biggest risks to consumption (which accounts for ~ 60% of India’s GDP) are social issues and climate change

Climate change has many cascading effects, none scarier than humanity running out of water. In fact, despite water being an important resource needed for survival, cities across the globe face a water crisis year after year. It is estimated that by 2030, 21 Indian cities will run out of water if they continue to rely on current resources and continue with the current irresponsible consumption patterns. Water is one of mankind's primal needs, when one of these needs is not met we have seen humans’ resort to our most basic survival instincts which could include fighting for water. If people are worrying about water there is no way they are going to be concerned about buying cars or jewelry. The second order effects of water scarcity could be a body blow for our economy, recovering from which may take decades.

Moreover, we don’t have to wait till 2030 to see the effects of water shortage. In the last couple of years between Cape Town in 2018 and Chennai in 2019 we have come close to experiencing what this world feels like as water begins to dry up and we can assure you this is not a life you want.

Coming Soon … Day Zero

Day zero is a day when a city’s taps dry out and people have to stand in line to collect a daily quota of water. Think about how millions of Indians queue up to collect their ration on a monthly basis. The only difference being that with water we will need to do this every day.

Cape town was months away from Day Zero in 2018 due to the lack of rainfall for three years. About 4MM citizens in the city were forced into saving water and being mindful of their consumption. Stringent consumption limits of 50-70L of water consumption per day per person were put in place. This limit was 1/6^th the amount of water consumed by the average person in California every day and 1/3^rd the amount the average person in Hyderabad consumes. To force water preservation the government made activities like agriculture, gardening, washing cars and usage of swimming pools illegal in the city. Additionally, strict fines were imposed on those that exceeded the water consumption limit forcing the citizens to ration their water usage.

Similarly in 2019, the four reservoirs that supply water to households in Chennai dried up due to insufficient rainfall for three years. Chennai typically has a consumption of 830MN liters per day and during the crisis the city could only accommodate 525MN liters per day. This forced shutting down of schools, restaurants, hotels and businesses asking people to work from home as the stress for water was high. To compensate for the rest of the water demand, water tankers were travelling to far off areas to extract groundwater which led to overexploitation of groundwater and inflated prices. A water tanker that would typically cost Rs. 700-800 was now costing close to Rs. 5,000 and what made matters worse was that customers had to wait for days at times to receive water. In fact, there were several scenes of people jostling each other to get access to this tanker water. All of this pain forced the citizens to become conscious about their water consumption. It was a much-needed wakeup call for the city to better manage their water resources.

Why wait for Day Zero to give us a wakeup call? Let’s talk about what we can do fix it.

In this blog, we are going to specifically be covering two aspects of the residential water management – Water Meters and Water Purification.

Water Meters

Today, our lives have been infiltrated with technology and smart gadgets which allow us to measure the time and effort we spend on different activities. From oxygen levels to heart rates and calories burnt on the iWatch, to time spent on social media on mobile phones to even the time we spent in meetings through our calendars. In all of this, we have forgotten to keep track of certain things that are extremely important but taken for granted. These include our water consumption, our carbon footprint, etc. All of us have been guilty of letting water run when we shouldn’t have, leaving that light in our room on when it probably didn’t need to be on or even leaving our car engine on as we wait for someone.  Two of the biggest drivers for our wasteful behavior in these matters are our inability to measure our wastefulness and the lack of any meaningful economic consequences from our wastefulness.

If you don’t measure it, you can’t improve it.

Unlike most developed countries, where each residential apartment receives a monthly bill of utilities that covers the monthly usage of electricity and water. In India, we only have the provision to receive electricity bills based on the resident’s usage due to the lack of sub metering for water in apartments.

The needs for sub metering water in India are several:

1. Due to the lack of sub metering, the water bills have been disproportionate to consumption which further promotes irresponsible consumption of water

Today, we don’t receive water bills as we do electricity bills in terms of usage. If an apartment complex receives a bill of Rs. 1,000 / month it is divided equally among the 4 units. Even though Unit A and Unit D are consuming higher levels of water which is unfair to residents of Unit B and Unit C. It may not seem like a big deal today but with increasing prices of water, one could start witnessing conflicts among residents.

Furthermore, results show that once the IOT enabled smart water meters are installed that allow for sub-metering by household, consumption by residents decreases by 35-50%. Since the water bill for each household is calculated based on their individual consumption, residents find themselves reducing their usage. This goes to show that the tracking of water consumption can lead to positive and conscious behavior changes thus reducing our water wastage. Some data and success stories here and here on the impact of smart water meters.

So why do we have to wait for Day Zero to approach when we can be more judicious today?

2. Rising prices of water and higher dependency of water tankers

Taking Bengaluru as a case study, the city has a requirement of 1.9BN liters per day whereas the water available is only 1.4BN liters per day. The rest of Bengaluru has to rely on water tankers for water supply which is significantly more expensive than the municipal water (see chart below).

*BWSSB – Bangalore Water supply and Sewage Board

The difference in costs as seen above is due to the lack of smart water metering that causes apartment complexes to pay more than independent houses even though they receive water from the same source – The Municipality (BWSSB). Furthermore, apartments that rely heavily on private water tankers for their water supply – common in metro cities like Bangalore, Chennai and Hyderabad, may end up paying 50-100 times more than those that rely on the municipality. However, the vast difference will only keep increasing as the municipality, in January 2020 proposed a 35% increase in price of water.*BWSSB – Bangalore Water supply and Sewage Board

This calls for fairness in water bills just like what we have with electricity bills.

3. Favorable regulation for smart water meters and replacement of current system

BWSSB is implementing a regulation that any new building that is being built with an area exceeding 1,200 sq. ft. or having three or more houses will need to have water sub meters as it wants to promote judicious consumption of water. The regulation is only for new buildings as of today and is expected to become applicable to existing buildings as well in the near future.

So, the question that now arises is who will meet this demand for smart water metering? The current infrastructure used to measure water is highly inefficient. Non-Revenue Water (Difference between volume of water sent by utilities vs volume of water billed to customers) for India is 38% much higher than the global average of 30%, and some countries like Denmark have it as low as 6%. Frost and Sullivan expects the demand of smart water meters in India to be over 500K+ a year. We expect the market to be big huge no matter how you look at it. India has roughly 300MM+ electricity meters, and why shouldn’t a smart water meter be present wherever an electricity meter is present.

Water Purification

While one of the major problems that we have to contend with is the judicious use of water across households, there is another urgent problem that needs solving. Across the country studies conducted by various organizations have shown the quality of water available to Indians is sub-standard. Both the WHO and Niti Aayog have claimed that over 600 million in India face high to extreme stress over water and it has the highest number of people that lack access to clean water. India ranks 122 globally when it comes to the water quality index.

More than a 100MM people in India live in areas with poor water quality and close to 38MM people are infected with water borne diseases

Groundwater in most cities in India is depleting at a faster rate than ever. Forcing municipalities and societies to dig deeper into the ground to source. As we dig deeper the water quality reduces.  water which in turn diminishes the water quality.

Electric Water Purifiers are highly under penetrated in India

Only 8.7% of households in India have electric purifiers. Inexplicable in a country with such poor quality of water. The lack of clean water is a serious health hazard and is known to cause several health problems and increase medical bills. Access and affordability remain a challenge for adoption of electric purifiers.

The three types of filters widely used for purification of water in India today

The three types of filters often used in water purifiers. Total Dissolvable Solids (TDS) is a metric used to measure the components and cleanliness of water for consumption 

The above charts talk about the different types of filters that are typically seen in a water purifier. The issues with having a RO filter as seen in the chart above is excess wastage of water when it goes through the water purification process - 50-70% of water that passes via the RO filter tends to go back out as it’s deemed unfit for drinking and takes the good minerals along with it. Furthermore, as it separates all the salts and bacteria from the water, it cannot, by design, discriminate between the so-called “good” and “bad” chemicals.

Ministry pushes back on the usage of RO filters for purification of water at certain locations

Earlier this year, the Union Environment Ministry has pushed back on the usage of RO filters at certain locations - claiming that RO filters is more of a problem and less of a solution. A draft notice has been issued that prohibits use of RO purifiers in locations where the total dissolvable solids (TDS) of water is below 500 mg/L. Furthermore, even the Indian water purification industry admits that “RO cannot be universally applicable for all water types due to key technology limitations” (Removal of good minerals during purification). With water depleting in India at a faster rate we have a purification technology being used at locations that doesn’t necessarily need one.

Incumbents in the water purifier industry still operate in a traditional model with little or no use of technology

Several consumer-focused incumbents that sell various household products like Hindustan Unilever, Tata, LG, Havells, Eureka Forbes, Kent and Blue Star find themselves competing in the water purifier industry. Eureka Forbes which claims to have a 55% market share in the electric water purification segment and Kent which claims a 40% market share in the RO purification segment in India are two of the largest players in the space.

Many Indians refer to water purifiers either as Aqua Guard – one of the many product lines of Eureka Forbes, or RO purifier - commonly associated with the brand Kent (think Hema Malini ads) by consumers despite the technology used by every brand in the market. Such is the dominance of these players. Due to their supremacy in this market, the incumbents have had little incentive to innovate around sales processes or at a product level. To date these brands, use traditional distribution channels of which door to door sales is still the most popular. Eureka Forbes has close to 4,000+ direct sales agents and Kent RO has 1,500+ direct sales agents. A clear lack of use of technology when it comes to distribution.

Furthermore, the lack of use of technology forces the incumbents to use a one size fits all approach rather than use case based customization. As an example, an Aquagaurd purifier that’s available in Bangalore will be exactly the same as the one available in Kolkata – while the TDS level of water may vary significantly.

Today, in India due to the lack of education around the ideal filtration process consumers tend to buy what a salesman suggests or what one sees in an advertisement on TV.

Size of Eureka Forbes

According to Economics Times, Eureka Forbes in FY’19 did roughly $320MM revenues of which over 50% comes from the water purification segment. The company claims to have an EBITDA of $10.5MM (3% of revenue) and was pegged at a valuation of $650-800MM as a standalone business.

High cost of water purifiers for the Indian market

An average water purifier in India costs anywhere in the range Rs. 10-20,000 ($150 – $300) with added maintenance every year. With India’s average annual household income at Rs 202,200 ($2700) not many people can afford to buy water purifiers offered by incumbents as it will account for roughly 10% of their annual income. Moreover, increasingly in metro cities young adults and families living in rented apartments tend to either drink water without filtration or use mineral water cans for daily consumption. Both of which are due to the lack of awareness among consumers and are harmful for health in the long term.

Despite 6-8 players with deep pockets the water purification industry is highly under penetrated. An opportunity lies for an upstart in the midst of the RO purifiers’ pushback to create personalized water filters depending on the TDS of the water at a particular location as well as an affordable price point that can be more accessible for the masses.

Final thoughts

In conclusion, to imagine life without water is impossible and producing water is non-viable as of today making conservation and preservation the only chance to avoid Day Zero for many cities. So, there can be two opportunities in the segments that we have talked about above – Firstly, IOT enabled smart waters that can find the right distribution channels and price points to improve fairness as well as inflict judicious and conscious use of water. Secondly, an upstart that solves the problem of water filtration by the use of technology to distribute water purifiers at affordable rates for the masses as well as personalize the filtration process depending on the TDS levels of water.

Unlike the pure technology sectors, water isn’t as exciting a sector. Not many venture dollars have gone into the water space globally (yet). But, it remains a sector that today lacks use of significant technology despite requiring urgent innovation due to its importance to our everyday life. So, if you’re a founder in this sector we would love to talk to you.

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Notable upstarts that are creating a market for the IOT enabled smart water meters - Smarter Homes, and WeGoT or going after the incumbents in the water purification space - Drink Prime, OCEO Water. Thank you to various stakeholders and upstarts in the field that has helped us with this research.