Clean Tech Next Hypergrowth Opportunity for Reliance

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Brokerages impressed with RIL’s decarbonization plan, laid out by President Mukesh Ambani at Thursday’s Green AGM

Reliance Industries Ltd’s focus on upcoming cleantech hypergrowth opportunities and its path to decarbonization has the potential to boost revaluation, clarify investment cycles and reduce investor anxiety, have said brokerage firms.

RIL Chairman Mukesh Ambani at the company’s “Green AGM” on Thursday pledged Rs 75,000 crore over the next three years to build an integrated green energy complex in 5 000 acres in Jamnagar, Gujarat, which will contain four giga factories.

The complex, which is said to be one of the largest renewable energy manufacturing facilities in the world, is said to have an integrated solar photovoltaic module plant, an energy storage battery plant, the manufacture of electrolysers for the production of hydrogen and the manufacture of fuel cells so that the hydrogen can be used in transport.

In addition to the four giga-factories, RIL would invest in manufacturing carbon fibers, green manures and green chemicals to support hydrogen and the solar ecosystem.

RIL’s three core businesses – petroleum chemicals (O2C), retail, and digital services – have become self-sustaining and cash-generating.

Jefferies said that unlike the previous three AGMs where consumer companies dominated, this year’s Annual General Meeting (AGM) focused on RIL’s renewable energy transition plan.

“The plan is critical in our view given that a significant portion of its conventional energy assets will approach end of life over the next two decades. The energy transition will allow RIL to be part of India’s longer-term energy consumption growth story, ”he said.

Ambani plans to close the sale of a 20% stake in the O2C business to Saudi Aramco this year, but the extent of the initial cash component of the transaction will determine the extent of the benefits for RIL, the houses said. brokerage, adding that a fully cash transaction will also reduce RIL’s carbon footprint.

“RIL’s AGM focused on the next cleantech hypergrowth opportunity and its path to decarbonization. The ‘mega plan’ is unique in a global context in several ways, has the potential to encourage revaluation, clarify the investment cycle and reduce investor concerns about the holdco surrender, ”said Morgan Stanley.

Its decarbonization plan consists of capturing the growing market for the manufacture of solar cells, electrolysers and fuel cells, while gradually orienting its energy activities towards green hydrogen, carbon fiber, electric fuels and fuel cells. green chemicals.

“The single-location energy complex will be the key to this plan and will support the hyper-integration of the energy supply chain, utilities and end-use. “The plan also helps diversify the revenue stream from India-centric consumer and chemical companies to international opportunities, through exports of energy transition equipment as well as hydrogen,” he said. declared.

Kotak Securities said RIL’s plans for the new energy and new materials sector may initially focus on integrated manufacturing of solar PV modules, while investments in other parts of the value chain could likely be indirect. .

The company can benefit from recent government policy initiatives to encourage domestic manufacturing of solar equipment, much of which is currently imported.

These initiatives include customs duties of 25% and 40% on imports of photovoltaic cells and solar photovoltaic modules to be imposed from April 1, 2022, Rs 4,500 crore in payments under the incentive program linked to the production for the national high efficiency program. Photovoltaic solar modules and access to cheap electricity, term loans and working capital financing.

“These incentives will significantly improve the economy of domestic players, who are currently struggling with 10% higher operating costs and inefficient capacity at scale compared to their Chinese counterparts,” he said. .

He estimated that 1 GW of integrated solar module capacity could require 3,500-4,000 crore of investment and that RIL’s goal of enabling more than 100 GW of solar power generation by 2030 may require it. to set up a solar module capacity of 10 to 15 GW.

Citi said the clean energy announcements look promising at first glance and should help steer the company towards a low-carbon future, although details are limited and returns on investment uncertain.

BofA said that while this is a good move from a long-term perspective, capital investments, coupled with investment in 5G, will likely move RIL away from its recently reached net debt position at a low. slight debt position.

HSBC said RIL should benefit from performance-linked incentive programs (PLIs) that the government is putting in place for the manufacture of photovoltaic panels and advanced energy storage plants.

The government has already developed a PLI program for the manufacture of advanced chemistry cellular batteries (Rs 18,000 crore) for the establishment of a capacity of 50 GWH in the country for the storage uses of electric vehicles and network. Any player can bid for a capacity of 5 GWH to 20 GWH in this scheme.

In addition, a PLI program for the manufacture of solar modules (Rs 4,500 crore) for a capacity of 10 GW has been announced. Players must bid for a capacity of at least 1 GW.

Stating that as the AGM approaches, the market expected more details on the launch of the Jio phone and the progress of the Aramco deal, HSBC said Ambani referred to the Jio phone as ” ultra-affordable “but had not given a price. and specifications.

Goldman Sachs said the company’s comments suggest that competition in the Indian internet space, especially e-commerce, will increase in the short to medium term.

Comments around JioMart suggest strong traction and increase confidence with the company reaching $ 19 billion in revenue, or 50 percent from online grocery store, by FY25.

Credit Suisse said the total addressable market (TAM) for Jio’s smartphone would represent 150 million of the current 400 million feature users (including JioPhones).


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