Analysts are increasingly confident in Reliance Industries’ new energy business, viewing it as the next significant growth driver for the Indian conglomerate, according to a Reuters report.
This optimism stems from the rapid progress in operationalising gigafactories for this nascent segment.
Reliance Industries, the conglomerate led by billionaire Mukesh Ambani, is making significant strides in its ambitious $10 billion clean energy initiative.
This substantial investment, initially unveiled in 2021, underscores the company’s commitment to transitioning its operations towards a sustainable future and achieving net-zero carbon emissions by 2035.
Confidence in new energy
On Friday, the company provided a detailed update on the progress of this pivotal investment, highlighting key advancements across its renewable energy portfolio.
The strategic allocation of capital is focused on developing a comprehensive ecosystem for clean energy, which includes giga-factories for solar photovoltaic modules, energy storage solutions, green hydrogen, and fuel cell manufacturing.
These integrated facilities are crucial for scaling up production and driving down the cost of clean energy technologies.
Reliance’s vision extends beyond mere production; it aims to establish India as a global hub for green energy innovation and manufacturing.
The 2035 net-zero target is in line with the company’s role in combating climate change.
This commitment is expected to not only transform Reliance’s own energy consumption but also contribute significantly to India’s broader renewable energy goals.
The update on Friday provided transparency into the tangible progress being made, signaling that the initial investment is actively being deployed to build tangible assets and capabilities in the clean energy domain.
Outlook
The group anticipates its clean energy factories will be operational within the next four to six quarters. Subsequently, the business will achieve self-sufficiency through strategic partnerships for both offtake and financing.
Nomura analysts were quoted in the Reuters report:
We believe the new energy business could be the next growth driver for Reliance, with the company targeting world-leading scale in integrated solar solutions, battery manufacturing, and implementation.
Reliance showcased new energy construction in Gujarat, highlighting its expansive 44 million square feet, nearly four times the size of Tesla’s Nevada gigafactory.
Last year, Ambani stated that the new energy business is projected to achieve profitability comparable to the core oil-to-chemicals segment within five to seven years.
Earnings growth is slowing in the company’s oil-to-chemicals business, which accounts for approximately 55% of its total revenue.
On Sunday, Emkay Global increased its valuation multiple for Reliance’s new energy segment to 1.5 trillion rupees (approximately $17 billion), which is double the invested capital.
Reliance is well-positioned to capitalize on the global energy transition, according to Jefferies. The firm values Reliance’s solar vertical at $15 billion and the overall group at $295 billion.
Jefferies highlighted several near-term challenges for the business, such as global overcapacity in the solar sector and potential US trade measures affecting Indian exports.
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