What are your thoughts on Reliance’s new green energy plans as was announced in the AGM today?
Look at what Reliance has been doing and how things have panned out in the past for them. Reliance typically gets into very large projects and executes them successfully. Once those projects start generating a lot of cash, they start looking for new growth engines for the company. That is the way the business has evolved for Reliance.
Jio is now one of the largest telecom players in India and has started to generate a good amount of cash. There are some technological plays like 5G which will happen in the next one to two years. Apart from that, it is a fairly stable business now. The O2C business is also generating a good amount of cash. The amount of EBITDA that the company is going to generate is an important aspect to understand how it will grow from the current levels.
The next wave of technology is in the green energy space. Even the battery space is in the renewable segment, which can generate an ROE of more than 18%. The capex is digestable from the perspective of balance sheet as well as cash flow generation in the next three years.
It is a very critical area that the company is getting into from an overall return on equity perspective. Overall, the belief is that ventures that the company is undertaking are ROE accretive and will result in good growth prospects. There is also a further re-rating potential for Reliance, considering that there are multiple triggers like ESG and growth trajectory.
