The market doesn’t seem to be excited with all the announcements made at Reliance AGM. What do you make of the Rs 75,000 crore capex plan?
Over the last three years, we have seen a lot of expectations from each of the AGMs. The stock tends to run up quite a bit in anticipation of the AGM every time. People were expecting more clarity on the timelines and valuation of the Aramco deal.
The pricing of the smartphone was also withheld. That may have created some disappointment among people who had bought the stock anticipating a boost on the AGM day.
I would not be worried too much about the stock reaction today. My sense is that the people who bought in anticipation of just the AGM announcements will probably exit over the next couple of sessions. The stock should then start to regain its normal trajectory.
The Rs 75,000 crore capex plan translates to Rs 25,000 crore a year. This company is likely to generate cash flows in the range of around Rs 65,000-70,000 crore. So the balance sheet does not get burdened too much. But the signal that it sends is that Reliance is positioning itself to transitioning away from traditional refining fuels.
It addresses the question of where will all this excess cash from FY22 to FY24 will be invested. Execution is their forte, but economics and numbers will become clearer over the next year.
Do you think that a push towards green energy is a good idea at the group level, considering that more than 50% of their revenues now come from new businesses?
In the last 15 years, they have been diversifying. There is no problem with that as long as your execution is fine. Their retail business is less than 10 years old and Jio is less than a five-year old story. And yet these two businesses are today on a much bigger base as more than 50% of their consolidated EBITDA comes from them. For Reliance, it has always been about whether the capital allocation delivers more returns to shareholders.
What does this mean for players like Adani Green and Renew Power who are already in the business?
Mr Ambani mentioned that the target is of reaching about 700 MW. Adani Green, from my limited understanding, has a plan to set up around 25,000 MW in the near-to-medium-term. Today they have about 3.5 GW of operational power capacity.
So I think it is more complementary rather than competing at this point of time. India’s energy requirements are pretty much in A and B and C kind of a market, rather than in A or B or C. So I would not necessarily look at it as a threat. It is more complimentary. More players create an ecosystem. That brings efficiency for all players. Even smaller OEMs are incentivised. So I would say that it is positive for everyone concerned.
