Reliance's expansion into green energy segment sparks analyst optimism

Reliance Industries' rapid progress towards operationalising gigafactories for its new energy business has raised analysts' confidence in the Indian conglomerate's newest business segment, which many see as its next major growth driver.

Billionaire Mukesh Ambani's firm on Friday revealed details of progress of a $10 billion investment to build its clean energy portfolio and achieve net-zero carbon emissions by 2035. The investment was first announced in 2021.

The group expects to operationalise its planned clean energy factories in the next four-to-six quarters, after which the business will be self-funded through partnerships for offtake and financing.

"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 and battery manufacturing and implementation," Nomura analysts said in a note on Monday.

Reliance showed visuals of the new energy construction in the western state of Gujarat, claiming it effectively spans 44 million square feet, nearly four times Tesla's gigafactory at Nevada.

Chairman Ambani had said last year that the new energy business will become as profitable as the mainstay oil-to-chemicals segment over five-to-seven years.

The company's oil-to-chemicals business, which contributes about 55 per cent of its overall revenue, is seeing an earnings growth slowdown.

Emkay Global on Sunday raised its valuation multiple for Reliance's new energy segment and values it at ₹1.5 trillion (about $17 billion), twice the invested capital.

Jefferies said that Reliance is positioned well to capitalise on the global energy transition and values the solar vertical at $15 billion, and the overall group at $295 billion.

However, Jefferies flags near-term headwinds for the business, including global overcapacity in solar and the potential impact of US trade actions on Indian exports.