RIL’s Clean Energy Business May Be Worth $36 Billion In Five Years, Says Bernstein
Laborers sit outside a Reliance Industries construction site at the Bandra Kurla Complex in Mumbai, India. (Photographer: Dhiraj Singh/Bloomberg)

RIL’s Clean Energy Business May Be Worth $36 Billion In Five Years, Says Bernstein

Reliance Industries Ltd.’s proposed investment in low-carbon technologies could create a clean energy business worth $36 billion (Rs 2.7 lakh crore) in the next five years, according to Bernstein.

The planned Rs 75,000-crore ($10 billion) capex will be “value-accretive”, Bernstein said in a report. And that would create a New Energy Business valued at Rs 395 per share by 2026, it said.

Having committed to net-zero carbon by 2035, India’s largest company by market value plans to build solar photovoltaic panels, batteries, hydrogen fuel cells, and electrolysers over the next three years. The plan comes as companies and investors globally switch to sustainable investments and seek suppliers with similar commitments to curb greenhouse emissions.

RIL announced in its annual general meeting that it will spend roughly Rs 60,000 crore ($8 billion) on creating manufacturing capacity and Rs 15,000 crore ($2 billion) on the value chain and technology.

Going by the size of the capex, Bernstein expects the business to contribute almost 10% to RIL’s total operating income by FY26, assuming all the factories are constructed and ramped up on the company’s timeline.

Also read: Reliance Considers Bid for India’s Solar Incentives in Green Push

Why Clean Energy

The logic behind investing in clean energy, according to the report, is compelling.

India has yet to declare a net-zero target but the direction towards low carbon is clear. Solar is becoming cheaper than coal and hydrogen and there are clear economic and energy security reasons to believe that the nation will transition towards clean energy, it said.

India’s primary energy demand is expected to increase by more than twofold from 34 exajoule to 77EJ by 2050, with renewable energy (nuclear, hydro, bio, solar, and wind) growing from 8% to 80%, the report said. “Given India’s strong potential for renewables, RIL’s shift to net zero, and new energy is fully aligned to capture the potential growth in India.”

Solar, according to Bernstein, is expected to be the largest energy source at 34% of India’s energy mix by 2050 (from 1% today), assuming the country wants to achieve net-zero by then. Batteries and hydrogen, it said, would grow at a similar pace to solar. That’s because batteries will be needed to store intermittent power, while low-cost green hydrogen will be used in the fuel cell to power commercial vehicles and provide stationary power, the report said.

Also read: Mukesh Ambani Goes Green: Old Playbook, New Play


RIL’s plan to install 100-gigawatt solar capacity by 2030 is ambitious but aligns with the government’s target, Bernstein said. This would “make the company one of the largest domestic players with more than 30% market share”.

The average EBIT margin for the solar industry, according to the report, is in the 10-15% range. Bernstein assumes RIL could achieve an average EBIT margin of 12% in the long run, below global market leaders but in line with the industry.

There, however, are challenges.

  1. Solar projects in India are obtained through a bidding process and have historically been sold to state-owned power distributors which have access to grids and may source solar PV from low cost Chinese manufacturers.

  2. Reliance needs to acquire large-scale land if it plans to generate its own solar power which can be a long process to acquire.

  3. The solar market is already very competitive with domestic (Adani Group) and foreign players (LONGi, Zhonghuan, GCL, etc.).

Also read: JSW Energy Plans to Spend $10 Billion on Clean Power by 2030


The industry is at a nascent stage and is still underestimated. Bernstein expects that it can grow almost 70 times from current levels of 166GWh in 2020 to 12TWh (terawatt hour) in 2050.

Reliance’s battery business capacity is expected to reach 1% of the total global capacity, or 2% of the top six battery makers’ capacity by 2025, the report said. “While this is small at a global level, Reliance would be the only lithium ion battery maker in India, which is critical as government policies globally continue to shift towards localization of battery supply chains.”

Also read: Reliance’s New Energy Plan Can Be Bolder

Fuel Cell & Electrolyser

The fuel cell market for transport is the largest for such companies. It’s expected to reach a total addressable market of $350 billion (Rs 26.25 lakh crore) by 2050. The electrolyser market, on the other hand, has an estimated total addressable market of $215 billion (Rs 16.12 lakh crore) by 2050, according to the report.

RIL is expected to construct 2.5GW of fuel cell capacity and 2.5 GW of electrolyzer capacity by 2025, Bernstein said.

Also read: India’s Green Energy Plan Needs A Clear Roadmap

Capex Estimates

Bernstein estimates capex of around Rs 25,000 crore annually from FY23 onwards for the new energy business. That’s around 30% of the total capex requirements.

Total capex requirements will be around Rs 80,000-88,000 crore annually, including base capex for the old energy business, Jio, retail and e-commerce, and new investments for new energy.

RIL, according to the report, will source capital internally as it is almost debt-free.

The company is expected to generate Rs 65,600-crore free cash flow in FY22 that will grow to Rs 1.5 lakh crore in FY26. Its free cash flow yield will grow from 4% currently to 11% by FY26.

RIL will also form a new platform to source long-term global capital for investment into the new business.

Besides, the possibility of a stake sale in oil-to-chemicals business to Saudi Arabia’s Aramco will provide additional funding to the new energy business, although the deal is still in discussion.


The biggest risk for investors is that RIL has no expertise in the technology required for batteries, fuel cells, solar PV, or electrolyzers.

It also has no experience in mass manufacturing.

“While it is unclear to us as to whether Reliance will be successful, it is too early to discount them given their track record of successfully disrupting other industries, such as telecom and retail,” Bernstein said.

RIL will need to find partners given the technology requirements needed for fuel cells and batteries. While companies will be reluctant to share their technology with a potential competitor, the market opportunity in India may be enough to persuade some.

Also read: Here Are The Competitors For Mukesh Ambani’s Clean Energy Push

Stock Rating

Bernstein has rated RIL as ‘outperform’ with a target price of Rs 2,830 apiece, implying an upside potential of 35% from Wednesday’s closing.


  • Operational complications at the Dhirubhai field could result in a significantly lower than expected production output and slower expansion.

  • Additional spectrum requirements in telecom 5G services.

  • Slow economic growth and weak demand could impact petrochemicals and refining performance.

  • Slower-than-expected footfalls, increase in capital expenditures and higher competition are risks to the retail segment.

Also read: What Analysts Made Of Mukesh Ambani’s Next Big Bet For Reliance Industries

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