Reliance Industries New Solar Deals: What Brokerages Had To Say

Brokerages retained their ratings and target price on Reliance Industries Ltd. after the oil-to-retail conglomerate acquired a Norwegian solar panel maker and an Indian builder of renewable energy projects.

Mukesh Ambani-controlled Reliance New Energy Solar Ltd. bought REC Solar Holdings AS at an enterprise value of $771 million (about Rs 5,800 crore). The company also agreed to buy 40% in Shapoorji Pallonji Group's Sterling & Wilson Solar Ltd., an EPC contractor.

Brokerages said the two new acquisitions mark the conglomerate’s entry into the solar value chain. While they see little impact on valuations as of now, they said the deals could open up more monetisation opportunities.

Here's what brokerages had to say about the acquisitions:

Morgan Stanley

• Maintains 'overweight' rating; target price of Rs 2,925 implies an upside potential of 9.4%.

• REC acquisition gives a significant boost to its new energy plan.

• This would drive quicker net asset value accretion than investors anticipate.

• At $0.5 billion per megawatt of acquisition enterprise value, value creation of $7-10 billion is 15% above estimates.

• The deal should reduce investor skepticism on the company's green path.

• Assume $25 billion in base case and see up to $60 billion value creation as RIL rolls out its green plant.

Citi

• Maintains 'neutral' stance; 12-month target price at Rs 2,575, suggesting a potential downside of 3.7%.

• Two acquisitions mark foray into the solar value chain.

• Clean-energy investments over the next few years could be a long-term value driver.

• Strong execution and a favourable domestic market hold the key.

• The deal could open up further monetisation opportunities.

JPMorgan

• Maintains 'neutral' rating with a target price of Rs 2,465, a potential downside of 7.8%.

• New energy foray picks up pace with $0.77-billion acquisition of solar cell manufacturer.

• India's current solar cell and module capacity is set to increase sharply over the coming years.

• Little financial impact, but positive for the stock.

• Ascribes an equity value of $10 billion for RIL’s new energy business.

Jefferies

• Maintains buy; target price of Rs 3,050 suggests an upside of 14%.

• REC Group is an integrated solar player with proven, low-cost technology.

• REC is the only company globally to commercialise technology that consumes 75% less power than Chinese peers.

• REC's track record gives confidence on RIL's move.

• REC opens up global export opportunity for RIL.

• Leaves earnings per share estimates broadly unchanged; sees a potential of 10-12% upgrade to consensus forecasts.