MUMBAI: Reliance Industries, one of the largest fossil fuel companies in the world, is going green.

Following in the footsteps of its larger energy peers like BP and Exxon, who have recently unveiled their own green energy plans, RIL announced at its annual shareholders’ meeting that it would invest around Rs 75,000 crore in the coming years to transition itself into a full-fledged green company.

“We are launching a new energy business with the aim of bridging green energy divide within India, and globally,” Chairman and Managing Director Mukesh Ambani said at the virtual annual meet.

The country’s richest man said the growing wealth and energy gap in the country is “unacceptable” and that the only option is for India to grow in a sustainable and equitable manner. “RIL will help transition India from industrial civilization to an ecological civilization,” Ambani said in a boisterous declaration of his plans.

Besides the green energy plans, there were a few more notable announcements from the company. Here are the major takeaways for investors:

Wooing the $2 trillion ESG funds

Ambani’s ambitious green energy plan that includes building four gigafactories — solar photovoltaic, advanced battery energy storage, fuel cell and electrolyser – at Jamnagar, Gujarat is certain to impress the global ESG fund managers who manage assets worth more than $2 trillion. Analysts said the green energy initiative could attract lots of capital from ESG funds to the company’s stock and trigger further re-rating in valuations.

JioPhone Next to further assert dominance
While the blueprint for the next installment of the JioPhone was laid out at RIL’s previous annual meeting, Mukesh Ambani announced its formal launch today, calling it the “most affordable smartphone in the world”. The phone will be available from September 10 in the market. Ambani has stated his aim to convert low-ticket 2G users to 4G and the JioPhone Next, built with Google, will do the footwork to achieve that goal. Ambani said Jio’s network has the ability to add 200 million more users.

New capex cycle to aid RoE
After the end of the previous capital expenditure cycle for Reliance Industries, investors were hoping that the company would focus more on free cash flow generation and cutting its gigantic debt. After raising Rs 3.4 lakh crore in 2020-21, Ambani has managed to make the company net debt free. That said, the announcement of a new capital expenditure cycle may make some investors get worried about free cash flows again given that renewable energy projects have a long gestation period. “These ventures are RoE (return on equity) accretive and will result in growth and further re-rating,” Naveen Kulkarni, chief investment officer at Axis Securities, told ETNow.

Lack of clarity on Aramco deal remains
RIL announced the inclusion of Saudi Aramco’s Chairman Yasir Al-Rumayyan to the company’s board as an independent director and said that Aramco’s acquisition of a minor stake in the oil-to-chemicals business will be expedited so that it can take place this year. However, analysts said the lack of comments on the valuation front and a more concrete timeline left investors underwhelmed.

Retail business to see 3x growth
While the green energy business dominated Ambani’s speech, he also demonstrated considerable confidence in RIL’s retail venture. Ambani said that he is confident that Reliance Retail is on a growth trajectory that will see the company grow “at least 3x in the next 3-5 years”. Ambani also highlighted that JioMart is beginning to gain more traction with users and merchants, which bode well for the company’s e-commerce hopes.

RIL is 5G ready
Ambani also updated shareholders that RIL is confident of becoming the first telecom operator to launch full-fledged 5G telephony services in India as and when the spectrum is commercialized by the government. The company has also extended its collaboration with Google beyond smartphone as Google will now work on 5G with Jio. RIL’s core retail and Jio businesses will completely shift to Google Cloud going ahead to further strengthen the two companies’ partnership.

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