It doesn’t seem like a big capital commitment from India’s most powerful businessman, certainly not when he just raised $ 44 billion in capital during a pandemic and took stock of $ 180 billion from its flagship product Reliance Industries Ltd. without net debt.
But these are still the first days of a decisive shift in the energy mix of India’s largely coal-fired economy. Ambani’s plans could easily become as aggressive as its 4G telecoms company, initially dismissed by naysayers as an entry-me-too into a field crowded with a dozen players. In just five years, Ambani’s digital startup has acquired more than 420 million subscribers, bankrupted several other operators and will soon launch one of the cheapest smartphones in the world in partnership with Alphabet Inc’s Google. If he displays a similar thirst for solar power, other aspirants may need to rethink their strategies.
Among them, the French TotalEnergies SE, which took a 20% stake in Adani Green Energy Ltd. and invested directly in some of the projects in the company’s 25-gigawatt solar power portfolio, which has grown 50-fold in three years. Gautam Adani, who earlier this year took his place behind Ambani as Asia’s second richest man, wants to be the world’s largest producer of renewable energy by 2030.
Will Ambani get in his way? So far, the two billionaires, both from Prime Minister Narendra Modi’s home state of Gujarat, have largely operated in their separate spheres. Ambani looked at data-driven mainstream businesses like retail and telecommunications, while Adani focused on infrastructure and utilities. The clean energy would see them overlap. While Ambani’s initial plans aren’t too dominant – he wants to hit 100 gigawatts of Modi’s green power target of 450 gigawatts by 2030 – that’s probably because he hasn’t yet defined the political terrain.
After spending $ 90 billion over the past decade, Reliance Industries claims it has the “ability to catalyze” an additional $ 200 billion in investment over the next 10 years. From a renewed focus on gas exploration to e-commerce on WhatsApp, India’s largest trading company has many shackles beyond clean energy. He also has deep pockets and influential friends like Google and Facebook Inc. Yasir Al-Rumayyan, the boss of Saudi Arabian Oil Co., joins Reliance’s board of directors. The lagging goal is to have Aramco as a strategic partner of Reliance’s refinery on India’s west coast and reposition it at the center of a low-carbon oil empire.
To support these initiatives, Reliance has $ 13 billion in annual profits before interest, depreciation, taxes, and depreciation. Its foreign currency debt is rated BBB by Fitch Ratings, a notch higher than the Indian government. Meanwhile, the listed entities of the Adani Group have an annual EBITDA of just over $ 3.5 billion and a combined net debt of over $ 19 billion.
After a dramatic rise over the past year, stock prices for the smaller group have recently faltered amid concerns over the outsized exposure of some dark shadow foreign funds. This fit of nervousness underscored the crucial role that funding will play for Adani to achieve his sprawling ambitions spanning ports, airports, coal mines, power generation and transmission, gas supply, warehousing. and data centers.
It is also possible that the richest tycoon is scattered a bit too much. Reliance is fighting Amazon.com Inc. and Walmart Inc. in e-commerce and will soon challenge Xiaomi Corp. with JioPhone Next, tailor-made by Google for the 300 million Indians still equipped with 2G devices. Then there is the foray into the unknown world of technology services: Ambani not only wants to be the first of the block with 5G in India, but it also aims to sell to other telecom operators in the world, in competition. maybe with Huawei Technologies Co.
Adani is eager to grow because he wants to diversify his cash flow beyond his thriving port business and seize the inevitable resource boom as the average incomes of India’s 1.4 billion people rise from low to middle income to high middle income. What is Ambani’s hurry?
Putting clean energy in a packed tote shows the 64-year-old can take succession planning seriously. Mukesh Ambani’s own past battle with his younger brother, Anil, for a division of family assets would be a reminder that he must use Reliance’s cost of capital advantage to nurture self-sustaining conglomerates for each of his three adult children at manage. That’s another reason to expect the four giga factories announced by Ambani this week – one for solar panels, batteries, green hydrogen and fuel cells – to be just the start. The push could very quickly turn into a stampede.