Stake sale to Aramco

For a big green shift, Reliance needs funds and what better way to do it than to make fossil fuels pay for it. The 20% stake sale in Reliance O2C to Aramco is likely to fetch $15 billion and fund the big green energy plans of RIL. While the actual confirmation is yet to come, RIL has indicated that the deal will be done in this fiscal. The development is likely to get underlined with the induction of H.E. Yasir Al-Rumayyan into the board of directors of Reliance Industries Ltd.  

Big green investments

RIL has laid out plans for a Rs.75,000 crore investment in green energy over the next 3 years. Reliance will invest funds to set up factories to manufacture hydrogen cells, green hydrogen, solar power equipment, solar batteries and a lot more products to underline its big shift towards green energy. The broader plan is for the group to turn zero–carbon by year 2035, which is the global trend today. Big energy is not just about the reduction of carbon emissions but it will entail Reliance rethinking the entire value chain and shift its portfolio largely towards low-carbon footprint products. 

Jio Next and Google Cloud

Apart from the green energy shift, the other big expectation was on the launch of the low-cost smart phone. RIL did not disappoint as the Jio Next phone is to be launched in September this year. When launched, it is likely to be the lowest priced smart phone with a host of data rich features. But the bigger challenge will be speed of access and for that RIL will leverage on the Google Cloud to give 5G-like experience to customers. Of course, the target market for Reliance here is the high volume 2G market, that has nearly 30 crore customers, ripe for an upgrade to a better data experience.  

Green energy as value driver

The big shift from valuation perspective is that green energy is likely to become one of the key value drivers over the next few years. In the last 6 years, oil has been generating a lot of cash for the shareholders, but the value was being driven by digital and retail. In fact, despite its oversized contribution to the bottom-line, oil refining was just about contributing one-third to the total valuation of the Reliance group. It is clear that incremental valuation boost from digital and retail should slowly go down. It is time for the shift. Fossil fuels already have an expiry date and the world is already moving green. Reliance obviously cannot be too far behind. This aggression shown at the AGM makes the right noises for investors of RIL!