Reliance New Energy Solar to Buy 40% Stakes in Sterling and Wilson Solar

On Monday, Reliance Industries (RIL) shares hit a new high after Reliance New Energy Solar LTD announced the acquisition of two companies, intensifying its drive into green energy. Nifty rocketed to a new high of 18,000, after gains in index heavyweights RIL and banks.

Mukesh Ambani’s conglomerate, RIL made two purchases over the weekend, including a 40 percent investment in Shapoorji Pallonji Group’s Sterling & Wilson Solar and a 40 percent stake in Norway-based solar panel producer REC Solar Holdings.

RIL paid $771 million for REC Group, an integrated solar PV manufacturer. REC’s technology would be used to build a 10 GW power plant in Jamnagar. “REC is the only player globally to commercialize a tech that consumes 75% less power than Chinese comps. It has patented tech and opens up the export market for RIL’s solar business,” analysts at Jefferies stated.

Refinery run rates have been reduced as a result of China’s restrictions on energy-intensive businesses and a broader winter emission reduction drive. If China adheres to its climate commitments until the Winter Olympics in February 2022, Jefferies predicts a 10-12 percent boost to consensus O2C Ebitda projections for FY22E. As a result, it reiterates its support for RIL. The stock’s ‘Buy’ recommendation has been maintained by the firm, with a target price of $3,050 per share.

Reliance New Energy Solar Ltd (RNEL), a proprietary subsidiary of Reliance Industries, is all set to receive a preferential allocation of 2.93 crore Sterling and Wilson shares at the rate of Rs 375 per share, representing 15.46% of the company’s increased equity base. RNESL will buy another 9.70 percent of the company from Shapoorji Pallonji & Co. Pvt. Ltd for the same price. According to Indian takeover regulations, it would also trigger an open offer for an additional 25.7 percent of the company, and if entirely successful, RNESL will own a 40% share in the company, resulting in a total payout of Rs 3630 crore.

Sterling and Wilson Solar had a market capitalization of Rs 6,972.45 crore on Friday.

In the quarter ended June 30, 2021, the company reported a consolidated net loss of Rs 76.02 crore, compared to a net profit of Rs 17.22 crore.

However, in expectation of a merger, the stock has increased by 60% in the last three months. SP Group and SWSL have repaid a remaining debt of Rs. 2,563 crore on September 29 this year, paving the way for a deal.

According to Mukesh Ambani, Reliance Industries wants to create the capacity to generate at least 100 gigawatts of electricity from renewable sources by 2030, which can be transformed into carbon-free green hydrogen.

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