This Smallcap Stock is Betting Big on Green Hydrogen & Semiconductors

With the global transition to get away from fossil fuels underway, a host of companies are foraying into emerging sectors that offer the potential to reduce the amount of greenhouse gases released into the atmosphere.

From the Adani group and Ambanis to public sector undertakings (PSUs), India's prominent companies have actively joined the competition for green hydrogen since the approval of the National Green Hydrogen Mission by the Union Cabinet in January last year.

The overarching goal is to position the country as a premier producer and exporter of green hydrogen.

As the race for green hydrogen heats up, numerous companies are unveiling their strategies to strengthen their presence in this sector.

Adding to this trend, Va Tech Wabag has recently declared its intention to venture into the green hydrogen space.

About VA Tech Wabag

VA Tech Wabag is a leading global player in the water technology space, providing comprehensive solutions for water and wastewater treatment, desalination, and industrial water treatment.

With a presence in four continents, the company is a pure-play water technology multinational offering a wide range of solutions focused on conservation, optimisation, recycling, and reuse of resources, directed at addressing water challenges across the world.

Va Tech Wabag is renowned for its expertise in designing, implementing, and managing water and wastewater treatment projects across the world.

The company has a rich history dating back to 1924 and has successfully executed over 6,000 projects in over 30 countries.

In 2023 so far, the shares of the company have rallied over 70% on back- to-back project wins.

Green Hydrogen Partnership

Va Tech Wabag is actively exploring strategic partnerships within the green hydrogen sector.

The Chennai-based company aims to position itself as a key water partner for organisations focused on green hydrogen production, utilising its internal capabilities and expertise.

While green hydrogen currently faces economic challenges, numerous entities are investing in the sector with the expectation that costs will decrease over time.

Va Tech Wabag foresees a shift in the next five years, similar to the success witnessed in the solar power segment. Despite initial scepticism about solar energy two decades ago, it has now become a competitive force against thermal power.

Water plays a crucial role in hydrogen production, serving as a raw material. The cleanliness of water is paramount, as impurities can lead to electrode scaling and decreased efficiency. Va Tech Wabag sees its role in ensuring a secure and clean water supply for hydrogen production.

The production of green hydrogen involves the integration of three essential components: green energy, electrodes, and water.

As a water partner, Wabag is well-positioned to construct, operate, and maintain water treatment plants, offering top green hydrogen companies a dependable source of clean water.

The company has garnered interest from several entities seeking Wabag's expertise as a water partner in their green hydrogen initiatives.

Pilot Green Hydrogen Endeavor

Wabag is also actively advancing its green hydrogen agenda by establishing a pilot green hydrogen unit.

The company is strategically sourcing electrodes from premier electrode manufacturers and collaborating with leading solar panel suppliers to develop a sustainable green power infrastructure for the project.

Within the coming year, Wabag aims to showcase its prowess by successfully demonstrating the pilot project for green hydrogen production.

This forward-looking initiative underscores the company's commitment to driving innovation and actively contributing to the evolving landscape of green hydrogen technologies.

Government's Push

The Indian government is taking significant steps to promote and support the production of green hydrogen as part of its efforts to reduce carbon dioxide emissions and establish itself as a leading exporter in the sector.

The Indian government has unveiled a US$ 2 bn (Rs 160 bn) scheme to promote the production of green hydrogen fuel in the country.

Producers will receive incentives worth at least 10% of their costs to support the transition to renewable energy and reduce carbon emissions.

The government plans to offer incentives of at least Rs 30 per kg for green hydrogen production to cut manufacturing costs from the current Rs 300 per kg. The scheme will also allocate funds for manufacturing electrolysers that are essential for production.

The government intends to begin the bidding process soon and expects to support 3.6 m tonnes of hydrogen production capacity over the next three years.

The auctions will be conducted in tranches for green hydrogen supply and electrolysers. The government aims to gain market insights, foster technology adoption, and drive cost reductions in the sector.

India strives to achieve 50% of its electricity capacity from non-fossil fuel sources by 2030 and reach net-zero carbon emissions by 2070.

The scheme reflects the government's commitment to clean energy and its ambition to establish India as a significant player in the green hydrogen sector.

This ambition will further support the company's green hydrogen plan.

Ambitious Future Plans

Wabag is also exploring opportunities in the semiconductor and bio-CNG areas. After a huge supply chain issue in the semiconductor sector post-Covid, several countries, including the developed world, are investing in their facilities to produce chips.

As semiconductor manufacturing requires a high level of extra-pure water, Wabag is keen to be part of this. A few years ago, Wabag did a project in the Middle East to supply pure water to one of the semiconductor manufacturing facilities.

In the Bio-CNG space, the company has already been building these plants over the past two decades.

The company has been converting biogas to power. Now, it plans to move to a higher value chain, which is Bio-CNG.

Conclusion

Going forward, Wabag plans to expand its focus on green hydrogen projects in global markets, aiming to strengthen its presence in the sustainable energy sector.

Wabag is well positioned to take advantage of this shift, as it has a strong track record of execution and a large network.

As the world increasingly pivots towards environmentally conscious practices, Wabag's commitment to expanding its focus on green hydrogen reflects its dedication to driving positive change in the global energy landscape.

With a robust foundation and a forward-thinking strategy, Wabag is poised to play a pivotal role in shaping the future of sustainable energy on a global scale.

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