India's Top Renewal Energy Stocks: Big Returns or Boring Returns?

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  • Dec 9, 2021 - India's Top Renewal Energy Stocks: Big Returns or Boring Returns?

India's Top Renewal Energy Stocks: Big Returns or Boring Returns?

Dec 9, 2021

India's Top Renewal Energy Stocks: Big Returns or Boring Returns?

Investing in disruptive and niche businesses has become the investment theme lately.

However, if you think about it, there isn't really anything new about it. This has always been the way of life and businesses.

Wasn't it disruption when wheel was invented or when mobile technology took over? Another example is Netflix and other streaming services disrupting the entertainment industry.

So why now, in this moment, is the theme of 'disruption' taking center stage?

Well, just because it's making the change at a lightning speed now.

Traditional businesses are too big and set in their old ways. And the one industry seeing a huge amount of money being pumped in is the renewable energy space.

Investors are falling head over heels whenever they hear the term 'renewable energy'.

Let's look at the top companies from the renewable energy sector and see if they're giving investors their money's worth.

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#1 Tata Power

Tata Power shares are on a dream run this year.

Why? Because this legacy power company is foraying into new-age technologies and the market has factored in the news.

Tata Power is one of India's leading players in the renewable energy space with renewable power capacity of 2.6 gigawatt (GW) in 11 states. It's well-positioned to respond to the shifting landscape of India's renewable energy push.

Tata Power is planning to take its renewable production to massive 15 GW by 2025.

The company is a front-runner across the renewable spectrum through its subsidiaries, Tata Power Renewable Energy, Tata Power Solar Systems (TPSSL), and Walwhan Renewable Energy (WREL).

Apart from renewable energy, Tata Power is acing the EV race. Tata Power has various orders up its sleeve in the electric vehicle (EV) charging stations segment.

Over the past three months, Tata Power share price is up 72%. When compared yearly, the stock is up a whopping 210% in the past 12 months.

Clearly, these are big returns by any margin.

Co-Head of Research at Equitymaster, Rahul Shah believes the sharp run up in the stock price over the last few months seems to have captured a lot of that upside.

Here's what he wrote...

  • Although the prospects look good, the sharp run up in the stock price over the last few months seems to have captured a lot of that upside. In fact, in our view, the markets may have overdone the bullishness a bit.

    Thus, if you have not invested in the stock already, it may be a good idea to stagger your purchase and not buy everything in one go.

    After all, it pays to be conservative if one has any doubts about the valuation of a stock.

To know more, check out Tata Power company factsheet and Tata Power's latest quarterly results.

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#2 Websol Energy Systems

Websol Energy System is a leading manufacturer of photovoltaic monocrystalline solar cells and modules in India.

The company went into business as a fully export-oriented unit catering to Europe (mainly Germany and Italy) and the US.

Keeping in view rapid technological advancement, Websol has invested in cutting-edge developments to manufacture world-class photovoltaic cells and solar modules at its state-of-the-art facility in Falta, SEZ. The facility comprises a production capacity of 250 MW cells and 250 MW modules.

Just like Tata Power, shares of Websol Energy are also on a roll this year.

Over the year gone by, Websol Energy share price is up around 175%. The big returns by the stock are in line with the company's fundamentals. The stock is under pressure this month and has fallen around 8%.

At the current price, the company commands a marketcap of Rs 2.7 bn.

#3 Borosil Renewables

Borosil Renewables is the first and only solar glass manufacturer in India. It's a proxy play if you want to participate in the solar energy revolution.

The company spotted the opportunity in the segment quite early and commissioned its solar glass manufacturing facility in January 2010.

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Amidst the global energy crisis, Borosil Renewables was the major beneficiary. Apart from solar glasses, it has other tailwinds to its business.

The stock has given positive returns across durations. It's yet another example of big returns.

% Change 1 Month 3 Months 6 Months 1 Year
Borosil Renewables 20% 84% 98% 326%
Source: Equitymaster


NTPC has been aggressively pushing for greening its portfolio.

The largest electricity producer in India has pivoted toward green energy as pressure mounts to reduce coal usage because of the fuel's role in global warming and its harmful impact on environment and human health.

The state-owned thermal power company was recently in news as it was planning to list three subsidiary companies on the exchanges - NTPC Vidyut Vyapar Nigam (NVVN), North Eastern Electric Power Corporation (NEEPCO), and the one-year-old NTPC-Renewable Energy (NREL).

NTPC has tied up with IOC for generation and storage of renewable energy or other forms of energy, including gas-based power, primarily to cater for IOC refineries or other installations.

It's also planning to produce green hydrogen on a commercial scale.

The company plans to do that from its upcoming 4,750 MW renewable energy park at the Rann of Kutch. The capacity of the plant will be 5 MW.

Despite all this, the company's stock performance is nothing to write home about. Even in this bull market, NTPC's stock has given 28% return in the past 12 months. In the past one month, the stock has lost about 9%.

#5 Reliance Industries

Reliance Industries has formed a slew of partnerships for its green energy plans. This includes solar, battery, and hydrogen investments.

The oil-to-retail conglomerate announced a wave of partnerships with REC, NexWafe, Sterling and Wilson, Stiesal, and Ambri for an estimated cost of US$1.2 bn.

The company recently announced its plans to become a net carbon-zero firm by 2035. It aims to replace transportation fuels with clean electricity and hydrogen.

Reliance will invest Rs 750 bn over the next three years in renewable energy. Out of this, it will invest Rs 600 bn in a 5,000-acre, green energy integrated complex called Dhirubhai Ambani Green Energy Giga Complex in Jamnagar, Gujarat.

The company's intentions to focus on renewable energy and reduce hydrocarbon footprint became even more evident when it announced its exit from the shale-gas business in North America last month.

Just like NTPC, Reliance's stock performance has been decent. Over the past one year, Reliance Industries share price is up 21% while it is trading near the same level it was trading 3 months ago.

To know more, check out Reliance Industries' latest quarterly results.

#6 GAIL (India)

GAIL supports the theme of rising gas penetration in India and government's focus to expand gas as a key energy transition fuel.

In July this year, the company had announced that it will invest Rs 50 bn to build a portfolio of at least 1 GW of renewable energy.

The PSU also plans to build India's largest green hydrogen plant as it looks to supplement its natural gas business with carbon-free fuel. Even as the company has ambitious plans with respect to renewable energy, the stock performance says otherwise.

Here's how the stock has performed over different time durations.

% Change 1 Month 3 Months 6 Months 1 Year
GAIL (India) -11% -8% -21% 10%
Source: Equitymaster

Clearly, these are boring returns.

#7 Indian Oil Corp (IOC)

Last month, two PSU behemoths Indian Oil Corporation (IOC) and NTPC signed a memorandum of understanding to together explore and collaborate in the renewable energy sector.

If all goes according to plan, the two companies will jointly build generation and storage of renewable energy or other cleaner forms of energy, including gas-based power, primarily to cater for IOC's refineries and other installations.

IOC's stock performance has been decent as it has gained 28% over the year gone by.

#8 L&T

Engineering major L&T has also forayed into the green hydrogen space.

Last week, L&T and renewable energy developer ReNew Power partnered to tap the emerging green hydrogen business in India. Under the partnership agreement, L&T and ReNew will jointly develop, own, execute and operate green hydrogen projects in India.

In its latest annual report, L&T said it aims to be net-zero emissions by 2040. 90% of this would come from switching over to initiatives such as renewable energy, green hydrogen, and biodiesel while the other 10% would be offset by creating carbon sinks.

The company plans to spend between Rs 10-50 bn on its green initiatives, over several years.

Shares of L&T have been in an upward trend since the start of this year, barring a few hiccups in March 2021. The stock is up 57% in the year gone by and 11% in the past three months.

#9 JSW Energy

JSW Energy share price has outperformed all the above-mentioned stocks by a good margin.

From trading at Rs 65 a year ago, JSW Energy currently trades at Rs 300 per share. That's a 360% gain in just one year.

Two weeks back, the company decided to restructure its renewables business. You can read the recent development taking place in the firm here.

Through this strategic stake sale in its green energy business, the company aims to catch up with peers such as Tata Power and Adani Power that have stepped up investments into non-conventional energy.

#10 Adani Group Stocks

It was in September this year when the Adani group decided to take on Reliance Industries.

Billionaire Gautam Adani has made it clear he has big plans for this space. He recently announced plans to invest up to US$70 bn (Rs 5.3 tn) in renewable energy over the next decade and produce the cheapest green hydrogen in the world.

In fact, he plans to invest the money across the entire green energy value chain.

To increase its presence in clean energy space, recently, Gautam Adani, chairperson of Adani Group, sealed the largest deal in India's renewable sector with acquisition of SB Energy for US$3.5 bn.

Here's how Adani group stocks have performed over the past one year.

#11 Sterling & Wilson Solar

Sterling and Wilson Solar is a global end-to-end solar engineering, procurement, and construction (EPC) solutions provider.

The stock has been in the news of late as Reliance Industries' wholly-owned subsidiary Reliance New Energy Solar agreed to acquire up to 40% stake in Sterling & Wilson for approximately a total pay-out of Rs 28.5 bn.

Shares of the company started to gain traction on the bourses a month before the deal was announced. Before that, the stock was trading in a range throughout the year.

Shares of the company have gained 50% in the year gone by while over the past one month, the stock has been under pressure, falling 10%.

An important factor one should note here is that Sterling and Wilson's profitability continues to remain impacted due to challenging environment across the entire solar industry value chain.

Sterling & Wilson Solar reported a consolidated net loss of Rs 2.8 bn for September quarter 2021-22. For financial year 2021, the company posted a loss of Rs 2,900 m after three consecutive years of profits.

To know more, check out Sterling & Wilson's factsheet and latest quarterly results.

Why renewable energy stocks will benefit in 2022 and beyond...

We're witnessing a disruptive shift in the energy landscape given the market's newfound love for all things 'green'.

Investors are falling head over heels whenever they hear the term 'renewable energy'.

And rightly so.

You'll agree when we say energy transition from fossil fuels towards greener, more environmentally-friendly sources is set to be the biggest investment theme of this decade.

Big corporates of Ambani and Adani have already announced plans for multi-billion dollar investments in renewable energy to ensure India moves closer towards its net-zero target.

Even the investing legend Charlie Munger is bullish on renewable energy.

Recently, Munger told that he is bullish on renewable energy and loves the fact that countries are rapidly reducing the burning of coal and the burning of gasoline and diesel.

Here's Munger in his own words:

  • I would be in favour of using a lot more renewable energy from wind and solar, even if there were no global warming problem.

    I think saving the hydrocarbons for future generations instead of blowing them all in one big blast, would be a very smart thing to do even if there were no global warming.

As India goes on a seismic shift where traditional energy sources get replaced by green energy like solar, wind, and green hydrogen, there's massive scope.

No wonder why India's investments in renewable energy has accelerated in the recent years.

Here are Links to Some Very Insightful Equitymaster Articles on Renewable Energy:

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...

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