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HomeBusiness‘Current share price does not reflect ReNew’s intrinsic value’

‘Current share price does not reflect ReNew’s intrinsic value’


In an interview, Sumant Sinha, chairman and managing director, ReNew Power, said shares prices do not represent the company’s intrinsic value. Its shares are currently trading at $6.17, way below its listing price of $11 per share, forcing the company to announce a share buyback plan. Its market valuation fell from $4.5 billion at listing in August 2021 to $2.5 billion now. Edited excerpts:

 

How is life after ReNew’s listing?

We listed in the end of August 2021 and, almost immediately, we had this massive market weakness coming into cleantech stocks globally. In January, there was a massive selloff in cleantech stocks as the Nasdaq fell 20%. Since then, the market has been falling in the US. Unfortunately, even though we are not a US stock or a typical cleantech stock, we have been categorized in the bucket of cleantech or energy transition or clean energy, and therefore, we have got caught up with some of that downdraught of the market. Nasdaq is off about 35% from its highs and we are off about 35% from our listing price.

The interesting thing is as a company our performance has been exactly what we had forecast. We met all our operating targets. We added almost 2.5 GW of capacity in the last financial year which is almost 40% increase on our capacity from the beginning of the year, and by far, the largest capacity any company has added in a single year so far in India.

Your share prices have declined from $11 to $6.17, but does the huge project pipeline present an opportunity for you to delist?

We have announced a share buyback and that share buyback is in motion. We have not talked about delisting but we have certainly talked about buying some of the company’s shares back from the market because we do feel that we are trading at a valuation that does not reflect our company’s intrinsic value and, from multiple standpoints, we are trading at values which are not very good and, therefore, one use of the company’s money is to enhance shareholder returns by actually buying back shares. That’s what we are doing. We are not thinking about delisting but we are certainly looking at buying cheap shares of the company.

Is delisting totally out of your agenda?

Whenever the company’s share price gets to a level which doesn’t make any sense, I would say any company’s management would think about it, but whether it is practically sensible, or not sensible, the process itself is cumbersome. Plus, we only listed last year, it has not even been a year; so you can’t jump up and down that fast. You have to give it some time. Now, in our case, since we listed, the markets have been selling off, so it has never really given our company’s share price a fair chance to trade well. Therefore, I think doing something so soon may not be practically sensible. But if the situation continues, then it is something, I am sure, not just us, but many companies would look at.

When will the first battery storage project with Fluence come up?

The JV has pretty much started and that it is going to be putting up a project for ReNew, where we will be requiring batteries for a project for a peak power project and also for the round-the-clock power project. These are projects that we won in various SECI auctions earlier. So, for projects we would require 215 MW hour of batteries, that this JV will be setting up as the first project.It will probably be the largest in Asia. In India, so far, the biggest is 10 MW hour, this 200 MW hour is at a different level altogether. This will happen in the next 12-15 months, in line with our RTC project and peak power project

What is the progress on the green hydrogen project with L&T and Indian Oil?

We have been talking with the partners and are in the process of putting the whole JV agreement together, and the JV company as well. I don’t want to give a timeline but certainly work is going on. We are bringing in such great expertise into this joint venture that I believe this that it will become a pre-eminent green hydrogen project in India.

The government will issue 4GW offshore wind energy. Do you have plans to foray into offshore wind energy segment?

If the government goes ahead with its plans, then, of course, we will be interested in bidding for the offshore wind.

Your revenue growth was good in the last fiscal but the company is still in losses. What is your outlook for the current financial year?

A. I think we continue to have a very robust growth. We have given the guidance also for next year and we are talking about 20% growth rate, in the current year as well, off the back of a year in which we increased our capacity by 40%. We are still talking of an additional 20% growth on top of that. So, there is fairly robust growth that will happen in this year as well.



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