Mukesh Ambani Goes Green: Old Playbook, New Play

Why is the fossil fuel giant growing a green conscience now?

<div class="paragraphs"><p>An earlier photograph of Mukesh Ambani, chairman of Reliance Industries Ltd. (Photographer: Abhijit Bhatlekar/Bloomberg News.)</p></div>
An earlier photograph of Mukesh Ambani, chairman of Reliance Industries Ltd. (Photographer: Abhijit Bhatlekar/Bloomberg News.)

Mukesh Ambani first spoke about a new energy foray in 2020. We have a 15-year vision to build Reliance as one of the world’s leading new energy and new materials company, he said at the annual general meeting in July. He also hinted that it would be a non-traditional play. A “platform company” he called it.

Till then, the chairman and managing director of Reliance Industries Ltd. had made nary a mention of climate change, renewable energy or sustainability in his annual speeches. If he did, it was only to point at how the company was moving up the petrochemical value chain as the world shifted from fossil fuels to renewable energy.

The global shift to renewables has been common knowledge for atleast two decades now. Yet, RIL, the refining and petrochemical giant founded by his father, did not pander to the wind power fad in the 2000s or the solar power fad this last decade.

In those two decades, Dhirubhai’s elder son picked telecom and retail.

So, why is the fossil fuel giant growing a green conscience now? A Rs 75,000 crore rupee one at minimum.

RIL AGM: Reliance Industries Plans To Invest Rs 75,000 Crore In New Energy Business

Well, firstly let me caveat this piece with “better late than never”. No matter at what point the Ambanis come at a business, when they do they bring capital, technology and scale.

There's also Reliance's own mega carbon offset requirements at play.

That said, this new announcement confirms a long held theory (of mine).

That Ambani is not a big believer in first-mover advantage. Instead, he’d rather wait to see how a new industry is evolving, the technology trends, capital required, policy maturity, big players in the fray, business models and then design a strategy backed by balance sheet and project execution muscle.

He did that in telecom. Even his first entry, in 2002, at the time of the un-divided Reliance, was a few years after others had jumped in and the milestone 1999 telecom policy made available a techno-regulatory gap to exploit. The second telecom foray came in 2012, in a hypercompetitive industry. Now only three survive and Jio is the biggest.

He did that in retail – launching five years after Kishore Biyani opened his first Big Bazaar, India’s first hypermarket chain. Now Reliance Retail has 11,300 stores and all of Biyani’s Big Bazaars.

He’s now doing it with green energy. The early technology and pricing flux seems to have settled somewhat. Local government policy has matured (read PLI). The geopolitics (Biden, Paris Agreement) and economics are also lining up. Scale is viable. Maybe, the point of acceleration is in sight.

So Ambani’s applying standard RIL first principles. In his own words, “by building a model that catches the irreversible upward curve in the demand for green, clean and renewable energy in India and globally; and the downward curve in the cost of their production.”

Interestingly, RIL has picked a supply chain and technology approach in this new venture – by betting not on large generation projects but on critical components, project management and construction. And finance.

That’s a new one.

The Renewable Energy Project Finance Division, Ambani said at the AGM on 25th, will

  • provide finance solutions to stakeholders in the green energy ecosystem

  • create a platform to source long-term global capital for these investments

  • seek support from banks and global green funds for this purpose.

  • also facilitate a platform to provide financing for small businesses and entrepreneurs who invest alongside RIL

This will be interesting to watch. Along with the fact that Ambani is back in project investment mode, after a two year debt-cleanse. In 2019, he threatened to sell even real estate and financial investments to achieve net zero debt. Now he’s putting Rs 75,000 crore on net zero carbon.

Menaka Doshi is Managing Editor at BloombergQuint