Indian renewable energy sector has become an attractive investment option due to rising environmental concerns, government support and substantial investments. Major industry players are working toward meeting India’s goal of 500 GW installed capacity by 2030 by expanding assets and capacities, according to the Union Budget for 2023-2024 which allocated Rs 10,222 cr for this goal. According to India’s Ministry of New and Renewable Energy, their estimated budget has increased by an astounding 48% – nearly Rs. 9,053 cr in 2014/15 alone !!
If you want to take advantage of this lucrative market, consider investing in top renewable energy stocks in India – we present two stocks from renewable energy sector in this article which has the potential to become multibagger in the long run.
| Stock Description | |
|---|---|
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Small Cap SJVN Limited is primarily engaged in the business of clean energy Current Price: ₹ 35.50 |
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Mid Cap NHPC Limited is primarily engaged in the business of electricity generation through hydroelectric power plants Current Price: ₹ 44.30 |
Why Renewable Energy ?
As fossil fuels become scarcer and more costly to produce, and environmental concerns continue to mount, the future of energy lies with renewable sources. Renewable energy is a relatively young and fast-evolving industry, and to reach maturity and become profitable requires time, research and experimentation, as well as significant investment from both public and private sources. Companies within this sector are currently investing heavily in research and testing new technologies that will make the transition to non-conventional energy faster and more effective. Renewable energy companies may not yet boast strong financials, but progress and efficiency gains are likely to lead to stronger performance over time. Therefore, investors in this sector should have a long-term approach.
According to Invest India, India ranks fourth globally in terms of installed renewable energy capacity in terms of large hydro, wind power and solar power combined. According to Prime Minister Narendra Modi, renewable energy capacity increased 250% from 2014-2021 and now comprises 42.5% of India’s energy mix; year-on-year renewable additions rose 9.83% last year alone! Furthermore, India ranks as second in Asia and third globally when it comes to new solar PV capacity sales with currently installed capacity totaling 63.3GW as of February 2023.
The recently announced Union Budget 2023-2024 included Rs. 19,700 crore towards the National Green Hydrogen Mission, designed to encourage low carbon intensity technologies while decreasing import dependence of fossil fuels. As part of this initiative, the Ministry of Power developed a scheme on Viability Gap Funding that supports development of Battery Energy Storage Systems with capacities up to 4,000 MWh.
Things to Consider Before Investing
Renewable energy stocks have experienced steady and profitable growth over the last five years, providing investors with lucrative returns. However, it should be noted that many of these companies carry significant debt, including names like Adani and NHPC. To make informed investment decisions, investors are advised to consult their financial advisor.
As the renewable energy sector has gained greater recognition recently, some stocks in this space may be overvalued. Therefore, conducting a valuation analysis prior to making a purchase can help identify overvaluations; Readers are advised to use valuation ratios and other tools or consult a financial advisor before making an investment.
Evaluate the debt levels of companies such as Adani, SJVN, and NHPC you are interested in investing in. Debt may not necessarily be considered negative, provided enough cash flow exists within the business to pay back its obligations in full and ensure long-term sustainability.
Since renewable energy is still relatively new, some companies may not yet be profitable, while others may only just recently start showing profits. Therefore, it’s vital that any company you consider investing in either already is profitable or has an action plan in place to become so in the near future. Factors to keep an eye out for include operations, technology and product line: Can these factors improve profitability for them, and do they possess the capabilities required? In addition to that it’s crucial that investors evaluate management’s views, attitudes and other supporting metrics before making investment decisions.