Large conglomerates eye solar power sector with long-term game plan

The Mahindra group, Hero Group and Aditya Birla Group are among those who have set up renewable energy firms, hired technical experts and are scouting for acquisitions

Mumbai: The solar energy sector that has seen the entry of start-ups and foreign firms alike has not missed the attention of India’s large conglomerates.

The Mahindra group, Hero Group and Aditya Birla Group are among those who have set up renewable energy firms, hired technical experts and are scouting for acquisitions.

India has crossed 10 gigawatt (GW) in operational solar energy capacity and aims to touch 100GW by 2022, attracting many foreign funds and clean energy firms that see a new opportunity opening up.

With this growth in mind, Aditya Birla Group in October 2015 agreed to sell a 49% stake in its subsidiary Aditya Birla Renewables Ltd to a unit of international private equity firm Abraaj Group to build a renewable energy platform focused on developing solar power plants in India.

The agreement with Abraaj is to build a portfolio of 500-1,000 megawatt (MW) over 3-5 years.

“As far as investment is concerned, we are flexible and have an open view for quality and profitable assets. Aditya Birla as a group and Abraaj are taking a long-term view. We shall ramp up our investments looking at the overall viability and attractiveness of the sector,” said Dev Bhattacharya, group executive president and business head of new ventures such as solar power, defence, and e-commerce, Aditya Birla Group.

Bhattacharya said the solar unit will also be on the lookout for acquisitions, and the firm will also make parallel investments in power grids and reactive baseload capacities, which will be critical for the viability of this sector.

Meanwhile, the Mahindra group plans to build about 5GW of solar projects in the next four years by a combination of third party EPC (engineering, procurement and construction) projects and Mahindra’s own projects.

The $18 billion Mahindra group in 2011 launched its renewable energy firm Mahindra Susten with turnkey execution of a 5MW grid connected solar photovoltaic (PV) project.

But it is only in the past four years that it has rapidly scaled up its portfolio to about 1.6GW of “profitable grid connected solar projects” with some projects under different stages of execution, said Basant Jain, chief executive officer, Mahindra Susten.

“The solar sector in India is witnessing a high rate of growth and offers scalable business opportunities to players in the industry,” Jain said in an email response. “We also aim to successfully leverage Mahindra Group synergies in terms of distribution channels and manufacturing to accelerate the rollout.”

Mahindra Susten is also planning to invest in start-ups in the solar sector for product innovation.

“We would like to provide impetus to these start-ups and help them prosper by providing them technological mentorship and useful industry insights. In some cases, we may also look for co-development of products or services along with strategic investment,” Jain said.

The Hero Group too has been investing in its renewable energy business, Hero Future Energies. Set up in 2012 under chairman and managing director Rahul Munjal, it has a pipeline of about 1100MW of wind projects and about 500MW of solar projects.

Earlier this year, International Finance Corp., the private sector investment arm of World Bank, invested $125 million in Hero Future Energies, which will be used to scale up renewable energy capacities.

Hero Future Energies did not respond to an email request for comments sent on 14 April.

The solar sector has seen intense competition, particularly as the supply of new projects has slowed down in the last 12 months, according to a 24 April note by consultancy Bridge To India.