Will the Next Set of Multibaggers Come from Renewable Energy?

Mon, 10 Apr Pre-Open

   Previous Close   

   09:30 am   

   11:30 am   

   01:30 pm   

   Closing   

Renewable energy has progressed from being an alternative to a conventional fuel source, to becoming a mainstream energy source. During 2017, India added 12.5 gigawatt(GW) of renewable energy capacity compared to 10.2GW capacity from conventional fuel sources.

India's energy resources are strained due to its sustained economic growth. India imports 80% of its oil needs. Lack of coal due to production and logistic constraints have increased dependence on imported coal. Thus, there's a significant risk of lesser thermal capacity being installed in the coming years severely stretching India's energy supply.

Demand on the other hand is steadily rising. Economic growth, growing per capita consumption, urbanization, are all likely to lead to a substantial increase in demand for electricity. Official peak deficits in the electricity sector are already around 12.7% which is expected to rise further in the future.

Currently, more than 50% of the population has no access to electricity. Others have to make do with poor and erratic supply of electricity.

Due to this demand-supply imbalance, huge quantities of diesel and furnace oil are being used for residential and commercial purposes. Kerosene is used in large quantities due to lack of lighting in rural areas. This in turn has resulted in higher dependence on oil imports as well as costs in the form of subsidies.

So the government is increasing its focus on renewable energy.

Just Released: Multibagger Stocks Guide
(2017 Edition)

In this report, we reveal four proven strategies to picking multibagger stocks.

Well over a million copies of this report have already been claimed over the years.

Go ahead, grab your copy today. It's Free.

NO-SPAM PLEDGE - We will NEVER rent, sell, or give away your e-mail address to anyone for any reason. You can unsubscribe from The 5 Minute WrapUp with a few clicks. Please read our Privacy Policy & Terms Of Use.

In April 2002, renewable energy based installed capacity was 3.5 GW or 2% of total installed capacity in the country. It has subsequently increased to 42.8 GW (14% of total capacity) out of the country's total installed capacity of 300 GW.

Resultantly, companies in solar and wind generation space are expected to benefit. The recent upgrade in Suzlon Energy's credit rating signals that troubles for renewable energy stocks may be abating. Foreign investments in the sector have also been on a rise over the past few years.

The government has also taken steps to give a push for generation of renewable energy. It is trying to address key concerns related to squatters blocking high potential wind generation sites, delays in signing of power purchase agreements and timely payments to energy companies. It has charted a programme to achieve 175 GW of capacity addition by 2022.

My colleague Rahul Shah had discussed, in his 5Min Wrap Up Premium, the dynamics of the power industry are certainly set to change.

Therefore, companies with low cost of production and high plant load factors are likely to capitalize on the demand potential in the renewable energy sector. These companies can turn out to be a proxy play in the next phase of India's economic growth.