Reliance Industries may hive off green hydrogen business to InvIT

Jefferies values firm's green hydrogen business at $8 bn

Reliance Industries is likely to hive off its green hydrogen business to an InvIT structure at a valuation of $8 billion, according to global financial services firm Jefferies.
 

The European Union’s and India’s green hydrogen sector, according to Jefferies, could translate into a $74-billion market for RIL’s electrolyser manufacturing business by 2030. "RIL would replace grey hydrogen with green hydrogen at its refineries. It could monetise the captive green hydrogen production by moving it into an InvIT and inducting investors," the firm said in a note to its clients.

An infrastructure investment trust (InvIT) is a collective investment scheme, similar to a mutual fund, which enables direct investment by individuals and institutional investors into infrastructure projects for earning dividends.

When contacted, RIL officials said it's too early to go ahead with such a transaction and the company shall rather wait for the plant to start operations to get a better valuation for the green hydrogen project.

Jeffries has valued RIL’s electrolyser manufacturing business at a 20 per cent discount to the European benchmark.

It said any meaningful capital subsidy from the government in the future would aid the valuation of RIL’s green hydrogen foray.

Last year, Reliance announced plans to invest $76 billion (Rs 6.2 trillion) into clean energy projects. Of this, about Rs 5 trillion was to be used to build 100 gigawatts of renewable power projects and a green hydrogen network in the next 15 years. RIL plans to invest another Rs 60,000 crore to make solar modules, hydrogen electrolysers, fuel cells, and storage batteries in Jamnagar.
 

A green hydrogen InvIT, if it gets off the ground, wouldn’t be the first such move by Reliance to unlock value. In 2019, an RIL group firm hived off its gas pipeline business at a valuation of Rs 13,000 crore and inducted Canadian financial services firm Brookfield as an investor.
 

A year later in October 2020, Reliance monetised its fiber optic network via an InvIT structure. Digital Fibre Infrastructure Trust raised around Rs 14,700 crore by issuing units to its investors, and raised another Rs 25,000 crore through debt, which was used to retire the debt of the fiber optic arm. A similar structure was used by RIL to hive off its portfolio of more than 170,000 telecommunication towers in India to Brookfield for Rs 25,000 crore in September 2020 – making it one of the largest independent tower companies in India.
 

Reliance shares rose 1.4 per cent to Rs 2,478 apiece in Tuesday’s trade.