ndia is one of the fastest growing economies in the world with fundamentals indicating that this rapid growth will continue for the next 10-20 years as well.However Green Investing in India is fraught with risk since major Green Energy Companies like Suzlon and Moser Baer have proven to be abject failures till now.A Good Way to do make Green Investments into India is through Renewable Energy Focused Utilities.Tata Power which is one of India’s largest utilities is looking to focus on Green Energy as well.The company has 16% of its power supplied from Renewable Energy Sources and is looking to increase it to 25% by 2017.
Coal India Limited (CIL) would be a safe stock to invest in if it priced in the indicated manner that is a $33 Billion Market Capitalization.This stock won’t be a multi bagger but would offer decent price appreciation with almost no downside risks.At trailing P/E of 15x and 3 year average trailing P/E of 20x,the company is not expensive given its competitive strengths.Its dividend yield would be around 1.5% with growth of around ~10-12%.However if you exclude $8.5 Billion in Cash,then the stock seems cheap at around trailing P/E of 11x.It has a P/B of 6x and P/S of around 3x.With its ASP being at a 65% Discount to the International Price,the Company has a huge moat around its business model and I would recommend it as a Buy.
Reliance Industries is known to have one of the smartest management teams in the country.The Reliance Group led by Mukesh Ambani is well connected with proven record in executing huge projects in the Oil and Gas Arena.However outside of their core competence,the Group has suffered.Its Retail Entry has not been much of a success despite big bucks being poured in the last 3-4 years.It entry into marketing of oil based fuels has also meandered without going anywhere.Now the Reliance Group has announced an entry into the Hotels Sector by acquiring a 14% stake in East India Hotels at a significant premium over the market price from the promoter Group.This ~$220 million investment is totally unrelated to Reliance’s activities and make no strategic sense.
.Most of the State Electricity Distributors are in poor financial shape and have been known to frequently default on their financial obligations.With almost 70-75% of the estimated $2.2 Billion in the first phase of the PV projects to be financed by debt,this represents a big hurdle for the success of Solar Energy.The government needs to come out with some sort of arrangement of guarantees for the smooth functioning of the Solar Mission and instill confidence amongst investors and Banks.
Reliance’s Strategy in Shale Gas makes a lot of sense.The Technology is but new and unproven on a long time scale.There have been concerns about the environment impact of Shale Gas Extraction.Also low Gas Prices due to the GFC has made the industry growth slowdown.This is a good time to buy Shale Gas Assets relatively cheaply as Economic Recovery will again see Fossil Fuel Prices heading up.
The Green Indices have sharply underperformed the broad market due to a combination of several factors.These are High Competition in Solar Energy,Declining Demand in Wind Energy,Lack of Global Agreement on Climate Change and Slow Growth of Smart Grid Technologies.With developed governments facing pressure to cut fiscal deficits,green investments are also expected to get hit from government stimulus plans.However India and China are the two bright spots in an otherwise bleak Green Investing Landscape.Both countries have a Prodigious Energy Demand which is still growing at a rapid clip.Despite their reliance on Coal and other Fossil Fuel forms,both countries realize the need to promote Renewable Energy.