Vedanta is making a contrarian bet on renewable energy. Will it pay off?

Core Viewpoint - Vedanta Group is establishing a private energy business focused on providing round-the-clock green power, betting that this approach will yield higher margins compared to traditional backward integration strategies adopted by other Indian conglomerates [1][4]. Group Structure - The private energy business of Vedanta Group includes Sterlite Electric, Serentica Renewables, and Resonia Limited, which are involved in manufacturing power conductors and cables, operating power transmission lines, and generating renewable energy from solar and wind sources [2]. Strategic Choices - Vedanta Group will not invest in manufacturing solar panels, wind turbines, or battery cells, as it believes these areas do not offer high margins unless a company is highly innovative [3][6]. - The company is focusing on providing round-the-clock green power, which is not yet commoditized due to the complexities involved in combining multi-located wind and solar power with storage solutions [7][8]. Market Dynamics - Current market conditions show an oversupply of battery cells and solar panels, making manufacturing less lucrative [7]. - RTC clean energy contracts are being signed at ₹4.3-5.5 per unit, compared to ₹2.6-3.2 per unit for plain renewable energy, indicating a potential for higher returns in RTC power [9]. Growth Plans - Serentica aims to scale up to 4 gigawatts of RTC solar and wind power within the next 12 months, with plans for 1 gigawatt of battery storage and 3 gigawatts of pumped hydro storage [12]. - The company has signed power purchase agreements for 8 gigawatts, with a long-term goal of reaching 17 gigawatts by FY30 [12]. Technological Advancements - Vedanta is also investing in technological advancements in its cable manufacturing business, developing intelligent cables that can identify failures in distribution lines, which allows for premium pricing [14]. Governance and Concerns - There are concerns raised by American short-seller Viceroy Research regarding the dealings between Serentica and Vedanta's listed companies, suggesting potential conflicts of interest [16]. - Pratik Agarwal defended the governance standards and the fixed-price contracts established with clients, asserting that they are transparent and subject to scrutiny [17].