India's Decarbonization Will Drive Renewable Adoption

Key Takeaways

• ReNew benefits from structural advantages, market-leading wins, and India's pro-renewables policies, leading to superior growth, resilience, and sustained margin outperformance.
  
• Expanding into manufacturing, storage, and ESG leadership unlocks multiple new revenue streams, supports strong capital access, and positions ReNew for additional upside not yet priced in.
  
• Heavy reliance on debt, customer concentration, rapid expansion, and exposure to weather and technology risks threaten profitability, revenue stability, and long-term competitiveness.

Catalysts

Generates power through non-conventional and renewable energy sources in India.

• While analyst consensus highlights ReNew's robust 18.5 GW contracted portfolio and expansion pipeline, they may underappreciate the company's dominant 14 percent market share in new project wins, which, if continued, would position ReNew as the leading beneficiary of India's 50 gigawatts-plus annual auction opportunity, driving above-consensus revenue growth for years to come.
  
• Analysts broadly acknowledge margin improvement from cost optimization, but this view potentially underrates the enduring structural advantage provided by ReNew's fully integrated project development, EPC, and O&M platform, enabling sustained outperformance in EBITDA margin expansion and earnings resilience regardless of supply chain volatility.
  
• Unlike the consensus, the market seems to underestimate the long-term impact of India's aggressive decarbonization policies and rapidly growing power demand, which virtually assure strong, structural tailwinds for ReNew's growth as peak demand accelerates and policy support for renewables and storage intensifies, translating into multi-year revenue and cash flow visibility.
  
• ReNew's increasingly diversified business model-including its stabilized, high-efficiency solar manufacturing operations, expanding third-party module sales, and rapid BESS deployment-offers significant incremental earnings streams and cash flow upside that are not yet fully captured in current valuation multiples.
  
• ESG leadership and strong recognition from global ratings agencies position ReNew to tap the rising pool of low-cost green and ESG-focused capital, reducing its effective cost of capital ahead of peers and further expanding net earnings potential as capital markets increasingly reward sustainability leaders.

ReNew Energy Global Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on ReNew Energy Global compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming ReNew Energy Global's revenue will grow by 29.2% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 4.7% today to 8.5% in 3 years time.
• The bullish analysts expect earnings to reach ₹17.7 billion (and earnings per share of ₹48.83) by about July 2028, up from ₹4.6 billion today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 25.6x on those 2028 earnings, down from 52.5x today. This future PE is lower than the current PE for the US Renewable Energy industry at 38.5x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 13.2%, as per the Simply Wall St company report.

ReNew Energy Global Future Earnings Per Share Growth

Risks

• Persistent high leverage and dependence on debt financing to support growth and manufacturing expansion exposes ReNew Energy Global to refinancing risk and rising interest expenses, which could compress net margins and depress future earnings if interest rates rise globally or credit conditions tighten.
  
• Ongoing customer concentration in power purchase agreements with Indian state utilities increases the company's exposure to counterparty risk such as delayed payments or contract renegotiation, potentially impacting reliability of revenue and cash flow stability.
  
• Execution risk remains significant due to rapid project build-out targets and manufacturing scale-up; any trend of project delays, cost overruns, or underperformance of new assets could erode profitability, resulting in weaker return on invested capital and lower net margins.
  
• The wind resource underperforming this year, as mentioned in the text, highlights ongoing vulnerability to weather variability and intermittency; sustained softness in renewable resource or worsening grid integration and storage costs could pressure future revenue and operating costs.
  
• Rapid technological advancement in solar and battery storage could make ReNew's existing or recently constructed assets less competitive or even stranded, potentially reducing long-term returns on capital and limiting future earnings growth.

Valuation

• The assumed bullish price target for ReNew Energy Global is $10.02, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of ReNew Energy Global's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $10.02, and the most bearish reporting a price target of just $7.06.
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be ₹209.3 billion, earnings will come to ₹17.7 billion, and it would be trading on a PE ratio of 25.6x, assuming you use a discount rate of 13.2%.
• Given the current share price of $7.69, the bullish analyst price target of $10.02 is 23.2% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.