Executive Summary / Key Takeaways

• Manufacturing as Competitive Fortress: ReNew Energy's fully integrated solar cell and module manufacturing business has evolved from a cost center into a high-margin profit engine, contributing INR 8.6 billion to EBITDA in H1 FY26 with margins exceeding 30-40%, providing supply chain security and external revenue that derisks the traditional IPP model.

• Execution at Industrial Scale: The company commissioned over 2.1 GW of capacity in the past year while maintaining disciplined bidding discipline, achieving 14% market share in auctions it participated in, and proactively securing 7.5+ GW of land-based connectivity that creates a structural advantage over competitors struggling with land acquisition and grid access.

• Financial Inflection Point: Despite weather-related headwinds that reduced EBITDA by INR 1.7 billion in Q2 FY26, ReNew delivered 24% EBITDA growth in H1 FY26, improved IPP margins to 82%, and generated profit after tax in Q1 FY26 that exceeded the entire FY25 total, demonstrating operational leverage that management expects to drive results to the higher end of INR 87-93 billion EBITDA guidance.

• The Asymmetry in Valuation: Trading at 11.0x EV/EBITDA with a manufacturing business that has seen its FY26 EBITDA guidance doubled to INR 10-12 billion, the market appears to undervalue the earnings power of a vertically integrated platform that combines project development, manufacturing, and operations in India's 500 GW renewable energy opportunity.

Setting the Scene: The Integrated Power Play

ReNew Energy Global Plc, founded in 2011 in London and now headquartered in Gurugram, India, has built something rare in the renewable energy sector: a fully integrated business model that controls the entire value chain from project development to manufacturing to operations. This isn't merely a strategic choice—it's a structural response to the unique challenges of building utility-scale renewables in India, where land acquisition bottlenecks, transmission infrastructure delays, and supply chain volatility can erode project returns by 200-300 basis points if left unmanaged.

The company operates across two core segments: an Independent Power Producer (IPP) business with 11.2 GW of operating capacity and an 18.5 GW contracted portfolio, and a manufacturing division with 6.4 GW of module and 2.5 GW of cell capacity. ReNew divested its transmission assets in December 2025, recycling capital to focus on its core competencies. This positioning places ReNew in the middle of India's most critical infrastructure transformation: the race to 500 GW of renewable capacity by 2030, requiring 50-70 GW of annual auctions that consistently see the highest capacity additions among all power sources.

India's renewable energy market operates as a tender-driven system where success depends on three factors: access to land and connectivity, execution capability to commission projects on time, and cost competitiveness to win auctions. ReNew's strategy addresses each systematically. The company has secured connectivity for its entire 25+ GW pipeline, with 7.5+ GW of land-based interconnection approvals that provide flexibility to optimize project locations. This is a non-trivial advantage—land acquisition remains the primary constraint limiting India's wind additions to approximately 5 GW annually, a ceiling management expects will persist for the next 2-3 years.

Technology, Products, and Strategic Differentiation

ReNew's manufacturing business represents more than vertical integration—it embodies a strategic moat that competitors cannot replicate quickly. The operational capacity of 6.4 GW of modules and 2.5 GW of cells achieved full stabilization in FY25, with the cell facility commencing commercial production in Q3 FY25 and immediately delivering industry-leading efficiency of 23.2%. This isn't marginal improvement; it's top-quartile performance that translates directly into cost advantages and customer preference.

The expansion underway—a new 4 GW TOPCon cell facility financed with $100 million in equity from British International Investments and $230-250 million in debt—will bring total cell capacity to 6.5 GW by FY27. This timing aligns perfectly with India's ALMM (Approved List of Models and Manufacturers) policy for cells, which mirrors the earlier module policy and effectively mandates domestic sourcing for government-backed projects. ReNew's head start means it can capture third-party sales while securing its own supply chain, a dual benefit that contributed INR 8.6 billion to H1 FY26 EBITDA.

The company's battery energy storage capabilities further differentiate its offering. ReNew commissioned India's first utility-scale 150 MWh BESS project and now has 1.1 GWh of BESS in its contracted portfolio. The decline in battery prices is making solar-plus-storage projects increasingly attractive, with IRRs 2-3% higher than plain vanilla solar. Management notes that plain vanilla projects accounted for only 25% of FY25 auctions—the lowest ever—while complex projects with storage now dominate. ReNew's ability to deliver integrated solutions positions it to win higher-return projects that pure-play developers cannot execute.

Financial Performance & Segment Dynamics: Manufacturing-Driven Inflection

ReNew's financial results tell a story of two businesses converging into a more profitable whole. The IPP segment delivered 24% EBITDA growth in H1 FY26 despite a net negative impact of INR 1.7 billion from subdued solar PLFs caused by an extended monsoon. New projects commissioned over the past 12 months contributed INR 2.5 billion to EBITDA, while asset sales of 600 MW solar capacity removed approximately INR 900 million in quarterly contributions. The net result: IPP EBITDA margins improved from 80.7% to 82%, driven by cost optimization initiatives that internalized O&M services and reduced provisioning.

The manufacturing segment's performance explains why management has revised its FY26 EBITDA guidance upward twice, from INR 5-7 billion to INR 10-12 billion. In Q1 FY26, manufacturing contributed INR 5.3 billion at margins exceeding 40%, though management cautions these will normalize as industry capacity ramps. Even at normalized levels, the segment is on track to deliver more than double its original guidance, with external sales of 650 MW in the current fiscal year and over 1.5 GW already delivered. This external revenue stream—something pure-play IPPs lack—provides earnings diversification and cash generation that reduces reliance on project commissioning cycles.

The balance sheet reflects disciplined capital management. Headline leverage declined from 8.6x in September 2024 to 7.0x in September 2025, while operating asset leverage remains below the 6x threshold. The company raised $260 million through asset recycling in the six months leading to Q4 FY25, using proceeds to fund the cell expansion and reduce corporate debt. With $2 billion in debt financing secured in FY25 at competitive rates and 30-35% of the debt portfolio benefiting from variable rate reductions as RBI cuts transmit through the system, ReNew's cost of capital is improving at the same time its earnings power accelerates.

Outlook, Management Guidance, and Execution Risk

Management's FY26 guidance reveals confidence tempered by weather realism. The reiterated EBITDA range of INR 87-93 billion assumes PLF levels similar to FY25's lower end, with upside if weather patterns normalize. The company expects to be at the higher end of this range, contingent on favorable conditions for the remainder of the year. This guidance includes INR 1-2 billion from asset sales and INR 10-12 billion from manufacturing—implying the core IPP business must deliver INR 74-81 billion, a 15-20% increase that assumes continued cost optimization and the full-year contribution of 1.6-2.4 GW of new capacity.

The commissioning target is achievable based on current execution. Year-to-date in H1 FY26, ReNew has already commissioned 1.2 GW (750 MW solar, 500 MW wind), with additional capacity erected and awaiting COD approval. Management emphasizes that execution is the "topmost priority and a key differentiator," noting that the 2.1 GW commissioned since October 2024 represents 22% portfolio growth after adjusting for asset sales. The key swing factor will be land acquisition for wind projects, which remains problematic and could delay some capacity into FY27.

On the commercial front, management expects several unsigned PPAs to be signed in FY26, providing clarity beyond the current 18.2 GW committed portfolio. The "lull in the bidding environment"—a cyclical phenomenon as most IPP players have built 4-5 year pipelines—plays to ReNew's advantage. With a disciplined approach that targets returns 2-3% above plain vanilla solar through complex projects, the company can afford to be selective while its land bank and connectivity provide optionality that peers lack.

Risks and Asymmetries: Where the Thesis Can Break

The most material risk to ReNew's thesis isn't competition—it's nature. Weather variability cost the company INR 1.7 billion in Q2 FY26 and forced a guidance reduction in FY25. If wind PLFs remain below historical averages due to extended monsoons or unusual climatic patterns, the INR 87-93 billion EBITDA target becomes vulnerable despite cost optimization efforts. Management's assumption that FY26 PLFs will match FY25's lower end leaves limited cushion for further degradation.

Execution risk on the manufacturing expansion presents a second challenge. While the 4 GW TOPCon facility is on track for pre-commissioning by Q2 FY27, any delays could push full commissioning into FY28, deferring the expected INR 4-6 billion incremental EBITDA contribution. The manufacturing business also faces margin pressure as industry capacity increases—Q1's 40%+ margins are "higher than normal" and will normalize as volumes scale. If module prices soften more than expected or if DCR (Domestic Content Requirement) demand weakens, the manufacturing segment could miss its ambitious INR 10-12 billion guidance.

Competitive dynamics pose a subtler threat. Management acknowledges that some IPP players have become "irrational," bidding at return expectations well below ReNew's hurdle rates. While ReNew's discipline is commendable, sustained aggressive pricing could compress market-wide tariffs, making it harder to win capacity at attractive returns. The company's 14% market share in participated bids reflects this selectivity, but if the bidding environment remains subdued for an extended period, growth could slow meaningfully beyond FY26.

On the upside, two asymmetries could drive results well above guidance. First, if the RBI's rate cuts transmit more quickly to ReNew's 30-35% variable-rate domestic debt, interest savings could add INR 1-2 billion to EBITDA. Second, the manufacturing business could exceed its guidance if third-party demand remains strong and the ALMM policy for cells creates a supply shortage that ReNew's expanded capacity can capture at premium pricing.

Valuation Context: Manufacturing Premium Not Yet Recognized

At $7.55 per share, ReNew trades at an enterprise value of $10.21 billion, representing 11.0x trailing EBITDA and 7.48x revenue. This multiple sits at a discount to pure-play Indian renewable peers like Adani Green (ADANIGREEN) (85.5x earnings, 1513x EBITDA) and NTPC Green (NTPCGREEN) (109.9x earnings), but those comparisons are distorted by different capital structures and growth profiles. More relevant is the EV/EBITDA multiple relative to the company's own trajectory: ReNew's manufacturing business alone is guided to generate INR 10-12 billion ($111-133 million) in FY26 EBITDA, implying a 7.7-9.2x EBITDA multiple for the segment if valued separately.

The manufacturing segment's margins (30-40%) and growth trajectory (guidance doubled in six months) suggest it deserves a premium multiple, yet the consolidated valuation appears to price it as a traditional IPP. This creates potential upside if the market begins to value ReNew as a vertically integrated energy platform rather than a project developer. The company's 6.75% profit margin and 6.70% ROE trail competitors like Adani Green (16.33% margin) and Suzlon (SUZLON) (23.12% margin), but the manufacturing ramp and debt reduction should drive margin expansion through FY27.

Balance sheet strength provides downside protection. With $260 million raised from asset recycling, $100 million in fresh equity for manufacturing, and operating leverage below 6x, ReNew has the financial flexibility to weather execution delays or bidding lulls without diluting shareholders. The variable-rate debt exposure (30-35% of portfolio) offers a natural hedge against India's benign inflation environment, with each 25 bps RBI cut potentially saving INR 500-750 million in annual interest.

Conclusion: The Integrated Advantage

ReNew Energy has reached an inflection point where its manufacturing moat transforms the investment proposition from a traditional IPP story to a vertically integrated energy platform play. The company's ability to commission 2+ GW annually while building a profitable manufacturing business that contributes over 10% of consolidated EBITDA demonstrates execution capability that few peers can match. With 7.5+ GW of land-based connectivity providing optionality, a disciplined bidding approach targeting 2-3% higher returns through complex projects, and a balance sheet that has strengthened despite aggressive expansion, ReNew is positioned to capture disproportionate value as India builds toward its 500 GW target.

The central thesis hinges on two variables: the manufacturing business achieving its INR 10-12 billion EBITDA guidance and weather patterns normalizing to support the core IPP segment. If both hold, the current 11.0x EV/EBITDA multiple appears conservative for a company with 24% EBITDA growth and expanding margins. The key monitorables are Q4 FY26 manufacturing margins for signs of normalization and wind PLF trends in Q1 FY27. Should ReNew demonstrate that its integrated model delivers consistent, weather-resilient earnings, the market will likely re-rate the stock to reflect a premium for vertical integration that pure-play developers cannot replicate.