For years, proponents of ecologically friendly initiatives encountered a frustrating roadblock — plausible deniability. In the absence of an acutely overt correlation between human activities and shifting climate patterns, it was easy for those staunchly committed to the status quo to deny any impulse for concern. The stock market can be volatile, but it also offers a wide range of firms the option to transform from a private company into a public company.
However, with alarming environmental disasters like the ongoing Siberian wildfire — an inferno bigger than all other worldwide blazes combined, according to The Washington Post — the cost for continued blissful ignorance could be severe. Thankfully, the initial public offering (IPO) of ReNew Energy Global can help change this narrative for the better.
When Did Renew Energy IPO?
Renew Energy IPO’d August 24th, 2021.
Like many innovative firms that launched their IPOs over the trailing year, ReNew Energy Global decided to enter the public domain via a reverse merger with a special purpose acquisition company (SPAC), in this case RMG Acquisition Corp. II (NASDAQ: RMGB).
On Dec. 14, 2020, RMG Acquisition announced the closure of its own IPO, which involved the sale of 34.5 million units at a price of $10 per unit. Excluding fees and costs associated with the debut, the SPAC raised $345 million. Bank of America (NYSE: BAC) and Barclays (NYSE: BCS) acted as joint bookrunning managers for the offering, per a corporate statement.
In February, ReNew Energy Global announced that it will merge with RMG, a deal that assigned the business combination an enterprise value of $8 billion. Later, on Aug. 16, the SPAC’s shareholders disclosed their approval of the merger, setting a date of Aug. 24 on the IPO calendar for when ReNew Energy shares can trade under their own brand. The equity unit will list on the Nasdaq Global Select Market under the ticker symbol RNW.
Although ReNew certainly has the clout to undergo a traditional IPO, it’s interesting that it instead chose to merge with a SPAC. One of the reasons why SPACs — also called blank-check firms or shell companies because they lack an underlying business — are popular with private enterprises is that they offer a less-convoluted pathway to the public markets.
Typically, bread-and-butter IPOs face rigorous vetting procedures and must meet stringent regulatory requirements. By merging with a publicly traded shell company, however, a private enterprise can sidestep some of the onerous obligations and the time expenditure required to meet them.
At the same time, SPACs have a shaky performance history over the trailing year. In addition, Harvard Law School provides an excellent breakdown of the myriad risk factors impacting blank-check firms, particularly the dilutive effect that shareholders usually bear.
ReNew Energy Global Financial History
According to its press release, ReNew Power — an entity under the ReNew Energy Global corporate umbrella — is “India’s leading renewable energy independent power producer (IPP), and among the 10th largest renewable IPPs globally by capacity, with a portfolio of more than 100 operational utility-scale wind and solar energy projects spread across 9 Indian states.” As well, the company owns and operates “distributed solar energy projects for more than 150 commercial and industrial customers across India.”
Further, ReNew Power owns the distinction as the first Indian renewable energy firm to cross the milestone markets of 1 gigawatt (GW) and 2 GW of generated capacity. At present, ReNew is the only company in India’s renewable energy sector that features an operational capacity of over 5 GW. This accomplishment puts ReNew in an advantageous position, with the Indian government setting a lofty target of installing green-centric infrastructure that will generate a total capacity of 450 GW by 2030.
Better yet, the sustainability-oriented company has solid numbers to back up investor enthusiasm. Based on ReNew’s filings with the Securities and Exchange Commission and its provided exchange rate, the firm posted top-line sales of $741.3 million in the fiscal year ended March 31, 2021, up 2% from the prior year’s result. Moreover, the 2021 sales haul was up nearly 14% from 2019’s revenue.
While encouraging, prospective buyers should pay attention to the bottom line. In the most recent fiscal year, ReNew suffered a net loss of $109.3 million, which expanded significantly from the loss of $37.8 million posted in FY 2020. Typically, you want to see positive earnings from utility firms, especially from renewable energy companies. Mainly, this is because if green solutions are not viable economically, their investment proposition loses significant luster.
ReNew Energy Global Potential
When the coronavirus pandemic first shuttered commercial activity in India last year, expert analyses estimated that the country’s carbon dioxide emissions dropped by a magnitude of 30% in April relative to the same month in 2019. Additionally, pollution faded markedly, resulting in blue skies to New Delhi, which typically suffers from bad air, per another report from The Washington Post.
But as India gradually recovers from the COVID-19, pollution is again heating up. More critically, the country is the 2nd largest in the world, with a population that is more than 1.3 billion strong. And by 2027 — just a few short years away — India could become the globe’s most populous country. Thus, demand for sustainable energy sources is not just a governmental request; it’s an international priority.
Not surprisingly, then, India has invested massive amounts of money toward building renewable energy infrastructures. According to Livemint.com, the country runs the world’s largest clean energy program, but its ambitions extend further. Leaders at the Central Electricity Authority of India are targeting a national operating capacity of 817 GW, with more than half stemming from renewable sources.
Logically, the Indian government’s aggressive push for green solutions aligns perfectly with ReNew’s own ambitions. The company intends to use the proceeds from its IPO to “fund its expansion plans, a target of 18.5 GW of wind and solar operational capacity by 2025. Currently ReNew has about 6 GW of operational capacity and 4.5 GW under construction,” according to India’s BusinessToday publication.
How to Buy ReNew Energy Global (RNW) Stock
Buying SPACs is identical to buying any standard security. If you already know how to buy stocks, you can participate immediately. If you don’t, follow the steps below.
Step 1: Pick a brokerage.
Because of the evolution of online brokerages and rising competition from mobile trading apps, most offer the same attractive financial incentives, such as commission-free trading. Thus, your choice of best brokers should narrow down to what you are most comfortable with.
Step 2: Decide how many shares you want.
To mitigate risk, choose a balanced share count that affords you solid rewards if you guess right but won’t devastate you if you’re wrong, based on the current stock price. You can add additional shares later.
Step 3: Choose your order type.
Before wagering, familiarize yourself with these market concepts.
- Bid: The highest price a buyer will offer, the bid is always lower than the ask.
- Ask: The lowest price a seller will accept, the ask is always higher than the bid.
- Spread: The bid-ask price difference, the spread also connotes market liquidity and risk. Tighter spreads indicate higher liquidity and lower risk, while wider spreads denote lower liquidity and higher risk.
- Limit order: To buy (or sell) stocks at a specific price, select limit orders, which facilitate transparency but no execution guarantees.
- Market order: Conversely, you can guarantee fulfillment via market orders but only at the prevailing rate, which may change substantially during order processing.
- Stop-loss order: A protective tool for your holdings, a stop-loss order automatically exits your position at either a predetermined price or anything lower.
- Stop-limit order: Stop-limit orders only execute at a specified price, affording full control in your automated exiting protocol. However, such orders carry the same nonfulfillment risk as limit orders.
Step 4: Execute your trade.
To execute a market order, follow these steps:
- Select your action type (buy or sell).
- Enter the shares you want to acquire (or sell).
- Hit the Buy (or Sell) button.
Follow the same sequence for limit orders (but include your execution price).
Green Solutions for a Critical Emerging Market
One pivotal lesson from the otherwise awful COVID-19 pandemic is that due to the proliferation of industrialization, very few countries operate in a vacuum. That’s especially the case for India, one of the most populous regions in the world. To ensure a stable future, ReNew Energy Global is stepping up, working with its governmental partners to promote and expand renewable power infrastructures, hopefully pushing further adoption of geothermal energy and future growth.
About Joshua Enomoto
His distinct writing style of distilling convoluted data into relatable and compelling narratives has earned him recognition among several investment-related publications.