RIL’s green drive, impending fiscal stimulus, and new demand rising for FMCGs: Three things Teji Mandi investors should know on June 25, 2021
RIL’s green drive, impending fiscal stimulus, and new demand rising for FMCGs: Three things Teji Mandi investors should know on June 25, 2021

Towards the Greener Tomorrow

RIL venturing into clean energy has emerged as the biggest takeaway from the company's AGM on June 24. RIL Chairman Mukesh Ambani announced an investment of Rs 75,000 crore over the next three years.

RIL will utilise these funds to make solar photovoltaic cells, green hydrogen, batteries, and fuel cells. It will set up four giga factories for the purpose. RIL has also announced the target of setting up 100GW of solar power generating capacity.

Currently, renewables contribute ~25% of India's overall energy mix. With RIL venturing into it, that is bound to leap up further. RIL has also reiterated its commitment to become net carbon zero by 2035.

The need for sustainable development and awareness towards climate change is constantly becoming part of corporate pitches. In the words of HDFC Chairman Deepak Parekh, there is a generational shift towards clean energy. And RIL's move proves it right.

Need for Economic Intervention

With the second COVID-19 wave fading, there has been a constant buzz around the need for a stimulus package from the government. Reacting to it, Sanjeev Sanyal, Principal Economic Advisor to the Finance Ministry, suggested that the centre is currently monitoring COVID-19 infection data for six weeks.

He also suggested that the government's response will be based on actual data instead of assumptions. It means the government will not determine its policies based on the projections made around the third wave of the pandemic.

The government has already announced several fiscal and monetary measures to support the stressed sectors. It includes schemes for the MSMEs, aviation, hotel & tourism, and healthcare. Any new announcement, when announced, needs to be in line with older measures to ensure policy continuity.

FMCGs Accelerates Investment

FMCG companies are reporting pick up in demand. It is majorly driven by increased operating hours with restrictions easing off.

Demand pick-up is seen across the board. Apart from staples, discretionary and non-essential products are also gaining good traction. The estimated increase in demand is in the range of 12-15% MoM in the first two weeks of June.

The rising demand has received the Capex cycle in the industry as companies are adding up new capacities. Dabur has recently announced to set up its single biggest manufacturing facility in Madhya Pradesh with a fresh investment of Rs 550 crores. PepsiCo is also investing Rs 800 crore towards capacity expansion in Uttar Pradesh. While Parle is resuming scale expansion, Marico has also hinted at the same possibility.

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