Corporates reorganize business as ESG finds favour

Kalpana Pathak & Nasrin Sultana

MUMBAI: Companies are aiming to recalibrate their businesses to not only get closer to their net zero emission goals but also to tap into newer pools of capital and shore up valuations to attract investors in these reorganized entities while enhancing shareholder value, as calls for them to become environment friendly gets louder.

In the past month alone, Vedanta Ltd, Reliance Industries Ltd (RIL) and JSW Energy have started moving in a new direction.

Vedanta’s restructuring may include a demerger and subsequent listings of the aluminium, iron and steel, and oil and gas businesses as standalone entities, while RIL is transferring the company’s gasification assets to a wholly-owned unit. JSW Energy is housing its green energy business in a new wholly-owned unit, JSW Neo Energy Ltd (JSWNEL), while keeping the thermal business as part of the main company. The green business is expected to contribute more than 62% of JSW’S earnings before interest, taxes, depreciation and amortization (Ebitda).

“The last decade has been certainly eventful with financiers, investors, and the society starting to demand transparency as well as comparability and reliability of environmental, social and governance (ESG) performance. These demands are nudging organizations to tell the whole story of their value and true impact on society,” said Inderjeet Singh, director, Deloitte India. “The access to green capital through dedicated ESG funds are triggering a recalibration of businesses towards an integrated outlook,” he said.

At the COP-26 summit, India announced its target of reaching net zero emission by 2070 and achieving 500 GW of non-fossil fuel energy capacity by 2030. India’s installed renewable energy capacity crossed 100 GW in August.

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