Industries

ANCHOR REPORT
Global Markets Research
27 February 2023
Emerging trends: Green Hydrogen in India
Tool for decarbonisation but not the panacea India Capital Goods
Priyankar Biswas, CFA - NFASL
priyankar.biswas@nomura.com
India is focusing on 5mntpa of green hydrogen production by CY30 to replace its
+91 22 403 74992
existing fossil fuel hydrogen use and develop new use cases
• Green hydrogen (derived from electrolysis of water by renewable power) to Neelotpal Sahu, CFA - NFASL
neelotpal.sahu1@nomura.com
become competitive with fossil fuel-derived hydrogen by CY28-30 (we
+91 22 403 74023
estimate USD1.6/kg cost by CY30F vs USD5+/kg currently). In our view, a higher
scale will lower opex and capex costs. India Oil & Gas/Chemicals
Hemang Khanna - NFASL
• We expect government green incentives/mandates in FY24F: This is part of the hemang.khanna@nomura.com
national green hydrogen mission announced in Aug-21. Further, policy clarity can +91 (22) 40374022
support at least 3.0mntpa of demand by CY30F (vs negligible level currently)
Prefer Reliance (RIL) and Larsen & Toubro (L&T), the major plays in the segment
• L&T has demonstrated its EPC competency, currently constructing the largest
green ammonia plant in Saudi Arabia, in our view. It has also put in place
technology tie-ups and joint ventures to target the refining segment.
• RIL targets at least a 20% Indian market share with a fully integrated plan
consisting of establishing giga factories and securing technology tie-ups.
Production Complete: 2023-02-27 17:27 UTC
See Appendix A-1 for analyst certification, important disclosures and the status of non-US analysts.
Green Hydrogen 27 February 2023
EQUITY: ENGINEERING & CONSTRUCTION
Research Analysts
Hydrogen a key step towards decarbonisation
India Capital Goods
Viability contingent on demand pick-up; policies and initial Priyankar Biswas, CFA - NFASL
priyankar.biswas@nomura.com
demand from refining to be initial catalysts +91 22 403 74992
Green hydrogen viewed by the government as a key pathway for decarbonisation; Neelotpal Sahu, CFA - NFASL
2030 policy goals are set, and we expect major policy decisions in FY24 neelotpal.sahu1@nomura.com
+91 22 403 74023
Green hydrogen is derived from electrolysis of water using renewable energy resulting in
virtually no emissions either during generation or during end use. The Indian government India Oil & Gas/Chemicals
views green hydrogen as a key decarbonisation tool and towards this end has announced Hemang Khanna - NFASL
a production target of 5mnt by 2030, entailing setting up at least 125GW of renewable hemang.khanna@nomura.com
+91 (22) 40374022
energy and significant electrolyser manufacturing capacity. A National Hydrogen Mission
(NHM) has been announced and based on the policy milestones published in Jan-2023,
we expect FY24 to be a year of major policy decisions.
Further, certain states like Uttar Pradesh (UP, Rajasthan) have formulated their own state
level policies highlighting policy push both at central and state levels.
Scaling up of electrolyser capacity to drive commercial viability; replacement of
“grey” hydrogen in refining to boost demand for green hydrogen initially
In India, demand for hydrogen originates currently from crude oil refining and fertilizers
(ammonia synthesis), based on data as of CY21 according to Niti Aayog. We believe the
initial thrust for hydrogen demand would come from refining, as the overall impact of the
usage of green hydrogen on costs is below 2% of opex at present. We view the adoption
in other areas like fertilizer to be challenging as it may lead to increased subsidy costs for
the government.
However, with the scaling up of electrolysers and consequent reduction in costs, we
believe applications in direct reduced iron-(DRI) based steel making, blending hydrogen
with natural gas, and eventually hydrogen transportation may become viable, as
infrastructure for transportation and storage scale-up support long-term demand growth.
We estimate green hydrogen demand at 3.1mnt, potentially supporting investments
of USD109bn (INR8.95tn), lower than the government’s target of 5.0mnt
We estimate that with economies of scale and incentives cost of green hydrogen can
decline to USD1.6/kg by FY30F (vs USD5+/kg currently). This can support 3.1mnt of
annual demand by FY30F (vs the government’s target of 5.0mnt) and 78GW of renewable
energy additions Given the government’s focus on localisation of both solar and
electrolyser manufacturing, we estimate USD109bn potential investment by FY30F (
Fig. 12 )
We are already witnessing significant announcements for setting up Giga factories
for electrolysers and solar manufacturing by leading industrial houses Reliance
Industries (RIL IN, Buy) and Larsen & Toubro (L&T) (LT IN, Buy). It appears that the
thrust is on alkaline electrolysis technology (least expensive) and PEM (proton exchange
membrane). Alkaline technology has the added advantage of available skilled manpower
from the existing chlor alkali industry in India.
Nomura | Green Hydrogen 27 February 2023
Executive summary
Green hydrogen is a key tool for decarbonisation; some policy
measures introduced and further measures planned for FY24
Hydrogen is a clean burning fuel with no carbon emissions at the end-use stage;
however, generating hydrogen from fossil fuels has brought about a significant amount of
carbon footprint. Thus, to eliminate emissions at the generation stage, the target is to
produce hydrogen from electrolysis of water using green energy (renewable energy),
which has no carbon emissions, and the product is known as green hydrogen.
Green hydrogen is not only a decarbonisation solution for existing hydrogen use
(refineries, fertilizers and to a limited extent in DRI-based steel production) but also for
new applications where carbon-based solutions are used presently. These areas range
from aviation to transport (i.e., fuel cell electric vehicles [FCEVs]), using hydrogen as a
reducing agent in primary steel instead of coking coal, among others. The solutions may
have wide implications in hard-to-abate industrial sectors and are key for the 45%
reduction in emission intensity of GDP targeted by India for 2030 and eventual Net
Zero carbon emissions by 2070 .
Towards this end, the government released the National Hydrogen Mission (NHM) in Jan-
2023 and based on the roadmap, we expect key policy initiatives (Fig. 1 ) in addition to
the existing ones put in place in Feb -2022 (Fig. 2 )
Fig. 1: National Hydrogen Mission implementation plan

SIGHT = Strategic interventions for green hydrogen transition
Green Regulations &
Facilitate fertilizers SIGHT Pilots & Hubs standards R&D
Procedure for
regulatory
Consultation and Roadmap for approval of pilot Formulation of
FY23 Market Review key sectors projects R&D Roadmap
Notification Notification of
of targets as bids Adoption of
may be Notification of relevant
Calls for
decided by Award of Incentive international Calls for proposal
proposal for
FY24 EG capacity Schemes standards for Phase I
Phase I
Preparatory implementation
implementation
steps for
implementati
FY25 on Construction
Call for Continuous

FY26 proposals Review and Call for proposals
Green Monitoring
Implementati Implementation
fertilizers
on of incentives
FY27 production Phase II Phase II
FY28 Implementation Implementation
FY29
FY30
Source: MNRE (Ministry of New and Renewable Energy), Nomura research
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Fig. 2: Initial policies and incentives announced in Feb 2022
Incentives announced in Feb-22

ISTS charges waived for 25 years for projects
Renewable energy commissioned before Jun-2025
Banking of power upto 30 days
Land in RE parks can be allotted for Green hydrogen
and Green ammonia
Grid connectivity to ISTS on priority
Power supply Discoms allowed to procure RE for Green H2 plants and
obligated to charge procurement cost, wheeling charges
and small profit margin determined by state
commissions; no ASS/CSS applied
Electricity supplied will count towards Discom RPO

Green hydrogen Proposal to set up manufacturing zones for green
production hydrogen and green ammonia
Storage and Producers can set up storage facilities near ports for
distribution exports
MNRE to establish single portal for all statutory
Governance clearances and permissions
Clearances to be provided in time-bound manner
preferably within 30 days of application
MNRE to aggregate demand from different sectors
for consolidated bids to achieve competitive prices
Source: MNRE, Nomura research
Currently, green hydrogen is a costly solution for

decarbonisation, but with scale and incentives we expect
green hydrogen to be cost competitive by FY28F
The current cost of generating green hydrogen is around USD4-5.5/kg which is
significantly higher than hydrogen generated from fossil fuel sources (USD2.0/kg break-
even cost). However, with incentives (lower transmission and power costs) and
economies of scale, we estimate green hydrogen cost will drop to USD1.6/kg by FY30F
(against the government's target of USD1/kg) and green hydrogen production will reach
3.1mnt in FY30F (against the government target's of 5.0mntpa).
However, production of green hydrogen below USD2.0/kg only addresses the use case
challenges, in our view. Transportation and storage-linked challenges remain and as a
result applications may initially be limited to captive consumption due to logistics
challenges. Transportation by converting to energy dense carriers is inherently energy
inefficient, in our view.
Fig. 3: Green hydrogen cost forecast Fig. 4: We estimate FY30F green H₂ demand visibility at 3mnt
2030 cost estimated at USD1.0-1.6/kg Significant demand driven by refining, fertilizers and potential blending
mandates
Source: Nomura estimates

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Fig. 5: Stack costs reduction driven by higher volume Fig. 6: BOP: Costs decline significantly with rise in scale
manufacturing and scale
Source: Manufacturing competitiveness analysis for PEM vs alkaline by NREL, Nomura

Source: IRENA (International Renewable Energy Agency), NREL (National Renewable research
Energy Lab.), Nomura research
Fig. 7: Energy losses are significant for carrier-based storage Fig. 8: Cost of transport of hydrogen by mode over various
This leads to high energy costs distances
EUR/kg (1EUR-1.08USD)
Source: IRENA, Nomura research

Source: European Hydrogen backbone 20221 by European Commission, Nomura
research
Technology obsolescence risk; the jury still out on whether alkaline, PEM or other
production technologies would dominate in the long term
Over CY19-22, alkaline electrolyser technology dominated (Fig. 9 ), and even in the
planned pipeline under execution (61GW) globally, alkaline still dominates (Fig. 10 ). The
domination is due to: 1) lower electrolyser cost at USD300/kw (Chinese electrolysers) vs
USD1,000/kW for PEM (polymer electrolyte membrane); and 2) more mature technology
as it is already in use by the global chlor alkali industry.
However, new technologies like PEM, AEM (anion exchange membrane) and SOEC
(solid oxide electrolyser cell) are progressing as well. PEM has the highest technology
maturity among these, and is better suited for intermittent power supply, according to the
International Energy Agency (IEA). However, the use of materials like platinum, iridium
and titanium makes electrolysers expensive.
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Fig. 9: Planned electrolyser capacity deployment Fig. 10: On current project pipeline of 61GW; alkaline
in MW electrolysers to dominate by 2030
Note: Unknown implies IEA has not been able to determine the final technology to be
deployed for those project announcements
Source: IEA, Nomura research
Fig. 11: Production cost using green hydrogen for various key green products vs grey variants
Green hydrogen is viable at USD1.2/kg for most applications
H2 CO2 Feedstock Total prod Fossil
feedstock feedstock cost cost fuel H2 price
(tH2/T) (tCO2/T) (USD/t) (USD/t) (USD/t) Premium USD1/kg USD2/kg USD5/kg
Green Ammonia (NH3) 0.18 0 212 282 280 1% -16% 68% 320%
Green Methanol (CH3OH) 0.13 1.38 288 384 390 -2% -10% 33% 161%
Synthetic methane (CH4) 0.25 2.75 575 767 300 156% 133% 244% 578%
Synthetic oil products (CH2) 0.14 3.14 485 647 650 0% -6% 23% 111%
Key opportunities for companies

We estimate INR8.95tn (USD109bn) of investment needs over FY24-30F; EPC
opportunities can be INR6.0-6.5tn
• The opportunities are in the form of planned direct investments led by corporates like
RIL Adani New Energy Ltd (ANIL; unlisted), a subsidiary of Adani Enterprises (ADE
IN, Not rated), also has ambitious plans but its ability to raise financing is a key risks.
The planned investments are across the entire ecosystem ranging from wafer
manufacturing, module and electrolyser manufacturing.
• Companies like L&T benefit from both EPC opportunities in India and near shore
geographies like the Middle East. L&T is also planning to establish 1GW of
electrolyser capacity.
Demand for power electronics benefits products companies like Siemens India
○
(SIEM IN, Neutral), ABB (ABB IN, Neutral) and Honeywell (HON US; Not rated).
The renewable capacity addition of 90-100GW we estimate by FY30 for green
hydrogen also leads to power transmission and pipeline linked capex.
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Fig. 12: Green hydrogen related investment opportunities and key beneficiaries
INR bn
FY30 Nomura est Govt target Beneficiaries
Refining sector impacted
Green hydrogen demand (mntpa) 3.06 5.00 initially
Renewable energy needs

Renew, Greenko, ANIL,
Green energy capacity (GW) 78 125 Avaada
Cost per MW (INR mn) 45 45
Cost of renewable capacity (INR bn) (A) 3,496 5,625
Renewable mfg capacity (GW) 11 18 Reliance, ANIL
Module line cost (INR bn/GW) 3 3
Cell line cost (INR bn/GW) 6 6
Backward integration polysilicon and wafer (INR bn/GW) 25 25
Fully integrated manufacturing capex (INR bn) (B) 2,602 4,188
Module (INR bn) 194 313 Renew
Cell line (INR bn) 466 750 Avaada
Wafer and polysilicon (INR bn) 1,942 3,125 Avaada
Transmission and pipeline cost (INR bn) ( C) 797 1,283
Transmission related capex (INR bn) 777 1,250 L&T, KEC, KPP
INRmn/MW 10 10
Pipleline (200kms per 1mnt) kms 612 1,000
Cost per km (USD0.4mn/km) INR mn 33 33
Pipeline investments (INR bn) 20 32.80 L&T, KEC, KPP
Electrolyser needs
Reliance, L&T, ANIL,
Electrolyser capacity needed (GW) 62 100 Ohmium, Greenko
Cost of electrolyser (USD/kW) -- 10MW modules 295 295
USD/INR 82 82
Electrolyser capex (INR bn) (D) 1,506 2,423
of which power electronics opportunities 414 666 SIEM, ABB, HWA
Potential electrolyser mfg capacity 12 20
Capex per GW of mfg capacity (INR bn) 30 30
Investments in electrolyser manufacturing capacity for 100% Reliance, L&T, ANIL,
local production (INR bn) ( E) 373 600 Ohmium, Greenko
Electronics capex per mnt of hydrogen (INR bn/mnt) 33 33
Electronics mfg capex (INR bn) (F) 100.27 163.73 Reliance
Desalination plants
Water needs (additional) 755 1233
100MLD plant cost (INR bn) 10 10
Desalination or waste water capex (INR bn) ( G) 76 123 VATW
Opportunties in terms of Green ammonia (mnt) 17 28
EPC cost per mnt (USD bn) 4.6 4.6
Overall EPC opportunity (INR bn) 6,445 10,523 L&T
Investments needed (INR bn) (A+B+C+D+E+F+G+H) 8,949 14,405
In USD bn 109 176
per mnt investment (USD bn) 36 35
Investment risks
• Financing and technology obsolescence risk: The green hydrogen ecosystem is
still in its infancy and as a result, the willingness of generally risk-averse financial
institutions and banks may be lower unless lending to hydrogen ecosystem comes
under priority lending. There is also the risk of technology obsolescence for
companies investing in the green hydrogen ecosystem as it is overly early to forecast
at this stage which electrolyser technology may dominate. Technology innovations
are still required for hydrogen storage and transport.
• Initial reliance on government mandates and incentives can be a risk: In the
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event the government incentives and mandates are inadequate, green hydrogen cost
reduction may not materialize due to lack of scaling up. Thus, in initial years there is a
material reliance on policy push, incentives and potentially subsidies.
• Significant financing risk to set up associated renewable, transmission and
logistics infrastructure: The cost of electrolyser is just one component of capex
needs. A bigger capex need is for setting up renewable energy capacity and its
transmission and transport infrastructure. The Government of India estimates a
INR8.0tn capex will support 5mnt of green hydrogen production capacity.
• Adoption in certain industries like fertilizers and steel can be challenging in
absence of mandates: Fertilizers in India are sold at almost a 90% subsidy to
farmers and companies making fertilizers are not highly profitable. The green fertilizer
mandate increases costs significantly in an already low margin industry. Similarly, for
steel, replacing coking coal with hydrogen as a reducing agent will lead to higher
energy intensity, as hydrogen reaction is endothermic (needs heat) and, thus it
increases the cost of production for green or low emission steel.
The need for green hydrogen; a tool towards decarbonisation

and path towards energy independence
India has committed to reducing emission intensity by 45% of GDP by 2030, aiming for
energy independence by 2047 and finally Net Zero emissions by 2070. At the same time,
as the Indian economy would continue to witness expansion, it would need energy. Thus,
the need for rapid decarbonisation is paramount, in our view.
At the COP26 conference at Glasgow, India has committed to combating climate change.
Towards this end, the following near-term targets have been put in place:
• Target of 500GW of installed renewable capacity by 2030 against 160GW at the end
of FY22.
• 50% of energy requirements to be met via renewables
• Reduction in cumulative emissions by 1bn tons by 2030
• 45% reduction in emission intensity of GDP
Towards this goal, the Indian government launched the National Hydrogen Mission in
August 2021 and announced the first set of policies in February-2022. This was followed
by further announcements in January 2023. The advantage of hydrogen is at the end user
level, as: 1) hydrogen is a clean burning fuel with practically no emissions and; 2)
hydrogen has a relatively high energy density by weight (3x that of petrol and diesel).
Fig. 13: Physical properties of select energy carriers

Hydorgen energy density by weight is high but low on a volume basis
Specific Energy
Density energy density
(kg Cum) (MJ/kg) (MJ/lt)
Petrol/gasoline 750 42 31
Diesel 900 43 37
Liquid petroleum gas (LPG) 550 46 23
Methane (STP) 1.0 50 0.0099
Liquid methane - LNG (111 K) 450 50 21
Compressed methane (250 bar) 215 50 9
Hydrogen (liquid, 20 K or (-) 253C) 71 120 9
Hydrogen (STP 0 degree 1 bar) 0.09 120 0.0099
Hydrogen (compressed, 350 bar) 23 120 3
Source: UNECE, Bloomberg Finance L.P, Nomura research
Hydrogen is clean burning but to be “green” its production

must be carbon-free which at present is not the case
Current hydrogen production is not green; mostly hydrogen is generated at the site
of consumption and used in refining, ammonia and methanol among others
The combustion of hydrogen is a clean process with water produced as a by-product; thus
end user emission levels are negligible. However, the production of hydrogen at present
is largely fossil fuel driven globally and thus there are emissions. Indeed, according to the
IEA, almost 8% of current global emissions (i.e. 830mnt for CY21) can be attributed
8
to hydrogen generation via fossil fuel .

Currently, hydrogen is consumed in refining, ammonia and methanol globally. These
sectors provide initial scope for decarbonisation by replacing fossil fuel-based hydrogen
by green hydrogen.
Fig. 14: Global Hydrogen generation mix (%) (2021) Fig. 15: Global demand (existing) is largely from refining,
Fossil fuel based sources account for 96%+ of hydrogen generation ammonia and methanol production
mnt
Source: UNECE, Nomura research

Even in India as of CY20, hydrogen demand was largely concentrated in refining and
ammonia production. The hydrogen generation process via SMR (steam methane
reforming) alone contributed 12% of industrial emissions and 3% of overall emissions in
CY20.
At present, a fraction of hydrogen in India is used for steel making, but steel accounts for
a significant share of industrial pollution. Thus, hydrogen maybe an eventual
decarbonisation option.
Fig. 16: Hydrogen in India is largely used in refining and ammonia; significant scope for
use in steel
Data as of CY20; at present hydrogen use in steel is limited
Sector CO2
emissions Share Industrial share
mnt (mnt) emissions emissions
Refining (SMR process) 3.0 27 1% 5%
Ammonia (SMR process) 3.1 40 2% 7%
Steel DRI 0.3 269 11% 45%
Others 0.1 0
Source: Niti Aayog, Nomura research
Hydrogen has several “colours”; green hydrogen is produced from renewable

sources namely electrolysis of water or from biomass
• Black hydrogen: Derived from oil or coal and is emission intensive.
• Grey hydrogen: derived from steam methane reforming (SMR) of natural gas. The
emission intensity is lower than that for black hydrogen but still, 15-20kgs of carbon
dioxide emissions (CO2) are emitted per kilogram of grey hydrogen synthesis.
• Blue hydrogen: generated by SMR but the carbon produced is captured by CCS
(carbon capture and storage) technologies resulting in reduced emissions. Initially
technology has shown promise but large scale projects are capturing under 40% of
emissions and are often facing time/cost overruns.
• Pink hydrogen: generated by water electrolysis but with electricity derived from
nuclear power plants. Emission intensity is negligible.
• Green hydrogen: generated by electrolysis of water but with electricity sourced from
renewable energy (solar, wind, hydro etc). Some technologies are mature or are near
commercial viability.
• Turquoise hydrogen: generated from pyrolysis of methane. The process has
minimal emissions but is fairly energy intensive and is not commercially mature yet.
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Initially hydrogen demand will be from existing segments like

refining and fertilizers (ammonia), but new applications will also
increase
Green hydrogen is a key effort towards global decarbonisation; India accounts for
7% of global carbon emissions
Global emissions have been rising and with global temperature also on the rise, climate
change has become a global challenge. Temperature rise has to be limited to 1.5-2.5
degrees to prevent irreversible climate change, according to NASA .
Currently, China and the US are the two biggest global emitters (Fig. 17 ) with power
generation, transport and industry accounting for the bulk of carbon emissions (Fig. 18 ).
In India, as well, emissions are heavily biased towards power generation followed by
industry and transportation (Fig. 19 ). We note that while emissions in India are just 7% of
global emissions against a global population share of 17.8% (World Bank 2020), the
share of emissions is rising over the year alongside its economic growth (Fig. 20 )
Global economic leaders are aware of the climate change issue and similarly there is
political awareness in India. This has resulted in major economies including India
committing to climate goals (namely carbon neutrality in the long term and emission
reduction targets in the near term) (Fig. 21 ).
Fig. 17: Emissions by key region (2018) Fig. 18: Share in global carbon emissions by sector (2018)
India accounted for 7% of global emissions
Source: IEA, Nomura research Source: IEA, Nomura research
Fig. 19: Carbon emissions mix for India by sectors (FY18) Fig. 20: Indian share of global emissions rising with economic
growth (FY18)
Bnt, % share for India
Source: India Country status report on Hydrogen

Source: World Bank. Nomura research
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Fig. 21: CO2 emission targets by country

Target is reduction vs Base year
US EU China Japan Korea Canada Russia India Brazil Mexico
Base year 2005 1990 2005 2013 - 2005 1990 2005 2005 -
Target year 2030 2030 2030 2030 2030 2030 2030 2030 2030 2030
Carbon neutral target year 2050 2050 2060 2050 2050 2050 - 2070 2060 2050
Target (reduction from target year) 26~28% -40% -60~65% -26% -37% -30% -25~30% -33~35% -43% -25~40%
Source: Nomura research
Currently, hydrogen is used in refining and fertilizer; scope to increase applications

for power, chemical feedstock, transport and steel making which are considered
hard-to-abate sectors from an emission perspective
Hydrogen application is currently focused on refining and fertilizers (ammonia based). The
existing usage provides scope for initial deployment of green hydrogen. Eventually, green
hydrogen can find applications in iron and steel making, and chemical feedstock, among
others
• Refining: Hydrogen is used in refining process to remove sulphur from raw materials
for gasoline, diesel and gasoil production. Sulphur is removed as hydrogen sulphide
(H2S) gas which can impact SOx emissions. Replacing grey hydrogen currently used
in refineries with green hydrogen can cut Indian industrial emissions by 5% (Fig. 16 ).
• Fertilizers: Production of green ammonia by the Haber Bosch process using nitrogen
can be used in the fertilizer industry. Currently, ammonia used is grey (derived via the
SMR process) and is significantly imported. Green ammonia can not only reduce
emissions but also reduce import bills, thereby saving on forex.
• Blending hydrogen with natural gas: The government is considering mixing green
hydrogen with PNG (piped natural gas) upto 15-20%. The hydrogen blending can
reduce cooking-related emissions and also aid reduce natural gas imports. However,
issues with existing pipeline infrastructure embrittlement is a challenge for blending
adoption. Blending can be used to generated power through natural gas turbines (gas
based power plants).
• Usage in fuel cells for road transport/aviation or even trains: While FCEV (fuel
cell electric vehicles) have not been launched in India, these may soon be a pathway
for transport decarbonisation. According to “Hydrogen Insights 2021”, green hydrogen
can be most disruptive for long distance transportation especially heavy-duty trucking
and shipping even without any carbon costs imposed. In particular, at green hydrogen
costs of under USD4.5/kg, heavy haul transport is already viable. China, Japan and
Korea are leading in the rollout of FCEVs.
• Fuel cells also find applications for stationery power supply like heating for
buildings, data centres and even as backup power source for renewable
energy: Renewable energy faces the issue of intermittency of power generation
during the day and also seasonally. Fuel cells can serve as substitutes for battery
back-up. In “green data centres” fuel cells (solid oxide fuel cells) are being explored
as a power back-up system instead of conventional high horse power (HHP) diesel
gensets or battery back-up (batteries are dependent on lithium supplies).
• Steel making: Currently CR (cold rolling) annealing operations and DRI-based
processes have hydrogen as inputs. Initially the existing hydrogen use can be
replaced by green hydrogen but in the event technology is developed to replace coke
(derived from coking coal) as reducing reagent in the basic oxygen furnace (BOF)
process, the use of green hydrogen in steel making can rise strongly.
Green hydrogen also supports decarbonisation via utilisation of carbon dioxide;

thus removing carbon emissions
• Methanol production: Green hydrogen can be used for production of methanol
(carbon is used up in the synthesis process) which is then used for blending with
gasoline or diesel to reduce emissions (Fig. 22 ).
• Synthetic gasoline and diesel: Synthetic fuels are made solely with the help of
renewable energy. In the first stage, hydrogen is produced from water. Carbon is
added to this to produce a liquid fuel. This carbon can be recycled from industrial
processes or even captured from the air using filters. Combining CO2 and H2, this is
then turned into a synthetic fuel, which can be gasoline, diesel, gas or even kerosene.
(LINK )
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• Synthetic natural gas (SNG) or methane: Synthetic gas is a creation of methane

from biomass or by using green hydrogen and captured carbon.
• Green urea: Production of urea using green ammonia. The challenge is securing a
carbon source separately. This can be achieved by locating green urea plants closer
to thermal- or gas-based power plants so that carbon emissions generated can be
used in green urea production.
Fig. 22: Use of green methanol can lead to significant reduction of marine
emissions
Emission benchmarked against marine gas oil (MGO)
Source: ICCT, Nomura research
Cost and storage issues are principal impediments to green

hydrogen adoption at present; scaling up and incentives are
needed to ensure commercial viability
Green hydrogen adoption faces the issue of higher costs but the gap is shrinking
Green hydrogen costs significantly more than grey hydrogen; other modes of low carbon
hydrogen generation are costlier and as far as technology, commercial and social
readiness is concerned, the gap with grey hydrogen is significantly wider. (Fig. 23 )
Currently, fossil fuel-based hydrogen (black and grey) costs range between USD0.7/kg
and USD2.3/kg, based on fuel feedstock prices with established production technologies
which are mature and commercial. However, emissions are quite significant at 3.0-11.0kg
of CO2 per kilogram of hydrogen generated. Deployment of blue hydrogen is not
necessarily CO 2 free. CO2 capture efficiencies are expected by the United Nations
Economic Commission for Europe (UNECE) to reach 85-95% at best, which means that
5-15% of all CO2 is leaked.
In contrast, the cost of green hydrogen generated via electrolysis of water using
renewable power source costs USD2.6-5.5/kg with average cost of ~USD4.0/kg .
This leads to a significant cost differential. Other technologies have relatively weak levels
of techno-commercial and social readiness. The higher cost of green hydrogen is an
impediment to use in direct application in the near term except for refining where cost
increase for substituting grey hydrogen with green hydrogen leads to only 2% cost
increase.
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Fig. 23: Hydrogen production costs, emissions and feasibility by source of generation
Assumed carbon capture at 93%, 0.2% fugitive methane emissions (equivalent to 3kgs of CO2/kg)
Emissions (kg CO2 eq/kg H2) Cost (USD/kg) Readiness
Tech Commercial Social
Process Min Max Avg Min Max Avg (1-9) (1-6) (1-5)
Fossil fuel based
Natural gas & steam Steam reforming hydrocarbons into
reforming hydrogen and carbon monoxide 9.0 11.0 10.0 0.7 2.1 1.4 9 6 5
Natural gas & partial Methane reacts with limited amount
oxidation of oxygen 9.0 11.0 10.0 0.7 2.1 1.4 9 6 5
Steam reforming hydrocarbons into
SMR + CCS hydrogen and CO 3.0 7.0 5.0 1.2 2.3 1.8 8 4 4
Natural gas & partial High temperature reaction between
oxidation+CCS coal and oxygen 3.0 7.0 5.0 1.2 2.3 1.8 8 4 4
High temperature reaction between
Coal gasification coal and oxygen 18.0 20.0 19.0 1.3 2.5 1.9 9 6 5
Coal gasification + High temperature reaction between
CCS coal and oxygen 11.8 11.8 11.8 1.6 2.6 2.1 8 5 4
Splitting natural gas into hydrogen
Methane pyrolysis and solid carbon 1.9 4.8 3.4 1.6 3.4 2.5 6 2 3
Renewable Hydrogen
Electrolysis - splitting water into
Green H2 hydrogen 0.7 2.8 1.8 2.6 5.5 4.1 8 3 4
High temperature reaction between
Biomass gasification + oxygen and biomass (e.g., wood
CCS logs) -14.6 0.4 -7.1 1.9 8.4 5.2 8 5 4
High temperature reaction of
biomass (e.g., wood logs) with no
Biomass & pyrolysis oxygen -14.6 0.4 -7.1 1.3 2.2 1.8 6 2 3
Pink Hydrogen
Electricity from nuclear Electrolysis – splitting water into
power hydrogen 0.3 0.6 0.5 4.2 7.0 5.6 8 3 3
Heat from nuclear power and water
Heat from nuclear through thermochemical process.
power Heat for SMR -0.1 -0.1 -0.1 2.2 2.6 2.4 6 1 2
Note: CCS can curb downstream emissions by 90-97% but cannot curb upstream GHG (greenhouse gas) emissions
For application-related ammonia production and production of key chemicals green

hydrogen costs need to drop to around USD1/kg (breakeven at USD1.2/kg)
Governments and corporates have targeted to cut green hydrogen production costs to
USD2.0/kg in the near term and to USD1.0/kg in the longer term (Reliance Industries has
set a target of 1-1-1 or produce 1kg of hydrogen at USD1 by end of one decade ).
Current green hydrogen prices (USD4-5/kg) are relatively high, leading to premiums
ranging 110-320% across products (Fig. 24 ) for producing green fuel. Even at USD2/kg,
green hydrogen is still not viable but at USD1/kg, we estimate green hydrogen is viable
for almost all green fuels except synthetic methane or synthetic natural gas (SNG). Thus,
for production of green fuels, cost of production have to drop to USD1/kg (Fig. 24 ) to be
viable.
Reducing costs is possible by raising scale and enhancing electrolyser efficiencies.
However, we believe initially incentives for hydrogen production and/or incentives
for electrolyser capex need to be provided .
Fig. 24: Production cost using green hydrogen for various key green products vs grey variants
Green hydrogen is viable at USD1.2/kg for most applications
H2 CO2 Feedstock Total prod Fossil
feedstock feedstock cost cost fuel H2 price
(tH2/T) (tCO2/T) (USD/t) (USD/t) (USD/t) Premium USD1/kg USD2/kg USD5/kg
Green Ammonia (NH3) 0.18 0 212 282 280 1% -16% 68% 320%
Green Methanol (CH3OH) 0.13 1.38 288 384 390 -2% -10% 33% 161%
Synthetic methane (CH4) 0.25 2.75 575 767 300 156% 133% 244% 578%
Synthetic oil products (CH2) 0.14 3.14 485 647 650 0% -6% 23% 111%
A drop in green hydrogen cost to USD1-2/kg range can lead to adoption in

transport segment and potentially ammonia synthesis
In our view, green hydrogen is already viable for heavy-duty vehicles and trains even
without the support of any subsidies globally (Fig. 25 ). This may explain the interest in
FCEVs in China, Korea and Japan. In India, due to its high taxes of hydrocarbon fuels,
the viability is higher. However, lack of local green hydrogen production on scale and
supporting infra is the key obstacle, in our view.
Railways have a use case of hydrogen fuel cells potentially for non-mainline routes which
are not electrified. Based on our interaction with Indian Railway officials, we understand
13
that decarbonisation efforts on mainline (broad gauge) are being implemented by

electrification and subsequent solarisation of the power supply.
The drive from refining is mainly driven by the low share of hydrogen costs in opex and
substitution, which should lead to just a 2% cost increase for end products.
In the event of a carbon tax, green hydrogen usage viability may increase for steel
making . Every ton of steel produced leads to 1.85ton+ of carbon emissions (7-8% of
global emissions), according to Hydrogen Insights Feb-2021(Fig. 25 )
Fig. 25: Lowering of Hydrogen production cost to USD1-2/kg can lead to significant shift
In the event of a carbon tax, the shift can accelerate
No carbon USD100/t
Technology Category tax CO2 For India
Diesel Buses 4.5 5.6 6.1
Diesel Trains 3.8 5.1 5.1
Diesel Trucks 2.6 3.5 3.5
Diesel SUV 2.2 4.4 3.0
Diesel Mid Sized vehicles 0.6 2.3 0.8
Nat gas (SMR) Ammonia 1.4 2.2 5.4
Nat gas (SMR) Refinery 1.4 2.2 3.2
Coal Steel (DRI) 0.6 4.6 0.4
Nat gas Power generation 0.8 1.4 2.3
Nat gas High grade heat 0.3 1.5 1.2
Nat gas Building heat (Boiler with existing NW) 0.5 1.2 1.9
Bunker fuel Ships 0.3 1.7 0.3
Kerosene Aviation (synfuel) 0.6 1.3 0.8
Note: Those highlighted in Blue have higher probability of near term substitution by Green Hydrogen; Grey highlights denote
possibility of further substitution by 2030
Source: Hydrogen Insights Feb 2021, Nomura research
Green hydrogen generation cost falls with scale, higher

efficiency designs and learning effect in cost reduction
After waiver of transmission charges and GST green hydrogen can be produced at
USD3.2/kg; electrolyser and power cost reduction supports USD2/kg by 2030F
According to Niti Aayog, green hydrogen costs in India reached USD5.3/kg in 2020,
without any incentives or subsidies. However, the Government of India in Feb-2022
announced to waive transmission and wheeling charges, and we expect tax incentives in
the form of GST (goods and service tax) waivers. Considering these factors and the RTC
(round the clock) power cost of INR3.60/kWh (based on RTC-I bids in 2019), we believe
production costs can be cut to USD3.2/kg for projects implemented by CY25F .
These costs can drop to USD2.0/kg by CY30F, driven by reduction in RTC costs and
lower electrolyser costs. (Fig. 26 )
Green H2 cost of USD2.1/kg achievable by CY27F; below USD1.6/kg by CY30F
We project green hydrogen generation cost to fall to USD2.1/kg by CY27F and to
USD1.6/kg by CY30F (Fig. 27 ). Key assumptions in our cost curve decline
• Lower RTC power costs: We estimate that RTC power costs can drop to INR2.85/kg
(RTC -II bids in 2021 were already at INR3.01/kg) by CY30F. We are using RTC
tariffs instead of solar tariffs to eliminate the costs of renewable intermittency factor.
• Higher scale: With increased scale, electrolyser capex can drop from USD500/kW to
USD125/kW (includes a 15% p.a. learning effect). We note learning effect on
electrolyser capex can be much higher, as demonstrated by recent technologies like
solar PV (35% pa), Lithium battery (39%) and onshore wind (lowest at 19%). Thus,
our 15% learning rate estimate can be conservative.
• Improved electrolyser efficiency: We also estimate alkaline electrolyser technology
efficiency will rise from 70% currently to 93% (as demonstrated by HydrogenPro
HYPRO prototypes which we believe will be fully adopted from 2027 onwards) by
CY30F.
14
Fig. 26: Cost reduction potential with T&D/GST waiver near Fig. 27: Green hydrogen cost forecast
term and lower electrolyser capex in longer term 2030F cost estimated atUSD1.0-1.6/kg
Does not assume further decline from higher electrolyser efficiency
Green H2 reference price 2020 2030
Electricity 2.1 1.7
Electrolyser capex 0.7 0.2
Opex 0.2 0.1
Stack replacement 0.3 0.1
T&D 1.5 1.5
GST 0.6 0.4
LCOH of Green H2 5.3 4.0
T&D waived -1.5 -1.5
GST waived -0.6 -0.4
Green H2 cost post policy 3.2 2.0
Source: NITI Aayog, Nomura estimates
Power cost reduction can be the biggest driver for cost

reduction; initially green hydrogen generation incentives
maybe necessary
Power costs account for 70% of lifecycle costs; thus reduction in power costs,
improved load factors and higher electrolyser efficiency will be key
Power costs are ultimately the biggest cost driver for green hydrogen production (Fig. 28
). We have witnessed a sharp reduction in solar and wind tariffs in India, leading to low
input costs. However, the intermittent nature of renewables especially solar (low load
factors) has led to a lower capacity utilisation. Further, current electrolyser efficiency
averages around 70%; hence;any major improvement in electrolyser efficiency to 90%
levels can reduce costs drastically, in our view.
Another area of improvement is increasing lifetime of stacks with new technologies in
alkaline supporting 10 year+ overhaul cycles.
We observe from Fig. 29 that low renewable costs (around USD20/MWh) alone without
higher PLFs cannot support costs below USD3/kg.
• But a rise in PLF to 48% reduces hydrogen cost to USD2.0/kg; and
• Hydrogen cost can fall to USD1.5/kg if electrolyser costs drop to USD200/kW (vs
average cost of USD840/kW) – currently China has achieved electrolyser costs at
USD300/kW ( Fig. 30 ).
Fig. 28: Power costs are the biggest component of green H2 lifecycle costs;
reduction of power costs is the key
Source: Ohmium, India Infrastructure, Nomura research
15
Fig. 29: Low renewable tariffs, higher capacity factors (utilisation) and improved process
efficiency can cut down costs
RTC can be a solution around PLF
Solar PV @26% PLF Wind @48% PLF
Tariff (USD/MWh) 17.5 85 23 55
LCOH of Green H2 (USD/kg) 3.2 6.9 2.4 4.1
Electrolyser @USD200/kw 1.5
Note: Estimated for alkaline electrolyser cost of USD840/kW; efficiency of 65-70%; NB: Chinese have achieved USD300/kW
electrolyser costs recently
Fig. 30: Chinese alkaline electrolysers are lowest in the industry

Driven by lower labour costs and well-developed electrolyser ecosystem
2021 2022E % change y-y
Western PEM 1,400 1,200 -14%
Western alkaline 1,200 1,000 -17%
Chinese alkaline 300 270 -10%
Source: HydrogenPro, Nomura research
Companies like HydrogenPro in Norway have developed higher efficiency

electrolysers suitable even for intermittent renewable power
Significant steps are being taken globally and a case in point is HydrogenPro (HYPROME
NO, Not rated) which recently partnered with L&T (LT IN, Buy) for electrolyser technology.
According to HydrogenPro, they have improved alkaline high pressure electrolyser
efficiency to 93% which is 14% higher than competing models .
They also claim to have made alkaline electrolyser suitable for operations under
intermittent renewable power, which was a key issue with current alkaline
technology. ( Fig. 31 )
Fig. 31: Comparison of available electrolyser technologies
Parameters PEM Alkaline Alkaline HYPRO

High pressure Atomospheric High pressure Alkaline HP
Plant efficiency Low Medium Medium High
Suitable for renewable
energy inputs Yes No Yes Yes
Cooling needs High Medium Medium Low
Overhaul opex High High Medium Low
Use of Noble metals Yes No No No
High pressure on O2 Medium No Yes Yes
Electrolyser cost reduction and enhancing their lifetime of

operations (lower overhaul) is another key step to reducing
cost
Globally two technologies are relatively mature – alkaline and PEM; alkaline is more
prevalent but PEM is bridging the gap
Alkaline electrolysis technology
Alkaline electrolysis technology is the most prevalent technology at present and also
the most mature. According to the IEA, alkaline electrolysis has been adopted by the
chlor-alkali industry since 1950s, and hence globally there is adequate workforce skill
available. Alkaline involves electrolysis of water using liquid alkaline electrolyte (typically
lye or 30% potassium hydroxide solution – KOH) and a porous diaphragm. The main
benefit of this technology is its liquid electrocatalyst, which negates the need for costly
metal materials. Alkaline electrolysis cells can be configured in large stacks, and are
known for their long-term stability and lifetime.
However, the issue faced with alkaline technology is low pressure of operations which
leads to requirement of four stage compression for generated hydrogen as well as long
ramp-up times which is relatively unsuitable for operations with intermittent renewable
power. Thus, alkaline cells maybe highly suitable for RTC power projects where
issue of power variability is eliminated . Further, companies in Norway and China
16
have developed high pressure alkaline systems to reduce compression needs .

Main materials used in cell stack are highlighted in Fig. 33 , and we note the lack of
usage of precious metals (nickel and steel are used which are widely available and less
costly ). The cost of alkaline electrolyser comprises 60% material costs and 40%
manufacturing cost, according to a Niti Aayog analysis. However, lye used as electrolyte
can be toxic to vegetation and end of life disposal can be a potential hazard.
Fig. 32: Alkaline electrolysis process
Fig. 33: Alkaline electrolyser stack composition
Alkaline electrolyser stack components and materials

Cast membrane using
Membrane m-PBI doctor-blade machine
PVD +Leaching in caustic
soda (NaOH) to get the
Electrodes Raney-nickel required porosity
Pure Nickel Corrosion resistance in
Porous Transport Layer Sheets alkaline solution
PPS-40GF or
Frame PEEK Injection molding
Surface treatment of high
Plates Nickel plates purity sheets
Note: Polybenzimidazole (PBI); polyetheretherketone (PEEK); PVD is physical vapour deposit
Source: NREL, Nomura research
Polymer electrolyte membrane (PEM) electrolysis

Polymer electrolyte membrane (PEM) electrolysis is the electrolysis of water in a cell
equipped with a solid polymer electrolyte (SPE) that is responsible for the conduction of
protons, separation of product gases, and electrical insulation of the electrodes. PEM has
the advantages of smaller footprint than alkaline (takes around one-third of space as
alkaline). Also, PEM modular and scalable and parts can be fitted and assembled even by
basic equipment like forklift (easy installation). PEM is suited more for RE intermittency vs
alkaline and since PEM operates at higher pressure, there is no need for hydrogen
compression. However, PEM efficiency levels are lower than alkaline (Fig. 31 ).
However, PEM is costlier than alkaline electrolysers due to
• Use of costly rare earth materials. The cathode and anode of PEM stack are created
17
by depositing platinum or Iridium on either side of a relatively costly NAFION

membrane (Fig. 35 ).
• The extraction process of these metals are relatively emission intensive
• The porous transport layer (PTL) is built using titanium which is costly as well. In
contrast, alkaline uses nickel which is widely available and of lower cost.
The presence of precious metals makes PEM costlier, by about 40-50% more than
alkaline electrolysers (Fig. 40 ). Chinese alkaline electrolysers are the lowest cost due
to higher scale, mature/developed electrolyser ecosystem and also relatively low labour
costs compared to developed countries.
Fig. 34: PEM electrolysis process
Note: There are no liquid electrolytes like alkaline process

Fig. 35: PEM stack composition
PEM electrolyser stack components and materials

Membrane Nafion117 PFSA (PEEK, PBI)
Pt-price=
Platinum USD1500/tr.oz DOE Current value
Platinum loadings:
Anode= 7g/m2 (Pt)
CCM Spray Coating Cathode= 4g/m2 (Pt-Ir)
Sintered porous
titanium
Porous Transport Layer USD4.5/kg Porosity=30%
Screen printed
PPS-40GF or Seal: 0.635 cm from each
Seal/Frame PEEK seal side
Stainless steel
Plates 316L Coated (plasma Nitriding)
Note: Advanced per-fluorosulfonic acid (PFSA), polyetheretherketone (PEEK), polybenzimidazoles (PBI)
18
Fig. 36: Cost of electrolysers by technology (USD/kW)
Based on the current pipeline of global projects announced (61GW) alkaline

electrolysis maybe the dominant technology, according to IEA
Alkaline electrolysis was the dominant technology for production of green hydrogen over
2020-2022 (Fig. 37 ). The IEA has estimated that based on current planned electrolyser
capacity addition of 61GW, globally alkaline may dominate in 2030 (Fig. 38 )
Moreover, Niti Aayog in its assessment in May 2022 is of the view that owing to the lower
costs, alkaline electrolysers may be more suitable for gigawatt scale applications.
Globally from an electrolyser manufacturing perspective, alkaline electrolyser
manufacturing capacity dominates (Fig. 40 ). This should lead to further economies of
scale and higher learning effect from a purely cost perspective.
Other electrolyser technologies are also attempting to address the shortfalls in the
current technologies, largely solid oxide electrolyser cell (SOEC) and
anion exchange membrane (AEM) . These technologies are currently under advance
prototype or demonstration phase and are not commercially ready yet (Fig. 39 ).
Fig. 37: Planned electrolyser capacity deployment Fig. 38: Based on current project pipeline of 61GW; alkaline
in MW electrolysers to dominate by 2030
Note: Unknown implies IEA has not been able to determine the final technology to be
deployed for those project announcements Source: IEA, Nomura research
Fig. 39: Technology readiness levels of electrolyser technologies

AEM recently went from large prototype to demonstration
Scale of readiness 1 2 3 4 5 6 7 8 9 10 11 Mature
Market uptake Alkaline Market uptake
Market uptake PEM Demonstration
Demonstration SOEC Large prototype
Large prototype AEM 2021 AEM Small prototype
19
Fig. 40: Estimate for end-2022 electrolyser manufacturing capacity (GW) by

producer and type
in GW
Company Alkaline Company PEM
Longi 1.5 ITM Power 1.0
PH2 Pure Hydrogen 1.5 Plug 1.0
thyssenkrupp 1.0 Cummins 0.6
John Cockerill 1.0 Ohmium 0.5
Sungrow 1.0 Siemens 0.3
H2 SinoHy Energy 0.5 NEL 0.1
GCL 0.5 Other 0.4
NEL 0.5
HYPRO 0.3
Others 1.6
Large scale deployment and manufacturing key to reducing

costs; scale also addresses technology shortcomings
Electrolyser cost is evenly split between cell stack and balance of plant (BOP) (Fig. 41 ).
The alkaline electrolysers cell stacks are less costly with manufactured items constituting
about 40% of the stack cost, the biggest cost component is the diaphragm/electrode layer
(Fig. 42 ) while for PEM, stack porous transport layer (PTL) and catalyst coated
membrane (CCM) are the biggest costs (Fig. 43 ). The high share of precious metals like
platinum, iridium and even titanium in PTL results in higher material costs.
The BOP components are similar across technology power supply, accounting for 50% of
the BOP costs and 20-30% of overall electrolyser cost (Fig. 44 ). If seawater is used, then
the cost of desalination to produce demineralized water (DM water) can further add to
water purification costs, which account for ~22% of BOP costs.
BOP costs can come down with scale; scope of reducing individual component
cost is low
We estimate that BOP costs decline significantly with scale and as we expect production
plants to scale from present 200kW systems to 1-10MW systems, we estimate BOP costs
will decline with scale (Fig. 45 ). We do not expect a significant reduction in costs of BOP
component and power electronics as these are already produced at industry scale by
global MNCs.
Fig. 41: Electrolyser cost split (cell stack and BOP)

BOP = Balance of Plant
Source: Niti Aayog, IRENA 2020, Nomura research
20
Fig. 42: Alkaline electrolyser stack cost split Fig. 43: PEM stack cost split
Source: Niti Aayog, Nomura research Source: Niti Aayog, Nomura research
Fig. 44: BOP cost split Fig. 45: BOP: Costs decline significantly with rise in scale
Applies for both alkaline and PEM cells
Source: Niti Aayog, Nomura research Source: Manufacturing competitiveness analysis for PEM vs alkaline by NREL, Nomura
research
Stack costs decline with higher manufacturing scale of electrolysers besides cost
reduction from scale deployment
The number of stacks manufactured annually leads to cost reductions besides learning
effect from higher scale of production. Unlike BOP components which are already being
manufactured at industrial scale, cell stacks are yet to be manufactured at industrial
scales. Hydrogen Insights estimates that at 50GW+ global scale optimised levels maybe
achieved. Together rising scale can reduce to significant reduction of total electrolyser
costs (Fig. 46 ).
India’s perspective on domestic manufacturing: Initially cell stacks need to be
imported, but BOP component manufacturing can be done at scale
In the event of increased PEM adoption, India’s imports of platinum and rare earths are
likely to increase which may not support the forex conservation goal of the government.
Even for alkaline nickel, it needs to be imported but the material cost bill of alkaline is
significantly lower. The import dependence, especially on China, reduces near-term
competitiveness in developing stack manufacturing capacities at scale. There can be a
shortage of skilled manpower as well for newer technologies, but this may not be an issue
for alkaline electrolysers due to existing workforce in the chlor-alkali industry where
electrolysis process is deployed.
BOP components present a large manufacturing opportunity. India has a relatively
well-developed electronics industry. India’s electronic manufacturing expanded from
USD29bn in 2014 to USD70bn in 2019 with electronics exports witnessing a 39% CAGR
over 2014-19, highlighting products are globally cost competitive. We view that BOP
power electronics components can be manufactured at scale by electronic manufacturing
services (EMS) companies in India focused on the clean energy segment.
The need for water treatment/purification and desalination also offers opportunities
for water EPC names like L&T and VA Tech Wabag (VATW IN, Buy)
21
Fig. 46: Stack costs reduction driven by higher volume manufacturing and
scale
Source: IRENA (International Renewable Energy Agency), NREL (National Renewable Energy Lab.),
Nomura research
Global commitments on green hydrogen production can lead to scaling up by

2030F, which in turn can drive down production costs
Several countries have committed to green hydrogen production targets by 2030, which
cumulatively are in excess of 30mnt by CY30 (Fig. 47 ), andon our estimate, would need
at least 400GW of electrolysers vs 61GW of planned manufacturing capacity deployment.
The 400GW of electrolyser deployment may need 80GW of manufacturing capacity
globally which is supportive for scaling up.
India has targeted 5mntpa of green hydrogen production . This will require 60-100GW
(75GW in base case) of electrolyser and 25GW of domestic electrolyser manufacturing
capacity, according to government estimates. This can drive scale-up in India.
Fig. 47: Green hydrogen targets announced by countries

mnt
22
Challenges being addressed to make electrolysers viable and

extent of benefits
Fig. 48: Proposed activities to improve the performance of alkaline electrolysers
Challenge Benefit
Increase catalyst surface area > 50 m2/g Easy Medium
Increase catalyst utilisation > 80% Moderate Medium
Improve kinetics for both hydrogen and oxygen evolution with novel nickel-based
alloys Moderate High
Mitigate catalyst poisoning/deactivation by foreign elements from electrolyte, and
components present in the system Moderate Low
Design, create and integrate forms of recombination catalysts for gas permeation
(crossover) Moderate Medium
Mitigate critical degradation of catalysts on the anode side to avoid loss of surface
area Difficult High
Mitigate nickel hydrogen (NiH) formation on the cathode side Difficult Low
Eliminate mechanical degradation of catalyst layers (delamination, dissolution) Difficult High
Identify stable polymer chemistry that can be used as ionomer (OH- transport) to be
used to fabricate electrodes for alkaline electrolysers Difficult High
Identify and reduce interface resistances from catalyst layer to porous transport layers Difficult High
Fig. 49: Proposed activities to improve the performance of PEM electrolysers
Challenge Benefit
Mitigate membrane poisoning/deactivation by foreign elements from components and
system Easy Medium
Design, create and integrate forms of recombination catalysts for gas permeation
(crossover) Easy Medium
Increase catalyst utilisation of anode and cathode catalysts Moderate High
Identify and reduce interface resistances from catalyst layer to porous transport layers Moderate Medium
Reduce the ohmic losses and gas permeation of perfluorinated sulfonic acid (PFSA)
membranes Difficult High
Improve kinetics for oxygen evolution using iridium-free catalysts, maintaining stability
like the best iridium Difficult High
Eliminate mechanical degradation of catalyst layers (delamination, dissolution) Difficult Medium
Create noble metal free protective layers for porous transport layers (PTL) Difficult High
Create titanium-free porous transport layers (PTL) Difficult High
Besides generation there are storage and transportation

challenges; current situation supports onsite or captive
consumption (limits trading potential)
Hydrogen storage can be physical storage or material/carrier-based storage with
each method having its challenges
Physical storage faces the challenge of storing large volumes and limited available
natural storage capacity; cylinders and liquefaction serve small volumes
Hydrogen is lightweight (about 0.09gm/litre) or low density, which results in low energy
density for pure hydrogen at room temperature. Compression costs of hydrogen are
about USD0.019/kg so hydrogen can be compressed in cylinders for small volumes
. In terms of physical storage, even adsorption by palladium or platinum can be
considered, but they are likely costly. Since hydrogen causes embrittlement of steel, the
construction of hydrogen storage tanks with specialised materials are technologically
challenging compared to LNG storage tanks.
Thus, in the event of captive or on-site consumption or upto 250kms distance for relatively
smaller amounts storage in compressed cylinder, this is viable. This factor favours captive
or onsite generation and consumption of hydrogen gas. This factor makes it suitable for
use in refining and fertilizers industry where captive hydrogen can be consumed.
23
Large volumes of hydrogen can be stored and transported in liquid form (LH2), however
that is energy inefficient with as much as 30% energy losses compared to 10-12% for
compression (Fig. 52 ) besides being highly costly (Fig. 51 ) due to the need for cooling
down to -253 degrees Celsius, specialised storage vessels and need to maintain higher
pressure for compression.
Large volumes of hydrogen can be stored in salt and rock caverns and even
depleted oil fields subject to geographical availability: Storage of large volumes in
salt taverns is both technologically and commercially viable but there is limited
geographical availability of such features. Storage in rock and depleted oil/gas fields are
being explored, but they are relatively expensive and are not techno-commercially viable
at the moment (Fig. 51 ). Even then specialised steel liners needs to be installed in salt or
rock caverns to act as permeability barriers which adds to cost of storage .
Hydrogen storage or transport through carrier molecules is energy inefficient
However, for storage of large gas volumes hydrogen may need to converted to
ammonia due to ammonia’s high energy and volumetric density (Fig. 50 ). Other
potential options are use of metal or chemical anhydrides. However, the issue with carrier
based hydrogen storage is high level of energy losses resulting in conversion and
reconversion of hydrogen. As an example compression into cylinders and decompression
can result in energy losses upto 11% while conversion to ammonia and converting back
ammonia to hydrogen can result in 70-80% energy losses (Fig. 52 )
Solid state metal anhydrides are being explored and are only in research stage.
Fig. 50: Various modes of storage of green hydrogen in physical form or in carriers
Source: Central Mechanical Research Institute (CMRI), Nomura research
Fig. 51: Hydrogen storage options costs and maturity levels
Depleted Solid state

Salt Rock oil/gas Press. Liquid H2 Ammonia (metal
caverns caverns wells Container (LH2) (NH3) LOHC hydride)
300- 300-
Capacity [tH2] 10,000 300-2,500 100,000 <1.1 <0.2 <10,000 <4,500 Small
Cost (USD/kg) -
Current 0.23 0.71 1.90 0.19 4.57 2.83 4.50 NA
Future 0.11 0.23 1.07 0.17 0.95 0.87 1.86 NA
Large vol Large vol Large vol Short lead Long lead Long lead Long lead
Advantage mid term mid term long term transport transport transport transport
Limited Limited
geo geo Limited geo Low Low Low Low Low
Disadvantage availability availability availability efficiency efficiency efficiency efficiency efficiency
Tech readiness (1-9) 9 3 3 9 8 9 7 1
Commercial (1-6) 3 3 2 2 3 4 2 1
Social readiness (1-5) 4 2 2 4 3 4 3 1
Note: LOHC - Liquid organic hydrogen carriers
LH2 - Liquid hydrogen
24
Fig. 52: Energy losses are significant for carrier based storage
This leads to high energy costs
Transportation over land and under 5000kms is suitable by pipeline; for longer
distances shipping through carriers or liquid hydrogen are viable
We expect green hydrogen to be mostly consumed locally or within nearby locations. For
nearby locations transport via cylinders is relatively costly as discussed in earlier section.
The best possibility is movement via pipelines, but these require significant capex.
Depending on whether pipelines are onshore or offshore or if they are repurposed,
existing lines or new pipelines capex can vary significantly (Fig. 54 ).
Transport over long distances appear viable via shipping (Fig. 53 ) but storage and
conversion costs are significantly high (Fig. 51 ). The larger part of the transportation cost
is converting existing shipping fleet (e.g. conversion of LNG ships to LH2 ships).
However, we note that ammonia and LOHC modes are already mature with global ports
and terminals are already equipped to handle ammonia and chemicals.
Fig. 53: Cost of transport of hydrogen by modes over various distances

EUR/kg (1EUR-1.08USD)
Source: European Hydrogen backbone 20221 by European Commission, Nomura research
25
Fig. 54: Hydrogen pipeline capex component (EUR = USD1.08)
Cost parameter Low Medium High

New pipeline capex (mnEUR/km)
Small 1.40 1.50 1.80
Medium 2.00 2.20 2.70
Large 2.50 2.80 3.40
Offshore medium 3.40 3.70 4.60
Offshore large 4.30 4.80 5.80
Repurposed pipeline capex (mn EUR/km)
Small 0.20 0.30 0.50
Medium 0.20 0.40 0.50
Large 0.30 0.50 0.60
Offshore medium 0.30 0.40 0.50
Offshore large 0.40 0.50 0.60
Compressor station Capex
(EUR/MWh) 2.20 3.40 6.70
Pipeline O&M (% of capex) 0.80% 0.90% 1.00%
Compressor O&M (% of capex) 1.70% 1.70% 1.70%
Source: European Hydrogen Backbone April 2022 by EC, Nomura research
For shipping, conversion to ammonia maybe the preferred

option with global trade in ammonia already taking place
Globally a significant volume of ammonia has been traded over the past decade (Fig. 55 ),
thus processes and infrastructure to liquefy ammonia and infrastructure to handle
ammonia shipments already exist at ports. Even in India, several ports on both the east
and the west coast are capable of handling ammonia shipments.
Moreover, there exists a significant shipping capacity for ammonia at the end of CY21 (
Fig. 56 ). This can be further enhanced at relatively short notice by converting LPG gas
carriers or VLGCs (very large gas carriers) with minimal modifications.
Fig. 55: Global ammonia trade is already around 20mntpa Fig. 56: Significant tonnage of ammonia shipping fleet exists
This represents 10-11% of global ammonia consumption currently Further LPG ships can also be repurposed to ammonia ships
Source: India Infrastructure, Nomura research Source: India Infrastructure, Nomura research
26
Government of India has been proactive in

formulating a policy roadmap; FY24F to be the
year of key decisions
Government announced an initial policy in Feb-22; the focus
was on supply side features
The Ministry of Power launched the first part of green hydrogen policy on 17 Feb-22,
which we discussed in our previous report (Report ).
The initial policy defined green hydrogen as produced from electrolysis of water using
renewable energy (including banked renewable energy) and also hydrogen/ammonia
produced from biomass .
The measures, as highlighted below (Fig. 57 ), focus on supply side measures but
demand side details are unclear, in our view. However, we consider that allowing
banking of renewable power for 30 days is a positive, as even progressive regions
like the EU do not allow use of banked renewable power for more than few hours .
The initial draft, however, did not provide details on promoting local manufacturing of the
hydrogen ecosystem components, namely electrolysers which are so far fully import
dependent. It also did not provide potential green hydrogen mandates in hard-to-abate
sectors and incentive structure for either capex or hydrogen generation.
Fig. 57: Initial policies and incentives announced in Feb 2022
Incentives announced in Feb-22

ISTS charges waived for 25 years for projects
Renewable energy commissioned before Jun-2025
Banking of power upto 30 days
Land in RE parks can be allotted for Green hydrogen
and Green ammonia
Grid connectivity to ISTS on priority
Power supply Discoms allowed to procure RE for Green H2 plants and
obligated to charge procurement cost, wheeling charges
and small profit margin determined by state
commissions; no ASS/CSS applied
Electricity supplied will count towards Discom RPO

Green hydrogen Proposal to set up manufacturing zones for green
production hydrogen and green ammonia
Storage and Producers can set up storage facilities near ports for
distribution exports
MNRE to establish single portal for all statutory
Governance clearances and permissions
Clearances to be provided in time-bound manner
preferably within 30 days of application
MNRE to aggregate demand from different sectors
for consolidated bids to achieve competitive prices
A detailed roadmap has been published now; FY24 maybe the

decisive year for policy and decision-making in our view
The MNRE (Ministry of New and Renewable Energy) has published a detailed roadmap
or implementation plan of the National Hydrogen Mission over FY23-30. Based on the
published implementation plan, we expect FY24F to be a significant year as far as
establishing policies and framework are considered (Fig. 58 )
• The Empowered Group (EG) of Ministries and departments headed by the
MNRE are to announce sector-specific mandates or targets for sectors . The
government is to mandate a minimum share of consumption of green hydrogen or its
derivative products such as green ammonia, green methanol etc. by designated
27
consumers as energy or feedstock. The year-wise trajectory of such minimum share

of consumption will be decided by the Empowered Group.
• To promote green fertilizers, at least two green urea and two more green DAP
(di ammonium phosphate) plant bids are planned, potentially on a pooling basis
and these tenders maybe awarded by FY24F. The target is for construction of such
plants to commence by FY25 with green fertilizer production by FY27 onwards.
• Explore USD-denominated bids for green hydrogen and ammonia
• Schemes and incentives both for capex and hydrogen generation to be
announced with an initial outlay of INR174.9bn (Fig. 59 ). Incentives are for: a)
electrolyser manufacturing; and b) green hydrogen production.
• FY35 target to substitute all ammonia-based fertilizer imports with domestic green
ammonia-based fertilizers
Fig. 58: National Hydrogen Mission implementation plan

SIGHT = Strategic interventions for green hydrogen transition
Green Regulations &
Facilitate fertilizers SIGHT Pilots & Hubs standards R&D
Procedure for
regulatory
Consultation and Roadmap for approval of pilot Formulation of
FY23 Market Review key sectors projects R&D Roadmap
Notification Notification of
of targets as bids Adoption of
may be Notification of relevant
Calls for
decided by Award of Incentive international Calls for proposal
proposal for
FY24 EG capacity Schemes standards for Phase I
Phase I
Preparatory implementation
implementation
steps for
implementati
FY25 on Construction
Call for Continuous

FY26 proposals Review and Call for proposals
Green Monitoring
Implementati Implementation
fertilizers
on of incentives
FY27 production Phase II Phase II
FY28 Implementation Implementation
FY29
FY30
MNRE targets 5mntpa of green hydrogen production capacity with potential

investment of INR8.0tn; 0.6 million jobs generation
The 5mntpa target will require 125GW of renewable capacity deployment and potentially
25GW of electrolyser manufacturing capacity. The electrolysers are to be imported initially
but later they would be substituted by local manufacturing.
28
Fig. 59: Government targets for National Hydrogen Mission and initial outlay
Outcomes by 2030
Investment (INR tn) 8.0
Jobs generated (mn) 0.6
Emission avoided (mntpa) 50
Green H2 (mntpa) 5.0
Renewable energy (GW) 125.0
Financial outlay INR bn
Initial Mission outlay (INR bn) 197.44
which includes
SIGHT programme 174.90
Pilot projects 14.66
R&D 4.00
Mission components 3.88
Mission objectives
• Make India a global hub for hydrogen production usage and export
• Make India self-reliant (Aatmanirbhar) through clean energy transition; reduce fossil
fuel independent; technology and market leadership for green hydrogen
• Target of 5mntpa by 2030 and potential of 10mntpa with growth of export markets (or
10% of global market by 2030, MNRE estimates)
Other salient features of the NHM

• The Mission aims to develop and scale up green hydrogen production technology and
make it affordable and widely accessible
• An important intervention will be to upscale production and deployment of high
performance electrolysers in sufficient volumes
• Limit dependency on imports and ensure supply chain resilience in the sector. It is
critical to develop a robust domestic electrolyser manufacturing ecosystem in India
• Innovative models to source green hydrogen through use of decentralized renewable
energy generation such as rooftop solar, and small/micro hydel plants will also be
explored
• Decentralised green hydrogen production will be advantageous to reduce the
requirement of its transportation for end-use
Use industrial or municipal wastewater as input
○
○ Hydrogen Refuelling stations in the cities and along highways could be connected
to decentralized RE plants for in-situ production of green ydrogen
○ For remote islands, renewable energy can be utilized to produce green hydrogen
in a decentralized mode to meet local energy requirements.
• It will also be an endeavour to maximize utilization of the renewable energy
potential on various islands in India.
○Through appropriate connectivity, the renewable energy generated at islands in
proximity to the mainland, could be transmitted and utilized for green hydrogen
production and other end-uses
• Support and facilitate building of required infrastructure for storage and
delivery of green hydrogen and its derivatives
○Port infrastructure required to enable exports of green hydrogen derivatives,
○ and pipelines to facilitate bulk transport of green hydrogen will also be developed.
• Further, the producers and consumers of green hydrogen and its derivatives will be
encouraged to pool resources and develop projects in a coordinated manner in the
form of large-scale Hydrogen Hubs
Mission to be implemented in two phases, first over FY23-26

and second over FY26-30
29
Phase I (FY23-26)
• The focus of Phase I will be on creating demand while enabling adequate supply by
increasing the domestic electrolyser manufacturing capacity
• In order to ensure “Make in India” from the inception stage, a bouquet of incentives
aimed at indigenisation of the value chain and increasing green hydrogen
production and uptake will be developed
• Initial phase demand from refineries, fertilizers and city gas sectors
• R&D focus on hard to abate sectors
• Pilot projects for initiating green transition in steel production, long-haul heavy-duty
mobility and shipping
• Work will commence on establishing a framework of regulations and standards to
facilitate growth in the sector and enable harmonisation and engagement with
international norms
• Shipping Corporation of India (SCI IN, Not rated)will retrofit at least two ships to
run on green hydrogen or other green hydrogen derived fuels by 2027.
• PSUs will be required to charter at least one ship each to be powered by green
hydrogen or derived fuels by 2027. Thereafter, the companies will be required to
add at least one ship powered by green hydrogen or its derivatives for each year of
the mission. India’s oil and gas PSUs also currently charter about forty vessels for
transport of petroleum products.
• Green ammonia bunkers and refuelling facilities will be set up at least at one port by
2025. Such facilities will be established at all major ports by 2035
Phase II (FY27-30)
• Green hydrogen costs are expected by the MNRE to become competitive with fossil-
fuel based alternatives in refinery and fertilizer sector by the beginning of the second
phase, allowing for accelerated growth in production
• Potential for taking up commercial scale green hydrogen based projects in steel,
mobility and shipping sectors will be explored. So the impact on steel sector is
back-ended, in our view .
• Undertake pilot projects in other potential sectors like railways, aviation etc. Thus, we
believe hydrogen fuel cell adoption in railways is unlikely before FY30F .
• The second phase activities would enhance penetration across all potential sectors to
drive deep decarbonisation of the economy
30
Fig. 60: Ministry and department wise responsibilities for Mission implementation
Ministry wise responsibilities assigned

Ministry of New and Renewable Energy (MNRE)
Responsible for overall coordination and Mission implementation
The Mission Secretariat, headquartered in MNRE, will formulate schemes and programmes for financial
incentives to support production, utilization and export of Green Hydrogen and its derivatives
The Ministry will also ensure holistic development of the Green Hydrogen ecosystem in the country through
active coordination with various public and private entities responsible for other aspects
Ministry of Power (MoP)
Will implement policies and regulations to ensure delivery of renewable energy for Green Hydrogen production
at least possible costs, including through development of the necessary power system infrastructure
MoP will also work with State Governments, Distribution Companies, Regulators and technical institutions to
align the electricity ecosystem for large scale Green Hydrogen production
Ministry of Petroluem and Natural gas (MoPNG)
Will facilitate uptake of Green Hydrogen in refineries and city gas distribution through both Public Sector Entities
and private sector
MoPNG will also enable development and facilitation of regulations through PNGRB
New Refineries and city gas projects will be planned and designed to be compatible with maximum possible
Green Hydrogen deployment, with a goal to progressively replace imported fossil fuels.
Ministry of Chemicals and Fertilizers
Encourage adoption of indigenous green ammonia based fertilizers for progressively replacing imports of
fertilizers and fossil fuel based feedstocks (natural gas and ammonia) used to produce fertilizers
The Ministry will enable procurement of green ammonia for its designated entities to create bulk demand.
Ministry of Road Transport and Highways (MoRTH)
Enable adoption of green hydrogen in the transport sector through regulations, standards, and codes, primarily
for heavy commercial vehicles and long-haul operations.
MoRTH will also facilitate technology development for adoption of green hydrogen in the transport sector
through testing facilities, pilot projects, and provide support for infrastructure development
Ministry of Steel
Ministry of Steel will drive adoption of green hydrogen in the steel sector
The Ministry will identify and facilitate pilot projects for use of Green Hydrogen in steel production and undertake
policy measures to accelerate commercial production of green steel
Ministry of Ports, Shipping and Waterways (MoPSW)
Play a crucial role in establishing India’s export capabilities for green hydrogen and its derivates
MoPSW will facilitate development of the required infrastructure including storage bunkers, port operations
equipment, and refuelling facilities.
MoPSW will also drive the adoption of hydrogen/derivatives (ammonia/methanol) as propulsion fuel for ships.
The Ministry will also work towards making India as a green hydrogen/derivative refuelling hub.
Ministry of Finance (MoF)
Explore suitable fiscal and financial frameworks to promote production, utilization and export of Green Hydrogen
and its derivatives
Ministry of Commerce & Industry
Encourage investments, facilitate ease of doing business, and implement specific industrial and trade policy
measures for low-cost production and trade of hydrogen and its derivatives.
The Ministry will undertake dialogue to facilitate global trade of hydrogen and its derivatives.
The Ministry will also formulate necessary policies and programmes for development of an ecosystem for
manufacturing of specialized equipment needed in the green hydrogen value chain.
Ministry of Railways (MoR)
Work on transitioning towards adoption of green hydrogen in their operations in view of its ambitious plans to
reduce the carbon footprint
For this, the Ministry will put in place the necessary regulations and standards
Source: National Hydrogen Mission, Nomura research
Hydrogen policy of Uttar Pradesh provides some insights into

potential structuring of capex linked incentives on a pan India
level in FY24
The state of Uttar Pradesh (UP) announced its own hydrogen policy in Oct-2022 (LINK )
besides the state of Rajasthan. The UP hydrogen policy is relatively comprehensive and
may provide a glimpse of potentially how the incentive policy may be structured nationally
in FY24.
31
• UP is providing capex incentives only for large electrolyser set-up: This should
encourage scaling up (>50MW plants) of systems which can in turn drive down costs.
Subsidies are higher initially before tapering off by FY28F (Fig. 61 ).
• Production based incentive available for green urea: UP is planning to mandate a
blending of 20% for green fertilizers by FY28. To encourage adoption, every
additional ton of green urea would be provided an additional subsidy of INR3,500/ton.
We note urea is sold at almost a 90% subsidy to farmers compared to prevailing
market price of INR50,000/t. This reflects a material subsidy burden on the state.
US Inflation Reduction Act (IRA) incentives may also be a path forward to

formulating an incentive scheme on production
The US IRA has provided new production tax credit (PTC) for clean hydrogen for a period
of 10 years starting operations. To qualify as clean hydrogen, lifecycle greenhouse gas
emissions (GHG) cannot exceed 4kg of CO2e per kilogram of hydrogen produced. The
value of credit provided is based on decrease in carbon emissions
• For emissions between 2.5kgs and 4.0kgs per kilogram of clean hydrogen, PTC will
be USD0.6/t of clean hydrogen (inflation adjusted by 2% annually)
• This will increase in slabs of USD0.6/t to USD3.0/t for emissions below 0.45kg per ton
of hydrogen. These low levels of emissions are possible currently with green
hydrogen and pink hydrogen (nuclear).
• Qualified clean hydrogen facility must begin construction before Jan-2033 and must
be owned by the taxpayer.
Fig. 61: Uttar Pradesh capex incentive scheme

Potentially expect to see similar national level initiatives in FY24
Source: Uttar Pradesh Green Hydrogen policy, Nomura research
Green hydrogen hubs are proposed in the Mission; experts

have proposed potential hydrogen hubs focused in Gujarat
and Maharashtra
Technical and logistical challenges are inherent in hydrogen transport due to hydrogen’s
low energy density. A cluster-based production and utilisation model would enhance
viability. The Mission will accordingly identify and develop regions capable of supporting
large scale production and/or utilization of hydrogen as green hydrogen hubs.
Projects in the Hubs will be planned in an integrated manner to allow pooling of resources
and achievement of scale. It is planned to set up at least two such green hydrogen
hubs in the initial phase .
• Potential locations for such Hubs would be regions having clusters of
refineries/fertilizer production plants in close vicinity
• Corridors connecting such Hubs will be developed as green hydrogen mobility
corridors by setting up sufficient refuelling infrastructure and Hydrogen supply
arrangements along such routes
• Green hydrogen projects will likely be drawn towards ports, in our view, favouring
locations in Gujarat and Maharashtra.
32
Experts like Indian Hydrogen Alliance have already proposed locations for hydrogen
clusters (Fig. 62 ).
Fig. 62: Proposed hydrogen clusters by Indian Hydrogen Alliance

Maharashtra and Gujarat proposed to have the greatest number of consumption hubs
Cluster types Locations
Green H2, NH3/Fertilizer
Hubs Ankleshwar-Bharuch-Dahej/Gujarat
Pune-Nhava Sheva/ Maharashtra
Nellore OR Vizag/ Andhra Pradesh
Chennai/ Tamil Nadu
Green H2 steel plants Bellary/Karnataka
Hazira/ Gujarat
Dolvi/ Maharashtra
Vizag/ Andhra Pradesh
Green H2 refineries Jamnagar or Vadodara/Gujarat
Mumbai/Maharashtra
Kochi/Kerala
Heavy-Duty Transport MAH2 Mumbai-Pune/Maharashtra
KochiH2-Coimbatore/Kerala- Tamil Nadu
H2-CGD Networks Indore CGD/ Madhya Pradesh
Pune CGD OR Nagpur CGD/Maharashtra
Vadodara CGD/ Gujarat
Waste to H2 cities Seven Municipal projects
Pune, Nagpur, Mumbai, Delhi,
Bangalore, Chennai, Ahmedabad
Source: Indian Hydrogen Alliance, Nomura research
33
Challenges in adoption by key sectors

Refining relatively less challenging
Layout and customisation challenges are present; can be addressed with scale
Hydrogen gas is used in refineries to reduce sulphur content of fuel especially diesel.
Further, they are also used for stabilization of refining end products and petchem through
saturation of unsaturated hydrocarbon molecules. The general process for use of
hydrogen is show in Fig. 63 . Thus, refineries globally including India are already using
hydrogen and refinery configurations to support the use of hydrogen already.
However, the challenge in existing refineries are layout requirements for
incorporating green hydrogen plants. Based on our discussions with operational experts
of HPCL (HPCL IN, Reduce) we learnt that currently due to the small scale of
electrolysers, manufacturing customisation is currently not viable for these manufacturers
for small size orders. This can however change if scale and quantum of orders can rise
(customisation is viable only for sizes >100MW, according to the experts) . Currently,
small scale electrolysers are sold as standard packages limiting scope for design
changes.
Further, electrolyser manufacturers have suggested two key challenges from the
customer side
• PSU refiners are asking for 50,000 hours of operation guarantee for stacks .
Globally such warranties are not the standard norm.
• PSU refiners are asking for 2-3 years O&M (operation and maintenance) which
increases costs : Electrolyser operations require low skill levels and experienced,
and manpower is already present in the Indian chlor alkali industry. However, the
PSU refiners are seeking 2-3 years of O&M. Since annual O&M costs are just 1.5-
2.0% of total capex, the small ticket size for below 10MW electrolysers are not
economically remunerative for the EPC players or the manufacturers.
However, the cost increase in replacing entire grey hydrogen to green hydrogen is
2-3% at present. Thus, if existing grey hydrogen is replaced by green hydrogen, the cost
impact would be less; hence, the green mandate by the government is economically
viable to implement with relatively low levels of incentives initially. We estimate that
~30% green hydrogen penetration is feasible by 2030F .
Fig. 63: Role of hydrogen in hydro-cracking process in refining
Source: US EIA, Nomura research
Fertilizer; significant cost challenges

Needs substantial incentives and ability to source carbon economically for green
urea in particular
Indian fertilizer usage is almost entirely ammonia dependent since fertilizers need to
34
supply crops with nitrogen as nutrient. Ammonia is the building block for all fertilizer
products containing nitrogen, for example, urea, complex fertilizers, ammonium sulphate
etc. Currently, ammonia is produced from natural gas feedstock using SMR, domestic gas
or imported R-LNG (regasified LNG). As such, hydrogen is not a direct input for
manufacturing of fertilizers.
Of the domestic ammonia production, 95% is used up for urea production while 5% is
used for other fertilizers. For the remainder of the fertiliser needs, ammonia has to be
imported.
Fig. 64: Indian fertilizer usage is almost completely ammonia dependent

(CY21)
Source: Rashtriya Chemicals and Fertilizers (RCF), Nomura research
Production of green urea is particularly challenging as separate carbon source is

needed; in SMR process carbon is generated within the process
Firstly, green ammonia as input costs as much as 2.5-2.7x of grey ammonia (via SMR),
according to Rashtriya Chemicals and Fertilizers (RCF). On top of that, carbon has to be
sourced separately either in the form of direct air capture (DAC) or locating fertilizer plants
near carbon emission sources like a thermal power plant or natural gas turbines where
emitted flue gas can be used. The additional cost of carbon makes green urea particularly
expensive.
On top of that, the fertilizer sector is low on profitability unlike the refining sector, and
thus even for a small quantum of blending, substantial viability gap funding (VGF) maybe
needed. There exists technological challenge of integration in existing plants, due to
pipeline embrittlement if hydrogen is directly input. (ANIL – Adani New Energy Ltd
(unlisted) is planning a green urea plant where carbon will be sourced from flue gas of
their Mundra thermal power plant ).
From the government’s point of view, it involves additional fertilizer subsidies on top of the
existing subsidies (currently urea is sold to farmers at 90% subsidy).
Thus, initially green ammonia can be adopted by non-urea fertilizer production
(complex fertilizers) which do not need additional carbon source, in our view.
Fig. 65: Besides green ammonia being expensive additional carbon sourcing
costs needed for green urea production
Costing challenges for green urea

Cost of Green Ammonia 2.5 x of Grey ammonia
2.7 x of Grey ammonia
1 T of urea need CO2 of 0.74 T
Cost of CO2 recovery 100 USD/t
Additional cost of carbon 6068 INR/t for green ammonia
Urea price Oct 2021 51400 INR/t
Source: RCF, Nomura research
35
Steel; challenge in using hydrogen as a reducing agent

Lack of high grade iron ore for increasing scope of DRI production and
endothermic nature of hydrogen reaction are the challenges
Globally the steel industry accounts for 7% of emissions despite contributing only 2% of
global economy (as of end-CY21). A key contributor to the relatively high emissions are
primary steel production via blast furnace — basic oxygen furnace (BF-BOF) mode of
production which accounts for 95% of emissions (Fig. 67 ). Further, global BOF carbon
emissions have intensified in recent times (Fig. 66 ).
Similarly, in India, carbon emission intensity has stagnated since CY15 and there are
significant decarbonisation measures necessary to meet India’s climate goals (Fig. 69 ).
The key challenge is Indian steel production is largely primary (Fig. 68 ) and we expect it
to remain so at least till CY40F due to low scrap availability, It is only post 2050F that
India’s scrap availability is likely to rise, as steel takes nearly 40 years to come back into
system as scrap, according to JSW Steel (JSTL IN, Reduce). Thus, for the near term
we believe the key challenge is decarbonising the BF-BOF process which we view
will remain dominant.
Fig. 66: Global BOF carbon emissions have stagnated and Fig. 67: Primary steel production accounts for 95% of steel
have witnessed a rise of late emissions (72% of global capacity) (as of end-CY21)
Steel accounts for 7% of global emissions; 2% of global economy
Source: JSW Steel, Nomura research Source: JSW Steel, Nomura research
Fig. 68: Indian steel capacity split by production technology Fig. 69: Indian steel emissions have stagnated since CY15;
As of CY21 end significant reduction targets by CY30/CY47 Net Zero by CY70
tCO2/tcs of steel
Source: JSW Steel, Nomura research
Key strategic challenges in steel decarbonisation

• Replacing coking coal/coke as reducing agent by hydrogen: The use of coke as a
reducing agent also generates heat (exothermic), in turn improving process efficiency.
However, while hydrogen is a good reducing agent (i.e. removes oxygen molecule
from iron ore), the reaction is endothermic (absorbs heat), resulting in higher energy
needs (increases energy intensity). A blending level of 20kgs of H2 per ton of hot
metal can still be explored (lower than theoretical level of 55kgs of H2 per ton of hot
36
metal). Thus, a full replacement of coking coal is tough. A possibility is H 2

injection in BF or convert H 2 to CH 4 methane outside BF, then inject it to prevent
endothermic reaction.
• The focus can be on direct reduced iron- (DRI) based steel making, but this
needs high grade iron ore which India lacks: In DRI process, hydrogen can be
used and pilot programmes are being contemplated. According to JSTL, the process
will need 70kgs of H2 per ton of metal (higher than the theoretical level of 55kg). The
issue associated with the DRI process is that it needs 65%+ iron or FE content
in ore while Indian ore iron content is usually much lower.
• Another issue is renewable power concentration is largely in West India while steel
plants and iron ore resources are based in East India.
• Definition of green steel or threshold for low emission or net zero steel: India
has yet to set threshold for green steel or low emission steel. However, it may follow
the IEA definitions. Based on scrap use or primary use, the IEA has defined low
emission steel as those having emissions within the ‘two lines’ definition, as illustrated
in Fig. 70 . In the event the emissions are below the grey lines it may qualify as Net
zero emission steel as per global standards.
Fig. 70: Emission intensity thresholds for near zero and low emission steel
kg Co2 equivalent per ton of steel; scrap share in metal input
Source: Net Zero Heavy Industrial sectors Iron and Steel - IEA
DRI process with renewables will require a large land footprint if captive renewable
generation is proposed
SInce most DRI plants are located in the eastern parts of India where local renewable
generation is low, there is a need to invest in captive power investment. Area wise, DRI
plant footprint suggests solar in particular will need a significantly larger land footprint than
coal (Fig. 71 ). This does not factor in water considerations as well.
Fig. 71: Constraints for 1T DRI (Direct reduced iron) by various power source
Assumed at high pressure alkaline or SOFC efficiency of 90%
Power source Coal Solar Wind
Electrolyser for 1T of DRI 408 408 408
Plant size (MW) 545 1,634 1,167
PLF 75% 25% 35%
Land 272 8,170 556
MW/acre 0.5 5.0 1.0
WTGs needed @2.1MW 556
Transport; electrification appears a better option

BEV efficiency and economy better than FCEVs; hydrogen can face distribution
issues only long haul trucking may still be a possibility
Battery electric vehicles (BEV) efficiency levels are materially higher than fuel cell electric
vehicles (FCEVs) based on well-to-wheel efficiency (Fig. 72 ). FCEVs have the advantage
of no requirement for electric charges, which at this time is a time-consuming process and
37
has the added advantage of relatively lower weight due to lack of a battery. However,
BEV charging time and infrastructure are improving, and hydrogen vehicles need
specialised tanks to offset part of the weight reduction.
• Well-to-Tank = electricity production efficiency is 1.4x hydrogen
• Tank-to-Wheel = BEV efficiency is 1.7x FCEV efficiency
• Well-to-Wheel = BEV efficiency is 2.3x FCEV efficiency
Further vehicle autonomy and cost of ownership for FCEVs inferior to BEVs
Due to higher efficiency at all levels, BEV vehicle autonomy (defined as km/kWh of
renewable energy) is materially higher for BEV vs FCEVs (Fig. 73 ). Further, we note that
for lifecycle costs are lower for BEV vs FCEVs.
The first FCEVs to be made commercially available have utilized an onboard storage
pressure of 700 bar, but storage tanks capable of storing hydrogen at such pressures are
expensive. Such tanks are not considered viable for large stationary applications.
However, for heavier vehicles, the capex cost are lower than that for BEVs and in case of
improvement in fuel efficiency, hydrogen applications are possible for long haul trucking (
Fig. 73 )
A German city has scrapped its hydrogen fuelled bus fleet only after a year of
operations; further announcing it will focus on BEVs only
The German city of Wiesbaden has opted to retire its one-year-old FCEV bus fleet and
has opted not to explore hydrogen buses again (News link ). The issues cited are
breakdown of hydrogen refuelling infrastructure.
The city in question has the second-largest BEV bus fleet in Germany at 120 buses only
behind Hamburg.
Fig. 72: Road transport via battery EVs is significantly more efficient vs
FCEVs
Battery EV Fuel cell EV

Well-to-tank
Electrolysis 76%
CO2 air capture and FT synthesis
Transport storage and distribution 94% 89%
Fuel production efficiency 94% 68%
Tank to wheel
Charging equipment 95%
Battery charge efficiency 95%
Hydrogen to electricity conversion 54%
Inversion DC/AC 95% 95%
Engine/Motor efficiency 95% 95%
Tank to wheel efficiency 81% 49%
Overall efficiency 77% 33%
Source: Enel Green hydrogen fact book 2021, Nomura research
38
Fig. 73: BEV total cost of ownership and vehicle autonomy is superior to
FCEVs
Battery EV Fuel cell EV

Vehicle autonomy (km/kWH of RE) - well to wheels
Cars 7.00 2.50
Buses 0.54 0.23
Regional Delivery Trucks 1.27 0.71
Long haul trucks 0.30 0.26
Total cost of ownership by EUR/km
Cars 0.40 0.55
Buses 0.82 1.47
Long haul trucks - -
Fuel O&M
Cars 0.16 0.21
Buses 0.41 0.99
Long haul trucks
Capex
Cars 0.24 0.34
Buses 0.41 0.48
Long haul trucks
Source: Enel hydrogen fact book 2021, Nomura research
Long haul trucking may still be feasible in India to reduce import dependance and
also lifecycle cost differentials are lower against BEVs
FCEVs may still find uptake in long distance trucking in India if refuelling infrastructure is
developed. Based on current technology, upfront capex cost is lower against BEVs for
regional delivery trucks (Fig. 73 ). Further, green hydrogen can be produced locally while
lithium batteries need to be imported due to lack of natural resources.
Further, FCEVs have significantly shorter refuel time than BEVs, which is an advantage
and there is not much of a significant increase in FCEV weight with increased range (BEV
battery weights increase with higher range requirements).
39
Steps taken by corporates in India

We analyze the plans announced by corporates in their pathway to implement a hydrogen
economy
Reliance Industries (RIL IN, Buy)

• RIL has announced “Plan 111” which aims to produce green hydrogen below
USD1/kg in one decade (or 2030). This compares to the current green hydrogen cost
of USD5.5/kg in India and the government’s medium-term target of USD2/kg by
CY25.
• RIL has announced a capex plan of INR750bn over five years for green energy which
includes setting up four Giga factories for:
○Polysilicon modules;
○ electrolyser factory;
○ advanced chemistry cells; and
○ fuel cells.
○ Giga factory for power electronics is also planned. We note power electronics
can make up 25-30% of electrolyser capex.
• It plans for 20GW of renewable installed capacity by FY25 to support green
hydrogen plants. This energy will entirely be used up for round the clock (RTC) power
supplies. The emphasis will also be on storage and transport solutions (LINK ).
• Net Zero target at organization level by 2035. Hydrogen strategy will be a key part
of the target, according to RIL. The transition from grey to green hydrogen may start
as early as from FY25.
• RIL has tied up with Stiesdal (unlisted) of Denmark for pressurised alkaline
electrolyser technology (HydroGen Electrolyzers). RIL is technology agnostic and
has plans for interchangeability to minimise obsolescence risk. Stiesdal has expertise
in cell stack manufacturing. RIL is seeking to use desalination plants for its DM water
input. RIL views the BOP ecosystem in India to be relatively mature.
• Initially Green Hydrogen will be used for captive consumption in the petchem
side of business (O2C)
Adani New Energy Ltd (ANIL; unlisted), part of Adani

Enterprises (ADE IN, Not rated)
ANIL, in our view, is targeting to leverage the green hydrogen ecosystem in a largely
integrated manner and has set a capex target for USD50bn by CY30 for the segment.
However, of late its partner Total Energies has paused investments in their joint ventures
following a short seller report on governance. This factor has the potential to delay
achievements of ANIL’s CY30 targets
• Availability of low cost renewable power: Power accounts for 70-80% of lifecycle
cost of electrolyser. The access to Khavda site provides potential for 20GW of
renewable power at a single location. According to management, the initial plan is for
10GW which can be scaled to 20GW. Mundra itself is directly connected to renewable
power. This addresses renewable energy scale up challenge and cost.
• Longer term, plans to develop hydrogen transport pipeline of 1mntpa for
200kms connecting Mundra: Mundra can be both a consumption and an export
location. The place also can support hydrogen storage. This opens up long-term
green ammonia export opportunities to Europe (EU), Korea and Japan. Tie-up with
Total Energies (TOT US, Not rated) can aid export options .
• ANIL is looking at full scale manufacturing integration: This includes complete
backward integration for both solar and wind ecosystem (Fig. 74 ). This addresses
the primary challenge for green hydrogen which is electrolyser scale up . More
than 85% of the value of modules is within the Mundra ecosystem .
• Targets 1mnt of green hydrogen production: This is adequate for producing
5.6mnt of green ammonia (or 10mnt of green urea) or alternatively 5.3mnt of green
methanol. Initially, ANIL is to develop 1.3mntpa of urea from Green H₂ to substitute
40
urea imports (Fig. 75 ). Total Energies has announced that this green H₂ can even be
used in European refineries.
• For green urea production carbon emissions from Mundra thermal power plant
can be used as a carbon source: Mundra plant generates 0.85kg of emissions per
kWh of thermal energy produced, and with a thermal capacity of 4.5GW, there is
enough carbon source for 1mnt of carbon needed for urea. This also reduces
emission intensity at the Mundra thermal power plant. (1T of urea needs 0.8T of CO2)
• ANIL signed a development and licencing agreement with Cavendish
Renewable Technology (CRT; unlisted) (LINK ): Agreement includes licence costs,
infra costs and royalties for CRTs electrolysis technology. Agreement covers R&D for
alkaline, PEM and AEM. Currently, CRT offers both alkaline and PEM. CRT is
developing a C cell (early stage) to significantly improve efficiency of alkaline
electrolysis.
Fig. 74: Adani New Energy (ANIL) targeting a fully integrated green H2 deployment
Manufacturing business Capacities by 2025

Solar modules
MG silica 35 ktpa Existing 2GW of cell and module making capacity
Polysilicon 30 ktpa Additionally upgrading 1.5GW to 2GW TOPCon
Ingots/wafer 10 GW Full backward integration from silicon to modules
Cells 10 GW
Modules 10 GW
WTG Prototype deployed
Mfg capacity 3 GW Mfg of turbine, rotor and nacelle
Electrolyser
Mfg capacity 5 GW Backward integration for supply assurance and cost efficiency
Focus on reduction in stack and BOP cost through scale and

localisation
Mfg to cover multiple technolgies - both alkaline and PEM
Note: TOPCon (also known as passivated contact) is next generation solar cell after PERC
Source: ANIL, Nomura research
Fig. 75: ANIL targets for green hydrogen and derivatives
Hybrid RE generation 20.0 GW

Electrolyser capacity 16.0 GW
Green H2 compression 1.0 mntpa
Hydrogen pipeline 200 kms
Green Ammonia 5.6 mntpa
Air separation unit (ASU) for nitrogen
generation
Green urea 2.8 mntpa
Source: ANIL, Nomura research
Larsen & Tuobro (L&T; LT IN, Buy)

Already taking steps to be an EPC leader in green hydrogen; initial focus appears
to be refining in India and green ammonia overseas
• L&T, as part of its FY26 strategy (Project Lakshya), has committed to investing
a 0.5GW of electrolyser capacity by FY26 and potentially 1.0GW by FY30. It has
highlighted this in a detailed report on Project Lakshya. The initial focus on hydrogen
generation will be on alkaline route and followed by PEM route.
• L&T also has plans for advanced chemistry batteries (3GW) and 5GW for solar
cell manufacturing: Towards this end, the company is seeking technology tie-ups
and it expects to secure some tie-ups over FY24-25E.
• L&T is focused on green and new age opportunities in the Hi-tech
manufacturing segment, including hydrogen electrolysers, batteries and data
centres: L&T stated that it seeks to set up a JV with investment of INR15bn in the
plan period to develop green hydrogen electrolysers. L&T will focus on the EPC of
green hydrogen plants and electrolyser supplies in India and the Middle East. L&T
41
may also pursue selective build own operate (BOO) projects against offtake
agreements for 15-20 years, as targeted in the refining segment . Towards that
end, L&T has stated that a technology partner is planned for selection in FY23.
Storage battery manufacturing is also planned for in a JV mode with a technology
partner, which may take at least two years to select and after that the JV targets
investment of INR35bn.
• L&T has already tied up with HydrogenPro (HYPROME NO, Not rated) of Norway
for alkaline electrolysers. Hypro claims that its high pressure alkaline electrolysers
are 14% more efficient than competing models which reduces power costs.
Recently L&T tied up with H2Carriers (unlisted) or H2C of Norway for floating green
ammonia production on industrial scale
We have interacted with H2C management on its P2X floater technology. P2X floater
ships of 1GW can cost EUR2.0bn of which 50% of the cost is electrolysers (PEM). For
L&T, the scope includes making the topside including fabrication of process and utility
modules (includes green hydrogen electrolysers, nitrogen plant and ammonia synthesis
process). Ship hull is not in L&T scope and will likely be outsourced to shipyards in Korea
of Singapore. We estimate EPC opportunity (including bought out component) for
L&T for these 1GW vessel is EUR1.2-1.5bn . We understand from our interaction that
at least three ships are planned for, which could be a multi-billion EUR opportunity .
L&T has secured a mega contract in Saudi Arabia for green ammonia plant; target
to operationalise in CY26F
Neom Green Hydrogen Company (NHGC; unlisted), a Neom green hydrogen company in
Saudi Arabia, has awarded Air Products and L&T JV contract for setting up an export
focused green ammonia plant of 1.2mntpa (0.2mntpa of green hydrogen used) integrated
with a 4GW of solar capacity. Based on the financial closure for the project, the contract
can be upto USD5bn . This unit is targeted to be operational by CY26 with a focus on
exports.
Joint venture with IOC (IOCL IN, Reduce) and Renew (unlisted) to target green
hydrogen opportunities in refining; initial start with IOC refineries at Panipat and
Mathura
This JV can provide initial EPC opportunities within IOC on a captive basis for green
hydrogen needs and can eventually target green mandates in other PSU refiners. The JV
will focus on developing electrolyser manufacturing with Renew working on establishing
the needed renewable energy supplies. The Initial focus will be on green hydrogen
projects at Panipat and Mathura refineries of IOC . L&T has estimated 2mntpa of green
hydrogen demand from refining, green fertilizers and city gas grid by CY30.
Ohmium (Enarka) (unlisted)

Deploying PEM electrolyser local manufacturing in India (80% local souring)
Ohmium is focused on PEM electrolyser technology and has presented PEM as a
superior offering over alkaline (NB: CEO/CFO has both alkaline and SOFC experience;
R&D emphasis with 200+ patents).
• This is due to alkaline being unsuitable for intermittent renewable power (however;
other experts on the subject point to use of RTC for alkaline and large scale
addresses the issue for alkaline),
• Low operating pressure (1 bar for alkaline vs 30-35bar for PEM. This leads to
additional compression stages (four stages to raise pressure). However, we note
Chinese alkaline players and HydrogenPro have developed prototypes addressing
the pressure issue (high pressure alkaline electrolyser)
• Low area footprint. Needs one-third space as alkaline stack so eliminates need for a
building. Stacking can be both horizontal and vertical; housing building is not required
.
• Significantly more modular and scalable, and parts can be fitted and assembled even
by basic equipment like forklift (easy installation).
To enhance competencies in the space, Ohmium in 2021acquired Enarka (unlisted) for

technology and design. It has also acquired an electronics company to keep electronics
in-house. Further, for BOP elements like power supply, it has outsourced to local contract
manufacturers. Ohmium claims the highest domestic content in its electrolyser at
80-85% domestic sourcing .
42
The company has presence in the EU, North America, Middle East, Australia and India
and has already planned 6-7 pilot projects in India.
Ohmium is looking to scale up its stack sizes ( Fig. 76 ), and expects to reduce
green hydrogen costs potentially to USD1.5/kg. Ohmium estimates PEM fuel cells
make long haul trucking potentially viable against existing diesel trucking in the long term.
( Fig. 77 )
Fig. 76: Ohmium intends to scale up stack size leading to further cost
economies
CY22 CY23 CY25

Stack size (in kW) 300 450 800
Mfg capacity (MW) - current 500
Target 1600
Headcount 300
Source: Company data, Nomura research
Fig. 77: Ohmium expects green hydrogen to be cost competitive which can
make long haul trucking viable with hydrogen fuelling
Indian context 2022 2025 2030

Grey H2 (USD/kg) 1.50 1.50 1.50
Green H2 (USD/kg) 3.26 1.40 0.90
Est solar power cost (kWh) 0.029 0.012 0.006
Refuelling price for 100 km for a long-haul
Indian context 2022 2025 2030
Diesel 21.89 21.89 21.89
Hydrogen 25.17 10.81 6.95
Note: For a long-haul truck,100 km distance, 40L of diesel required; Equivalent hydrogen required -7.72kg.
Pricing is without taxes (both state & central) and dealer margin has been removed
Source: Ohmium, Nomura research
Hero Future Energies (unlisted)

• Strategic partnership with Ohmium for PEM for 1GW of Green H 2 facilities in
India, the UK and the EU (targets 400-500TPD of green hydrogen production).
Hero acts as the renewable energy and BESS developer just like Renew in the IOC-
L&T-Renew JV.
• Hero will participate in government niche tenders for
Green hydrogen blending;
○
○ Green hydrogen for mobility. Dual fuel or FCEV; and

○ DRI-based sponge iron projects pilot cases
• For electrification purposes, the company believes SOFC is better suited due to
stability in high temperature operations and higher efficiency. According to the
company, PEM and alkaline are unsuitable for stationary applications .
• Hero believes green hydrogen can be used for running gas turbines and is also
pushing for behind the meter (BTM) solar projects with the government for pilot green
hydrogen projects.
Greenko (GKO LN, Not rated) ; focus on electron to molecule

• Greenko’s focus is to use renewable power to move from electron to molecule phase
(green hydrogen)
• Alkaline technology focus tied up with John Cockerill (COCKERIL IN, Not rated)
of Belgium: Greenko plans to put up 1GW of alkaline electrolyser manufacturing
initially and then scale up to 2GW. This will entail a capex outlay of USD500mn.
• The pilot for green ammonia in Himachal Pradesh (HP) was commercially successful
(200TPD) and will be commercialised in next 16-18 months.
43
• Plans for 1mntpa plant of ammonia (POSCO) on East coast and JV with ONGC for
Green Ammonia plants either on East Coast or West Coast. Greenko has already
entered into an agreement with Keppel (KEP SP, Not rated) in Singapore to
supply 0.25mntpa of green ammonia for which a solar facility of 1.3GW with pumped
hydro storage is to be set up to address intermittency issues.
• Greenko favours alkaline over PEM as
Indigenisation easier for alkaline vs PEM due to non usage of noble metals;
○
○ With RTC (round the clock) projects intermittency issue of renewable is

addressed. Greenko targets to commission the first RTC project in India in FY24
and expects 50GW of RTC tenders over the next three years; and
○ Pumped Hydro storage idea seeded in 2017 to address renewable intermittency
issues.
Renew Power (RNW US)

• Renew already has an existing portfolio of 13GW of renewable energy assets.
Targets 5mntpa of green ammonia capacity across five locations . Management
is also looking at green ammonia export opportunities.
• Intends to backward integrate with 2GW of solar and 1GW of WTG (wind turbine
generator) manufacturing capacity. Towards this end, Renew has secured 100 acres
of land at Dholera SEZ and with an investment of INR20bn, it targets to set up a 2GW
solar cell and a module manufacturing facility by 3QCY23. Construction is currently in
progress. This can be further expanded to a 4GW module capacity.
• Renew also favours alkaline electrolyser deployment in green hydrogen: This is
due to India’s significant industry experience in handling alkaline electrolysis in the
chlor alkali industry.and strong domestic components' system for alkaline.
• Renew is also securing RTC tenders to address intermittency issues. Renew
has secured a 400MW RTC tender. We believe Renew’s acquisition of a 99MW hydro
asset from L&T is to provide stable green power for its RTC projects.
Avaada (unlisted)
• Avaada has proposed INR400bn (USDbn) investment for a 5mntpa green
ammonia facility in Rajasthan (LINK ). Avaada expects significant export
opportunities for green ammonia from the EU under the carbon border adjust
mechanism (CBAM) with a potential need for 100mntpa of green ammonia in the EU.
It has already conducted front end engineering design (FEED) and targets to finalize
the EPC contractor by CY23 (12 EPC companies have expressed interest in pre-bid
discussions) .
• Avaada is seeking to operationalize 5GW of solar cells and modules factory in CY23
with a target to scale upto 10GW by CY30 with backward integration into polysilicon,
ingots, and wafers.
• Avaada is targeting 11GW of renewable portfolio by CY25 (vs 4GW at present) and
30GW by CY30.
• It is seeking electrolyser technology tie-up with a focus on alkaline electrolyser.
The alkaline operations are proposed to be conducted via RTC route though RTC is
relatively costly at present.
Ayana (backed by NIIF) (unlisted)

• Ayana has partnered with Greenstat (unlisted) of Norway for jointly developing
green hydrogen projects (LINK ). An initial pilot green hydrogen project is planned at
Karnataka.
• Ayana is focusing on PEM technology for electrolyser. Since alkaline needs 24x7
banking and is not suitable for intermittent renewable completely at atmospheric
pressure highlighting that RTC is costly and banking of power may not be feasible for
large scale projects, according to company experts.
ONGC (ONGC IN, Reduce)

• MOU signed with Greenko on July 2022 (valid for two years) to set up a 1mntpa
green ammonia plant by FY26: ONGC has estimated a cost of USD6.2bn of which
44
○ USD1.0bn is for green hydrogen and ammonia plant

○ USD5.2bn for 1.4GW RTC (pumped hydro storage) along with at least 5.5GW of
renewable capacity
• Targets green ammonia export opportunities in the EU, Japan and Korea besides
the Indian domestic market
• ONGC targets 10GW of renewables by 2030 and another 5GW overseas under
ONGC Videsh. ONGC is also considering 3GW of offshore wind portfolio as well.
GAIL (GAIL IN, Neutral)

• GAIL has awarded contract for 10MW PEM (4.3tpd) based plant at Madhya
Pradesh for green hydrogen. Cummins India (KKC IN, Reduce) to be O&M partner
while Technimont (MT IM, Not Rated) to be EPC contractor. GAIL is seeking 50%
domestic content.
• GAIL has already started hydrogen (not green hydrogen) blending in Madhya
Pradesh. So far 2% hydrogen blending has been achieved.
• GAIL experts highlighted maximum blending potential at 18%. Key challenges
are
○Lack of safety guidelines/regulatory framework which needs development;
○ Natural gas pipeline integrity issues. Hydrogen causes higher brittleness in steel
pipes, a challenge which we discussed earlier. Work needs to be done on pipeline
metallurgy to address the brittleness issues;
○ With green hydrogen blending with natural gas, customer agreements will have to
be reworked as the calorific value and efficiency of the gas changes.
• Repurposing existing natural gas pipelines can cost 15-20% of new pipeline
cost: This is less costly and allows for easier transport of hydrogen blended with
methane. This also helps in storage. These gases are relatively easy to separate and
recover.
GR Promoter group (controls GR Infra) (GRINFRA IN, Not

rated)
• GR Group and H2B2 (unlisted) of Spain has formed a JV (50% each) Green
Electrolysis to explore green hydrogen opportunities in India. H2B2 is a technology
partner and GR Promoter Group will focus on project development activities.
• GreenH Electrolysis will cover the whole value chain of hydrogen, with a focus
on the manufacturing of electrolysers and the development of green hydrogen
production plants in India and Asia. Initially a 100MW production plant is planned
which can be scaled to 1GW+.
• Focus is on PEM electrolyser based on our interaction with H2B2. H2B2 has
projects in the US and Spain. The company (H2B2) is currently engaged in SoHyCal
Project in California, setting up a green hydrogen production plant (state funded to the
extent of USD3.9mn) integrated with a solar PV and hydrogen refuelling station (HRS)
at a cost of USD29mn (USD8.6mn hydrogen plant of 1.3tpd/3MW, USD9.7mn solar
PV plant of 5MW and USD6.6mn HRS of 1.2tpd)
Green mandate push in refining, fertilizers and blending can

lead to 3mnt of green hydrogen demand by FY30F
We estimate that the first commercial usage of green hydrogen can materialize in the
refining sector as early as FY25F with the first leg of policies and incentives during FY24.
• We expect refineries to achieve 24% grey hydrogen replacement with green hydrogen
accounting for nearly a third of green hydrogen demand by FY30F.
• We expect a rise in green methanol blending in fuel to reduce emission content (this
can be driven both by mandates and lower costs); we estimate a rise to 15% blending
with diesel by FY30F and potentially 15% hydrogen blending in CGD by FY30F.
• Further, the mandate as envisaged by Niti Aayog to replace ammonia imports by
FY30 can drive growth from green ammonia and green fertilisers.
This leads to an overall demand estimate of 3.0mnt by FY30F, which while lower
than MNRE estimate of 5mnt, still represents significant opportunities . (Fig. 78 )
45
Additionally, we also estimate that at 3.1mnt of green hydrogen production

• supporting electrolyser capacity of 55GW is needed to be put in place which in
turn can support investments of at least 10-15GW of electrolyser manufacturing
capacity; and
• The additional renewable energy need can be 60-65GW.
The electrolyser capex alone would require investment of INR1.35tn, on our estimate, and
this can lead to at least INR340bn in additional power electronics demand over FY23-30F.
Thus, even achieving 3.1mnt green hydrogen production has significant ramifications
Water requirements to rise; desalination and municipal wastewater use are the
most ecologically friendly options
We estimate that at 3.1mnt of green hydrogen output, DM water requirement would rise
by 76MLD which in turn would need an even higher quantum of raw water (Fig. 79 ). This
can lead to water stress in arid or semi-arid areas and can thus be a potential ecological
concern (ESG concern). We estimate industrial water demand could rise by ~1% .
We estimate water stress as a key risk and this does not include water needs for
additional solar plants.
Thus, the government may mandate use of municipal waste water or desalination project
(Reliance intends use of desalinated water). This can support investments in water
treatment plants and desalination plants.
Fig. 78: We estimate FY30F green H₂ demand visibility at 3mnt

Significant demand driven by refining, fertilizers and potential blending mandates
46
Fig. 79: Incremental water and renewable power capacity needs

We estimate ~3.1mnt green H₂ demand for FY30F
Green H2 production 2030 3.06 mntpa

Daily production 8,389 TPD
350 TPH
DM water needed 9 Ltr per kg of H2
75,503 CUM/day
DM water needs 76 MLD
Raw water needed for DM 20 Ltr per Ltr of DM
1,510,064 CUM/day
Raw water needed 1,510 MLD
Power needs 19 GWH
Supporting power capacity @35% PLF 55 GW
Oxygen produced 2,796 TPH
CO2 emission saved 1,923 TPH
Additional water needs 755 MLD

SMR needs DM water 37,752 CUM /day
Extra DM water needed 37.75 MLD
Indian industrial water use 40 bnCUMpa
109,589 MLD
Increase in industrial water demand 0.7%
47
Product and plant solutions oriented

companies are best placed to benefit
Major players in automation and digitalization globally have already shown significant
interest in green hydrogen ecosystem and have invested into technology. The Indian-
listed arms of these major players may prove to be beneficiaries in the event hydrogen
adoption rises. (Fig. 80 )
The Indian arms of these global major players already have strong solutions for BOP
systems, especially in compressors and power systems (power electronics) where local
manufacturing ecosystem is relatively well-developed.
Fig. 80: Automation and digitalization companies benefit from offerings in green hydrogen production
ABB Siemens Energy Honeywell (HON US)

Hydrogen production Hydrogen production Hydrogen production
High performing Catalyst coated
membrane (CCM) for both PEM and
Grid and plant electrical and automation AEM - reduces electrolyser stack cost
infra Electrolysers by 25%
1,000+ Honeywell UOP Polybed™
Pressure Swing Adsorption (PSA)
Energy optimsation models PEM technology systems deployed globally
Digitalized thermal systems: Digitalize

and analyse data from thermal sensors
operators can create actionable Opex
Asset management (condition and Capex roadmaps for real-time
monitoring and predictive maintenance) Silyzer 300 sustainability monitoring.
Gas grid injection solutions for safe
reliable renewable gases integration into
distribution network. (300+ systems in
Safety and security management Electrical equipment operation)
Analysers and instrumentation Auxiliary systems H2 gas blending solutions for pipelines
Grid connectivity: Transmssion & Flow meters, pressure controller, gas

Service Distribution, substations, transformers quality measurement
High performance energy saving motors Honeywell control solutions like the
for H2 compressor Grid management Control Edge PLC
Honeywell Blue H2 Solutions is a ready-
now suite of proven carbon capture
Rectifiers H2 compressor (reciprocating & radial) technologies
ABB launched energy management

system for green H2 to cut production
costs by 20%: ABB Ability™ OPTIMAX® Asset management (condition
@1-3% of electrolyser capex Thermal storage battery storage monitoring and predictive maintenance)
Honeywell’s UniSim Design process

Auxiliary systems simulation for Green H2 Digital Twins
Hydrogen storage Field Instruments & automation
water treatment
Mechanical equiment
48
Larsen & Toubro LART.NS LT IN 27 February 2023
EQUITY: ENGINEERING & CONSTRUCTION
Taking significant strides on green hydrogen Rating

Remains Buy
Initial focus on technology acquisition; local electrolyser Target price
Remains INR 2,540
manufacturing and refinery foray can build scale Closing price
24 February 2023 INR 2,134
We maintain our estimates and TP; near term announcement of electrolyser
manufacturing plant capex and completion of technology tie-ups are key catalysts;
L&T already competent in the BOP space Implied upside +19.0%
L&T is one of the major thematic stocks in our coverage to play the green hydrogen trend.
The company's long-term strategy for FY26 (or Project Lakshya ) explicitly mentions green Market Cap (USD mn) 36,262.9
ADT (USD mn) 56.2
hydrogen to be among its key focus areas.
• L&T has already secured a mega order in Saudi Arabia for EPC of green
ammonia plant: The company has secured order for the construction of a 1.2mnt of Relative performance chart
green ammonia plant in Saudi Arabia in partnership with Air Products (APD US, Not
rated). The engineering, procurement and construction (EPC) scope for L&T includes
integrating 4GW of wind and solar with the project, for which L&T has secured
financial closure of USD5bn. L&T will be focusing on power grid and power generation
work. However, electrolysers may be imported this export-focused unit.
• Technology tie-up already exists for alkaline. Further tie-ups and electrolyser
manufacturing can boost EPC margins: According to L&T management, it plans to
unveil details regarding an investment of INR15bn for an electrolyser manufacturing
facility in collaboration with a technology partner by the end of FY23 or 1QFY24.
With reduced electrolyser manufacturing dependance on imported components, this
will result in higher EPC margins, in our view. L&T has already tied up with two leading
Norwegian companies for alkaline and PEM technology.
Source: Thomson Reuters, Nomura
• Commercial tie-ups with Indian Oil (IOCL) (IOCL IN, Buy) and Renew Power (u
nlisted) of green hydrogen EPC in refining can ensure initial order inflows: L&T
has tied up with Renew Power (for captive green power) and IOCL (captive Research Analysts
customers), aiming to bid for green hydrogen projects for refineries. This should India Engineering & Construction
enable L&T to target PSU refiners initially and achieve scale and cost economics. Priyankar Biswas, CFA - NFASL
According to L&T, initial contracts are planned at IOCL’s own refineries. priyankar.biswas@nomura.com
+91 22 403 74992
Trading at 19.5x FY25F EPS of INR109.6; maintain Buy with unchanged TP Neelotpal Sahu, CFA - NFASL
We are not revising our estimates. Our SOTP-based TP of INR2,540 is unchanged, neelotpal.sahu1@nomura.com
implying ~19% potential upside. We maintain our Buy rating. Key risks are weak order +91 22 403 74023
inflows and commodity price inflation.
Year-end 31-03-2022 FY22 FY23F FY24F FY25F

Currency (INR) Actual Old New Old New Old New
Revenue (bn) 1,565 1,848 1,848 2,081 2,081 2,336 2,336
Reported net profit (bn) 87 102 102 132 132 155 155
Normalised net profit (bn) 86 102 102 132 132 155 155
FD normalised EPS 60.45 72.13 72.13 93.00 93.00 109.62 109.62
FD norm. EPS growth (%) 24.2 19.3 19.3 28.9 28.9 17.9 17.9
FD normalised P/E (x) 35.3 – 29.6 – 22.9 – 19.5
EV/EBITDA (x) 23.4 – 20.0 – 16.5 – 14.3
Price/book (x) 3.7 – 3.3 – 2.9 – 2.6
Dividend yield (%) 1.7 – 1.4 – 1.7 – 2.1
ROE (%) 11.0 11.8 11.8 13.6 13.6 14.3 14.3
Net debt/equity (%) 137.5 119.6 119.6 103.1 103.1 86.4 86.4
Source: Company data, Nomura estimates
Key data on Larsen & Toubro

Cashflow statement (INRbn)
Year-end 31-03-2022 FY21 FY22 FY23F FY24F FY25F
Performance EBITDA 156 182 212 257 293
(%) 1M 3M 12M Change in working capital 103 36 -81 -110 -107
Absolute (INR) -3.3 4.0 21.4 M cap (USDmn) 36,262.9 Other operating cashflow -86 -69 -72 -86 -95
Absolute (USD) -4.5 2.6 11.1 Free float (%) 87.6 Cashflow from operations 173 150 59 61 90
Rel to NIFTY50 0.3 9.5 13.9 3-mth ADT (USDmn) 56.2 Capital expenditure 36 -32 -29 -31 -32
Free cashflow 209 117 31 30 58
Income statement (INRbn) Reduction in investments -195 -3 0 0 0
Year-end 31-03-2022 FY21 FY22 FY23F FY24F FY25F Net acquisitions 82 6 0 0 0
Revenue 1,360 1,565 1,848 2,081 2,336 Dec in other LT assets
Cost of goods sold -896 -1,027 -1,223 -1,346 -1,491 Inc in other LT liabilities
Gross profit 464 538 625 735 845 Adjustments 41 18 19 22 24
SG&A -89 -88 -102 -117 -134 CF after investing acts 137 139 50 52 83
Employee share -248 -297 -342 -393 -452 Cash dividends -51 -51 -41 -53 -62
expense Equity issue 0 0 0 0 0
Operating profit 127 153 182 225 259 Debt issue -86 -81 16 1 1
EBITDA 156 182 212 257 293 Convertible debt issue -36 1 0 0 0
Depreciation -29 -29 -30 -32 -34 Others 46 19 31 36 40
Amortisation CF from financial acts -126 -111 6 -16 -21
EBIT 127 153 182 225 259 Net cashflow 11 27 55 36 61
Net interest expense -39 -31 -27 -27 -27 Beginning cash 151 162 190 245 281
Associates & JCEs 0 1 2 3 4 Ending cash 162 190 245 281 342
Other income 34 23 24 26 29 Ending net debt 1,241 1,133 1,093 1,058 998
Earnings before tax 123 145 181 227 265 Balance sheet (INRbn)
Income tax -40 -42 -50 -63 -73 As at 31-03-2022 FY21 FY22 FY23F FY24F FY25F
Net profit after tax 82 103 131 165 192 Cash & equivalents 162 190 245 281 342
Minority interests -13 -17 -29 -33 -36 Marketable securities
Other items Accounts receivable 422 461 532 597 671
Preferred dividends Inventories 58 59 62 71 79
Normalised NPAT 69 86 102 132 155 Other current assets 1,598 1,618 1,766 1,924 2,095
Extraordinary items -36 1 0 0 0 Total current assets 2,241 2,328 2,605 2,873 3,187
Reported NPAT 33 87 102 132 155 LT investments 433 436 436 436 436
Dividends -51 -51 -41 -53 -62 Fixed assets 331 334 332 331 330
Transfer to reserves -17 36 61 79 93 Goodwill 81 75 75 75 75
Valuations and ratios Other intangible assets
Reported P/E (x) 90.5 34.9 29.6 22.9 19.5 Other LT assets
Normalised P/E (x) 43.9 35.3 29.6 22.9 19.5 Total assets 3,086 3,172 3,448 3,715 4,027
FD normalised P/E (x) 43.9 35.3 29.6 22.9 19.5 Short-term debt 565 689 689 689 689
Dividend yield (%) 1.7 1.7 1.4 1.7 2.1 Accounts payable 455 511 604 669 752
Price/cashflow (x) 17.5 20.2 51.1 49.5 33.5 Other current liabilities 363 402 451 507 570
Price/book (x) 4.0 3.7 3.3 2.9 2.6 Total current liabilities 1,383 1,603 1,744 1,865 2,011
EV/EBITDA (x) 28.1 23.4 20.0 16.5 14.3 Long-term debt 839 634 649 650 651
EV/EBIT (x) 34.5 27.9 23.3 18.8 16.2 Convertible debt 0 0 0 0 0
Gross margin (%) 34.1 34.4 33.8 35.3 36.2 Other LT liabilities -15 -18 -18 -18 -18
EBITDA margin (%) 11.5 11.6 11.5 12.3 12.5 Total liabilities 2,207 2,218 2,375 2,497 2,644
EBIT margin (%) 9.4 9.8 9.8 10.8 11.1 Minority interest 121 130 158 191 227
Net margin (%) 2.5 5.5 5.5 6.3 6.7 Preferred stock
Effective tax rate (%) 32.7 29.0 27.7 27.6 27.6 Common stock 3 3 3 3 3
Dividend payout (%) 151.2 58.3 40.0 40.0 40.0 Retained earnings 756 821 911 1,023 1,153
ROE (%) 4.7 11.0 11.8 13.6 14.3 Proposed dividends
ROA (pretax %) 4.4 5.2 5.9 6.9 7.4 Other equity and reserves
Growth (%) Total shareholders' equity 759 824 914 1,026 1,156
Revenue -6.5 15.1 18.1 12.6 12.2 Total equity & liabilities 3,086 3,172 3,448 3,715 4,027
EBITDA -4.3 16.6 16.5 21.1 13.9 Liquidity (x)
Normalised EPS -22.4 24.2 19.3 28.9 17.9 Current ratio 1.62 1.45 1.49 1.54 1.58
Normalised FDEPS -22.4 24.2 19.3 28.9 17.9 Interest cover 3.3 4.9 6.7 8.4 9.6
Source: Company data, Nomura estimates Leverage
Net debt/EBITDA (x) 7.95 6.22 5.15 4.12 3.41
Net debt/equity (%) 163.6 137.5 119.6 103.1 86.4
Per share
Reported EPS (INR) 23.59 61.13 72.13 93.00 109.62
Norm EPS (INR) 48.66 60.45 72.13 93.00 109.62
FD norm EPS (INR) 48.66 60.45 72.13 93.00 109.62
BVPS (INR) 534.98 581.09 644.70 723.54 814.83
DPS (INR) 35.65 35.67 28.85 37.20 43.85
Activity (days)
Days receivable 111.3 103.0 98.1 99.3 99.0
Days inventory 23.6 20.9 18.2 18.1 18.4
Days payable 181.6 171.8 166.5 173.0 173.9
Cash cycle -46.7 -47.8 -50.2 -55.6 -56.5
50
Company profile
L&T is a play on rising infrastructure spend in India. L&T has execution capabilities for diverse segments of infrastructure including transportation
infrastructure, commercial infrastructure, power, hydrocarbon and defence.
Valuation Methodology
We value L&T on sum-of parts basis for various segments to arrive at our target price of INR2,540. We use EV/EBITDA for almost all segments
except for financial services and development portfolio, which we value by P/B metric. We benchmark against NIFTY50.
Risks that may impede the achievement of the target price

Further delay in the recovery of the investment cycle and continued deterioration in working capital requirement are key downside risks
ESG
L&T has significant focus on the environment with thrust on energy and water-use efficiency. As of FY20, L&T generated 1.06mn units of solar
power and was able to reduce carbon emissions by over 104k CO2 emissions. It aids in building social infrastructure critical to economic
development. It reports its progress on sustainability goals in line with Global Reporting Initiative (GRI) Standards ‘In Accordance – Comprehensive
option’ – highest level of disclosure in public domain. L&T has no promoter share pledges.
51
Setting the stage to lead on green hydrogen

EPC in India/globally
Green hydrogen is a key pillar of L&T strategy; EPC
competency for green hydrogen/ammonia projects is already
present
L&T management has described green hydrogen as a key focus area in its strategic
plan
L&T’s strategic plan for FY26, known as Project Lakshya, has a clear and committed
focus on ESG which includes increasing the share of green business revenue from 30%
in FY21 to 40% by FY26 (Fig. 82 ). Furthermore, for the hi tech-manufacturing division, its
key goal is to set up 500MW pa of electrolyser production capacity by FY25 and further
expand to 1GW by FY28. The vision also specifies initial milestone may be based on
alkaline electrolyser technology and the later phase may include PEM electrolysers as
well (Fig. 81 )
Green hydrogen-linked EPC opportunities will be focused on by the energy segment (
Fig. 81 ). L&T has also set goals to establish 5GW of cell manufacturing and 3GW of
battery modules by FY27 for advanced chemistry batteries. Thus, green hydrogen-related
prospects can be the key drivers for energy and hi-tech manufacturing, based on
management strategy.
Fig. 81: L&T growth plan for FY22-26
Includes Growth outlook Drivers Capex required

11-13% growth in Continued thrust in public capex, opportunities in line
Infrastructure Infrastructure order inflows with rising thrust on ESG globally INR100-110bn
Hydrocarbon+ Power+ 11-13% growth in Strong uptick in order inflows by GCC countries, focus
Energy Green EPC order inflows on green hydrogen EPC
Manufacturing of electrolyzers (500 MW by FY26E and
1GW by FY28E) through technology tie-ups. To focus on
hydrogen manufacturing through alkalyne route and then INR60-70bn for green hydrogen,
through PEM route in Phase II. Also manufacturing of data centres, electrolysers,
Heavy Engineering, 15%+ revenue advance chemistry batteries (5GW of cell manufacturing battery and any other new
Hi tech manufacturing defence engineering growth and 3GW of battery modules by FY27) businesses
IT services+e-commerce High teen growth in Acquisitions, growth in Edutech and Sufin, growth in
Services- IT&TS businesses revenues datacentres (target of 90MW by end of FY26E) Acquisitions of INR70-75bn
Financial services Financial services Reorganise lending portfolio towards retail lending
Tie up with IOCL for supply of green hydrogen, near term

Preference for exit, exit of road concessions and Nabha Power, de-risking
Build, own operate Hyderabad metro by stabilising debt and eventually
Development portfolio in green hydrogen taking the Invit route
52
Fig. 82: L&T long-term ESG plan on environment
FY21 FY26 FY35 FY40 Comments

Climate change
Total emissions (mnTCo2) 0.80 0.48 Net Zero 40% reduction by FY26
Emission intensity (tCO2/INR bn
sales) 790-815 Scope 3 emissions being mapped
Renewable (% consumption) 11% 50%
Efficiency improvement 2.0%-2.5%/y
Trees planted 4.4 1.5-2.0mn/y FY22 is cumulative
Water security
Total consumption (mn kL) 9.6 Net Zero
Water intensity (mn kL/INR bn sales) 10.6-11.4 6-9% efficiency gains pa

Water recycling (%) 7.20% 7.6%-9.0%
Green Business
Green porfolio (% of sales) 30% 40% Water infra, solar, FGDs, green
buildings in FY22 and green
hydrogen, energy storage by FY26
Note: FGD = Flue gas desulphuriser
L&T has demonstrated EPC capabilities for constructing green ammonia; it has
secured a mega contract in NEOM, a planned smart city inSaudi Arabia
L&T’s hydrocarbon division within its energy segment has secured a large contract,
amounting to USD6.4bn (according to Arab News ) for a 1.2mnt green ammonia plant in
NEOM, Saudi Arabia. Based on management comments and media disclosures, it
appears L&T is undertaking the EPC part (electrolyser is out of scope). This the world’s
largest green ammonia plant under construction with a focus on exports from 2026.
• According to Zawya newspaper , Haldor Topsoe (unlisted) will provide the
technology for green ammonia synthesis,Thyssenkrupp Nucera (TKA DE, Not rated)
will supply 2.2GW of electrolyser technology, and Baker Hughes (BKR US, Not
rated) will be the partner for hydrogen compression. Air Products (APD US, Not
rated) will partner with L&T to provide its air separation technology.
• According to Arab News, L&T has secured a contract for EPC of renewable energy
infrastructure, winning bids against competitors including Chinese firms Energy
China (601868 CH, Not rated) and Power China (601669 CH, Not rated). The
contract focused on EPC of the renewable energy infrastructure which includes:
○ 2.93GW of solar power generation plant along with 1.37GW of wind power farm
○ A 400MWh battery energy storage system (BESS).
○ Further, 190ckms of transmission infrastructure is included in the scope.
Securing such a large contract may place L&T favourably in large green
ammonia/hydrogen projects. Currently, Petronas (6033 MK, Not rated) is planning a
large green ammonia facility at Tamil Nadu and Masdar (unlisted) is planning a large
green hydrogen project in the UAE, according to IESD .
Focus on technology and commercial tie-ups

L&T is penetrating deeper in the hydrogen ecosystem with a focus on electrolyser
manufacturing; tie-ups are being secured with technology partners
L&T had already tied up with HydrogenPro (HYPROME NO, Not rated) for alkaline
electrolyser technology. This step is critical in securing commercially viable technology to
electrolyse water to produce green hydrogen. HYPRO claims to have among the lowest
costs of green hydrogen generation (potentially below USD2/kg under Indian power costs
) and uses its proprietary alkaline electrolyser technology (Quick Note - Green Hydrogen
expert talk - green hydrogen below USD2/kg? ). The technology has the advantage of low
opex; moreover, no precious metals (like platinum) are used as catalysts, leading to
affordable solutions .
53
Fig. 83: HYPRO alkaline electrolyser technology is already Fig. 84: Opex accounts for ~80% of lifecycle cost of fuel cells;
competitive vs grey hydrogen; significantly ahead in costing opex savings can thus add significant value
vs PEM fuel cells
Source: Hydrogen Pro, Nomura research

Source: Hydrogen Pro, Nomura research
L&T targets to announce INR15bn investments with JV partners to set up

electrolyser manufacturing plant; this can boost long-term EPC EBITDA margins
L&T at its 3QFY23 earnings call stated that by late 4QFY23 or early 1QFY24 it expects to
finalize joint venture and technology tie-ups for setting up an electrolyser manufacturing
plant at Hazira. We estimate it will take two years to set up the manufacturing plant, in
which L&T expects to invest INR15bn (enterprise value includes debt) along with
equity contribution from JV partners . This investment will enable setting up 500MW of
electrolyser manufacturing plant as targeted under the strategic plan (Fig. 81 ).
In-house electrolyser manufacturing can improve margins in EPC contracts
through reduction in imported items. Note that electrolyser stacks account for nearly
50% of the costs of a green hydrogen plant, according to the IEA.
L&T has already commissioned a pilot alkaline electrolyser plant in Sep-2022
L&T has set up a 380kW pilot green hydrogen plant at the Hazira facility using alkaline
electrolysis technology (30% potassium hydroxide base). At present, the green hydrogen
developed is blended with natural gas (15% green hydrogen), resulting in reduced
emissions.
The hydrogen plant can be further expanded in scale, and L&T plans to add PEM (proton
exchange membrane) electrolysers as well. Thus, by deploying both the leading
technologies, L&T intends to demonstrate its capabilities in both technologies to potential
customers. The facility can produce 45kgs of green hydrogen daily and has 990kW of
solar power capacity connected, along with battery storage. With the demonstration of
its capabilities, L&T expects to secure contracts from refiners to replace
conventional hydrogen use with that of green hydrogen.
JV with IOCL and Renew can help penetrate green hydrogen EPC contracts for PSU
refineries; refineries will lead to increased green hydrogen adoption, in our view
L&T is among the very few companies in India to have taken a number of concrete steps
in this direction, and this leads us to our view that L&T is well-placed to reap the benefits
of green hydrogen adoption in the country.
• L&T had tied up with Renew Power for the supply of green energy (solar power)
: Renew Power has 10.3GW of solar assets in the pipeline in India (as of Feb-22),
with experience in developing utility scale renewable energy projects while L&T has
experience in EPC. Thus, the focus of the strategic tie-up is on securing a green
energy source (link ).
• The tie-up between IOCL, L&T and Renew Power on 04 Apr-22 adds the final
dimension to green hydrogen readiness, in our view: The three companies have
signed a binding term sheet for a JV to develop green hydrogen. In addition, L&T
and IOCL have signed a binding term sheet to form a JV to manufacture and sell
electrolysers to produce green hydrogen. The partnership will initially focus on
implementing green hydrogen projects at IOCL's Mathura and Panipat refineries, and
54
the JV expects refining to be the driver of green hydrogen adoption in India,

consistent with our view as well .
We believe the tie-up can result in IOCL becoming an immediate captive customer,
with further potential to add other refiners as well as fertilizer industry players
Based on media interviews of IOCL, the Indian government is contemplating introducing
GHCO (green hydrogen consumption obligation), at 5% in FY24 and increase to 40% by
FY30. Thus, major refiners like IOCL may potentially require 346kt of Green Hydrogen
annually by FY30F, against none at present, on our estimate (Fig. 85 ).
The JV between L&T-IOCL-Renew can thus result in IOCL becoming a captive customer
initially. After the execution of green hydrogen projects at the Panipat and Mathura
refineries, the JV can target other PSU oil refiners as well. Thus, we estimate prospect
potential ranging between 0.3mntpa and 1.0mntpa for the L&T JV by FY30F from
refining alone .
Fig. 85: Green hydrogen usage estimation for refiners and other segments
Refining is the leading driver for green hydrogen adoption
FY21 FY30F
IOCL total Hydrogen demand (kt) 659 866
Green H2 consumption for IOCL (co
est) kt 346
All India refining demand of H2 (kt) 1,400 2,600
Green H2 demand refining 1,040
Total Green H2 demand of
refining, fertilisers and city gas 2,000
Demand from fertilisers 960
Investment required (USD bn) 60
Total Hydrogen demand (kt) 5000-6000 12,000
Green H2 All India (kt) - 5,000
Source: IOCL, L&T, Nomura estimates, Economic Times
Fig. 86: Green hydrogen consumption obligations (GHCO) proposed by Govt

%
FY24 FY27 FY30
% green H2 for refining and
fertilizers 5% 23% 40%
Source: Economic Times, Nomura research
The tie-up with H2Carrier (or H2C) is positive in not only targeting exports markets
but also securing shipbuilding orders
L&T has also tied up with H2C (unlisted) from Norway for floating green ammonia plants
for industry scale applications. This also gives L&T access to PEM electrolyser
technology as well as opportunities for shipbuilding
• L&T to build topside for H2C proprietary P2XFloater which is an industry scale
floating green ammonia and green hydrogen platform. The hull of the ship will be
manufactured either in Korea or Singapore, according to H2C management.
• Project scope includes fabrication of process and utility modules which include
electrolysers for green hydrogen, nitrogen plant (nitrogen is input for green ammonia)
and ammonia synthesis unit (via Haber Bosch process). The PEM technology is
proposed to be deployed .
Based on our interaction with H2C CFO, its strategic plan focuses on tapping stranded
renewable energy sources resulting in low power cost. The platform-based approach also
leads to no land footprint (based offshore) and can be a means to tap the renewable
potential of islands and offshore wind farms.
• The initial plan is to build 200MW ships via conversion of existing VLGC (very large
gas carriers) used for LPG/ammonia shipments
• It plans to eventually scale up to 500MW and then to 1GW sizes . These offshore
based production are among the most cost competitive expect for some large-scale
55
projects in Australia (Gladstone) among others.

• The 1GW ships can potentially cost EUR2.0bn and the eventual target is to deploy
seven ships for a green ammonia capacity of 1.80mnt in by 2030 . Initial vessels
may have additional 10-15% engineering and design costs.
• The final investment decision (FID) for these platforms are targeted in CY24 with
three years construction timeline (first green ammonia target is CY27). Thus, we can
expect some shipbuilding (excluding ship hull) for L&T over the next few years .
L&T’s IT arm LTIM (LTIM IN, Reduce) has also shown involvement in green
hydrogen ecosystem
Mindtree (now part of LTIM) has designed and implemented a digital command and
control solution. Built using Insights NxT, the IoT and data analytics platform of Mindtree
NxT, the solution enables remote monitoring and control of all services at the plant to help
optimize operational and energy costs, and drive effective utilization of resources such as
solar energy and battery energy storage systems. The solution is equipped with
preventive and predictive data analytics capabilities to provide real-time insights into plant
performance and support data-driven decision-making.
Fig. 87: Nomura vs consensus

INR bn, except EPS in INR
FY23F FY24F FY25F
Nomura Consensus Diff. Nomura Consensus Diff. Nomura Consensus Diff.
Revenue 1,848 1,817 2% 2,081 2,053 1% 2,336 2,304 1%
EBITDA 212 216 -2% 257 256 0% 293 291 1%
EBITDA margin 11.5% 11.9% (42) 12.3% 12.5% (13) 12.5% 12.6% (10)
Recurring PAT 102 110 -7% 132 136 -3% 155 162 -4%
ROE (recurring) 11.8 12.9 (112) 13.6 14.4 (78) 14.3 15.2 (95)
Source: Bloomberg consensus, Nomura estimates
Trading at 19.5x FY25F EPS of INR109.6; maintain Buy with an

unchanged TP of INR2,540
We continue to value L&T on a sum-of-the-parts (SOTP) basis, with unchanged multiples
for core segments (infra EV/EBITDA multiple at 16x, which is at historic mid-cycle levels).
We use a P/B approach for financial services and developmental projects. We value other
segments at one-year-forward EV/EBITDA. Only for Hyderabad Metro we use a DCF
approach. We arrive at a TP of INR2,540, implying ~19% potential upside, and
maintain our Buy rating .
56
Fig. 88: L&T – SOTP valuation

INR bn
Holdco Valuation Multiple 1Y fwd INR/
Segments L&T share discount Metric (x) EBITDA EV share
Infrastructure 100% EV/EBITDA 16.0 95.2 1,523 1,084
Energy 100% EV/EBITDA 9.0 29.5 265 189
Hi Tech manufacturing 100% EV/EBITDA 17.0 23.8 405 288
IT & ITES or LTIM 69% 25% EV/EBITDA 10.8 118.5 879 626
Others 100% EV/EBITDA 16.5 13.3 220 157
13.5 280.3 3,293 2,343
Less: Net Debt (ex- Dev projects and Fin services) (238) (169)
Add: Value of Joint Ventures 26 19
Less: Inter-segment
elimination 83% EV/EBITDA 13.5 13.9 155 110
Equity value (ex Dev
Projects and Fin Services) 3,402 2,421
INR bn
Valuation Multiple INR/

Segments L&T share Metric (x) Book Value Equity Value share
Developmental Projects P/BV (FY23) 2.9 20.7 60 43
Stake in IDPL Invit 15.0% P/IC 11.5 0.8 9.8 7
Financial Services 64% 25% P/BV (FY23) 1.0 149.7 96 68
165 118
Equity Value INR/

(INR bn) share
Equity Value L&T 3,567 2,540
Fig. 89: L&T overall PE Fig. 90: L&T: Core P/E
Source: Bloomberg Finance L.P.

Source: Bloomberg Finance L.P., Nomura research
Investment risks
• Delays in recovery of the investment cycle.
• Substantial rise in commodity prices adversely affecting margins.
• Deterioration of working capital requirement.
• Adverse foreign exchange movements.
57
Reliance Industries RELI.NS RIL IN 27 February 2023
EQUITY: INDIA ENERGY
RIL to lead the Indian renewable energy industry Rating

Remains Buy
Significant scale, technology tie-ups and favorable Target price
Remains INR 2,850
regulations place RIL strongly to develop new energies Closing price
24 February 2023 INR 2,384
RIL is best placed to capture the growing renewable market; maintain Buy
RIL’s strategy to pivot from its existing hydrocarbon business to a renewable energy Implied upside +19.5%
powerhouse derisks the company from terminal value concerns for its existing refining
business and create a long runway for growth. In our view, RIL’s holistic approach across the Market Cap (USD mn) 189,640.8
renewable value chain with deep backward integration, size, scale, technology ADT (USD mn) 184.5
prowess through significant acquisitions and a favorable regulatory framework place the
company to deliver robustly on its strategy to achieve its 'Net Carbon Zero’ target by 2035.
Robust strategy and execution, the defining factors for RIL’s success Relative performance chart
RIL has delivered strongly in creating industry-leading capacities with a high degree of
complexity across its entire O2C (Oil-to-Chemicals) business, a strategy which it replicated
robustly to its consumer-facing business and is adopting the same successful strategy for new
energy. Through significant investments of INR750bn, RIL will hold 21% market share in
India’s solar PV module industry, 20% share in green hydrogen and 31% share in
energy storage systems, on scaling up capacities as company disclosures.
Large acquisitions provide access to technology and scale will drive efficiency
RIL has invested USD1.37bn to acquire stakes in large global technology and EPC
(Engineering, Procurement and Construction) players to have a tight control on cost and ramp-
up of the new energy business. On solar module, RIL has invested USD1.1bn across REC
Solar (unlisted) (technology IP) and EPC player Sterling and Wilson Solar Ltd (SWSOLAR IN,
Not rated) to develop 20GW of low-cost solar PV module plants. It has also set up a co- Source: Thomson Reuters, Nomura
operation agreement with Stiesdal (unlisted) for technology development and manufacturing of
Stiesdal's HydroGen electrolyzers in India. RIL will set up 20GW of captive solar power to Research Analysts
provide energy for its green hydrogen generation, and will leverage its low-cost solar modules India Oil & Gas/Chemicals
and power generation along with Steisdal’s unique low-cost electrolyzer technology to achieve Hemang Khanna - NFASL
its 1-1-1 target for green hydrogen. hemang.khanna@nomura.com
+91 (22) 40374022
Favorable regulations to also aid RIL
The government’s announced measures such as: 1) the Green Hydrogen Mission, providing
incentives for electrolyser manufacturing and green hydrogen production through the PLI
scheme of INR175bn and mandating use among key consuming industries; 2) a PLI scheme
of INR240 bn for solar module manufacturing plants; and 3) customs duty on PV cells of 25%
and modules of 40% for imports from China. These are all beneficial to RIL.
Year-end 31-03-2022 FY22 FY23F FY24F FY25F
Currency (INR) Actual Old New Old New Old New
Revenue (bn) 7,000 9,619 9,619 10,634 10,634 11,004 11,004
Reported net profit (bn) 607 638 638 830 830 920 920
Normalised net profit (bn) 579 638 638 830 830 920 920
FD normalised EPS 91.10 100.50 100.50 130.59 130.59 144.81 144.81
FD norm. EPS growth (%) 26.4 10.3 10.3 29.9 29.9 10.9 10.9
FD normalised P/E (x) 26.2 – 23.7 – 18.3 – 0.2
EV/EBITDA (x) 17.3 – 13.9 – 11.6 – 0.1
Price/book (x) 1.9 – 1.8 – 1.7 – 1.5
Dividend yield (%) 0.3 – 0.4 – 0.4 – 33.3
ROE (%) 8.2 7.9 7.9 9.5 9.5 9.6 9.6
Net debt/equity (%) 29.5 33.7 33.7 33.3 33.3 27.8 27.8
Key data on Reliance Industries

Cashflow statement (INRbn)
Year-end 31-03-2022 FY21 FY22 FY23F FY24F FY25F
Performance EBITDA 807 1,105 1,415 1,718 1,868
(%) 1M 3M 12M Change in working capital 699 -515 162 -92 83
Absolute (INR) -1.3 -7.6 5.7 M cap (USDmn) 189,640.8 Other operating cashflow -1,428 253 -733 -499 -776
Absolute (USD) -2.6 -8.8 -3.3 Free float (%) 55.3 Cashflow from operations 78 843 845 1,127 1,175
Rel to NIFTY50 2.3 -2.1 -1.8 3-mth ADT (USDmn) 184.5 Capital expenditure -1,058 -1,195 -1,436 -1,421 -1,008
Free cashflow -980 -351 -591 -293 167
Income statement (INRbn) Reduction in investments 0 0 0 0
Year-end 31-03-2022 FY21 FY22 FY23F FY24F FY25F Net acquisitions
Revenue 4,669 7,000 9,619 10,634 11,004 Dec in other LT assets -168 -466 10 -15 -15
Cost of goods sold -2,927 -4,749 -6,714 -7,465 -7,778 Inc in other LT liabilities -142 126 68 64 72
Gross profit 1,742 2,251 2,905 3,169 3,226 Adjustments -47 433 42 84 95
SG&A -1,201 -1,444 -1,882 -1,873 -1,807 CF after investing acts -1,338 -258 -471 -161 319
Employee share Cash dividends -39 -43 -54 -57 -60
expense Equity issue 2,136 402 0 0 0
Operating profit 542 807 1,023 1,296 1,419 Debt issue -847 77 427 330 -175
EBITDA 807 1,105 1,415 1,718 1,868 Convertible debt issue
Depreciation -266 -298 -392 -422 -450 Others -47 9 0 0 0
Amortisation CF from financial acts 1,203 446 373 273 -235
EBIT 542 807 1,023 1,296 1,419 Net cashflow -135 188 -98 112 84
Net interest expense -212 -146 -190 -200 -204 Beginning cash 309 174 362 264 376
Associates & JCEs Ending cash 174 362 264 376 460
Other income 163 149 120 132 152 Ending net debt 2,064 2,301 2,826 3,044 2,786
Earnings before tax 493 810 953 1,229 1,366 Balance sheet (INRbn)
Income tax -17 -163 -241 -307 -342 As at 31-03-2022 FY21 FY22 FY23F FY24F FY25F
Net profit after tax 476 647 712 922 1,025 Cash & equivalents 174 362 264 376 460
Minority interests -41 -69 -73 -92 -105 Marketable securities
Other items Accounts receivable 190 236 211 233 241
Preferred dividends Inventories 2,183 2,539 3,122 3,289 3,370
Normalised NPAT 435 579 638 830 920 Other current assets 447 44 69 47 39
Extraordinary items 56 28 0 0 0 Total current assets 2,994 3,181 3,666 3,945 4,110
Reported NPAT 491 607 638 830 920 LT investments 3,648 3,943 3,943 3,943 3,943
Dividends -42 -51 -54 -57 -60 Fixed assets 4,511 5,005 6,089 7,220 7,854
Transfer to reserves 449 556 584 772 860 Goodwill
Valuations and ratios Other intangible assets 800 1,143 1,941 1,803 1,637
Reported P/E (x) 29.3 24.9 23.7 18.3 0.2 Other LT assets 1,260 1,725 1,715 1,730 1,745
Normalised P/E (x) 33.1 26.2 23.7 18.3 0.2 Total assets 13,212 14,997 17,354 18,641 19,289
FD normalised P/E (x) 33.1 26.2 23.7 18.3 0.2 Short-term debt
Dividend yield (%) 0.3 0.3 0.4 0.4 33.3 Accounts payable 1,135 1,094 1,871 1,796 1,647
Price/cashflow (x) 183.3 18.0 17.9 13.4 0.2 Other current liabilities 1,476 1,853 2,281 2,384 2,320
Price/book (x) 2.1 1.9 1.8 1.7 1.5 Total current liabilities 2,610 2,947 4,152 4,181 3,966
EV/EBITDA (x) 23.2 17.3 13.9 11.6 0.1 Long-term debt 2,238 2,663 3,090 3,421 3,246
EV/EBIT (x) 34.6 23.7 19.2 15.4 0.2 Convertible debt
Gross margin (%) 37.3 32.2 30.2 29.8 29.3 Other LT liabilities 370 496 564 628 700
EBITDA margin (%) 17.3 15.8 14.7 16.2 17.0 Total liabilities 5,218 6,107 7,806 8,229 7,912
EBIT margin (%) 11.6 11.5 10.6 12.2 12.9 Minority interest 993 1,095 1,168 1,261 1,366
Net margin (%) 10.5 8.7 6.6 7.8 8.4 Preferred stock
Effective tax rate (%) 3.5 20.1 25.3 25.0 25.0 Common stock 64 68 68 68 68
Dividend payout (%) 8.6 8.4 8.5 6.9 6.6 Retained earnings
ROE (%) 8.5 8.2 7.9 9.5 9.6 Proposed dividends
ROA (pretax %) 4.4 5.8 6.4 7.3 7.6 Other equity and reserves 6,937 7,727 8,312 9,084 9,943
Growth (%) Total shareholders' equity 7,002 7,795 8,379 9,152 10,011
Revenue -21.8 49.9 37.4 10.6 3.5 Total equity & liabilities 13,212 14,997 17,354 18,641 19,289
EBITDA -2.8 36.8 28.1 21.4 8.7 Liquidity (x)
Normalised EPS 8.0 26.4 10.3 29.9 10.9 Current ratio 1.15 1.08 0.88 0.94 1.04
Normalised FDEPS 8.0 26.4 10.3 29.9 10.9 Interest cover 2.6 5.5 5.4 6.5 6.9
Source: Company data, Nomura estimates Leverage
Net debt/EBITDA (x) 2.56 2.08 2.00 1.77 1.49
Net debt/equity (%) 29.5 29.5 33.7 33.3 27.8
Per share
Reported EPS (INR) 81.44 95.57 100.50 130.59 144.81
Norm EPS (INR) 72.09 91.10 100.50 130.59 144.81
FD norm EPS (INR) 72.09 91.10 100.50 130.59 144.81
BVPS (INR) 1,160.73 1,227.12 1,319.11 1,440.70 1,576.02
DPS (INR) 7.00 8.00 8.50 9.00 9.50
Activity (days)
Days receivable 11.1 8.5 7.6 7.9
Days inventory 245.3 181.5 153.9 157.2 156.2
Days payable 185.0 85.6 80.6 89.9 80.8
Cash cycle 60.3 107.0 81.8 74.9 83.3
59
Company profile
Reliance is India’s largest private sector company. It is a diversified energy major with global scale capacities in both refining and petrochemicals,
and has also diversified in upstream E&P. Over the last decade it has also diversified into telecom & digital services, and retail, and has already
become the leading player in these businesses. It has also announced major plans to diversify in New Energy and New Materials business.
Valuation Methodology
We use a sum-of-the-parts valuation to value RIL's different businesses. We use Dec'24F EV/EBITDA multiples for petchem (7.5x), refining (7.5x),
Reliance retail (35x), Jio (9x) and E&P (6x). We ascribe an option value to New Energy business at 15x Dec-24F EV/EBITDA to steady-state
earnings. Our target price is INR2,850. The benchmark index for this stock is Nifty 50.
Risks that may impede the achievement of the target price

Key downside risks: 1) lower than-anticipated refining margins; 2) weaker petrochemical margins; 3) lower-than-expected EoP subscribers or further
delayed tariff hikes; 4) weaker-than-expected growth for the retail segment; 5) slow ramp-up and lower profitability in New Energy business; and 6)
sharper INR appreciation vs the USD.
ESG
Reliance is India’s largest company by market-capitalisation and profitability. It is a diversified energy major with large global scale capacities in both
refining and petrochemicals, and also has upstream investment. Over last decade it has also diversified into telecom and retail business. While there
was always focus on environment, recently RIL has announced major plans of venturing in new clean and green energy. It has planned to set-up
Giga factories for solar PV, energy storage, green hydrogen and fuel cells. It is targeting initial investment of USD10bn in first three years. It has also
set itself a target to become net carbon zero by 2035. With increased focus on energy transition, RIL's ESG scores could meaningfully improve over
next few years, in our view.
60
RIL is investing INR750bn in the new energy segment

RIL has set a target to invest INR750bn in setting up five giga factories to scale up its new
energy business. Over the next few years, RIL will set up the following giga factories:
Solar PV manufacturing. A 10 GW solar PV cell and module factory based on REC
Solar’s technology (RIL acquired a 100% stake in REC Solar in Oct-2021) will commence
production by 2024. RIL will further scale up to 20 GW in a phased manner by CY26.
Green hydrogen. RIL will set up one of the world’s largest green hydrogen facilities at
Jamnagar, Gujarat. The company is currently among the world’s largest grey hydrogen
producers and aims to commence the transition from grey hydrogen production to green
hydrogen by CY25. RIL has set targets to bring down production costs for green hydrogen
to USD1/kg in a decade per its 1-1-1 plan, in comparison to the current cost of producing
green hydrogen at ~USD4-6/kg.
Energy storage. In energy storage solutions, RIL intends to create an end-to-end battery
ecosystem, spanning from battery materials to cell manufacturing, packs and battery
management systems (BMS). RIL has set up several strategic partnerships to deepen the
understanding of chemistry and materials. The company aims to start production of
battery packs by CY23, scale up to a fully integrated 5 GWh facility by CY24 and further
to 50 GWh by CY27.
Fuel cells. To develop engines that can generate electricity using oxygen and hydrogen,
which may be used to power vehicles as well as utilities like data centers, telecom towers,
generators, micro-grids and industrial equipment.
Power electronics. RIL will build capabilities across design, manufacturing of power
electronics and software systems to integrate the company with telecom, cloud computing
and IoT.
Solar energy generation. RIL aims to set up 20 GW of capacity by CY25 for its round
the clock (RTC) captive power needs and intermittent energy for green hydrogen.
Fig. 91: RIL's new and renewable energy project timelines and
capacity
RIL to set up significant capacities for renewable energy in the coming years
Capacity (GW) Timeline
Giga Factories
10 CY2024
Solar PV manufacturing
10 CY2026
5 CY2024
Energy storage
45 CY2027
Green hydrogen 1 MT CY2025
Fuel cells
Power electronics
Energy generation
Solar energy generation 20 CY2025
Robust strategy and execution have been defining factors for

RIL’s success
RIL has delivered strongly in creating industry-leading capacity in size as well as
complexity across both refining and petchem, enabling it to emerge as the world’s largest
single location refiner and among the world’s top eight players in a majority of petchem
products. RIL recreated that strategy robustly for both its consumer-facing businesses of
telecom and retail where it dominates the market by a significant margin across both
industries. Drawing from its playbook, RIL is scaling up its new energy business through
significant investments of INR750bn to create leading capacities across the value chain.
After scaling up to currently disclosed capacities, RIL will hold a 21% market share in
the solar PV module industry, 20% share in green hydrogen and 31% market share
for energy storage systems in India.
61
Fig. 92: RIL's India market share across renewable energy segments
RIL will hold 20-31% market share across green hydrogen,solar PVs and energy storage
solutions when disclosed capacities are commissioned.
Significant acquisitions provide a unique positioning which

should drive efficiencies
RIL has invested ~USD1.37bn in recent years to make acquisitions across both
technology and EPC services to control key factors in the development of its new energy
business.
RIL invested USD0.8bn in Norway-based REC Group. REC owns IP over polysilicon
production equipment using Fluidized Bed Reactor technology that consumes 25-30%
less energy than technology used by Chinese producers. REC also owns IP on split HJT
cell and modules that have achieved efficiencies of over 25% in commercial installations
across the EU and US. Lower cost of solar modules will drive higher efficiencies for RIL
and enable it to drive lower overall cost for the production of green hydrogen. RIL has
placed orders for 10GW of HJT cell lines recently and is on track to commission solar PV
modules by CY2024. REC is also doubling its PV module capacity in Singapore to 1.2
GW and setting up a plant in India. In the EPC space, the company has acquired a 40%
stake in SWSL. SWSL has executed over 11GW of solar power projects across the globe.
RIL signed a cooperation agreement with Stiesdal Inc in Oct-21 to develop technology
and manufacture Stiesdal’s HydroGen electrolyzers in India. Stiesdal’s electrolyzers can
be directly tied up to solar PVs, eliminating the needs for inverters, transformers and
rectifiers, thereby lowering overall costs and capital intensity. According to Stiesdal, its
economics are similar to Chinese electrolyzers, albeit still in the prototype stage and
needs commercial validation.
Fig. 93: RIL's acquisitions and MoUs

RIL has invested USD1.37bn across technology and EPC companies across various segments of renewable energy
Investment by RIL
Target company Competency RIL's holding INR mn USD mn Timeline
Acquisitions
REC Solar Holdings Solar cells, panels and poly-silicon manufacturing 100 63,222 771 Oct-21
Sterling & Wilson Solar Ltd EPC and O&M services in renewables 40 28,437 347 Oct-21
Faradion Global battery technology company 100 9,950 121 Jan-22
Lithium Werks Cobalt-free lithium battery technology and manufacturing 100 5,002 61 Mar-22
Ambri Inc. Long-duration energy storage system technology 4,100 50 Aug-21
Caelux Developer of perovskite-based solar technology 20 984 12 Sep-22
Kanoda Energy Solar energy player 88 750 9 Jan-19
Total 1,12,445 1,371
Cooperation agreement
Stiesdal Fuel Technologies Electrolyzer for green hydrogen production Oct-21
Backward integration to drive efficiencies for RIL

In order to control and drive down the overall cost of production of renewable energy, RIL
plans to completely backward integrate its solar modules production plant. According to
RIL, this will be a first-of-its kind 'quartz-to-module' facility globally — the facility will be
fully backwardly integrated beginning from quartz, to metallurgical silicon, to polysilicon, to
ingots/wafers — and integrated with cells and modules. Successful backward integration
62
can reduce risks from a sharp rise in commodity prices (as for polysilicon in CY2022) in
the solar value chain. RIL will also set up 20GW of captive solar power generation
capacity to power its green hydrogen production. Further, using Stiesdal’s HydroGen
elecrolyzers, the overall cost for producing green hydrogen can be even lower than
peers.
The fully backward integrated nature of operations will enable RIL to tightly control overall
cost of production, thereby driving efficiencies and competitive advantage, in our view.
Favorable regulations to also benefit RIL

The government has announced measures such as: 1) the Green Hydrogen Mission,
providing incentives for electrolyser manufacturing and green hydrogen production
through the PLI scheme of INR175bn and mandating use among key consuming
industries; 2) a PLI scheme of INR240 bn for solar module manufacturing plants; and 3)
customs duty on PV cells of 25% and modules of 40% for imports from China, which are
all beneficial to RIL, in our view.
Fig. 94: RIL’s backward integration for the O2C segment

RIL has created industry leading capacities with significant complexity to drive deep backward integration across its O2C value chain...
63
Fig. 95: RIL’s backward integrated solar module-electrolyzer-green hydrogen strategy

... RIL is recreating its deep backward integrated strategy across its new energy segment as well as
settingup the world’s first ‘quartz-to-module’ plant, which will be forward integrated to produce green
hydrogen, thereby driving significant efficiencies
Silica Poly Silicone Wafer
Module Cell
External sales Captive consumption
Eletrolyzer
Green Hydrogen
Fig. 96: Stiesdal’s HydroGen electrolyzer is more efficient than traditional processes
Stiesdal’s HydroGen electrolyzer can be tied up directly to solar PVs thereby eliminating traditional costs
related to inverters, transformers and rectifiers
Source: Stiesdal, Nomura research
64
Maintain Buy and TP of INR2,850

We maintain our Buy rating for RIL with an unchanged SoTP-based TP of INR2,850. Our
SoTP valuation uses an EV/EBITDA multiple for its segments based on December 2024F
EBITDA.
RIL’s Energy business accounts for an EV of INR7.1tn, accounting for INR1,117/share of
our SoTP.
For the O2C segment, we ascribe a 7.5X EV/EBITDA multiple to the refining and petchem
segments, leading to a combined O2C valuation of INR4.9 tn (USD61bn) INR765/share.
We ascribe 6x for RIL’s upstream segment, leading to an EV of INR1.5 tn contributing
INR234/share to the SoTP.
We ascribe an option value to RIL’s solar PV business with an EV of INR0.8tn,
INR118/share, based on a 15x EV/EBITDA multiple to our estimates of RIL’s steady state
EBITDA of INR74 bn from a 10 GW capacity.
We value RIL’s consumer facing businesses of Jio and Retail at a combined EV of
INR13 tn.
For Jio, we value the business at an EV of INR4.8tn, based on 9x December 2024F
EBITDA of INR675bn and netting off the 33.52% minority stake, leading to a value of
INR757/share.
For Retail, we value RR at an EV of INR8.2 tn, based on 35x multiple to December 20
24F EBITDA and netting off the 14.94% minority stake in the business leading to a value
of INR1,284/share.
We factor in our net debt estimate of INR2.6tn leading to an impact of INR405/share.
We reiterate our Buy rating for the stock with a SoTP-based target price of INR2,850.
Key downside risks: 1) lower than-anticipated refining margins; 2) weaker petrochemical
margins; 3) lower-than-expected EoP subscribers or further delayed tariff hikes; 4)
weaker-than-expected growth for the retail segment; 5) slow ramp-up and lower
profitability in New Energy business; and 6) sharper INR appreciation vs USD
Fig. 97: RIL: SOTP Valuation
Dec'24F Valuation
Consol EBITDA methodology EV Valuation
(INR bn) EV/EBITDA (X) (INR bn) (USD bn) (INR/share)
Energy 7,097 89 1,117
O2C 648 7.5 4,856 61 765
Petchem 286 7.5 2,144 27 337
Refining 362 7.5 2,713 34 427
Upstream 248 6.0 1,488 19 234
New energy option value 752 9 118
Consumer facing businesses 12,963 162 2,041
Jio 4,808 60 757
Jio EBITDA 675 9.0 6,075 76 956
Less: Minority interest (33.52%) -1,267 -16 -199
Retail 8,155 102 1,284
Retail EBITDA 273 35.0 9,549 119 1,503
Less: Minority interest (14.94%) -1,394 -17 -220
Total enterprise value 20,060 251 3,158
Others 570 7 90
Consolidated net debt 2,572 32 405
Fair value 18,058 226 2,850
65
Appendix A-1
Analyst Certification
We, Priyankar Biswas, Neelotpal Sahu and Hemang Khanna, hereby certify (1) that the views expressed in this Research report
accurately reflect our personal views about any or all of the subject securities or issuers referred to in this Research report, (2)
no part of our compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in
this Research report and (3) no part of our compensation is tied to any specific investment banking transactions performed by
Nomura Securities International, Inc., Nomura International plc or any other Nomura Group company.
Issuer Specific Regulatory Disclosures

The terms "Nomura" and "Nomura Group" used herein refer to Nomura Holdings, Inc. and its affiliates and subsidiaries, including Nomura
Securities International, Inc. ('NSI') and Instinet, LLC ('ILLC'), U. S. registered broker dealers and members of SIPC.
Materially mentioned issuers

Issuer Ticker Price Price date Stock rating Sector rating Disclosures
Larsen & Toubro LT IN INR 2,134 24-Feb-2023 Buy N/A A1,A2
Reliance Industries RIL IN INR 2,384 24-Feb-2023 Buy N/A
A1 The Nomura Group has received compensation for non-investment banking products or services from the subject company in the past 12
months.
A2 The Nomura Group has had a non-investment banking securities related services client relationship with the subject company during the
past 12 months.
Larsen & Toubro (LT IN) INR 2,134 (24-Feb-2023) Buy (Sector rating: N/A)
Rating and target price chart (three year history)
Date Rating Target price Closing price
31-Jan-23 2,540.00 2,124.40
01-Nov-22 2,425.00 2,024.45
27-Jul-22 2,065.00 1,796.65
16-May-22 1,995.00 1,542.90
30-Jan-22 2,412.00 1,897.55
28-Oct-21 2,167.00 1,814.25
27-Jul-21 1,870.00 1,608.25
16-May-21 1,654.00 1,415.50
26-Jan-21 1,616.00 1,361.30
15-Dec-20 1,510.00 1,246.25
24-Jul-20 1,152.00 887.23
08-Jun-20 1,200.00 943.09
16-Mar-20 1,432.00 950.30
For explanation of ratings refer to the stock rating keys located after chart(s)
Valuation Methodology We value L&T on sum-of parts basis for various segments to arrive at our target price of INR2,540. We
use EV/EBITDA for almost all segments except for financial services and development portfolio, which we value by P/B metric.
We benchmark against NIFTY50.
Risks that may impede the achievement of the target price Further delay in the recovery of the investment cycle and
continued deterioration in working capital requirement are key downside risks
66
Reliance Industries (RIL IN) INR 2,384 (24-Feb-2023) Buy (Sector rating: N/A)
Rating and target price chart (three year history)
Date Rating Target price Closing price
23-Jan-23 2,850.00 2,430.30
25-Oct-22 2,750.00 2,441.55
25-Jul-22 2,885.00 2,420.40
04-Jul-22 Buy 2,413.70
04-Jul-22 2,800.00 2,413.70
18-Oct-21 Neutral 2,707.60
18-Oct-21 2,850.00 2,707.60
25-Jan-21 2,400.00 1,941.00
31-Aug-20 2,450.00 2,080.70
16-Jul-20 2,200.00 1,843.40
04-May-20 1,900.00 1,421.72
16-Mar-20 1,770.00 1,006.16
For explanation of ratings refer to the stock rating keys located after chart(s)
Valuation Methodology We use a sum-of-the-parts valuation to value RIL's different businesses. We use Dec'24F EV/EBITDA
multiples for petchem (7.5x), refining (7.5x), Reliance retail (35x), Jio (9x) and E&P (6x). We ascribe an option value to New
Energy business at 15x Dec-24F EV/EBITDA to steady-state earnings. Our target price is INR2,850. The benchmark index for
this stock is Nifty 50.
Risks that may impede the achievement of the target price Key downside risks: 1) lower than-anticipated refining margins;
2) weaker petrochemical margins; 3) lower-than-expected EoP subscribers or further delayed tariff hikes; 4) weaker-than-
expected growth for the retail segment; 5) slow ramp-up and lower profitability in New Energy business; and 6) sharper INR
appreciation vs the USD.
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As at 31 December 2022.
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STOCKS
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indicates that the analyst expects the stock to perform in line with the Benchmark over the next 12 months. A rating of 'Reduce', indicates that
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67
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ANCHOR REPORT

Global Markets Research

Emerging trends: Green Hydrogen in India

Production Complete: 2023-02-27 17:27 UTC

Fig. 1: National Hydrogen Mission implementation plan

Call for Continuous

Fig. 2: Initial policies and incentives announced in Feb 2022

Incentives announced in Feb-22

Electricity supplied will count towards Discom RPO

Currently, green hydrogen is a costly solution for

Source: Nomura estimates

Source: Manufacturing competitiveness analysis for PEM vs alkaline by NREL, Nomura

Source: IRENA, Nomura research

Source: IRENA, Nomura research

Key opportunities for companies

Renewable energy needs

The need for green hydrogen; a tool towards decarbonisation

Fig. 13: Physical properties of select energy carriers

Hydrogen is clean burning but to be “green” its production

to hydrogen generation via fossil fuel .

Source: UNECE, Nomura research

Hydrogen has several “colours”; green hydrogen is produced from renewable

Initially hydrogen demand will be from existing segments like

Source: IEA, Nomura research Source: IEA, Nomura research

Source: India Country status report on Hydrogen

Fig. 21: CO2 emission targets by country

Source: Nomura research

Currently, hydrogen is used in refining and fertilizer; scope to increase applications

Green hydrogen also supports decarbonisation via utilisation of carbon dioxide;

• Synthetic natural gas (SNG) or methane: Synthetic gas is a creation of methane

Source: ICCT, Nomura research

Cost and storage issues are principal impediments to green

For application-related ammonia production and production of key chemicals green

Source: IRENA, Nomura research

A drop in green hydrogen cost to USD1-2/kg range can lead to adoption in

that decarbonisation efforts on mainline (broad gauge) are being implemented by

Green hydrogen generation cost falls with scale, higher

Source: Nomura estimates

Power cost reduction can be the biggest driver for cost

Source: Ohmium, India Infrastructure, Nomura research

Fig. 30: Chinese alkaline electrolysers are lowest in the industry

Companies like HydrogenPro in Norway have developed higher efficiency

Fig. 31: Comparison of available electrolyser technologies

Parameters PEM Alkaline Alkaline HYPRO

Electrolyser cost reduction and enhancing their lifetime of

have developed high pressure alkaline systems to reduce compression needs .

Fig. 32: Alkaline electrolysis process

Source: UNECE, Nomura research

Fig. 33: Alkaline electrolyser stack composition

Alkaline electrolyser stack components and materials

Polymer electrolyte membrane (PEM) electrolysis

by depositing platinum or Iridium on either side of a relatively costly NAFION

Fig. 34: PEM electrolysis process

Note: There are no liquid electrolytes like alkaline process

Fig. 35: PEM stack composition

PEM electrolyser stack components and materials

Fig. 36: Cost of electrolysers by technology (USD/kW)

Source: HydrogenPro, Nomura research

Based on the current pipeline of global projects announced (61GW) alkaline

Fig. 39: Technology readiness levels of electrolyser technologies

Source: IEA, Nomura research

Fig. 40: Estimate for end-2022 electrolyser manufacturing capacity (GW) by

Large scale deployment and manufacturing key to reducing

Fig. 41: Electrolyser cost split (cell stack and BOP)