Websol Expects 2-3 Years of Margin Stability Amid Slow Industry Ramp-Ups

Websol Energy Systems struck a confident note on profitability during its maiden Q3 FY26 earnings call, indicating that its 40 percent-plus EBITDA margins are likely to remain resilient despite a wave of announced solar manufacturing capacity across India.

The management’s commentary came as investors sought clarity on how long such elevated margins can be sustained in an increasingly competitive domestic market.

Strong Q3 FY26 Performance Led by Cell Capacity Ramp-up

Websol reported revenue from operations of INR 261 crore in Q3 FY26, marking a 77.2 percent year-on-year increase. EBITDA stood at INR 106 crore, translating into a margin of 40.8 percent, while profit after tax (PAT) reached INR 65 crore with a 24.8 percent margin.

For the first nine months of FY26, the company posted revenue of INR 648 crore, EBITDA of INR 282 crore with a 43.6 percent margin, and PAT of INR 179 crore, corresponding to a 27.3 percent margin. Management attributed the strong performance primarily to the commissioning and ramp-up of Cell Line 2, along with higher overall utilisation across its manufacturing operations.

Margin Outlook: Stability for 2-3 Years

Margin sustainability dominated the Q&A session. Management acknowledged that margins could moderate as industry capacity matures, but argued that announced projects would take time to translate into effective production.

According to the company, margins are expected to remain broadly stable for the next “two to three years,” with only a “3 to 4 percent variation” likely in the near term. It also cautioned that blended margins may appear lower as module sales increase, given that module manufacturing structurally carries lower margins than cells.

Websol highlighted its favourable capacity mix, with 1.2 GW of cell capacity compared to 550 MW of module capacity, keeping it more exposed to higher-margin cell manufacturing than many peers.

Sequential Margin Dip Linked to Pricing and Product Mix

Addressing concerns over the sequential decline in EBITDA margin from 45 percent in the previous quarter to 40.8 percent in Q3, management pointed to two factors.

It cited some softening in cell and module prices during the quarter, alongside a higher contribution from module sales as capacity ramped up. Despite this, management said it does not expect any sharp margin erosion, emphasising operational efficiency and cell performance as key differentiators.

DCR demand underpins pricing and profitability

Websol positioned itself firmly as a domestic-content requirement (DCR) player, stating it currently has no non-DCR exposure. Management described the DCR segment as lucrative, with prices and margins at healthy levels.

While prices dipped during Q3, the company said they have started firming up in the current quarter, driven by rising input costs, including silver, and evolving policy and trade dynamics. Indicative realisations shared during the call placed cell prices at around 14 cents per watt peak and module prices in the range of 21.5 to 23 cents per watt peak.

High Utilisation and Efficiency Support Margin Resilience

Operational metrics were a key pillar of management’s confidence. Cell Line 1 is operating at around 97 percent utilisation, while Cell Line 2, commissioned on 27 September 2025, reached 54 percent utilisation in its first three months and is now close to 90 percent.

On technology performance, management indicated average cell efficiency of about 23.4 percent, with peak efficiency levels exceeding 23.6 percent shortly after commissioning. The company highlighted lower breakage, reduced rejections, and faster recovery from downtime as advantages stemming from its operational experience.

Silver Cost Management

With silver prices rising sharply, investors questioned potential margin pressure from input inflation. Websol said it has secured advance procurement of silver to improve near-term cost visibility and has already reduced silver consumption by around 25 percent through process optimisation.

The company is targeting an additional reduction of about 10 percent and is also evaluating alternatives to silver over the longer term.

Andhra Pradesh Expansion: Integrated TOPCon Facility Planned

On growth, management provided details of Phase 3 of its expansion in Andhra Pradesh, where land allotment and approvals are already in place. The phase involves a 2 GW integrated TOPCon cell and module facility, with an estimated investment of INR 1,600–1,700 crore.

Funding is expected through a 70:30 debt-equity mix, with debt of INR 1,100–1,200 crore and equity of around INR 500 crore. Management said the equity portion will be met through internal accruals, ruling out any qualified institutional placement or preference issue. Financial closure for the debt is targeted around March–April.

Pledge Release and financing structure

Investors also raised questions on pledged promoter shares linked to an existing IREDA facility. Management said the outstanding loan is around INR 100 crore and discussions are underway to secure release of the pledge in the coming months.

For the Andhra Pradesh project, debt is expected to be routed through a wholly owned subsidiary, with the company aiming to avoid fresh share pledges as part of the financing structure.

Policy Support, Technology Roadmap, and Supply Chain Plans

Management said its first cell line is already covered under the Approved List of Models and Manufacturers (ALMM), with approval for the second line expected shortly. It argued that ALMM expansion and DCR mandates should keep demand firm, particularly given the mismatch between approved cell and module capacity in the market.

The Andhra Pradesh facility will be based on TOPCon technology, while the existing West Bengal plant continues with mono-PERC, supported by a strong order book linked to schemes such as PM-KUSUM and PM Surya Ghar. Conversion of mono-PERC lines to TOPCon is under evaluation, though no timeline has been finalised.

On raw materials, the company continues to source wafers from China, citing limited domestic availability, and reiterated its plans to explore ingot and wafer manufacturing ahead of the government’s proposed wafer ALMM mandate in 2028.

Inventory build-up attributed to deferred offtake

Addressing the rise in inventory to around INR 93 crore, management said the increase was due to deferred customer offtake amid temporary liquidity constraints, rather than order cancellations. It expects normalisation in the current quarter.