Solar’s Next Big Challenge- Sustainable Growth

Coming Up- Solar’s Next Big Challenge- Sustainable Growth

It has been an abiding mystery how many business journalists, for all the knowledge they collect on their preferred sectors, usually ignore the financials of the firms they track. Relationships with firms, especially if they are not publicly traded, tend to be at an arm’s length, with information supplied on a need-to-know basis. The solar sector in India was also a lot like that, with yours truly forced to dig into filings with the Ministry of Corporate Affairs (MCA) or other ‘sources’, to get a real idea of the financials of many firms.

Till about two years back, this made limited difference, thanks to the typical delay of more than a year in seeing the numbers (FY21 or FY22 if we were lucky to see them in 2023), and more importantly, because of the almost uniform struggles of firms across the supply chain, from manufacturers to developers, with perhaps only some EPC firms showing reasonable profitability. Most were just getting by, with the promise of future growth dominating the narrative rather than past performance. All that changed in the last two years.

Not only did many of the promises start coming to fruition, but in the conversion of potential to reality, the sector itself has undergone a huge shift, a shift that is still ongoing. While the most visible aspect of this shift has been the slew of firms across the supply chain that have gone public, opening up a major new source of data and management insights,  even the non-public part of the industry is changing to survive in a new era of larger scale, quality and service standards.

This story sets out to chart the changes underway, the impact already seen, and the risks to future growth that continue to loom on the horizon, even at a time of record profits and goodwill for the sector. It is instructive to note here that the engine of solar growth, China, has seen at least three boom-bust cycles already since a serious solar push started there around 2010. Or once every five years. The latest, a one-year-old slump in prices caused by massive overcapacity, is already bleeding the top Chinese manufacturers, but will probably end with a much more leaner market there, in terms of the number of firms, their scale and the dominant technologies in use. Once that happens sometime next year, it is anyone’s guess how that will impact the rest of the world.

The FY25 Story- Full Throttle With Barely A Speedbreaker In Sight 

Notably, just two of the 15 companies we tracked for this feature reported a drop in growth in net profit, with Borosil Renewables being the sole loss-making exception. And even Borosil has seen its stock hold firm, thanks to the anti-dumping duty imposed on Solar glass for five years recently. The other, SJVN, has suffered due to a poor Q4. Moreover, most of these listed solar firms covering developers, EPC and module and cell makers also reported a margin expansion visible through the increase in their EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization), besides PAT (Profit After Tax).

Companies like Premier Energies, which were listed on the stock market last year, reported a massive 305 % jump in annual profits. Similar is the tale of Tata Power (TP) Solar (1272% profit), Solex Energy (390%), Websol Energy (228%), ACME Solar (130.7%) and Sterling & Wilson (140.55%).

Solar Module & Cell Manufacturers

We considered seven listed solar module and cell manufacturers in the Indian stock market. Spread across the main board and the SME exchanges, the scale of their profit margins and EBITDA portrays a rosy picture of their fast-improving finances. The key driver has been the enforcement of the Approved List of Module Manufacturers (ALMM) provision for all domestic projects. While launched as a non-tariff barrier to support domestic industry in 2019, the ALMM actually delivered in 2024-25, as restrictions on imports rose through higher duties and outright compulsory usage of domestic modules from April 1, 2024. The Domestic Content Requirement (DCR) across key categories drove up demand for domestically produced cells, leading to a persistent shortage and higher prices. And it showed in the FY25 results.

With firms also benefitting from lower input material costs from China, economies of scale by expansion, higher module demand, and lower cost of funds, most listed firms or their subsidiaries reported stellar improvements. For example-Tata Power subsidiary TP Solar, which is into solar cell manufacturing, reported a 1272% increase in its PAT. It also increased its PAT margins from -15.45% (FY24) to 7.91% in FY25. Similarly, struggling solar cell maker Websol Energy reported a spectacular turnaround with a PAT of Rs 154.7 crore, from a loss of Rs 120 crores earlier in FY24.

Percentage of key cost against its total revenue.

Two of the biggest solar module and cell manufacturers-Premier Energies and Waaree Energies, are listed in FY25. Propelled by lower input costs for imported wafers (the precursors to cell manufacturing), besides larger scale and high demand, these firms have delivered record profits. In Waaree’s case, exports to the US also offered higher margins, accounting for 15-20% of revenues, and a higher share of profits. Order books are bulging, at 18-30 months of potential production tied up already, signalling a strong show for the next few quarters as well.

The Input costs component stood at 73.3% of the operational revenue in FY24 for Premier Energies, which came down to 57.20% in FY24. Similarly, for Waaree Energie, it was brought down from 70.8% to 52.7%.

Waaree Energies, touted as the largest Indian solar module manufacturer with an operational capacity of around 15 GW, also commissioned its US module manufacturing unit in January 2025.

It also commissioned its 5.4 GW solar cell manufacturing line at Chikhli in Gujarat. 2024-25 also marked the one-year operations of its newly acquired firm, IndoSolar, which added Rs 55 crore revenue to the Group’s coffers as revenue. Their operational efficiency, with the reduction in their raw material cost, also seemed to have improved their financials. The firm now aims to increase its EBITDA from Rs 3,123  crore to anywhere between Rs 5,500 crore to Rs 6,000 crore in FY26. This is perfectly possible, considering its strong position in India with a 25 GW capacity approved in ALMM, and a 1.6 GW operational plant in the US.

Amit Paithankar

Amit Paithankar, CEO of the firm, saw a silver lining in new US restrictions on imports from Southeast Asia, besides China. “Indian cells are actually going to be better positioned tariff-wise, potentially, to be accepted (in the US)”, he said in a conference call with analysts.

This control over in-house solar cell production seems to be a key factor for many of India’s listed solar cell makers to bolster their financials further going ahead. Take the example of Tata Power. In the latest conference call, the firm said it had supplied 650 MW of solar cells in FY25 and explained how it aided in scripting a new success story for the group.

“We have a huge pipeline of orders to be executed. And most of these cells and modules that we will produce will be consumed internally.

Praveer Sinha

Maybe in subsequent years we might have some extra capacity for third-party sales…. we are not selling these DCR modules as such. A very small quantity we sell, depending upon the timelines in which it is required,” Praveer Sinha, CEO and MD of Tata Power, told investors.

Financially, among the solar module makers, Hyderabad-based Premier Energies delivered the highest profit increase. The firm, which has a 2 GW of solar cell capacity and 5.1 GW of module capacity, tripled its profits in FY25.  It now aims to further bolster its backward integration with its planned commissioning of wafer production by 2026 and ingots in FY2028.

The rise in demand for solar cells for key government schemes like PM Surya Ghar and PM-KUSUM, especially the former, has even surprised some of these firms, leading to the temporary shortage we saw till recently, which is expected to normalise only by the year-end as more production capacity comes online.

For Kolkata-based Websol Energy, one of the earliest solar cell makers that floundered in the face of Chinese imports,  the turnaround has been spectacular, with a 20X revenue growth.

Over the past year, Websol made significant progress as full-scale production resumed after an upgrade to its 600 MW Mono PERC Bifacial Solar Cell line. This return to operations contributed to a 20x-plus increase in revenue, reaching Rs. 5,755 million. This is reflected in the EBITDA margin of 44.2% and a PAT margin of 26.7 %.

The only listed solar manufacturing company to suffer was solar glass maker Borosil Renewable, which reported a negative growth in profit despite seeing a surge in its revenues. The firm is still recovering from the stiff competition from the alleged dumping of ultra-cheap solar glass from China and Vietnam, besides higher-than-expected costs associated with a European acquisition. However, with the imposition of Customs Duty against such imports and the imposition of anti-dumping duties against such countries, the fortunes of the Mumbai-based firm are set to turn soon.

Ranking of solar companies by their revenues from operations earned in FY25

Solar Project Developers

Solar project developers, or the firms that actually do the heavy lifting to bid for and win large solar projects,  have delivered a mixed bag of financial results. For these firms, gains from lower cost of funds and stable to dropping solar prices have proved to be vital to increased profitability. With far more stable returns of slightly lower returns owing to the nature of the business and the tough reverse tendering format, developers, of course, benefit from lower raw material risk besides long-term contracts.  Among the four key listed solar and renewable project developers, ACME Solar garnered the highest profit growth of 130.7% in the latest financial year (FY25) despite a mere 7.4% increase in its total income. It is also one of the few green energy developers that reported growth in PAT margins as well as EBITDA margins. The firm has attributed the rise in its income to its 1200 MW of commissioned solar projects in the fiscal year.

Its operational capacity is currently at  2,700 MW. In its investor presentation, the firm said that its balance sheet was strengthened via the equity raise and listing in November 2024, leading to an improved net debt situation. The firm plans to increase its total green capacity to 10 GW by 2030. With 450 MW of near-commissioning projects, 1,890 MW of signed PPA projects, and 2,090 MW of Letters of Awards (LoA), it is hopeful of maintaining momentum for its 2700 MW strong portfolio. A closer look at its balance sheet revealed a lesser burden of finance costs in FY25 compared to FY24.

For India’s largest renewable project developer, Adani Green, 2025  was another milestone year. Adani Green Energy added 3.3 GW of new capacity in FY25, when it had actually targeted 5 GW. This, the firm said, was still the highest ever by any renewable company in India. These additions led to a 22.7% growth in its income and a 58.8% growth in PAT. However, EBITDA margins witnessed a minor dip on account of increased expenses, primarily increased depreciation and finance cost, in addition to a rise in expenses for equipment. Buoyed by its growth and ambitious plans to focus on boosting capacities at Khavda, Ashish Khanna, CEO of Adani Green said told investors that the firm has eyed 5 GW of new capacities in FY26. The firm has set a 50 GW target for 2030.

A notable aspect of India’s top developers, other than NTPC Green, is how four of the top 5 are already into module manufacturing as well, in an effort to take advantage of government policies and secure supplies for their projects. Be it Adani Green through group firm ANIL or Adani Solar, Acme Solar with its own plans, or ReNew with its module and cell plants in Gujarat, or even Avaada which is moving to build a cell and module plant in Uttar Pradesh, the manufacturing footprint of Indian developers is an interesting sidelight that will be watched with interest by many. With a clear view to seeing if the diversification is sustainable in the long term. After all, this was seen in China as well a decade back, before firms decided to focus on their core competencies.

Ranking of solar companies based on their net profit earned in FY25

Solar EPC Firms

For EPC Firms, the good times have come from multiple directions. While smaller firms have the bonanza of the PM Surya Ghar scheme to harvest, the larger ones have both the large, utility-scale sector and the C&I segment to focus on. While the former delivers high-value, ‘prestige’  orders, the latter helps protect margins. And then there is the emergence of FDRE, RTC and Hybrid tenders, which have already seen multiple firms return to, or start up, wind energy EPC operations as well.

Take the EPC arm of Waaree Group-Waaree Renewable Technologies Limited (WRTL), known to many for its astounding stock run between 2023 and 2024 end, that claims to have an unexecuted order book standing at 3.2 GWp by the end of FY25. This does not include its first-ever GW-sized order, a 2 GW order from Jindal Renewables, besides sizeable orders from NTPC and other large developers. Its core area, the C&I segment, continues to develop all this while. The firm, which reported an 82.29% increase in its income and a 57.64% increase in PAT, however, witnessed a decline in its PAT margins and EBITDA margins.

The firm is now busy building up capabilities to execute more RTC and BESS projects as well.

Sterling & Wilson (SW) Renewable Energy, which was acquired by Reliance from its erstwhile promoter group in FY2023,  claims that out of their Rs 7,051 order inflow, 84% of it was domestic market orders, while other offshore projects came from two South African projects. For SW Renewable, 55% of their domestic orders came from their IPP business and 45% were PSU orders. The firm seems to be optimistic about the potential in India’s hybrid and BESS renewable projects.

Chandra Kishore Thakur

“Looking ahead, our India order pipeline continues to remain very strong, and we expect nearly 22- 23 gigawatts of orders to be bid out during this calendar year alone or in the next six to nine months. Over and above the solar EPC pipeline, we will continue to target BESS projects and select wind projects as well,” Chandra Kishore Thakur, Group CEO of the firm, told investors. He, however, reiterated that the success of EPC firms in India would depend on the finalization of contractual terms, financial closures, etc.

He also added, “We can overall say that we will be exceeding this year’s revenue target by 15%, 20% from the UOV that we have on 1st of April and the new orders will be coming. This is primarily because of many factors that is impacting the project commissioning and other things. But the growth prospect seems to be definitely better than this year’s and, say, the growth would be something better than, I mean, in the range of 15% to 20%.”

Another leading EPC firm, KPI Green Energy commissioned 960 MW of renewable projects in FY25. Alok Das, Group CEO of KPI Group, said that the annual renewable market demand in India is close to 40 GW to 50 GW with conductive policy support.

The firm, which had hitherto been focused on CPP or Captive Power Projects for C&I customers, claimed that the share of its Independent Power Producer (IPP) business stood at 13%. However, the Gujarat-based firm has planned to boost its IPP capacity upto 1.5 GW.

“Our final goal is to at least take this IPP portfolio to 25% and the remaining to our CPP portfolio. With that increase, naturally, the margins will improve because, as we all know, that IPP brings in a strong EBITDA margin of around 85% to 90%, and the CPP brings around 20% to 22%. Combined EBITDA margin would be around 32% to 33%,” Das told investors.  A clear sign of success arrived when the firm bagged a 300 MW bid with Coal India Limited for a Solar plant  last year.

FY25 proved to be a key year for the solar companies from all setors barring a few firms.

Even solar pump maker-Shakti Pumps, which buys its solar panels in the market, has tripled its net profit on the back of growth driven by PM KUSUM. It has attributed its increased profit margins on account of higher sales of its pumps in the domestic and export markets. Shakti Pumps’ business model is, however, unique in a way as it deals more with the state governments rather than with private entities. A close analysis of its presentation revealed that 77% of its consumers are government entities with a longer collections cycle. Perhaps the only factor weighing down its stock price for investors besides capacity limits. Shakti Pumps in fact has even made plans for a foray into module manufacturing itself, but it remains to be seen if it finally goes ahead, considering the impending risk of serious oversupply in the market.

Dinesh Patidar, Chairman of Shakti Pumps, said, “We have a healthy order book of Rs. 1,655 crores as on today with steady order inflow from major states such as Maharashtra, Haryana and Rajasthan.”

Conclusion

All three categories we have considered here, ie, Developers, EPC firms and manufacturers, are on a firm footing in terms of revenue visibility and prospects for the next financial year. However, it is post-FY26 that things appear to get a little cloudy. If developers face the risk of missing buyers for almost 30 GW of projects awarded, manufacturers face a serious risk of overcapacity in both module and cell manufacturing in due course. Current module capacity is already at over 87 GW as per the May ALMM list from MNRE, a figure that is expected to go up to 125 GW by year-end end possibly. Cell capacity, on the other hand, albeit causing shortages with the current 25 GW plus of active capacity, is also expected to rise to at least 50 GW by this time next year. All this is expected to have an impact on future orders for EPC firms, who might face margin pressures as order sizes go up.

In a market that, for all its growth and records in FY25, added about 24 GW of solar capacity in FY25, maintaining the growth rate of over 55% over FY24 seems out of the question in FY26 at least. Simple estimates show that the domestic industry will ideally hope to see at least 35 GW of additions to ensure enough work all around, besides a bigger push into off-grid installs. More importantly, these numbers are also needed to meet the national target of 300-odd GW by 2030. Support will come from the storage target of 230 GWh by FY32.

Why this might still be an underrated challenge was underlined by the recent instances of prices falling to Rs 0 or thereabouts on power exchanges, during solar hours, even as prices during non-solar peaks nudged Rs 10 even. A case for more storage, especially BESS in the system, if ever there was one. However, despite over 150 GWh of BESS tenders being floated to date, only a negligible portion have moved ahead. That needs to change, and change soon, for the solar story to continue to shine as brightly as it has in the past year.