Decoding domestic solar manufacturers IPO streak for India

What is Eninrac’s Overall Outlook on streak of Solar IPOs in India?

The outlook for domestic solar manufacturers launching IPOs is highly optimistic, driven by rising demand under India's Domestic Content Requirement (DCR) and restrictions on Chinese solar module imports. With the focus on backward integration to remain competitive in the global export market-particularly in regions like the USA (with UFLPA) and the EU, which have restrictions on Chinese inputs—manufacturers must avoid using Chinese components to prevent export rejections.

The export market has fueled significant growth, as seen with Waree Energy, which experienced a 5x revenue increase from FY 2022 to FY 2024, reaching INR 1,100 crore, and an EBITDA margin rise of nearly 9%. Encouraged by this, many OEMs are expanding into backward integration and related segments such as glass and black sheets. While the Production Linked Incentive (PLI) scheme provides substantial support, delays in operationalization are limiting growth and hindering global competitiveness. Hence, more IPOs shall be seen soon as well.

What is this trend of so many solar manufacturers going for IPOs? What is the reason behind this streak of IPOs?

Indian OEMs are not only targeting the domestic market but also tapping into high-potential export markets, particularly in regions like the US and EU, where restrictions on Chinese OEMs create opportunities. The export market offers significantly better margins, with module prices fetching INR 20-25/Watt more than in the domestic market. However, some Indian OEMs have faced rejections in these markets due to the use of Chinese wafers or cells, pushing them towards backward integration.

Moreover, relying solely on the PLI scheme for expansion is challenging, given the delays in operationalization and the need to customize production lines for different customers, which limits capacity utilization to 30%-45%. Larger facilities would allow OEMs to streamline production by dedicating lines to specific configurations, improving capacity utilization and operational efficiency. Additionally, growth in ancillary goods like glass and black sheets would significantly reduce imports, strengthening the domestic supply chain and cutting costs.

Currently, the investment landscape in India is notably buoyant, driven by an increasing number of millennial and Gen Z investors who are favoring stocks and mutual funds over traditional investment avenues. This trend has created new opportunities for companies to capitalize on. Additionally, renewable energy stocks are performing well, bolstered by the country’s aggressive renewable energy initiatives. Furthermore, companies are not immediately obligated to provide returns on the capital raised through initial public offerings (IPOs). This lack of immediate obligation positively influences the companies’ financial health, enhancing their creditworthiness and overall valuation. Such improvements may attract additional investment and funding from various sources.

What does it entail for the industry overall?

The wave of IPOs in India’s solar industry marks a significant growth phase, unlocking capital for manufacturers to expand capacity, pursue backward integration, and enhance global competitiveness, especially in export markets like the US and EU. This influx of funding will reduce reliance on Chinese components, drive innovation, and improve operational efficiency, as seen with Waree Energy’s success. The sector is poised for consolidation, new market entrants, and accelerated R&D, leading to better products, job creation, and alignment with India’s renewable energy goals. Investor confidence will rise, attracting foreign investment, boosting India’s ability to compete with China, and advancing the business case for hydrogen adoption in the long term.

How does the market look like 4-5 years from now i.e., till 2030?

In 4-5 years, India's solar market is poised for significant transformation, driven primarily by a strong focus on research and development, alignment with renewable energy goals, and an enhanced global presence. The influx of capital from the ongoing IPO spree will enable solar OEMs to invest heavily in R&D, leading to the development of innovative technologies such as high-efficiency solar modules. This emphasis on advanced solutions will not only improve product offerings but also ensure that Indian manufacturers remain competitive in the evolving energy landscape.

Additionally, the growth of the solar market will play a critical role in helping India achieve its ambitious renewable energy targets, including the goal of reaching 500 GW of non-fossil fuel capacity by 2030. As manufacturers expand their operations and enhance their capabilities, they will significantly contribute to reducing the country’s carbon footprint and increasing energy security. Furthermore, Indian OEMs will strengthen their presence in global markets, particularly in regions like the US and EU, where opportunities arise from restrictions on Chinese imports. This combination of R&D focus, alignment with renewable energy objectives, and a robust international footprint will position India as a key player in the global solar industry.