“When I first visited the US as a Prime Minister, India was the 10th largest economy in the world. Today, thanks to various efforts, India is the fifth largest economy,” said Prime Minister Narendra Modi. Indeed, India remains the fastest-growing major economy in the world. According to some specialists, India is on its way to becoming a great power, potentially even a superpower.
India’s Solar Initiative
India has recently announced plans to boost solar power in the country, aligned with its broader push for sustainability. The Modi 3.0 government has made a bold promise to India—a commitment to become the third-largest economy in the third term of Narendra Modi. While most people are extremely excited about this, there is one significant problem for India: oil dependency. This issue is causing inflation to rise, and our companies are struggling to compete in the global market.
Government Policies and Initiatives
The easiest solution to oil dependency is renewables. This is why the Modi government has tried several policies to boost the Indian solar industry. In the field of energy, India’s Prime Minister Narendra Modi announced the Prime Minister’s SUEZ government launched the scheme PM KUSUM on 19th February 2019. This scheme aims to enhance farmers’ income, de-dieselize the farm sector, and reduce environmental pollution.
Challenges from China
Unfortunately, despite these efforts, China is dumping solar products into India, making it difficult for local manufacturers to compete. Chinese companies can produce solar panels at significantly lower costs compared to their European and American counterparts. For example, Chinese modules can be 50% cheaper than European ones and 65% cheaper than US-made modules.
India’s Response
However, there is good news. An Indian company, Waaree Energies, is finding ways to break China’s monopoly in the solar industry. Waaree Energies plans to launch the biggest IPO in the entire renewable energy space. If successful, this company could significantly reduce India’s dependency on Chinese solar products. Waaree Energies has a production capacity of 13.3 GW, three times that of its closest Indian competitors.
Waaree Energies: The Game Changer
Waaree Energies has shown incredible growth, with a revenue increase of 136% and a net profit growth of 538% in FY23. This company is not part of the Adani, Reliance, or Tata groups but is an independent entity making significant strides in the solar industry. Waaree Energies is the largest manufacturer of solar PV modules in India, offering a 30-year warranty and holding the biggest market share in the domestic market.
Strategies for Success
Manufacturing Capacity
Waaree Energies realised the importance of capacity creation. Increasing capacity helps reduce production costs and enables the company to compete with Chinese prices. With global demand for solar panels rising, this strategy opens up opportunities for increased profits.
Supply Chain Security
Waaree Energies is taking bold steps to vertically integrate all elements of the supply chain within India. This reduces dependency on Chinese imports and mitigates the risk of dumping strategies by Chinese companies. By producing everything from ingots to wafers to solar cells and modules, Waaree Energies aims to create a secure and self-sufficient supply chain.
Distribution System
Waaree Energies has built an extensive distribution network across India using a franchise model. This network of 388 franchises helps the company reach even tier 2 and tier 3 cities, ensuring widespread availability of their products.
Advanced Technology
Waaree Energies offers advanced technology that is often better than domestic peers and comparable to international competitors. Their flexible solar modules can be installed on various surfaces, including low load-bearing roofs, dome-shaped surfaces, and tensile fabric structures, making them adaptable to different environments.
Financial Viability
Waaree Energies has shown impressive financial performance. The company’s interest coverage ratio, a measure of its ability to pay interest expenses from profits, stands at 11 times, indicating strong financial health. Additionally, Waaree Energies has experienced significant revenue and profitability growth, driven by large orders from the United States. The company’s return on capital employed (ROCE) stands at 31.6%, indicating excellent profitability.
Challenges Ahead
Despite its success, Waaree Energies faces several challenges:
Decreasing Prices
The global cost of solar modules has dropped significantly, putting pressure on profits and increasing competition. The price of solar modules has reduced by 95% from $1.78 per watt in 2010 to just $0.096 per watt in August 2024.
Chinese Dumping Strategy
Chinese companies’ dumping strategies could pose a significant threat to Waaree Energies. If China targets Waree with aggressive pricing, it could impact the company’s profitability and sustainability.
Dependency on Chinese Raw Materials
Currently, Waaree Energies procures 70% of its raw materials from China. If China perceives Waaree as a threat, it may disrupt the supply chain, creating challenges for the company.
Government Support
The Indian government is taking steps to support the solar industry:
Domestic Content Requirement
The government mandates the use of domestically produced components in solar projects, promoting local manufacturing.
Performance-linked schemes
The government offers incentives linked to performance, encouraging companies to boost their production capabilities.
Import Duties
To protect domestic producers, the government has imposed a 40% import duty on solar modules and a 25% duty on solar cells, making it difficult for Chinese products to compete in the Indian market.
Conclusion
India’s solar energy industry holds immense potential, and companies like Waare Energies are at the forefront of this revolution. By building manufacturing capacity, securing the supply chain, and leveraging advanced technology, Waaree Energies is positioning itself as a key player in the global solar market. With government support and a strong focus on reducing dependency on Chinese imports, India’s solar dream is within reach.
As India continues to pursue its renewable energy goals, the success of companies like Waaree Energies will play a crucial role in achieving energy independence and sustainability. By learning from the challenges and opportunities in the solar industry, India can build a solid and self-sufficient renewable energy ecosystem.
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