Waaree Energies Taps Recurring Revenue with Green Hydrogen Service Model

INDUSTRIAL-GOODSSERVICES
Whalesbook Logo
AuthorIshaan Verma|Published at:
Waaree Energies Taps Recurring Revenue with Green Hydrogen Service Model
Overview

Waaree Clean Energy Solutions inked a 15-year Electrolyzer-as-a-Service (EAAS) agreement with Zero Footprint Industries (ZFI) for a 2.5 MW green hydrogen system in Uttar Pradesh. This deal, coupled with an MOU for up to 50 MW, signifies Waaree's strategic pivot to recurring revenue models in the expanding Indian green hydrogen market. The EAAS approach aims to make green hydrogen adoption cost-neutral for industries like chemicals and pharmaceuticals, aligning with India's National Green Hydrogen Mission and Uttar Pradesh's supportive policies. Waaree Energies' stock (WAAREEENER.NS) closed at ₹2,917.10, reflecting ongoing investor interest in the sector.

### The EAAS Catalyst: Recurring Revenue and Scalability
The agreement between Waaree Clean Energy Solutions and Zero Footprint Industries (ZFI) introduces a novel 'Electrolyzer as a Service' (EAAS) framework. This model fundamentally shifts Waaree's engagement from a direct equipment sale to a long-term operational partnership, generating predictable recurring revenue streams. By handling the design, installation, operation, and maintenance of the 2.5 MW alkaline electrolyzer system, Waaree enables ZFI to access green hydrogen and oxygen without the substantial upfront capital expenditure, a crucial enabler for cost-neutral transitions in sectors such as mentha oil, chemicals, steel, and pharmaceuticals. This strategic move positions Waaree not merely as a supplier but as an integrated solutions provider in the burgeoning green hydrogen economy.

Policy Tailwinds and Sectoral Expansion

The core of this development lies in Waaree's adoption of the EAAS model. Under this 15-year contract, Waaree will own and operate the 2.5 MW alkaline electrolyzer system manufactured at its Gujarat plant, supplying green hydrogen and oxygen to ZFI's Uttar Pradesh operations. This agreement, slated for commercial operation by Q3 FY27, is projected to produce approximately 41 lakh Nm3 of green hydrogen and 20 lakh Nm3 of green oxygen annually. Beyond the initial deployment, a broader Memorandum of Understanding (MOU) targets an additional 50 MW of electrolyzer capacity via EAAS across northern India, with ambitious scaling plans from 500 cubic metres per hour to 10,000 cubic metres per hour over five years. This scalable, service-oriented approach contrasts with traditional capital expenditure models, offering Waaree a more predictable revenue base and deeper customer integration. The stock, which closed Monday at ₹2,917.10, is trading with a P/E ratio in the range of 24.47 to 29.2, reflecting market valuation amidst growth prospects [3, 9, 21, 25, 33].

This partnership is deeply embedded within India's national and state-level green hydrogen initiatives. The project receives backing from the Uttar Pradesh New & Renewable Development Agency, aligning with the state's Green Hydrogen Policy 2024 [5, 8, 12]. Nationally, it supports the ambitious National Green Hydrogen Mission (NGHM), which aims for 5 million metric tonnes per annum (MMTPA) of green hydrogen production by 2030, backed by ₹4,440 crore in incentives for electrolyzer manufacturing capacity [4, 7, 10]. The UP policy itself offers significant incentives, including capital expenditure subsidies and waivers on electricity and transmission charges, creating a favorable ecosystem for projects like this [5, 12]. The green hydrogen produced will power industrial decarbonization and inland transport, reflecting a broader trend towards sustainable energy applications beyond mere power generation. India's renewable energy market, valued at over USD 33.6 billion, is experiencing robust growth, driven by policy support and declining technology costs, creating a fertile ground for hydrogen infrastructure development [17].

THE FORENSIC BEAR CASE: Execution Risks and Competitive Pressures

While the EAAS model offers recurring revenue, its success hinges on Waaree's operational efficiency and ZFI's consistent demand. The rapid scaling envisioned from 500 cubic metres per hour to 10,000 cubic metres per hour presents significant execution challenges, potentially straining capital resources and operational management. The Indian green hydrogen sector is intensely competitive, with giants like Reliance Industries, Adani Group, and NTPC making substantial investments and pursuing aggressive cost reduction strategies aiming for sub-$1/kg green hydrogen [27, 35, 37, 42]. Competitors like L&T Electrolysers are also establishing manufacturing capabilities [31]. Waaree's primary strength has been solar PV manufacturing, with a 21% share of the Indian module market [39], but its position in the complex electrolyzer service segment needs to be proven at scale. Furthermore, while analyst consensus leans towards a 'Buy' with price targets around ₹3,422.73, some analysts maintain 'Sell' or 'Underperform' ratings, citing risks in commodity-like businesses or valuation concerns [6, 14, 16]. The long-term viability of the EAAS model will depend on maintaining competitive pricing and technological efficiency against evolving alternatives and potential shifts in government subsidy structures.

The Future Outlook

Analysts generally maintain a positive outlook for Waaree Energies, with an average 12-month price target of ₹3,422.73 [6, 14, 19, 20]. This optimism is fueled by the company's expansion into high-growth areas like green hydrogen and its established presence in solar energy, supported by India's aggressive clean energy targets. The successful implementation of the EAAS model could unlock significant recurring revenue and solidify Waaree's position as a comprehensive clean energy solutions provider. The market expects robust earnings growth, with a 5-year CAGR of 113% and a strong ROE track record [39]. The government's continued focus on domestic manufacturing and green hydrogen adoption, including production-linked incentives and policy support, is likely to sustain demand for electrolyzer technology and related services, creating a favorable environment for companies like Waaree that can effectively navigate the operational and competitive challenges.
Disclaimer:This content is for educational and informational purposes only and does not constitute investment, financial, or trading advice, nor a recommendation to buy or sell any securities. Readers should consult a SEBI-registered advisor before making investment decisions, as markets involve risk and past performance does not guarantee future results. The publisher and authors accept no liability for any losses. Some content may be AI-generated and may contain errors; accuracy and completeness are not guaranteed. Views expressed do not reflect the publication’s editorial stance.