Whalesbook
Policy Aims for Full Solar Supply Chain in India
India's government is taking a significant step by requiring domestic solar wafer production to begin in June 2028. This expansion of the Approved List of Models and Manufacturers (ALMM) framework now covers the entire solar value chain, including modules, cells, and the crucial wafer stage. The goal is to build a complete solar manufacturing system within India, cutting reliance on foreign suppliers for key parts. The wafer mandate will only go into effect if at least three independent companies can jointly produce 15 GW of ingots and wafers. This move is designed to push for more investment in early-stage production, where India currently has limited capacity.
Industry Consolidation and Competitive Shifts
Experts expect this policy change to speed up consolidation in India's currently fragmented solar manufacturing industry. Companies that already have or are building integrated operations—from ingots and wafers to cells and modules—will likely gain a clear advantage. This integration offers better cost control, more reliable supply chains, and more stable profits. Waaree Energies, known for its strong growth in modules and cells, is expected to benefit from this trend due to its efficient operations and good product mix. However, the mandate also brings significant investment pressure, especially for manufacturers using older technology or lacking deeper integration.
Challenges: Cost, Capacity, and Competition
Despite government support, India's push for domestic wafer production faces big challenges, mainly in matching global prices and building sufficient capacity. While India's module manufacturing capacity has grown rapidly to over 100 GW under the ALMM, the important ingot and wafer segment is still new, with current production far below future needs. Building the required 15 GW capacity by 2028 will need large investments and technical skill.
The global solar market is marked by tough competition and falling module prices, currently around $0.14 per watt. This price pressure, caused by too many modules being made worldwide, makes it hard for India to compete on price. This is especially true if domestic operational costs, like electricity prices (around ₹8.6/kWh, or $0.10/kWh, for industrial consumers in some states, though figures vary widely and can be higher), are higher than international benchmarks such as China (around $0.06/kWh for industrial power).
The ALMM extension, while boosting local production, could inadvertently make production more expensive if Indian players cannot achieve economies of scale and use the same technology as international competitors. Comparing companies, Waaree Energies has a market value near ₹88,150 crore and a trailing P/E ratio around 27, making it a strong company. However, its valuation is much lower than Adani Green Energy (Market Cap ~₹142,645 Cr, P/E ~99), suggesting different market views on their growth and profits. Sterling and Wilson Renewable Energy has a negative P/E ratio, showing it's facing financial issues despite its global EPC role.
Analysts generally recommend 'Buy' for Waaree Energies, with average price targets between ₹3,422 and ₹3,710, showing belief in its growth. Yet, some analysts rate it 'Sell' or 'Underperform', warning of possible risks. In the past, ALMM rules caused delays in getting materials, highlighting execution risks.
Risks: Weaknesses and Execution Hurdles
The government's goal to build a self-sufficient solar industry faces risks in carrying out the plan. The success of the wafer mandate depends on domestic manufacturers not only building capacity but also matching global prices and staying technologically advanced. India's current ingot and wafer production is very small compared to what will be needed. Furthermore, the global oversupply and falling module prices create a tough market for prices, potentially making Indian wafers less competitive unless big cost savings are achieved.
There's a risk the policy could accidentally create a market with only a few big players if only a small number of companies can afford the high costs and technology needed for wafer production. This could harm competition and new ideas over time. While Waaree Energies has a good history, its U.S. operations are affected by changing trade rules, like tariffs, which could impact profits and business diversification. The main question is: will forced domestic production lead to cheap, good products that can compete with global makers, or will it result in a costly, less efficient Indian supply chain?
Future Outlook
The outlook for India's solar manufacturing sector over the next few years appears fundamentally strong, especially for integrated companies. Government backing, along with rising demand at home and abroad, is expected to help companies charge more and use their factories better. Waaree Energies is expected to beat its FY26 earnings forecast, with analysts expecting continued growth. Margins are forecast to settle around 20.5% by FY28. The company's active expansion into markets like the U.S. and moves into areas like battery storage systems show a strategy to reduce risks and capitalize on new clean energy needs. The path forward will depend on the industry's ability to balance government rules with what the market needs, ensuring that making things in India helps, rather than hurts, its ability to compete globally.