Markets
Why Waaree Energies’ meteoric rise has hit a wall
Summary
- Waaree Energies stands at a crossroads, with ambitious expansion plans and a need to adapt to a rapidly changing market landscape. Despite recent stock declines, the company’s focus on diversification shows promise
After a blockbuster debut on the BSE in October 2024, when its shares listed at a 69.66% premium, Waaree Energies has seen its performance falter dramatically. The stock has plunged 37% from its peak of ₹3,743, closing at ₹2,355.95 on 23 January, 2025. The sharpest blow came on 22 January, when the stock plummeted by 10% in a single trading session triggered by the expiration of a shareholder lock-in period, which escalated its selling pressure.
The solar solutions company is navigating a volatile market, and investor unease has further deepened due to concerns over global trade policies, particularly in the US.
As the largest manufacturer of solar modules in India, Waaree Energies stands as a forerunner for the country's clean energy ambitions. However, its recent performance and strategic decisions reveal a more complex and evolving story.
India’s renewable energy boom and Waaree’s role
India is taking bold strides toward a greener future, setting an ambitious goal of generating 500 GW of non-fossil fuel-based power by 2030. The country’s solar module manufacturing sector is thriving, with 65 GW of capacity already operational and another 25 GW of cell manufacturing expected to come online soon.
Waaree Energies, with its 13.3 GW installed capacity, is a significant contributor to this growth. Operating state-of-the-art facilities across India and with a global footprint spanning 25 countries, the company offers innovative solar solutions ranging from panel manufacturing to EPC services.
However, while India’s solar module assembly sector has seen remarkable growth, achieving complete backward integration remains a significant hurdle. Policies like the Approved List of Models and Manufacturers (ALMM) have fueled local manufacturing by requiring India-made photovoltaic (PV) modules for government projects.
In a recent interview with Moneycontrol, Waaree’s CEO Amit Paithankar emphasised the need to extend ALMM policies to include ingots and wafers to bolster India’s solar manufacturing ecosystem further. This policy push aligns with India’s broader aspirations to reduce dependency on imports and strengthen domestic manufacturing.
The introduction of production linked incentive (PLI) schemes has further incentivized manufacturers to focus on vertical integration. Waaree’s strategic decisions to expand its solar cell and wafer manufacturing capabilities reflect its commitment to aligning with these government initiatives.
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US policy shifts
The anticipated policy shifts under the Trump administration, including higher tariffs on solar imports and a rollback of climate-focused incentives like the Inflation Reduction Act (IRA), have created uncertainty. These measures threaten to disrupt Waaree’s key export market, with the US being the largest contributor. In fiscal year 2024, the company reported export sales amounting to around ₹6,569 crore, representing 57.64% of its total revenue from operations.
The company’s reliance on US demand highlights its need for strategic diversification, as the country accounted for 97% and 99% of India’s PV exports in FY2023 and FY2024, respectively.
Waaree Energies, along with Adani Solar and Vikram Solar, contributed significantly to this export surge, each shipping more than half of their annual production to international markets, with the majority destined for the US market. This heavy dependence underscores the importance of diversifying into other regions to mitigate potential geopolitical and regulatory risks.
Adding to the uncertainty are concerns around global supply chains and fluctuating raw material costs. Waaree’s focus on securing supply chains and pursuing backward integration into ingots and wafers may mitigate some of these risks, but challenges remain significant.
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Strategic expansion and diversification
Waaree Energies has taken proactive steps to mitigate some of the external risks. The company’s 1.6 GW solar module plant in Texas marks its entry into the US. manufacturing space, aiming to leverage local demand and bypass potential tariffs. Plans to expand this capacity to 5 GW by FY27 underscore its commitment to capturing a share of the profitable US market.
Additionally, the recent acquisition of Enel Green Power India for ₹792 crore is a strategic move to diversify its portfolio into wind energy and enhance its independent power producer (IPP) business. Enel’s operational and developmental assets offer Waaree a foothold in the broader renewable energy landscape.
These expansions reflect a broader trend in the renewable energy sector. Waaree’s plans to enter the battery energy storage systems (BESS) market and its exploration of electrolyzer technologies for green hydrogen production also highlight its forward-looking strategy.
Financial performance and market sentiment
Despite all these challenges, Waaree Energies has shown some financial resilience. In Q2FY24, the company reported a 17% rise in consolidated net profit at ₹375.6 crore, with the order book standing at 20 GW, marking customer confidence in its execution capabilities, according to the company.
Waaree aims to expand its solar module manufacturing capacity in India to 21GW by FY27. Furthermore, it plans to achieve backward integration by establishing 11GW of solar cell manufacturing capacity by the same timeline. By combining cell manufacturing with solar module production, the management anticipates a reduction in overall module costs and projects an improvement in blended margins by 2-3%.
Despite Kotak Institutional Equities’ ‘sell’ rating on the stock in its recent initiating coverage, the brokerage anticipates a 12% compound annual growth rate (CAGR) in Waree's module capacity, reaching 40 GW by 2035. It also forecasts a 14%CAGR in module volumes through FY2035, driven by robust capacity expansions and high utilization rates.
However, Kotak raised concerns about the stock's elevated valuations, which it views as unsustainable relative to peers. The brokerage also flagged risks associated with Waaree’s reliance on US exports and the execution challenges tied to its ambitious vertical integration plans. While Waaree’s entry into US manufacturing through its Texas plant is a strategic move, geopolitical and regulatory uncertainties add to the complexity of its growth trajectory.
Nevertheless, the brokerage expects Waaree to continue its dominance, driven by rapid capacity expansion plans, and see it reach 19.3 GW module, 11.4 GW cell and 6GW wafer capacity by 2027. It also highlights that vertical integration is expected to significantly enhance Waaree's Ebitda margins, increasing from 13.8% in FY2024 to 23.6% by FY2027.
“Over the medium term, we believe that integrated Indian manufacturers and companies with local US manufacturing presence would continue to enjoy a competitive advantage over peers, resulting in superior profitability," it said.
Yet, the company must navigate heightened competitive intensity, which is anticipated to pressure margins by 2028, it added.
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Intensifying competition
While Waaree Energies leads the pack in India’s solar module manufacturing, it operates in an intensely competitive landscape both domestically and globally. Among its key competitors are Tata Power Solar, Vikram Solar, Adani Solar, and RenewSys, which have also capitalized on India’s ambitious renewable energy targets.
Tata Power Solar, for instance, boasts integrated operations that span from manufacturing to EPC services, giving it a significant edge in large-scale projects. Vikram Solar has established itself as a strong player with a robust export portfolio and advanced R&D capabilities. Adani Solar benefits from the financial muscle of the Adani Group and its focus on end-to-end vertical integration, positioning itself as a key rival in the Indian market.
Globally, Waaree also faces competition from Chinese manufacturers like Longi Green Energy and Jinko Solar, which dominate the international solar module market with their cost-efficient, large-scale production capabilities. This competitive pressure underscores the importance of Waaree’s ongoing efforts to expand capacity, strengthen backward integration, and secure its position in critical export markets like the US.
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Policy and regulatory dynamics
The Indian government’s support for the renewable energy sector, through initiatives like the PM-Kusum (Pradhan Mantri Kisan Urja Suraksha evam Utthan Mahabhiyan) Scheme and the National Green Hydrogen Mission, provides a push for Waaree. However, the sector’s heavy reliance on policy support also exposes it to regulatory risks, both domestically and internationally.
Government policies have been both a boon and a challenge for Waaree Energies. Domestic measures, such as the ALMM mandate, trade barriers on Chinese imports, and initiatives like the PM-KUSUM Scheme, have supported the sector’s growth.
However, global policy shifts, particularly in the US, have created complications. The Trump administration’s proposed tariffs on solar imports could make Indian exports less competitive while raising module prices in the US, benefiting Waaree’s local manufacturing units.
Operationally, the company faces challenges in maintaining high utilization rates across its manufacturing facilities. As the company scales up its operations, it will be crucial to ensure consistent quality and timely delivery to sustain its market leadership.
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The road ahead
Waaree Energies exemplifies both the promise and the challenges of India’s renewable energy sector. Its aggressive capacity expansion, strategic entry into US manufacturing, and diversification into wind energy highlight its growth ambitions. However, external risks—from global trade policies to competitive pressures—remain significant hurdles.
The company’s ability to adapt to evolving market dynamics will determine its future success. For Waaree, success will be highly dependent on strategic execution, policy navigation, and investor confidence.
Moving forward, Waaree’s focus on integrating cutting-edge technologies and expanding its global footprint positions it as a key player in this transition. However, realizing this potential will require navigating a complex web of challenges, from regulatory hurdles to market competition.
For stakeholders and industry observers, Waaree Energies remains a company to watch—not only as India’s largest solar module manufacturer with a 44% market share as of FY2023-24 but also as a case study in the evolving dynamics of the global renewable energy market.
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Note: The objective of this article is to share insightful charts, data points, and thought-provoking opinions. It is NOT a recommendation to buy or sell any stocks. If you are considering an investment, please consult a professional financial advisor. This article is intended solely for educational purposes.
About the author: Suchitra Mandal is a financial writer with expertise in delivering well-researched insights and detailed analyses of companies' performance and market trends.
Views are personal and do not represent the stand of this publication.
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