About Waaree Energies Limited

Waaree Energies is the largest manufacturer of solar PV modules in India with the largest aggregate installed capacity of 12 GW, and and utilized capacity of 45.01%, as of and for the three months ended June 30, 2024. For Fiscal 2024, they had the second best operating income among all the domestic solar PV module manufacturers in India. They commenced operations in 2007 focusing on solar PV module manufacturing with an aim to provide quality, cost-effective sustainable energy solutions across markets, and aid in reducing carbon foot-print paving the way for sustainable energy thereby improving quality of life. Over the years, they have significantly expanded their aggregate installed capacity from 2 GW in Fiscal 2021 to 9 GW, as of March 31, 2023 which further increased to 12 GW as of June 30, 2023, as evidenced by their ability to quickly complete their expansion plans efficiently. Subsequent to June 30, 2024, we have commissioned 1.3 GW of solar module manufacturing facility at Noida, Uttar Pradesh through our subsidiary, IndoSolar Limited (“IndoSolar Facility”). They are in the process of expanding their manufacturing operations in the United States through our Subsidiary, Waaree Solar Americas Inc by establishing a new up to 3 GW manufacturing facility in the United States. They have entered into a five year binding agreement with a customer for the supply of 3.75 GW of solar modules for a period of five years from the commissioning of the facility, currently estimated during Fiscal 2025

They are also establishing the 6GW of Ingot Wafer, Solar Cell and Solar PV Module manufacturing facility in Odisha, India (“Project”). The total estimated cost of setting up the Project is ₹ 90,499.59 million for which we propose to deploy a sum of ₹ 27,750.00 million from the Net Proceeds, by way of an investment in our wholly owned subsidiary Sangam Solar One Private Limited, through equity or debt instruments or a combination of both as may be mutually decided between our Company and the Project Company.

Their solar PV modules are currently manufactured using multicrystalline cell technology, monocrystalline cell technology and emerging technologies such as Tunnel Oxide Passivated Contact (“TopCon”) which helps reduce energy loss and enhances overall efficiency. Their portfolio of solar energy products consists of the following PV modules: (i) multicrystalline modules; (ii) monocrystalline modules; and (iii) TopCon modules, comprising flexible modules, which includes bifacial modules (Mono PERC) (framed and unframed), and building integrated photo voltaic (BIPV) modules. They operate one factory each, located at Surat (“Surat Facility”), Tumb (“Tumb Facility”), Nandigram (“Nandigram Facility”) and Chikhli (“Chikhli Facility”) in Gujarat, India and and the IndoSolar Facility, in Noida, Uttar Pradesh.

The solar PV modules warranties are insured by external parties, which requires us to maintain high standards for insurance approval. They have consistently received a tier-1 PV module maker rating from the Bloomberg New Energy Finance for all years between Fiscal 2018 and Fiscal 2023. The laboratory is accredited by the National Accreditation Board for Testing and Calibration Laboratories (“NABL”) which tests their solar PV modules for quality check. They also manufacture semi-flexible solar panels for sale to global customers through their in-house research and development in product application.

As of June 30, 2024, the total number of employees of the company stand at 1,428. The Bankers of the Waaree Energies Limited are State Bank of India, Bank of Maharashtra, IndusInd Bank, Bank of India, Union Bank of India, The Hongkong and Shanghai Banking Corporation and Bank of Baroda.

INDIAN SOLAR POWER MARKET

Overview of RE Sector in India
Renewable energy installations (incl. large hydro) have increased fivefold to approximately 179 GW as of October 2023, as compared with approximately 63 GW as of March 2012 (source: MNRE), led by various central and state-level incentives. As of October 2023, installed grid connected renewable energy generation capacity (including large hydro) in India constituted approximately 42% of the total installed generation base in India. In particular, this growth has been led by solar power, which has grown to approximately 72 GW from approximately 0.09 GW over the discussed time period.

Solar energy potential is the greatest in India amongst all the commercially available renewable energy sources. As per an assessment by the National Institute of Solar Energy (“NISE”) and a report by MNRE, the top five states with the highest solar PV potential are Rajasthan, Jammu & Kashmir, Maharashtra, Madhya Pradesh and Andhra Pradesh. While the MNRE has considered 3% of wasteland that can be utilised in a state for the installation of ground-mounted solar PV projects, it has also considered 2% to 25% of the rooftop space being utilised (1 kWp – 100 kWp) across various buildings, such as offices, shops, hospital, and government buildings, for the setting up of rooftop solar PV projects.

Indian power sector
India’s power sector is highly diversified, with sources of power generation ranging from conventional (coal, lignite, natural gas, oil, hydro and nuclear power) to viable, non-conventional sources (such as wind, solar, and biomass and municipal waste). Transmission and Distribution infrastructure has expanded over the years for evacuation of power from.

Solar capacity additions in India from Fiscals 2018 to 2023
The GoI imposing solar RPOs across Indian states in 2011, coupled with the sharp drop in capital costs, led to most states releasing solar polices. This resulted in a spur in solar sector investments. Till Fiscal 2012, only Gujarat and Rajasthan had state solar policies. After the success of Gujarat’s solar policy, other states such as Andhra Pradesh, Tamil Nadu, Karnataka, Madhya Pradesh, and Telangana introduced their respective solar polices.

During Fiscals 2018 to 2023, approximately 55 GW of solar capacity has been commissioned compared with the expected commissioning of 60 GW to 65 GW. Despite the second pandemic wave, approximately 14 GW of solar capacity was added in Fiscal 2022. The momentum continued in Fiscal 2023, with robust solar capacity additions of approximately 13 GW.

Commissioning activity has been concentrated in the key states of Rajasthan, Gujarat, and Tamil Nadu, where of approximately 8 GW capacity was added in Fiscal 2023; approximately 65% share was concentrated in these three states combined. In the previous fiscal as well, the installation trend was driven by the same states.

Robust capacity addition is expected from Fiscals 2022 to 2024 due to a strong pipeline nearing the end of timeline extensions. Capacity additions slowed since Fiscals 2019 to 2021 in the segment due to several policy and execution-related challenges as mentioned below.

Review of solar rooftop segment in India
Rooftop projects are small-scale PV installations on roofs of buildings. Rooftop projects may or may not be connected to the grid. 

The government had proposed to achieve 100 GW of solar energy by Fiscal 2022, of which 40 GW was proposed to be added under rooftop-based solar systems. This was extended to Fiscal 2026. However, it is estimated that approximately 11.1 GW of rooftop capacity was installed till August 2023, with approximately 2,201 MW added in five months of Fiscal 2024 so far as against approximately 1,568 MW of ground-mounted solar projects. Additions are seen across Gujarat and Karnataka accounting for 61% of total additions. These additions are also 2.5 times the additions in first six months of Fiscal 2022. The expansion of the market can be attributed to several factors, including increased consumer awareness, advancements in technology, and proactive subsidy initiatives implemented by both central and state governments. Additionally, Chinese solar module prices have reached a historic low, standing at just US$ 0.20 per Wp, which is expected to stimulate growth in solar power capacity. 

The capacity addition in Fiscal 2023 was largely driven by robust additions under the residential rooftop segment, especially in Gujarat driven by Surya Gujarat solar rooftop scheme, closely followed by Maharashtra at 516 MW driven by rooftop subsidy scheme. These two states accounted for 58% of the total 2.2 GW additions in Fiscal 2023. Capacity additions in Fiscal 2023 were approximately 19% lower than in fiscal 2022 owing to policy changes and surging cost of modules as the imposition of the BCD and the ALMM mandate for rooftop solar projects added to the volatility in solar module prices and supply in the market. Further, the 40% subsidy for 3KW projects announced by the Haryana government, also supported overall capacity additions. Most of the additions were under the capex model with states empanelling vendors & commissioning the allocated capacities under MNRE Phase II of the rooftop solar program. 

The rooftop solar segment in India is dominated by Commercial & Industrial (“C&I”) consumers, accounting for over 75% to 80% of the total market. Some of the reasons for their dominance are availability of large rooftop space, higher electricity consumption, increasing electricity costs, favourable economics, strong thrust on sustainability and increasing awareness. 

Nevertheless, rooftop solar projects have attracted interest from players in the entire solar value chain, ranging from module manufacturers (Tata Power Solar, Waaree Energies, Vikram Solar, etc.) to system integrators (Rays Power, Jackson Engineers) and independent power producers (Fourth Partner, Amplus, Cleanmax, Azure Power, SunEdison, Mahindra Solar, Radiance etc.) owing to falling costs and favourable regulatory policies in key states (net metering, exemption on electricity duty, wheeling and cross-subsidy charges).

Outlook on rooftop solar PV capacity additions in India
CRISIL Consulting expects 19GW-21.5 GW of projects to be commissioned under the solar rooftop segment over the next five Fiscals (2024-2028), mainly led by the commissioning of capacities by SECI (up to 2,000 MW); capacities allocated by state governments (1,500-2,000 MW); commissioning of 1,000-1,500 MW of capacities by government institutions such as metro, railways, and airports; 7,000-7,500 MW of capacities to be added by industrial and commercial consumers under net/gross metering schemes of various states; and 1,500-2,000 GW added by residential rooftop consumers. Furthermore, the ministry’s approval for net metering up to 500 kW would provide a much-needed fillip to the sector, leading to an increase in the demand for rooftop installations. Also, the MNRE provides central financial assistance for all rooftop projects constructed by residential consumers: 70% for special category states and 30% for other states.

The utilization of storage technology enables solar energy to contribute to the electricity supply even during periods when sunlight is unavailable. Additionally, storage systems can assist in mitigating fluctuations in the flow of solar energy on the grid, thereby ensuring a more consistent and stable power output. 

RE projects, along with battery storage, can provide firm power supply for a longer duration in on-grid as well as off-grid applications, helping utilities and consumers meet energy requirements efficiently and, in an environment-friendly manner. Globally, deployment has already started picking up.

The introduction of battery storage in the power system network will support higher integration of RE sources, such as wind and solar, into the grid. Amid rising adoption of battery storage and maturing technology, newer business models based on storage will evolve, which will change the present market structure of electricity production and consumption.

Outlook of solar energy capacity additions in India
Fiscal 2023 saw slower additions, totalling approximately 12.78 GW against approximately 13.91 GW in Fiscal 2022. Capacity additions slowed down last fiscal because of shortages of domestically manufactured solar modules, the pandemic-led low imports, and the imposition of duty on imported solar modules leading to an increase in prices of imported modules. 

A robust approximately 13.9 GW was added in fiscal with open access utility-scale installations estimated at 1.2 GW to 1.4 GW, led by Karnataka, Uttar Pradesh, Tamil Nadu, and Maharashtra. This was on the back of a slowdown in capacity addition in Fiscal 2021, mainly due to continued localised restrictions and extension in timelines post pandemic. 

Commissioning activity is concentrated in Rajasthan, Gujarat, and Tamil Nadu, collectively accounting for approximately 65% of the approximately 8.2 GW added last Fiscal. In Fiscal 2022 as well, the installation trend was driven by these three states.

ASSESSMENT OF EPC SOLAR MARKET IN INDIA
A typical EPC solar project covers design, civil works, equipment purchase and installation, and commissioning. However, with constrained returns, the scope of an EPC solar project has been evolved and now includes O&M services also. Most of the EPC players provide integrated and customised solutions as per the client requirements through a consultative approach. Favourable government initiatives, increased demand for clean and green energy, rooftop installations by C&I Consumers have provided impetus to solar installations. 

The EPC services can be classified into various subcategories based on the scale and type of installations, i.e., utility scale and rooftop solar installations. Some of the key players in EPC are Waaree Energies, Tata Power, Sterling & Wilson, Vikram Solar, BHEL, Prozeal Infra, L&T and Jakson etc. Most of these players are also present in rooftop solar installation’s EPC. 

The overall project works is classified as supply (material) contracts and services contracts and are awarded to different entities instead of one single EPC contractor. The capital-intensive items, such as modules, transformers, inverters and cables, covering around 75%-80% of the project cost are being procured by developers. The developers enter into third-party contracts for services part, covering civil works, commissioning, erection and mounting of equipment, which forms around 20%-25% of the project cost. However, some solar module manufacturers insist on buying the entire package and not just solar modules, since they also provide EPC services.

SOLAR MODULE MANUFACTURING
Over the past decade, there has been a significant geographical transformation in solar PV manufacturing capacity and production. China reinforced its dominant position as a manufacturer of wafers, cells, and modules by increasing its share of global polysilicon production capacity nearly three times. China’s role in supply chain becomes more critical as it holds more than 75% of cells and module lines, leading to high dependence from a global supply chain perspective. 

Having integrated solar PV manufacturing plants that produce wafers, cells, and modules all under one roof have certain advantages such as improved efficiency and cost reduction. With reduced transportation costs and economies of scale, these plants can optimize their production flow and have better quality control. Integrated solar PV manufacturing plants also provide greater flexibility and supply chain security. The manufacturer can respond to changes in demand efficiently, dependence on external suppliers gets reduced and with access to advanced technologies, it can certainly gain competitive advantages in terms of quality as well as price. 

The global solar PV manufacturing capacity is projected to approach nearly 1,000 GW by 2024 a capacity sufficient to cater to the expected annual demand of nearly approximately 650 GW by the year 2030 as projected by International Energy Agency (“IEA”). In 2022, global solar PV manufacturing capacity increased by over 70% to reach almost 450 GW, with China accounting for over 95% of new facilities throughout the supply chain. Governments in the US, Europe and India have already begun to prioritise solar PV supply chain diversification, implementing policies such as India’s PLI scheme and the US IRA to provide direct financial incentives for domestic manufacturers to increase their competitiveness with Chinese counterparts. These country specific measures are expected to boost manufacturing capacities across the countries and would result in meeting the global demand by 2030.

Over the past decade, China has emerged as the top destination for solar PV manufacture as a result of favourable government policies, continuous innovation and accelerated investments in the segment, surpassing Europe, Japan and the United States. Global PV shipments during 2022 crossed 300 GW, of which the top 10 players, including LONGi Solar, Trina Solar, Jinko Solar, accounted for a share of approximately 80% in shipments.

Module prices to fall in Fiscal 2024
On a global scale, the polysilicon base expanded by 68% year-on-year by the end of December 2022, reaching a range of 1,000-1,100 metric tons from the previous 600-650 metric tons. Weakened demand and lower consumption in the first half of 2023 in China, coupled with oversupply, resulted in a dramatic price drop of 72% to US$ 8 per kg in July 2023, down from US$ 28 per kg in December 2022. Consequently, downstream components also witnessed significant price reductions, with wafer prices plummeting by 50%-55% to US$ 0.35 per piece from US$ 0.70 per piece. 

The oversupply of polysilicon also prompted the world's largest monocrystalline solar wafer supplier to cut the prices of its photovoltaic wafers twice between April and May 2023, reducing prices by 33% as cell manufacturers sought to fulfill their order requirements. 

Cell prices also saw a decrease of 43% in July 2023, reaching US$ 0.09 per Wp from December 2022, while module prices fell by 25% during the same period. Additionally, spot prices for bifacial mono perc modules continued to decline, reaching US$ 0.18 per Wp in the first half of August 2023 as suppliers offered lower prices to clear their inventory. The combination of weak European demand and an accumulation of Chinese module inventory is expected to keep global module prices subdued in the current fiscal year.

Module prices experienced a remarkable surge of 22% in Fiscal 2022 and a subsequent 7% increase in Fiscal 2023. However, in the first five months of Fiscal 2024, they have undergone a significant decline, dropping by 21% compared to Fiscal 2023, reaching a level of US$ 0.19 per Wp. This sharp decrease is primarily attributed to an oversupply of upstream components, particularly polysilicon. Domestic module prices in India also experienced a significant drop, falling from US$ 0.30 per Wp to US$ 0.25 per Wp, primarily due to the country's reliance on imported cells. As of March 2023, India had approximately 39 gigawatts of module capacity, in contrast to only around 7 gigawatts of cell capacity, leading to a doubling of cell imports year-on-year between January and June 2023.

WAAREE ENERGIES LIMITED COMPETITIVE STRENGTHS
1. Largest solar PV module manufacturer in India well positioned to capture industry tailwinds and growth prospects for solar energy in India and globally
2. Diversified base of global and Indian customers with a substantial order book
3. Advanced manufacturing facilities with global accreditations
4. Extensive pan-India retail network
5. Consistent track record of financial performance
6. Experienced senior management team with demonstrated execution capabilities and a committed employee base

WAAREE ENERGIES LIMITED STRATEGIES
1. Implement strategic backward integration to enhance operations and increase profitability
2. Maintain leadership position in the utility and enterprise modules sales market with continued capacity expansion in India and abroad
3. Focus on technology upgrades to manufacture high quality modules
4. Continue to grow and diversify our export markets
5. Continue their focus on maintaining leadership position in commercial and industrial, and residential business verticals
6. Continue to scale their operations through organic and inorganic expansion opportunities

WAAREE ENERGIES LIMITED RISK FACTORS & CONCERNS
1. The export sales make their operations subject to risks and uncertainties of various international markets, in particular the United States. Total export sales was 57.64% in FY24 out of which 57.14% was from one jurisdiction, USA.
2. The proposed Project is dependent on various government subsidies. For the Project, we have been awarded with an outlay of ₹ 19,232.40 million under National Programme on High Efficiency Solar PV Modules (“PLI Scheme”) awarded by the GoI to enhance our backward integration capabilities. The award under the PLI Scheme is subject to certain terms and conditions such as completion of the facility in a timely manner with the scheduled commissioning date for commissioning of full manufacturing facility by April 18, 2025. However, the Project is expected to be completed by Fiscal 2027. While we have applied for an extension in the scheduled commissioning by an additional 24 months with Solar Energy Corporation of India Limited.
3. They derive a substantial portion of their Retail Sales from Gujarat.
4. They are in the process of expanding their manufacturing operations in the United States through our Subsidiary, Waaree Solar Americas Inc by establishing a new up to 3 GW manufacturing facility in the United States.
5. They import a portion of the raw material supply from China.
6. Decline in the price of solar PV module prices may have an adverse impact on their business, results of operations and cash flows.
7. They bid for solar projects for power supply with state power generation companies that expose them to risks related to execution of projects of such nature, the time and costs.
8. They bid for EPC and O&M projects through a competitive bidding process.
9. Top 5 customer contributed 40.13% of sales in which the top customer accounted 8.91% of sales in FY24.