India's Solar Boom Faces Margin Pressures Amid Rising Power Demand

The report noted that India's energy mix is gradually transitioning towards renewables, with solar emerging as the key driver of capacity additions.

"India's power sector continues to transition toward a renewable-led capacity mix, with solar driving additions supported by strong policy push... and rising C&I adoption under Green Open Access, while coal remains critical for baseload stability," the report said.

At the same time, the brokerage noted that solar manufacturing companies could face near-term pressure on utilisation and margins, mainly due to weaker exports, rising competition and higher input costs.

"Our coverage companies... are expected to face marginal near-term pressure on utilisation and margins, driven by weaker exports, rising competition, capacity ramp-up, and elevated input costs," the report added.

According to the report, policy support from government schemes and rising demand from businesses and households is helping accelerate solar adoption across the country.

"Capacity additions remain strongly renewable-led, with solar emerging as the key growth driver, supported by large utility-scale projects and gradually improving traction in rooftop installations, aided by better economics and policy support," it said.

Government initiatives are also playing a key role in boosting demand for solar energy, especially through rooftop installations and agricultural applications.

"Government initiatives continue to provide strong visibility, with schemes such as PM Surya Ghar driving rooftop adoption through subsidies and rising residential participation," the report noted.

The report further highlighted that India remains dependent on imports for several components of the solar value chain, particularly from China.

However, domestic manufacturing capacity is gradually expanding, particularly in states such as Gujarat and Tamil Nadu.

The report also noted that solar capacity additions continue to dominate India's overall power capacity expansion.

"India added ~35 GW of solar capacity in FY26 YTD... contributing the bulk of the ~45 GW total capacity additions across all sources, highlighting solar's central role in capacity expansion," it said.

India's total installed power capacity stood at around 521 GW as of January 2026, reflecting a diversified energy mix where renewable energy now accounts for a significant share.

The report read, "Wind (55 GW), hydro (51 GW), and other renewables (17 GW). Meanwhile, gas-based capacity (21 GW) and nuclear (9 GW) form a smaller share of the mix, with lignite negligible."

- ANI