Key Points

Integrated players in the solar space are likely to be more resilient to margin pressure, leading to consolidation of smaller module capacities.

"As of July 2025, India’s module manufacturing capacity reached 118 GWp, while cell manufacturing capacity stood at 27 GWp. However, effective operational capacity is estimated at 80-85 GWp for modules and 11-13 GWp for cells, with the remainder in the stabilisation phase," CareEdge ratings said in its report.

Consequently, annual production is estimated at 50-60 GWp for modules and 8-10 GWp for cells, resulting in an import dependency of 40-45 GWp for cells, the report noted.

This accelerated capacity expansion has been driven by increased solar installations, proactive policy support, and improved access to financing avenues.

According to the report, domestic cell manufacturing capacity is projected to reach 100 GWp during the same period, with capex exceeding Rs 55,000 crore, driven by backward integration efforts.

As a result, module production is likely to increasingly rely on exports, even as cell production is also likely to eclipse domestic demand in the medium term.

While pureplay module players could be at risk of consolidation, integrated players are likely to withstand the margin pressure owing to cost efficiencies.

“The solar equipment manufacturing sector has several tailwinds, including robust domestic demand outlook, maturing module capacities, favourable government policies, and improved financing avenues for the RE sector," said Jatin Arya, Director, CareEdge Ratings.

However, nascent integration of solar equipment capacity, supply chain dependence on China, uncertainty shrouding export prospects, and lagging RE capacity additions due to systemic issues are some headwinds that remain monitorable over the medium term, he added.

The report highlighted that the reduction in GST rates could lead to project cost savings of 4-5 per cent.

Meanwhile, tightening policies in the US could impact India’s module exports, although the medium-term outlook remains promising, provided Indian players manoeuvre compliance and maintain cost competitiveness.

- IANS