China-Plus-One strategy powers up India's exports of solar modules

Exports of solar modules from India are on a rise, gaining from the China Plus-One strategy which opened opportunities for large Indian players, and the Industry experts are hopeful that the trend will continue to be a part of the policy for most manufacturers.

Coined way back in 2013, China-Plus-One is a global business strategy in which companies avoid investing only in China and diversify their businesses to alternative destinations.

In the first half of FY24, solar cells and modules exported from India were worth Rs 8,307 crore, a multi-fold growth from Rs 1,453 crore in the same period a year ago, according to data from rating agency Icra.

A similar growth is also reflective in numbers of some of the large domestic manufacturers.

For Adani Enterprises, in the September-23 ended quarter (Q2FY24), the overall module sales were up 205 per cent. Of the 630 megawatt (MW) sales, 405 MW was exports, compared to 75 MW of exports in the same quarter a year ago.

“India's solar module exports are mainly to the US market, where the ban on China has opened opportunities for large Indian players. There is a gap currently, which the Indian companies are trying to fill in with exports. One will need to see how long it lasts as capacities are getting added in the US market too,” said Vikram Reddy, vice president and sector head-corporate ratings – Icra.

Jugeshinder Singh, chief financial officer (CEO) for Adani Enterprises, noted to analysts that most of the company’s module exports were to the US.

For Waaree Energies, a major player in this segment, as of February, the order book was at Rs 28,000 crore, and 80-85 per cent of the orders (confirmed and in the pipeline) were from export markets, including the US, Canada and Europe, among others, rating agency Crisil noted in a report early this year.

Tata Power, which expects to start production from its 4.3 gigwatt cell and module plant in Tamil Nadu by the end of FY24, also plans to cater to international markets.

“The new company called TP Solar which is in Tamil Nadu where this 4.3 GW setup is coming through and of course that company might also sell 1 to 2 GW depending upon the need in international market and domestic market,” Praveer Sinha, chief executive officer and managing director for Tata Power informed analysts in a Q2FY24 earnings call.

JSW Energy also plans to join the list of solar module makers. The company aims to enter this segment with 1 GW of manufacturing capacity and a timeline of 2025. An email query sent to the company requesting details on interest to sell in the international market remained unanswered.

Executives from rating agencies expect exports to continue to remain a part of the strategy for most large manufacturers.

“Solar modules exports will remain on the upswing for the next twelve months. For domestic buyers, imports are still more viable, while for domestic manufacturers exports are offering a premium of up to 30 per cent. In the long term, most manufacturers will look at a mix of exports and domestic, though the countries may change,” said Rajashree Murkute, Senior Director, Head Infrastructure Ratings at CareEdge.

To be sure, some of these companies view their solar module manufacturing capacities as an exercise to strengthen their green energy supply chain.

Adani Enterprises in its call with analysts noted, the excess cash flow generated from various segments (including solar modules) “will continue to be deployed into the green hydrogen ecosystem.”

The company’s operational module manufacturing unit is expected to later feed into its green hydrogen generation value chain, which is currently under development.

The company in total plans to invest $50 billion in developing the green hydrogen system and start with production of green hydrogen in FY27. Meanwhile, the new energy ecosystem business segment, which includes solar modules, reported a segment profit before interest and tax (PBIT) of Rs 430.59 crore in Q2FY24.

Despite this, others expect exports to remain a market under consideration. “The Indian players, who are setting up solar module manufacturing facilities, are likely to explore the export markets once the captive needs are met or in the interim of captive needs emerging, as the realisations are expected to be higher in export markets,” said Reddy from Icra.

It’s sunny

Rs 8,307 crore worth of solar cells and modules exported in H1FY24

Adani Enterprises: Of the 630 Mw solar module sales in Q2FY24, 405 Mw was exported

Waaree Energies: Of its ~28,000 crore order book as of February this year, 80-85% were for export markets

Tata Power: Firm looks at international markets for its 4.3 Gw cell and module plant