China's decision to end solar export subsidies has sparked a wave of interest in the Indian market. This move could be a game-changer for Indian firms, but which ones will truly benefit?
The Great Solar Shift: China's Rebate Removal
For years, China has dominated global exports, with a fifth of its economy reliant on this trade. However, as tensions with the US rose, China's export-driven strategy faced challenges. To maintain its export engine during the trade war, China heavily subsidized domestic manufacturing.
China's solar exports were no exception, enjoying rebates of 9-13%, according to Arihant Capital. But now, concerns about profitability and self-sufficiency have taken center stage. On January 9th, China announced the removal of rebates on photovoltaic products, with a gradual phase-out plan.
Given China's 80% share in the global solar panel value chain, this move will significantly impact global solar panel prices. This could be a major opportunity for India's solar exporters, who have long been overshadowed by China's subsidized products.
Which Indian Sectors Will Thrive?
Let's explore the potential winners and how they might benefit.
Solar Module Makers: A Bright Outlook?
Waaree and Premier Energies are India's leading solar cell and module manufacturers. Waaree leads with 5.4 GW and 18.7 GW of cell and module manufacturing capacity, while Premier follows with 5.1 GW and 3.2 GW, respectively.
China's module manufacturing has been 10% cheaper than India's, 20% cheaper than the US's, and a whopping 35% cheaper than Europe's. With the removal of the 9-13% rebate, the scales tip in India's favor, not just for domestic use but also for exports.
Waaree's exports have grown significantly, contributing 47% of its revenue in Q2FY26, up from 17% in FY25. Premier, on the other hand, has more room to grow its exports, as 99% of its revenue currently comes from domestic sales.
Both companies have improved their Ebitda margins to a healthy 25-30% range over the years. Waaree's revenue has skyrocketed, growing over seven times from less than ₹2,000 crore in FY21 to nearly ₹15,000 crore in FY25. Premier's revenue has also doubled to ₹1,100 crore over the same period.
As global module prices rise, Premier is well-positioned to accelerate its growth, given its already strong margins. Waaree, with its faster growth, may focus on balancing margin expansion and growth acceleration. Both companies have negative net debt, leaving room for rapid expansion.
With order books of ₹47,000 crore for Waaree and ₹13,250 crore for Premier, revenue visibility is almost guaranteed for the next two years.
The stocks have experienced a decline of almost a third since their September 2025 peaks, making their trailing 12-month price-to-earnings (P/E) ratios more attractive, currently around 27.
Investors are more optimistic about Premier, given its larger export potential. Premier's shares rose 4% on January 10th, while Waaree's increased by 1%.
Solar Glass Manufacturers: A Lingering Challenge
Borosil Renewables dominates India's solar glass market, competing directly with cheap Chinese imports. This has left Borosil's profitability at the mercy of India's customs duties and approved list of models and manufacturers (ALMM). Borosil has faced volatile profitability, even incurring losses at times.
Things improved in FY25 as its debt-to-equity ratio moderated from over 0.4 to 0.25, supporting profitability. Once Chinese solar glass becomes more expensive, Borosil's profitability is expected to expand further. Its German subsidiary should also benefit as imported Chinese products no longer undercut prices.
However, domestic competition could intensify. About 87% of Borosil's revenues come from within India, and firms like Asahi India Glass, Hindustan Glass, and Sejal Glass, which already have solar glass as a revenue stream, may double down as India's price disadvantage to China diminishes.
Borosil's working capital management could be a challenge, as it has increased from 96 days in FY24 to 159 days in FY25, potentially impacting cash flows. These risks have kept investor sentiment flat since late 2021, and even the removal of China's rebates only provided a delayed boost.
EV Chemical Players: A Promising Future
Certain chemicals, such as lithium hexafluorophosphate and lithium cobalt oxide, are crucial in photovoltaic cell manufacturing. Indian chemical companies have been expanding their capacities in these areas.
Neogen Chemicals, in a joint venture with Japan's Morita Chemicals, is building India's largest facility for manufacturing lithium hexafluorophosphate. With Morita's three decades of experience, Neogen is well-positioned to capitalize on the potential shift away from China. Its stock has gained over 15% since January 9th.
Himadri Speciality Chemical, leveraging its partnership with Australia's Sicona Battery Technologies, is set to become India's first company to produce advanced carbon material for lithium-ion battery anodes. Himadri is also on track to manufacture lithium iron phosphate cathode material. However, the stock price already reflects this optimism, having grown at a compound annual growth rate (CAGR) of 56% over the past five years. China's rebate removal did not significantly impact its stock price.
Gujarat Fluorochemicals, India's only fluoropolymer manufacturer and an early mover in battery chemicals, has also seen its stock grow at a five-year CAGR of 42%. With limited room for further growth, the stock has corrected since January 9th. Nevertheless, once the benefits materialize, the fundamentals are likely to justify the high valuations.
Risks and Challenges
We can draw parallels with the 20-50% rallies in aluminum and copper prices after China scrapped its 13% rebates on these metals in December 2024. This trend could extend to solar modules, but the picture is less optimistic when considering the entire value chain.
According to a CRISIL report, the gap is wider in solar cell manufacturing. Despite incentives for domestic manufacturing and import duties, manufacturing solar cells in India costs up to twice as much as in China. While China's rebate removal will help narrow the gap, India's cell manufacturing still lags in terms of scale and price.
The removal of rebates also means higher costs for building solar plants. Companies like Tata Power and Adani Enterprises, with plans to build the entire solar production value chain, may benefit. However, independent power producers like NTPC, focused solely on building power plants, may face increased costs for solar panels.
Conclusion
China's decision to end solar export subsidies presents a unique opportunity for Indian firms. While some sectors are poised to thrive, others face challenges and a longer road to competitiveness. The impact of this shift will be felt across the solar industry, and it remains to be seen how Indian companies will navigate this new landscape.
What are your thoughts on this potential shift in the solar market? Do you think Indian firms are ready to take on the challenge and capitalize on this opportunity? Feel free to share your insights and predictions in the comments below!
