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Big becomes Beautiful in Indian Solar Industry as Financial Muscle gives an Edge

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The Indian solar industry is seeing a rapid consolidation around large developers as smaller and mid-sized companies are getting edged out due to the financial muscle of the bigger players. The industry was always very competitive with developers bidding at the lower end of the ROE range. Given the huge size of the industry, many financial investors had jumped into the Indian market. These companies have prioritized building a project pipeline over profitability leading to very low tariffs in solar auctions.

Many small and mid-sized companies that had also jumped in the fray attracted by the sharp growth, are now looking to exit the industry as they are unable to keep up with the larger fish. The big players are cornering the lion’s share of the market as they are able to finance the projects at a lower cost of capital using their size and access to foreign markets. Some of the large Indian firms such as Adanis, Mahindra, Birlas and Tatas have also managed to survive this consolidation given their large size or/and connection to the broader Indian power market.


Source: Economic Times

Solar development does not really have any strong competitive advantage to build on given that it is more or less a commodity play. The only edge comes through access to large pools of capital at low cost which allows you to have a higher IRR at the same procurement costs. Even the procurement costs are lower for larger firms as they are able to get components such as panels and inverters at a lower price due to economies of scale. With bids seeing prices of INR 2.5-3.5/kWh over the last one year despite a rise in interest rates, rupee depreciation and the safeguard duty on imports of solar panels, even a small difference in interest costs or system costs helps. Smaller companies such as Essel, Ostro, Welspun etc. had/have realized this and exited by selling to the larger players.

I see this as a healthy development, given that hyper-competition had led to irrationally low tariffs and there were a large number of fly by night operators which had entered this industry. The competition in the industry remains sufficiently high to ensure that consumers do not pay high tariffs due to industry consolidation; at the same time, the industry might see more sustainable development with larger, well-capitalized players remaining in the fray.


Sneha Shah

I am Sneha, the Editor-in-chief for the Blog. We would be glad to receive suggestions, inputs & comments on GWI from you guys to keep it going! You can contact me for consultancy/trade inquires by writing an email to

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