India has a huge potential for renewable energy growth given its green credentials and rising demand for power in the country. However, the stocks focusing on wind or solar energy have not replicated the potential in the form of stock returns for investors. On the contrary, these stocks have been battered the entire time. Suzlon Energy (NSE:SUZLON) is a classic example, losing about 95% in the last 15 years. The shares which once traded near the Rs.400 mark have been reduced to merely Rs.7 currently. Even though the company is in the promising business of manufacturing wind turbine generators, it is not translating into the desired share price gains.
Another company Surana Solar (NSE:SURANASOL), which is engaged in manufacturing solar panels in India saw its share price halve to Rs. 14 from Rs. 28 five years earlier. The companies have failed to deliver sales/ profit growth over the years. However, business conglomerates like Adanis and Tatas have continued to do well in the energy business. Adani Green Energy (NSE:ADANIGREEN) has registered a gain of ~97% since 2018, while Tata Power (NSE:TATAPOWER) has gained by more than 100% in the last year. Adani Green has a current project portfolio of 3 GW and an operational capacity of 2 GW. Tata Power is one of the biggest and oldest solar panel manufacturing operations in India, has commissioned 175 MW of EPC projects, 43 MW of solar rooftop projects, and exported 600 MW of modules to date.
Though the business has the potential to shine in a huge country like India, manufacturers are unable to convert this potential into growth. The major reason being the import of products and components from neighboring nations particularly China at dirt cheap prices which have led to poor demand for indigenous goods.
So what is changing now
Growing pollution and rising oil prices have both acted as tailwinds for the renewable energy industry in India. With the Indian government’s strong emphasis on going green, increasing its renewable energy footprint in the near future, and growing reliance on domestically produced components (with the levy of safeguard duties), things might change in the future. The Indian government has already announced that it will impose a 40% duty on solar panels and a 25% duty on solar cells from April 2022 to protect and promote its domestic industry. However, the Indian manufacturers need to have the competent technology and capacity to meet the rising demand while keeping an eye on the pricing in a price-sensitive market like India. Though investors have been disappointed in the green energy stocks things look much brighter now.
