In Short : CRISIL suggests that the Approved List of Module Manufacturers (ALMM) policy in India is expected to maintain margins for solar module makers at 12-14% in the next fiscal year. This policy is likely to play a crucial role in shaping the financial landscape for solar module manufacturers in the renewable energy sector.
In Detail : This fiscal, profitability is expected to almost double over the previous fiscal as rising share of exports, which fetch a 15-20 per cent premium over domestic prices, will more than offset the surge in imports in the absence of ALMM.
The implementation of the Approved List of Models and Manufacturers (ALMM) from April 1, 2024, is expected to help keep operating margins of domestic module makers strong at 12-14 per cent in fiscal 2025, in line with the level likely this fiscal, said a report by CRISIL Ratings. This will be mostly driven by healthy domestic and export demand, the report added.
This fiscal, profitability is expected to almost double over the previous fiscal as rising share of exports, which fetch a 15-20 per cent premium over domestic prices, will more than offset the surge in imports in the absence of ALMM.
“Indian module manufacturers are facing an onslaught of cheaper imports because of the temporary suspension of ALMM till April 1, 2024. However, the trade restrictions on China — mainly by the US — are boosting overseas demand for Indian modules. In fact, India’s module exports are seen tripling to 8-9 GW this fiscal. Markets abroad will stay good for Indian manufacturers next fiscal, too, as the US will continue to face a supply deficit due to its increasing demand and continuing restrictions on Chinese supply,” said Ankit Hakhu, Director, CRISIL Ratings.
Also, with ALMM coming back, domestic demand for Indian modules will become stronger.
Ankush Tyagi, Associate Director, CRISIL Ratings, said, “The return of ALMM in fiscal 2025 should curb the competition from imports. As a result, we expect domestic module prices to firm up after having fallen by more than 50 per cent this fiscal. Moreover, demand growth will increase utilisation rates, as 70-75 per cent of domestic demand (26-28 GW) will be met by Indian module producers next fiscal, up from 30-35 per cent this fiscal. These factors will help offset the pressure on profitability due to the decline in the share of exports for domestic module manufacturers (to 35-40 per cent in fiscal 2025 from 50 per cent in fiscal 2024).”
Higher sales volumes (both domestic and exports) and healthy margins will lead to robust accruals for module makers rated by CRISIL Ratings in the current and next fiscals. This will support capital expenditure for capacity expansion and technology upgrade and sustain healthy credit profiles.
That said, CRISIL said, any further extension in the ALMM implementation would be a risk to the estimates. Also, any change in the US policy towards imports from China, will remain monitorable.
