Imagine a world where Indian solar companies can finally compete on a level playing field! China's decision to eliminate solar export subsidies is poised to be a game-changer. For years, Chinese manufacturers have dominated the global solar market, thanks to hefty government support. But now, that advantage is about to disappear, potentially opening up huge opportunities for Indian firms. But here's where it gets controversial... will this really be a boon for everyone in the Indian solar sector? Let's delve into the details and see which Indian companies stand to gain the most.
For decades, China has prioritized exports as a key pillar of its economic growth, with approximately one-fifth of its economy relying on them. However, recent trade tensions, particularly with the United States, have put pressure on its export-driven model. To maintain its export momentum amidst these challenges, China has heavily subsidized its domestic manufacturing sector. These subsidies essentially act as discounts, making Chinese goods more competitive in the global market.
China's solar exports have been no exception to this strategy, benefiting from rebates that translate to discounts of 9-13%, according to Arihant Capital. But now, a shift in priorities is underway. Concerns regarding the profitability of these subsidies and a growing emphasis on domestic self-sufficiency have led to a significant policy change. On January 9th, China announced that it would remove rebates on photovoltaic (PV) products, the core components of solar panels. Furthermore, rebates on batteries will be reduced from 9% to 6% starting April 1, 2026, before being completely phased out by early 2027. This is a significant move with far-reaching implications.
Considering that China controls a staggering 80% of the global solar panel value chain, the removal of these rebates is expected to drive up global solar panel prices by a corresponding amount. This presents a potentially massive opportunity for India's solar exporters, who have long struggled to compete with China's subsidized products. Could this be the moment they've been waiting for?
So, which sectors stand to benefit the most from this shift, and how will it impact their operations? Let's break it down.
Solar Module Makers: Wins All Around?
India boasts several prominent solar cell and module manufacturers, with Waaree and Premier Energies leading the pack. Waaree currently holds the largest market share, with a cell manufacturing capacity of 5.4 GW (Gigawatts) and a module manufacturing capacity of 18.7 GW. Premier Energies follows closely, with corresponding capacities of 5.1 GW and 3.2 GW.
According to industry reports, Chinese module manufacturing is currently about 10% cheaper than India's, 20% cheaper than the US's, and a whopping 35% cheaper than Europe's. The removal of the 9-13% rebate will significantly level the playing field, making Indian-made solar modules more competitive not only for domestic consumption but also for exports. This could lead to a surge in demand for Indian solar products globally.
In the second quarter of fiscal year 2026 (Q2FY26), Waaree derived approximately 47% of its revenue from exports, a substantial increase from 17% in FY25. This demonstrates the company's growing focus on international markets. Premier Energies, on the other hand, has even greater potential to expand its exports, as 99% of its revenue currently comes from domestic sales. This means they have significant "headroom" to grow their export business.
Both Waaree and Premier Energies have successfully expanded their EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) margins to a healthy 25-30% over the years, indicating strong operational efficiency. However, Waaree has experienced faster growth overall. Its revenue has surged more than seven-fold, from less than ₹2,000 crore in FY21 to almost ₹15,000 crore in FY25. In contrast, Premier Energies has seen its revenue less than double to ₹1,100 crore over the same period. This growth trend has continued into FY26.
With global module prices expected to rise due to China's policy change, Premier Energies can hopefully accelerate its growth trajectory, given its already strong margin performance. Waaree, with its existing export presence, may focus on strategically balancing margin expansion with further growth initiatives. Importantly, both companies have negative net debt, providing them with financial flexibility to pursue faster growth opportunities. Furthermore, their substantial order books, with ₹47,000 crore at Waaree and ₹13,250 crore at Premier Energies, provide revenue visibility for almost two years based on annualized quarterly run rates.
Interestingly, the stocks of both companies have experienced a correction, shedding almost a third of their value since reaching their peaks around September 2025. This has brought their trailing 12-month price-to-earnings (P/E) ratios down to more attractive levels around 27.
The recent developments in China have particularly boosted investor confidence in Premier Energies, primarily due to its greater potential for export growth. On January 10th, Premier Energies' shares gained 4%, while Waaree's shares rose by 1%. This suggests that the market anticipates Premier Energies to benefit more significantly from the changing global landscape.
Solar Glass Manufacturers: Fundamental Overhang Lingers
Borosil Renewables dominates India's solar glass market, directly competing with cheaper imports from China. This competition has left Borosil's profitability heavily dependent on India's regulations concerning customs duties and the Approved List of Models and Manufacturers (ALMM). As a result, Borosil has faced volatile profitability, even experiencing losses at times.
However, things improved in FY25, with its debt-to-equity ratio moderating from over 0.4 to 0.25. This positive development supported profitability, which is expected to expand further as Chinese solar glass becomes more expensive. The situation should also improve for Borosil's German subsidiary, as imported Chinese products will no longer be able to undercut prices.
And this is the part most people miss... while the removal of Chinese rebates is generally positive for Borosil, increased domestic competition could pose a challenge. Currently, approximately 87% of Borosil's revenues originate from within India. Companies like Asahi India Glass, Hindustan Glass, and Sejal Glass already have solar glass as part of their revenue streams and may intensify their focus on this segment as India's price disadvantage compared to China diminishes.
Borosil's working-capital management could also be a potential concern. Having expanded from 96 days in FY24 to 159 days in FY25, further strain on working capital could negatively impact cash flows. These risks have weighed on investor sentiment, and the stock has remained relatively flat since late 2021. Even the news of China's rebate removal only managed to provide a limited boost to sentiment.
EV Chemical Players: Promising Potential
Certain specialized chemicals, including lithium hexafluorophosphate and lithium cobalt oxide, are essential in the manufacturing of photovoltaic cells and lithium-ion batteries for electric vehicles (EVs). Indian chemical companies have been actively seeking to expand their production capacities in these areas.
Neogen Chemicals, for example, has formed a joint venture with Japan's Morita Chemicals to establish what will be India's largest facility for manufacturing lithium hexafluorophosphate. Leveraging Morita's three decades of experience in this field, the potential shift away from Chinese suppliers comes at an opportune time for Neogen. Since January 9th, its stock has gained over 15%, reflecting investor optimism.
Meanwhile, Himadri Speciality Chemical is poised to become India's first company to produce advanced carbon material for lithium-ion battery anodes, utilizing its technological partnership with Australia's Sicona Battery Technologies. Himadri is also on track to manufacture lithium iron phosphate cathode material. However, the stock price already reflects this positive outlook, having clocked a compound annual growth rate (CAGR) of 56% over the past five years. Consequently, China's rebate removal has not significantly boosted its stock price further.
Gujarat Fluorochemicals finds itself in a similar situation. As India's only fluoropolymer manufacturer and one of the early movers in battery chemicals, including lithium hexafluorophosphate, its stock has achieved a five-year CAGR of 42%. With limited room for further immediate gains, the stock has corrected slightly since January 9th. Nevertheless, once tangible benefits from the changing market dynamics start to materialize, the fundamentals are likely to eventually justify the stock's steep valuation.
Risks Remain
We can draw parallels from the 20-50% rallies in aluminum and copper prices that followed China's decision to eliminate its 13% rebates on those metals starting December 1, 2024. This trend suggests a similar potential for solar modules. However, the picture becomes less clear as we move further up or down the solar value chain.
According to a report by CRISIL, the cost gap is even wider in solar cell manufacturing. Despite production-linked incentives for domestic manufacturing and customs duties on imports, manufacturing solar cells in India can cost up to twice as much as in China. Therefore, while China's removal of the 9-13% rebate will help narrow the gap in solar cell costs, India still has a significant distance to cover before its cell manufacturing processes can match China's in terms of scale and price.
The other side of the coin is that building solar plants will become more expensive. Companies like Tata Power and Adani Enterprises, which have plans to build the entire solar production value chain, may benefit from this. But others, such as NTPC, are independent power producers that have so far remained focused solely on building power plants. They may be left footing the bill for costlier solar panels.
So, what do you think? Will China's policy change truly level the playing field for Indian solar companies? Or will other factors, such as higher manufacturing costs and increased domestic competition, limit their potential gains? Share your thoughts in the comments below!
Disclaimer: The author does not hold shares of the companies discussed. The views expressed are for informational purposes only and should not be considered investment advice. Readers are encouraged to conduct their own research and consult a financial professional before making any investment decisions.
