when I first visited the us as a prime minister India was the 10th largest economy
in the world thanks today India is the fifth largest economy India Remains
the fastest growing major economy in the world rooftop India is a middle power uh on
its way according to some specialist to become a great power a super power India
has recently announced plans to enhance solar power in the country aligned with
its broader push for sustainability hi everybody the Modi 3.0 government has
made a bold promise to India and that is a commitment to become the third largest
economy in the third term of Narendra Modi and while most people are extremely
excited about it there is one big big problem for India and because of this one
problem inflation in India is increasing we are being bullied by America and Europe
and most importantly our companies are not able to compete in the global market this
problem is the problem of oil dependency now the most straightforward solution to
this is obviously renewable energy which is which is why the Modi government has tried
several policies to boost the Indian solar industry Rooftop in the field of energy sector India's
prime minister Narendra Modi announced the Prime Minister sues the government launched the
scheme pm kusum on 19th February 2019 scheme aims to enhance their income deize the farm sector
and reduce environmental pollution but you know guys as much as I would love to believe that India
could become a superpower the bad news is that China is dumping in India and as have consistently
stated India is dangerously dependent on China you don't believe me look at this chart the solar
panel production has four stages polysilicon Ingot wafer solar cells and solar modules
and China has done such an incredible job that in January A Research Unit of the European
commission calculated that Chinese companies could make solar panels for just 16 to 18.9 cents per
watt whereas Europeans could produce it at 24.3 to 30 cents per watt and US companies could produce
them at 28 cents per watt so a Chinese module is 50% cheaper than Europe and 65% cheaper than us
this is the reason why not just India but even us and Europe are dependent on China but you know
what guys there is one big piece of good news here while I was going through my my research
I found that there is one Indian company that is finding ways to break this Monopoly of China
and soon this company is planning for the biggest IPO in the entire renewable energy space and if
successful this company could be our brahmastra to challenge the Chinese dependency why because
if you look at this graph while Mundra which is owned by Adan it has a capacity of 4 gwatt
Vikram solar stands at 3.5 gaw where as this company alone stands at 13 .3 gwatt so it has
three times the capacity as that of the Adonis similarly in fi23 while the revenue growth
of Adan Mundra was - 12% Vikram solar stood at - 7% Tata power stood at - 19% whereas this
company experienced a positive Revenue growth of 136% and the cherry on the cake is that they
also experienced a net profit growth of 538 this company is not an adani or a Reliance or a Tata
company but a company with a unique name called Waaree energies largest manufacturer of solar
Pv modules Renewables India largest solar panel manufacturer with 30 years warranty body energies
has opposed significant growth in its financial performance over the 3 years the group has the
biggest market share in the domestic market so the question over here is when the entire world
is dependent on China how is this Indian company trying to beat China how are they so far ahead
of the tatas and Adis of India what exactly is their business strategy that makes them India's
brahmastra to the chines domination and most importantly what are the business lessons that we
need to learn from the incredible rise of Waaree energies before we continue let me introduce you
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power industry we first need to understand the solar value chain so if you look at this chart
the solar value chain starts with silica which makes up almost 60% of the Earth's crust so
silica is first mined and purified to make poly silicon this poly silicon is first made into
large cylindrical blocks called ingots and then these ingots are turned into thin discs called
Wafers these Wafers then undergo processing to be turned into solar cells and when these cells are
framed and assembled together they make up a solar panel this solar panel is installed in our houses
and industries and if you look at China China is the leader in all the stages and out of the 99
million tons of silicon produced in the world in 2023 6.6 million tons were produced only in China
and if you look at where India stands India only produced 60,000 tons in comparison then 83% of
the world's poly silicon produced in 2023 was only produced in China and even when it comes to
the rest of the value chain from Ingot to Wafers to solar cells and even modules China controls
more than 80% of this entire entire value chain now when it comes to India we imported 100% of
our wafers in 2021 from China because our own production of polysilicon ingots and Wafers was
virtually zero so the question over here is how is China able to dominate this entire supply chain
and why has no country been able to compete with China well the answer is pretty simple the Chinese
government started subsidizing their manufacturing way back in 2009 itself and while other countries
were busy giving subsidies to buy solar panels Chinese companies were getting subsidies to
Manufactured solar panels so everybody in the world wanted to buy solar panels but not make
a solar panel whereas the Chinese only wanted to make and sell solar panels and this is how
the Chinese achieved insane economies of scale because of which today the Chinese are able to
produce the cheapest solar panels in the world secondly China practically produces all of the
world's equipment for manufacturing solar panels and the supply of every component of solar panels
from Wafers to special glass all of it comes from China so because of this if you look at China's
growth in the market share in the global shipment of PV cells it increased from 5% in 2004 to
90% in 2024 I repeat from 5% in 2004 to 90% in 2024 and lastly the low cost of Labor and low
cost of electricity helped the solar industry of China to grow at an exponential rate this is how
by entering the market too early by subsidizing the Chinese companies to manufacture while
everybody else was buying by controlling the manufacturing knoow and eventually by using cheap
labor China became a monopoly in the Solar space of the world China was one of the first countries
to realize the potential of solar panels China was going all in solar energy will be the dominant
source of renewable energy by the end of the day decade and the world is dependent on China for
the technology and today China is growing at such a staggering rate that China's PV module making
capacity is increasing at a c of 38% whereas all other countries combined are growing at just 26%
this is the market domination on which the Chinese companies stand so the question over here is when
the Chinese have such a strong Monopoly how is waaree helping India break through this Monopoly
well here's where ladies and gentlemen waaree energies is making a bold attempt to protect India
from the Chinese influence while the answer to it lies in its efficiency and operations so let's
first start with understanding what exactly does Waaree energy offer to the market if you look at
var's portfolio they offer a range of products and services like solar PV modules inverters
batteries Rooftop Solutions to even EPC services or engineering procurement and Construction
Services in simple words whether you are a homeowner Factory owner or a restaurant owner if
you ask Waaree to set up a solar plant for you Waaree will take care of everything from
engineering to purchase to installation end to end so you don't have to go to different
vendors Waaree alone will help you out end to end so if this basic understanding is very clear
to you let's understand the business strategies that make Waaree an incredible player in the
Solar space against the Chinese companies the first superpower that they are building is their
manufacturing capacity so Waaree Energy's realized that on the global stage there is a premium
on capacity creation for two reasons number one when a company increases capacity the cost of
producing solar panels decreases so as we produce more and more panels we will get closer to the
Chinese prices number two achieving this scale is pretty easy today because the global demand for
solar panels is shooting up every single day so it opens up the gateway to increase your profit the
second superpow that Waaree is building is their supply chain security for those who don't know
if you look at the market today Chinese products have been cheaper and they've been trusted by the
Indian vendors for a very long time so Indian PV module manufacturers often prefer buying all their
raw materials from China but if the entire Indian ecosystem is over reliant on China it creates
a big risk for India and here's where China's evil dumping strategy comes in for those who don't
know dumping is when a country deliberately sells its products at a dirt cheap price such that it
becomes impossible for the domestic Market to survive for example if a chinese company sells
solar cells for $4 and an Indian company starts manufacturing at $2 and sells the same product at
the same $4 then obviously because this product is made in India all the Indian companies would
buy from the Indian manufacturer right but here's where the Chinese would suddenly start selling the
same product at just $1.5 and obviously the Indian company won't be able to sell at $1.5 because it
cost them $2 just to manufacture and this is the reason why it becomes impossible for the Indian
companies to make a profit or to even sustain in the market and because of this it becomes
impossible for the indan Indian company to match the Chinese prices so when the Chinese products
are available at such diry price what will happen all the Indian clients will switch back to the
Chinese supplier and this Indian company will incur so much losses that eventually it will shut
down but after this company shuts down the Chinese would again increase the price to $4 so that they
can continue to make a profit this is what you call as dumping and this is the reason why Waaree
is taking a bold step to vertically integrate all the elements of the supply chain in India itself
which means in the supply chain they would be producing everything from ingots to Wafers to
solar cells to even solar modules so if Waaree ends up building this supply chain for India it
could practically become a Monopoly with a huge leverage in the Solar Supply Chain of India and
my sense is that the moment the Modi government senses that India has the capacity to manufacture
ingots they will exponentially increase the import Duty on Chinese products so that way it
would become impossible for the Chinese to enter the Indian market and whosoever completes
this vertical integration they would go on to become a huge beneficiary of this solar wave of
India this is again why Waaree could be a savior for India this is a second barrier to entry that
Waaree is building thirdly Waaree is building an insane distribution system to reach the remotest
corners of India and to build this distribution Waaree is using the franchise model to scale all
across the country today they have a network of 388 unique franchises all across the country which
helps them Reach even tier 2 and tier three cities of India and lastly it's the technology Waaree
energies have the technology which is better than its domestic peers and in some cases it is at par
or better than its International competitors for example nobody in the country has the flexibility
in their modules so if you want to install a solar panel on a low loadbearing roof or a doome
shaped surface or even if you want to install a solar panel on a tensile fabric structure waaree
has the technology that can adapt to any surface where regular panels cannot be installed so
do you realize they are building capacity to achieve economies of scale they're building supply
chain security to cut the Chinese dependence and most importantly they are using their franchise
Network to reach out to customers all across India these are the three superpowers that Waaree
is building for itself now the question over here is V is doing all this that is fine but is it
even financially viable to be spread across 388 franchises and have vertical integration without
suff offering dumping from the Chinese and then make a profit well this is why I got into the
waer of Waaree to understand their financials and this is what it looks like the first thing
I saw is the interest coverage ratio as in what is the ability of the company to pay its interest
expenses from its profits in simple words if your earnings before tax and interest is 1 lakh rupees
and your interest expense is 50,000 Rupees then your interest coverage ratio is two which means
you can pay your interest two times over with your earnings so if the interest coverage ratio is
less than one then it is considered to be risky if it is one then it is considered to be good and if
it is more than one then it is considered to be excellent and this indicator of Interest coverage
ratio helps us understand three very important things about a company and they are solvency
Financial Risk and debt capacity so number one it tells us whether a company can generate
enough earnings to cover its interest payments or not number two it tells us the possibility of
the company going backup and lastly it tells us the debt capacity of the company as in it tells
us how capable a company is to take up debt for expansion so the more this ratio the better it is
for the company so the better is their scope of expansion through debt now if you see the interest
coverage ratio in the Solar industry while Adan Mundra solar has an interest coverage ratio of 4.5
Vikram solar stands at 1.8 whereas Vari energy has an interest coverage ratio of 11 times which means
it is super safe at the moment with respect to its debt and it has a very high debt capacity to
expand further secondly if you look at their revenue and profitability like I mentioned in
the intro in fi23 while the revenue growth of adani's Mundra solar was- 12% Vikram solar stood
at minus 7% Tata power stood at minus 19% whereas Waaree energies not only saw a positive Revenue
growth it stood at a massive 136% Revenue growth so the question over here is how is Waaree able
to do it well one major reason for this is that the company's order books are filled with orders
from the United States if you see this table below their orders have increased from 0.41 gaw in 2021
to 18.06 gaw in 2023 that is a 4,38 increase in Just 2 years and if you see their sales more
than 68% are coming from exports and 96% of it is just United States so now the question over
here is why are these American companies going to worry and the reason is pretty simple there is
a global Mega Trend called China plus1 strategy whereby countries all across the world are
adopting to decrease their dependence on China so us companies are decreasing their imports from
China and they're increasing their imports from other countries especially India so this Mega
trend is helping the solar manufacturers in India and Waaree just happens to be a beneficiary
of it and lastly we saw their return on Capital employed and this indicator for Waaree stands
out as well for those who don't know Roci is nothing but for every 100 rupe that a company
invests how much profit does it generate so if your company invests 10,000 rupes and generates a
revenue of 12,000 rupes your net profit is 2,000 Rupees so in terms of return on Capital employed
it is 2,000 divided by 10,000 equal to 20% and in general a return on Capital employed of 20% or
higher is considered to be excellent 15 to 19% is considered to be good 10 to 14% is considered
to be average and less than 5% is considered to be bad now if you look at the return on Capital
employed for Waaree for fi23 it stands at 31.6% for adani's Mundra it is unknown but for websol
it stands at- 12.05% and as for their drhp the reason for their extraordinary financials is the
increase in capacity economies of scale vertical integration diversification and China plus1
policy all of these factors have helped waaree grow exponentially if this is very very clear to
you let's move on to the next section and that are the challenges that this company is facing in the
Indian solar industry people the first challenge that VAR is facing is the decrease in price of
Solar modules so globally if you check the cost of solar panels and Solar Products in general they
have dropped by five times if you see this graph the price of Solar modules have reduced by 95%
going from $1.78 per watt to just 0.096 per award and this is from 2010 to August 2024 and as these
prices keep on dropping the profits will go down and the competition will increase secondly the
Chinese companies and their dumping strategy can make things even worse in the future for Vari and
lastly even today Waaree energies is procuring 70% of its raw material from China so if China starts
to see Waaree as a threat they might unleash their dumping strategy and they might specially Target
Waaree and this brings us to the last question and that is how is the government helping the
solar industry of India and how exactly are companies like Waaree energies benefiting from
them well firstly there is a government mandate for domestic content requirement or DCR long story
short so if you want to build a huge solar powered charger for your entire school and you try to
get a grant from the government the government will want you to use parts of the charger that are
built in India itself secondly the government is giving away something called performance Linked
In sander schemes the link to which I'll put out in the description and lastly the government
is protecting domestic producers by imposing a heavy import duty of 40% on solar modules and
25% on solar cells this is what the government is doing to make sure that Indian supply of solar
components sustains and when it comes to demand creation as we saw in our rooftop episode the
government is giving away a subsidy of 78,000 rupees on solar panels costing 1.8 lakh rupees
and the government is aiming that 1 CR Indian households will buy solar panels and contribute
to the Indian solar dream so if the government is is able to fulfill this target of 50% energy
needs from renewable sources it will be a dream Run for the solar companies of India and I'm
just praying with all my heart that companies like Waaree Vikram solar and adani solar go on
to become Market leaders of the world this is the story the mo the financials and the risks of
a rising Legend of India that goes by the name Waaree energy and if all goes well it could
be the brahmastra for the Indian solar dream and that is the reason why I thought it to be
extremely important to cover VAR energies and to pay a tribute to the pioneers of India and this
brings us to the last part of the episode and that are the lessons that India needs to learn from
this solar revolution of the world lesson number one the power of a country doesn't lie in its
ambition but in its independence to pursue that ambition in this case while India and China both
have their renewable energy dream while China is racing ahead independently India's dream is still
dependent on the Chinese and this is because while we let the solar slip due to lack of vision now we
need to bleed losses so that we can take charge of our destiny both in case of solar and the EV
industry and after we are done capturing this wave the leaders of our country need to study
and find out how India can build a leverage for itself lesson number two after this wave is done
the leaders of a country need to study and find out how India can build a leverage for itself in
the global economy in this case while the Chinese invested in solar and eeve way back in 2008 in
2009 we started pursuing this dream only after 2014 and 2016 but if we repeat this act and we do
not build a leverage for ourselves by 2035 India becoming a superpower will remain a distant
dream and lastly since the government is the Godfather of the market whichever company helps
the government drisk India that company will go on to become a major beneficiary in the Indian
market in this case since Waaree is acting as India's brahmastra for the Chinese dependency it
is OB vious that Waaree is going to get an insane advantage in the market this is what we need to
learn from India's struggling solar dream and I just hope you learn something valuable from this
Cas study that's all from my side for today guys if you learn something valuable please make
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business and political case studies please subscribe to our Channel thank you so much for
watching I will see you in the next one bye-bye [Music] he [Music]