ALMM Revival to Spur Solar Module Makers' Profit Prospects in 2025: CRISIL
A substantial increase in exports, commanding a premium of 15-20 percent over domestic prices, is anticipated to more than compensate for the surge in imports during the temporary suspension of ALMM.
February 01, 2024. By Abha Rustagi
The ongoing fiscal year is witnessing a noteworthy surge in profitability, nearly doubling compared to the previous fiscal. A substantial increase in exports, commanding a premium of 15-20 percent over domestic prices, is anticipated to more than compensate for the surge in imports during the temporary suspension of ALMM.
Ankit Hakhu, Director at CRISIL Ratings said, “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.”
With the imminent return of ALMM in fiscal 2025, there is an expectation of a strengthened domestic demand for Indian modules. Ankush Tyagi, Associate Director at CRISIL Ratings, emphasizes that the reinstatement of ALMM is likely to mitigate competition from imports. “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 percent this fiscal. Moreover, demand growth will increase utilisation rates, as 70-75 percent of domestic demand (26-28 GW) will be met by Indian module producers next fiscal, up from 30-35 percent 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 percent in fiscal 2025 from 50 percent in fiscal 2024),” he said.
The positive trend in higher sales volumes, both in domestic and export markets, coupled with healthy margins, is expected to generate robust accruals for module makers rated by CRISIL Ratings in the current and upcoming fiscal years. This financial strength is poised to support capital expenditure for capacity expansion and technology upgrades, ensuring the sustainability of healthy credit profiles.
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