The sector is already faced with a supply surplus. Domestic module production capacity has rapidly expanded to 160 GW in recent years, while annual installations remain closer to 40-45 GW. This mismatch has led to price pressure and margin compression.Manufacturers are facing intense price pressure and competition between suppliers as capacity exceeds demand. The US market has historically accounted for a significant portion of India’s solar exports, with shipments worth around Rs 34,000 crore between April 2023 and November 2025.
The latest trigger came on February 24, when the US Commerce Department announced a provisional 126% countervailing duty on certain solar imports from India. It also proposed tariffs on imports from Indonesia and Laos.
At first glance, the 126% tax rate seems strict. However, Motilal Oswal said the applicability depends on the country of origin of the solar cells used in modules supplied to the US. In fact, the tariff would apply only if the modules use solar cells manufactured in India.
For Waaree Energies, which gets roughly a third of its revenue from the US, the brokerage said the impact is likely to be limited because it does not use Indian-made solar cells for its US supplies. Premier Energies, meanwhile, only gets about 1% of revenue from overseas markets and remains largely insular. Yet the broader signal is negative. Arpit Jain, Joint MD at Arihant Capital Markets, said the solar sector is clearly in an oversupply phase. “Aggressive capacity expansion, especially in modules, has created a global supply-demand imbalance and put pressure on prices. The new US tariffs add another layer of uncertainty.”
He said companies with manufacturing facilities in the US or plans to set up factories there are structurally better placed. They can benefit from local incentives and avoid tariff-related disruptions. Companies that export a lot without geographical diversification run greater risks.
India’s cell manufacturing capacity is still increasing and is largely focused on meeting domestic demand.
Motilal Oswal estimates the cell capacity at around 27 GW under ALMM-II, compared to the module capacity of 162 GW under ALMM-I. Surpluses available for exports are likely to be limited at least through FY28. That could limit the scale at which Indian manufacturers can serve export markets, even if tariffs are reduced.
Sourav Choudhary, Managing Director at Raghunath Capital, said the industry is entering a more differentiated phase. He pointed out that manufacturers are still at the epicenter of the stress cycle. In a scenario where export opportunities are reduced due to tariffs, excess inventory could be diverted into already competitive markets, further putting pressure on prices and stretching working capital cycles.
He added that integrated players with backward integration in cells and wafers are better positioned to control costs. However, module production remains cyclical and exposed to global trade regimes.
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On the other hand, renewable energy producers operating under long-term power purchase agreements are less exposed to module price fluctuations. Choudhary said independent power producers benefit from contracted revenue streams rather than production margins. The visibility of their revenues depends more on project execution and financing costs than on global module prices.
EPC and project developers are somewhere in between. Their income depends on the demand for installations and not on the module distribution. Implementation risks and tender prices remain factors, but structural expansion of renewable capacity provides support in the medium term.
Despite the short-term stress, most analysts agree that the long-term renewable energy story remains intact. India’s target of 500 GW of non-fossil capacity by 2030, industry targets to decarbonise the economy and policy support such as PLI schemes provide a strong structural backdrop.
Jain said the current correction, with some solar stocks down 40-70% from their peaks, reflects oversupply concerns and policy uncertainty. For long-term investors, this phase could offer selective opportunities in companies with strong balance sheets, integrated operations and access to key markets.
Margins are under pressure due to falling module prices, but some players see stabilization as raw material costs cool and supply growth slows. In the short term, volatility is likely to persist. If U.S. tariffs end at current levels in mid-2026, export economics could become unviable for some players unless they adjust supply chains.
The sector is not in decline, but in transition. The next cycle will favor companies with scale, integration, financial discipline and diversified markets. Oversupply and tariffs may reshape the sector, but they are unlikely to derail the broader story of solar energy growth in India.
In terms of individual stocks, Motilal Oswal has a target price of Rs 3,514 on Waaree as its domestic module business is valued at 13x FY28E EBITDA. The US module business is valued at 12x FY28E EBITDA, which is in line with global peers. Meanwhile, the broker expects Premier Energies to touch Rs 1,000.
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(Disclaimer: Recommendations, suggestions, views and opinions expressed by the experts are their own. These do not represent the views of the Economic Times.)
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