Smaller Solar Module Manufacturers Find it Challenging to Raise Capital

The big players, however, say funding is not a problem


Module manufacturers are scrambling to add capacity and upgrade technology after the government effectively barred imports. While large and established companies say capital is available in the market for expansion, funds have not been easy to come by for smaller companies that are looking to tap into domestic demand.

Domestic manufacturing capacity and corresponding demand are heavily mismatched, according to Mercom’s Q2 2022 India Solar Market Update.

This means developers are looking to place large orders, emphasizing highly efficient modules made with the latest technology. Smaller firms are unable to measure up on capacity and technology.

Recently, the Ministry of New and Renewable Energy (MNRE) issued an updated list of models and module manufacturers under the Approved List of Models and Manufacturers (ALMM) order. There are now 67 module manufacturers with 20 GW of module capacity enlisted under ALMM.

“Medium and small manufacturers are not finding it easy to raise money. But in a positive development, global funding agencies are showing interest in investing in module manufacturing,” Dhruv Sharma, CEO of Jupiter Solar and President of the Indian Solar Manufacturers Association, said.

He added that as government policies and their implementation mature, the lenders would be much less apprehensive.

Further, small manufacturers often struggle with the funds needed to run day-to-day operations, which comes in the way of their expansion plans. Harsh Jain from Citizen Solar said, “If you want to go for a 500 MW line, the CAPEX required is around ₹400 million (~$4.91 million)-₹500 million (~$6.13 million), and the working capital will be more than ₹1 billion (~$12.25 million). The ratio is around 1:2.5. The problem with Indian manufacturers is that they don’t have the working capital and incur losses.”

The inherent structural problems faced by small module manufacturers in expanding capacity are being addressed to some extent by lenders dedicated specifically to manufacturing.

The state-owned lender for small businesses, the Small Industries Development Bank of India (SIDBI), has favorable terms for capacity expansion. Manish Kumar, Deputy General Manager at SIDBI, said, “If the manufacturing unit already exists, we have 100% financing for it with a cap of ₹50 million (~$612,430).”

SIDBI offers full financing if 60% of the machines qualify as energy-efficient. “If that is not the case, we have the 80:20 model for green projects, where 80% comes from loans and 20% from promoters. It’s a repo rate-based lending program, where the rates range from 6.5% to 7%. So, funding is not a problem for solar manufacturing projects,” Kumar said.

No dearth of funding for big players

A Gujarat-based manufacturer said developers were still not placing large orders with domestic module-makers as they are hoping for some leeway on Basic Customs Duty (BCD) which may allow them to procure Chinese modules again.

“This is frustrating, but we aren’t overly worried because if developers continue in the wait-and-watch mode, we have the ready option to export,” A Gujarat-based manufacturer said.

The export option makes investing in manufacturers a more secure option for lenders.

“With organizations across the globe growing more conscious about sustainable growth, the solar sector in the country has witnessed a steep rise in interest from global ESG funding agencies in investing in the domain,” Gautam Mohanka, Managing Director of Gautam Solar, said.

Sharma concurred that manufacturers currently have multiple funding options, including venture capital or private equity players. “Besides, firms are also exploring non-banking financial companies  like Edelweiss for debt funding. You can also borrow from banks and the Indian Renewable Energy Development Agency (IREDA),” he said.

Stakeholders also say there is a need for an upgradation fund to help smaller manufacturers set up new facilities with the latest technology.


The option of going public to raise capital is on the table, manufacturers say, but the volatility in the sector – primarily due to the newly introduced domestic policies – does not encourage initial public offering (IPO). However, some companies might go down that road going forward.

“IPOs are a lot more difficult than what is being said. In the next 12-15 months, only a few companies will go public, and over time more companies will come forward. Small and medium enterprise IPO is another thing that manufacturers are looking at closely,” Sharma said.

India has seen record capital being raised from the capital markets in the last year, but solar module manufacturing is not quite there yet.

Jain felt IPOs provide a good alternative to funding by sharing equity with the general public. “But the time is not right for manufacturers to go public. They should wait another year or two to get their companies listed because there is a significant amount of volatility in the market, and if the IPO is not fully subscribed, it becomes a problem.”

Stakeholders are optimistic that government initiatives will facilitate the growth of domestic manufacturing in the country. Still, there is also a genuine concern that smaller players may not benefit yet. Lenders are coming forward to help, but it might take a while before smaller manufacturers are ready to compete with the bigger players and Chinese counterparts in capacity and technology.