Tata Power Company Ltd has made a significant stride in India’s renewable energy landscape by commencing solar cell production at its 2GW facility in Tirunelveli, Tamil Nadu.
With this development, Axis Capital has assigned an ‘Add’ rating to Tata Power’s stock and set a target price of Rs 500 apiece.
This article delves into the potential of Tata Power’s solar cell production, its competitors like Adani Solar and Premier Energies, and what it means for investors.
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Solar Cell Production in India: Tata Power vs. Competitors
India’s solar manufacturing capacity is rapidly expanding, with Tata Power’s new 2GW production line playing a crucial role.
However, when compared to the national production scale, the overall solar cell capacity in the country remains insufficient.
India’s total manufacturing capacity stands at 9GW, with Adani Solar contributing 4GW, Premier Energies accounting for 2GW, and Tata Power producing 2.5GW.
The remaining capacity is shared by smaller players like Jupiter International and Websol Energy Systems.
This capacity falls well short of the anticipated 25GW solar cell demand in FY25, highlighting a supply gap that companies like Tata Power are working to close.
Axis Capital’s Analysis: What the Future Holds for Tata Power
Axis Capital believes that Tata Power is well-positioned to capitalize on the solar market, particularly as the Approved List of Models and Manufacturers (ALMM) for solar cells has yet to be enforced.
This allows Tata Power the flexibility to earn higher margins through integrated module and cell capacities, especially for Domestic Content Requirement (DCR) projects, such as solar rooftops and pumps.
Moreover, the company has the option to export to lucrative markets like the US, similar to competitors Adani Solar and Premier Energies, which can fetch better prices than selling domestically.
According to Axis Capital, leveraging a large portion of its Tirunelveli plant for in-house solar projects, however, may not yield optimal returns.
This is because the cost of Tata Power-manufactured cells would not be significantly lower than that of imported Chinese modules, even after accounting for import duties.
Additionally, revenue generated from internal solar projects would not reflect on the company’s profit and loss (P&L) statements due to consolidation adjustments, although it could lead to cost savings and better internal rate of return (IRR) over 25 years under power purchase agreements (PPAs).
Strong Stock Performance and Future Expansion
On the back of these developments, Tata Power shares saw a surge of 6.55% to close at Rs 445.20 on the BSE.
Investors are optimistic about the company’s capacity to ramp up its solar production, with its Tirunelveli plant expected to add another 2GW in the coming 4-6 weeks. The plant is projected to reach full production capacity within a few months.
Tata Power’s recent solar module manufacturing facility at the same location, with a capacity of 4.3 GW, was commissioned in October 2023.
To date, the company has already produced 1.25GW of solar modules. The total investment in this project is Rs 4,300 crore, with over 70% allocated to the cell production facility, underscoring the company’s focus on solar cell manufacturing.
Impressively, the Tirunelveli plant will be one of the largest integrated solar manufacturing facilities in India, powered by an 80% female workforce—a significant achievement in gender diversity.
Tata Power’s Long-Term Growth Strategy in Solar
Tata Power’s new solar cell and module plant is expected to be fully operational by FY26. In the meantime, the plant will cater to the company’s extensive solar projects pipeline, which includes 913MW of solar projects and 4,378MW of hybrid solar-wind projects.
The company plans to allocate 2.5GW per year from the Tirunelveli facility for its internal solar utility projects.
Additionally, around 1GW per year will be directed toward solar rooftop projects under the PM Surya Ghar Yojana, which mandates the use of domestically manufactured solar cells and modules.
A significant portion of Tata Power’s solar module production from the Tirunelveli plant is expected to be exported to the US market, with regulatory approvals anticipated by the end of FY25.
The plant is also partly funded by a $150 million loan from the US International Development Finance Corporation (DFC), which will help the company strengthen its global market presence.
Government Regulations and Industry Outlook
Looking ahead, the Ministry of New and Renewable Energy (MNRE) has announced draft norms for the ALMM for solar cells, which will come into effect from April 2026.
Once enforced, this regulation could have significant implications for Tata Power and other domestic manufacturers.
The enforcement of ALMM will prioritize locally manufactured solar cells, potentially boosting Tata Power’s market share and giving it an edge over Chinese imports.
Conclusion: Can Tata Power Shares Hit Rs 500?
With its strong foothold in solar manufacturing, strategic expansion plans, and growing demand for renewable energy, Tata Power appears well-positioned to achieve Axis Capital’s target of Rs 500 per share.
The company’s ability to leverage its integrated solar production line and cater to both domestic and international markets will be key to driving future profitability.
However, the extent of its success will also depend on factors such as government policies, the ALMM enforcement timeline, and global market dynamics.
For investors, Tata Power remains a strong player in India’s green energy transition, making it an attractive stock for long-term growth.
In conclusion, while Tata Power is set for significant growth in the solar sector, the potential risks and challenges should be carefully considered before making investment decisions.