The Central Government’s announcement that it wants India to achieve net zero carbon emissions by 2070 and meet half of its power needs from renewable energy sources by 2030 has sparked a lot of interest in solar energy stocks.
As a result, many investors are keen on solar energy stocks. Hence, this blog provides a list of such stocks and discusses important factors that you should consider before investing in them. So, read on…
A Brief Overview of the Solar Energy Sector in India
The solar energy sector is witnessing exciting developments in India. Currently, India ranks fourth in the world in terms of its solar power capacity, which has grown at an impressive rate in the last five years from 21,651 MW to 70,096 MW in 2023.
The Central Government is leading the way in promoting the cause of solar energy to deal with climate change. Under its National Electricity Plan, India has set an ambitious target of achieving 500 gigawatts of renewable energy by 2030 and more than 600 gigawatts by 2032.
Besides, the country wants to emerge as a leader in green energy by 2047. To ensure that India achieves its target, the Central Government has announced many schemes, such as the Production Linked Incentive (PLI), Solar Park Scheme, and many more.
These schemes are creating a conducive environment for the development of solar power projects. Hence, several private companies are aggressively investing in this sector. As a result, many investors are actively tracking solar energy stocks with the objective of generating a return.
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Why Invest in Solar Energy Stocks?
Solar energy companies can grow at a high rate. This is the main reason why someone should consider investing in these stocks. But, before you invest, you need to understand why such companies are poised to grow at a high rate.
First, the Central Government has shown its commitment to clean energy in order to curb the adverse impact of climate change. The Government has announced that it wants to achieve the target of net zero carbon emissions by 2070. Besides, the government has implemented several policies to promote solar energy, which are explained under the previous subheading.
Second, many private sector companies have already started investing aggressively in the solar energy space, including Adani Green Energy, Waaree Energies, Tata Power Renewable Energy, Premier Energies, Alpex Solar, etc.
Third, many private players are still relatively small. Hence, in percentage terms, they can grow at a high rate. That said, you must understand that solar energy is still an upcoming sector, which is heavily governed by the government.
Therefore, it will take some time to mature and stabilise. If at all, you want to invest in this sector, you should not invest a significant portion of your portfolio here.
Popular Solar Energy Stocks in India in 2024
Find below the list of famous solar energy stocks in India in 2024:
Adani Green Energy: This company is an extremely well-known player in India's renewable energy industry. It builds, operates, and maintains utility-scale grid-connected solar and wind farm projects in the country. It provides electricity to entities belonging to central and state governments.
Waaree Energies: This company is the largest manufacturer of solar PV modules in India. Its objective is to deliver premium and cost-effective sustainable energy solutions and help in reducing carbon footprint. Apart from having four solar module manufacturing centres in India, it also has international presence.
Tata Power Renewable Energy: This wholly owned subsidiary of The Tata Power Company is a major player in the solar energy industry. It has expertise in developing, constructing, and operating solar and wind power assets. The company’s current operating capacity is 1,839 MW, which includes 907 MW of wind power and 932 MW of solar power.
Sterling and Wilson Renewable Energy: This company is a prominent solar engineering, procurement and construction (EPC) and operations & maintenance (O&M) solutions provider. It has operations in India, Australia, the US, South East Asia, the Middle East, Africa, Europe, and Latin America.
Solar Energy Stocks in 2024 as per their Market Capitalisation
Here is the list of solar energy stocks in 2024 based on their market capitalisation:
Adani Green Energy: This is a famous solar energy stock in India with a market cap of 2,59,742 (₹ crores). It develops, operates, and maintains many renewable energy projects, including solar power plants. It has developed several large solar parks in India.
Premier Energies: This solar energy stock has a market cap of 43,639(₹ crores). It is an integrated solar cell and solar module manufacturer, which is backed by a Washington DC-based private equity investor. Its annual production capacity stood at 2 GW for solar cells and 3.36 GW for solar modules on March 31, 2024.
KPI Green Energy: Based out of Gujarat, this company is a famous solar and hybrid power generating company. It is into developing, building, owning, operating, and maintaining hybrid and solar power projects. With a market cap of 9,876 (₹ crores), it is a leading stock in the solar energy space.
Alpex Solar: It is a prominent manufacturer of solar PV panels. Besides, it offers a variety of high-quality solar solutions meant for the varied requirements of its clientele. To ensure total control on quality, it manufactures its own high-grade aluminium frames. At a market cap of 1,931 (₹ crores), it is a famous solar energy stock in India.
Zodiac Energy: This company has installed solar power plants for private players and also entities related to the government. Some of its prominent clients include Sun-Edison India, Adani Group, Torrent Power, Gujarat Energy Development Agency, and the Reserve Bank of India. Its market cap is 788(₹ crores).
Note: The data for market capitalisation of companies mentioned above is taken from the National Stock Exchange’s website on October 28, 2024.
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Key Factors to Consider Before Investing in Solar Energy Stocks
If you are keen to invest in solar energy stocks, here are the factors you must keep in mind:
Financial Performance: You should analyse the financial performance of all solar energy stocks you are keen on. Understand how their sales and profit have grown in the last 5 years. You must also pay close attention to their cashflows. As many solar energy companies are currently investing, their net cashflows could be negative. Hence, you should estimate when they will start generating positive cashflows.
Market Trends: Several interesting market trends are emerging in this sector. For example, India is adopting high-efficiency solar cell powered modules. Besides, there is an increase in the focus on energy storage. Hence, the recycled batteries market is likely to grow. Based on such trends, you should analyse which stocks are expected to grow and then make an investment.
Regulatory Environment: This is a heavily regulated sector, as the Central Government has announced several policies and benefits for faster adoption of solar energy. Some of these announcements involve providing tax benefits, financial incentives, production-linked incentives, etc. Hence, as an investor, you should analyse how such regulations/policies impact stocks you are keen on.
Global and Economic Factors: You should track global and economic factors that can impact the solar energy sector. For example, international agreements on climate change and renewable energy incentives can impact the demand for solar energy. You should also track how various countries are performing on curbing environmental damage by promoting solar energy because it can give you a cue in terms of how India will perform.
Future Outlook of Solar Energy Stocks
As the Indian Government is emphasising on solar energy, it appears that such stocks have a positive future outlook. In the last few years, many solar energy companies have invested a lot to expand. Hence, there is potential for future growth.
That said, you should also understand the challenges this industry faces. For example, there is still lesser awareness about solar or renewable energy in rural areas than in urban areas. Besides, investment in solar projects tends to take a lot of time to generate a return.
There could also be issues related to land acquisition and government approvals in this sector. Moreover, solar energy is an upcoming sector. Hence, a lot of money and effort still has to go into research and development (R&D).
Based on these factors, different solar energy stocks may have different strengths and weaknesses, which will determine their future outlook.
Conclusion
If you have a trading account, you may find solar energy stocks interesting, which is not surprising because the government is focusing a lot to promote renewable energy. Hence, the sector has growth potential. However, before investing, you should also understand the risks involved. Moreover, you must financially analyse these stocks. If after doing thorough research, you think a stock is worth investing in, only then you should invest in it.
Disclaimer: Investments in the securities market are subject to market risk, read all related documents carefully before investing.
This content is for educational purposes only. Securities quoted are exemplary and not recommendatory.
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