SmallCap Hunter : Trying to find the dark horses with triggers

Solar module manufacturing industry in India has never been and is still not attractive from an investor’s perspective.

1. Most the technology required for manufacturing is always imported because there is no tech development which happens in India. Mono PERC as a technology is not very old, and now we have TopCon, additionally there will be many other in the development stage which will render the TonCon obsolete pretty soon.
2. Most raw materials required for module manufacturing are imported. The value chain is solar grade silicon ingots >>>wafers>>>cells>>>modules. At most we make cells in India from imported wafers and then module manufacturing is essentially an assembly work (with some automation/mechanization involved). There are many other materials required like glass, aluminum frames, junction box, connectors, soldering materials, EVA (front and back), backsheets, etc and host of chemicals, most of which (not all, but significant portion) is again imported, mostly from China.
3. The tech development in solar is rapid, meaning technology obsolescence is fast. This leads to significant CAPEX on a regular basis (leading to writing off of earlier investments).
4. The global price of solar module is driven mostly based on China’s price. Government may try to protect domestic manufacturers but its never going to be sufficient because India does not manufacture modules at scale. Moreover, many regard solar modules as commodity (for price negotiations) even though its not. And because of rapid tech development the fall in price of modules historically has been pretty high.
5. There is no technology advantage, no competitive advantage, no pricing power, for Indian manufacturers.
6. Just think about this, in the past decade and more, there is huge installation of solar projects in India, more than 80% of which used imported modules. Why, because the manufacturing scale was never there. Even currently, we dont have enough module capacity to meet the demand.
   I personally think that it could only be a speculative bet and pure luck to make money, because fundamentally the economics are against module manufacturers. A company like Reliance Industries also bought a foreign module manufacturer and did not invest in building the business from scratch. Tatas also have had module manufacturing business for many years, but that has never scaled to meaningful capacities.
   Look at historical performance of WebSol, Indosolar, Swelect, Surana from perspective of sales growth, profit growth, RoE/RoCE, networth improvement, etc.
   Closing comment…chances of losing money in such stocks are much higher than making money.
   Not invested, only sharing my personal opinion, not an investment advice.