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ICRA Warns of Solar Module Overcapacity, Margin Pressure, and Industry Consolidation by FY27

India’s solar manufacturing sector may be heading toward an overcapacity crisis, with the country’s solar PV module capacity projected to surge from 109 GW currently to over 165 GW by March 2027, according to credit rating agency ICRA. The agency also expects solar cell manufacturing capacity to rise sharply — from 17.9 GW (under the Approved List of Models and Manufacturers, or ALMM) to around 100 GW by December 2027.

However, ICRA cautioned that this rapid expansion could lead to excess supply, as India’s annual solar installations are expected to remain at 45–50 GWdc, compared to a module production capacity of 60–65 GW per year. The mismatch, combined with the recent U.S. tariff measures that have reduced export opportunities, may trigger price competition and consolidation among smaller OEMs.

“Operating profitability for ICRA’s sample of domestic solar OEMs, which stood at around 25% in FY2025, is expected to moderate amid growing competitive pressures and overcapacity,” said Ankit Jain, Vice President and Co-Group Head – Corporate Ratings, ICRA.

Jain added that U.S. tariffs and regulatory uncertainty will likely dampen exports, further intensifying pricing pressure on Indian manufacturers.

ICRA noted that vertically integrated manufacturers — those with control across the cell, module, and upstream supply chain — are better positioned to withstand market volatility in the long term. Meanwhile, pure-play module makers could face margin erosion and potential consolidation.

The agency highlighted that the ALMM requirement for solar cells will become effective from June 2026, making it crucial for domestic players to scale up and stabilize cell manufacturing in time. Modules using domestic cells are expected to cost 3–4 cents per watt more than those using imported cells.

In a temporary relief, projects with bid submission dates before September 1, 2025 — representing a pipeline of 45–50 GW — will remain exempt from ALMM List-II requirements for solar cells, even if commissioned after June 1, 2026. This provision will support the near-term order books of OEMs without in-house cell manufacturing.

Globally, China dominates the solar supply chain, holding over 90% share in polysilicon and wafer production, 85% in cells, and around 80% in modules. ICRA warned that any geopolitical restrictions on the supply of technology or equipment for backward integration could pose additional risks for Indian OEMs.

The agency emphasized that each successive stage in the solar value chain requires higher technological sophistication and capital investment, which could further challenge new entrants as the industry evolves toward consolidation.