As of December 31, 2021, Vikram Solar Limited is one of India s largest module manufacturers, in terms of operational capacity, producing solar photo-voltaic (“PV”) modules (Source: CRISIL Report), and is also an integrated solar energy solutions provider offering engineering, procurement and construction (“EPC”) services, and operations and maintenance (“O&M”) services to its customers. Further, the company had a domestic market share of approx. 19% (calculated as a percentage of operational modules capacity) with 2.5 GW (inclusive of trial production i.e. which is not yet commercially available) of installed manufacturing capacity for solar PV modules, as of December 31, 2021 (Source: CRISIL Report). It strives to deliver reliable solar solutions through innovative products, and it achieves this through its specialized high-efficiency PV module manufacturing, comprehensive EPC solutions and O&M services.

The Offer comprises a Fresh Issue and an Offer for sale. The Fresh Issue aggregates up to ₹15,000 million while the offer for sale is of 50,00,000 equity shares. Out of the net proceeds from the fresh issue, ₹12,388.03 million would be used for Funding capital expenditure for setting up of the Proposed Project and the balance would be used for general corporate purposes.

The company’s revenue from operations has decreased from ₹20,168.36 million in FY19 to ₹16,101.38 million in FY21. The company’s EBITDA increased from ₹1,828.16 million in FY19 to ₹1,945.02 million in FY21 while PAT also dropped from ₹408.22 million in FY19 to ₹381.93 million in FY21.

Vikram Solar is India's leading module manufacturer, one amongst several companies trying to make headway into the alternative energy space. Let’s take a look at how its listed peers have fared in the stock markets-

Vikram Solar Limited, one of India’s largest domestic solar PV module manufacturers in terms of operational capacity and the company had a market share of 19% (calculated as a percentage of operational modules capacity). (Source: CRISIL Report). It has an extensive presence in the domestic market having a pan-India presence in 23 states and 3 union territories through an extensive distributor network of 42 distributors. It also has 56 trusted resellers of its products across India and has a network of 97 empanelled system integrators who are on-boarded with the company which ensures that the end customers are accessing genuine products, uncomplicated purchase process and seamless technical guidance.
Furthermore, according to CRISIL, Vikram Solar Limited is also the only manufacturer with a capacity greater than 1.5 GW having a presence in eastern and southern parts of the country which further facilitates direct access to distributors and their network, as of December 31, 2021.

Vikram Solar Limited is primarily a high-efficiency solar PV module manufacturing company that has developed a diversified product and service portfolio catering to solar energy solutions, and as a result, it is able to provide integrated EPC and O&M services. The company provides these services primarily for its own manufactured PV modules, as a value-added offering. It has over a decade of experience in executing EPC projects for solar plants and have more than 300 projects which has been executed or are under execution with an aggregate capacity of 1.42 GW, 413 MW of which are at various stages of construction. Post completion of the EPC projects undertaken by the company; it also offers its customers an option to extend O&M services to these projects on an ongoing basis. The company is also providing O&M services to projects with a cumulative capacity of over 900 MW, a significant majority of which has been sourced from its EPC customers. Both EPC and O&M services are value added services, which in addition to providing it with a steady source of revenue also benefit from higher margins.

Vikram Solar Limited is well known for providing high-quality products and services with a strong execution experience, as evidenced by its performance in the reliability testing by Photo-voltaic evolution labs (PVEL) where it has emerged as a top performer in four out of the last five years and its inclusion in Tier 1 solar PV modules manufacturer list of Bloomberg NEF. Its marketing strategy is focused on understanding the needs, behavior, and desires of its customers, as well as those involved in its distribution networks. To understand its customer’s needs, the company undertakes market research to enable the company to provide a diverse product and service portfolio to different stakeholders.

Among all commercially available renewable energy sources in India, solar energy potential is the highest. (Source: CRISIL Report). At the COP 26 climate summit, India set a target of achieving 500 GW of non-fossil energy by 2030, and solar energy is expected to receive special emphasis from the government in achievement of this target. Considering the installed base of approximately 50 GW as on January 2022 for solar energy, and a target of 280 GW by 2030, a potential 230 GW of solar energy may be driven over the next nine years and assuming the current practice of approximately 1.4x module capacity installed compared with 1x of solar project rated capacity, approximately 320 GW of module demand may potentially arise over the next 9 years. In addition to the favourable industry and market dynamics, the company also benefits from a favourable regulatory landscape and support provided to domestic manufacturing.

Vikram Solar Limited’s manufacturing units are automated, utilising equipment and technologies from Japan, Germany, United States of America and Switzerland. Further, its operations at Falta are certified under ISO 14001:2015 standard for environment management and the ISO 45001:2018 standard for occupational health and safety management systems implementation. Further, the quality management systems at Falta are certified ISO 9001:2015. With quality at the core of its ethos, its high-quality solar PV modules are backed by rigorous testing and robust quality control systems. The company’s processes are optimized through practice of lean manufacturing and Six Sigma methods, which is a data-driven tool for process improvement with a primary focus on eliminating defects and variation from organizational processes.
The company employs 14 Green-belts and 3 black belts (personnel with in depth knowledge of the Six-Sigma practices). It also has an online Total Quality Management (“TQM”) portal that has over 1,100 documents covering health, safety briefings, quality specifications, work instructions, module acceptance criterion, etc. which are updated on real time basis.

Its success depends on its ability to build new manufacturing plants and add production lines in a cost-effective manner, both of which are subject to risks and uncertainties.
It does not have long-term contracts with suppliers of solar PV cells and all other raw materials and therefore are susceptible to potential unavailability of raw materials.
It incurred losses in the six months ended September 30, 2021 and any similar losses in the future may adversely affect its business, financial condition and cash flows.

Over the next 5 years, generation is likely to increase at a healthy 4-5% CAGR in line with power demand, even as the generation mix undergoes a gradual shift.
In Union Budget 2021-22, the Central Government announced the National Hydrogen Energy Mission (NHM) envisaging the use of hydrogen as an energy source, leveraging its utility as a clean alternative fuel. This is likely to increase business for the company.

Restrictions on the import of solar raw materials, machineries and equipment and related components may increase its business costs. The company may also face similar restrictions on its exports.
The company operates in a competitive industry and any failure to compete effectively may result in a decline in its market share.
Its customers may fail to meet their contractual commitments or may become subject to insolvency or liquidation proceedings.

To continue to maintain its market leadership in domestic solar PV module manufacturing, Vikram Solar is constantly evaluating opportunities to strategically grow its operations. The company intends to expand its manufacturing capabilities and has plans to establish a new facility of 2 GW in Tamil Nadu for the manufacturing of solar PV modules with backward integration with solar cells of 2 GW. The new facility will have an annual rated capacity of 2 GW.
Furthermore, its proposed backward integration initiatives and ability to manufacture high quality solar cells in a cost-effective manner may also allow the company to expand its operating margin. Subject to its successful completion and receipt of approvals, as required, the proposed expansion is expected to increase the overall capacity and also upgrade the entire capacity with M10 and M12 cell technology production that provides higher wattage per solar PV module. The expansion plans are driven by the expected growth in demand (both domestic and international) and the GoI’s target of 280 GW of solar capacity by 2030 which would entail installation of approximately 25 GW/annum for the next decade.

Vikram Solar Limited strategy is to be a “fast follower” which entails adopting new, promising and proven technologies early. It achieves this through the continued development of innovative products, which will enable the company to expand its products portfolio and drive increased product orders going forward. This can be evidenced by the constant improvements of solar PV module wattages and Efficiencies since 2009. Furthermore, the company is constantly pursuing opportunities and product segments which leverage its existing technology platform and know-how. In particular, the company is currently working on developing solar PV modules with Efficiencies of more than 23.30% using cell types such as n-type monocrystalline cell with Tunnel Oxide Passivated Contact (“TOPCON”) cell. It also intends to also expand into captive projects. Commercial and Industrial (“C&I”) users consume approximately 51% of the electricity generated in India, but only small percentage of the energy procured by them comes from renewable energy sources.

Vikram Solar Limited plans to continue focusing on operational and financial efficiency by investing in its design and development team and their engineering efforts. The company also focus on recruiting, training and retaining a talented workforce and offer training and career opportunities. In addition, it continues to focus on its risk assessment matrix and stay updated with new technology. Through its market approach, the company intends to continue building strong customer and stakeholder relationships and realize operational efficiencies. It continues to enhance its O&M practices by moving from conventional reactive maintenance to predictive maintenance through the use of real-time analytics. The company also applies this predictive maintenance in a variety of other operations, including its dust-detection systems (which it uses to determine when its solar PV modules need to be cleaned based on the actual dust accumulation and its impact), thermal imaging (for monitoring the status of its solar PV modules), string combiner box and inverter level monitoring systems and tilt monitoring systems (to calculate the optimal tilt angle for its solar power plants and the date when tilts should be changed based on the actual on-site data).

Vikram Solar Limited has also expanded its global footprint through a sales office in the United States of America and a procurement office in China and has supplied solar PV modules to customers in 32 countries, as of December 31, 2021. As per secondary reports, over the next four to five years, the European Union and United States of America has a potential of adding up to 35-40 GW and 25-30 GW of solar energy respectively each year while the International Energy Agency pegs this at around 20-25 GW each annually. Both the regions would be a key driver for export demand from India. Exports will also be further supported by continued demand from Africa, European Union and Middle-East. Further, besides the United States of America ban on imports of panel materials originating from the Xinjiang province, diversifying sourcing policies to consider origin destinations apart from China would be key positive drivers for Indian-make modules. The company has been successful in establishing a presence in the United States of America and will continue to leverage its presence to increase its market share.

Vikram Solar Limited actively pursue environmental, social and governance initiatives as part of its business operations. The company’s business is environmentally focused, and it strives towards facilitating a cleaner environment and reduced carbon emissions through the use of its solar PV modules, as well as its EPC and O&M services, for solar power generation, which is an environment friendly method of power generation. Furthermore, the company’s marketing and branding efforts are constantly focused on building climate consciousness amongst its customers. In addition to the above, we are constantly undertaking measures to enhance its environment, social and governance (“ESG”) focus. The company also strives to reduce wastage and while expanding its manufacturing capacity, it is developing economies of scale.

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