This Tata Stock is Sitting on a Billion Dollar Solar Rooftop Goldmine

The Tata group is proving to be a master of many sectors. From stocking your fridge with everyday essentials to powering your gadgets with cutting-edge tech like semiconductors, they've dominated diverse industries.

Now, they're setting their sights on a sun-kissed future: solar power. This isn't just any market - it's been the undisputed king of new power generation for a staggering seven years running!

The buzz is electric, with everyone from generator manufacturers to engineering firms plugging into the action. And the excitement doesn't stop there.

The government's ambitious plan to equip 10 million homes with rooftop solar solutions has given a boost to the entire industry.

This, coupled with existing growth trends and the government's proactive support through policy tweaks and budget funding, paints a billion-dollar picture for Tata Power.

Here's how...

About Solar Rooftop Subsidy Scheme

Under the PM Surya Ghar Muft Bijlee Yojana, the centre is looking to provide subsidies to households of 60% of the solar unit cost for systems up to 2 kW capacity and 40% of additional system cost for systems of 2-3 kW capacity.

At current benchmark prices, this will mean Rs 30,000 subsidy for 1 kW systems, Rs 60,000 for 2 kW systems and Rs 78,000 for 3 kW systems or higher, as per a government statement earlier.

The scheme was approved by the Union Cabinet on 29 February and has a budget of Rs 750.2 billion (bn).

This central government's rooftop solar subsidy scheme for households could present a US$ 1 bn-plus business opportunity for Tata Power, according to Praveer Sinha, managing director of the company.

The opportunity will play out over the coming three years as the company looks to corner a fifth of the domestic market for solar modules.

The company estimates that the scheme could generate demand for 25-30 GW of solar modules, with Tata Power aiming to supply 5-6 GW of this demand.

At an estimated price of 20 cents per watt, this could translate into a business opportunity of US$ 1-1.2 bn (Rs 83.5-100 bn).

Currently, Tata Power holds 13% of the domestic solar module market. The aim is to increase this share to 20%, supported by the company's new solar cell and module manufacturing unit in Tamil Nadu.

The Tirunelveli-based unit, established with an investment of Rs 30 bn, can manufacture 4 GW of solar cells and modules annually.

New Units Advantage

Tata Power's subsidiary, Tata Power Solar, will have its manufacturing plant fully operational this year.

The module manufacturing unit will be operational throughout the entire year, while the cell manufacturing unit is expected to be operational for approximately nine months.

The new manufacturing unit will also give the company an advantage in the rooftop solar scheme, as the scheme mandates the use of domestically manufactured solar cells and modules.

Once Tata Power's new plant becomes operational, the company's total installed solar module capacity will reach 4.9 GW, including a 600 MW annual capacity at its Bengaluru plant.

Additionally, Tata Power executes engineering, procurement, and construction (EPC) projects for solar power through its subsidiary, Tata Power Solar.

For the sale of its rooftop solar units, Tata Power will rely on its network of over 500 channel partners across 450 cities. The company plans to double this network to 1,000 channel partners within the year.

Apart from that, Tata Power Group's arm Tata Power Renewable Energy Ltd has started commercial production of solar modules from its new plant in Tamil Nadu, with the solar cell production set to commence next month.

This development is expected to boost several capacity-addition projects that require locally manufactured products.

The new solar cell and module facility of Tata Power Renewable Energy produced about 130 MW of modules in the March 2024 quarter.

The manufacturing operations are expected to stabilise within three months, with the factory reaching its peak capacity of 4.3 GW in the subsequent quarter.

Tata Motor-Tata Power Joint Venture

Tata Power and Tata Motors have joined hands for the development of a 7 MWp solar rooftop project at Tata Motors' passenger vehicle plant in Chikhali, Pune.

This is the third phase of a joint 17 MWp on-site solar project developed by the two companies, of which 10 MWp has been installed earlier.

With this latest installation, the Tata Motors PV manufacturing unit, installed by Tata Power, will become home to India's largest on-site solar project.

Tata Motors and Tata Power have recently inked a Power Purchase Agreement (PPA) for this solar project.

The installation is expected to generate 23 million units of electricity, mitigating 5.2 lakh tonnes of carbon dioxide emissions.

The project reinforces Tata Power's position as one of India's top renewable energy players, offering considerable value to its partners through its project execution capabilities and technical expertise.

Ambitious Solar Energy Expansion Strategy

Tata Power Renewable Energy had announced that it would increase investment in the existing agreement with the Tamil Nadu government, signed on 4 July 2022, to set up 4 GW of solar cells and solar modules.

The investment will be Rs 30 bn, in two phases, in Gangaikondan in Tirunelveli District of Tamil Nadu.

The expansion will include the upgradation of the infrastructure and setting up of an additional 300 MW each of cell and module lines using the latest TOPCon technology, bringing the total plant capacity to 4.3 GW. As per the new MoU, this project will entail an additional investment of Rs 8 bn over the next two years.

The modules produced in Tamil Nadu will be used to meet the captive requirements of the company initially.

As of now, it has sufficient contracts for the current module capacity. As and when it ramps up, it will look at other sales opportunities..

The management indicated that the company was maintaining its leadership position in the solar rooftop EPC segment.

How Shares of Tata Power have Performed Recently

The share price of Tata Power has climbed by 1.8% in the past one month.

Over the past one year, shares of the company have rallied 113%. So far in 2024 the stock has climbed 32%

The company touched its 52-week high of Rs 464.2 on 3 May 2024 and its 52-week low of Rs 201.8 on 15 May 2023.

About Tata Power

Tata Power is primarily involved in the business of power generation, transmission and distribution.

In the first half of the financial year 2024, the company generated 54% of revenue from distribution, 32% from thermal, coal and hydro segment, 14% from transmission.

For more details about the company, you can have a look at the Tata Power fact sheet and quarterly results on our website.

You can also compare the company with its peers.

Tata Power vs Adani Power

Tata Power vs NTPC

Tata Power vs Power Grid

Tata Power vs Reliance Power

To know what's moving the Indian stock markets today, check out the most recent share market updates here.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...