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Sector Outlook – Policy Intent Established, Timeline Uncertain

As the sector grapples with delay in official announcement, green shoots have begun to emerge. Minister of MNRE announced at the Agrivoltaics World Conference curtain-raiser in New Delhi, the government’s intention of rolling out KUSUM 2.0 shortly. Companies are now getting orders from state DISCOMs for solar rooftops, thereby filling the gap created by the KUSUM 2.0 lag. At the same time, high material cost and low realisation persist. Earlier, we expected KUSUM 2.0 renewal by H1FY27-end, which did not materialise. We now anticipate a notification by FY27-end. Therefore, we continue to maintain a “neutral” stance till the official announcement.

View and Valuation

We believe re-rating potential could trigger an upside only after the scheme is formally announced. Revenue visibility and diversification are key monitorables for the sector. We, therefore, revised our margin estimate downwards, awaiting policy catalyst to account for higher material cost and lower realisation for the current order book. However, we maintain our TP for SKPI and OSWALPUM as KUSUM 2.0 is expected to ease margin pressure by increasing realisation.

Maharashtra’s Magel Tyala Saur Krushi Pump Yojana is the solar pump sector's main source of demand while KUSUM 2.0 remains unnotified. Companies have received orders for over 50,000 solar pumps in Q2FY27 from MSEDCL. The scheme aims to provide 1 Mn agri solar pumps for new connections.

MNRE Consultation Paper Supports Manufacturers with In-House VFD/Controller Capabilities

* MNRE has drafted new controller specifications prepared by NISE, raising the engineering bar materially. The specifications include minimum efficiency requirements, remote monitoring features and improved strength.

* Monitoring is tightening at the state level as well. Bihar is tendering a platform which will integrate remote monitoring systems with MNRE's national SEDM portal.

* We read both as consolidation levers. Stricter controller performance and continuous data telemetry raise compliance cost and technical risk for assemblers which buy in VFDs and controllers. These initiatives favour manufacturers with inhouse power electronics. This supports our existing view that in-house VFD capability is a moat, thus benefitting SKPI.

Rooftop solar and inverters emerge as diversification levers to offset KUSUM 2.0 delay

* SKPI’s rooftop revenue reached INR 80 Mn in Q1FY27, up 300% YoY, albeit on a small base. The business is built around its in-house inverters and more than 90 dealers have been onboarded.

* OSWALPUM expects to begin in-house solar inverter production by Q3FY27-end, for which it has set an annual target of about 0.2 Mn rooftop installations.

* One of the orders received by OSWALPUM is structured in a RESCO model wherein it is required to operate and generate power from the installed panels for 10 years and sell it to the DISCOM. This model adds a revenue potential of INR 670 Mn over 10 years.

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