IMAP India: Industrials Update January 2025
IMAP’s Industrials group brings you this monthly update with a focus on latest news, transactions and interesting snippets from the Industrials sector in India
Recent News
- The Indian budget 2025 saw the creation of a National Manufacturing Mission to focus on 5 areas – ease of doing business, upskilling, MSMEs, availability of technology and quality products; the budget also had an increase in allocations across sectors through the PLI scheme and a focused product scheme for India’s footwear and leather sector
- India’s manufacturing PMI rose to 58 in Jan’25 from 56.7 in the previous month as output and new orders rebounded from a relatively weak 3rd quarter; a PMI value above 50 indicates growth
- The U.S. announced a list of executive orders that will have an impact on businesses globally – import tariffs on China, Canada and Mexico, terminating funding for renewables under Biden’s Green New Deal, ending 50% EV goal for new cars and a push for conventional fuels
- In its efforts to localize production, Chinese networking company TP-link announced a tie-up with Optiemus Circuits to manufacture TP-Link's networking devices and smart home products in India
Selection of Recent Transactions
DATE TARGET ACQUISITION
Jan '25 Volt Up The EV battery swapping player raised $8mn in a fundraise led by EM Impact Capital
Jan '25 Euler Motors The EV truck and 3W manufacturer raised $20mn in a fundraise led by responsAbility Partners
Jan '25 Pegatron Technologies Tata Electronics acquired a 60% stake in the Indian subsidiary of the Taiwan based EMS player
Jan '25 Milk Mantra Hatsun Agro, acquired a 100% stake in the milk producer for $26.5mn
Jan '25 Minimalist Hindustan Unilever acquired the skin and personal care product manufacturer for $342mn
Jan '25 Bgauss Auto The EV 2-wheeler manufacturer raised $18.6mn in a fundraise led by Bharath Value Fund
The Solar Energy Space - India Update
Between 2024 and 2030, India is expected to add ~200 GW of total utility power capacity of which ~75% i.e. 150 GW will be from renewable energy sources.
Within the renewable space, the contribution of utility level solar is expected to be 132 GW i.e. 66% of total addition or 88% of renewable capacity addition. At ~US$ 0.5 million per MW, this addition of solar capacity entails a total capex of US$66 bn by 2027 in generation alone. This large impending capex is driving interests across the 3 main segments of the solar space:
Independent Power Producers (IPP) – IPPs own the power project and contracts with the utility/end-consumer for power offtake. Despite the addition of large capacities, the sector is competitive with current bids (for pure solar) at Rs.2.5/unit with estimated biding equity IRR of 11% - 13%. The key IPPs in India currently include Adani Green (7.4 GW), Renew (5.5 GW), Tata Power (4.3 GW), NTPC (3.5 GW), Avaada (4.2 GW), SJVN (2.5 GW) and over 20 other players.
Engineering, Procurement & Construction (EPC) - EPC players construct power projects for the IPPs. Prominent players include Sterling Wilson, Waaree Renewables, KPI Green and Vikram Solar. Key factors to consider while evaluating EPC players – party bearing module price risk (IPP vs EPC), exposure to domestic vs export market and % share of in-house projects being executed by the EPC
Component Manufacturers – Manufacture the various solar plant components – key being the solar cell and solar module. As of FY24, India has 7GW (going to 88 GW by FY27) of solar cell capacity and 70GW (going up to 160GW by FY27) of module manufacturing capacity.
Supportive policies for solar component manufacturing in India include (1) import tariffs (25% /40%) on solar cells/ solar modules (2) non-trade barriers such as ALMM and DCR and (3) PLI to support domestic manufacturing.
The solar energy space in India is currently a high-growth sector with strong government support; while valuations for listed players currently seem rich, we are likely to see the emergence of some large players across the value chain.
