Indian solar companies are earning very high profits right now, but these profits are expected to slow down in the coming years as more factories open and competition increases, according to a report by DAM Capital.
The report explained that domestic solar module and cell makers are currently enjoying super-normal margins. This is mainly because imports are restricted and India does not yet have enough domestic manufacturing capacity. Due to limited supply and strong demand, companies are able to earn higher returns at present.
It stated, “Domestic manufacturers are earning exceptionally high returns currently due to import restrictions and limited domestic capacity. However, rising competition and rapid expansion in module and cell capacities will normalise profitability over the next three years.”
The report also said that many companies are rapidly expanding their module and cell manufacturing capacities. As more players enter the market and supply increases, competition will rise. Because of this, profit margins are expected to come down gradually over the next three years. By FY27E, the report expects module margins to fall sharply.
At the same time, returns from cell manufacturing are also likely to moderate as large-scale capacities start operations. This means companies may not earn the same level of profits as they are earning today. Even so, the report added that profits in the solar industry will not disappear completely. Instead, the profit pool is expected to move towards upstream products.
As government policies change and supply chains become stronger, companies that make products higher up in the value chain are likely to benefit more. The report noted that companies that can quickly move into backward integration will be in a stronger position. By making more parts of the solar value chain themselves, these companies can capture a larger share of profits before competition increases further.
The report also expects this focus on local manufacturing to expand further into areas such as Battery Energy Storage Systems (BESS), inverters and other related products. This is expected to create new opportunities for companies to grow, diversify and build stronger businesses.
Overall, the report said that while current high profits may reduce, companies that expand smartly and move up the value chain will continue to benefit from India’s fast-growing solar sector.
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Published on December 15, 2025
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