No negative margin impact from Trump pausing Inflation Reduction Act spending: Waaree's Amit Paithankar

Around half of Waaree’s ₹50,000 crore order book is from US-based clients.

“Because of the business model that we have, the certainty of the order book that we have, our margins will not be negatively impacted because of the IRA pause," said Amit Paithankar, chief executive of Waaree Energies.

Also Read: US market uncertainty weighs heavy on Waaree Energies

He added that even if the act is repealed, the prices of modules in the US will change, too. “If IRA changes in whatever way shape or form, market dynamics will change. So that will potentially give maybe a kicker, but that will not be detrimental (on margins)."

The company has over two years of order visibility in the US, and some of these orders are “margin-locked", Paithankar said. "We run the business in such a way that I have certainty of margins and cashflows."

In fact, the company has doubled down on its bet on the US market. On Tuesday, the Waaree Energies' board approved setting up an additional manufacturing line at its plant outside Houston, Texas, to double its capacity to 3.2 gigawatts.

In comparison, the company has a module manufacturing capacity of 13.3GW in India, which it plans to increase to around 23GW in the next couple of years.

Self-sufficient business

Waaree’s executives have said while the IRA was a deal sweetener, it has set up its operations in the US to be self-sufficient with healthy margins even without fiscal incentives.

Also Read: Why Waaree Energies’ meteoric rise has hit a wall

“We are an extremely conservative company. So when we make a decision to go into any geography, market, we ensure that it can stand on its own two feet," Paithankar said.

“Of course, with the IRA, the numbers will improve dramatically. But can the business stand on its own feet? Absolutely yes. Do we have customers who want made-in-US modules? Absolutely yes. Do we have customers willing to give us the extra premium, which will come about because of any changes? The answer to that question is also yes. And that's what keeps the US plant interesting, not just viable, interesting for us," he said.

While the US accounts for nearly half of Waaree's orders, it accounts for only a fifth of its revenues. This is because the company's average order execution time in the US market is slower than in India—upwards of 12 months, even up to 24 months in some cases, compared to about nine months in India, Paithankr said.

He said a lower revenue exposure to the US would also shield the company's margins from turbulence in the US market.

What is the IRA?

The IRA, signed into law by former US President Joe Biden in 2022, represents one of the largest financial commitments made by the world’s largest economy towards combating climate change.

While the act has several objectives, including lowering healthcare costs, the highest capital allocation—nearly $400 billion—was towards funding clean energy through tax incentives, grants, and loan guarantees, among other measures.

Also Read: Waaree Renewable’s growth momentum may persist with the big order win

It provided $0.07 (about ₹6) per watt of tax incentives to module makers, improving their margins. The scheme also provided incentives of $0.0275 per watt of renewable energy projects set up in the country by 2032, leading to a robust order book for solar module manufacturers.

However, Trump signed an executive order on his second day in office on 21 January to pause all federal disbursals under the IRA, leading to a sharp correction in the share prices of clean energy firms with an exposure to the US.

Shares of Waaree Energies, whose 1.6GW US-based solar module factory began production just a day later on 22 January, corrected by nearly a quarter in the following five trading sessions to touch a 52-week low of ₹2,030 on 27 January. The shares have since partially pared the losses to open at ₹2,425.85 on Thursday.

The Waaree Energies stock debuted on BSE at ₹3,133.85 on 8 November and lost about a quarter of its value as on Thursday. Benchmark Sensex has declined 2.36% over the same period.