Why are key players exiting the rooftop solar business?
This is the second blog four-part blog series to assess and analyze the different routes via which C&I rooftop solar players are raising much-needed investments to further scale this sector and accelerate growth. In the first blog, we dived into equity investments to understand where do the majority of those investments come from and who are the key players. In this blog, we will look into another route through which investors and players are raising investments or increasing their rooftop solar portfolio, the Mergers and Acquisitions route.
As mentioned in the earlier blog, project developers catering to the C&I sector in India have raised more than US$2 billion, since 2015. Out of this, 25.4% of the funds are the result of acquisitions, of which the biggest chunk is held by PETRONAS’ acquisition of Amplus in April 2019, as illustrated in figure 1.
Fig 1: Investments Made in the C&I Renewable Space in India (2015-Present) and Share of investments raised in 2019
Source: JMK Research
Note: For acquisition deals from Jan-Aug 2021, some deals whose investment amounts were not disclosed are not included in this analysis.
As of October 2021, key players such as Statkraft India, Sterling & Wilson, and Azure Power have off-loaded their rooftop solar assets, with Renew Power also in talks with Amplus Power to sell its rooftop business as well. Key reasons for their exit are:
- With increasing competition, the margins from rooftop solar were shrinking, making rooftop a less viable business option.
- For Azure Power, ReNew Power and Statkraft, rooftop solar was not the main business. Instead, their focus is more towards hydropower and utility-scale solar projects. Hence, as part of their strategic plan, they decided to offload their small rooftop solar assets to raise capital for their under-development projects.
- Growing regulatory uncertainty with respect to net metering and banking regulations by DISCOMS leading to unsustainable business models.
The biggest chunk of 152 MW of rooftop solar assets from Azure was acquired by Radiance Renewables in April 2021. This acquisition is particularly unique in the rooftop solar space considering the fact that Radiance Renewables had no prior experience in developing rooftop projects. Radiance Renewables is a wholly-owned subsidiary of the Green Growth Equity Fund (GGEF), managed by Eversource Capital (a joint venture between EverStone Capital and Lightsource BP). This fund has received investments from the UK Government via the Foreign Commonwealth Development Office and FMO (A Dutch Development Bank).
Recent reports suggest that CleanTech, a Royal Dutch Shell-backed organization, is also looking to off-load its majority stake (51% valued at nearly US$400mn). Four candidates, namely by Fourth Partner, O2 Power, Eversource Capital, and Keppel Corp, are in separate discussions to acquire the stake.
Table 1: Key Acquisitions Made in the Rooftop Solar Space
| Date | Company Name | Acquirer(s) | Deal Value (in US$m) | Asset Acquired |
| July 2021 | Statkraft India | Fourth Partner Energy | Undisclosed | 8.9 MW |
| April 2021 | Sterling and Wilson | Amplus Solar | Undisclosed | 7.2 MW |
| April 2021 | Azure Power | Radiance Renewables | 73.5 | 152 MW |
| February 2020 | Origin Renewables Pvt Limited | Radiance Renewables | Undisclosed | 100% stake acquired |
| April 2019 | Amplus | Petronas (Malaysian Oil and Gas conglomerate) | 391 | 100% |
Source: JMK Research
In conclusion, acquiring existing rooftop portfolios has been a popular route for new players to establish themselves in this space as is the case with Radiance Renewables and Petronas’. While for others, it is a way to expand their existing portfolio as done by Amplus and Fourth Partner. On the other hand, established players such as Azure and Sterling, and Wilson have exited the rooftop solar sector via this route to focus on their core business (utility-scale solar). In the next blog, we will understand other players, who have not been able to tap into funds via the M&A and equity routes, are doing so by accessing debt instruments and loans.
Click below to access our report, co-authored with IEEFA, for in-depth analysis on the financing trends in the C&I Rooftop solar space.