Tata Power to REC: Renewable energy stocks likely to gain from PM Suryoday Yojana
Upstox
4 min read • Updated: February 12, 2024, 6:35 PM
Summary
Top players in the renewable energy sector like Tata Power, IREDA, REC, Suzlon Energy and Borosil Renewables are expected to gain from the government’s ambitious home solarisation plan.
The central government’s recently announced Pradhan Mantri Suryoday Yojana aims to provide solar power for one crore homes across the country. The ambitious target could boost renewable energy adoption and reduce dependency on fossil fuels.
In her Budget speech on February 1, Finance Minister Nirmala Sitharaman announced that the PM Suryoday Yojana will enable each household to save up to ₹15,000-₹18,000 annually on electricity bills.
The scheme is also expected to provide a major impetus to solar rooftop installations and benefit top companies in the renewable energy sector.
Before taking a look at the renewable energy stocks poised to gain from the government’s ambitious rooftop solar project, here are the key aspects of the scheme.
PM Suryoday Yojana
Under the PM Suryoday Yojana the government targets to install rooftop solar in one crore households in the next one year. State-owned REC Limited has been appointed as the nodal agency for the scheme. The power finance company will lend up to ₹1,20,000 crore for installation of rooftop solar panels.
The scheme will help the households to get 300 units free electricity from rooftop solar. Under the scheme, the government will provide a 40% subsidy on the installation cost for solar panels of 3-kilowatt capacity. Those going for higher capacity of 10 kilowatts or more can get another additional 20% subsidy.
Top stocks to watch out for
The leading players in the renewable energy sector like Tata Power, REC and Indian Renewable Energy Development Agency (IREDA) have caught the attention of the investors and market experts after the announcement of the PM Suryoday Yojana on January 23.
Tata Power is one of India's largest integrated power companies, with a significant presence in solar rooftop space. It has a portfolio of over 500 MW of rooftop solar projects. REC Ltd, the public sector undertaking of the power ministry, is going to act as the main financing agency for the government’s ambitious scheme.
Other top players in the renewable energy sector that are likely to gain include IREDA, a leading renewable energy financing firm. State-run construction major NTPC and dam developer NHPC will also be playing a major role in implementing the scheme. Electrical equipment firms like Havells India and KEI Industries that supply cables and fixtures are anticipated to see higher demand.
Solar panel and component makers like Borosil Renewables and Sterling & Wilson Renewable Energy Ltd are expected to hugely benefit from the massive scale of installations planned.
With an expected 20-22 GW capacity addition target over the next year under the scheme, component requirements will see a massive boost. Solar module manufacturers like Adani Solar and Tata Power Solar Systems Ltd are expected to benefit. According to estimates, solar panel structures form around 7% of project costs. Other core components like inverters, cables and mounting structures form another 20% of costs. The schemes' massive scale will translate into higher demand for these companies.
Market response
On the day of the announcement of the scheme, on January 23, shares of Tata Power, Borosil Renewables, IREDA, Waaree, and Sterling & Wilson saw a significant surge in value. Borosil Renewables was the top gainer with nearly 14% rise while Tata Power rose 3%. On the other hand, IREDA, Waaree and Sterling & Wilson hit their 5% upper limits.
On January 24, Tata Power rallied over 11% while Adani Green jumped 7% and Azure Power gained 5%.
After FM Sitharaman’s Budget speech on February 1, top green energy stocks also gained up to 7%. The shares of IRED and Websol Energy surged 5% each while Suzlon Energy and Sterling & Wilson gained 4% and 2%, respectively. Shares of KPI Green Energy jumped up to 7%.
| Company Name | Stock price in last one week | Stock price in last one month |
|---|---|---|
| Tata Power | 1.39% | 16% |
| REC | 1.99% | 17.2% |
| IREDA | 9.46% | 89.34% |
| Suzlon Energy | 7.06% | 21.24% |
| KPI Green | 24.49% | 59.56% |
| Borosil Renewables | -3.58% | 26.15% |
| Adani Green | 11.86% | 11.56% |
Conclusion
The successful implementation of the PM Suyoday scheme will significantly boost investor sentiment in renewable energy stocks that have direct exposure to rooftop solar segments. Investors can also gain exposure through firms that are likely to supply capital goods and materials for the installations. If targets are met on schedule, it could accelerate India's renewable capacity addition goals and support the government's broader renewable energy targets.