In an interaction with Thiruamuthan, Correspondent at Finance Outlook India, Vipin Kaushik, Chief Financial Officer, Servotech Renewable Power System Ltd, discusses how India’s solar manufacturing is witnessing a shift from aggressive upfront capex to modular, demand-aligned expansion. He also emphasizes that in India’s renewable sector, capital efficiency is now driven by smart supply chain management and system-level value creation.

With India’s solar manufacturing capacity nearly doubling under PLI schemes, how are firms balancing aggressive capacity expansion with maintaining capital efficiency and asset utilization rates?

The PLI-driven capacity expansion has undoubtedly accelerated growth, but it has also made capital discipline more critical than ever. The real challenge isn’t building capacity, it’s ensuring that capacity remains productive. We’re approaching this by phasing investments in line with demand visibility rather than policy momentum alone. Instead of deploying full-scale capex upfront, we’re modularizing expansion, allowing us to scale in response to actual order inflows and pipeline strength.

Equally important is sweating existing assets harder, reducing downtime, and aligning production planning closely with market demand. Capacity utilization today is as much a financial metric as it is an operational one, and maintaining that balance is key to sustainable growth.

Also Read: Future of Finance in AgriTech: Opportunities and Challenges Ahead

Given that large-scale capital is still flowing more into generation assets than manufacturing, what structural constraints are limiting capital efficiency in domestic equipment manufacturing?

One of the less discussed realities is that manufacturing carries a fundamentally different risk profile compared to generation. Generation assets offer long-term visibility through PPAs, which makes capital more patient and predictable. Manufacturing, however, operates on shorter demand cycles, pricing pressure, and limited offtake guarantees, making capital inherently more cautious.

Another structural constraint is working capital intensity. Domestic manufacturers often end up financing the ecosystem, whether through extended credit cycles or inventory buffers due to supply chain uncertainties. Add to that the lack of deep component ecosystems in India, which increases import dependence and volatility. Improving capital efficiency will require not just incentives, but stronger demand visibility, faster payment cycles, and a more integrated domestic supply chain that reduces these structural frictions.

As manufacturing investments remain in the $30–160 million range, how are companies optimizing capital allocation across upstream integration like wafers, cells, and modules?

What’s becoming clear is that full backward integration is not always the most capital-efficient path, especially in a market where technology cycles and pricing benchmarks are still evolving. We’re looking at integration not as a linear progression from modules to wafers, but as a question of control versus flexibility.

In the current investment range, most companies are prioritizing selective integration focusing on cells and modules where demand visibility is stronger, while being more cautious on wafers due to higher capital intensity and global price sensitivity. The idea is to secure critical parts of the value chain without locking excessive capital into segments that may face rapid commoditization. We’re also seeing a shift toward partnership-led models, strategic tie-ups, and supply agreements that would allow access to upstream capabilities without fully owning them.

This keeps capital lighter while ensuring supply reliability. Ultimately, capital allocation in this space is less about owning the entire value chain and more about building a resilient, responsive one where capital is deployed where it creates the most strategic and financial leverage.

With high capital costs, land delays, and grid bottlenecks impacting project viability, how do these external inefficiencies translate into capital productivity challenges for manufacturers?

These challenges are often seen as project-side issues, but their ripple effects are deeply felt on the manufacturing side as well. Delayed project execution, whether due to land acquisition or grid connectivity, directly impacts demand realization timelines.

Orders don’t always get canceled, but they do get deferred, and that creates a mismatch between installed manufacturing capacity and actual offtake. From a capital productivity lens, this leads to underutilized assets, elongated working capital cycles, and in some cases, inventory build-ups. When you’ve already deployed capital into production lines, but the revenue realization tied to that capacity gets pushed out.

We’re trying to mitigate this by diversifying demand across segments balancing utility-scale exposure with rooftop, commercial and industrial, and increasingly, EV charging infrastructure. It reduces dependence on any single project cycle. We also build flexibility into production planning, so capacity can be redirected based on real-time demand signals. Ultimately, improving capital productivity isn’t just about internal efficiency; it also depends on how well you anticipate and absorb external system inefficiencies without letting them disrupt your financial rhythm.

Also Read: How Rising Rates Are Reshaping Financial Strategy

As supply chain localization gains traction but upstream dependencies persist, how are manufacturers improving working capital cycles while managing import-linked cost volatility?

Localization is gaining momentum, but the ecosystem hasn’t fully matured yet to eliminate upstream dependencies, especially for critical components. So the focus has shifted from eliminating imports to managing them more intelligently.

One of our key levers has been tightening the working capital loop. This means aligning procurement cycles far more closely with confirmed demand, rather than building large inventory buffers as a hedge against uncertainty. At the same time, we’re restructuring supplier contracts to include staggered deliveries and price-linked mechanisms, which help absorb volatility without locking excessive capital.

We’re also diversifying sourcing geographies and increasing engagement with emerging domestic vendors, even if initially at smaller volumes. It builds optionality into the supply chain. On the receivables side, sharper credit discipline and faster collections are equally critical. Ultimately, improving working capital efficiency today isn’t about eliminating volatility, it’s about designing systems that can operate efficiently despite it.

Looking ahead, how will emerging investments in storage, green hydrogen, and integrated manufacturing ecosystems reshape capital efficiency benchmarks for renewable energy manufacturers in India?

With energy storage and integrated ecosystems coming into play, the benchmark is shifting from asset-level returns to system-level value creation. For instance, energy storage is not just an adjacent investment; it fundamentally improves the utilization of generation assets, which in turn stabilizes demand cycles for manufacturers like us. While I can’t say much about green hydrogen, going forward, the most efficient players won’t necessarily be the ones deploying the least capital, but the ones ensuring that every layer of investment is interconnected, demand-aligned, and capable of compounding returns across the ecosystem.