IPO-bound Waaree Energies flags export challenges to US amid scrutiny over Chinese forced labour concerns

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Solar panel manufacturer Waaree Energies has had its exports to the United States intercepted two to three times this year, following heightened scrutiny on shipments of electronics equipment from India, chief executive officer Amit Paithankar told Moneycontrol.

The increased inspections are a result of a 2022 law banning the import of goods made with forced labour from China’s Xinjiang region.

The Uyghur Forced Labor Prevention Act (UFLPA), enacted by the US government in 2022, bans the import of goods made using forced labour, particularly focusing on products from China’s Xinjiang region, to prevent human rights abuses in supply chains.

"Any Indian manufacturer, anybody who wants to export to the US at this point in time, the primary rule is around ULFPA, which is making sure that the imports into the US are free of unfair labour practices... It's been maybe a couple of times, two or three times that we might have had instances in this calendar year.  We have had situations where we have actually gone ahead and given adequate proof as well. So it's a matter of I would say doing business, I would not say we should be worried about it," Paithankar said on the sidelines of the module maker's initial public offering (IPO) event.

Waaree imports 90 percent of its raw materials, especially solar cells, from countries including China, Vietnam, Malaysia and Thailand, according to its Draft Red Herring Prospectus (DHRP), with materials from China accounting for 54.08 percent of its imports.

Paithankar said, "We are laser-sharp focused on making sure that any element of the supply chain is not involved in forced labour practices. So we have adequate processes set up to ensure that this is the case and therefore instances of detention should be minimised."

Expansion plans

On the other hand, Waaree is looking at reducing its import dependency through backward integration measures. The move comes as Indian companies are stepping in to bridge the gap created by the exclusion of Chinese exports from the rapidly expanding US solar industry.

Waaree currently exports 44 percent of its manufactured modules and the US is one of its key markets. The company is planning to set up a 1.6 gigawatt (GW) module facility in Houston, which is expected to be commissioned by next year.

Modules are solar panels that consist of multiple photovoltaic (PV) cells, which convert sunlight into electricity.

"We are absolutely gearing up to address our customers both in the Indian market space as well as in the US market," Paithankar added.  The company is constructing a 5.4 GW solar cell manufacturing facility in Gujarat, which is expected to be operational by the end of fiscal 2025.

"All solar cells manufactured by us are intended to be utilised for captive consumption towards the manufacture of our solar PV modules," the company said in its prospectus. Waaree also has plans to set up a fully integrated 6 GW facility for the manufacture of ingots, wafers, solar cells and solar PV modules, which is expected to commence commercial operations in fiscal 2027.

"Cells originating from China find it hard to get into the United States, therefore obviously cell manufacturing in India really will help. So, before the 6 GW comes in, we actually have a 5.4 GW cell factory which will go live any time now. We are in the final stage of commissioning," Paithankar said.

IPO details

Waree IPO will open for subscription on October 21 and close on October 23, with anchor bidding starting October 18. It has set a price band of Rs 1,427-1,503 a share for its IPO, a 45 percent discount from its unlisted price.

The IPO consists of a fresh issue of Rs 3,600 crore and an offer for sale of up to 4.8 million shares by its existing shareholders and promoters. The 6 GW facility will be partly funded by the net proceeds. The company's current capex stands at Rs 9,000 crore and the orderbook at 16.7 GW.