Borosil Renewables Limited (502219) Earnings Call Transcript & Summary

Good morning, everyone. Thank you for joining to the earning call of Borosil Renewables Limited. On behalf of Edelweiss Broking, I would like to welcome management team of Borosil Renewables to discuss the result and the outlook way forward. We have with us Mr. Pradeep Kheruka, Chairman; Mr. Ashok Jain, Whole-Time Director; Mr. Sunil Roongta, Chief Financial Officer; and Mr. Rajesh Chaudhary. I would now request Mr. Kheruka for his opening remarks post which we can open the floor for Q&A. Over to you, sir.

Thank you. Good morning, and welcome to the Borosil Renewables Financial Year '20 Investor Call. This happens to be the first call after implementation of the composite scheme of merger and amalgamation and change of name. Thank you for joining me and my colleagues. We are glad to be interacting with you again. Hope all of you and your near and dear ones have been safe and healthy in these pandemic times. We have been working from home since 22nd March. Unfortunately, Mumbai has been one of the most impacted cities by the coronavirus. We have not yet reopened our headquarters office in Mumbai. And we'll take a call on the same as and when permitted by authorities. However, the factory has been operating from middle of April after being shut down for nearly a month, and sales are taking place. Borosil Renewables announced its financial results for the financial year ended 31st March '20 on the 26th June. We have updated the investor presentation and uploaded it on our company website and that of the stock exchanges. The key internal development since we interacted over the last investor call has been the implementation of the composite scheme of amalgamation and arrangement. As most of you are aware, the Scientific and Industrial Products division and the Consumer Products division of the company have got demerged into Borosil Limited, erstwhile Hopewell Tableware Limited. In addition, the business of Vyline Glass Works Limited has also got demerged into Borosil Limited. Borosil Technologies and Klass Pack Limited has become subsidiaries of Borosil Limited. Borosil Renewables now houses the solar glass business. It stands separate from Borosil Limited, which owns neither equity nor preference shares in Borosil Renewables. The discussions of business going forward will relate to solar glass. The company's shares continue to trade on the NSE and BSE. Its issued equity capital is INR 11.4 crores shares of a face value of INR 1 each. After the restructuring, the Promoter Group owns 70.5% of the equity reduced from 72.85% prior to the scheme. The big discontinuity that has impacted everyone around the world is the spread of the COVID-19 pandemic and responses from different governments, businesses and individuals. India imposed one of the most stringent lockdowns in the world. which we have naturally complied with. After operating 2 furnaces alternately, finally, both the furnaces are now into production from around the 15th of June 2020 and are working at nearly full capacity. The impact of COVID-19 has been severe on our operations. Likewise, the plants of our customers remained closed from the last fortnight of March 2020 and started to open up gradually once the guidelines were relaxed. Solar installation activity was halted, which forced our customers to go slow in production and hold back fresh purchases. Accordingly, sales from the end of March until end of April were just nominal. Order flows from May started to improve. However, selling prices came under severe pressure due to steep discounts offered by exporters from Malaysia and China. The company had no alternative but to suitably adjust its prices downwards on a need basis and secure orders. Solar installation activity, which was impacted badly due to shortage of manpower, has begun to come back gradually. The company has a pipeline of orders to be serviced, and its sales are now closer to the normal levels. Exports have also been at normal levels. However, we have to be prepared for some volatility in demand during financial year '21 as the situation with regard to managing the pandemic around the world evolves. Office work and sales are being conducted smoothly, as arrangements were made for the teams to function from home. We have constituted a steering committee to oversee all functions of the company to ensure compliances and to respond appropriately to the evolving situation. I would now like to touch upon the highlights of the company's performance and other developments. The revenue during the last quarter of the last financial year increased to INR 94.3 crores as compared to INR 62.1 crores in the corresponding quarter in financial year '19. The corresponding increase in EBITDA was INR 21.2 crores, as against INR 9.5 crores for the previous period. A better product mix improved net sales realization by about 3%. As you are aware, the company underwent a brownfield expansion in the second line SG2, went into commercial production in the beginning of August 2019, with a capacity of 240 tonnes per day. Soon after, the first furnace SG1 was shut for a complete rebuild in the middle of August 2019. This was recommissioned in the beginning of December 2019. Thus, the company began operating with both furnaces from sometime in December 2019, and we were happy to say that we could sell the entire volumes. Unfortunately, this performance of enhanced capacity of 450 tonnes per day was halted by the COVID-induced lockdown mid-March. We could not see even 1 full quarter with operations from both furnaces. The company lost sales of about INR 10 crores to INR 12 crores in the quarter 4 financial year '20 due to lockdown with corresponding impact on EBITDA. Revenue during financial year '20 was about INR 271 crores, a growth of 25.1% over the previous year. Net sales realization during financial year '20 came under pressure owing to cheap imports from China and Malaysia. While India has imposed antidumping duty on imports of solar glass from China, no antidumping duty has been imposed on imports from Malaysia. As a result, Chinese manufacturers have been using production from Malaysia to export solar glass to India at low prices. As per data available, the imports from Malaysia by module manufacturers in domestic tariff area in India are now close to 90% of the overall imports. A good part of our supplies to a few large customers who import from China and Malaysia had to be made at lower prices to match these cheap imports. Countervailing duties against Malaysia are required to take care of low landed costs. Average realization per tonne during financial year '20 declined by about 7.5% as compared to financial year '19. As we have discussed in our earlier interactions, the company's old furnace SG1 was being operated on an extended life. It was operated at reduced efficiency levels during the first half of the financial year ended March 2020. This led to lower production over which to absorb overheads as well as lower material yields. This also impacted margins, particularly in the first half of the financial year. Compressed sales realizations and the lower operating efficiency in SG1 during first half of financial year '20 led to a decline in EBITDA margins from 19.3% in financial year '19 to 14.8% in financial year '20. The company recorded a profit for tax of INR 1.3 crores and a profit after tax of INR 0.5 crores during financial year '20. These figures are abnormally low. As I explained earlier, the EBITDA margin was lower. Besides the company also had a higher level of interest and depreciation related to the brownfield capacity expansion. Production and revenues from both the furnaces were available only from December 2019 before again getting impacted from 22nd March due to lockdown. The good news is that the business has started to return to normal sooner than feared, and the company has started to sell its entire production. Operational efficiency of both the furnaces is getting optimized. We expect the selling prices to recover gradually as uncertainty and anxiety gets over in the next few months. With both these happening, the EBITDA margins are expected to return to normal levels in the coming quarters. The company would aim to have a judicious mix of customers, so as to maintain healthy margins. Borosil Renewables had innovated to produce the world's first 2-millimeter fully tempered solar glass. The exports of 2 millimeter are growing. Sale of glasses of lower thicknesses of 2.5 mm and 2.8 mm is gaining traction, owing to the lower cost of ownership they provide to solar power developers. The thinner glass can be used in glass-glass modules, where the power generation can be high by 10% to 15%. It also helps to enhance the life of the module to about 40 years as against 25 years in conventional modules. About 20% of the company's sales in financial year '20 came from loss of lower than the conventional 3.2 mm thickness. The company successfully produced other innovative products such as anti-glare solar glass that is becoming mandatory in installations near airports and got necessary certifications from international agency. We expect this to pick up as new airports come up. I will not dwell upon the major announcement regard -- affecting the solar power industry. As per indications from the government, there's a strong possibility of imposition of basic customs duty on imports of solar cells and modules at 20% to 25% from 1st August 2020, which is likely to be raised further in the next year. The current safeguard duty may lapse after July 2020. We will have to wait for the exact announcements in this regard. The government and the PM Kusum scheme decided to provide 2 million farmers to set up standalone solar agricultural pumps and targets 1.5 million farmers to set up grid-connected pumps. Under the program, farmers with barren lands would be able to generate solar power to sell to the grid. A 3-gigawatt solar capacity proposed to be developed on the railway land owned by the Indian railways. Tenders for 2 gigawatts have been issued and balance 1 gigawatt is being issued. Various state governments have accelerated the residential rooftop projects. The manufacturing linked tender for 6 gigawatts issued by SECI has finally got oversubscribed with bids of 7 gigawatts after the purchase price was raised. The successful bidders have announced plans to set up manufacturing capacities of 3 gigawatts of solar cells and modules in the country. There will be substantial additional glass demand for this. We have already started discussions with the successful bidders who happen to be our existing customers. The government's call for Aatmanirbhar Bharat and reducing imports as well for the company as module manufacturing in India will increase. The customers have already started to prefer domestic source of components, including solar glass, to support localization and also owing to growing sentiments against imports from China and logistics issues so that their production lines do not get shut for want of components in case of any further deterioration in geopolitical situation. The past few months experienced inventory excess in the industry, with lower demand owing to cessation of activity during the lockdown. In the near term, the company will have to brace itself for volatility in demand. However, the medium- to long-term prospects for solar energy and its consequent demand for solar glass are likely to be very strong. Of the new capacity additions worldwide in power generation, the share of solar is the highest. The company is well positioned as the only solar glass manufacturer in India. We believe that not only will we be able to sell out our current capacity of 450 tonnes per day, but there is room for further expansion of capacity. The current domestic demand supports further capacity, and a lot of new demand is expected to be generated as mentioned earlier. The company's Board has already approved further expansion with a capacity of up to 500 tonnes per day, which would be sufficient to manufacture solar panels of 2.5 gigawatts. That is a summary of our performance and developments during financial year '20. With that background, I would now welcome questions from you. Thank you.

[Operator Instructions] The first question is from the line of [ Naveen Bothra ], individual investor.

My first question is regarding the existing capacity, our furnaces SG1 and SG2 for 210 and 210, that comes to 420 metric tonne per annum. So in the investor presentation as well as in your introductory remarks, you said that is 450 metric tonne per annum. So if you can clarify on this one.

So actually, SG2, you see when we purchase the plant from the vendor, they are conservative, and they gave us certain figure in their offer, which was 210 tonnes. However, we are actually, today, as we speak, operating the furnace at 240 tonnes, which was informally discussed with the furnace designer. Said, look, you should be drawing 240 tonnes from this. So that is why since we have established an output of 240 tonnes on a continuous basis, we are calling it 240 tonnes. And we expect similar things from SG1 after rebuild that instead of 210 tonnes, it will go up -- could be going to 220, 230, we don't know. But for the time being, we are calling it 450 tonnes. which is production, which we are actually physically achieving today.

That's very great. And my second question is regarding, sir, power and fuel expenses in the last 5 years have increased from 15% in March to 2015 to 20% this year. So are we planning any measures to reduce the power and fuel expansion in the overall sales ratio?

Actually, this year, the financial year '20, has seen inefficient production from SG1. And the first 6 months, you can see virtually from March of 2019 until the furnaces were shut down in August, it was consuming much more fuel than was expected or that was required. And there was correspondingly virtually no output or the output was very less. Therefore, the consumption has fallen on the amount of glass that was actually manufactured and saved. We expect that fuel consumption should go back to the previous figure, whatever it was later because the new furnace is very efficient. In fact, SG2 is more efficient than SG1 ever was

So we expect it to come to around 18% to 19%.

I cannot make any quantitative comments on that right now. But I do expect that the fuel consumption will be economical, in terms of the units of consumption. You see that in the last quarter, which we have seen from April to June, about which this call is not being discussed. As is publicly known, the price of petroleum natural gas, everything has dipped significantly. So from a cost perspective, it is probably even much lower. But these are fluctuating things. And we are always looking at the kilo calories consumed per kilogram of glass melted. That is the benchmark for the company.

So currently, we are getting the full benefits of the decline in international prices of gas and crude?

Yes.

Okay. That's good, sir. My couple of questions regarding the new expansion plan. If you can throw more light on that and the financing plan regarding the debt and equity. Equity will be from the rights issue or [indiscernible].

You see all options are open. We -- as I mentioned in my opening comments, we have only seen 1 full quarter -- I mean, we saw much of 1 quarter, we did not even see the full quarter when both furnaces are functioning. Now we have begun just seeing the lay of the land currently is looking, what should I say, optimistic, all right. And we don't know how the markets are going to respond. And we have not made up our minds regarding the mode of financing, debt equity, rights, whatever. Everything is open and everything is up for consideration by the company.

So in the next board meeting, we will get more clarity and all these things.

It might not be even the next board meeting, it might be further down. We are working very hard on preparing the entire groundwork for the next expansion. And this will come up in due time, the groundwork. So we should be able to see a little bit more. It might take 6 months before we take a final call.

Okay. A couple of questions regarding the -- in your opening remarks, you said that the opportunity side is getting bigger and bigger in the solar glass space.

Yes.

So seeing the opportunity, do you see any other competitor planning to enter in this solar glass business?

You see India is a free country, and there are people with so much money all over the place, all right. And who comes in is completely open, and we simply cannot hazard a guess on this. I do believe that manufacturer of solar glass is unusual and different as compared to normal glass. So here, we definitely -- we have the best numbers in terms of efficiencies and in terms of norms and everything. We far outperform everybody else in the world. We probably have the lowest cost operation in the world in terms of consumption of units for units of output. In that respect, people have toyed with the idea of making solar glass furnaces but they have backdropped after that. So I don't know. We are not stopping our expansion projections, and we have devoted completely to growing the business.

So right now, we are not seeing any other competitor in this area?

At least nobody has announced or nobody is visible.

Yes. Yes. And at the last con call and before that there were some discussions about looking into new products and services in renewable energy space. If you can throw more light if the plants are going in that direction.

Actually, what happened is after the middle of March, everything has gone on hold, everything. And we -- nobody knows what is happening. So what is going to be the availability of labor? What will be the availability of supply side and demand side and all that and what new things open up, everything has gone into complete disarray. So at the moment, the only thing we know is the glass business that we already know completely. And we can see that after this geopolitical problem, which we have experienced in -- from April onwards, which is continuing until today, there has been a very major shift in the government approach regarding solar power. And I think there is extremely strong signal from the top that India has to be self-sufficient in the means for generating of solar power. So earlier, there was a kind of a relaxed attitude by the government in terms of promoting Indian industry. They say [Foreign Language]. But now there's a very deep-rooted seriousness about Indian industry. So the glass business itself is apparently offering a lot of opportunities, and that's where we are focused.

So currently, our focus will be on the solar glass only.

That's right.

The next question is from the line of Pritesh Chheda from Lucky Investment Managers.

Sir, first, I wanted to understand what would have been the capacity utilization for FY '20 in quarter 4, whichever would have been tonnes per day or whichever way you can help us. And in your opening comments, you said that margins are lower because of realignment of the furnaces, inefficient furnace plus initially lower usage. So that comment was with respect to full year is what I wanted to clarify because your quarter 4 margin after the 2 furnaces being operational is a lot different from what it is in the past and for the FY '20 as well. So some comments if you could give on the margin side will also be useful.

See, the quarter 4 of financial year '19-'20 is the only quarter in which we can see some semblance of what the future might look like, all right? So for the days that we operated quarter 4 on a full basis, we were operating at full capacity. I mean, literally, there was no glass in the factory. We were producing, and we were shipping everything. And in fact, there was a huge traction of demand at that time. And so the COVID crisis came with the lockdown. In the first few -- in the first couple of weeks in January also, I cannot say that we were operating at full capacity. In the sense, that doubling your capacity overnight is not a joke. And once we started producing all the glass from December onwards, everything has to be tuned up in terms of the workforce, in terms of so many different things. So yes, we were in full operation for most of the last quarter. And once again, we find that we are going ahead at full steam. Right now, in the current month, we are having high production, all right? And we are coming to nearly the top of our capacity. You're right, in the total year '19-'20, the first 6 months, the first quarter, April to June was probably the worst quarter we've ever had after solar glass started because we had very little production. In June, we started trial production from the new furnace. So July was also spent in trial production. August, we shut down the first line. So pretty much until December, we had all the expenses, but we didn't have all the revenue. In fact, we had very little revenue in that period. And so that's why this year, financial year '19-'20, the whole year is certainly not a benchmark at all pertaining to the future. And the only thing that can show -- throw some light on the future would be the results from the last quarter, which would give an indication about what it might be like. Once again, I want to sort of clarify that the first quarter of this current financial year has also been very severely impacted, all right, because of COVID. So all of April, there was hardly any sale at all. In May, we started selling about a little and June also, we started -- it's only in the last 2 weeks of June that we started operating both furnaces normally.

Which means what you reported for quarter 2 as margin would have some upside because of full utilization without any breakdowns, right? And also low...

Quarter 4 is subject to upside, yes.

Yes, and lower gas prices as well, right? Low energy costs.

And there's another thing which we must sort of see. There was this renewable energy manufacturing conference yesterday, all India all done on the Internet. And there, Mr. Anurag Thakur seem to give some indication that 20% basic customer duty is likely to be imposed.on imports of solar cells and modules from the 1st of August. Whether glass is included in that is something that only time will tell. I don't know if that is there or not. But even if modules are being made in India, that brings a lot of robust demand for our product. And once the demand is there, then we are better placed to meet the demand being in India and having a short supply lead time, et cetera. It's good for us.

And for us, gas is the bulk of the energy cost?

In terms of energy cost, electricity and power are both very important. So we are also looking at investing a certain amount of money, several megawatts of solar power generation ourselves. And we are planning on that maybe in the next 2 weeks or 3 weeks, we should be finalizing plans, which should also bring down our energy consumption costs down significantly.

Lastly on peak utilization, when you -- peak utilization of 450 tonnes, which is your capacity. What kind of revenues is possible at that 450 tonnes? Because the revenue number for us swings a lot. So when we were 240 tonnes per day capacity, that time also we saw INR 100 crore type revenue. And when you are expanding capacity -- expanded capacity, what should be the revenue?

About INR 37 crores or so. It could be anything between INR 37 crores and INR 45 crores.

Monthly?

Monthly.

Okay. And your 50 tonne extra capacity when you put in, what is the CapEx you will need there?

Not 50 tonnes, 500 tonnes.

Okay. That's 500. So 450 will double to 500.

Yes. Right now, I mean, we were 180 tonnes. From 180, we rebuild to 210. We put in a new furnace, which is giving us 240. So that's about 450 tonnes altogether. Now we're looking at another 500. So in case the 500 comes up, that will be quadrupling our original furnace.

So SG1 is 210, right? And SG2, you said is 240?

Yes. I mean, officially, this is 210. We are getting 240 from it.

And this 500, which is a completely new furnace comes in, what CapEx?

CapEx is something -- it will be unfair to give a proper number today because we are a brownfield. And in certain cases, with SG2, we were able to take a lot of advantage from the existing infrastructure. And new one, we'll have to work it out in detail, and there's no point throwing numbers off the cuff.

So it will be a greenfield, this 500?

No, no, it's not greenfield, still brownfield. It's still brownfield. But there were many utilities, which we were able to use in the case of the second furnace. And we will be continuing to use many of these utilities in future also. And -- but I mean, some new costs will have to be incurred for utility.

But any best educated guess you would want to put on the...

It is not fair for me to say anything because I've not shared with the Board of Directors. I can't tell you anything.

No problem. And when should you be able to use the existing capacity? Should we be able to use fully by quarter...

It's pretty much being used now.

Oh, it's pretty much being used.

It's pretty much being used earlier. We were having a very good flow of orders. We were having a good flow of business. We are not waiting for orders. We are getting orders, and we're shipping it. And everything is normal. I mean we're getting paid on time. We don't have any old outstandings and all that. So I mean it's business as usual, actually. We are blessed by God that we have been -- we have escaped coronavirus by and large, in the production, yes. I mean -- but so far. So we are very fortunate.

The next question is from the line of Nishith Shah from Aequitas Investment.

Sir, actually, I'm new to this company. So I just wanted to understand in brief, what exactly is the solar glass used in terms of, let's say, for solar modules?

Mr. Ashok Jain, would you answer that question? Hello, Ashok? Okay. Let me answer this question. You see all solar modules we generate power are made on solar glass. So solar glass is a substrate on which the entire module is laid out and becomes effective. So without the glass, there is no module because the solar cells are wafers, which are very thin and very fragile, 0.2 mm thick only. So -- and ordinary glass cannot be used for solar modules because they absorb too much of sunlight. So the solar glass is a very high performance, low end, high life transmission glass which is very -- it's a very specialized glass, not only we make in India.

Okay. And sir, I wanted to understand who would be our top customers. Let's say, if you can name top 3 customers?

We all -- there are about 250 customers in India. And I would say that probably 95% of them buy from us. And I can tell you the names of the largest module manufacturers in India. There is Waaree Energies. There is Adani. And then there is Tata. There is company called MV in Bangalore. The company called Vikram Solar in Bengal. So these are just 5 names. There are 250 names there.

Okay. And there is no competitor for us in India yet, right?

No. But the competition is there from China and Malaysia.

So sir, in your opening remarks, you said some duty on Malaysia. So I could not get that clearly. So is there any duty on imports from Malaysia?

No antidumping duty on imports from Malaysia currently. I was saying that gives us trouble in the pricing. And so our prices get depressed when there is a lot of competition coming from Malaysia. So I mean, we have been applying because according to the WTO norms, there should be antidumping duty or countervailing duty on imports of Malaysia for which an application is pending, and we'll have to wait for the outcome.

Okay. And sir, there are some news articles that Adani and Renew Power are looking for setting up module facilities in India. So that would be completely different. So they would not be looking at glass, let's say, per se, right?

At the moment, Adani already has the manufacturing capability. They make -- they have 2 gigawatts of module manufacturing. So as far as Renew is concerned, for them, this would be a new venture. But they are not looking at glass. They're looking at the module line and the cell line also, but not at the glass. So they would be a customer, a potential customer for us.

Okay. So that would benefit us.

Yes.

Okay. And sir, I wanted to understand in terms of imports. So competition is based on China and Malaysia. So what would be the price difference and the quality difference from there?

The quality is similar. And the price is very dynamic. So by and large, whatever -- there is an antidumping duty that we were able to obtain on imports from China. So that is there. Now at the moment, when China is exporting to the SEZ company, no duties being paid by them on that import. And when they clear the module, also no duty is being paid. But I'm told that SEZ will come out with some clarifications and some amendments to the SEZ act, whereby any import duty which is leviable on glassing imported into domestic tariff area will be charged on clearance of modules from SEZ into domestic tariff area. So they have an unfair advantage today, which will seize after this amendment comes into play.

[Operator Instructions] The next question is from the line of Dipan Mehta from Elixir Equities.

Congratulations on successful commissioning. My question is that are we or are we not globally competitive? Because if you require government support from time to time, and obviously, we're not globally competitive. And only when there are custom duties and physical import restrictions, will we be able to generate a decent return on investment. So can you just throw some light on your global competitiveness. And if Malaysian imports are going to affect us so much, then what is the point of adding capacity? Why not add in Malaysia only?

So to answer your question, yes, we are indeed globally competitive. We are exporting 25% to 30% of our output to European countries, where they have local manufacturing in Europe. And there, we are definitely competitive. The thing with solar glass tempered is that it is subsidized by the government of China. They get as high as 21% subsidy when they export solar tempered glass, and that is what causes the price to be less than us, though the cost is higher than ours. As I mentioned in my opening remarks, we are one of the -- we are perhaps the most economical manufacturer of solar glass in the world in terms of consumption and that is a Chinese strategy to dominate the world market for the means of production of solar energy. And therefore, they subsidize it. So they don't want any country in the world to have manufacturing capacities.

Okay. That's a good answer, sir. Second question is regarding the average capacity utilization in Q4. So we assume 450 tonnes per day was operational for Q4. What would have been the average capacity utilization for Q4?

About 85%.

85%?

Yes.

And last quick question, sir, that the doubling of capacity, expected commissioning time -- I know we are in uncertain times, but expected commissioning time of doubling of capacity?

About -- you see, we are internally looking at taking a call by the 1st of January 2021. And our time was 14.5 months from the starting to the drawing of glass for SG2. So if we were to follow a similar time line, then capacity that we would decide in January 2021 would come into operation by March 2022.

The next question is from the line of Nishith Shah from Aequitas Investment.

Yes. Sir, my question is answered.

The next question is from the line of [ Raj Mahadevia ], individual investor.

Mr. Kheruka, I had a couple of questions. One is regarding your raw material supply. Are you fully self-sufficient within the Indian context? So are you dependent in China on China in any way?

There is -- we bought some antimony, which comes in from Belgium for the time being. Otherwise, everything else is within India.

So it's largely India plus a little bit from Belgium?

That's right. When I'm saying largely India, like soda ash is a very big raw material for glass. And soda ash is very sufficiently available in India. But that's an international product. So occasionally, we get a better price from abroad and we import it.

But you have an Indian alternative as well?

Yes, very strong. Very large production in India.

Perfect. And in terms of the -- you mentioned in your opening remarks, the dumping from Malaysia and China, how much was that dumping because these were products have already had been shipped to India and were being sold by their distributors? Or were they actually being shipped from Malaysia at the time? And how much of the market do these imports constitute today?

See, the total sales that we do is -- Ashok, are you there? Mr. Ashok Jain, are you there?

I don't know he's [indiscernible] much.

The question is about the percentage of the total market. I would say that we are catering to perhaps less than half the total demand of the country.

Right. So the balance is all import.

About 35% of the country's demand is being met by us. So if we are to double our capacity, we would still be meeting 70% of the demand.

Understood. So even in a situation where there is an import duty imposed by the government, we would essentially be an import substitute. And yet the local market demand even after that expansion would be greater than our capacity.

Yes.

Plus the new capacities are getting added.

We are looking at huge expansions in capacity of modules in India, huge expansion.

Right. And when I look at your P&L on Q4 FY '20 versus Q4 FY '19, and I know there's an aberration, but I'm just trying to get a sense of the normalized level of profitability going forward. So our revenue has jumped by roughly INR 32 crores, right? Our EBITDA has gone up by roughly INR 12 crores. However, interest and depreciation has gone up also by roughly INR 12 crores, which has largely negated the impact of the increase in EBITDA. And consequently, there's a minimal increase in profit after tax. So based on what you are seeing at [ full potential ] of INR 135 crores a quarter, the slowdown in EBITDA is roughly 20-odd percent, would be 20% of an incremental INR 40 crores, which is about INR 8 crores. And hence, the slowdown to the profit after tax should be close to INR 2 crores. Is that sensible?

No, actually, the entire increase in EBITDA will flow to the profit because depreciation is already fully charged and interest is already fully charged. So whatever incremental things happen in EBITDA level will translate to net profit. And the EBITDA level of 20% is not the right number to look at. We expect it to be much better than that.

I say that in the quarter ended March '20, first of all, we knock out about 10 days or so from the last month, from March. And frankly speaking, in January, also the first 15, 20 days, we were still finding our feet. As I mentioned earlier, doubling your capacity, it means you are handling twice the tonnage of glass. That's a lot of glass to handle, to pack, to deal with just the sheer movement of 500 tonnes a day of packed glasses is a lot. So people -- it's being done by workers. I mean they need to get used to it. So after that, after about the 20th of January, we were in a nice slow, nice swing of things. So even the quarter for March 2020 is not completely reflective of what [indiscernible] might be.

Understood. Understood. And in your business, is it fairly working capital heavy business? Or do receivables come in pretty quick, do receivables match payables? Do you need to keep a large amount of inventory of the glass? Or is it sort of more just in time given the large domestic supply?

We don't have a large sales inventory of glass. We make glass to order. And once it's made, we ship it out.

Understood. So it's more just in time...

We do have a large inventory of raw materials. We like to keep ourselves well stocked with raw materials. Because we just don't like idea of a disruption there. But Ashok, do you have any comments on that?

Yes. So our stores are quite low, and our receivables are also under control. And our working capital requirements are very low comparatively to the downstream units like module manufacturing, where you have large receivables and large stocks lying with them. So we are fairly comfortable on this part.

Okay. Good. And the large part of the inventory, as Mr. Kheruka said, is raw material inventory as opposed to finished goods inventory because it's more just-in-time type manufacturing. And I'm assuming receivables, we try -- we ever to make receivables match payables?

In fact, we don't have much payables because our working capital cycle is good. And our -- in fact, our working capital facilities are hardly getting used. So it's a good working capital cycle in terms of the cash flow management.

I understand. I'm just wondering, is there room for further improvement, Mr. Ashok, because If we're saying we don't have much payables, that means we are paying people upfront for the element of sourcing they're doing, whether it's soda ash or otherwise. And we still have receivables of, I don't know, 40 or 50 days at the bare minimum. So my question is, can we become even more working capital neutral by stretching out our payables?

Well, we -- whatever payables are there, we -- our team ensures that we get the right prices or right discounts in terms of the money which we are paying upfront on a shorter credit. So we are not losing on that front. Whatever cost we incur on the credit, we are getting more than that. So that's one thing. On the cash flow, on the receivable side we have added 2 large customers or their volumes have increased in the last 6 months because of double capacity where they seek some credit. So we can -- the way to do is to probably discount their bills and get the money faster. But since our working capital is not getting utilized, what will you do with the funds? So that's where we are.

[Operator Instructions] The next question is from the line of Dhruv Kashyap from Edelweiss.

Mr. Kheruka, firstly, thank you so much for that very comprehensive, concise and crisp update at the beginning. It's one of the best ones I've heard in a long time.

Thank you.

And also thank you so much, sir, for the effort that you and your team are doing in running the company wonderfully that you've been doing for the last few years. I had 3 quick questions, sir. The first one is that given the problem that you mentioned of China and Malaysia and given the fact that this solar is the top of the town both in India and globally. Is there some sort of coming together all the sort of generators, distributors, ancillary units, et cetera, and working with the government to almost make solar the next big theme coming out of India, just like the IT industry came in the 1990s. And that's an opportunity for the government as well because that's also looking for something big after IT and pharma to put India on the global scale. And given the fact that we -- the government of India doesn't seem to be very fond of Malaysia anyways currently.

Sorry, you broke up there.

Yes, hello.

Sorry, should I repeat my question or where did you kind of...

You're breaking up actually quite a lot. But yes, I think I've got the gist of of query. And the answer to that is that we have been well positioned for solar for the last 5 years, actually speaking. But the government has not really understood that, and the government has not acted on that. But that seems to be in the past, and it seems to be now coming forward that the government has woken up to this thing, and all that you say is true. We have been hammered down by these cheap imports from China, which have all been subsidized by the way. And if we get protection, suitable tariff protection and the Indian industry is able to flourish, then we could become like automotive components today. India is a very, very key player in the world for automotive components and could absolutely become the next big thing after IT and after pharma. I agree with you.

Yes, because, sir, it's a win-win, if you ask me, it's a big win to be the first in this because India tends to be labeled as a cheap provider in a copycat. But in this case, India can actually lead the solar initiative globally across the value chain. And there's a lot going for the government, for employment, for India being put on the map. So if the whole industry could come together and seriously give undertakings to the government because I can't see a bigger win-win on any industry today than solar.

I couldn't agree more with you.

Yes. So that was my first question, sir. So I'm hoping that something being done. If not, I'm very happy to help on that.

Thank you.

The second, sir, is that in terms of applications and ability, going forward, solar is going to become a much bigger part of our lives, what more things can be driven out of solar. So for example, currently, we're talking about commercial and residential electrification. What about things like automotive and various other industries that can get solar?

So the answer was provided yesterday in that conference, which was posted by CII and the Ministry of New and Renewable Energy. A question was asked about the government policy for automobile. And the answer that was provided by the government, by the Minister, was that at the moment, there are huge investment in automobiles in the country. And the government cannot take a policy decision overnight, which is going to bring all these investments, employment, tax generation, everything crashing down, all right? So I think they are in serious dialogue with the automotive sector in the country about a changeover from fossil fuel to power to electric power. And the next big thing that is being discussed in electric trucks and electric vehicles are replaceable batteries. So basically, the idea is that we are going to tank upon petrol, there will be battery stations at -- along the highways and so on. So you go there, you get it off your battery and take on another battery. They'll fit it in about 3 minutes, and then you're up again. So even for trucks and [indiscernible], it will be like that. So that is what the sort of scenario looks like. So this is not in the making. Right now, we need electric power. So yesterday, Mr. Piyush Goyal said that in another 8 years, I think, or 9 years, they are looking at making the railways 100% solar-driven, 100%. So there are storage for solar power, and we'll be working with that. Our trains will be running 100% energy efficient. So actually, there seems to be no end to solar, if you ask me personally. There is just almost limitless.

Yes, that sounds very promising. My last question was more a clarification that if I've understood correctly, if you take a decision by January 2021, you could potentially have the capacity on stream by March 2022. Is that correct, sir?

Yes, that's what I said. Correct.

And would it be fair to say that we have done a fair amount of diligence to arrive at the potential of actually being able to deliver to 2,000 tonnes in terms of our sales and revenue?

I'm sorry, because you're breaking up so much. I missed the question.

Yes. So I'll say that again, that I'm assuming we, as a team, have done our diligence that when we get to 1,000-tonne capacity a day in March 2022, we actually have the orders backing that. I mean we have the revenue potential or the sales potential for that.

Yes. We definitely expect that pretty much from the moment that we have the glass, we should be able to start selling. I mean, they say, lands on mice and men. So these all lands. I'm a great believer in God. So if God will, everything will happen. But we still have to plan. We still have to do what we have to do. The expectation certainly is that in March 2022 by the time we are up and running, we should be able to start selling from the moment we are ready to go.

Just to add here, the current demand in the country for solar glass is more than 700 tonnes per day already. And with the capacities which are in pipeline from Adani, Waaree, Vikram, Renew and many others like Premier, the demand is going to become more than double in the next 2 years' time. So to sell 800,000 tonnes by March 22 will not be a problem.

And we are also looking at exports. You see we -- I mean, we must remember something that solar power because of its cost, it is now fossil fuel power that thermal power is out of the window. A solar power now, all the growth in power generation capacities in Africa and other countries is probably all going to be solar. So we cannot just stop at India. And as one of the other gentlemen mentioned India can become a vendor to the world. China being under serious stress right now, people would look for alternate supplies as well. In India, there is no reason why India cannot be an easy match for China.

The next question is from the line of [ Utkar Somaya ], individual investor.

Sir, I wanted to ask you that recently China further reduced their prices by around 9% on the PV modules. So even though the import duty on the [indiscernible].

I'm extremely sorry. Your voice is breaking up. I couldn't get your question.

Sir, am I audible now?

Yes, a little bit.

Yes. Sir, I wanted to ask you that recently China reduced PV module prices by 9%. So even in spite of the government coming in with an import duty, do you think take a further reduced prices to compete with India?

You see it's like this, that the reason for Chinese reduction of prices is that China seems to be getting back on its feet after COVID by around the middle of March, all right. And by the middle of March, the crisis in Europe and the United States are starting. And so their customer base dried up, okay. Whatever was being sold in China was being sold in China, but China is supplying to the world. So that stuff, which piled up in inventories that they were not able to sell started coming and those were prices just to offload the product and to get -- to in cash the modules that they had made already. So that is not something which is likely to continue. And everything, there is a limit. You can reduce prices for everything up to a point. Beyond that, you cannot reduce these prices with your offering now an all-time low. This cannot continue. So many of the countries have gone belly up. I mean a lot of Chinese banks are stressed that all these loans to -- all the money that they give to the solar companies and into billions of dollars, how much can you give -- continue to give.

In the today's paper, it is reported that the Chinese government has to pay $42 billion to the solar people, the solar company is in all, $42 billion.

So clearly, it's sustainable.

So they are -- they just go by the skin of their teeth, then move all their way. It's a government-owned bank, it's a government-owned company or they're senior communist party members who have shares in some of the largest companies. So action on them is delayed. I mean like normal recovery action from the bank is delayed. And -- but one day, the bill is presented, one day, it cannot be delayed. So China is very -- it's a very mysterious place, nobody really knows what's going.

Right. Okay. And sir, [indiscernible] always commoditized products in terms of pricing. Sir, do you have [indiscernible] pricing power coming into the Indian market, I mean maybe not in the next 2 years or maybe in the next 3, 4, 5 years?

Indian what?

Pricing power?

Pricing power will gradually come down with very large economies of scale. And we are experiencing it ourselves that once we doubled our production, we have achieved certain economies of scale. I would say that...

Sir, can I answer this question? Yes, the pricing power is actually comes by way of a brand creation. And since you rightly mentioned the product is being used as a commodity, we are trying to create our own brand image and our own perception -- brand perception on the product, which will enable us to get better prices and better preference in buying. So that effort is going on right now. And in another 1 year's time or so, we will like to see that the people are prepared to pay better prices for our brand. So we are on this job.

Okay. Okay. I understand. Okay. And sir, what percentage of the total cost is fixed -- fixed cost?

Well, it's close to 50%, yes.

Oh, until your EBITDA margin, 50% is fixed? EBITDA margin on the P&L.

Yes.

Okay. So you can see tremendous economies of scale as you increase volumes?

Absolutely.

[Operator Instructions] The next question is from the line of Ritika Gupta from Equitas Investments.

I wanted to know that what kind of return on investment do we expect when we pick up the brownfield project and we [indiscernible]?

Ashok, can you answer that?

Yes. So generally speaking, our benchmark to ROCE on the new project or payback is between 4 to 5 years. So that's a ballpark number, which we look at because this is a capital-intensive product, and 20% ROCE for 5 years payback is what we are looking at.

Okay. And sir, since power is such a big cost for us, do we have PPAs or like how do we draw power?

Yes, we buy power from the DISCOM. And on the top of that, we have made an agreement for long-term power and medium-term power with private vendors, where we save the cost by almost INR 1 per unit. So this is the way we try to economize on the power cost. And Sir Kheruka has said earlier that we are trying to set up the solar production -- solar power production in our compound. That will reduce the power cost to a bit, and also we have wind energy. So we are trying to optimize and reduce our power cost to the extent it is possible.

So sir, what is the power cost per unit?

Well, it's about INR 8 if you buy from the DISCOM, and we are buying at about INR 6.5 or so. So on a bundle basis, which is about INR 7.5.

Okay. And sir, for tonne of manufacturing, how much power do we need in terms of unit?

For 1 unit, we need, 1.2 kilowatt hours. And that's, you can say, efficient plant, which we operate. So we are able to control the cost.

Sorry, 1 tonne, we need how much power?

For 1 kilo, 1.2 kilowatt hours.

1.2 kilowatt hours. Okay. And so we -- what is like -- where do we see the company, say, like 5 years from now? Like do we have a target? Do we have...

Yes. So as Mr. Kheruka said about the new CapEx on 500 tonne per day facility. After that is implemented, we are likely to reach closer to INR 1,000 crore turnover, I suppose. And beyond that, we have to still plan.

Okay. And also my last question, sir, what would be the breakeven right for these -- for the solar glass in terms -- so that -- what would be the breakeven price for us at full capacity?

See, we -- whatever the price [indiscernible] profit. So one can judge from that, that what could be the breakeven price.

Sorry, sir, I didn't get you.

See, we have certain EBITDA and certain margins. So based on that, one can say what could be the price. Because it's difficult to give one price because there are various types of material, and it is sold in various thicknesses. So there will not be one price.

The next question is from the line of Deepak Agrawal from Impetus Advisor.

Yes. No, you just said that you can't give the price, but still you can give some idea regarding what has been the price? Because you said the price has been soft recently. So how -- so what was the decline in the price? And -- so what was in the trend recently?

See, there are various state of customers in various type of customers where the prices are little different. And they are large players and they are small players. There are off-grade applications and there are good applications. The prices are very different in all the segments. So on a bundled basis, if you ask me what is the company realizing on a per unit basis, it is close to INR 100 per unit, per square meter, per millimeter.

INR 100 per millimeter.

Yes.

Okay. And -- right. And what was it, let's say, 3 months ago and 6 months back?

Yes. So we have reported that 7.5% has been the decline over last year, FY '19. The decline has been about 7.5%. So the price prevailing in previous year was about INR 106, INR 107.

And just the recent decline in the price, is just because of the dumping from Malaysia or the...

Yes. Of course, the price is a factor of how the landed cost works out for the Indian domestic producers. And that's where the challenge lies. So whenever the price decline from the Malaysian or Chinese manufacturers, the prices seem to be readjusted to suit the domestic customers, domestic buyers for us. So largely because of the -- this -- as Mr. Kheruka has said about clearance of inventory and other anxiety over how the COVID will turn out, what the demand would be. The players in solar glass industry also have been offering low prices. On the top of that, large industry is a continuous process industry, where you keep producing and you -- the shutdown cost is very high. So people have to just go on clearing their inventories and production. So with that objective, some people have been offering 10% to 15%, 20% lower prices in the last 2, 3, 4 months, and that has some impact on our pricing as well.

Okay. So you said there is no antidumping duty on Malaysia, but is there an ADD on China?

Yes. I guess, China, there is ADD in place from August 2017 for 5 years. And this is a various percentage -- various dollar per tonne based on manufactures. So it is ranging from about 15% to 30%, you can say.

Okay. And what is the basic custom duty currently?

Unfortunately, there is no basic custom duty on the solar glass. And as Mr. Kheruka said on the -- when you export glass to China, there is 21% duty. So this is a paradox situation where you can't export to China, but you have to import everything without duty, and that's putting our prices down in terms of competition.

Okay. One last thing. I recently read that University of Cambridge has developed the zinc battery, zinc cathode battery, which didn't require a solar panel. So that means it will not require a new glass.

I'm not quite aware of that. Mr. Kheruka...

No real defendable panel that has been made without glass. I mean, regardless of whatever anybody might say, glass is the great protector. Your all auto is today run on glass. It's either metal or glass or it can be fiberglass for the body, you need glass. And the solar panel is facing the sun, I mean, the solar cell. So that the cells are very little. They are very small, very easily subject to wear and tear. The cost of glass is nothing compared to the cost of the cell. So it makes zero sense to try to save the money on the glass. That's why I don't see glass going out for the longest time. At the moment, I cannot see any product in the world, which can replace glass.

The next question is from the line of [ Divyesh Shah ], individual investor.

Sir, I am your old shareholder of Gujarat Borosil. So now I've got the shares of Borosil Renewables as well as Borosil Limited. So can you please tell us when your Borosil Limited will be listed because it is taking longer time than expected.

We have done all we could. I mean, we have put up everything. I think it's very, very close now, the listing. We have already received this information from BSE and NSE and from SEBE. Now there are certain things which are formalities to be gone through, which we are going now, and It's a matter of days now. It's not in that end, so I cannot tell you a definite answer. But it's a matter of days. It could be...

And sir, can you highlight the financial highlights of Borosil Limited because we don't get that highlights or is on March 2.

No, we did that yesterday. In the morning, in 10:00, there's an investor call of Borosil Limited.

Sorry, sorry, I missed that.

I'm sorry about that. It's not appropriate to talk about Borosil Limited right now.

Okay. It is posted on the website?

Yes, the investor call, the investor presentation has been posted on our company's website already.

The next question is from the line of [ Jayesh Shah ] retail investor.

I've got a couple of quick questions. So first would be how much do the soda ash prices affect us? Because from what I've heard, the soda ash prices have been running up, and they're expected to stay at that level for a year at least now.

No, it's come down.

Okay. Because from what I got from GHCL and Tata Chemicals con calls and from the distributors, they said that it is expected to grow and stay that for a year.

Once again, Mr. Ashok Jain, do you agree?

Yes, yes. So I'd like to say that GHCL and other manufacturers like Nirma and all are trying to get antidumping duty levied against certain exports or imports coming into India. Now I mean, they're may be taking that as an assumption, their duties will be levied and they will be able to raise their prices further up. But what is happening around the world is that the prices are nose driving actually, not only reducing, it's nose diving. So like what happened with various commodities, it has happened with soda ash. The prices are down by at least 15% in last 4 months in import markets. And what I hear from China, the prices are even down further. So there is a trend to sell the soda ash from the overseas markets into India and various places where the consumption could be. But these domestic manufacturers who are sort of working together trying to protect their prices even though they are making decent profits and trying to have the anti-dumping duties, levied and all those things. So we have to wait and see how the results of that anti-dumping investigation goes on and finally concluded. And yes, as far as they are concerned, the prices are not down, it's marginally down because we ourselves buy from them as well as we ourselves import. So we know what the changes have been. So it's a very minor change for them.

Okay. Second question, sir. So sir, what kind of demand are you seeing from Europe? Like after the pandemic, are there -- do they want to shift to local manufacturers for glass? Or are we still seeing high demand from them?

Well, we have good order flow from Europe fortunately. And even the pandemic times also, we have been registering sales as usual. So our buyers are in certain locations where the impact has been low, except for Italy, where the impact was very heavy and our supply were suspended. So even Italy has returned now and now they've started importing from us. And as far as the local competition is concerned, yes, there is a player over there, but the demand is higher than what they can supply. And in the meantime, one of the plants, which was operated by Saint-Gobain on and off basis is almost getting shut. So they may actually need more imports. So we are quite comfortable on our exports now and going forward as well.

Okay. And sir, like if the beauty is implemented, when can we see the benefits of the duty kicking? And how much margin expansion can we expect? Like a rough figure if you could if you could give us.

Yes. It's very difficult to predict, first of all, whether the duties will come or not and how much it will come. And second thing is, again, it's -- to guess what the price adjustment will take place in the final pricing offer by Chinese and Malaysian exporters. So we would like to wait and see.

[indiscernible] the price you see after...

Yes, which is what they have been doing always with any duties across the board. Like even if I get USA or Europe, they try to adjust the prices, drop the prices and try to secure the business. So yes, we will have a positive situation in terms of the prices and demand from local buyers for us. But what percentage it will translate to, it's really the challenge.

The next question is from the line of [ Utkar Somaya ], an individual investor.

Sir, I wanted to ask you from all your major customers that you mentioned. Do any of them buy from China or Malaysia or all of their product comes from [indiscernible].

Yes. See, the large players were in SEZ are largely importing their products. So the names like Adani, Vikram, all these people are basically meeting their requirements for imports. They buy a small quantity from us. The players in DTA are, to some extent, some players, 100% they buy from us, some will buy 80% or like that. And there are a set of people who may constitute more than 50% of our customers, they're 100% rely on us. I mean, they depend on us. So these are the different set of people. And when the demand grows internally from these players, the benefit will accrue to us, which will leave from both the set of people.

Okay. Sir, I wanted to ask you how much more can you expand in this space before you have to go for greenfield expansion?

I'm sorry, I couldn't get your question.

Sir, how much more can you expand in your current space before you need to go for greenfield expansion?

Good question. We have not worked it out. We have our plan. We are using only a fraction of the total property that we have available.

Okay. So that -- could you just give some guidance assume how much more like doubled from your...

So suppose if we go for 500 tonnes today now as the next project, we could easily set up another 1,000 tonne, 1 furnace on existing property that we have. Hello? Ashok, are you there?

I think [indiscernible].

Okay. You're right. I think we should wind up at some point. I have another...

Yes. I think I will be closed now because [indiscernible].

Sir, would you like to add any closing comments?

Well, thank you very much for the interest shown in the company and its functioning. I hope I've been able to answer most of your questions. And I look forward to the next meeting at the end of the next quarter. [Technical Difficulty]. Hello? Yes, so I hope that the next meeting would be little bit better results. Let us see, and bye-bye.