Borosil Renewables Limited (502219) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Borosil Renewables Q4 FY '23 Earnings Conference Call hosted by Axis Capital Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Jiten Rushi from Axis Capital. Thank you, and over to you, sir.

Thank you, Tanvi. On behalf of Axis Capital, I am pleased to welcome everyone to the Borosil Renewables Q4 and FY '23 Earnings Conference Call. We have with us the management team of Borosil Renewables represented by Mr. P.K. Kheruka, Executive Chairman; Mr. Ashok Jain, Whole-time Director; Mr. Sunil Roongta, Chief Financial Officer; and Mr. Swapnil Walunj, Head of Marketing. We will begin with the opening remarks from the management followed by a Q&A session. Thank you, and over to you, sir.

Good afternoon, and welcome to the Borosil Renewables FY '23 Investor Call. The Board of Borosil Renewables on 24th May approved the company's financial results for the year -- year financial year '23 and quarter 4 of the financial year '23. Our results and an updated presentation have been sent to the stock exchanges and have also been uploaded on the company's website. We will discuss the operation of Borosil Renewables on a stand-alone basis as well as on a consolidated basis. I will also provide you some highlights of the operations in our newly formed acquired overseas subsidiaries. During financial year, the company recorded a net revenue from operations of INR 688.17 crores, an increase of 6.8% over financial year '22. I Sales volumes on a quantitative basis grew by 4.3% as a result of commissioning of new plant, i.e. SG-3 from 23rd February 2023. Average selling prices during the year for about INR 136.5 per millimeter as compared to INR 133.5 per millimeter in financial year '22, an increase of 2.3%. Export sales during financial year '23, including to customers in SEZ were INR 195.25 crores, comprising 28.4% of the turnover, an increase of 14.2% over financial year '22 where it had been INR 171 crores. While direct exports were INR 181.7 crores, which were up from INR 127 crores in financial year '22. During the last quarter of financial year '23, the company recorded a net sales of INR 187.54 crores. From a quantitative standpoint, sales volumes were 7.8% higher than those for quarter 4 financial year '22. However, the average ex-factory selling price was lower by about 1.4%. The domestic selling prices were depressed for most of the second half of the year as a result of dumping from China, Malaysia and Vietnam. The landed cost of imports became lower due to a combination of 2 factors. Firstly, the expiry in August 2022 of antidumping duty on solar glass imports from China, imposed in August 2017, coupled with a significant drop in international freight rates. Meanwhile, the price of natural gas, soda ash, packing materials and other commodities, had risen considerably. All these factors contributed to a contraction in margins. EBITDA during financial year '23, including subsidies of INR [ 9.75 ] crores from the government of Gujarat was INR 176.55 crores, corresponding to an EBITDA margin of 25.7%, which was a steep decline as compared to an EBITDA margin of 41.1% in financial year '22. During quarter 4 of financial year '23, EBITDA was at INR 38.02 crores and the margin was 20.3% as against 34.9% in the corresponding quarter and financial year '22. And 26.7% in quarter 3 financial year '23. Arising from increased costs, coupled with lower selling prices, which prevailed during this period. Moreover, during this quarter, SG-3 had been lit up and fully manned. As such, our expenses are being incurred while there was little corresponding revenue. Lower EBITDA led to a decline in the profit after tax and the company recorded a profit after tax of INR 88.54 crores, a decrease of 47% over financial year '22. PAT during quarter 4 financial year '23 was INR 11.69 crores, which is a decline of 75% as compared to quarter 4 financial year '22 which had better sales prices. Ironically, solar glass is the only component in the entire solar photovoltaic value chain which has no import duties whatsoever. With expiry of antidumping duty on imports of solar glass from China, post 17th August 2022, imports continue to remain completely exempt from payment of any sort of import duty. While imports are subject to a basic levy of customs duty of 15% as circular going back to 1999 exempts imports of solar components from payment of customs duty. This is an anachronism not only because solar glass manufacturing is the most capital-intensive component after solar cells, having the lowest asset turnover issue, but also because an investigation launched by the Ministry of Commerce, as recently as 2022 has found the largest solar glass manufacturers guilty of unfair trade practices, that is to say dumping and have recommended imposition of 63% antidumping duty on imports from them. The order seriously skewed against the solar glass industry, where imports of heavily subsidized Chinese glass are welcomed into India with no imposition of any duties. There is no level playing field for this industry. We have been representing our case to the government [indiscernible] to end possibly the exemption from BCD on imports of solar glass. The solar installations in FY '23 stood at a slightly lower 12.8 gigawatts in FY '23 again 13.9 gigawatts in FY '22. However, overall domestic demand for solar glass has become stronger as demand for Indian-made modules has risen strongly in the export markets like U.S.A. together with strong demand in India. The additional demand for glass is being met through higher imports owing to limited availability of domestic manufacturing capacity and hence, the market share of Borosil Renewables innovative market currently stood at 19% only in the last quarter of the last -- of last year. The overall demand situation for solar glass continues to look robust in India as the domestic module manufacturing capacities are expected to rise to almost 100 gigawatts in the next 2 or 3 years from about 35 gigawatts currently. The actual domestic manufacturing may rise to 35 gigawatts, 40 gigawatts annually, which will increase the demand to 3x from the present levels over the next 2 to 3 years. Commissioning of a 10-megawatt Captive Power plant of solar plus wind energy being set up through an SPV in which Borosil has 31% shareholding, which was planned in December '22 was delayed due delay in approvals from the relevant state authority. I'm happy to share with you that the requisite approvals have now been obtained and the project is commissioned. This is expected to meet about 35% of the company's power demand. This has enabled us to increase the use of green power in our manufacturing while also reducing the average cost of power. We are also looking to set up an additional 8 megawatts of solar plus wind power once there is enough clarity on the regulations. I'm happy to share that commercial production from our third furnace SG-3 began from 23rd February 2023 taking the production capacity to 1,000 tons per day, 6 gigawatts from 450 tons per day, 2.8 gigawatts. Going forward, we shall now be in a position to more than double the sales, servicing our higher customer demand while achieving higher operating leverages. The demand for glass has shifted to higher sizes where we now have achieved capability. About 55% to 60% of the production is already in large sizes. We have recently commissioned facilities to service a higher volume of 2 mm [ back ] glass with holes drilled and also grid printed. These are used for a [ back ] glass in bifacial solar PV modules and this is our major growth area. The recently acquired German solar glass manufacturing plant had added an operating capacity of 300 tons per day to BRL's manufacturing capacity. The plant has been operating at about 95% capacity However, a cold repair of this furnace was carried out from 13th March to 5th May and the furnace has been brought back into production from 8th May with a higher capacity of 350 tons after incorporating changes, which will help raise the production yield and achieve energy savings. A portion of the CapEx planned for the processing area is still under implementation, which will help achieve capability to supply larger-sized glasses and also enable more efficient operations. An overall CapEx of EUR 34 million will be incurred on this, of which EUR 24 million is being borrowed from banks. Now I come to the consolidated results for the quarter, which is the first full quarter post acquisition. These results include the operations of the wholly owned subsidiaries abroad. The Interfloat Group registered a revenue of INR 121.79 crores. In this quarter, with an EBITDA of INR 5.12 crores registering an EBITDA margin of 4.20%. The subsidiaries have been able to achieve this despite prohibitively low -- prohibitively high energy and raw material prices and also a shutdown of production from 13 March 2023. The consolidated net revenue and EBITDA for the quarter 4 financial year '23 stands at INR 309.05 crores at INR 39.08 crores, respectively. Energy prices have been correcting gradually. However, on the other hand, the sales prices have been adjusted downwards in order to maintain competitiveness with the imports. With an emphasis on domestic manufacturing and sourcing from second force in European Union, U.S. A. and Turkey, we see export demand from our Indian operations rising significantly over the next 2 to 3 years. We believe that with manufacturing operations in Europe and in India, we are in a strategically advantageous position to meet higher demand in the export markets. With that, I would now like to open the floor to questions that you may have.

[Operator Instructions] The first question is from the line of Keval Ashar from DSP Investments.

Sir, first question is that since we have 1,000 TPD of capacity right now and we can cater to 6 gigawatt of solar module capacity? And India in the next 2 to 3 years will have 100-plus gigawatts of solar module manufacturing capacity. So does this give us comfort at our current capacity and upcoming 1,100 tons per day of capacity can be sold off in domestic market itself?

Yes, gives us a lot of comfort. I provided the government does not make any further changes in its policy for solar modules in India.

Sir, the second question is that over the last 2 years, if I see the realizations of solar glass it's almost been stable, like, at around INR 130 and -- but our margins have significantly corrected. So is it because of elimination of BCD or the duties? Or what is the reason our margins have corrected while the realizations have stayed the same?

See the cost of inputs has gone up significantly, nearly we're 60%, 70% in the last calendar year. And on the other side, of course, selling prices did decline because of the absence of any antidumping duty with effect from August of 2017 -- sorry, 2022. So what we see here is actually an overall price, which is spreading over a long period of time, we had certain contracts at older prices and so on, which got executed at those prices. So for all these various reasons, we see that the prices was a bit higher, but they did register a decline in the last quarter.

Okay. So got it. Sir, what will be the current realizations of solar glass?

So it's slightly lower.

Okay, sir. If you can give a number?

It wouldn't be right to put any number as of now, but it's slightly lower.

Sir, what is the CapEx that we are planning for FY '24-'25, India plus Europe?

We just completed our CapEx in Europe. We spent about significant amount of money there to rebuild our furnace. And it's now, as I mentioned in my talk, it's about 350 tons a day now from 300 tons a day. And the furnace is good for another 5 years at least. So we spent money there. And of course, we spend money here. So at the moment, I do not see any special CapEx going in during the current year other than routine maintenance CapEx.

Sir, actually, for the next year, the 1,100 tons per day of capacity, we are planning in calendar year '25, so how much CapEx would be required for that?

So we are taking a pause as of now because we have just completed a large expansion from 450 tons we have moved to 1,350 tons. So we will be reviewing this in the next quarters and so on and we'll figure out which -- whether to go for 1,100 tons or what the project should be. And we will come back to you after that.

The third question is that we had a tough year in Germany due to energy crisis, et cetera. which has also impacted our margins over there. So has the situation normalized in Germany? And if yes, then how much margins can we expect from Germany plant in normal situation?

So there are 2 sources of energy that we use in Germany, one is natural gas and the other is electrical power. So the prices of natural gas have stabilized significantly to what they were before the war started. And to that extent, it gives us some comfort that the prices have stabilized. However, the cost of electrical power gets very high. So that, I believe, is based to a large extent on natural gas. And therefore, I would imagine that the price should be coming down in the foreseeable future. But till that time, I would say that power prices still remain high. I see that the working this year would definitely be better, more improved as compared to last year, which was quite a disaster, frankly.

Okay, sir. Got it. But in general -- in the normal situation, can we make around 20%, 25% margins what we make in India in Germany?

That would be difficult to make in any overseas operations, particularly Europe and Germany. So we believe that 10% to 15% will be a normal margin for that business player.

[Operator Instructions] The next question is from the line of Ranganath N, an Individual Investor.

It seems like I have a few questions on the acquisitions part. One is like how are you planning to like fund this in acquisition and CapEx plans going forward? Is there any chance of equity dilution going ahead?

We already funded the acquisition, paid the money. And now we are incurring CapEx. This is EUR 34 million. And out of that, EUR 24 million is being borrowed from banks, which is already tied up, the remaining money is funded from internal accruals of the company.

So there is no equity dilution chance going forward?

There is no plan for that particular leg. Whenever we have more CapEx plan for expansion, at that time will be raising equity.

So my second question, you said there is an antidumping duty request that you put in for government. So how is that in a response from their side? And is it positive? Or like do you expect anything in the future?

So antidumping duty has been discontinued from 17th August 22, though commerce minister has recommended, but finance minister declined it. So there is no antidumping duty that chapter is over. If we want the antidumping duties to come into play, we will have to file the application again for every country like China, Vietnam and Malaysia. And then the entire process will be run, which may run up to 1 year or so after which one can expect antidumping.

So if I -- correct me if I'm wrong, like my understanding, I heard like we already filed an application for that. Is that not the case? Or are we still in the process?

No, we had filed application for continuation of antidumping duty against China, which was expiring in August '22. The DGTR analyzed everything, they held the entire process. And after that, they recommended antidumping duty continuation for 2 years. But finance minister declined it. So that matter is over now. If we want to invoke anti-dumping duty on any of those countries, we need to file fresh application now.

The next question is from the line of Nikhil Abhyankar from ICICI Securities.

Sir, my first question is what is the share of solar glass in the total cost of a module.

So it actually depends on which kind of model you are talking about. If it is conventional module, where we use glass in the front and backsheet -- polymer backsheet at the backside, it would be 8%, 9%. If it is a bifacial then it might be 15%.

Okay. If it is a bifacial. Sir, my second question will be among the PLI winners who will be ramping up their module facility, so what portion of them are getting into these bifacial module manufacturing?

So basically, all the solar cells now being available are bifacially charged. You could eventually make bifacial modules from every sale available now. But it all depends on what kind of obligations and what kind of projects you are doing. So if you talk about international scenario like China already almost 45%, 50% is bifacial module. But it is yet to be followed in the same way in India and Europe. So gradually, it will move higher up in the bifacial modules as we go along because earlier the equipment were not capable of making bifacial module in India and so also in Europe, but now they are changing the equipment. And gradually, the increase -- there will be increase in the bifacial module.

And sir, are we in talks with any of these PLI winners to -- or are they in talk with us for getting into any kind of a long-term supply contract?

Actually, we -- most of these people are our customers already, and those who are not also we are in touch with them. And the contracts practically have not worked so far, like long-term contracts, but supply arrangements on a monthly basis are there. And we hope to continue like that because without the price, there is no contract basically and price is something which nobody wants to prefix because of the changing situation. Solar glass prices keep changing. Every component price keeps changing and the dynamics of profitability keeps shifting from here and there in the module industry. So nobody wants to have a fixed price. But basically, all the people who are going to have module capacity will require glass. And higher the domestic value added in there, they will be getting higher PLI. So obviously, it will be interesting for them to buy locally.

So they are not looking to set up their own glass manufacturing facility?

Well, Adani and Reliance are looking to set up their own capacities and also maybe like Shirdi Sai Electricals might look at setting up the capacity. Other than these, we have not heard any other players looking at setting up glass capacity.

Sir, just a final question, sir, what is the difference in realization for exports and domestic?

Export sales realization is higher compared to domestic realization by about 10%, 12%.

10%, okay sir.

The next question is from the line of [ Santosh Kucheria ] an Individual Investor.

This is with regard to imbalances in asset and liabilities statement, 174 crores of inventories is there, in which how much is the finished goods and how much is raw materials?

Sunil, can you respond on this? Or you want to come back. In the meantime, we can continue with another question.

Yes. And this is with another, in profit and loss for Q1 results, the power and fuel was -- last year, it was INR 30 crore now is [ INR 52 ] crores. Why is this so much high...

So now we are running third furnace as well, which is a large furnace of 550 tons per day, so we need to have more power and fuel consumption from 450 tons we have reached 1,000-ton production. So obviously, it will require power and fuel.

But it has not affected in your turnover because production has gone up from February itself. So the revenue should have been higher. Whether your [ buildup ] market has been improving under inventory...

Yes. So production -- commercial production has begun on 23rd February. So virtually 1 month production is happening -- has happened in March. And there has been some buildup in the inventory as well. which is why the ratio is not appearing the same.

So actually, whatever you are producing those goods are not being -- getting sold or you [indiscernible] but the not in your inventory?

So there are 2 things. One is that Ind AS impact is there, large impact is there of goods having been invoiced but not delivered to the customer. So that's a large impact already. Plus, there was some buildup in the inventory as well because initially when you start producing, you don't get 100% right material. So one is to see for 1 month, 2 months or so before it can sell everything.

So just clarifying that INR 174 crores of inventory how much is finished and how much is raw material? Because we have debited all the raw material expenses and profit and loss [indiscernible] raw material.

Out of INR 174 crores inventory, sir, INR 74 crore inventory is raw material. And balance inventory of finished goods, work in progress, stores, taking material and collect.

So have you [ invoiced ] -- out of your INR 100 crores have you invoiced anything for the goods [indiscernible].

That is INR 36 crores around.

INR 36 crores, we have sold, but it has not accounted in sales, right?

That is in the stock because of Ind AS.

Otherwise, profit has been much more than that figure, no?

Yes. Yes.

The next question is from the line of Rishabh Shah Dalal & Broacha.

I have a few questions regarding the company -- understanding the company. So will the management can tell me or have a brief idea about what will be the realization number for 1 mm glass that is imported from China in India?

Yes. We obviously have an idea about what prices the goods come in India. And in fact, the goods are sold by us taking benchmark of import prices. So obviously, we need to know that. But each and every buyer has different pricing. On an average basis, the goods -- if you were to ask me on a per millimeter mass, it will be about INR 110 crores to INR 115 per millimeter.

My next question would be regarding for the third furnace. So the third furnace would be a dual furnace, if you know the dual furnace where in the previous conference calls or in previous investor presentation, it was mentioned that it's run on furnace oil and on the diesel. So will that be a dual furnace?

Yes. It will be a multifuel furnace. It can be run on different sources of energy. It could be natural gas, it could be furnace oil, diesel, LDO, propane LPG.

So yes, now my next question would be regarding the number of days for the production of the glass, which is your capacity is INR 1,350 ton per day. So for -- on a yearly basis, if I want to calculate on a yearly basis, so for how many days shall I take for the calculation for yearly basis of the production?

You take the entire full year, but generally, 10% would be downtime for the dollar change and other things. So generally, 330 days is what one can take.

Good days, which I heard.

330 days.

And also, can you please give me any update for the ADD by the government, which -- that is ADD that is on the imports from China by the government. Is there any update on that?

I wish I would love to give you that update. But this is completely beyond our scope, we have been trying very hard, and we are hopeful that we should succeed because we have very good reason for our request for grant of basic customs duty at least, if not antidumping duty. And it's a question of when the government will sit up and take notice.

Also, I just have one question. Regarding the 67 gigawatt solar production, which was reported as of FY '23. So we -- do we contribute 100% of it? Do the solar glass contribute 100% to it?

No. No. Not at all. This installation can be by way of domestically manufactured modules or by imported modules. So a large portion of the installations in the pas h's been with the imported modules. So it will be incorrect to say that it is made in India like that and we contribute for the module making. The domestic module manufacturing, of course, is going up now. So as we speak, the domestic modules maybe about 75% of the installation currently happening.

And sir, also, I would like to ask that can you -- can you please tell me how much would be the export volume, if you can give me some guidance towards that.

Exports are about 25% of the volume.

The next question is from the line of Sagar Sanghvi, from ADD Capital.

I have 2 sets of questions. One on the volume front. Sir, at 1,350 tons per day what would be the full utilization that you've been looking at in terms of percentage? And at full organization, what kind of volume should we be looking at in terms of square meters? Or any volume metric that you can help us understand so that we can model the P&L for that. That is one. And two, on the raw material front, how should we look at raw material prices going ahead in terms of soda ash prices, are we -- do we have the contact for full year or half yearly contracts? And even on the other raw material prices and power and fuel.

So on the production side or turnover side, 1 benchmark to take would be that if you were to run both the plants full capacity like India and Germany, the turnover one -- which one can expect could be about INR 1,800 crores to INR 1,900 crores per annum.

But that will also take a particular realization per square meter or something into consideration?

Yes. So that's the reason I've given you a band of INR 1,800 crores to INR 1,900 crores, depending on what the price would be. And what the volume we can expect. In terms of the quantity, if you were to ask me from Indian operations, one can expect about INR 5 crore square meter on 2 millimeters. And the German operations about INR 1.1 crore square meter on 2 millimeter. With regard to your other question on the cost and prices, we do have supply contracts for soda ash for this calendar year. And this time, the contract is linked to benchmark of quarterly pricing. So should there be any changes in the quarterly pricing, it will be applicable to us from the next quarter. So suppose the price in this quarter...

Got it. About other fuel?

For power and fuel, like power, of course, is like DISCOM and now we of course have our own power and fuel we are buying from the government owned companies and natural gas coming GAIL.

So what would be the margin should we be looking at? Is it a 22% margin or will it be a normalized 15%, 16% kind of margin for a consolidated number?

So our margins in the last 3 years have not been below 20%. So it is not right to assume 15% margin. But we expect margins to be between 20% to 25% generally.

On a consol basis, not India operations, right?

Standalone, I'd say.

No, my question was on the consol basis?

On international operations, we see margins to be between 10% to 15% so one can do the consol.

The next question is from the line of Anuj Upadhyay, an Individual Investor.

I'm from Investec. Not an individual investor. Anyway sir, you mentioned about the market share -- domestic market share decline to 19%. Can you throw some kind of a number on the export market? I mean what share do we have -- China as a major player role to play out there. But any market share which we can pick our sales over there.

So there are different markets in which we have different market share. So it is not uniform like Indian market, of course, we can discuss about the market share, and we will not have a complete idea of other markets as well. So like through our German operations, we know that we have a large market share there. Our German company is holding almost 60% to 65% of the market in Europe. We have another 10%, 12% there. So there's a market share we enjoy there. In Turkey, we may be about again 10%, 15%. And in U.S.A., we are already there, maybe 1% or 2%.

Okay. So this export, which we are doing is largely targeted towards what the European region or Europe...

Europe and Turkey.

It's Europe and Turkey. And going ahead sir, considering the fact that the domestic competition is going to be intense. What would be our strategy in the export domestic composition service. The approach would largely be on the export market or how...

Yes. We maintain our focus on the export market, subject to the limitation of growth there sometimes. But -- of course, we will have to increase our presence in the domestic market as we grow the volumes because the demand and module manufacturing activity in India is growing very fast as compared to the other countries, other markets. But maybe after 1 or 2 years, USA will become another growth area. But as of now, we concentrate on Turkey, Europe and India.

Okay. And sorry, so I joined in a bit late. I missed out on your Q4 production and sales volume and also the bifurcation among the domestic and export sales, can you, please help me out?

So the sales volumes have gone up by about 7%, 8% in the quarter, led by the commissioning of SG-3 but it has not got full operations as of now. We started only from 23rd February. So from the current quarter, the impact will come in a major way, and then it will show a right picture.

Right, sir. And the and domestic mix?

Well, it was about 25%, 26% in export in the last quarter.

And sir, our earlier agreement on the solar gas will expire in December 2022. And we enter into a new contract, this in what time period? And how much is the elevated prices compared to the previous contract?

So we are still waiting for the right level of the prices for a new contract. But in the meantime, we are using a major part of our operations, furnace oil, which is cheaper than the market-related gas as of now. And market-related gas prices also have come down, but they are still way above furnace oil prices. When they are almost at the same level, we'll like to enter into contracts.

So likewise in Europe, even in India, we are using furnace oil, right sir?

Sorry, say again.

Likewise, in our European operations, even in domestic market, we are using now furnace oil. This is what you are saying?

In Europe, we are using completely natural gas and oxygen and like that. There is no use of furnace oil in European operations. In India, almost about 18% to 20% is utilization of gas and rest is furnace oil. So that's the mix right now in India. But as and when the prices of gas are right, we will again ship shift back to gas.

And with the commissioning of this 10-megawatt Captive Power plant, any rough figure you can make sir, how much are we saving in the power cost? How much we could save with the fully commissioning of the SG-3?

We hope to save about INR 35 lakhs to INR 40 lakhs per month.

And lastly, sir, in opening remarks, you've mentioned about we are rethinking on the strategy of coming up with the SG-4 and SG-5. We -- when we had a discussion on this expansion, you had mentioned all our plants we have a contract to supply the solar glass [indiscernible] supply majority of them are going for the expansion plan on module manufacturing. So the reason to re-look at the strategy has to do with the competition because demand, I don't think is a concern as of w. It has to do with the price. Am I right in my assessment, sir?

Yes. So we would -- we are currently in the process of stabilizing our expansion because after having expanded from 450 tons o 150 tons, we need to take a pause, and we cannot be in a hurry. And similarly, there are other aspects like on the duty front, there is no clarity as of now, and we cannot only chase the revenue and not the bottom line. So we would not like to sacrifice too much on the bottom line and just chase the growth. So we will take the call at opportune time when to put in money for the next expansion.

And lastly, sir, if at all, we say supposedly decide to go ahead with the expansion in next quarter, how much time would it take because earlier target was set up this capacity by FY '26. We would be sticking to the same time line or there could be some...

Yes, it takes about 15 to 18 months anyway. And whenever we take the call from there, it can be another 18 months.

The next question is from the line of Rishabh Shah from Dalal & Broacha.

One of the questions which I have is for the backward integration that the company had given the guidance for soda ash and natural gas. Are there any updates on the backward integration for that?

No, we do not have any such plans. We have never given guidance to get into backward integration of these products. So I think you seem to have misplaced it.

And also I just have one question regarding, are there any differentiation in the quality of glass that is produced by us and the glass, which are imported from China, Vietnam and Malaysia?

Generally, the quality is same.

However, our quality, there are some differences in composition which gives our glass greater longevity, which we do because we believe in making a better product.

The next question is from the line of [ Ashish ] Jain an Individual Investor.

My question is pertaining to the capital allocation policy. Now in the absence of a big CapEx in the ongoing year, what will be the capital allocation policy regarding the free cash flows?

So we are continuously innovating and continuously looking at various opportunities in the business. We have recently started R&D center also in Pune with an objective to develop products or come up with cost saving measures and all. Whatever cost saving measures are there, they may not require large CapEx. But in case we are able to come up with some new products, new ideas, we will discuss that, and then we can come back with the plan to do any CapEx on that. So in the meantime, the small CapEx or routine CapEx will continue to do.

No sir, my question was whether -- the free cash flow that we generate this year, whether we will save it for the CapEx that is upcoming in next year or whether we will use it to reduce the debt or a possible dividend payout? What are the management's thinking on this?

So I think we will take the call at appropriate time. Right now, we are not in a hurry to decide on that. And our next expansion may not be very late as well. So maybe and most probably, the cash flow will be used for next CapEx cycle. But we'll have to take a call as and when we reach that level.

I have just one more follow-up question. So always our exports were very high-margin products for us. Now that we have a European subsidiary, where is the material that we are producing in Europe is being sold versus where were we exporting from the Indian manufacturing houses?

So material produced in Germany is getting sold almost 100% into European market only, whereas we have been exporting to Europe, Turkey, U.S.A., [ MENA ] countries and all the areas where the demand is there. So that's how it is being looked at. Currently, also, we continue to export material from India to European market because there is a higher demand for glass, which the German plant cannot completely meet.

So none of exports are being sacrificed because of this European plant, right?

No, because they contribute only 60% of the market, and there is room available for other players to supply. So we will continue to export.

The next question is from the line of Jitendra [ Shah ] from Axis Capital.

My first question would be on the Europe business. As you said, the plant has the CapEx in German plant has settled down, so what could be the contribution from the European plant in terms of total revenue this year probably? Or what could be -- what is the order backlog because you said utilization level can be at [ 80% plus ] if at all there is any room for huge scope in the European market. So what can we see, any guidance this year for the European business from the German plant?

So we can probably expect turnover of about INR 550 crores to INR 600 crores from that plant.

And sir, this margin would be like between 15%, 20%...

10% to 15% EBITDA margin.

EBITDA margin. And sir, this INR 500 -- INR 550 crores is the peak or we can even achieve more?

Well, we have just rebuilt the furnace, and we will have to build the rest of production and create efficiency in all. It could be slightly better, but this is what we normally expect when we start the production. As we go along, we'll try to more improve our productivity over there.

What will the portion of exports to your location with antidumping duty against China and probably how competitive are we in those areas? That's probably -- I know that your main exports is in Europe and Turkey, but how are we competing with China in those regions if there an antidumping duty there?

So in both these markets, there is antidumping duty against China but there is no antidumping duty against Malaysia and Vietnam who happen to be the large exporter to these 2 geographies as well. And we have to compete with them.

And these entities are also like the Chinese company only...

Yes. They are Chinese companies only.

We have a follow-up question from the line of [ Ashish ] Jain, an individual investor.

Sir, one question. So in the earlier calls, we have suggested that the 1000 TPD would help generate INR 1,200 crores order of revenue, which indicates to 1.2x asset turn. But in the previous question, you suggested that our 350 tons plant could generate INR 500 crores of revenue, which is much higher asset turns. So is it the case that the European plants are much better in terms of efficiency and productivity?

No. In fact, the prices in Europe are higher compared to what they are in India. And it can generate a better product mix as well because there are a lot of markets which they serve, like, we now for bifacial markets, which are paying higher amount there. In Indian context, we have to compete with Chinese and our prices remain lower. So that also is another bottleneck in India.

Okay. So sir, regarding Indian manufacturing plant, 1.2x asset turn is still an ideal situation...

This 1.2 asset turn is happening because ours is a greenfield -- brownfield expansion here, and we have set up the old plants, like I said, 2010 and 2019 and all. But if it was a new plant to be set up in India, the asset turn will not be like that. It will be mostly 0.85 or like that. So in Indian context, for our company, you can say it will be 1.2x. But if you were to really look at any greenfield plant, it will be much less than 1.

As there are no further questions, I would now like to hand the conference over to management for closing comments.

Thank you very much for your questions. These have been -- they reveal the interest that investors are taking in the stock and in the operations of the company. I can only assure investors that we continue to remain alive to the situation, and we are constantly working towards making products that would have a higher realization. We are all working constantly to maximize production and also to keep our costs at the lowest possible level. I do want to inform people that what we have done now is we have installed a very modern, very sophisticated plant, and it just takes time to tune it up and to get the maximum output from this. So we're hard at work, and we are seeing results every week, things keep getting better. So we are quite confident that in time, we should be able to cover all the points that need to be covered, and we should be able to have a very efficient production from the total operation. Thank you.

On behalf of Axis Capital Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.