Ladies and gentlemen, good day and welcome to the Q2 FY25 earnings conference call of Borosil Renewables Limited, hosted by Axis Capital Limited. As a reminder, all the participants' lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on the touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Rohan Gheewala from Axis Capital Limited. Thank you and over to you.
Good evening, everyone. On behalf of Axis Capital, I'm pleased to welcome you all for the Q2 FY25 earnings conference call of Borosil Renewables Limited. We have with us the management team representatives, Mr. P. K. Kheruka, Executive Chairman, Mr. Ashok Jain, Whole-Time Director, Mr. Sunil Roongta, Whole-Time Director and Chief Financial Officer, and Mr. Balesh Talapady, Vice President of Marketing and Sales. We thank the management for giving us the opportunity to host the call. We will begin with the opening remarks from the management, followed by an interactive Q&A session. Thank you and over to you, sir.
Good afternoon and welcome to the Borosil Renewables Q2 FY25 investor call. Mr. Kheruka has not been able to join on the call because of his personal reasons. I'm Ashok Jain, Whole-Time Director. The Board of Borosil Renewables yesterday approved the complete financial results for the Q2 FY25. 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 operations of the company on a standalone basis as well as on a consolidated basis. Overall, the company's performance has shown improvement compared to the immediately preceding quarter. The total sales during Q2 FY25 grew to INR 264.94 crores from INR 241.40 crores in the preceding quarter. The improvement in EBITDA performance was greater, with INR 52.88 crores representing 20%, up from 12.3% in the previous quarter.
This improvement was driven by an increase in production efficiency and a rise in ocean freight for imports, which allowed us to charge higher selling prices. Export sales, including those to affiliate customers, amounting to INR 34.39 crores in Q2 FY25, accounted for 13% of the turnover, compared to INR 22.42 crores in the preceding quarter when exports made up 9.3% of the turnover. The company achieved a profit after tax of INR 12.62 crores in Q2 FY25, compared to a post-tax loss of INR 3.64 crores in the preceding quarter. The exemption from basic customs duty on import of solar tempered glass has finally ended on 30 September 2024, with a levy of BCD of 10%.
Unfortunately, in anticipation of this duty, the Chinese exporters slashed the FOB prices by 22% in August 2024, and the domestic module manufacturers stockpiled large quantities of cheaper solar glass from China before the BCD implementation. Imports in September surged to five times the volume imported during the previous year, ended on 31 March 2024. This is causing a huge challenge in procurement of orders from September onwards due to excess inventory at the customer's end. The impact of this price reduction will be visible in the current running quarter. The Ministry of Commerce and Industry had initiated an anti-dumping investigation into alleged dumping of solar glass from China and Vietnam, based on the application made by the company.
I am happy to inform that the Directorate General of Trade Remedies, DGTR, in its preliminary findings, has recommended imposition of provisional anti-dumping duty pending completion of the investigation, vide its notification dated November 5, 2024. The matter is now with the Ministry of Finance. We are awaiting the matter of countervailing duty on imports from Vietnam in the application made by the company. We are still awaiting issuance of preliminary findings by the DGTR. We have also petitioned the government to mandate use of domestically manufactured solar ancillaries in modules. We believe this step is crucial for fostering long-term growth and to develop a robust and competitive local supply chain for solar photovoltaics. Our company is seeing a faster pace of solar installation on the basis of a substantially higher demand.
Manufacturing capacity for solar modules has already reached 75 gigawatts, which is expected to double to 150 gigawatts in two to three years. Use of locally produced modules has risen sharply after the implementation of ALMM mechanism from April 2024, which is leading to increased demand for all the components, including solar glass. Our German operations continue to face significant challenges due to reduced demand. The steps taken by the European Union to support domestic manufacturing of modules have been adopted by France, Italy, and Austria. It will take time for the demand from these countries to make a meaningful difference to the overall demand. Germany, in the meanwhile, has taken this matter under consideration. We have been able to operate the plant at a high rate of utilization by securing orders from markets like the USA and EU, which are at low prices.
However, the orders are insufficient, and it will take some time to generate additional orders since the customers in the USA are still renting out, and demand in adjacent markets is low. Now I come to consolidated results for the quarter, which includes the operations of the subsidiaries. The overseas subsidiaries, including the step-down subsidiaries, have generated net standalone revenue of INR 107.48 crores and negative EBITDA of INR 16.85 crores for Q2 FY25. The performance has declined over the preceding quarter, which had a net revenue of INR 129.40 crores and negative EBITDA of INR 2.38 crores. This was due to a large share of orders being booked at lower prices.
The consolidated net revenue for the quarter and the review stands at INR 372.42 crores and EBITDA of INR 34.51 crores, as compared to net revenue of INR 370.79 crores and EBITDA of INR 25.91 crores in the preceding quarter. This improvement visible here has arisen from the better results of the Indian operations. Meanwhile, determined efforts continue to further optimize the cost of production. The magnitude of drop in selling prices by the Chinese makes it appear that imposition of anti-dumping duty on dumped imports is the most obvious way for the domestic solar glass production to come back to a reasonable level of profitability. Finally, I would like to update you on the proposed rights issue. The company has received in principle approval for rights issue from BSE and NSE, and also the final observation from SEBI. Updated draft letter of offer will be filed.
Detailed terms of rights issue, including but not limited to the issue price, rights entitlement ratio, record date, and timing will be determined by the Board or its duly authorized committee in accordance with applicable law. With that, I open the floor for questions, which you may have. Thank you so much.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touch-tone telephone. If you wish to remove yourself from question queue, you may press star and two. Participants, I request that you use handsets while asking your question. Ladies and gentlemen, we'll wait for a moment while the question queue assembles. The first question is from the line of Sunny from IAF. Please go ahead.
Hello. Sir, I have a few questions. Am I audible? No, no, I will rejoin. Thank you.
The next question is from the line of Omkar from Trade Brains. Please go ahead.
Thank you for the opportunity, sir. My first question is, I have observed that Germany's expenses are more than India's business in terms of employee costs and raw material. I want to know why don't you do outsourcing manufacturing in third parties in Germany?
So you are saying that our cost of raw material is higher in Germany, is it?
Yes, sir. And your employee costs and raw material costs in Germany are higher than Indian business. So why don't you do outsourcing and manufacturing by third parties?
Okay, so you are suggesting that instead of manufacturing ourselves, we can be done from somebody else?
Yes, sir.
In Germany or other parts of the world?
Only in Germany, sir.
The cost of manpower and fuel and, like, power and everything is higher in Germany as you may appreciate it because it's a developed economy and the costs are higher there. While the cost of production in Germany is higher, when we took over the company and did our due diligence, at that time, the revenue was also correspondingly higher. The cost, after offsetting the higher cost, also there was a decent EBITDA being made by the company. The challenge now is that the demand itself, the demand for solar glass itself, has gone down because there is no protection for module manufacturers in Germany or the European Union. Neither the BCD nor anti-dumping duty is there on the module.
So the modules are coming at a very cheap price in the European Union, which has forced the customers to go out of business, which is why the demand has gone down. So if you are running the plant at full capacity and the customers are also running at full capacity, the cost can still be recovered. But in the current scenario, where the local demand is only about, say, 40% of the production, it is becoming difficult to manage. So we are reviewing all our options. We are trying to first get the orders from other geographies so that we can still run at higher capacity, bring down the per-unit cost of production, and still manage to bring both ends together in terms of revenue and cost. Failing which, we will have to look at more alternatives.
Okay, sir. Follow-up question is, as you are at 65% market share in Germany, based on the dumping duty in Germany, do you think about declining market share in the future?
Sorry, your voice is not audible properly.
There is some problem.
Yes, sir. Follow-up question from the previous one. As you have 65% market share in Germany, due to the dumping duty in the German market, are you seeing any declining market share for business?
No, there is no decline in the market share. The market itself has declined. There is a problem because if the demand is there, we will, of course, be able to get the demand back in our fold, being a local producer which offers a lot of advantage in terms of just-in-time delivery and our supply chain. The challenge is that the demand itself has dropped to, say, less than 50% of what it was, which is where we stand today.
Okay, sir. Understood. Sir, as you mentioned, Chinese are doing dumping goods at lower price in India, while in the same way, Chinese do dumping for electronic goods in India also, sir. But those electronic companies made a strong rebound based on their backward integration and joint ventures in the last couple of years. So same strategy, why can't we use in the Indian market what electronic manufacturers are using in India as of now?
So the business too is different if you really appreciate the kind of business you are talking about. It's more of an assembly business, which may be true in solar for, like, say, module manufacturing, where you buy various components from various, say, vendors and assemble it into a product, and you sell it. So there you can backward integrate in the manufacture of those components and possibly bring down the cost of production. But in the case of solar glass, it is not the same story. You have to basically start from silica sand and convert that into finished goods by a lot of value addition in terms of the energy cost, the manpower cost, and interest and depreciation and all the things. So backward integration in solar glass is not feasible. The products which we use are, like, say, natural gas or power or soda ash or sand.
So where the backward integration is not feasible in the case of solar glass.
Okay, sir. Understood. And my last question is, sir, your revenue has grown by 135% in the last three years. And while production capacity has increased by three times, is that capacity utilization in line with the sales as per industry standards?
The capacity has gone up from 450 tons to 1,350 tons per day, including the German plant. But the full utilization of the German plant is not happening as you know that because of the orders or the capacity of orders, the capacity is not fully utilized. Second thing is that the selling prices, when we were running only 450 tons or, say, less production in 2022, 2023, or 2021, 2022, the selling prices were quite high, almost, say, 25% higher than what they are today. So a drop in selling prices in the current context would also mean that you are looking at a lower growth in the sales numbers. So our utilization is not low in terms of Indian plants, but the selling prices are low. In the case of German plants, again, the selling prices are also low, and utilization is also not increased.
So this has to be understood in the context of selling prices as well.
Okay, sir. Understood. Thank you, sir. All the best for the upcoming quarters.
Thank you.
Thank you. A reminder to all participants, you may press star and one to ask questions. The next question is from the line of Sunny from IAF. Please go ahead.
Hi, sir. Am I audible this time?
I can hear you from a distance, but we'll try to send the question and answer.
I have two questions. Primarily, you are using INR 450 crores, and you have a total debt of around INR 557 crores, which includes INR 366 crores of debt and INR 187 crores of short-term debt. So you are planning to pay off fully long-term debt only, sir?
That's very interesting.
Okay, no problem, sir. And second question regarding, let's assume that from today onwards, anti-dumping duty is held. So how much time it will take for us to do the CAPEX, which is on hold? And is it brownfield or greenfield CAPEX?
The anti-dumping duty notification has to be issued by the Ministry of Finance, as I mentioned, because it's a customs notification where you are charged the duty. It is issued by the Ministry of Finance, which normally takes four weeks to, say, eight weeks' time. Once that is done, suppose the notification gets issued by the end of December or middle of December, we will review the situation in the fourth quarter of this financial year, January to March. Once the Board decides that this is the right time to go for expansion and we decide on the funding mechanism, then we will be able to move ahead in the matter. From the time we decide that we want to go into the CAPEX, it will take at least 18 months to start production.
In terms of the greenfield or brownfield, we have a lot of facilities available in the current infrastructure. The land is available, even so many items of utility are available, and many other benefits which we have at the current location. You may still consider it as a brownfield project, and that will enable us to do it in, say, 18 months as against a time required of 24 months for a greenfield project.
Thank you, sir. That's it from my side.
A reminder to all participants, you may press star and one to ask questions. The next question is from the line of Sunny from IAF. Please go ahead.
Hello.
Yeah.
Sir, am I audible?
Yeah, Sunny, we can hear you.
Sir, the latest notification which we get from DGTR, which includes anti-dumping from China and Vietnam also, tells us last time China was able to dump 60% of their solar glass using Malaysia. So what is the plan to mitigate that?
Your question is, there is anti-dumping from China, and even Malaysia can start exporting. That's what your question is?
Yes, sir. China can use Malaysia for dumping.
Okay. Available in Malaysia, and there is all the possibility that some goods from Malaysia may start coming in. As of now, for the last, say, one and a half years, there have not been any exports into India from Malaysia because the base was shifted by the Malaysian company to China. I mean, the Malaysian plant is a subsidiary of the Chinese company. So they stopped the exports from Malaysia, and they started from China. Now they can reverse the strategy. That possibility definitely exists. But that Malaysian plant may not be able to supply to all the customers in India and all the markets. So there may be certain customers and certain volumes which may start to come from Malaysia. But we will have to see how to play around and how to ensure that we get the right utilization using some strategy against Malaysian imports.
If they come too much, then we will have to think of some measures against Malaysia.
Thank you, sir. That's it from my side.
Thank you. The next question is from the line of Viraj from Avendus Capital. Please go ahead.
Yeah. Thanks for the opportunity. My question was that could you throw some light on what were the realizations in the past quarter, like the average glass selling price, what was in the last quarter?
So the average realization, as I mentioned, was higher compared to the previous preceding quarter, which helped us to register a higher EBITDA. While export numbers, we are not continuing to talk about in the calls because now we have a lot of local manufacturers also, and it may become difficult for us to deal with a lot of customers disclosing the prices. But what I can tell you is that the prices were better by almost 5% in terms of the number compared to the preceding quarter.
Okay. Okay. This was it. Thanks.
Yeah.
Thank you. The next question is from the line of Akshay from Alpha Invesco. Please go ahead.
Hello. Am I audible?
Yes.
All right. Thank you for the opportunity and congratulations on great numbers. I just wanted to get one answer. So can you provide some update on the 1,100 tons additional capacity that you were talking about? You said it's on hold. Can we expect this capacity to come up next year, or what would be the CapEx outlay for that capacity?
See, the capacity which is put on hold is what the Board had decided some time back was 1,100 tons per day, and that was by way of one single plant. But depending on the situation, we will see at the Board level reviewing whether a single plant of 1,100 tons would be a right fit, or it can still be done in two parts of 550 tons, depending on the comfort, on the funding, and the risk around the business. So we will be evaluating this, as I mentioned, in the quarter of January to March, and thereafter, we will take the call about the expansion. Once we have taken a decision to expand, it may take 18 months, as I mentioned, to come into production.
Okay. What would be the approximate CAPEX, maybe say for 1,100 the entire plant expenses?
For the 550 tons, we think it may be about INR 750 crores or so.
Okay. So roughly INR 1,500 crores for the entire 1,100 tons per day.
More or less, yes.
All right. That's it. Thank you. That's it from my side. Thank you.
Thank you. A reminder to all participants, you may press star and one to ask questions. The next question is from the line of Sumit Kishore from Axis Capital. Please go ahead.
Hi. Good evening. Thanks for the opportunity. Just wanted to understand what are the key provisions or the contours of the recommended levy of provisional anti-dumping duty on imports of solar glass that you can share at this stage and how significant you mentioned that it will be a substantial relief for the domestic solar glass industry? But if you could sort of help us quantify, given the varying forces that are impacting this particular market?
So during the investigation or during the period of investigation, there were certain selling prices or import prices which were prevailing, and they were analyzed, and the injury margin and other calculations were done by the DGTR in line with the norms. Now, what happens is that this market is so much fluctuating. The prices from China, the freight, everything is so much fluctuating. Then in case we have a fixed rate of duty, like say $50 per ton or $100 per ton, and the prices themselves change by $100, then the duty has a lesser impact or it becomes nullified. So what the DGTR around this time has done based on, of course, the representation by the company and the other fellow members of the producers in India, that they have made the duty in the form of a reference price.
So the reference price is the price below which, in case the imports are happening below that price, the difference between the reference price and the import price has to be paid as duty. So in the case of China, the reference price is announced or determined at $600. Now, in case the imports come at $600, suppose, the $73, the difference will be paid as anti-dumping duty by the importers. In the case of Vietnam, the price has been fixed at $565 per ton. So similarly, if the imports are coming at lower price, then the duty will be the difference. But if the imports are coming, this import means the landed price, including basic customs duty at our Indian ports. Suppose the imports are coming at a higher price, there will not be any duty.
So on one side, there is a protection from the downside to the solar glass manufacturers because if the prices fall and duty is a fixed duty, they still do not get covered. On the other hand, if the prices increase, the duty is not levied because there is no need for the duty in that sense. So this is a very good mechanism found by the DGTR authorities. And this is the way it is structured, that it's sort of a minimum import price, reference price, which will be applied to, say, two sets of imports like China and Malaysia. And accordingly, the duty will be charged.
And.
Have I explained it clearly, Sumit?
Yes. Yes. So sir, over what time frame do you expect this matter to be cleared by the Ministry of Finance now? And if you could also elaborate on this 32% price cut between June and September by exporters from China, Vietnam? So how does this compare with your average realization in the September quarter? So how much below has this price cut led the market at? And so you mentioned that this is unsustainable, but what is the volume impact expected in the coming quarter? If you could maybe give some guidance around it.
Yeah. So the first thing about the price cut is that the Chinese or the Vietnamese exporters are probably having a shortfall in demand because the local manufacturing of module has gone down because China is facing some challenge in exports as well as in domestic market because of overcapacity. So the prices have been cut down on the module, as you know. The prices from almost $0.30 have come down to $0.14 for the module per watt peak. So with steep decline in the price, there is a lot of, say, shortfall in capacity utilization, which is leading to surplus in the case of components, due to which there has been certain, say, nervousness in the hands of the solar glass manufacturers.
Correspondingly, they have cut down the prices first by about 10% in, say, quarter one up to June and another 20% in the next quarter. Almost 30% price has been cut by the Chinese manufacturers in this financial year. Now, corresponding to that, we have not witnessed such a decline in our domestic realization because we have been able to contain the decline, and also we have been able to maintain good relationship with the customers by explaining to them the situation. Our decline has been there, but not to the same level. In the case of volumes, if I were to give you some example, in 2023-2024, the average imports per day were about 2,000-2,100 tons per day. In July and August, it became 4,000 tons per day. In September, it was 9,000 tons per day.
The imports actually have become very significantly high in September because of the impact of duty coming in. Or rather, say, looking at the duty position of 10%, the importers have imported large volumes. Also, they have tried to take advantage of the falling prices of glass. There has been a lot of imports, which has caused problems of carrying high inventory. And since glass is a high-volume product requiring a lot of space, it creates problems in continuous ordering and keeping it in the warehouse. This is creating some strength in the business as of now. But I think we are hopeful that in two months' time, probably the high level of inventory should get adjusted. And from December, maybe this starts getting neutralized.
By December, you would expect that the Ministry of Finance would provide the required.
So by December, they will consume the excess inventory, which means that from January, you can probably expect.
The volumes to come back.
The volumes to come back, yes.
Okay. But is there any indication on by when will the Ministry of Finance provide the required support?
Just to give you a perspective, the Ministry of Finance is supposed to have a 90-day window to clear the proposals, which is actually in the case of final findings. But since there is no guidelines or there is no, say, stringency about provisional duty, we can assume that they may apply similar yardstick of 60-90 days or 90 days maximum. So we are trying to pursue with them and try to see that it can be done faster than this period. And we hope that we will succeed and get it earlier than this target period.
Got it. Thank you for answering my questions. Thank you.
Okay.
Thank you. A reminder to all participants, you may press star and one to ask question. Participants, may press star and one to ask question. Is there no further questions from the participants? I would now like to hand the conference over to the management for closing comments. Over to you, sir.
Thank you very much to all the participants for attending this conference call of Borosil Renewables. I hope I have been able to answer all your questions. In case there is any clarification required, they can reach out to our investor relations team, and we will be happy to clarify. We hope with the introduction of anti-dumping duty, probably in the fourth quarter onwards, we may start to look up in terms of the performance because on the volume front or operational front, we are doing our bit. This is a very significant moment in terms of anti-dumping duty. We should bring a lot of positivity in the entire thing and also, say, motivate us to expand the capacity and grow the business. I hope to meet you in the next quarter investor call with more news about all these aspects.
Thank you, and thank you for all your questions, and goodbye.
Thank you very much. On behalf of Axis Capital Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you, everyone.
Thanks, sir.