Ladies and gentlemen, good day, and welcome to the Q3 FY 23 earnings conference call of Borosil Renewables Limited, hosted by Axis Capital Limited. As a reminder, all participant lines will be in the listen only mode, and there is 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 your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Jiten Rushi from Axis Capital Limited. Thank you, over to you, sir.
Thank you, Michelle. On behalf of Axis Capital, I'm pleased to welcome you all to the Borosil Renewables Q3 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 opening remarks from the management, followed by an interactive Q&A session. Thank you, over to you, sir.
Good afternoon and welcome to the Borosil Renewables third quarter FY 23 investor call. The board of Borosil Renewables on 13th February approved the company's financial results for the third quarter and 9 months ended on 31st December 2022. 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 operations of Borosil Renewables on a standalone basis. I will thereafter provide you some highlights of the operations in our newly formed acquired overseas subsidiaries. During the third quarter, the company recorded net revenue from operations at INR 161 crores, a decline of 4% over Q3 FY 22. Overall, domestic demand for solar glass has remained strong as the manufacturing of domestic modules for local installations as well as for exports increased.
This additional demand has been met through higher imports owing to limited availability of domestic manufacturing capacity and hence the estimated market share of Borosil Renewables in domestic markets currently has come down to about 19%. Export sales during the 3rd quarter, current financial year, according to and including to customers in SEZ, were higher at INR 58 crores, comprising 35.9% of the turnover as against 26.5% in the same quarter last year. Average prices of solar tempered glass during the last quarter were about INR 134.3 per millimeter, per square meter, a decline of 5% over the similar quarter in the previous year, and a decline of 4% over the previous quarter of the current financial year.
The price decline was a result of discontinuation of anti-dumping duty on the import of solar glass from China, with effect from 17th August 2022, as also a steep reduction in ocean freight rates, both leading to a lower landed cost of imports into India, which is generally used as a benchmark for domestic pricing. The company was able to contain the decline in average price by following a strategy to cut low price domestic volumes and raise exports which are at higher prices. Post 17th August 2022, there is no anti-dumping duty on imports of solar glass, which continue to enjoy an exemption from payment of basic customs duty as well for the last 24 years.
Ironically, solar glass is the only component in the entire solar photovoltaic value chain which has no import duty whatsoever, though it is the most capital intensive component with a low asset turnover ratio. This leads to a complete absence of level playing field for domestic manufacturing of solar glass against heavily subsidized and dumped Chinese imports. During quarter three of the current financial year, the company earned an EBITDA of INR 43.1 crore. The EBITDA margin at 26.7%, which was almost at the same level as in quarter two FY23. The same was about 1,800 basis points lower compared to the same quarter last year, owing to declines in average selling prices and rise in the cost of raw materials and energy.
The EBITDA on one hand includes INR 9.8 crores income on account of exchange rate difference and interest income on loans given to the overseas subsidiaries. The EBITDA excludes an amount of INR 6.6 crores being profit carried forward due to reversal of scale compared to such exclusion of INR 3.2 crores in the same quarter last year, owing to accounting treatment under Ind AS. Thus, comparable EBITDA without these impacts would be INR 36.7 crores. That is to say about 22.7% of net revenue. During quarter three of the current year, the company earned a profit before tax of INR 30.1 crores.
The profit after tax was INR 22.5 crores as compared to INR 45.7 crores during the same quarter last year, a decline of 51%. For the 9 months ended December 2022, the company clocked a revenue of INR 500.6 crores, a growth of 8% over corresponding 9 months of the previous financial year. The company earned an EBITDA of INR 138.5 crores, a margin of 27.7%, and a profit after tax of INR 76.9 crores, i.e. a PAT margin of 15.4%.
Commissioning of 10 megawatt captive power plant of solar plus wind energy being set up through an SPV in which BRL has 31% shareholding, which was planned in December 2022, has been delayed and is expected to come on stream from April 2023 after receiving relevant approvals from state authorities. We will be able to increase use of green power in our manufacturing, as also reducing the average power cost. We are also looking to set up an additional 8 megawatt solar plus wind power plant once there is enough clarity on the regulations. The overall demand situation for solar glass continues to look extremely robust in India, and we expect huge increase in the module manufacturing capacity as the new plants are getting added.
The domestic module manufacturing capacity are expected to rise to 65 gigawatts from about 25 gigawatts currently, which will increase the demand to 3 times from the present level in next to 3 years. The Union Budget 2023 had many announcements for the growth of renewable energy sector in India. A few of them are as follows. Allocation to MNRE of INR 10,232 crores for financial year 2024, which is about 45% higher compared to the previous year. INR 19,000 crores for National Green Hydrogen Mission, which aims to achieve 5 MMP production by 2030. INR 35,000 crores for priority capital investments towards energy transition and net zero objectives and energy security by MOPNG. INR 20,700 crores for interstate transmission system for evacuation and grid integration of 13 gigawatts renewable energy from Ladakh.
I'm happy to share the trial production from our third furnace, SG3, has started from 26th January 2023. The furnace is under stabilization, and we expect commercial production to begin soon. Our capacity has now risen to 1,000 tons per day, 6 gigawatts from 450 tons per day. With this, we will be in a position to more than double our sales and also achieve some operating leverages. The recently acquired Tschernitz plant has added an operating range of 300 tons per day to BRL's manufacturing capacity and also widened its range of offerings, including various textures, coatings, dimensions, and thickness, and is bringing in synergies in manufacturing and sales operations in India and Europe. The plant is operating at about 95% capacity.
Whole repair of this furnace will be carried out during March and April over 45 days. Thereafter, the furnace will be put back into production. We are also executing the CapEx plan for raising production capacity along with debottlenecking and new machineries to increase efficiency and also achieve capability to supply larger sized glass and make the processes more efficient. An overall CapEx of EUR 34 million will be incurred on this, of which EUR 9 million has already been done from internal funds.
The consolidated results for the quarter and nine months, including the operations of Interfloat Group from acquisition to 31st December 2022, as also the wholly owned subsidiaries abroad, the Interfloat Group registered a revenue of INR 84.36 crores equivalent in this period with an EBITDA of INR 6.3 crores, registering an EBITDA margin of 7.4%, which they were able to achieve despite extremely high energy and raw material prices. The consolidated net revenue and EBITDA stand at INR 246 crores and INR 28.5 crores respectively. The EBITDA is net of recognition expenses of INR 18.84 crores debited in the profit and loss account of the two overseas holding companies. With the announcement.
With the announcement of the Green Deal Industrial Plan by European Union, implementation of Inflation Reduction Act in USA, and favorable policy and fiscal support for domestic solar module manufacturing in Turkey, the technology development and solar module manufacturing activity is expected to substantially increase in these overseas markets. As a result of this, the demand for solar glass continues to look extremely robust. We see growth opportunities for meeting this requirement. Most nations are trying to raise domestic production of solar cells and modules, and also trying to re-reduce dependence on Southeast Asia, which places India in an advantageous position for exports. Our step of having manufacturing in Europe complements well with expanding production in India to meet a high demand in export markets. With that, I would now like to open the floor to questions that you may have. Thank you.
Thank you very much, sir. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone phone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. You may press star and one to ask a question. The first question is from the line of Nikhil Abhyankar from DAM Capital. Please go ahead.
Hello?
Hello.
Please.
Yes, sir. This is Mohit Kumar from DAM Capital, sir. A few questions on my side, sir. First is on the... Of course, we have this new cellular module capacity which is coming up. Do you think the capacity utilization to be muted and rise gradually over next few quarters? Or do you think you'll be able to operate at a much higher capacity, you know, from Q1 FY24?
I'll ask Mr. Ashok Jain to respond to this question.
The, as we speak, the current manufacturing is almost 10-11 gigawatts in the country. The module manufacturing capacity in the country also is close to 25 gigawatts. The activity is going up. Yes, you are right that solar cell manufacturing capacity is still low and the new capacities are to be still added in forthcoming future. Imported solar cells are being consumed by domestic manufacturing. We believe that this expanded capacity, though will take time, it will not be a bottleneck in terms of using the module capacity.
Can we expect a gradual ramp up or are we expecting the full ramp up for the first quarter itself?
For the furnace you are saying?
Yes, sir. For furnace.
Furnace we will ramp up immediately as soon as we get the production to right efficiencies and all, we will ramp it up. Last time when we commissioned our furnace in 2019, we could do so in about a month's time. We would like to do it as fast as possible because the demand exists and we would like to sell more quantities.
Sir, related question is that has there been any new cell and module capacity which has come up in CYTE in last few quarters? New, sir. New.
So-
I understand the Adani capacity is up and running. Anything else, sir?
Module capacity is a lot of capacity have got added, particularly by Waaree Energies. The large capacity they have been added, as you may know. They are almost at 9 gigawatt now as compared to 3.5 gigawatt they were about 6 months or 8 months back. They have added huge capacity. Other people also have gradually added capacities, this is the by far the biggest capacity which has been added. In terms of the solar cell manufacturing, nothing substantial has been added except Adani.
Understood, sir. Lastly on sir, of course, we see the export sales have increased during the quarter and it's meaningful and its contribution has gone up. Is it entirely exposed to Europe right now? Are you seeing any new inquiries from Europe for tying up some incremental capacities?
Exports are, you're right, to generally to Europe and also to Turkey. Turkey also happens to be very fast-growing market. There are a lot of new plants also coming up in Turkey adding capacity and existing co-existing module manufacturers also adding capacity. There is a large market in Turkey. In Europe also growth is happening, and we are getting inquiries from existing as well as new customers there.
Understood, sir. Thank you and all the best, sir. Thank you.
Thank you. A reminder to all the participants, anyone who wishes to ask a question may press star and one now. The next question is from the line of Bala Murali Krishna, an individual investor. Please go ahead.
Yeah, good afternoon. I want to know that the Europe margins are very low. How long it will be some 10-15% EBITDA margins will continue?
European margins, when we acquired the plant, I mean, when we started to look at the opportunity, the margins were running high. As you all know, the Russian-Ukrainian war has put the gas prices to such a high level that it has become difficult to earn any margins in glass industry in Europe. Fortunately, by efficient working at the German plant level, we have been able to stay positive in terms of EBITDA margin. As we speak, the gas prices and power electricity prices have come off quite a bit. The gas prices have come down to almost 60 EUR as against 150, 140 EUR, as you would have noticed in last couple of months. Also power prices have gone down.
Currently the situation is better and, we have to live with whatever has happened in 2022, because the EBITDA margins were only in single digit, about 7% or so. We hopefully will be able to do better.
Just a follow-up on this, sir. In Q4 or Q1, can we expect some improvement in margins?
Q1, at German plant level you are saying?
Yeah, yeah.
Yeah. we are trying to improve the margins. It's a continuous exercise and we cannot commit any, say, digits on that. Of course, we would like to show a better picture as we close the quarter one. One more thing
Sorry to interrupt. Mr. Krishna, Murali Krishna, we are not able to hear you, sir, clearly. May we request you to use your handset to ask a question, please?
Yeah, I'm using handset only. Yeah, I'll just repeat again.
Okay. Thank you.
In this quarter we have some significant export revenues. I would like to know what would be the difference in the realization for the domestic and exports. Do you see this trend, you know, continuing this quarter, which in this quarter and upcoming quarters also? Export and you are asking separate realization for export and domestic. Is that your question? Yes, sir. That is the question. In this Q4 and in the upcoming quarters also, can we expect some export more export revenues compared to domestic?
As far as the export and domestic realization is concerned, it is the sales are on a monthly basis, and we cannot be sure of what realization will come for a particular quarter.
The prices of course are staying at current levels, so that we can assure you that we will sell at a market price. In terms of the growth in the export market, we are already at 32%-33% of our sales are going to export market. I think if we maintain that level, it will be quite good. In fact, the percentage level might go down because now we will have increased production from production 3, which will substantially increase the output available. Our target would be to at least make 25% of the turnover in exports. The volume would have gone up substantially as the numbers will double.
Oh, okay. Thank you. That's it. All the best.
Thank you. A reminder to all the participants, you may press star and one to ask a question. We have the next question from the line of Jiten Rushi from Axis Capital Limited. Please go ahead.
Thank you for taking my question. Sir, the first question from my side is what proportion of the exports are to locations with anti-dumping duty against China, and probably how competitive are we in those areas where there is no duty?
Basically there are anti-dumping duties in Europe and Turkey against China, and which is where our maximum exports are there actually. Non-duty areas like USA and MENA countries, our exports are limited. There is a direct competition from China there and prices are low. Yes, the markets available to us where we can really make better margins are Europe and Turkey, where we export our maximum volume, almost 90-95%.
Of the total export, 90%, 95% is Europe and Turkey.
Yes.
Sir, any natural calamity in Turkey will impact our revenue in Q4 or Q1? What is your view based on the insights you are receiving last couple of weeks or 10 days?
Yeah, of course, these things can affect, but we are not depending on one particular area or one particular customer. We have ability to move our volumes to different geographies. Like in India, the demand is quite high, where we are able to provide only limited quantity in Indian market compared to what the requirement is. We have ability to move our volumes to different geographies and different customers.
Don't see any impact on revenue.
Currently, as you are referring to Turkey's situation.
Yes, yes.
Disruption has been generally in south Turkey, closer to Syria border. All our customers are in northern area generally. In fact, our team has just visited and completed their visit to Turkey. They come back last week only or started only.
Mm-hmm.
All the plants have been operating there.
We have been not seeing impact on the revenue from Turkey.
No, no. In fact, we are trying to increase our revenue there.
Sir, probably in this quarter, what is the export portion in terms of revenue?
In Q3, our export is about 33%.
In nine months?
Nine months would be slightly lower. Give me a second. 27.5%.
Sir, is it safe to assume that our margins from India is about 25%, while from exports it is lower, hence the blended margin is at 24%-25%. That can be a safe assumption?
Sorry, can you repeat your question?
What would be the blended margin? Probably margin from India and margin from exports. What will be the better margin from these two region and what can be the blended margin going forward in terms of guidance?
Our blended margins are shown in the results, which is at about 24%-25%.
Yes. Yes.
Separately, we are not declaring any margins for export and domestic markets.
Is it safe to assume that in domestic we would be having better margin, higher margin?
It is on the contrary. Exports are giving better margin.
Better margin. Got it. Sir, after, so if at all after the removal of anti-dumping duty import from China and India, what is the net value proposition for our customers in India to buy from overseas versus importing from China and India? And what is the pricing difference or any other value that customer will see from buying from Borosil? Can you quantify these things?
It is difficult to quantify. In a nutshell, we can say that there are more than 100 customers in India, more than 100 module manufacturers. Some of them do have imports, as many of them do not have imports. Maybe almost 15, 20 customers may be importing and rest are not importing. They buy completely from us. They are rather medium or smaller scale players. The larger ones do have more as a necessity because our production is not sufficient to meet all the demand.
In terms of the product quality and product servicing and offering, more or less the products are same, except that whatever advantage we offer for, from being a local source, that's an added advantage to the customers where they can have flexibility in ordering and receiving goods, shorter delivery period, where warehousing, inventory costs, all those benefits are there for local sourcing. That's where the local production comes in actually.
Sir, any update on the PLI, the second PLI which was signed halfway or which has happened in February? Any updates from your. Any participation from your side?
No, we are not eligible for PLI. Only the solar cell module and polysilicon.
Okay, got it.
That will be probably taking place in the next month.
Next month. Okay, sir. That's it from my side. Thank you and all the best.
Thank you.
Thank you. Participants, to ask a question, you may press star 1 now. The next question is from the line of Sharon, an individual investor. Please go ahead.
Yeah. Thank you for the opportunity. First question is, as you were saying, like you have challenges with respect to oil and gas prices, spiking. Just want to check like whether the furnace can run on green electricity? I read in an article where, there are furnaces in some companies, they are running with green electricity as well. Just wanted to check, does your furnaces also can run on electricity instead of oil and gas?
These are large furnaces which are basically run on gas or oil only worldwide. Only small furnaces are capable of being run on electricity. But these kind of furnaces, of course, run on natural gas or furnace oil, or simultaneously they can be operated on any of the both the fuels. Of course, there is a research and there is a trial going on for using green hydrogen in furnace, which is still a few years away, I think. But electricity cannot be used for such large furnaces.
Okay, sure. Can you explain the SG4 and SG5 CapEx timeline? I think it's already mentioned, but like the CapEx funding, basically how much it will be internal and how much it will be the raising the fund via QIP or anything. Also, couple of years back, if I remember, a long-term investor, like they participated in QIP and then later within a year or so they exited. Are you expecting any long-term investors to come in now as part of further expansion in Germany as well as in India for SG4 and SG5? Can you throw some light on that?
Currently we are focusing on stabilizing SG3 commercial production. Once we have started to earn some revenue and profitability from this project, which should happen soon, thereafter we'll take a stock of the complete situation prevailing in the ecosystem, like what kind of expansions are coming, how the module manufacturing is growing, what kind of duty structures prevail, then we, our board will possibly meet and take a call when to commission, when to start the next round of expansion. We will come back to you as soon as the board meets and decides on this particular aspect. Right now we are focusing on SG3 commercial production.
Okay. Yeah. What's the status of the reinvestigation of anti-dumping duty? I think it's in the Gujarat High Court, if I'm not wrong, right? Also this year again, by August, if there are new players who will start producing the glass locally, it means there will be multiple players in India itself. Are there any chances that this year again there will be anti-dumping duty?
Anti-dumping duty, as you know, has been withdrawn from seventeenth of August. We have gone to Gujarat High Court by way of a writ petition. The writ petition has come for hearing many times, it has got postponed all the time. The hearing is yet to take place. We do not see a quick result coming from the whatever effort we are making in the High Court. In terms of continuation or a new duty, it's a complete exercise. The complete data has to be submitted to the Ministry of Commerce. They have to examine, they have to cross-examine, they have to seek responses from various stakeholders, it's a long-drawn process of almost a year.
We have not moved any application for new duty, but the old duty application has died unless the court instructs Finance Ministry to revive it.
Sure. Yeah. One last question is like as you mentioned and we all are aware, globally the demand is increasing for renewable energy and solar, right? Do you see across global, the availability is meeting the requirement or it's still below the requirement? Mainly like how about China, like, they also have the local capacity. Local also demand is more, right? They will be able to fulfill local demand and their export will be reducing in future, you see, which will be beneficial for, especially for Borosil.
China, as you may know, has the biggest capacity of entire solar value chain. In many cases, they control almost 95%, like in solar glass they control 95%, 97% of the world market. In component and other things also they control almost 90% of the market. In module manufacturing also they have 75% plus market share in manufacturing. They obviously dominate the whole scene in solar PV value chain. Unless their domestic demand is quite high, they try to export their extra production to overseas markets, which is where the challenge comes in terms of the supply demand mismatch. In terms of the module installation last year, the numbers which we have seen are quite good and they are as per the... almost as per the target.
Next year projections are still very high, so we believe that demand in 2023 is going to be much better compared to even last year.
Okay.
More than 300 gigawatt of installations are planned for this year worldwide.
Okay. Sure thing. Thanks for the time and answering all questions on the investor feature.
Thank you.
Thank you. Thank you. Participants you may press star and one to ask a question at this time. The next question is from the line of Sumit Gugnani, an individual investor. Please go ahead.
Thank you so much. I have 2 questions. One, I understand that your European cold repair furnace will happen in March and April. Is that for 2 months? And in your last call you had mentioned that you were planning to substitute or send in products from the domestic market furnace to the existing customers of the European furnace during that period. Has that been qualified or are we going to miss out on sales? That's the first question.
European furnace at GMB is going to be brought down for repair by middle of March. That's the plan. Generally speaking, it should take about 45 days to come back to production. We estimate that time to be maintained, but one is to provide for contingency, so maybe 1 or 2 weeks we may provide more. That's how 2 months is possible, but we'd like to finish it in 45 days. In terms of the supply of glass from India to customers in Europe at the time of shutdown period, we are working with the team at German plant, what quantities for what, which customers may be required. We're
We also have export to many of the customers which are common between the two plants. It will be possible to use the glass supplied from India for those customers, seamlessly without any further, like, say, checking or certification or, examination of the quality parameters and all. That will be done as and when it is required and in respect to whichever customers it is needed in the month of March and April.
Okay, thank you. The second question is regarding the input prices of gas. Both for the domestic supply as well as in Europe, we all know natural gas has been very volatile. Are your contracts fixed or are they variable? If they are fixed, for what tenure are they fixed? They spiked up a lot, now they've come down a lot. Do you buy on a spot basis or do you have a long-term contract, separately for domestic and separately for Europe? There are two questions within that.
For our plant in India, which is Borosil Renewables plant, we had contracts of gas for five years from with GAIL under various arrangements. Those contracts have expired in December 2022. New contracts are yet to be entered because the prices are still high. What we have done is to mitigate this high cost of natural gas or say RLNG, we have started to use furnace oil. For most of our requirements, we are using furnace oil in the glass, in melting the glass in India as of now, which is how we are trying to keep the cost under control. As and when there is an opportunity to lock in for a short period or medium term, then we will do that as we go along.
In Germany, we have system of buying futures, or we hedge gas purchases and power purchases based on the current scenario and future prices available. We keep reviewing that every week or every month, depending on how volatile the market is. Currently, we have hedged certain volume for 2023 and certain volume for 2024, and we keep, after reviewing, we keep increasing the hedge as the situation permits. There are no fixed contracts in Germany or India as of now.
Got it. Thank you. The furnace oil for the domestic, that is working out more cost effective than the spot, gas prices or any long-term, midterm contract, that you would sign currently. Is that right?
Yes, yes, absolutely. You're right.
Why not make that a long-term thing?
Generally natural gas is preferred fuel for this kind of furnaces. When it comes to economic viability, then we have to also look at how we manage the cost of production and how we remain competitive in the market. That's why we have taken a decision to use part of the fuel as furnace oil. Partly, we still use natural gas, but that's a lesser quantity right now.
Got it. Last question is just on the pricing trends for our product. Quarter-on-quarter, year-on-year, in this quarter, what is the trend that you're seeing in terms of the price of the selling price of our glass?
The prices have been generally stable except for the impact of anti-dumping duty withdrawal, which has happened in August 2022. Because of that, the landed cost has come down for imports, and we have to adjust our prices suitably to match the imported landed price or to give a price competition to that. Generally, the import prices and domestic prices are remaining around the same. I mean, They are being stable. There is a gap in domestic pricing. Domestic pricing is higher by 8%-10% compared to imported landed cost.
No, my question was, for the October through December period, the pricing versus the previous quarter, how much lower was it? If you mentioned it in the introductory remarks, I might have missed that, because the line wasn't clear at that time.
That was about, 5%.
5% decline last quarter over the previous quarter, correct?
Yes. That is because the prices remain same, but because we have to decline it because of the.
It's important.
anti-dumping withdrawal, yeah.
Yes, I understand. This quarter, as I'm looking till Fed, You said it's stable. It's stable versus what you had in October, November, December. Is that right?
Yeah. We can view it that way. That's right.
Okay, great. Thank you. Appreciate your response.
Thank you. The next question is from the line of Yash Shah, an individual investor. Please go ahead.
Hello, am I audible?
Yes. Yes, sir. Please proceed.
Yeah. I would like to know regarding the long-term contracts with any of the customers regarding the price. Do we have any contracts as of now which are for long term at fixed prices?
No, the solar glass is being sold on a monthly basis, on the base of monthly purchase order. There are no long-term contracts.
Okay. Where do we see the EBITDA going on a long-term basis? Can we maintain at the current level? Because earlier, I guess six to nine months before, we had said that, we were operating at a pretty high EBITDA level, which was bound to come down. Are the current levels, stable enough? We can expect it to be at this level in the future quarters as well, or there is scope for further reduction?
When the EBITDA levels were high, that time also we had mentioned that these are higher than the normal EBITDA levels because of the situation of high freight and high international prices. When it came down to almost 30%, that was the level we presumed would have been the normal level. After withdrawal of anti-dumping duty, this 30% expectation has come down slightly. We should look at EBITDA levels between 25%-30% or thereabouts.
Okay. Thank you so much.
Thank you. Before we take the next question, a reminder to all the participants, anyone who wishes to ask a question may please press star and one now. The next question is from the line of Anuj Upadhyay from HDFC Securities. Please go ahead. Sir Upadhyay, please proceed with your question. I've unmuted your line, sir.
Yeah, hi, sir. Thanks for the opportunity. Am I audible now?
Yes.
Yeah. Okay, fine. Sir, how long this import price or the discounted imported price is sustainable? I mean I need to understand the things like, in your initial remark, you mentioned that with the invention of the domestic module manufacturing thing, we may see a demand ramp up happening. Currently, the reliance is more on the imported glass, as a result of which the competition has been quite stiff, we are taking price cuts. With the invention of the domestic module manufacturing, say, 2 to 3 years down the line, would there be any chance of, you know, going back to our earlier pricing regime, considering the fact that the gas prices have now come down, even the freight rates have cooled down a bit. Just need to understand the thought process on that.
Secondly, how has the competition been? When I say the competition is the domestic competition, because we have seen many domestic players also coming up with big solar glass manufacturing capacities. We heard of Vishakha coming with the capacity addition, RIL as well. Now with this discontinuation of the duty, are we seeing similar kind of competition coming into the industry or there has been a hold as of now? That's it, sir.
Actually, as you would understand, the market is a determining factor of the prices, and demand supply will drive the prices up or down or maintain prices whatever levels. As, as it happens with any commodity, this is a commodity business, so we have to believe that market forces will decide what prices will prevail. The imported competition or imported prices are one way to benchmark it against which the Indian manufacturers are seeking the prices from us. When it comes to movement in the prices, you have seen that the prices have moved up very high in 2020 to 2021, 2022, and they have corrected later on. This will keep on happening based on demand supply worldwide, whether China impacts it or India impacts it. This will all be the case.
In terms of the local manufacturing, there are a couple of players who are coming up. These are basically plants being set up as greenfield plant. The cost of those plants is much higher than ours. That's what our view is or belief is. Their cost of production is also going to be higher than ours. We do not foresee the prices to go down in the time when the local production comes in. In any case, we are competing with world's largest producers right now from China. These two players who are listed on the exchange are controlling almost 60% of the world market. Almost more than 60% of the imports into the country are coming from these two sources based in Malaysia and Vietnam.
These are both Chinese factories. Competition will stay throughout your life for every product. We have to stay positive, and we have to stay competitive by controlling our costs, by being innovative, by providing customer value for money. That's how we would look to. We'll like to look at the solar glass as well.
Yeah. Thanks, sir. Just to follow up on your last remark. apart from the replacement, I mean, usage of a furnace oil, is there any other cost, reducing measures which you are adopting so as to be competitive?
Many, actually the day starts with innovation thought process only. The complete mindset of the people in the country is to stay competitive. We have to face the Chinese competition without any help from any corner in the country, be it the government or the any other side of this. All the Chinese exports are coming to India with lot of subsidies and lot of incentives being rolled out to those manufacturers in those countries. We have to pay full prices, full cost or we don't any duty support or any subsidies for that matter. The thought process in the company is to be innovative in terms of each aspect of whatever activity they are handling. That's how we are trying to keep our costs under control.
Whether it is raw material pricing or furnace oil or say, gas consumption in the furnace or use of innovative packing ideas, all those mechanisms are helping us to control our prices. Of course, the productivity of the equipment is very high in our case, which is allowing the higher production, higher throughput, which keeps the cost of production quite low.
Okay. How have been the demand for the bifacial models, sir, both at the domestic and the export level?
Bifacial module worldwide, I mean, in China it is more than 40% already. In India now with the new module plants which are coming up, having this capability of producing bifacial modules, this demand is set to rise. Already some players have started to make bifacial modules in the country, the large ones. Gradually this demand will go up. In terms of the overall thinner glass sales, we sell almost 30% of our production as thinner glass, which is into 2 millimeter, 2.5 millimeter and 2.8 millimeter. We also export 2 millimeter glass. We see that the demand for thinner glass is going to ramp up very quickly to very, very high levels, which is used in bifacial modules.
Fine, sir. It was almost 30% of our total sales. Is my understanding correct?
That is including 2.5 and 2.8, which are not going in bifacial module cases. We believe two millimeter demand, which is in bifacial, will also rise to double digits very soon in terms of the composition of overall demand.
Fine then, sir. It could be somewhere in the range of 5%-10%. Right, sir?
It could be more than 10%. It, it all depends on how the module manufacturing plants
current run, sir. Current sales. I'm referring to the current sales, sir.
Current sales only. I'm talking about our customers, because it is the capability of our customers to produce bifacial modules. They are all setting up new equipment, new module lines, which are capable. How fast they can convert their capacities to bifacial will also be a driving factor how the demand for thinner glass will be.
Oh, fine, sir. Thank you.
Thank you. We have the next question from the line of Kiran Paranjape, an individual investor. Please go ahead.
Thank you for taking my call. My question is mainly related to our European subsidiary. If I look at it, can you just remind me once again, what is our capacity, in terms of, tons per day in India and in Europe?
In India, we were operating 450 tons per day, and now we are 1,000 tons per day after our expansion. In Europe it is 300 tons per day currently.
Okay. Okay. If I look at your consolidated number and your standalone number, right, I'm seeing some discrepancy in terms of sales. Does it mean the volume in Europe was down this quarter or the sales prices were down? Because I was expecting much better numbers on top line at least. I understand the cost pressures, but the top line looks muted for this quarter for a 3 months. Is that a small quarter, part of the quarter or volume slower? Can you throw light on that?
Yeah, you are right. Actually, the acquisition took place only at the end of October. The consolidation includes results only post-acquisition. This is not a full quarter, so only two months sales are reflected in the from the German plant. That's why you see the numbers not reflecting a complete picture. Going forward, it will be reflected in the next quarter's results, the full quarterly sales of German plant. The new plant which has just got commissioned and is under commercial production in India, 550 ton. The sales also will start coming in from this from this quarter sometime. You will see that the numbers going up from the March quarter itself.
Okay. Okay, thanks. Thanks for that clarification. My second question was regarding once again on the European subsidiary. If I look at again the difference between consolidated and standalone, on the cost front I see the cost which is your power and fuel cost or employee cost or other costs. They're almost same as of standalone numbers. Those now being European, we expect them to be on high side, but I never expected that to be so high, typically in power and fuel. Now I understand the gas situation. Can we expect coming quarter because the fuel and gas are going down and you must be doing some rationalizing on manpower costs, et cetera.
Can we expect this EBITDA which we delivered for this quarter to be a bottom and then next all quarters we'll continue to see up move on EBITDA levels on a quarterly basis sequentially?
Yeah. Well, that will be the attempt to do, there will be full quarter results in the next quarter. That is another thing. You are right on the cost front also. There has been lot of softening in the natural gas prices and also electricity prices. All these are one hand. Another hand is that we are going to put the furnace under cold repair from middle of March, so that for the second half of March there may not be any furnace production. Of course, whatever WIP will be there in terms of annealed glass, we'll like to temper it and sell it. March quarter you will again see slight, maybe slight...
It will not be complete picture probably, going forward you will see that the situation keeps improving as the quarters go by. Because the gas prices have softened a lot, the cost will be much lower.
Okay. Okay, thanks. My last question is again related to European subsidiary. It was about manpower cost. If I look at the numbers, if I re-deduct consolidated and standalone, the numbers for European employee cost comes to about INR 18 crore. Now, if that is just for 2 months, does it mean that it is about INR 27 crore for entire quarter?
Just a minute.
Yeah.
Yes. Employee cost in Europe is high as you would know because because of the structure they have in terms of the cost. I'm just looking at the numbers.
Yeah, yeah. That's fine.
Yeah, you're right. The numbers indicate about INR 18 crores for 2 months.
Yeah, 18 for 2 months. That would be roughly about 27 for 3 months, right? The next quarter comes in, right?
Yeah.
Okay. Okay. Okay. I'm sure you would be working on that to ensure that how it can go down as an Indian company acquires a European company. Manpower cost is one of the biggest item of cost, one want to automate or do something about it, right?
You're right. It is structural in terms of the economic levels of the different geography. As you would know, German costs are very high. In terms of the number of people, they engage less number of people, quite less compared to what we use in India. On the, on the cost front, you have to pay the minimum salaries, minimum wages and also incentivize the people to deliver. We are of course watching the cost on one side, but we cannot be sure whether this can go down. In fact, we have to increase the productivity and once the, once the production is better, the percentage wise it will look much, much better to look at.
Okay, okay. Okay, thanks a lot. Those are my questions.
Thank you. The next question is from the line of Ashit Kothi, an individual investor. Please go ahead.
Thanks for this opportunity. Sir, I would just want to understand with other than the government support with regards to dumping by Chinese companies, how exactly would you be able to compete or attack Chinese companies? Because India as well as Europe, everywhere China is the major player.
This is what we have been doing right from the day we started solar glass production, actually. The duties have not been significantly favorable for long period of time. After anti-dumping duty in 2017, the Malaysian plant started, thereafter maybe Vietnam plant started, there were no duties against those plants. Lot of imports shifted to those countries. The imports have been affecting the profitability or pricing in Indian market as well as overseas markets. In terms of how we are able to perform as a management, as a company, you can compare it with the audited and published results or unaudited results of the two listed companies on the Hong Kong Stock Exchange, which is like Xinyi Solar and Flat Glass.
If you were to look at those numbers, you will see that our numbers at EBITDA levels are in fact better than them, despite our being only 4, 5% of their production size. We are trying to be innovative. We are trying to control our costs. We are.
Sir, that's heartening to know.
Sorry, one minute please. That's why we are trying to be focusing on controlling our costs. In this direction, we have taken another step, which is going to be very important to have R&D center within the company, where we are going to constantly work on the technologies and products and processes in order to improve our competitiveness in this field and also develop new products which could be of importance going forward.
Right. Thanks. That's heartening to know. My question was not just from the point of view of the past or the current situation. Once this lockdown is opening up or China is opening up big time, what we are seeing in chemical industries, specialty chemical as well as basic chemicals in India, that everybody is facing the big hit from Chinese dumping. Possibly China would want to do this across the industries across the world. This is more in terms of any further pressure coming from Chinese dumping or Chinese exports, then how we would tackle that?
It again comes to the same thing that you have to be competitive in the market and in terms of your cost of production, and that's how you can survive in the competition. In terms of the Chinese dumping, if the dumping goes up, we still have mechanism to deal with it by applying to the government for certain amount of relief. Whether under anti-dumping duty, whether under safeguard duty or whatever things are available as a trade remedy measures. In terms of the, like say, cost of production and ability to keep dumping, also there is some limit because this is a continuous process industry. The costs are global generally, like soda ash, you know, natural gas and other things are global costs.
If it is possible for Chinese to keep dumping without denting their margins, then I would agree that they will keep dumping and they will like to destroy Indian industry or Indian market for that matter. That's not so. Their cost of production, I believe, is almost at the same level at which the prices are prevailing today, and we do not foresee them to even drop price further. While you are right, the opening up might impact the sectors like chemical and all, but what we have seen is that there is not much difference in the solar industry particularly because worldwide the industry is still a favored industry. Unlike any other industry which are not significantly in the forefront of the current growth phase, solar is to remain. Nothing much is changing there.
Okay, sir. Thanks. Maybe we'll take up this, maybe after March quarter, which would possibly give us a more clear picture.
Sure, sure. We'd like to re-review that after March.
Yeah. Thank you, sir. Thanks a lot.
Thank you. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to the management for closing comments. Over to you, sir.
Thank you. Thank you very much for questions which you have asked. It shows a healthy inquiry into the business of the company. We assure you that we are making great efforts to meet with the ongoing situation and with the production output coming from the new furnace, which should give us double the capacity, double the output that we have been seeing now, the picture would look brighter in the days to come. Thank you very much and goodbye.
Thank you, sir. On behalf of Axis Capital Limited, that concludes this conference. Thank you for joining us, and you may now disconnect.