In an interaction with Pradeep Kheruka, Executive Chairman, Borosil Renewables Ltd

The demand for solar glass continues to rise and this places Borosil Renewables Limited in a comfortable position, reveals Executive Chairman Pradeep Kheruka in this exclusive interview

What is your outlook on the domestic and international solar power manufacturing sector? Also, can you highlight the key demand drivers?

Solar installations across the globe have seen strong growth. The year 2021 has seen the addition of about 170 GW of solar capacity globally. The visibly extreme climate has heightened the sense of urgency to reduce dependence on and consumption of fossil fuels. The war in Ukraine has created a very firm resolve in Europe and around the world to not depend on external resources for energy needs. Most countries depend on Chinese companies for their requirements for solar modules and its components. A strong sentiment has been visible across major economies i.e. the European Union, India and the USA for a need to have a robust and reliable supply chain of complete solar manufacturing, either domestic or from an alternate country.

Authorities in these geographies have formulated appropriate steps to encourage investment in their domestic solar manufacturing industry. The European Union has launched the Solar Manufacturing Accelerator programme under which manufacturing capacity is expected to rise to 12-13 GW by 2024 from about 7 GW today and the output of modules actually manufactured is expected to grow to 7-8 GW annually from about 2.7 GW today. The USA has announced attractive tax breaks for domestic solar module manufacturers and many existing and new players are targeting to set up manufacturing capacities there. The Government of India has enabled a number of schemes like the Production Linked Incentive (PLI) scheme, mandating the use of cells and modules manufactured under the Approved List of Modules and Manufacturers (ALMM).                                      

This is in addition to the imposition of basic customs duty of 40 per cent on imports of solar modules and 25 per cent on imports of solar cells. In addition to that, schemes like KUSUM and CPSU, which mandate the use of domestic modules and cells, have created a healthy demand for domestically made solar modules. It is expected that these schemes will take module manufacturing capacity in India to 45 ~ 50 GW in the next 2-3 years from about 15 GW today. The utilisation factor of this capacity is expected to be high in order to meet the demand created in line with the plan to achieve 300 GW of solar by 2030. We firmly believe that the outlook for domestic solar module manufacturing in India as well as other geographies, specially the EU, is very positive and it will greatly boost the demand for solar glass in the near future.

For FY22, Borosil Renewables reported total income and net profit of Rs 664.73 crore and Rs 165.8 crore, exhibiting healthy YoY growth of 31 per cent and 85 per cent? What factors are responsible for your stellar outperformance?

During FY22, the company recorded net sales of Rs 644.2 crore, an increase of 28 per cent over FY21. Improved production efficiencies enabled growth in sales volumes by 11 per cent as the full year impact of capacity expansion done in 2019-20 and increased productivity became visible. Higher ex-factory prices boosted sales by about 13 per cent.

The sharp rise in input costs in recent months has led to increased margin pressures. What measures are you taking to safeguard profitability in the coming quarters? 

A global shortage of natural gas and soda ash has resulted in a sharp rise in the cost of these key inputs. These cost increases are applicable to all the solar glass producers across the globe. Hence, they shall be obliged to increase their prices accordingly. The rise in selling prices of solar glass does not yet fully cover these cost increases. We feel that international prices of solar glass are bound to rise as this is the only way to cover the higher costs. 

Over the last four quarters Borosil Renewables has recorded healthy export numbers. How do you expect revenue mix to evolve over the medium term?

During the last financial year, our exports were 20 per cent of the total sales. Even after capacity addition by 122 per cent in 2022~23 with the commissioning of SG 3, and a further expansion by another 110 per cent with the addition of 1,100 TPD from SG 4 and SG 5, we expect to maintain our exports sales proportion since demand from high-growth areas like the EU, Turkey and USA are expected to be significantly higher and there is a good chance for Indian exports.  

The Board of Borosil Renewables has recently approved buying 100 per cent stake in Interfloat Group, Europe’s largest manufacturer of solar glass. Can you elucidate the salient synergistic benefits from this acquisition and the expected time span for these synergies to fully fructify?

 We believe that we shall be able to realise several synergies in production and sales once we get into the management of the German company. A very big class of beneficiaries will be the European customers who could then be supplied from two locations.  Borosil  Renewabales’  expertise in achieving high efficiency in the manufacturing process which results in lower costs arising from higher throughput will bring higher economies within the Interfloat Group.  

Moreover, the rapidly increasing demand for different glasses – be they thinner glasses for glass or glass modules or larger size glasses for the new generation of large-size solar cells – puts strain on a single production line. With several production lines, each capable of producing a different type of glass, there will be ready availability for each specialised requirement. Further, there is already a plan in place to increase the capacity at the German plant from 300 to 500 tons per day in the next 18 months. With our expertise of capacity additions at a lower capex, we believe we shall be able to bring appreciable value to their expansion plans.

Presently, what are your top three strategic priorities? 

Our top three strategic priorities are primarily determined based on our vision to be the most customer-centric company in the world. Timely completion of our expansion plans in India and Europe will bring us closer to fulfilling the rapidly expanding demand for solar glass in India and Europe. Our other high priority will be to strive to make our production even more carbon-efficient and green than it is now. We already operate the most carbon-efficient production in the world. However, this is a strong focus within the company, which will continue unabated. The third priority is getting ready to face the future where the emphasis on a circular economy is going to make us strive to make our business sustainable for years to come. This will involve innovating products and services based on the evolving needs of our customers and also working on creating a roadmap for our ESG journey, etc.

What is your earnings’ outlook for FY23?

With the addition of a new 550 TPD furnace in India by September 2022 and the acquisition of the 300 TPD German assets, we shall be selling nearly three times our present day capacity of 450 TPD as this year draws to a close. Considering even the existing demand for solar glass we expect that the additional production will be sold out comfortably. Thus, sales would be much higher from the second half of FY23 and we believe they could rise by about 50-60 per cent over FY22. It will be difficult to provide any guidance on earnings as the margins have significant dependence on international solar glass prices which have seen fluctuations in the last two years. The long-term future of the business is not in doubt, and we are going ahead with our expansion plans in order to meet the growing demand from our customers both in India and overseas.