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Borosil Renewables Ltd
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Good afternoon, ladies and gentlemen. I'm Kritika, moderator for the conference call. Welcome to Borosil Renewables Limited Q1 FY '23 Earnings Call hosted by Axis Capital. [Operator Instructions] Please note, this conference is recorded.
I would now like to hand over the floor to Mr. Sumit Kishore of Axis Capital. Thank you, and over to you, sir.
Thank you, Kritika. Good afternoon. On behalf of Axis Capital, I'm pleased to welcome you all for the Borosil Renewables Q1 FY '23 Earnings Conference Call. We have with us the management team of Borosil Renewables, which is represented by Mr. P.K. Kheruka, Executive Chairman; Mr. Ashok Jain, Full-time Director; Mr. Sunil Roongta, Chief Financial Officer; and Mr. Swapnil Walunj, Head of Marketing. We will begin with the opening remarks by Mr. Kheruka, followed by an interactive Q&A session.
Over to you, sir.
Good afternoon, and welcome to the Borosil Renewables Quarter 1 Financial Year '23 Investor Call. It is a pleasure to be interacting with you once again. The board of the company approved the company's financial results for quarter 1 on August 9. Our results and an updated presentation have been sent to the stock exchanges and have also been uploaded on the company's website. .
During quarter 1 financial year '23, the company reported net revenue from operations of INR 170 crores, a growth of 25% over the same quarter in the last year. Sales volumes on a quantitative basis also grew by 23%. Solar glass in the domestic market has been strong -- has seen strong demand as the manufacturing of domestic modules has picked up ever since the custom duty on import of modules came into force from April '22, which is also evident from the surge in imports of solar glass in this quarter due to limited availability domestically.
Export sales during quarter 1 financial year '23, including to customers in SEZ for INR 39.5 crores comprising 23.3% of the turnover. Here, again, the demand is extremely robust. Average prices of solar tempered glass during the current quarter were INR 140.8 per millimeter, which is around the same level as in quarter 1 financial year '22. However, as you are aware, prices do vary based on the global demand and supply equation. The average selling prices have shown some improvement, and the same were higher as compared to the immediately preceding quarter, which is quarter 4 financial year '22 by about 4.5%.
I have been mentioning about rising input costs, mainly the soda ash and natural gas costs over the past 2 quarters in view of global situation. We have seen a partial impact in the immediately preceding quarter and now a significantly higher impact in the current quarter. On the other hand, the increase in selling prices has covered only a part of the increase in costs. The company has been making efforts to reduce the impact in costs by increasing production and achieving cost savings in raw materials and electricity to some extent. We believe such decline in margins have been faced by our competitors as well.
During quarter 1 financial year '23, the company earned an EBITDA of INR 51.3 crores. The EBITDA margin at 30.2% has suffered a decline of 2,000 basis points, owing to cost inflation in raw materials and energy as above. We believe that the EBITDA margin during quarter 1 financial year '22 at 50.1% was abnormally high, a more sustainable level of EBITDA margin would be lower as mentioned in my earnings call.
The company has existing contracts in some imports such as soda ash and natural gas until December 2022 at prices that are favorable as compared to current market prices. The company continues to actively work on various cost optimization and efficiency improvement initiatives. However, margins would also depend on how unit selling prices of imports behave as the country is importing almost 75% of the requirement of solar glass as per latest data. This will, of course, have a bearing on global demand-supply situation of solar glass. The antidumping duty on import of solar glass from China is due to expire on 17th August 2022. We expect a new notification for continuation of the duty for another 2 years.
During quarter 1 financial year '23, company earned a profit before tax of INR 40.3 crores. The profit after tax was INR 30.1 crores as compared to INR 39.6 crores during the corresponding quarter in the previous year, a decline of 24%. The demand for solar glass remains high in both the domestic and export markets. As I mentioned in the last quarter, the current geopolitical climate has heightened the need for energy security, for each country by enhancing solar capacities available from domestic production. Policy and fiscal measures undertaken by the government in the recent past, by encouraging a rise in solar installations in the country, which is evident from the order pipeline for solar installations. We believe the domestic manufacturing of solar modules will rise to a significantly higher percentage of installation, which offers well for the demand for solar glass.
Ministry of Power published a green OA policy as electricity promoting renewable energy through green energy open access rules 2022, in June '22. This policy also likely to benefit the domestic solar module manufacturers, OEMs since the open access and net metering rooftop solar projects will need to source solar modules from the vendors listed in ALMM approved list models and manufacturers starting 1st October 2022. Presently only domestic OEMs approved under ALMM. This is expected to increase domestic manufacturing and demand for solar glass.
During financial year '22, the average pool of glass or furnaces was 49 tonnes per day on a capacity -- sorry, 449 tonnes per day on a capacity of 450 tonnes per day. So this would mean 100% of capacity was being drawn on an average basis. We have been producing at capacity and selling out the entire production. We are, therefore, keenly looking forward to the commissioning of a brownfield expansion project at G3 that will enhance the capacity by another 550 tonnes per day.
Global supply chain bottlenecks have delayed the commissioning by 3 months. We now anticipate that the project can be commissioned by October 2022. We expect to take up the next expansion by way of SG-4 of 1,100 tonnes per day in the immediate future. An approval of shareholders has been sought for raising equity up to INR 1,100 crores by issuing new shares.
Last quarter we had announced the acquisition of 100% stake in Interfloat Group, the largest solar glass manufacturer in Europe. The closing of transactions has been held back due to leakage in the furnace of GMV in the last week until we assess the impact of the same on the transaction. Accordingly, the resolution for issue of shares to sellers on a preferential basis has been withdrawn from the ensuing meeting of the shareholders being held on 11th August. In the meantime, we continue to believe that the demand for solar glass in Europe is on the rise and has good potential.
In the meanwhile, we are trying to integrate the team to achieve expected efficiencies in the operations at GMV and BRL. We have acquired or floated 2 wholly owned subsidiaries in Europe, which will act as SPVs for this transaction. BRL is conscious of the need to make its operations furthermore environment friendly. We are setting up a 10-megawatt captive power plant of solar plus wind energy through an SPV in which BRL will have 31.2 shareholding -- 31.2% shareholding.
This project is expected to be commissioned by December 2022, and BRL will be able to use this green power besides reducing the cost. We are also looking at further opportunities to tap the potential to use solar plus wind power. The overall demand situation for solar glass is looking to be extremely robust, both in India as well as in other important markets like Europe, U.S.A. and Turkey. We see growth opportunities for meeting this requirement. Most nations are trying to raise domestic production of solar glass and modules and also trying to reduce dependence on Southeast Asia, which places India in an advantageous position for exports as well, particularly due to the fact that there are no serious capacities in other markets to produce solar glass [indiscernible] having manufacturing in Europe through Interfloat GMV fits in well. All in all, we remain bullish on the growth.
With that, I would now like to open the floor to questions that you may have.
[Operator Instructions] First question comes from Mohit Kumar from DAM Capital.
Three questions from my side, sir. So what is the duty structure at this point of time? Is there no duty as import duty? Is that the right understanding?
There is no basic custom duty on the import of solar glass. Having said that, there is an antidumping duty on imports of solar glass from China, which is at the very least about 10% to 11%. And it goes up to 60% for different manufacturers. There is an import -- there's a countervailing duty on import of solar glass from Malaysia, which is just under 10% at about 9.71%. There is no import duty on import of solar glass on Vietnam.
Understood. Second is on the dividend of our second capacity or SG-3 is about to commission, how do you intend to par from that? Is it mostly spot or retain any other alternative to the gas?
I'm sorry, I couldn't quite follow your question.
No, no, sir. Do you intent -- given the fact that SG-3 will be up and running here some time, do we need to ask for the gas requirement for medium term or long term or do you intend to continue buying on the spot basis? Or is there any other alternative to fire up furnaces?
So we -- all our furnaces have dual fuel capacity. So dual fuel capacity means that we can use at the minimum 2 types of fuels, which is the gas and which is a fossil fuel. Within the group of fossil fuels, we can use furnace while we can use like diesel oil. So at this moment, the SG-3, we might be using furnace oil to fire that simply because that could be more economical.
And lastly, on the Interfloat acquisition, it seems like unfold. Is that the understanding is right, right?
I'm sorry, I didn't get your question.
Just to answer that, we are keeping the transaction running as of now, but the decision to understand the impact of the situation of the GMV funds leakage and what it will have impact on the transition that is under discussion. Once we have clarity around these aspects, then there may be certain renegotiations, but transaction is very much there as of now.
One more question on SEZ. The CapEx signature for the new SG-4 is seem to be the higher side compared to SG-3 because I see furnace currently on 550 tonnes per day, we are spending around INR 500 crores. Is that the right number? And you're spending a portion that tonne per day, we are spending INR 1,400 crores.
No, on 550 tonnes per day furnace, our revised estimate is INR 688 crores, which has been approved recently by the Board and informed to the exchanges. So it is actually in line with the SG-3 CapEx only, which is the INR 1,400 crores or estimate for SG-4. So it is almost double. .
So all the SG-1, SG-2, SG-3, SG-4 in the same campus. Is that right?
Please repeat. Your voice is not very clear.
So my question is, all these SG-1, SG-2, SG-3, SG-4 are in the same campus, right?
Absolutely. They are in the same campus.
Same location?
Yes.
Next question comes from Amit Goyal, an Individual Investor.
Sir, my question is like what's the main impact in declining revenue by 5% Q-on-Q. Is it because of any volume decline?
The volume has, in fact, gone up. The reason is the price, selling price, which has caused that to happen.
So what was the average selling price in Q1 as compared to Q4? Like in Q4, you mentioned that INR 141 -- or I guess INR 134, sorry per like a square meter per milliliter. And this time, it is INR 140, am I right?
Yes. So Q4 was INR 135 thereabouts, and Q1 is about INR 140 thereabouts, so which is what was mentioned in the opening remarks that there is an increase of 4.5% compared to Q4, but it is not enough to cover all the cost.
Next question comes from [ Dariya Trivedi from Dgd Investments ].
So by calendar year '24, we are going to increase our capacity to 2,100 tonnes per day, which equals to about 12.5 gigawatt worth of module manufacturing. Now given the fact that about 37 gigawatts of module manufacturing capacities to be added over the next 2 or 3 years, don't you think that even at 2,100 tonnes per day we will be able to cater to only 1/3 of the incremental demand? And in light of this, do we have plans to further increase the capacity from 2,100 tonnes per day?
Actually, there are announcements by many other people about their increase in capacities and many of them have already started work in right earnest. So I believe that we might see a lot of extra capacity coming up. I think capacity on the annual is nearly 6 gigawatts now. So we need to see what actually comes up and what is the fate of the people who are bringing it up and how good the glass is and how well it is selling all these things need to be examined. So that's why, right now, talking about further increases after SG-4 seems to me to be a bit premature. Though having said that, I would say, that the demand for solar modules seems to -- there seems to be no end in sight for that. So if you have no end in sight for solar modules and the end to the demand for glass as well. But as far as we are concerned, we are not talking beyond SG-4 for the time being.
Just to also clarify here, the module manufacture capacity utilization is rather low as compared to solar glass manufacturer, which is a continuous process plant. In module industry, we have seen that typical utilization on an average for the industry is 50% to 60%. So though there may be a capacity of, say, about 50 gigawatts going forward, if you really look at the actual capacity utilization of about, say, 50% to 60%, the manufacturing may be 25 to 30 gigawatts. So that requirement of glass will be only corresponding to the actual utilization.
Understood. So these new players who are setting up capacity that is on solar module manufacturing -- and right, that is not necessarily called solar glass. Is my understanding correct?
Yes, this 37 gigawatts, which you said is for module manufacturing. But it is also -- at the 6 gigawatt which Mr. Kheruka said is regarding solar glass production lines, which will be equal to 6 gigawatt. So 12.5 of ours and 6 of this will already make 18.5.
Okay. So is there somebody else apart from us, who is also setting up capacity in the glass space, solar glass space?
Yes. So these 6 gigawatt capacities, which we mentioned is coming from other players, other than Borosil.
Okay. Okay. Understood. And just 1 last question on the bookkeeping front. What is the likely interest cost going to be for this financial year?
Actually, it is very miniscule as of now because we are hardly using any working capital and once the full utilization starts happening maybe in Q4 of this calendar year, then there will be interest cost, but today, it is difficult to confirm what it would be.
Okay. But most likely, it will be in SG-4, right, during the course of the financial year?
It will start to getting utilized, yes. And also, there will be interest on the term loan, which we have taken for the SG-3.
Okay. And what is the quantum of that term loan, please?
We have booked close to -- we will have about INR 250 crores overall.
Okay, okay. So the interest from that will start accruing from next year. Is that understanding correct?
It will start, I mean, on commercial production startup because currently, the interest is getting capitalized because of the construction period. So once the commissioning happens in, say, October, the interest will get accounted in the profit/loss [ growth ].
[Operator Instructions] We are having a question from Dhruv Kashyap, an Individual Investor.
Sir, my first question was on the antidumping duty, which is getting over on the 17th of August. And my understanding is that a very strong case has been presented to the DGTR and DGTR in turn to the Commerce Ministry and then the Finance Ministry. But that -- I think the case was presented sometime in the month of May by the DGTR to the Commerce Ministry. Now we are sitting on the 10th of August with 6 days to go before the current duty expires. So do we have any view -- I mean, do we have any signaling from the government that is it actually coming?
Well, it's been recommended by the Ministry of Commerce by the designated authority. And typically, the Ministry of Finance does not issue the notification until the end. So we have no signal at all that it's not coming.
Okay. Great. The second question, sir, was on the Interfloat GMBH acquisition. Now my understanding is it's a very recent development about the gas leak, et cetera. And obviously, the buyer should be doing their own check to see what's the level of damage, et cetera. But how are you or the Board reading it that -- is this like a pause? Or is this a full stop? And have deals already been dispatched to a -- I mean, what's the kind of time line you're looking at to say, yes, no, maybe.
That's a difficult question to answer, the second question. But the first question, whether we're looking at as a stop button or a pause button? I would definitely say it's a pause button. It's not at all a stop button.
And also the leakage is actually in the furnace, it's not a gas leakage. It's a glass leakage. So after the certain years, there could be wear-and-tear in the glass furnaces like this. And typically, it can be repaired. So the team of experts is already working on it, and we will hear soon that what will be the outcome, how they are, it will proceed going forward. And what will be the time horizon within which the sector can come back to production.
So just to conclude this point, sir, that what you're saying is that there's already some sort of assessment being done. And if you believe that it's worth going ahead with the investment, then you will come back at some time in the future, even though if it might be at a changed cost or changed terms and conditions, et cetera. And at that time, you will come back and then you'll put in that point about taking approval for raising the -- or issuing the preference share. But the way I heard you say it is that it's not as this deal is off.
No, no, not at all. You are right. The deal is not lost at all.
Okay. Okay. So this is a call like you said, more than anything else. Sir my third and final question is that now that you have decided to combine the 550 plus 550 into 1,100-tonne furnaces SG-4. So basically SG-4 and 5 has been collapsed into SG-4, and which makes imminent sense in terms of scale and economies and CapEx and so on and so forth. But would you have any idea by when do you want to -- because see, the thing is that while you are saying that in 2024, say, the same time October or something, you'll have it up and about. But based the experience of 550 tonne furnace that you've just been trying to put up it became delayed because of various reasons. Would you not think that you would want to have some time line on when you want to take it to the market and raise funds. And so that this time, there is no delays on the SG-4 in 2024.
I really want to make a point clear that our design, meaning our plant layout, the selection of equipment and the engineering from our side was correctly done even for SG-3. And everything was ordered on time correctly and there's been no change from our side. The change which has happened is that because of this COVID business, you see a lot of our suppliers have suffered great shortfalls in availability of labor. And therefore, there simply have not been enough people at the supplier plants to manufacture the equipment that we needed. That is one point.
The second point is, there's been a global disruption on ocean freight. So some people who are supplying equipment to us are depending in turn for part of the inputs to come from other countries by sea. When they don't receive those inputs in time, their supplies to us get delayed. The third thing is that there has been a huge shortage of computer chips, almost all machines that we buy they are governed by PLCs, which are process logic controllers, which are sort of a term used to denote an industrial computer chip. And there has been a shortage of these industrial computer chips. So even as a machine has been ready, the computer chip has not been, and therefore, there has been a delay in supply. So even for the 1,100-tonne plant, we have our design ready. It's a question of when the time is right to go to the suppliers and take prices and open letters of credit and negotiate the prices and then arrange the shipment. So we feel that by the end of 2024, the plant should be up and running.
On the fund side, we already moved a resolution to the shareholders to approve equity raise of INR 1,100 crores, and the balance will fund us either internally or take some loans. So on the fund side, we are -- fund side, we are getting ready already. In SG-3 also there was no problem of funds being available or like that. It has been explained by Mr. Kheruka. All the delays were actually help me get the other side, the suppliers and because of situation out of control. So we are taking enough control and measures from our side that the project is executed in time.
In fact, SG-2 project, which we did earlier was executed in a record time of 14 months. So our team is fully capable to handle this new project as well. And we hope that they will be able to deliver 1,100 tonne furnace also in a record time.
Next question comes from [ Avinash Khare from BP Capital ].
Sir, my first question is on the 1,100 tonnes per day that we are going to be setting up. So because of including -- combining 2 furnaces together, how much extra production incrementally do you expect to happen?
Can you repeat your question? I think you said that we are shutting off or something?
No, no. My question is on the SG-4 that is going to come online. How much more production will we be able to do simply because the furnace is much larger than having 2 separate 550 tonnes per day furnaces?
The production output will be 1,100 tonnes only, but there will be efficiencies in the cost of melting. So there will be a reduction in the consumption of fuel that we definitely foresee.
Sir then, do you expect margins to be significantly different once we have a much larger furnace?
Well, I can only say that the cost of -- that the consumption will be reduced. The question of margins all depends on the cost of the input, you see, and the availability of the input. We are today foreseeing a shortage of gas and that is only because of artificial reasons, as we all know, that there's Russia stopped supply of gas to Europe and then Europe is buying gas from everywhere. And therefore the prices that are being driven up are not really by any sensible reason. So we don't know how long this is going to go on. And finally, Russia has to sell its gas also. So -- at the end of the day, it's not as if the world demand for gas or consumption of gas has gone up that much more. So I mean the current prices should see a decline from the standpoint of common sense, but I'm not an expert in the gas futures. I cannot release.
Coming to the natural gas scenario. So in case that there are no supply chain issues in the future, then do you think it's possible that being a solar glass manufacturer will get priority when it comes to APM or the supply that comes through GAIL?
No. Unfortunately, no, because the APM gas is almost fully earmarked for the public sector and the priority sector, which is like CGD and all. Industry has very little quota under the APM. We have to buy all our requirements either from a market or we can alternatively use like furnace oil, which at the moment is cheaper than the export price of GAIL. So eventually, we have to choose between the 2, what it works out finally. But we believe that the prices of oil and gas would moderate in course of time. And then -- then we'll be able to select what to do.
Okay. Understood. And the green captive plant that you have that is being set up the 10-megawatt one so that is going to be only for consumption of power for the operation, right, that can't be used for the furnaces. So how much of -- apart from the furnace how much are you spending in absolute terms on the rest of the power in your entire facility?
So actually, most of the electricity usage happens post production of glass after furnace. Until furnace production, there is a little amount of electricity. But in processing the glass, which is like tempering or, say, grinding or the power is used. So most use of power is after processing, after producing the glass. And -- which is where we'll be using this power, but it can be used for anywhere in the plant. It's not like that you're generating preproduction or post production. So I guess the overall consumption it will get adjusted.
Yes, the overall consumption is very much higher than 10 megawatts. So the 100% of this will get utilized by us.
Right. So is it possible to quantify how much of overall consumption in megawatts is?
So we have a contract demand of 25 megawatts. And our consumption would be roughly around, say, 15 or so. That is what we are expecting.
Sure, sure. Okay. And just if I could squeeze in one last question. The furnace in Europe is quite old, as you said, right, because of -- that's why the glass lease happened. So does that mean that since it's an old furnace maybe the utilization level over there will be a little lower than what we're running right now in India?
That's a different furnace design with completely different from us. And when we said we have to evaluate everything that something that we don't know about how and what the immediate future looks. You see, we have to give them some time for them to make an assessment and give us a report. And once they give us a report and make a statement, then we go and meet them and try to make an evaluation of what's going on, what they wish to do. So it's something on those lines. It's a little immature to give any projections on that.
Next question comes from [ Jimesh Sanghvi from Star Union ].
Couple of things. Sir, if you can kind of let us know what are the contract prices for soda ash and natural gas that we have contracted into? And how are the current size is higher in terms of percentage or anything, if you can say. By what percentage are they higher compared with the contract prices?
So in terms of soda ash, we have a contract for supply up to December '22, and that sets the price, which was prevailing in January, February '22. So we had entered a full year contract. And the current prices are higher by about 30% over contracted price. In terms of the gas, we have many different type of contracts. Our average cost is roughly about INR 35 per SCM. The export prices are much higher. It is more than 2x, 2.5x of the average price at what we are getting the base. But we are buying hardly anything -- or rather nothing in the export contracts because for the requirement to get, we are using furnace oil at the moment. And for -- as you said, for the complete requirement of SG-3, we are trying to use furnace oil. So we are not going to buy under export as long as the same is cost driven furnace.
Okay. And secondly, sir, just a clarification on the realization side you said the realizations were higher than 5% quarter-on-quarter, whereas the volumes were flat. Is that the statement that you've made or probably the volumes were down on a sequential basis?
Yes. So volumes were flat for Q-on-Q basis. But on a Y-o-Y basis the volumes were about 23% high. In terms of the prices, the price level was roughly 4% to 5% higher from Q-on-Q basis, but the prices were slightly lower compared to Y-on-Y basis. So it's different.
So just wanted to, so basically, if I have to look at on our revenue plan, it has declined by around 5% sequentially. So when you are saying that there is a 5% increase in realization of the volume of flat on a sequential basis. What is it that makes this realization drop -- or sorry, revenue drop on a sequential basis?
It is precisely the raw material input costs, energy and raw material costs.
No, no, sir. You're already talking on the turnover part. So the turnover is down 5%, wherein you are seeing realization increase of around 5%. So that's the...
Realization is...
Sir were there any yield losses or something, so actual volumes were lower than what?
Yes. So volume was a little lower. Yes, you're right.
Okay. So can you share it was down by what, around 8% to 10% or something of that because the realization was at or around 5%?
I'll just come back on that point in a minute.
Sure. And sir, lastly, if you can also share how easy it will be to ramp up the new furnace, like, will it be -- since we have been currently operating the smaller-sized furnaces, how easy it will be to ramp up the new furnaces and bringing up head up to the optimal utilization. Do you have any technical challenges, which you could face while ramping that up, if you can share your thoughts on that as well?
Can you repeat your question, please?
The new furnaces, like the 1,100 tonne, which we are targeting and the 550 tonne, which will be starting beginning October, they are the larger furnaces compared to the 250 or TPD furnaces that we are currently operating. So do you see any technical challenges in ramping up those furnaces and how easy it will be to get to full utilization?
No, we don't see any challenges.
So can we see it ramping up immediately to -- in the next 6 months to full utilization or it will be a slow under gradual process over a year?
In my opinion, 6 months is a long time.
Yes. On the volume front, there was a -- I say the data, there was a decline of about 9% in sales compared to Q-on-Q.
That production was higher. [Technical Difficulty].
Sir sorry missed. Can't hear you, sir.
There was a decline of 9% in the quantity of sales.
You said production was higher.
No. No, no, no.
No, it wasn't. Okay. Fine, sir. And you also said in your opening comments that there were some imports which were there and which affected the market. So can you just throw a little bit more light on that?
Well, the imports are increasing because the availability from us, we are the only domestic supplier as of now. So our ability to supply remains constant because of capacity but requirement is going up. So the import share is rising in the overall consumption of solar glass in the country. And this, of course, is hampering us because of the prices because the prices are not moving up. So on the price front, it is hurting us as of now, not because of the volumes. And since the cost is going up and prices are not going up separately, it is hurting the margins. That is [Technical Difficult].
Can I move on to the next question, sir?
Yes. Yes, please.
We're having a question from Anuj from HDFC.
Sir, just one clarity on SG-3, which is expected to come up. You mentioned that for soda ash and gas, we have a contract in December '22. This is for the existing capacity. And for SG-3, would it be operational under the same contract? Or you are planning to have something on a spot basis to run it for the time being?
So this we have discussed already that for SG-3 requirement, we need to have fresh contract. But since the spot prices are very high, it will be imprudent on our part to enter into any long-term or medium-term contracts for gas supply at the current prices. So we are taking a call to use furnace oil instead of using natural gas for the time being. But once the prices moderate to a level where we are comfortable to enter into medium-term or long-term contract for gas, we will do so as we go along. In terms of soda ash, both the plant requirements are covered until December. And from December, that is from January, we'll have to enter into new contracts at the prevailing price. Currently, the prices are higher than before.
This for SG-3 as well. I mean until December the contract...
For the entire requirement, we have.
Okay. So for the entire 1,000 TPD we have contract for soda ash. And in your initial remarks, you mentioned that the company is working on a few of the measures to bring down that cost down toward so that the margin can be improve from here on. Could you just elaborate what are those measures? Because considering the raw material cost for the power costs, which are the near term unlikely to taper down, how we are planning to phrase our margin going ahead or provide some kind of push into it?
Yes. So we are working on various funds, for example, finding a better economic best cost of raw materials where we can save some money, then to use coating liquid, which is cheaper. We have developed some liquid, which is giving equal or better performance. So we have started to use that. So these are a couple of things on the raw material side.
On the side of electricity, we have mentioned about using renewable power under our captive consumption route through renewable sources like solar and wind. So although the efforts are -- will lead to certain savings in the cost of production. And also we are trying to increase the production quantity and efficiencies in generating the saleable output, which will lead to higher production and thereby reduce the cost of production.
But this largely would get reflected from next fiscal onwards because we have already contracted in December for the current year. Am I assessment correct? Or we could see some kind of benefit flowing in the current system as well?
It will flow in from the current -- it has already started to flow in some measure already from the current quarter, July to September quarter. And we will see -- we do gradually come actually. It cannot be done overnight. So it will gradually reflect.
Fine, sir. On the European plant, as you clearly mentioned that currently the status as on a hold basis and not a stop basis. But anyway, this plant was old and it was like supposed to get replaced by a new 500 PPD over the next 1.5 day kind of period. So the currently status solely has largely to do with -- on the consideration part, the one which we have already entered into or it has to do more with the process design, which we need to work on something.
See, we have to understand that the furnace is not very old. In fact, this kind of furnaces keep running for 8, 9 years. The overseas is going to run the furnace for 9 years in solar glass. So the furnace suppliers had said that it could run for another 1 or 2 years at least. And that is a minimum time which we can expect this furnace run to happen. But in glass furnaces, typically, these kind of leakages can happen. And this is not like complete -- completely a no, no thing that this cannot be resumed or like that.
So we are making all our efforts along with the GMB team with the furnace supplier to check what are the possibilities, how it can be put to effective use quickly and then proper repair can be done at a later date. So all those things are getting discussed between the 3 teams. And we will find some resolution to the problem. And then we will have an assessment that how much of the impact it has on the transaction and whether the transition needs to be relooked at in terms of the way it is structured today or even the cost of the transition overall from that perspective. All those things will be discussed in the current sellers and owners. And thereafter, the call will be taken how this will be proceeded with.
Fair point, sir. As on it, we haven't paid anything to the company, right, sir?
Absolutely.
And lastly, sir, on the customer perspective, I mean customer point of view. So we have been seeing that rise in module prices, duty in positions, rupee depreciation, all has now impacted -- even the GIB case has impacted the execution of solar projects across the country. So what kind of impact are we seeing on that front? Even our projects are getting impacted because of these issues or we have some kind of contract with our existing customers based on which our volumes are not that highly impacted?
So on the side of glass demand, as I mentioned -- as we have mentioned in the call before, the demand for glass has gone up, the domestic model manufacturing is much higher than before. From the current data available, we see that almost 11 to 12 gigawatt per annum of manufacturing is taking place in the country -- as I guess, 6, 7 gigawatts in the year gone by. So the demand for glass and components in India for local manufacturing is quite high as compared to past. And there is no death of orders for that -- from that perspective for the solar glass. The challenge is around the prices because the cost is going up so fast and so much it is difficult to get it realized in the prices because of the competition strategy to not go for full coverage of the cost increase.
[Operator Instructions] We are having your question from Vishal Mahajan, an individual investor.
I have a very basic question. And I was listening to you, you mentioned some of the great points that this company has. You've mentioned about very strong demand, no end in sight. You mentioned about duties favoring us, no serious capacities available and quality of our glass is very excellent. And yet we are struggling with pricing power out there. Could you please explain to me exactly how does this play out? Why don't we have so much of pricing power? You did spell out that competition is trying to keep prices low. But at the same time we have great quality of glass, and we have really differentiated us out there. So any particular reason why we are not able to push prices up?
So this industry wanted to understand that is working mainly for grid connected solar farms. And all these are by way of bids and tenders where lowest price bidder gets the tenders. And the challenge with them is to minimize this cost of procurement somehow, which is where the challenge is actually. If we were to keep quoting INR 2.42, INR 2.43, when the cost of everything has gone up so much, like the module prices have gone up by almost 30% in the last 6 months. Similarly, the glass cost has gone up like this. There is a sort of tug-of-war between the, say, procurement people and their module suppliers. Clear the cost is high, but the developers are not willing to pay higher costs because they have quoted at a lower price.
And they have PPS, they have signed PPAs to supply the power and all those things. So this is a case '22 situation, which is where we are in today, and which is why there is a certain amount of pressure.
Now in terms of the ability to price our product to higher compared to the imports. We have to understand that we are sort of a marginal supplier as of now being only producer also, we are a marginal supplier. At 25% of the market share, 75% coming from the world's largest players who are more than, say, 20x of our capacity, it becomes difficult to project ourselves as the price leader. And all along the industry has worked on the basis of matching the imported lender cost in the last so many years. So this is how it has been.
And when the prices were very high and our costs were not so high, we got better prices. And around this time, we have also suffer on the same front that our costs are rising, but the selling price is not able to increase. So it's a strategy, which the company has taken along with the customers, and we have to live by it because this is how it has worked.
[Operator Instructions] We are having a follow-up question from Mr. Trivedi from Dgd Investments.
So I heard you saying that a new player is setting up capacity for 6 gigawatt of module manufacturing. So does that mean they will also have 1,000 tonnes per day capacity when that does come online?
Yes, there are a couple of players who are bundled into this 6 gigawatt actually. And there are at least 3 players. The largest capacity is coming up through an associate of Mundra Solar, that is Adani company's associate, which is setting up a plant for 600 tonnes. And we believe that almost 70% to 80% of their production is going to be consumed internally by Mundra Solar and rest they'll be able to sell in the market. Besides them, there are 2, 3 -- 2 more players who are setting up plants for about, say, 150, 200 tonnes per day. So all put together, it is going to be about 1,000 tonnes per day, which will be about 600 gigawatts. Now the progress of these plants is also delayed somewhat. And we believe that in calendar year '23 and sometime in early '24, these production capacity might come on stream.
Okay. So sir, is it safe to assume that, I mean, since -- so far, you have the sole manufacturer of solar glass in India, but now with these additional players setting up capacity, there is a high possibility of us considering some market share to them?
It does not translate into that exactly because there is enough market available already plus the market is going up very fast. As you would know, I said 12 gigawatt annually manufacturing in India as compared to 6 gigawatt. So demand is already quite high. But yes, they will take a certain market share, and they might take share from imports, they might take share from the growth in the demand, whichever way it happens, but we are sure to sell our volumes.
Okay. And thus far, if I'm not mistaken, we had a 35% market share in the Indian market. And currently, I heard you saying that the share has come down to 25%. So does that mean that the Chinese players are capturing a larger share of the market?
It's not a question of them capturing. Actually, there is no production available in India other than us and our capacity is already fully utilized. So from where the balance demand will get covered. So naturally the consumers have to import. So it's not their question of capturing or supplying or whatever it is. It's the question of meeting the demand.
Okay. But our market share has reduced from 35% to 25%, right, because in the previous financial year...
That is what I said, because the demand has gone up and our share remain -- our quantity remains the same.
There is no change in our supply. Our supply remains unchanged. If the demand goes up, then the fellow will buy from somewhere, which is what is happening.
[Operator Instructions] We are having a question from [indiscernible] from BMS.
I just had a question regarding like what is the reason for the [ foreign volumes ] for this particular quarter?
Can you repeat, please, your voice is not very clear.
Am I audible now?
Yes.
So what was the reason for the fall in the volumes for the -- on a sequential basis?
On a sequential basis, yes, there was some fall because in April and May, our production levels -- net production levels were rather lower compared to what they were in Q4. However, we have recovered the -- I mean, we have gone back to the previous levels from June '22, and we are trying to have even better numbers as we go along. So we are confident that in the rest of the months we will be able to recover that difference or lost volume by way of increasing production.
Next question comes from Pankaj Kumar, an individual investor.
Sir. So my question is around -- you just mentioned that Chinese there are having 75% market share. So my understanding was there is already an import duty in place. So how much is that -- so how much is the import duty in place from China -- Chinese supply?
This has been replied before. Again China, there is anti-dumping duty and there is a countervailing duty at Malaysia. And I guess, Vietnam, there is no duty. So imports are coming from all the 3 locations. And what we have seen is that the maximum amount of imports from China are coming at the lowest amount of antidumping duty because the duty structure is on a vendor-wise basis in the case of antidumping duty. The lowest amount is about 10%, 11% and the highest would be about 28%, 30%. So most imports are coming at the lower end of the duty. So roughly, you can say about 10%, 11% duty is being direct on the imports coming from China and Malaysia. But there is no import duty or any kind of duty against Vietnam.
Okay. Okay. So despite 10%, 11% duty, there is a large market share that Chinese supplier has captured.
Yes, because the capacity in India is limited and the demand is high, so ultimately the demand has to be fulfilled from somewhere. We have more production in India, the chance is that local production will have larger share are very much right.
There are no further questions. I would now hand over the floor to the management for the closing comments.
Yes, thank you all the investors for participating in this call. We are very pleased to answer your questions. And shall connect with you again at the time of next quarter. Thank you very much. Goodbye.
Thank you, sir. Ladies and gentlemen, this concludes your conference for today. Thank you for your participation and for using [indiscernible] conference call service. You may disconnect your lines now. Thank you. And have a pleasant day.