Borosil Renewables Ltd
NSE:BORORENEW

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Borosil Renewables Ltd
NSE:BORORENEW
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Price: 441.8 INR -0.3% Market Closed
Market Cap: 57.7B INR
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Earnings Call Analysis

Summary
Q1-2025

Borosil Renewables Q1 FY25 Performance and Outlook

Borosil Renewables reported a net revenue increase of 6% quarter-over-quarter, driven by a 2% rise in sales volume and improved selling prices. However, year-over-year, revenue growth was only 2% due to a 17.9% drop in selling prices. Despite this, EBITDA margins improved significantly to 12.3% from 5.8% in the previous quarter, aided by better pricing and production efficiencies. The company also reported a reduced post-tax loss of INR 3.64 crores, down from INR 13.37 crores. Borosil forecasts EBITDA margins to stabilize between 20-25% following a forthcoming 10% customs duty on imports, effective from October 2024.

Earnings Call Transcript

Earnings Call Transcript
2025-Q1

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Operator

Ladies and gentlemen, good day, and welcome to the Borosil Renewables Limited Q1 FY '25 earnings conference call hosted by Axis Capital Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Rohan from Axis Capital Limited. Thank you, and over to you, sir.

R
Rohan Gheewala
analyst

Thank you, Tobin. Good afternoon, everyone. On behalf of Axis Capital, I'm pleased to welcome you all for the Q1 FY '25 Earnings Conference Call of Borosil Renewables Limited. We have with us the management team represented by Mr. P. K. Kheruka, Executive Chairman; Mr. Ashok Jain, Whole-Time Director; Mr. Sunil Roongta, Whole-Time Director and Chief Financial Officer; and Mr. Balesh Talapady, VP, Investor Relations. We thank the management for giving us the opportunity to host the call. We will begin with the opening remarks from the management, followed by an interactive Q&A session. Thank you, and over to you, sir.

P
Pradeep Kheruka
executive

Thank you. This is Pradeep Kheruka. Good afternoon, and welcome to the Borosil Renewables first quarter financial year '25 investor call. The Board of Borosil Renewables on 12th August approved the company's financial results for the first quarter of the current financial year. 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 stand-alone basis as well as on a consolidated basis. I will also provide you with some highlights of the operations in our overseas subsidiaries.

Overall, the company's performance shows distinct improvement as compared to the previous quarter. Of course, the operating results of the same quarter last year were much better considering the much higher selling prices prevailing then. The net revenue during the quarter under review was higher by 6% compared to the preceding quarter, led by a quantitative increase by 2% and a higher selling price. Average ex-factory selling prices during the quarter rose to INR 105.5 per millimeter per square meter as compared to INR 99.6 in the preceding quarter, which is an increase of 6%. A sharp increase in ocean freight had been the reason for the increase in import landed prices, which allowed us, in turn, to have a more remunerative selling price.

During the first quarter of the current year, the sales volume of the company rose by 23% quantitatively over the corresponding quarter in the previous year. However, the significantly lower selling prices meant that the rise in net revenue from operations was just 2%. Average ex-factory selling prices during the quarter despite showing a recovery were lower by 17.9% as compared to INR 128 during the corresponding quarter.

Export sales during the first quarter of the current year, including the customers in SEZ stood at INR 22.42 crores, comprising 9.3% of the turnover as against INR 13.55 crores in the preceding quarter when it comprised 6% of the turnover. Exports stood at INR 72.13 crores in the corresponding quarter last year. There's a demand slowdown in export markets around Europe for the past 2, 3 quarters, although the exports were higher compared to the previous quarter.

During the quarter under review, the company earned an EBITDA of INR 29.71 crores, corresponding to an improved margin of 12.3% as compared to the margin of 5.8% in the preceding quarter. This flowed from better selling prices, has also higher production efficiencies. The margin during the corresponding quarter last year had been 23.8% due to the higher selling prices than prevailing. The company's post-tax loss declined to INR 3.64 crores for the quarter under review against a post-tax loss of INR 13.37 crores in the preceding quarter, which is attributable to an improvement in selling prices and production efficiencies.

I'm happy to share that the long drawn saga to end the ill-conceived exemption from payment of basic customs duty on imports of solar tempered glass has finally yielded a positive outcome. The exemption ends on 30th September 2024, and a duty at a reduced rate of 10% will come into effect, although the duty in tariff was 15%.

The investigation by DGTR into our applications for an imposition of an antidumping duty on imports from China and Vietnam and a countervailing duty against imports from Vietnam is making progress. We expect a decision and issuance of preliminary findings in the next few months. Meanwhile, Chinese exporters have dropped their prices even further in their continued relentless dumping. For the domestic solar glass producers getting ADD and CVD remains extremely important to assure industrial expansion.

Government tenders for certain requirements, mandate use of only domestically made solar cells in the modules. We are now petitioning the government to additionally mandate the use of other domestically made ancillaries, including solar glass in such tenders. This will help create a robust local supply chain and increase the use of domestically produced ancillaries. The pace of solar installations in the country is making rapid progress and there is a sizable demand visibility. Manufacturing capacity for solar modules has already touched 65 gigawatts, which is expected to cross 100 gigawatts in 2 to 3 years. Use of locally produced modules has risen sharply after the implementation of ALMM mechanism from April 2024, which is leading to increased demand for all the components, including solar glass.

Coming now to our German operations. The European solar module manufacturing industry continues to suffer from unrestrained import of Chinese solar modules at dump prices. This has led to shutdown of production by many of the large players in Germany. The European Union has cleared legislation, by member countries to incentivize the use of European-made solar modules by allowing tax subsidies and other measures.

Countries like France, Italy and Austria, have already taken steps to incentivize local production. But Germany, which is the largest producer, is yet to make an announcement. The company continues to run full production by locating demand from alternate markets although at lower selling prices. Cost optimization efforts are continuing at the plant besides enhancing production efficiencies.

Now I come to the consolidated results for the quarter, which includes the operations of the subsidiaries abroad. The overseas subsidiaries, including the step-down subsidiaries have generated net stand-alone revenue of INR 129.4 crores and negative EBITDA of INR 3.8 crores for the first quarter of the current year.

The performance shows a marked improvement over the preceding quarter, which had a net revenue of only INR 55.88 crores and a negative EBITDA of INR 33.95 crores. The overseas subsidiary was reeling under reduced demand, which led to reduced production and consequential losses from the demand slowdown in Europe. The subsidiaries are making efforts to improve operations by making inroads into overseas markets besides the enhancing customer outreach in Europe.

The consolidated net revenue for the quarter under review stand at INR 370.79 crores and a positive EBITDA of INR 25.91 crores as compared to net revenue of INR 283.11 crores, and negative EBITDA of INR 20.82 crores in the previous quarter. This shows significant improvement. The positive trends and developments we are experiencing in this quarter on both prices and production efficiencies are encouraging. And we feel that the upcoming quarters hold the potential for further improvement in the performance.

Looking at, a, the expectations of better selling prices enabled by higher landed cost of solar glass in the domestic market, post the position of basic customs duty from 1st October 2024; and b, the strong and expanded demand in domestic markets arising from the spurt in domestic manufacturing, our positive outlook in this sector has further improved.

We are actively engaged in cutting our cost per unit. To further optimize our cost of par, we have finalized an additional 16.5 megawatt solar/wind hybrid power plants that is expected commissioning during second quarter of financial year '26.

Finally, I would like to update you on the proposed rights issue. The company had on 10th June 2024, filed a draft letter of offer to SEBI to raise funds up to INR 450 crores by a rights issue of equity shares. The proceeds are proposed to be utilized mainly to reduce the debt for the Indian operations as well as at the overseas operating subsidiary.

The company has received in principal approval for rights issue from the BSE Limited and NSE of India. Post receipt of other applicable approvals, detailed terms of the rights issue, including, but not limited to the issue price, rights entitlement ratio, record date, timing and terms of payment will be determined by the Board or its duly authorized committee in accordance with applicable laws. With that, I now would like to open the floor to questions that you may have.

Operator

[Operator Instructions] We have the first question from the line of Sumit Kishore from Axis Capital Limited.

S
Sumit Kishore
analyst

My first question is that after the announcement in the project, where do you see EBITDA margins for Borosil [indiscernible] in coming quarters, especially given your commentary that the Chinese are also undercutting prices and that has a downward impact even as we speak?

A
Ashok Jain
executive

Yes. So it's a moving number as of now because the prices have been changing and the freight rates also have been changing. But the impact of basic customs duty would mean that 11% will get added to the landed cost of imports, which will allow us to raise our prices of the corresponding order. So we can estimate based on the current earnings that the EBITDA margins may settle between 20% to 25% post the imposition of basic customs duty. Provided there are no very significant changes in the prices or in the freight.

S
Sumit Kishore
analyst

You said 11% or will it be 10% increase?

A
Ashok Jain
executive

10% is the basic duty and there is a surcharge of 10% there on. So effectively, it becomes 11%.

S
Sumit Kishore
analyst

Okay. And our freight rates -- seaborne freight rates cooling off now after peaking sometime in the previous quarter?

A
Ashok Jain
executive

So in the last 2 months, the freight rates have been high, but off late the freight rates have softened a bit. And whether they will stay at current level or will change further is anybody's guess as of now because the situation is very dynamic.

S
Sumit Kishore
analyst

Sure. And where would you peg India's solar glass manufacturing capacity now? And based on what is under construction right now by the end of the fiscal, where do you see that capacity going and Borosil Renewables share is what we are looking at?

A
Ashok Jain
executive

So in India, there are 4 new plants which have started in the last 1 year or so. They're totaling to almost 1,300 tonnes per day, and Borosil Renewables is at 1,000 tonnes per day. So total capacity has become 2,300 tonnes per day in terms of the domestic production. And a very sizable, significant imports are also happening at this point in time because these capacities put together are not enough to meet the entire demand.

S
Sumit Kishore
analyst

Sure. And what capacity is under construction right now in case your -- can you give us?

A
Ashok Jain
executive

Right now, there is nothing significant, except for maybe Reliance, which may be under construction for their own captive purpose. But generally, for the market offerings, there is no further capacity in the pipeline as we speak.

S
Sumit Kishore
analyst

Given the shortfall in domestic manufacturing capacity versus the size of the Indian market itself, what are your thoughts in terms of expanding capacity hereon? Or do you think that you will wait for government intervention and probation of extra duty protection to make it more attractive?

P
Pradeep Kheruka
executive

To be honest, the way I'm looking at things that we have spent the last year actively following with the government and bringing to their notice that in order to have a complete ecosystem, all the ancillaries need to be studied and they have to be dealt with so that we are able to retain and grow some full manufacturing ecosystem. Going by the speech given by the honorable Finance Minister in the Lok Sabha this year, when she took solar glass by name, I hope it seems that our words have reached her and she has understood.

And the putting of the 10% duty is a very welcome step towards the fact that this has been recognized. And so therefore, I see that with continued pushing our agenda in the corridors of power, the fact is that the government is definitely very keen to get out of the umbrella of China. And so therefore, generally, I see that things should be getting better and better as time goes by.

S
Sumit Kishore
analyst

Sure. Just one final question. Of your total -- of India's total solar glass inputs, what percentage comes from China? And what percentage comes from Vietnam and other locations?

A
Ashok Jain
executive

You mean as the total Indian market, or the total Indian markets?

S
Sumit Kishore
analyst

Yes.

A
Ashok Jain
executive

So imports are basically at this point in time coming largely from China, almost 85% comes from China and only 15% come from Vietnam.

Operator

[Operator Instructions] We have the next question from the line of Rohan from Envision Capital.

U
Unknown Analyst

Sir, the first question was on the company that there was just a newly established entity, Solar Ancillary Manufacturing Association. So what was that in regards to -- just a little background on that? The second question was what is the India's domestic solar glass consumption against the 2,300 tonnes per day capacity?

P
Pradeep Kheruka
executive

So for the first question about Solar Ancillary Manufacturers Association. See what we realized in the -- people in the solar glass industry, that the focus of the government has so far been on solar cells and modules. But there are many other products which we need in order to complete the production of our solar module. And if we are still going to be dependent on China for other things, then just having production of cells may not be sufficient. And so we drew -- we decided to form an association. There are people who are glass makers, people who make [indiscernible] people who make back sheets, junction boxes, aluminum frames, copper conductors, et cetera. Everybody is a member of this association. So when we go, we go in a comprehensive way because we are working for the entire solar component ecosystem, and that is why we made this association. And it has been successful, and I think the imposition of the 10% duty is a fallout of the fact that we went as an association, and we were able to get it.

A
Ashok Jain
executive

I think regarding the share of imports and the domestic producers can share, the entire domestic production is getting sold as of now. And most of it is getting sold in India. Some exports are there, which may be about 8% to 10% overall, but sizable imports keep coming to India because the requirement is growing very steadily now with the implementation of ALMM from April '24, the consumption has gone further in terms of solar glass consumption in the modules being made. So imports may be about 55% to 60% of the demand as of now and domestic maybe about 45% or so.

U
Unknown Analyst

Right. And so what is the demand -- Indian demand totally?

A
Ashok Jain
executive

Well, Indian demand in terms of glass consumption would be about 4,000 tonnes per day, of which about 1,600 may be coming from Indian production.

Operator

[Operator Instructions] We have the next question from the line of Ketan Jain from Avendus.

K
Ketan Jain
analyst

Sir, my first question is, what will be the landed cost of China glass prices. Like what would be the price without duty and after duty?

P
Pradeep Kheruka
executive

The landed price of solar glass from China?

A
Ashok Jain
executive

Yes. Actually, the prices are changing every day almost or every week, at least in terms of the landed cost. But what we -- what we do is to sell against the landed price and seek some premium over it, which is maybe about 3% to 5%. So you can see that what we have realized is about INR 105, INR 106 on ex-factory level. So you may say import prices maybe about INR 102 or INR 100 per mm.

K
Ketan Jain
analyst

Understood, sir. Sir, what is your view on the trajectory of solar glass panels from China? How long will they be able to dump more?

P
Pradeep Kheruka
executive

The situation in China today is a little tight, tight from the standpoint that their panels, which were being sold everywhere, especially in kind of markets like the United States and India, have suffered a very sharp decline. And so therefore, all the components that go into solar glass production, including glass, are also facing a great resistance or there might be not enough market in China. And therefore, they are selling to other countries under certain compulsion.

Now maybe that is the reason or what, but the prices at which we are selling, there is no possibility that they can make any money from that. In fact, they will be losing money unless they are being subsidized, which is our fear. So it's very difficult for us to hazard a guess on China and the selling prices other than to say that whatever they're doing is completely unviable.

K
Ketan Jain
analyst

Understood, sir. Sir, also you said that EBITDA margin is going to settle at around 20%, 25% post custom duty. So what realization I can assume for this, it will be around INR 130?

A
Ashok Jain
executive

See, INR 105 is what we realized in the current quarter on an ex-factory basis, and we earned a margin of 12%. So if you were to add another 10%, then that will give you the numbers, because whatever -- whatever extra price that is added to the margin.

K
Ketan Jain
analyst

So around INR 125.

A
Ashok Jain
executive

If you were to do your math correctly, if INR 105 is the price, and if you would increase by 10%, it won't be INR 125, isn't it.

Operator

The next question is from the line of Rohan from Envision Capital.

U
Unknown Analyst

Sir, the question was if a vendor is now purchasing solar glass from us for use in domestic modules wherein the modules are also sold at a higher price. So is there a price difference between that price and the price at which the imported glass is sold in India. So how is that -- how different is that?

A
Ashok Jain
executive

Yes. I just said some time back that whatever the import landed cost is there, basis that we price over material at about 3% to 5% higher. That is the premium you can say.

Operator

The next question comes from the line of Santosh, an individual investor.

U
Unknown Attendee

This is with regard to German unit, sir. Their revenues were INR 129 crores and employee costs were around INR 38 crores, that is around 30%. So how can we reduce this employee [indiscernible] German unit, sir?

A
Ashok Jain
executive

So German cost is higher, as we know the Germany labor cost is higher. But what was happening was that the producer -- the buyers in Germany were able to pay a higher price because they were getting higher price for their modules. Now that situation has changed because they are not able to run their operations at a low price coming from China, which is putting pressure on our selling prices, which is why the ratio is looking so high in terms of the employee cost.

What we are trying to do is to rationalize on the workforce, try to cut down on the number of people and also increase productivity. Similarly, we have put in the CapEx and new equipment there or added more machinery, which will give us much higher productivity. So with all those efforts, we will be able to cut down per unit cost and impact of the labor cost.

U
Unknown Attendee

Because we -- when we compare with the Indian employee cost and German cost, there is a lot of mismatch because in India, we are paying INR 19 crores only. In German, we are paying INR 37 crores for a turnover of INR 129 crores.

A
Ashok Jain
executive

Your point is absolutely well taken. And this is the situation we have to deal with. And we have to increase the productivity and production. And it may not come down to Indian levels, but still we will have to see how best we can curtail the cost and increase our selling price.

U
Unknown Attendee

Yes, this is the same with the power also, power expenses in German unit?

A
Ashok Jain
executive

Power is not so much different in terms of the percentage and even the...

U
Unknown Attendee

It's coming to around 30% only. So INR 37 crores of power expense is there in Germany.

A
Ashok Jain
executive

Yes. So that is, again, because we were running the old equipment and all and now we have put in new machinery, which will give us almost 25% to 30% reduction in the power cost -- power consumption per unit of production. So all those efforts are now going to fructify once these machines start operating, which already actually started producing in this month. So with that, you will see changes in the further quarters.

U
Unknown Attendee

So we can expect same revenue in next quarter also from German unit, that is around INR 129 crores. So it will be high or less?

A
Ashok Jain
executive

It will be in the same ballpark.

U
Unknown Attendee

So when can we expect the right issue, sir?

A
Ashok Jain
executive

The right issue is subject to the approvals. Now we already have BSE/NSE approvals, and major approval now is SEBI, which is almost on the cards, now anytime we may get. So once we have this, then we'll start the process of filing the final letter of offer, and I think the right issue should be there in the end of September or beginning of October.

U
Unknown Attendee

So with regard to this anti-dumping duty, are you following with the government with regard to anti-dumping duty to...

A
Ashok Jain
executive

Yes. We are the applicants for anti-dumping duty and countervailing duty, and the other manufactures are supporting our application, other glass manufactures. And this application is continuously being followed up at the DGTR level. So hopefully, we will have the issuance of preliminary findings -- provisional findings in next month or so.

U
Unknown Attendee

How much time it will take sir, 1 month?

A
Ashok Jain
executive

1, 1.5 months it should take for the process to complete in terms of the provisional findings. After that, it will take another 3, 4 months to get the final approval. By December, we will have some final view from them.

Operator

[Operator Instructions] We have the next question from the line of Sunny from [indiscernible].

U
Unknown Analyst

I have just one question regarding the CapEx plan which you have [indiscernible]...

Operator

Sorry to interrupt, your line sounds muffled. If you could please change the mode on your handset.

U
Unknown Analyst

Sir, I have just one question. What is the CapEx plan for the future, which presently is...

A
Ashok Jain
executive

So Board had, in the past, approved for expansion by 1,100 tonnes per day, setting up another furnace to increase the production, which is currently at 1,000 tonnes per day. But this was put on hold because of the change in the economics and the scenario after the removal of anti-dumping duty against China. So with the positive developments happening on the basic custom duty front and once there is some clarity on the antidumping duty, we expect the Board to reconsider the matter. And once a decision is taken, we will communicate the same to the investors.

Operator

[Operator Instructions]

A
Ashok Jain
executive

If there are no more questions, we can close the call.

Operator

So, we do not have anyone in the queue at the moment, sir. If you would like to proceed with closing comments, you can go ahead, sir.

A
Ashok Jain
executive

Yes. Thank you so much, all the investors for joining on the call and showing your interest in the business of the company. The management is putting in all the efforts to resume the past glory of the company, which for some quarters has been lost because of the unremunerative selling prices. We are actively working on the anti-dumping duty, which will provide the required fillip to the operations of the company and visibility of further growth in the business. Thank you so much for asking all the questions, and see you again. Thank you.

Operator

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

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