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Borosil Renewables Ltd
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Ladies and gentlemen, good day, and welcome to the Borosil Renewables Limited Q4 FY '22 Results 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. Kevyn Kadakia from Axis Capital Limited. Thank you, and over to you, sir.
Yes. Thank you, Faizan. Good afternoon, everyone. I'm Kevyn Kadakia. I'm part of Research for Capital Goods and Logistics sectors at Axis Capital. On behalf of Axis, I'm pleased to welcome you all for the Borosil Renewables Limited Quarter and Full Year Ended March '22 Earnings Conference Call.
We have with us the management team today from Borosil Renewables, which is represented by Mr. P. K. Kheruka, Executive Chairman; Mr. Ashok Jain, Whole-Time Director; Mr. Sunil Roongta, CFO; and Mr. Swapnil Walunj, Head of Marketing. We will begin with the opening remarks from Mr. Kheruka, followed by Q&A session.
Thank you, and over to you, sir.
Good afternoon, and welcome to the Borosil Renewables FY '22 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 fourth quarter for the year finance '22 and for the whole year '22 as well on the 5th of May. Our results and an updated presentation have been sent to the stock exchanges and have also been uploaded on the company's website.
During the year gone by, the company recorded net sales of INR 644.2 crores, an increase of 28% over financial year '21. Sales volumes on a quantitative basis grew by 11% over the year. Net sales were also boosted by higher average ex-factory prices of tempered solar glass during the year. Average prices during the year were about INR 133 per millimeter per square meter as compared to INR 119 per millimeter per square meter in financial year '21, an increase of 12%.
Export sales during financial year '22, including to customers in SEZ, were INR 171 crores, comprising 27% of the turnover, an increase of 55% over financial year '21, while direct exports were INR 127 crores, up from INR 67 crores in financial year '21.
During the last quarter of financial year '22, the company recorded net sales of INR 179.1 crores. From a quantitative standpoint, sales volumes were 2% higher than for the same quarter in the last year. However, going to a lower average ex-factory selling price by about 14%, the sales value was lower by 8%.
For the year gone by, in addition to the inflation and pricing of natural gas, soda ash, packing materials and other commodities seen more so in the second half, logistic costs have also escalated disproportionately. However, higher annual average realizations for the year have covered these cost increases.
EBITDA during financial year ended '21-'22, including a subsidy of INR 9.7 crores from the government of Gujarat, was INR 265 crores, corresponding to an EBITDA margin of 41.1% as compared to an EBITDA margin of 40.4% for the year ended March 2021. During quarter 4 FY '22, EBITDA margin was 34.9%, as most part of cost increases took place in the last 3, 4 months of the financial year, whereas the selling prices prevailing during this period were at the previous lower levels. Consequently, the cost increases are not commensurately covered in the selling prices.
Higher EBITDA led to an increase in the profit after tax, and the company has recorded a profit after tax of INR 165.9 crores, which is an increase of 85% over financial year '21. Profit after tax during quarter 4 financial year '22 was INR 46.4 crores. This is a decline of 31% as compared to quarter 4 financial year '21, which was an exceptionally high base quarter, driven by the then prevailing high prices of solar glass. The profit after tax as a percentage of sales during the last quarter of the financial year '21-'22 was a healthy 25.9%.
The demand for solar glass remains high in both the domestic and export markets. The current geopolitical climate has also heightened the need for power security by enhancing solar capabilities available from domestic production.
The country has seen solar installations rise to over 12.4 gigawatts in the financial year '22, which is almost 80% higher than the previous year. This is expected to rise exponentially in the coming years, led by the policy and fiscal measures undertaken by the government in the recent past.
There has been a significant import of modules in the last quarter of the financial year '21-'22, by developers and others to avoid payment of basic customs duty, which came into effect from 1st April 2022. While this may, to an extent, impact demand for components during the current quarter, we see no signs of this nature.
During financial year '22, the average gross pull of glass from our furnaces was 443 tons per day on a capacity of 450 tons per day. We have been producing at capacity and filling out the entire production. As many are aware, the company has undertaken a brownfield expansion project, SG-3, to enhance the capacity by another 550 tons per day, bringing the total production from this location up to 1,000 tons per day during the second half of this year. Global supply chain bottlenecks are likely to delay commissioning by 2 or 3 months. This will significantly enhance the capacity and capability of the company to meet the growing demand for current products as well as the larger-sizes glass, which are becoming more popular.
As some of you are aware, the company entered into an agreement to acquire a 100% stake in the Interfloat Group, the largest solar glass manufacturer in Europe. Interfloat Group has a production capacity of 300 metric tons per day in solar photovoltaic, solar thermal and greenhouse glasses. It has manufactured solar glass since 2010 and enjoys deep-rooted relationships in the European glass trade for over 4 decades.
The acquisition was made for a consideration of EUR 52.5 million, which is tantamount to about INR 425 crores. There is an additional consideration payable based on performance over 2024, 2025 and 2026 by sharing the EBIT, but not exceeding 50% of each respective year. During the calendar year 2021, Interfloat Group posted a revenue of EUR 60 million, which will come to about INR 525 crores.
The acquisition will accelerate investments in new products and technology development in Interfloat that will benefit customers. Borosil's expertise in achieving high efficiency in the manufacturing process to enhance throughput and lower costs will bring economies of scale to Interfloat's expansion and manufacturing plans.
We expect a significant jump in the demand for solar glass in Europe in view of the enhanced focus by the government to reduce dependence on Russian gas and Chinese solar components. Many new module manufacturing plants are expected to be commissioned besides capacity expansions by the existing manufacturers. Customers of solar glass in Europe are looking for availability of higher volumes from a diversified and reliable supply chain with domestic routes. There is a plan to increase the capacity at the Interfloat plant from 300 to 500 tons per day in the next 18 months.
The current SG-3 expansion in India will take Borosil Renewables domestic capacity to 1,000 metric tons per day by September 2022. Together with the 500 tons per day enhanced capacity from its European operations and proposed SG-4, the company expects to have a total capacity of 2,050 tons by the end of the year '22-'23, while derisking production from a single location. The company also plans to further increase its capacity to 2,600 tons per day in calendar year 2025 by way of SG-5.
We are pleased with the performance in financial year ended March 2022. We saw increased sales service at virtually 100% capacity production from the factory. The implementation of the third furnace has progressed well, but for small unforeseen delays owing to global supply chain issues, which are outside our sphere of control.
We have completed the acquisition of Interfloat to establish an on-ground presence in an important market for Borosil Renewables. I'm proud of our team's achievements and look forward with confidence to continue doing their best in the future, with a larger team that now includes our colleagues in Europe.
With that, I would now like to open the floor to questions you may have. Thank you.
[Operator Instructions] The first question is from the line of Avnish Khara from VT Capital. Mr. Avnish Khara, your line is in talk mode. Please go ahead with your question. Mr. Khara, your line is unmuted.
The current participant has left the question queue. We'll move on to the next question from the line of Mohit Kumar from DAM Capital.
And congratulation on a very good quarter, especially the entire fiscal year. Sir, the first question is on the GMB plus Interfloat, which you're acquiring. So what was the margins in FY '22 for the entity? And how do you plan to improve it? And is there any plan to increase the capacity for Interfloat and GMB over medium term?
So we have not shared the margins with anybody yet so far. I can just say it was very good. Once we take a call to share this information, we'll certainly share it. The issue with Interfloat is that during the current year, the prices of inputs like natural gas, electricity and soda ash, which has bedeviled everybody, have gone up there as well. And therefore, that has brought margins under some pressure. It is still profitable, but the margins have reduced somewhat.
We are renegotiating prices with our customers. And after some time, once the horizon becomes clear, we will be very happy to share the outlook with you. But you must remember that the agreement was signed as recently as the 25th of April, which has really given us about 10 days between then and now to have been able to understand the workings of the company in detail.
I'm now asking Mr. Ashok Jain to add his observations here.
Yes. Moreover, the closing of the transaction is yet to take place, which will be 2 months plus down the line. And once we have control of the company, then we will start sharing all the information, including consolidation and all. So let's wait for some more time before we -- before you have all the numbers with you. And we will have complete transparency in terms of information sharing as per the listing requirement.
Understood, sir. So given the fact that our SG-3 will get commissioned in this fiscal year, right, so this -- I think in the quarter 3, CY '22. How do we see the demand panning out? Are we in talks for further some kind of quantity tie-ups given this large capacity is coming up?
Yes. So demand in India is quite good, actually. Last year, the country has added more than 12 gigawatts, and only less than half of it was manufactured in India. With BCD and PLI scheme having come into play, the domestic manufacturing of modules is likely to run up quite significantly. The imports are going to drop. That would mean that the demand for glass is going to be substantially higher than before.
So we are well in time to commission our SG-3 project by September. And our customers are, of course, in touch with us for long-term tie-ups as well. We believe that we will be able to conclude some of these contracts within this quarter. As of now, nothing has been done, in the sense concluded, but discussions are in progress with at least 3, 4 large buyers. So we will have long-term tie-up with them. And also, we are quite sure of the -- like the demand and sale of the extra production will not be a challenge.
So how was the capacity utilization in Q1 -- Q4 FY '22? And how is it currently?
Q1 FY '22 was fairly flat out, as was mentioned, 443 tons per day or so. So that is against the capacity of 450 tons per day, so it was 100%. And in current quarter also, besides certain downtime in the machines in April, we are running at almost full capacity.
Last question, sir, how are you managing your gas requirements? Is it completely spot? You have -- is it some mix of APM or something?
Yes. So we have a couple of different type of arrangements. We hardly buy anything under sport. And we are fairly comfortable in terms of the costing because we are not buying under spot. So of course, some quantity is coming under APM as well, as has been the case. About 1/3 of the requirement is under APM.
The next question is from the line of Keval Ashar from DSP Investment Managers.
I have 2 questions. So first is related to your German acquisition. So what is the annual solar PV addition in the European market that we expect? And second is what percentage of total solar glass requirement in Europe is currently imported?
So annual addition in Europe are almost close to 20 gigawatts in that sense, in the entire Europe put together. But the manufacturing, local manufacturing is quite limited as of now. It is less than 3 gigawatt.
Similarly, like Indian program of Aatmanirbhar Bharat, they are also having solar accelerator program, where local module manufacturing and local solar cell manufacturing is being promoted. We believe that the local manufacturing of solar modules will go up to 8 to 10 gigawatts in the next 2, 3 years' time. And this will propel the demand for solar glass into Europe, which is one of the reasons why we have taken this step of getting into this acquisition and also looking at expanding it immediately.
Got it, sir. And second is, in India, as you see many module manufacturers are aggressively expanding the capacity post the BCD. And also by CY '25, you will be able to cater 15 gigawatts of solar modules in India. So what is the possibility of us signing annual contracts with all these large module manufacturers?
So I just mentioned that we are in discussion with many, many large module manufacturers. The agreements have not been concluded as yet, but they are in advance stage of finalization. And they are also -- the customers are also eager to have long-term supply arrangement in order to ensure the supply chain. And we are also keenly interested to have those contracts so that our capacities are fairly stable, and we have benefits of larger production runs with higher efficiencies.
The next question is from the line of Anuj Upadhyay from HDFC Securities.
Sir, you mentioned about the average expected price of tempered solar glass for the entire year at INR 133. Could you just quantify it for the quarter and for the corresponding quarter of previous year as well?
So we already mentioned that the quarter 4 FY '22 realization has been lower by 14% of the previous year's corresponding quarter. And in terms of the number for this quarter, it was about the average of the full year only. It was closer to that number only.
INR 133, around?
INR 1 here and there. INR 134 actually.
INR 134. Okay. But this is slightly lesser than what we saw during the Q3. Q3 saw the number raising flatly above INR 140. And factoring the thing that the input cost has already gone up. Any reason, sir, why the realization was down by, say, 3% or 4% on a Q-on-Q basis, whereas the input cost has been much higher?
As we have been explaining in all our conference call or investor calls, the prices are largely depending on the landed cost of imports. As the landed cost of imports have moved southwards or northward, our prices have been adjusted accordingly in the quarter-to-quarter basis. So this is why you see that there has been a decline in the last quarter. But as we speak, the prices have again started to go up from the level prevailing in the last quarter, completed quarters. Prices are actually up by about 14%, 15% already in the current period.
So these are fluctuations which we have to live with in terms of the international supply chain. India still depends on imported glass to the extent of more than 65%. So there's a quite sizable amount to ignore, and the prices are accordingly getting moved because of the imported prices.
Okay, sir. And next one is the acquisition of Interfloat, sir. You mentioned that Europe is also following the similar pattern, which is being seen in India, the domestic manufacturing is given more importance. Could you also highlight or mention about what kind of import restrictions or the duty they are imposing on the Chinese solar glass manufactured over there?
So Europe has anti-dumping duty against China of the order of 55% to 60%, depending on the source. Against other countries, they do not have any anti-dumping duty. So India is a preferred source of import in Europe because of China Plus One strategy. And we find a better pricing also in terms of our realization because the local prices are fairly high in terms of the prices over there. So we are very keen to expand our products or our supply to European markets.
And could you mention about the proportion of export in the overall sale? And post this acquisition, what kind of change we are expecting in the import/export going ahead, sir? Import/export in the sense, domestic and export sales, say, over next 2 to 3 years down the line.
So our direct exports are about 20% of our production and -- which we believe we will continue to have on a longer-term basis. And SEZ exports are close to about 7%. So that's within India, but it's an export from that perspective. So we believe that this percentage will continue in the -- after the expansions also.
The next question is from the line of Monika Gandhi from Aditya Birla Sun Life Mutual Fund.
I am her colleague, Sachin, from Birla Mutual Fund only. Yes. So I just want to ask the question. See, last quarter margin got impacted because of increase in the input cost, mainly the fuel cost, soda ash and gas prices. So considering the fact that Borosil Renewable is only manufacturing in India, so is not price able to pass it on to end user?
Yes. So this question is to be answered in the same way like the import prices are the governing factors for what would be the prices which we can get from our customers in India. All said and done, we try to pass on the cost increases. But again, we are restricted by the landed cost because the customers have choice to import.
And also we have to assume that there is a certain time lag between the cost increases and the time to adjust any selling prices because you have to convince the customers to absorb certain portion of the cost increases. So we are in continuous dialogue with our customers to do so.
And as I said, the prices from China or Malaysia have already started to go up. So there has been a rise in the prices in the recent -- current quarter. So we'll see an impact over a period of time, over a period of quarters that these costs are, to a great extent, passed on.
Okay. How frequently you negotiate or renegotiate the contracts with your customers?
Our supplies are normally on a month-to-month basis. So every month, there is a price negotiation and quantity confirmation from the customers. Sometimes, it is done on quarterly basis also.
Yes, these cost increases are applicable to all the solar glass manufacturers around the world. So we are not the only ones to get affected because of the cost increases. So everybody is looking at their own balance sheet and P&L and trying to readjust the prices to the reality. And this, of course, has some time lag.
The next question is from the line of [ Pradyumna Choudhury ] from JM Financial.
I just wanted to understand, like you've explained the rationale why we have gone ahead and purchased Interfloat Group. But from the seller's perspective, I just wanted to understand the rationale, especially considering that even the valuation seems to be on a reasonable side, I would say.
So sellers are actually not a glass manufacturer background, and they are basically financial investors just to assume that they are not an actual glass manufacturers. So actually, they were looking at the CapEx plan which was in front of them. And they also looked at what Borosil Renewables has been doing in the same space, and they were quite comfortable in talking to us on the particular transaction. And they also saw that we have been doing quite well in terms of our production, our profitability, and they cross-checked background and everything. And they finally -- and the transaction got finally negotiated and concluded.
In terms of their thought process, they would have also thought that by joining hands with us as a major partner, we will be able to smoothen out the CapEx program as well as run the operations more for a long-term basis because we are a glass manufacturers of more than [ 6-decade ] standing. So they saw a good partnership in us.
Finally, they -- initially, they had agreed for 85% stake sale, but finally, they agreed for 100%. But at the same time, they visited our plant and they were comfortable with our project, our operations and our profitability and every other aspects of business and also saw that the Indian market is also very fast growing in this space. So they went ahead with a swap of a certain portion of the acquisition costs, so that they are also equally interested in that sense to holding company like Borosil Renewables. And also through that, they are remaining interested in the European operations as a subsidiary.
So the transition got concluded at a very comfortable level. And this EUR 30 million cash payment and 22.5 million shares is something which is comfortable from our side as well in terms of obligation and ability through the transaction.
The next question is from the line of Dhiral from PhillipCapital.
Sir, how are we look to fund the expansion that we are planning for Europe as well as for our SG-4 and SG-5?
So for the European expansion, we are still calculating the CapEx requirement. The existing team has worked out some numbers, which we are evaluating. Also, we are looking at the project design itself and there could be certain changes there. But in terms of the financing of the overall project cost there, we will be taking a certain amount of loan in the target company. And also there is some government subsidy from the state government over there, which should be utilized for the project. And some amount of funds will be provided from internal accruals of the company, which have been accumulated in the company. And more or less, they have been utilized to some extent for the project already. So this will be the financing pattern for the European operations CapEx.
In India, for SG-4, we have still not firmed up our financing plan, but it will surely be a mix of debt and equity and internal accruals. So maybe in next couple of quarters, we will be coming back to you with that information after approval from the Board of Directors.
Okay. And sir, is the cost of operation in Europe is same as we operate in India? Or is it...
So in terms of the inputs cost, basically, the soda ash and other commodities are internationally priced. But currently, the gas price is out of way from the perspective of European operations because of the Russia, Ukraine crisis.
And in terms of the manpower cost, it is higher in Europe. But at the same time, the local production is very valuable over there for the domestic buyers. And correspondingly, they are able to recover higher selling price from the customers.
So on a net basis, if you see, though the costs are higher, the prices are also higher. And there is a decent amount of EBITDA in the company, which is quite comfortable from the European operation's point of view.
And sir, what is the market share of Interfloat in European region?
It's close to 2/3 as of now. And 1/3 is being made by imports from India, Malaysia, Vietnam and other places.
Okay. And sir, lastly, this 13%, 14% rise that we are seeing currently, is it fully covering the cost inflation which is there?
No, not fully.
Okay. So you feel that margin pressure would continue even in Q1?
I wouldn't comment on that because the prices keep changing every 10 days. So -- and prices could change rapidly also. So I have not put a number to it as of now.
The next question is from the line of Kashyap Javeri from Emkay Investment Managers.
A couple of questions from my side. One, this total 1,000 TPD capacity would be equivalent to...
Sorry to interrupt you, sir. The audio is not clear from your line. Please check.
Is this better?
Yes, please go ahead.
Sure. Sir, this 1,000 TPD capacity would be equivalent to how many megawatts if we were to convert that?
It will be close to 6 to 6.25 gigawatts, 6 gigawatts plus.
6 gigawatts plus. And second question is on this -- again, Interfloat, in the last question, you mentioned that it's about -- the market share of Interfloat is about 2/3. If I got the numbers correctly, you said total, the size of European market is about 20 gigawatts, of which domestic production is about 3 gigawatts. And of that 3 gigawatt, Interfloat is about 2/3.
Yes. So global manufacturing is about 2.5 to 3 gigawatt. And whatever the Interfloat production is taking place, the entire production is getting sold in Europe and that would be equal to about 65%, 66% of the demand.
Sure. And I can see about INR 300 crores of CWIP already there on the book as of March '22. And this additional 550 TPD, which we are putting up, what would be the cost per TPD that we are incurring?
So the last approved price for the project is INR 650 crores, which has been approved by the Board. So from the angle of 550 tons, it would be like in that ratio, INR 650 crores of 550 tons per day.
Okay. And last question from my side. In this 450 TPD, I understand about 2, 2.5 years ago when I had met Mr. Shreevar Kheruka, there was some talks about reducing the thickness of the glass and consequent improvement in the overall freight cost and its impact on the margin. So in this 450 TPD today, what's the breakup of -- if you look at the thickness, what will be the breakup?
We have been successful...
[ Technical Difficulty ]
Sorry to interrupt you. Ladies and gentlemen, the line for the management has got disconnected. Request you all to please stay online while we reconnect them. Thank you.
Ladies and gentlemen, thank you for patiently waiting. The line for the management is reconnected. Thank you, and over to you, sir.
So the question was about thinner glass. I'm very happy to say, as much as 27.3% of the total production of the company is now being sold in thicknesses which are less than 3.2. So it is taking its time in getting accepted, but it is getting accepted. And we are drawing more -- these sales are more remunerative for us.
So when you say less than 3.2, this will be largely 2 mm?
Sorry, this includes 2 mm, 2.5 and 2.8 mm, all 3 thicknesses.
Okay. And the difference in the freight cost as a percentage of the selling price would be what number, between the 2?
So trade difference is not significant. Actually, the prices are -- in lower thicknesses are remunerative, higher than the proportionate reduction in the thickness. So like, say, 1 square meter of 3.2 maybe selling at, say, INR 500 and 2.1 maybe selling at [ 4.1 ]. So it is not proportionately down in that sense. So you get a higher average per square meter per millimeter of glass when you sell a lower thickness class.
And these glasses are becoming popular because of the bifacial models coming into play very big way in China and other parts of the world, including now in India. So this demand would rise significantly in the years to come, which will be good for the company because the company is equipped to make 2-millimeter glass and supply it to the customers here. We are already exporting 2-millimeter glass.
Okay. And last question from my side. In your -- the total order book as of today or let's say, total sales also today, how much would be PSUs?
I'm sorry, I couldn't -- how much would be what?
PSUs.
PSUs. So PSUs are very limited because, like, say, BHEL is yet to -- they have just resumed their production. Earlier, they were running at about 200 megawatts, but they had stopped production in between. So they are the largest customer in PSU. But otherwise, there are not many PSUs. Rajasthan Electronics and Central Electronics are also, to some extent, the buyers.
The next question is from the line of Akshay Kothari from Envision Capital Services.
Sir, I wanted to understand regarding this Interfloat acquisition. Like in India, the pricing power we have is based on the landed cost of imports. So in Europe, how is the pricing power? Like you did mention that their local manufacturing is favored by the local population. So can you throw some light on that?
In Europe, the domesticity of the source of supply is very important. And so -- therefore, in the case of many consumers who are large volume consumers, they do not really factor -- they do not compare the prices with imported prices, which is done mainly by the smaller producers. And so yes, the system of pricing -- system of buying there is a little bit different.
Yes. So particularly in Germany and other parts, there are annual contracts done by the Interfloat Group with the customers because the customers are wanting a dependable supply source and also a consistent volume coming to their factories. Because solar glass, after all, is about 11%, 12% of the cost of module and they would like a dependable source, which is available in the form of Interfloat there. So the pricing is not exactly in tune with the imported landed cost, but it is on certain decent margin basis on which Interfloat has been able to sell their volumes to the customers. And customers are willing to pay that slightly priced for this kind of assured supply chain.
Okay. And could you just give a sense of cost of generation of power from solar energy vis-à-vis any other source of synergy in Europe? Like what is the differential going on right now?
Solar is much cheaper than any other source of energy. We could not give you more details than that because we are not that familiar with that market yet. But by far, the cheapest source of...
Were there any other buyers for Interfloat?
No, it was a bilateral transaction. We had a discussion with them, and then we both got interested in the transaction. So there was no process being run. So it was a bilateral deal.
The next question is from the line of Levin Shah from ValueQuest Investment Advisers.
The current participant has placed the call on hold. We will move on to the next question from the line of Nikhil Chowdhary from Kris Portfolio.
Sir, most of the questions have been answered. I just wanted to understand the normalized margins, like considering the Interfloat, maybe some supply challenges, and that is why the margins were depressed. But if you could share some margin color, whether it is Borosil or similar to Borosil, the normalized margins? And second question was on the gas supplies front, like are you seeing normalization of gas supplies? Or do we see the challenges [indiscernible].
Mr. Chowdhary, sorry to interrupt you. The audio is breaking from your line now. Please check.
Hello, is it better?
Yes. Please, go ahead.
Yes. So I just wanted to understand. I'll repeat my questions. I wanted to probably get some color on the normalized EBITDA margins of Interfloat, if you could share, like is it better than Borosil or similar to Borosil? I can understand the current challenges that are depressing the margins. You could probably share some color on that.
And second thing, sir, we made an acquisition at the time when the glass supplies are really challenging for the glass manufacturers in Europe. So is it getting better? Or do we see some challenges going forward? Because suppose if they don't normalize and the capacity remains unutilized, so probably even if you have paid some reasonable price, it doesn't probably make sense for us to pay even INR 400 crores then? Just wanted some color on that.
So the supply is not -- the production is not unutilized. All the glass being made there is being sold. There is no shortage of demand for the glass. So that is to answer your last question first. Giving you any sense of the normalized margin is premature at this time because we really need to be in control of the company before we can share this information.
Regarding your question, which was regarding the prices of gas in Europe, the answer is that the government is very acutely seized of this problem. They recognize that the price of gas is very high, and something has to be done to protect the industries, which are dependent upon the supply of gas and which are of national strategic priority.
We have mentioned Interfloat by name in -- amongst the list of companies, which are going to qualify for some support from the government. However, the exact nature and extent of support has not yet been discussed. What is in the air is that, at least one proposal which we have heard is that any price above a certain ceiling, which is fixed by the government, is going to be borne by the government. So the user of the gas will know that this is the ceiling at which I will get my gas and no higher than that. So if that happens, then that brings a lot of comfort to a lot of investors.
The next question is from the line of Levin Shah from ValueQuest Investment Advisors.
Sir, my question was on the exports market. So what we read and understand is that post this imposition of duties in U.S., specifically on the Chinese and other South Asian countries on the import of panels as well as glass, there has been a very good demand that we have seen from the U.S. market for the local players. But when we look at our revenue, our exports are like 20% of sales, and that is also predominantly to Europe is what I understand. So is there a mismatch in terms of our growth from U.S. versus domestic sale and module players, the kind of growth that they are seeing in U.S.?
So in the U.S., actually, there is no bar on import as of now because the program which they were to announce or they had announced rather in order to promote the local manufacturing of modules, an incentive program, that has not been finally approved by the senate yet. So they do not have any support system to local -- for local manufacturing or module as of now. So there is some disconnect in the thought process, I think.
And to the extent that the modules are getting imported, the local manufacturing is very limited in U.S.A. as of now. To our understanding, it is about 2 to 3 gigawatts only, whereas they install more than 20 gigawatts annually. So it is a similar situation like Europe. But they are moving slowly on the part of promoting the local manufacturing, which is why the demand in U.S.A. is less.
Moreover, lots of U.S. companies have Chinese stake or Chinese interest in terms of the purchase department or like that. And they have preference to Chinese companies or Malaysian companies for that region because when we discuss with our customers or prospective buyers in the U.S.A., a lot of time we experienced that this kind of phenomena there.
So we are, of course, trying to increase our export to U.S., but we have a limited volume as of now to offer. And it is rather easier and at a better price in Europe compared to U.S.A. So we are aware that Europe -- U.S.A. also is going to be a big market for us. But as of now, that does not seem to be so.
Okay. But the same -- the similar kind of demand trend both cell and module guys are seeing even we are witnessing that. Obviously, we'll not be able to supply immediately because of the capacity limitations that we have.
Yes. And for the module industry, it is quite good because of the China Plus One strategy. There is a lot of -- a lot of requirement of U.S.A. is now being made by countries like India, where a lot of export orders are getting diverted. So from a module perspective, it is working out faster for Indian exporters, but for glass it is yet to become like that.
Right. Sir, but ultimately, the module manufacturers in the domestic market will also procure glass domestically, right, to supply to the U.S.?
Yes. So domestic glass demand is quite high, and it is going to be even higher for this reason what you mentioned regarding export to U.S. and all. So that was without saying. And we see that the domestic glass demand will be close to double in the next 2 years' time. So local manufacturing is going up. The import of module is going down in India, which itself will increase the demand for glass substantially, besides the export in the installation.
Okay. Okay. Sir, and my last question is on this -- the duty protection that we have from Chinese imports, and I understand that, that is going to expire somewhere in July of this year. So now what is the requirement for it to be reinstated? And has there been talk that you have had with the government and government agencies on this regard?
Yes. So there is a certain process under which we have to go through. So we had filed our application for sunset review. And after public hearing and all, the government has been analyzing the data or the information. Now they are in the process of further processing it for issuing of disclosure document and then finally issuing the final findings, which would include continuation of duty or reduction or increase in duty.
So as we speak, the disclosure had just been issued yesterday. And we believe that -- this is going into the right direction as of now, but we have to wait for final findings from the government after hearing the views from different parties, all stakeholders.
Right. Sir and what is the -- just a basic question, but what is the duties that we have protected with, I mean, the quantum of duties currently?
It is 12% to 15% largely against import from China. And against Malaysia, it is 9.71%. So these are the duty structures.
The next question is from the line of Samir Gandhi from Greenenergy Sustainables LLP.
Sir, I am Director of Manufacturer Association of Maharashtra also for the solar. I have a few questions. Sir, first thing is after BCD is imposed 40%, even DCR panels, which do not have any import contents, they have also gone up. So whether Borosil had any opportunity to get better price realization in a way, whether this 40% BCD is a positive for us or negative for us?
It is definitely positive for the nation as such because this means that it will become prohibitive for anyone to import modules going forward. As such, the demand for modules produced in India is going to expand exponentially. So in that sense, it is good for the solar industry, solar manufacturing industry as such. However, there is -- the 40% duty on modules does not have anything to do with the import of glass. Glass can continue to be imported by anybody from anywhere subject to payment of whatever is the applicable duty, if there is any. So if there is no applicable duty, then glass can be imported without payment of duty.
So to the extent of the company, the advantage is that there are more customers now in India who are going to be making modules. And hence, we have an opportunity of selling to customers who are going to make modules in India. In the past, when models were being imported into India, the company had no opportunity to sell any glass to such manufacturers.
Because my question is like that, even DCR models, whether they do not have any import contents of sales, they have also taken this advantage and increased the price. So my question was accordingly that.
Sir, my second question is you have said that currently, you are facing some bottlenecks for the expansion. So what kind of bottlenecks are these? And even after this, are you sure that you will be able to go for 1,000 MT by September 2022? And my other question in this, there -- are we getting any PLI advantages?
The people who use our glass in manufacture of modules in India will definitely get advantage of PLI because the higher the domestic content, which they are using in the manufacture of the modules, the higher PLI they will get. So definitely, the people who are going to make modules using domestic glass will be earning more money than people who are importing glass.
With regard to the question of our projects, we -- I'm not sure which bottlenecks.
Sir, we actually mentioned about the COVID and other situations, which delayed the projects by a couple of months because it was applicable not only India, but in countries where the equipment were being made for supply to our plant. So these -- there have been certain delays in those supplies, which is now almost sorted out. And our project, instead of July, will get commissioned in September. So there has been 2, 3 months delay only, which is understandable from our perspective from -- looking at the circumstances. And yes...
There is no change in our plans to do another 1,000 tons after commissioning of SG-3. There's no change at all.
Okay, sir. My next question is right now, we are facing power cuts and a tremendous increase in the gas price. So how do it affect Borosil, first thing? Second thing, our production is at one site only. So are you going for any multi locations to dealing from the single-site risk?
At this moment, so far as multi location is concerned, we took a slightly bigger step, and we shifted our location to Germany. But as far as India is concerned, for the time being, we are still looking at manufacturing in the same location, but there are many, many advantages which we have in continuing in this location because of the availability of so many services which are essential for the production of solar glass.
Sir, whether domestic production is sufficient in India for taking into account all manufacturing capacity of the modules?
See, that's a difficult question to answer. We know that at least one company, Adani, is well on its way to setting up production facility. And they have said that they expect to come into production by the end of this year or maybe at the very latest in the early part of the next year. So this is what the market news is, and that would be about 600 tons per day. So that's not a small capacity.
In addition to that, there are other companies like Triveni and Gopal Glass, who have announced that they will be setting up solar glass production. I don't know what tonnage is and when it is good to come up, but they have announced, and we believe that they will come up. So we don't have much doubt about that.
There are also other companies like Gold Plus who have announced and another Saint-Gobain seems to have announced something as well. But after that initial announcement, we have not heard anything. So -- and of course, Reliance is there. But Reliance says that they will manufacture only for self-consumption. So their glass, if they make it, is not likely to come into the market, but the other people's glass will come into the market. So we will have a nice field of manufacturers who will be able to supply glass to domestic customers.
Mr. Gandhi may we request that you return to the question queue for follow-up questions. The next question is from the line of Mohit Kumar from DAM Capital.
Sir, do you need to raise external money to expand the capacity to till 2,000 TPD?
Yes, Mohit, as I had mentioned that Board will actually consider the SG-4 expansion at an appropriate time. And we will surely be looking at financing by way of debt and equity both. At that point in time, we may probably decide to raise some equity. But as of now, that is not there.
From the point of view of funding the acquisition also, there is discussion about raising the equity to pay the money in a couple of months or maybe some time later. But these are still to be finalized. We will surely be needing some capital to complete our expansions in Europe as well as here.
Secondly, sir, you haven't withdrawn, I think debt amount is [ $1.4 billion ] at the end of FY '22. Once the SC -- the expansion is complete, what will be the debt figure, the peak debt? I'm talking about the current drawn or expansion.
In the current expansion, which is SG-3 in India, we had tied up for INR 200 crores of term debt. So we have drawn close to INR 100 crores by now, and INR 100 crores will be drawn by the time the project is completed. So that's the status on the date. And equity, we had raised INR 200 crores by QIP. Rest everything is being financed from internal accruals.
So the debt after the expansion will be around $2 billion. Is that understanding correct, right?
So INR 200 crores is this. And also, there is a debt which was taken for first expansion, which was SG-2, which is about INR 55 crores to INR 60 crores, INR 55 crores.
The next question is from the line of Keval Ashar from DSP Investment Managers.
So just one small question. Sir, what will be the price differential between us and Chinese solar glass manufacturers currently?
So the FOB prices are different. But in terms of their local pricing, we have to look at the landed cost. So to most large buyers in India, we sell at the comparative landed cost plus/minus something -- or rather plus something. And to other customers who are smaller ones, we have slightly higher pricing for them, which is about 5% to 10%, depending on case-to-case basis.
Okay. So is it 5% to 10% of price differential between Chinese peers? I didn't get that exact number.
For the smaller customers, yes. But for the larger customers, it will be 2% to 3%, 2% to 5% maybe.
The next question is from the line of Kashyap Javeri from Emkay Investment Managers.
Sorry, my questions have been answered. Thank you.
Thank you. Ladies and gentlemen, we will take that as a last question. I would now like to hand the conference over to the management for closing comments.
Thank you very much for the interest shown in the performance of our company. And we appreciate all the good wishes, which have been given. And it is with the support of the investor community that we can consider to grow and flourish. So we appreciate your support. Thank you very much.
Thank you. Ladies and gentlemen, on behalf of Axis Capital Limited, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.