Some statements in this discussion may be forward looking. Actual
scenario /outlook may however differ materially from those stated on account of various
factors such as changes in government regulations, tax regimes, economic developments,
currency exchange rates and interest rate movements, impact of competing products and
their pricing, product demand and supply constraints within India and other countries
where the Company conducts business.
A. INDUSTRY STRUCTURE AND DEVELOPMENTS
The Company is engaged in the production of low iron textured solar
glass used in the manufacturing of solar photovoltaic modules in the power sector. China
has dominated the global solar power manufacturing sector over the last decade and has the
highest annual solar power installations. Chinese manufacturers have increasingly started
to use other Southeast Asian geographies like Malaysia and Vietnam as their new
manufacturing hubs for solar glass by setting up their subsidiaries there with a primary
objective to circumvent the Anti-dumping duties levied by various countries against
Chinese imports and continue to dominate the sector by using these geographies for
exports. These subsidiaries engage in large scale related party transactions with their
parent companies in China, which provide interest-free capital, fixed assets, and raw
materials at related party prices. This create costs that are not necessarily at armsRs
length, circumventing international trade remedy measures by showing a lower cost of
manufacturing than prevailing international prices of inputs and services. They also have
access to several significant fiscal and other incentives in the host countries.
Solar power has emerged as a major growth area in the country, driven
by increased focus from the Central Government since the year, 2014. The Government set
ambitious targets of achieving 280 GW of solar power installations by year, 2030. As of
March 31, 2023, the total installations stood at 66 GW with a demand pipeline for another
70 GW in various stages of tendering/installation. The installations were impacted by
steep hike in the prices of solar components and modules in the last one year, as well as
higher costs due to the imposition of Basic Customs Duty (BCD) on imports of solar cells
and modules. However, the Government has recently postponed the implementation of Approved
List of Models and Manufacturers (ALMM) for Government projects by one year thereby paving
the way for continued use of imported modules. Meanwhile, the prices of solar cells and
modules have corrected significantly in the last 3 months, making the cost of projects
based on imported modules viable for developers. Based on these developments, it is
expected that the pace of installations will accelerate from the current financial year,
driven by a robust demand pipeline. Solar power remains the single largest source to meet
the growing demand for power. Electrical vehicles are going to be another major area for
demand growth in the near future. Green hydrogen is becoming the next growth area which
will be possible with a cheap source of power like Solar. All these factors will ensure
continuous demand visibility and high growth in this industry. A significant portion of
new power installations is by way of renewable energy and the share of solar power in the
renewable as well as overall energy basket is rising rapidly.
Various governments across the globe are providing significant support
to achieve a higher growth in renewables. In calendar year, 2022, the estimated annual
global solar PV installations reached around 240 GW, a 37% increase compared to 175 GW in
2021. Installation records were set by China, which accounted for about 106 GW, European
Union (EU) accounting for 39 GW and United States of America (USA) accounting for 19 GW.
In India, solar installations were 14 GW during calendar year 2022 about 18% higher
compared to those during calendar year 2021.
The Company anticipates a gradual shift in preference to the use of
locally produced modules across major economies like USA, EU and India which are providing
support and incentives to boost local manufacturing. The domestic manufacturing sector in
India has now received a significant boost on account of the imposition of BCD on solar
cells and modules and Production Linked Incentives (PLI). Led by these initiatives, there
have been significant capacity additions in all the components in the solar module value
chain and it is expected that the country will not only achieve self-sufficiency in this
strategically important industry but also become a major center for exports.
As part of the CompanyRss global business expansion plans, the Company
has set up two overseas wholly owned subsidiary companies namely, Geosphere Glassworks
GmbH (“Geosphere”) based in Germany and Laxman AG based in Liechtenstein. The
Company through these wholly owned subsidiaries has acquired a majority stake of 86% in
GMB Glasmanufaktur Brandenburg GmbH (“GMB”), based in Germany and Interfloat
Corporation (“Interfloat”), based in Liechtenstein. Interfloat is a
well-established and leading solar glass supplier to European markets, with nearly 40
years of experience in the industry. GMB specializes in the manufacturing of flat glass,
special glass products and similar products, which in particular produces glass for solar
modules, thermal collectors and greenhouse glass amongst others. It is the largest
producer of textured tempered solar glass in Europe, with a manufacturing facility in
Tschernitz, Germany. GMB manufactures solar glass products for Interfloat, which are sold
by Interfloat to its customers across Europe. These acquisitions have strengthened the
CompanyRss global presence and market position.
Additionally, the Company has been organically augmenting its own solar
glass production capacities to capitalize on growth opportunities. The recent
commissioning of SG-3 furnace at the existing manufacturing facility in Bharuch, Gujarat,
has increased the CompanyRss production capacity from 450 tonnes per day to 1000 tonnes
per day. Also, the production capacity of GMB has increased from 300 tonnes per day to 350
tonnes per day after the completion of cold repairs activity at its manufacturing facility
situated in Germany.
B. OPPORTUNITIES & THREATS OPPORTUNITIES
The Company is the 1st producer of solar glass in the
country, and its products enjoy widespread acceptance. As an early mover in the field, it
has invested significantly in a long and painful learning curve and come a long way. In
this journey the Company has amassed distinct advantages in its understanding of operating
techniques and with recent expansions it has started to accrue benefits of scale in its
operations. It has sufficient land and infrastructure to undertake further brownfield
expansions. Having met the stringent quality requirements and needs for testing as a
component as well as at Photo-Voltaic (PV) module level, it has a definitive edge over new
entrants. It constantly evaluates avenues for growth in this sector in both the domestic
and the export markets. In the domestic market, its natural advantage of offering a
shorter lead-time to module manufacturers and assured supplies work favorably in helping
it to secure business. A significant portion of the expansion in module capacity is being
done by its existing customers, which will make it relatively easier for the Company to
sell additional volumes.
Power demand has been rising and solar remains the single largest
source of new power capacity additions consecutively in the last 6 years.
The various policy initiatives taken by the government as mentioned
hereinabove, more particularly the ones directed towards promoting domestic manufacturing
of all components, are expected to generate a long-term sustainable demand which will
enable the creation of a robust value chain in the near future. With the help of schemes
like Production Linked Incentives (PLI) from the Government of India, the country is now
trying to establish the entire value chain by backward integration into Polysilicon,
ingots and wafer manufacturing in order to avoid disruptions in supply chain and achieve
self-sufficiency. Initiatives like “Atmanirbhar Bharat” are also changing
sentiments to give preference to local supplies. The Geo-political situation with China
has already become a key decision point for the drive to reduce dependence on imports by
various stakeholders in the value chain, and this sentiment is not just in India but also
internationally, where there is a concerted effort to diversify their sources of solar
glass.
It is expected that the global installations will be significantly
higher in the current and the following years as all the major economies are placing an
increased focus on renewables. This will drive up the demand for all components including
solar glass.
Module manufacturing capacity has increased to about 35 GW from 15 GW
in the beginning of the financial year and is expected to rise in the next 2-3 years to
100 GW. The output from the three furnaces operated by the Company and the new capacities
coming online by other players will still fall short to meet the current demand. There is
significant room for further capacity additions considering the expansion in demand. This
demand will further rise with a major shift happening towards bifacial /glass-glass
modules.
THREATS
> India does not have sufficient capacities for solar cells and
there are no capacities for Polysilicon, ingots and wafer manufacturing leaving the entire
program vulnerable to disruptions in supply chain and strategic pricing by Chinee sources.
This situation may change gradually over next 2-3 years as we expect capacities for these
products under the PLI scheme.
> The Government had introduced ALMM as a measure to control imports
of sub-standard modules through a certification of models and facilities by MNRE. The
Government has suspended this requirement for one year till March 31, 2024 which may
adversely affect the domestic manufacturing and thereby demand for components. Whereas
huge capacity additions have been made and more are in the pipeline, this will impact the
manufacturing and increase import of modules.
> China as the WorldRss largest solar glass producer accounts for
over 98% of the total solar glass capacity. Chinese manufacturers are aggressively raising
their solar glass production capacities looking at future demand which has already started
to cause demand supply mismatch which can result in surplus capacity for glass and
depressed prices and margins.
> The Chinese producers have set up manufacturing plants in Malaysia
and Vietnam mainly to cater to their export markets including India. A significant portion
of solar glass imports into the country till the recent past were happening from Malaysia
which replaced China in order to avoid paying Anti-Dumping Duty (ADD) on imports from
China into India. Subsequently Vietnam also became a significant exporter to India as
there is no duty and this dented the impact of duties against China and Malaysia. Now from
August 2022 the base has shifted back to China after the discontinuation of ADD.
Such tactics by the Chinese will continue to impact domestic pricing
and profitability unless the present exemption from levy of BCD is withdrawn immediately
and additional duty measures are put in place against all exporting countries. The BCD
exemption needs to be withdrawn considering the fact that the very basis of granting the
exemption by treating solar cells and modules as falling under Information Technology
Agreement (ITA) has undergone change and significant Basic Customs duties have been levied
on imports of cells and modules in consideration of the substantial subsidies which these
products receive in other countries. Since exactly the same regime of extensive subsidies
are received by manufacturers and exporters of solar glass, there is no justification to
continue exemption for customs duties on imports of solar glass. The continuation of
exemption denies a level playing field to domestic manufacturers and strongly counters the
idea of an Atmanirbhar Bharat.
C. SEGMENTWISE OR PRODUCTWISE PERFORMANCE
The CompanyRss business activity falls within a single primary business
segment viz. Manufacture of Flat glass. As such, there are no separate reportable segments
as per Indian Accounting Standard 108.
The Segment Revenue in the Geographical Segments considered for
disclosure are as follows:
i) Revenue within India includes sales to customers located within the
Domestic Tariff Area in India, sales made to units located in Special Economic Zones
(SEZ).
ii) Revenue outside India includes sales to customers located outside
India.
Sales |
2022-23 |
2021-22 |
|
(Rs in Lakhs) |
(Rs in Lakhs) |
Within India |
50,709.25 |
52,411.07 |
Outside India |
18,107.86 |
12,011.14 |
TOTAL |
68,817.11 |
64,422.21 |
D. OUTLOOK
The outlook of Solar Photovoltaic (PV) installations has been positive
globally. The ambitious target of Indian government to achieve solar power installations
of 280 GW by 2030 and the various initiatives to reduce dependence on imports e.g.
imposition of BCD, PLI scheme and preference to domestic solar modules is leading to
continuous rise in demand for solar glass in India. The European UnionRss “Solar
Accelerator Program” and Green-deal to reduce dependence on Chinese imports and boost
local manufacturing is also leading to increase in demand for solar glass in European
markets. Similarly, the “Inflation Reduction Act” (IRA) introduced in the USA is
leading to capacity announcement by many large players. Turkey and various other countries
are also providing significant support to achieve higher growth in renewables and in the
process giving a boost to domestic manufacturing thereby prompting a rise in demand for
solar glass.
To achieve the ambitious targets set by the Government, we need
corresponding quantity of solar modules, which could either be imported or made
domestically. Government is putting an increasingly high focus on Domestic manufacturing.
The agencies like Solar Energy Corporation of India Limited (SECI) are creating enough
demand visibility and auctions are being held well in advance. The Company expect that the
solar module manufacturing capacity in the country is expected to go up to almost 100 GW
from the present capacity of about 35 GW on the back of a series of measures taken by the
Government. This will ensure that a larger proportion of solar installations will use
domestically produced modules. Moreover, the exports are rising and there is a good
opportunity to increase export of modules. Further, the demand for glass-glass bifacial
modules (in which the polymer back sheet is replaced by the glass) is increasing across
the world. Thus, demand for solar glass is expected to rise exponentially over the next
3-5 years.
The solar energy will reduce pressure on natural resources besides
being non-polluting and environment friendly and will lead to saving in the countryRss oil
import bill with very little recurring cost. It is expected that a very significant
portion of new power installations will continue to come from renewables, led by solar.
Significant amount of work is going into providing economic and efficient electricity
storage, which will make solar installations along-with electricity storage a competitive
and reliable source of power. As the prime domestic manufacturer of solar glass, the
Company expects to participate in and benefit from the extremely strong growth potential
for the solar power sector.
E. RISK AND CONCERNS
The Company is exposed to normal industry risk factors of competition,
economic cycle and uncertainties in the international and domestic markets. Additionally,
the changes in Government policies e.g. levy/removal of Anti-dumping duty and
nonimposition of BCD leads to reduction in sales and margins.
IIn India there is a complete exemption from import duty on solar glass
whereas it is subject to levy of high rate of import duties in major producing countries
i.e. China/Malaysia. Glass imports from China increased disproportionately after removal
of ADD in August, 2022 and along-with duty free imports from Vietnam have taken huge
market share of over 90% during January to MarchRs 2023. These imports are happening at
highly subsidized prices and hindering the ability of domestic industry to realize its
full potential and serve the growing demand. It is essential that India ends exemption
from payment of BCD on imports of solar glass and imposes an appropriate basic import duty
immediately. The Government should also extend support by way of inclusion as a product
eligible for incentive under PLI scheme and DCR. Such measures are essential to provide a
level playing field to domestic industry and attract investment.
On the Solar installations front, the Government approvals for land and
readiness of power distribution companies to evacuate power, needs to be focused in order
to realize the ambitious growth plans to produce solar energy. The continued pressure to
quote lower prices for electricity in the biddings to get Government allocations is
leading to lower prices for input/component manufacturers thereby making them vulnerable
to the temptation of using substandard components, which could affect the health of the
manufacturing industry. On the other hand, it leaves very little incentive for
investors/developers to commit resources.
This is a strategically important industry for India and we have to see
how the industry shapes up in the near term buoyed by measures taken by the Government to
boost manufacturing in the entire value chain and become self-reliant. Development of the
entire eco-system is the only way to pave the way for robust growth, ensure supply chain
reliability and achieve ambitious plans.
F. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY
The Company has adequate Internal Control Systems commensurate with its
size and nature of business. The internal control systems are designed to ensure that the
financial statements are prepared based on reliable information. Internal Audits are
regularly conducted by an in-house Internal Audit department of the Company and Internal
Audit Reports are reviewed by the Audit Committee on a quarterly basis.
G. DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL
PERFORMANCE
The operational performance during the year was adversely impacted due
to lower selling prices in the domestic market and rise in the cost of raw materials,
energy and packing materials which could not be passed on to customers due to depressed
market prices arising from dumping by Chinese exporters and the additional impact of
removal of Anti-dumping duty on imports of Chinese glass from August 17, 2022. There has
also been a considerable drop in the cost of international freight thereby making the
imports cheaper which forced the Company to reduce the selling prices. Consequently, the
Earnings before Interest, Depreciation and Tax (EBIDTA) margin has declined.
H. MATERIAL DEVELOPMENT IN HUMAN RESOURCES, INDUSTRIAL RELATIONS AND
NUMBER OF PEOPLE EMPLOYED
The exponential growth path that we have embarked upon with global
presence is possible only because of the untiring and relentless support and commitment of
our people.
At Borosil Renewables, it is our endeavour to provide employees with an
open, transparent and empowered environment, where everyone feels valued and cared for.
Over the years, some of the key factors that have contributed to our growth are:
• Shared Vision
• People Driven Company
• Culture of Trust and Transparency
• Home Grown Management
• Empowerment given across all levels
• Welcoming of new ideas
• Open door policy
• Loyal employees with decade long tenures
• Supportive Management
• Alignment of Individual aspiration to organizational goals.
In partnership with an external agency, the HR department is also
facilitating the creation of a future-ready organization by way of setting up the required
organizational structure, assessing the leadership skills, key talent and potential of our
team to shoulder this responsibility. This ensures attraction, retention, motivation and
engagement of Talent for exposure to new roles and growth.
The Learning and Development (L&D) vertical which has got formally
institutionalized focuses on providing such opportunities for employees to continuously
learn, grow and excel in the organization. Our L&D initiatives are designed by
understanding the business needs and the training programs rolled-out to address those
business challenges. The Impact study conducted thereafter helps measure and evaluate the
effectiveness of the trainings imparted and implementation of the learnings for enhanced
productivity and performance. The focus is towards creating a holistic developmental
journey aligned to oneRss role and grooming Future-Fit leaders.
Our values of Integrity, Customer Focus, Respect, Continual
Improvement, Accountability, Safety are our guiding light in all that we do, which is
reinforced through all our communication channels and connects with our people.
Like always, we owe the continued success of our journey to our people
and their passion!
The Company has 719 permanent employees (including workmen) as on March
31,2023.
I. DETAILS OF SIGNIFICANT CHANGES IN KEY FINANCIAL RATIOS, ALONG-WITH
DETAILED EXPLANATIONS
Ratios (Based on Standalone Financials) |
2022-23 |
2021-22 |
Change (%) |
Explanation where changes is more than 25% |
| Debtors Turnover Ratio |
12.06 |
9.76 |
23.52% |
- |
| Inventory Turnover Ratio |
5.66 |
12.08 |
-53.15% |
Due to higher inventory at the year end. |
| Interest Coverage Ratio |
17.04 |
79.46 |
-78.56% |
Due to lower profitability and capacity ramp
up phase of SG-3 |
| Current Ratio |
1.46 |
3.75 |
-61.15% |
Due to utilization of surplus funds in
project and increase in short term borrowings. |
| Debt equity Ratio |
0.41 |
0.20 |
106.33% |
Mainly due to project loan disbursed during
the year. |
| Operating Profit Margin % |
15.64 |
31.36 |
-50.13% |
Due to lower profitability on account of
rising cost of raw materials, energy and packing materials which could not be passed on to
customers due to prevailing market conditions. |
| Net Profit Margin % |
12.87 |
25.74 |
-50.00% |
|
| Return on Net Worth % |
10.07 |
21.09 |
-52.25% |
|
|
For and on behalf of the Board
of Directors |
|
P. K. Kheruka |
|
Executive Chairman |
|
DIN:00016909 |
Place : Mumbai |
|
Date : May 24, 2023 |
|
+91-9892691696
