Borosil Renewables Ltd Management Discussions

Some statements in this discussion may be forward looking. Actualscenario/ 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 andsupply constraints within India and other countries where the Company conduc?s business.

A. INDUSTRY STRUCTURE AND DEVELOPMENTS

The Company is engaged in the production of low iron textured solar glass, a component used in the manufacture of solar photovoltaic modules in the power sector.

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 has set ambitious targets of achieving 280 GW of solar power installations by year, 2030. As of March 31, 2024, the total installations stood at 81.8 GW with a demand pipeline for another about 65 GW in various stages of tendering/installation. The year 2023-24 saw a growth in installations from 12.8 GW in the previous year to 15 GW. The prices of all the components in the solar power value chain in FY 2023-24 fell considerably led by huge price cuts in China due to concerns of oversupply owing to huge capacity additions for each item. This also had its impact on the solar glass prices.

Solar power remains the single most preferred source to meet the growing demand for power worldwide. Electrical vehicles are already becoming an area for demand growth and Green hydrogen is expected to be the next growth area which will need Solar power. The most recent move by the Central Government to facilitate roof top solar installations at over one crore households under the "PM surya ghar yojana" will further boost the demand. 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.

China dominates the entire global value chain of solar manufacturing over the last decade and also installs the highest wattage of solar power generation amongst all countries. Other markets i.e. the European Union, USA, India and Turkey are also growing rapidly. The Chinese domination of manufacturing arises from heavy subsidization of their manufacturing sector. They have expanded with 100% owned component manufacturing subsidiaries in Malaysia and Vietnam. With all this, they control almost 96% of the global market. It is generally believed that their overseas subsidiaries facilitate the circumvention of anti-dumping duties levied by various countries against Chinese imports.

Various other governments across the globe are also providing significant support to achieve a higher growth in renewables. In calendar year, 2023, as estimated by Bloomberg New Energy Finance, the estimated annual global solar PV installations reached around 444 GWp (DC), a staggering 76% increase compared to 252 GWp in 2022. Installation records were set by China, which accounted for about 268 GWp. As per Solar Power Europe, Europe accounted for 56 GWp solar capacity addition during 2023 (40% increase over 2022 additions). United States of America (USA) accounted for 32.4 GWp solar capacity additions in 2023 as reported by Solar Energy Industry Association (SEIA) and Wood Mackenzie (51% increase over 2022 additions)

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 received a significant boost on account of the imposition of BCD on solar cells and modules, ALMM scheme and Production Linked Incentives (PLI). Consequently, there have been significant capacity additions in all the components in the solar module value chain. 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. This can already be seen in the growth in export of modules from India in the financial year 2023-24. The Government has also withdrawn the suspension of ALMM scheme effective April 2024 which is expected to lead to rise in the share of domestically made modules in the domestic installations. This augurs well for growth of domestic manufacturing of solar glass and four new plants have been commissioned during 2023-24 with a combined capacity of 1300 TPD besides 1000 TPD of the Company.

B. OPPORTUNITIES & THREATS OPPORTUNITIES

The Company is Indias largest producer of solar glass, and its products enjoy widespread acceptance. It also happens to be the largest non-Chinese owned solar glass producer in the world. As an early mover in the field, it has invested significantly in the learning curve. 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. 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 the new entrants. In the domestic market, the natural advantage of offering a shorter lead-time to module manufacturers and assured supplies from a local source works favorably in helping to secure business. All the major customers have significantly expanded their capacity which has made it easier for the Company to sell additional volumes. It has sufficient land and infrastructure to undertake further expansions at the existing location.

Power demand globally has been rising and solar remains the single largest source of new power capacity additions consecutively in the last 7 years. With the help of schemes like Production Linked Incentives (PLI) and ALMM from the Government of India, the country is now trying to establish the entire local 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 is driving all the major countries to reduce dependence on imports from China and diversify their sources of solar components including 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 the demand much higher for all components including solar glass.

Module manufacturing capacity has increased to about 65 GW from 35 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 which have been commissioned by other players will still fall short to meet the expected growth in demand. This demand has already shifted to larger size modules and the focus has moved towards bifacial /glass-glass modules. There is significant room for further capacity additions considering the demand growth.

THREATS

0 Manufacturing capacities for solar cells are under rapid deployment in India, and we may become self-sufficient in the forseeable future. Capacities for Polysilicon, ingots and wafer manufacturing are under discussion. Shortages here would leave the entire program vulnerable to disruptions in supply chain and strategic pricing by Chinese vendors. This situation may change gradually over next 2-3 years as we expect capacities for these products to come up under the PLI scheme.

0 China as the Worlds largest solar glass producer accounts for over 96% of the total solar glass capacity. Chinese manufacturers are aggressively raising their solar glass production capacities looking at future demand which has caused a demand supply mismatch and depressed prices as a result of surplus capacity for glass.

0 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 in the 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. From August 2022 the export 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 e.g. ADD/ CVD are put in place against all exporting countries. The levy of ADD/CVD would be necessary since the countries with whom we have FTA would continue to export the goods without BCD even after the withdrawal of BCD exemption. There is no justification in continuing the BCD exemption on solar glass when a duty of 25% has been put in place from April 2022 on solar cells which is also a component of solar modules. The continuation of exemption denies a level playing field to domestic manufacturers and defeats the idea of an Atmanirbhar Bharat.

C. SEGMENTWISE OR PRODUCTWISE PERFORMANCE

The Companys 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) and to Export Oriented Units (EOU).

ii) Revenue outside India includes sales to customers located outslde india.

Sales	2023-24	2022-23
	( In Lakhs)	( In Lakhs)
Within India	80,395.50	50,709.25
Outside India	18,191.90	18,107.86
TOTAL	98,587.40	68,817.11

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 under ALMM are leading to continuous rise in domestic manufacturing of modules and consequently the demand for solar glass in India.

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 65 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 European Unions "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. India stands a good chance to increase its exports of solar glass in view of absence/limited local production of solar glass in the export markets.

The solar energy will reduce pressure on natural resources besides being non-polluting and environment friendly and will lead to saving in the countrys 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 on import of solar glass and non- imposition of BCD leads to reduction in sales and margins.

In 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. Solar glass imports from China increased disproportionately after removal of ADD in August, 2022 to almost 80% of the total solar glass imports and the remaining 20% comes as duty free imports from Vietnam. 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 the 15% basic import duty as per tariff immediately. The Government should also extend support by way of a mandatory use of local ancillaries (e.g. solar glass, EVA, backsheet etc.) upto a certain percentage for the modules being produced under PLI scheme, ALMM, DCR and any other government funded/ supported scheme. Such measures are essential to create local demand, provide a level playing field to domestic industry, attract investment and achieve scale to become globally competitive.

On the Solar installations front, the Government approvals for land, readiness of power distribution companies to evacuate power and expenditure on creating infrastructure on grid balancing 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 a pressure 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. Growth in local manufacturing of components by allowing them a level playing field may have some marginal additional cost but it will not raise the cost of power to unsustainable levels.

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.

As regard our overseas operations, The German and other European Governments including European Council seem to be aligned to the idea of promoting domestic manufacturing. However, too little has been done so far and it could be too late. Many of the solar module manufacturing plants have already shut down or have announced their plans to discontinue the operations. The authorities need to put in place the right measures immediately to incentivize and save the domestic manufacturing of solar modules and solar glass. Unsustainable operations have already taken their toll on many other industries in the EU and a delay in implementing support measures for the solar value chain could destroy the local industry.

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 for the year suffered significantly due to decreased selling prices in the domestic market, primarily caused by a sharp decline in market prices resulting from the dumping practices of Chinese exporters. This situation was further exacerbated by the removal of Anti-dumping duties on imports of Chinese glass starting August 17, 2022. There has also been a substantial drop in the freight from China to India thereby making the imports cheaper which forced the Company to reduce the selling prices. Although the costs have shown some amount of moderation but it was not sufficient to absorb the huge drop in the average selling prices due to dumping. Exports also suffered from the second half of the year. Consequently, the Earnings before Interest, Depreciation and Tax (EBIDTA) margin has declined.

As regards the overseas operations, the operating performance was impacted due to lower selling prices as the landed cost from alternate sources for customers declined due to a substantial drop in prices from Malaysia/Vietnam and reduction in international freight rates. Furthermore, production was hampered by operational challenges. Initially, there was a slowdown in plant operations due to furnace repairs conducted in April and May 2023. Subsequently, from December 2023 to March 2024, production from one of our two production lines was suspended due to sluggish demand in Europe. Consequently, the Earnings before Interest, Depreciation and Tax (EBIDTA) margin of overseas operations has also 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 endeavor 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 ones 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 809 permanent employees (including workmen) as on March 31, 2024.

I. DETAILS OF SIGNIFICANT CHANGES IN KEY FINANCIAL RATIOS, ALONG-WITH DETAILED EXPLANATIONS

Ratios (based on standalone financials)	2023 24	2022 23	Change (%)	Explanation where change is more than 25%
Debtors Turnover Ratio	12.55	12.06	4.07%	-
Inventory Turnover Ratio	6.14	5.66	8.55%	-
Interest Coverage Ratio	5.53	24.77	-77.66%	Due to negative profitability on account of lower selling price and a higher interest cost on SG-3 loans as the plant got commissioned from 23rd February 2023.
Current Ratio	1.52	1.46	4.57%	-
Debt equity Ratio	0.41	0.41	-0.47%	-
Operating Profit Margin %	-1.73	15.64	-111.03%	Due to negative profitability on account of lower selling prices and a higher depreciation as SG-3 plant got commissioned from 23rd February 2023.
Net Profit Margin %	-1.68	12.87	-113.03%	Due to negative profitability on account of lower selling prices and a higher depreciation as SG-3 plant got commissioned from 23rd February 2023.
Return on Net Worth %	-1.86	9.78	-118.98%	Due to negative profitability on account of lower selling prices and a higher depreciation as SG-3 plant got commissioned from 23rd February 2023.

 

For and on behalf of the Board of Directors	Pradeep Kumar Kheruka
Place: Mumbai	Executive Chairman
Date: May 27, 2024	DIN:00016909