Borosil Renewables Limited (502219) Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to Borosil Renewables Limited Q1 FY '27 Results Call. [Operator Instructions] Please note that this conference is being recorded. I would now like to hand over the call to Mr. Rohan Gheewala from Axis Capital Limited. Thank you, and over to you, sir.

Thank you. Good evening. On behalf of Axis Capital, I'm pleased to welcome you all to the Q1 FY '27 Earnings Conference Call of Borosil Renewables Limited. We have with us the management represented by Mr. Ashok Jain, Director; Mr Melwyn Moses, Chief Executive Officer; Mr. Sunil Gupta, Whole-Time Director and Chief Financial Officer; and Mr. Dhaval Patel, EVP, Investor Relations. We will begin with the opening remarks from the management followed by an interactive Q&A session. Thank you, and over to you, sir.

Thank you, Rohan. Good afternoon, and welcome to the Borosil Renewables Q1 FY '27 Investor Call for the quarter ended June 2026 as approved by the Board on 16th July and an updated presentation have been uploaded at both the stock exchanges and company's website. We will now discuss the operations of the company on a stand-alone and consolidated basis. First, coming to the stand-alone results. Sales were INR 405.69 crores versus INR 332.26 crores in the corresponding quarter last year, registering a jump of 53%. Q4 FY '26 immediately preceding quarter sales were INR 437.62 crores, which included sales of INR 32.07 crores goods dispatched in previous quarters but delivered to customers in the Q4 FY '26. EBITDA was at 35% of sales at INR 142 crores as against INR 92.53 crores in the corresponding quarter last year, which was at 27.9% of sales. Q4 FY '26 EBITDA was 144.61 crores, which included INR 9.77 crores on the goods of INR 32.07 crores, as I mentioned some time ago. The major increase in sales value came from the selling prices as the average ex-factory price during the quarter increased to INR 160.30 per millimeter, per square meter as compared to INR 138.10 in the corresponding quarter and INR 150.20 in the preceding quarter. The selling price includes a fuel surcharge levied from 10th March 2026 to offset cost increase due to rising fuel prices after outbreak of war in West Asia. Sales in quantity terms were higher by 8% compared to the corresponding quarter. I'm happy to inform that we were able to operate the plants at full capacity despite disruption in fuel supplies and the prices led by war in West Asia. EBITDA margin has consistently stayed above 33% for the fourth quarter in a row. We continue to work on efficiency improvements and cost reductions and expect further enhancement in the operational efficiencies. Our new solar wind hybrid captive power plant commissioned in March '26 has helped us increase the share of renewable power sources to 93% of the total power requirements of the quarter, making our processes more environment-friendly and also saving us on the cost. The West Asia war situation seems to have slightly eased and the prices of fuels have come off in the last few weeks, although uncertainties still prevail. The government has already announced lifting of supply curbs, and we expect that full contracted volumes will be made available after some time. This will bring the cost closer to the prior levels. Solar manufacturing has been -- has seen a strong growth on the back of government support. The module manufacturing capacity in the country has reached 203 gigawatts compared to just 11 gigawatts 5 years ago on the back of support by way of PLI scheme, basic custom duty and ALMM scheme. Similarly, solar cell manufacturing is now supported and ALMM 2 has been implemented with effect from 1st June 2026, mandating use of domestically produced solar cells. This has led to increase in the capacity to 30 gigawatts already, which is now expected to rise to 75 gigawatts by 2027 as significant capacities are under installation. Now government is extending similar support to ingot and wafer manufacturing by introduction of A13, which is scheduled from June 28, under which ingot and wafer will also be mandated to be sourced from local production. We expect ingot wafer capacities of about 50 gigawatts to come into production gradually by 2029. This will bring further resilience in the solar PV value chain in the country. Various demand drivers introduced by the government helped annual solar installations to reach 45 gigawatts, which is equal to 62 gigawatts on DC basis in 2025, '26. Expected growth in demand from other emerging sectors like electric vehicles, data centers and green hydrogen will take this to even higher levels going forward, leading to an increased demand of solar glass. Government support to develop domestic supply of components, for example, solar glass is also seen as the Ministry of Finance has issued a customs notification on 2nd June 2026, extending the CVD of 9.71% against import of solar glass from Malaysia for an additional period of 5 years. Earlier, you will recall that in December '24, government extended a major support by imposing antidumping duties on import of solar glass from China and Vietnam. The 62 gigawatt module requirement translate to solar glass capacity of about 11,000 tonnes per day against which local solar glass capacity stands at 2,600 tonnes per day, equivalent to 18 gigawatt and the country depends on import of balance for the balance. Domestic solar glass production capacity is expected to rise gradually to 7,700 tonnes per day, which will be close to 51 gigawatt by March '27, still leaving a supply gate. A significant portion of these new capacities is all for captive consumption. As such, the company has a ready demand for its ongoing expansion and the company does not see any challenges in selling the additional production in view of its customer relationships. Work on our ongoing expansion of 600 tonnes per day at existing location is in full swing, and we expect the commissioning of the project in Q4 FY '27. Once commissioned, this will result in sales to rise by 60% with corresponding rise in the EBITDA amount. Company is exploring further opportunities for the next round of growth. Now I come to the consolidated results for the quarter. The overseas subsidiaries, including the step-down subsidiaries did not generate any revenue for Q1 FY '27 and had a negative EBITDA of INR 0.84 crores as against net revenue of INR 14.32 crores and negative EBITDA of INR 23.24 crores in the corresponding quarter last year. The consolidated net revenue for the quarter stands at INR 405.69 crores and EBITDA at INR 141.16 crores as compared to net revenue of INR 346.58 crores and EBITDA of INR 69.28 crores in the corresponding quarter last year. With these words, I would like to now open the floor to questions that you may have. Thank you.

[Operator Instructions] The first question is from the line of Shivam Gupta from Fin Asset Managers.

I want to like profit nearly from INR 169 crores in Q4 to INR 87 crores in Q1 despite revenue decline only 8%, significantly drove the margin compression this quarter?

Sorry, I didn't get your question. The numbers which you are mentioning do not seem to be in line with what numbers we have announced.

I'm telling like profit was INR 169 crores in Q4, and it went to INR 87 crores in Q1, and revenue only declined around 8%. What significantly drove this proportionate margin compression this quarter.

No. Actually, I'll just repeat the numbers for the quarter. The revenue has been INR 405.69 crores and EBITDA has been INR 142 crores as against the revenue of INR 332 crores in the previous corresponding quarter and INR 92 crores of EBITDA in the corresponding quarter. So in fact, the performance has been significantly better. The EBITDA has risen by 53%. There is no drop in the profit. I don't know which numbers you are referring to.

Sir, I'm comparing from Q4 to Q1, like profit number.

Okay. So Q4, if you really look at Q4 of FY '26, the EBITDA was INR 144 crores and Q1 number is INR 142 crores. So it's just about rare only, same numbers almost. Are you talking of the PAT?

Yes, sir.

Okay. So I'll just explain that. In the quarter 4 of last year, we had recognized the tax shield on the amount provided against the German subsidiary investment of INR 325 crores. So what had happened was that in the Q1, Q2, Q3, we had not considered any tax rebate, and we have provided tax. But when we got to know from the court administrator that there is nothing which Borosil or the shareholders is going to receive out of the proceedings, we consider that as a write-off. We have written the investment into books. And accordingly, the tax shield has been taken into account. So the tax provision has been recalculated, which is why you see that the PBT is INR 120 crores and the PAT is INR 169 crores because the INR 75 crores of tax provision has been written back on that investment and it has been shown as a higher PAT. So if you really remove that INR 75 crores, the performance is not inferior. Am I making it clear?

Yes, sir.

The next question is from the line of from [indiscernible] Invest.

I wanted to ask what is the U.S. impact on the company, the impact of U.S. or the tariff, what is the impact of that on the company?

Which tariff?

Like on tariffs by the U.S. government, is there any problem that you are facing on the export side?

U.S. government. So actually, our exports to U.S. are very, very small. And we are dealing with customers who are having niche products and niche applications. So our export to that extent are not impacted. However, we foresee that U.S.A. may become a significant market to look at in future. But as of now, it's a very small percentage of our portfolio. Our domestic demand in India is quite high and the prices are good. So we are more focused on the domestic business as of now.

And sir, you have also started a rooftop solar business. So what are the revenue expectation from the [indiscernible]

See, we have started this new initiative to leverage the brand and to use the acceptability of product of the company and the group. And this is very early stage that what would be the outcome finally. But our internal target is to generate revenue of about INR 36 crores in this financial year. In the first quarter, the revenue was about INR 1.3 crores. We have just started with small projects. And as we go along, the awareness will increase and our team has been already built up, so which will be obtaining more business, and we hope to do a good job here.

And sir, what about the capacity expansion? Are you planning for any debt increase? Or are you planning for equity raise?

No. For the current expansion, which is already ongoing, we are already fully funded. And for the next round of expansion, whenever we decide on the project and the size of the project, we will take a call about financing it. But I think looking at the current run rate of profitability for the next, say, after the current project is commissioned by March '27, for next 1 year or 2 years, we will generate certain cash and that will provide by way of equity support for the next expansion. And some amount of debt may be required in case there is a size of the project is high. We don't foresee any equity raise in the near future.

Another question, sir, the working capital days has been increased from 34 to 152 in the current year. So do we -- can we see any decrease in the working capital days?

So working capital days have not -- according to us, not gone up substantially. Slight increase is there because of the store inventory and other things. But in fact, we do not carry much stock of finished goods or WIP. So I'll have to really look at from where you are getting this number, 152 days. Our working capital is just about 60 days.

The next question is from the line of [indiscernible] from DJT Investments.

Congratulations on a great set of numbers. My question is long term. As per my understanding, at the moment, the Indian producers are able to seek a higher price because the landed cost of imports is higher than domestic prices. And now with the domestic capacity expected to rise from 2,600 tonnes per day to 7,700 tonnes per day by March 2027, how will the price get impacted? I understand that a lot of the capacity is for captive consumption. But do you expect the domestic prices to move downwards because of this?

Actually, the demand in the country is quite high. And currently, the domestic industry is able to supply only about 25% of the demand. So even after the capacities have expanded to 7,700 tonnes per day, it will still be 75% of the demand only. And as I mentioned, a lot of these capacities are coming from the players who are using it for captive. The capacity available in the market will not rise substantially. In any case, the competition will remain, whether from imported or domestic goods. But because the demand is very robust and we are having reference price as the import price parity, we don't foresee any kind of challenge on the pricing.

Right. Understood. And sir, is it fair to assume that we maintain the current revenue and EBITDA run rate for the rest of the financial year?

Well, it will not be appropriate to give any guidance like that, but we are expecting that if all the things remain the same, we continue to -- we hope to continue to do in a similar way.

The next question is from the line of Siddharth Jain from Ventures.

So my question is, sir, how do you look Borosil Renewables as a company growing from FY '28, say, for next 5 years? So what is the vision of the company? How big the company wants to become, say, towards the INR 4,000 crores, INR 5,000 crores top line? And how do we plan to get into on the last call, Kirukaji had mentioned that Borosil is also evaluating options to get into inverter, backward integrated into inverters and get into multiple solar rooftop products. So just I'm interested as a long-term investor, what are the growth prospects the company is looking for next 4, 5 years?

Well, this is a very important thought for the management of the company to grow the company from here. And with -- after the current expansion, we need to certainly take up some other project, which will enhance the company's turnover, profitability as well as provide it more diversified base of revenue streams. So we are looking at options, including additional solar glass furnace because the demand is still very robust. The gap is still there, and there is a possibility for coming up with more production of solar glass. But at the same time, we are also evaluating other options in the allied or adjacencies where we can -- in terms of glass, our expertise in glass production. So we are also looking at certain other areas where it could be more interesting compared to expanding in the same product. So we hope to conclude on these aspects in next 6 months or so. And the project size and the turnover, everything will be known by that time, but we certainly are looking to grow this company from here after March '27 from INR 2,500 crores to at least INR 4,000 crores or so. So that's how we are looking at in terms of growing the company in the next 3, 4 years.

That's very helpful. Sir, another question -- one last question I had that in the current capacity utilization, we are increasing -- in the current new capacity, we are increasing our total capacity from 1,000 TPD to 1,600 TPD. If say, further we want to do any further CapEx on the 600 TPD, can we increase the capacity more by spending some amount of CapEx in the new facility, say more 500, 600 TPD if possible, if the company feels so? Or again, we have to go for an entire greenfield kind of a project?

So this will be a separate project only because whatever expansion we are doing currently is already fully designed and layout is frozen and building is already getting constructed accordingly. So if we decide to add more capacity, it will be a new project and new building and new facility only. It may be in the same premises and in same location, but it will have to be constructed a new and the project size will depend whether 600 or 1,200 will depend on what decision the management and Board takes at an appropriate time.

The next question is from the line of Sidhaant Lodaya from Sanshi Fund.

I had a question regarding the solar rooftop business that was answered.

The next question is from the line of [indiscernible]

Sir, I just had a couple of questions. For the expansion of our 600 TPD that we'll be going live, how is the timeline looking, sir? Is everything on track or we are seeing some delays?

So it is going on as per the plan, and we hope to complete the construction and everything by December '26 and commission the project within first quarter, that is January to March '27.

So both the furnaces, SG4G5?

Well, we want to start both the furnaces. It will be done one after another. So there may be a gap of maybe 1 month or so, but both will be commissioned by March '27.

So we'll be seeing the entire revenue from FY '28 for both the furnaces?

Yes, absolutely.

Okay. And sir, also for this expansion that we have done, the incremental volume, is it earmarked for existing large accounts scaling up or like widening of customer base any commitments from any large manufacturers?

So it will be decided at the appropriate time because existing customers also are looking for more volumes. And on the other hand, we are not able to service some customers which we would like to take on board. And we have been supplying to them in the past, but because of the paucity of material availability, we have not been able to supply to them. So we may add a couple of those customers whom we wanted to take on board, which we are not able to do. And also, we will increase supplies to some of the existing customers.

Okay. And also, sir, if you can shed some light on like the solar glass revenue between the large integrated module manufacturers versus the smaller and unorganized module makers that we have for our customers also.

So now every module manufacturer is becoming big and big. And if you really -- you look at the numbers earlier, the people were in 100, 200, 300 megawatts. Now everybody is in gigawatts.[indiscernible] 10, 15 of them between 5 to 15 gigawatts even. So broadly, our supplies are to customers who are larger medium. But small customers also, we are servicing to the extent we can. And in terms of I would say, concentration, if you ask me on the customer concentration, our top 10 customers would be almost 65% to 68% of the total volume.

Okay. And with this new expansion coming in, we'll be able to cater more players because like we are the biggest one out there and like everyone wants the best glass for the module, right? So I think we'll be able to cater to all small players as well as to such large orders, which we will be seeing down the line.

Yes. So while we will attempt to service the existing and new customers as well, but we'll have to see how the module industry actually consolidates in the next 1 year or 1.5 years because the module capacity has run up very fast, and it is far in excess of requirement. So there may be some adjustment. And because of the technology also, you might find that the module manufacturers who have got their plants based on mono PERC sale, they may not be able to perform or the module players who do not have sale production facility or do not get enough sale for domestic production, they might not be able to continue or their volumes might drop. So we'll have to see how the situation pan out and then take our call on customer arrangements, which customers we would continue to deal with or which customers whether they perish or they consolidate or whatever happens to them.

Because of the ALM coming in, the sale will have to be domestic. So a lot of changes throughout the industry will be happening. So our expansion plan post FY '27, like for FY '28, if we see, do company have some framework or any understanding for like what more we can do from here on?

Yes. So I mentioned some time back that we are evaluating both options like whether to increase capacity in solar glass itself by setting up additional furnaces or whether to go for some other product, which is -- which also diversifies our revenue stream and derisk from the perspective of concentration on single product. So we have been evaluating these options, and we will take another 5, 6 months before finalizing any particular strategy.

The next question is from the line of Anuj Jain from Globe Capital. Anuj's line has dropped. We move to the next participant. The next question is from the line of Deepak Purswani from Svan Investments.

Sir, just wanted to check regarding -- if you can please repeat regarding the volume growth, what was the volume growth in this quarter?

Volume growth compared to the corresponding quarter was 8% in terms of sales.

Okay. And what was the yield in the plant in this quarter?

The net production was also about 10% higher compared to corresponding quarter. It was 1.25 crores square meters.

Okay. Okay. Sir, I mean, if I were to look into the realization part, this INR 160.3, does it also include in the calculation of fuel surcharge, which we were discussing and that's the reason the realization is appearing to be higher? Because when I'm doing on the implied basis, the volume growth based on this realization, there seems to be some decline. So just wanted to double check on this.

Yes, you're right that INR 9.50 was the full fuel surcharge, which we had invoiced to our customers, and that is included in INR 160. So which is why you see that the realization from INR 150 has increased to INR 160 in this quarter compared to the previous quarter. And the decline in volume, what you are looking at probably is from Q4 FY '26 and not Q1 FY '26.