Borosil Renewables: Business Analysis

Borosil Renewables is one of the flagbearers of renewable energy theme based investing and the company is one of the few located outside of China that is really looking to make its mark in an otherwise Chinese dominated industry structure.

About

Borosil Renewables Ltd (BRL) is a manufacturer of solar glass which is used as a substrate for solar PV modules. It is the only manufacturer of solar glass from India currently. BRL is a part of the Borosil group which is well-known for the brand "BOROSIL" that manufactures a range of lab ware, scientific ware, and consumer ware products. BRL’s manufacturing facility is located in Bharuch, Gujarat with current installed capacity to produce 450 TPD solar glass. BRL is currently undergoing a significant capacity enhancement whose successful completion will significantly scale up the manufacturing prowess of the company.

Product Offering

BRL is engaged in the manufacturing of low iron textured solar glass, with an iron content less than 120 ppm. It allows higher light transmission with a minimum of 91.5%, which is higher compared to any conventional flat glass and thus, suitable for use in manufacturing of solar panels. The transmission increases by 2-2.5%, when coated with anti-reflective coating liquid.

These solar glass products are in the form of textured low iron glass. One surface of such glass is almost completely flat while the other surface has some figure/design/pattern, which blocks the view through the sheet. Such glass products are usually in the range of 2 mm-4 mm in thickness. BRL’s solar glass products with an anti-reflective coating in order to improve performance of the products.

Solar glass products find application in the following sectors:

·       Solar photovoltaic modules/ panels - Solar textured glass with light transmission of over 91.5% finds use in solar PV modules.

·       Solar thermal collectors - A solar thermal collector collects heat by absorbing sunlight. Solar textured glass finds use in solar thermal collectors, which is used to heat water.

·       Green houses – Solar glass is used in green houses for horticulture.

Presence of Solar Glass in Solar PV Value Chain

The solar PV module manufacturing starts with converting silicon rocks into cylindrical ingots which is then cut into thin silicon wafers. These wafers are treated and then connected to form solar cells. After the cells are put together, a thin layer of solar glass is added on the front side, facing the sun. Solar glass forms 8-10% of the costs involved in manufacturing solar modules.

Manufacturing Process and key Raw Materials

The major raw materials primarily utilized in the manufacturing of solar glass include quartz, silica sand, soda ash, limestone, dolomite, coating liquid, etc. BRL sources quartz and silica sand domestically. Soda ash is procured domestically as well as imported from European countries like from Bulgaria, Turkey and Romania. BRL procures limestone from Egypt as well as from North India. Dolomite is sourced from North India.

Besides these raw materials, natural gas is one of the key requirements of an energy intensive manufacturing process of glass. BRL has a long-term agreement with GAIL for the supply of natural gas.

To ensure energy security, BRL has recently signed a power purchase and a share subscription agreement with RGP and RGESPL to subscribe to equity in the 10 MW Wind-Solar Hybrid power plant in the State of Gujarat wherein the power generated will be supplied exclusively to BRL under the Rules of Captive power consumption. The Project will be operated and maintained by RGPL. BRL will contribute upto Rs. 11 Crore (31.2% stake) in one or more tranches, towards equity share capital of RGPL.  

Manufacturing Facility

BRL is the only domestic manufacture of solar glass in India. The company spotted the opportunity in manufacturing of solar glass quite early and commissioned the solar glass manufacturing facility at Bharuch in Indian State of Gujarat in 2010. Over the last couple of years, it has scaled up operations with giant capacity expansion plans on the anvil.

BRL started out with its first furnace in Bharuch having a capacity of 180 TPD. During 2018, it started a complete rebuilding exercise of its first furnace taking its capacity to 210 TPD in 2020. At the same time, BRL also started work on adding a second furnace of 240 TPD capacity which also go commissioned in 2020, taking the total installed capacity to 450 TPD equivalent to 2.4 GW per annum.

Current Capacity Expansion

BRL is currently adding a third furnace at its manufacturing facility with a capacity of 550 TPD. The said furnace is likely to be commissioned in Q3FY23 which will take the total capacity of BRL to 1000 TPD.

Besides the current ongoing capacity expansion, BRL has already announced its targeted capacity of 2100 TPD by the end of 2024. After the commissioning of the third furnace, BRL will start the work on adding the fourth and fifth furnace with a capacity of 550 TPD each respectively by the end of 2024. The successful commissioning the said furnaces will take the total capacity of BRL to 2100 TPD equivalent to 13 GW per annum. The expansion will be funded through a mix of equity, debt and internal accruals.

The company has highlighted that the present domestic demand for solar glass is greater than the post expansion capacity of BRL so the absorption of the enhanced volumes will not be a problem and imports of solar glass would reduce to a great extent, provided policy support.

Technological Changes and Product Innovation

Solar glass comes in varied thickness between 2mm to 6mm but there is a growing shift towards bifacial thinner glass modules. There is a major shift towards use of a thinner glass globally as lower weight enables the assembly of glass-glass modules. Such modules enhance productivity and cost effectiveness of the module as compared to conventional 3.2mm glass used with a back sheet.

Glass to glass modules using bifacial cells can enhance power generation by as much as 10-15%. The demand for 2.1mm from the Photovoltaic solar market is growing in the export markets. Similarly, the use of solar glass in 2.5mm thickness, which allows manufacturers to make completely new, lighter and more efficient conventional as well as glass-glass Photovoltaic modules is gaining traction. These thinner glasses fetch higher realizations.

BRL has also developed various value-added products which are gaining acceptance in the market. Its recently developed “Shakti” solar glass with matt finish on both sides leads to a higher light transmission with transmission value reaching higher than 94% with use of an appropriate AR coating. It has developed an anti-glare glass “Selene” which prevents loss of vision temporarily caused by glare from the PV modules installed near Airports.

The company has also recently received patent for antimony free solar glass. Solar glass contains antimony which is hazardous in nature and causes respiratory problems, skin problems, DNA damage among other harmful effects.

Demand Drivers

India currently has a total installed power generation capacity of 399 GW as of Mar 2022. The share of renewables stands at 27% (110 GW) of which solar (54 GW) is about 49% of the renewable capacity. With a focus on increasing the share of renewables in installed power capacity, the Govt has set a target to install 175 GW of Renewable Energy by the end of 2022, of which Solar is 100 GW.  Further, the target for Solar has since been raised to install 300 GW by 2030. FY22 witnessed the highest ever solar power addition of ~14 GW.

Solar glass directly benefits from increase in solar power capacity addition being a critical element in solar PV module manufacturing. India has around 15 GW of solar module manufacturing capacity as of Mar 2022 but due to stiff competition from low-priced imports and low installations, the actual utilization of the domestic manufacturing is about 6 GW annually (about average 40-45% utilization). The Govt is pushing for enhanced local content in PV modules and has come out with the PLI scheme to provide policy support.

Total PLI scheme hiked has been hiked to 24,000 Cr in budget 2022 for domestic solar cell and module manufacturing up from 4,500 Cr announced earlier.

Domestic solar PV manufacturers such as Waaree Energies, Adani Solar, Vikram Solar, Reliance etc. have announced investments in additional/new module manufacturing capacities of 37 GW which will significantly boost demand for solar glass.

China Factor

China is the World’s largest PV glass producer accounting for over 95% of the total solar glass capacity. Large capacity additions have been initiated in 2020 by Chinese manufacturers which are going to spill over into 2021 and 2022. International pricing of solar glass is completely dependent on Chinese producers.

BRL has historically faced pressure on its selling prices due to continued cheap and dumped imports from China and Malaysia. The imposition of anti-dumping duties in August 2017 on imports from China provided some relief but its impact was only marginal due to a shift of the major supply point to Malaysia, which offers subsidies to its companies. Large volumes of imports continued to flow unhindered from Malaysia acquiring a significantly large market share by dumping at low prices without being subject to anti-dumping/countervailing duty.

On 12th March 2021 the Government levied a countervailing duty on imports of solar tempered glass originating from Malaysia. The Anti-dumping duty against imports from China was valid till August 2022. The company filed an application with the concerned authority to extend the duty for another 5 years considering a strong likelihood of continued dumping in view of large production capacities being added by Chinese companies, which are likely to cause a surplus and heighten the dumping. However, in a surprise move for the industrym the government did not extend the anti dumping duty beyinf August and thus the dumping from China is expected to pick up agressively in coming months. 

Along the solar PV value chain, there is a basic customs duty of 40% on import of modules and 25% on import of solar cells from 1st April, 2022.

Financials

BRL's financials have taken off since the group restructuring of Borosil in which the consumer & scientific ware division and the solar galss division were separated and listed individually. 

In FY21 and FY22, the company grew sales at 85% and 28% respectively while EBITDA margins were ~38%. While the company continued to highlight that such margins are not sustinable, the outlook on growth continues to be positive given the massive capacity addition plans in solar power. 

A look at the long term perfromance of the company (source - sharescart.com):

Valuation 

BRL's stock has been a 5 bagger in the last 2 years alone and it was close to being a 10 bagger in April after which the stock has takrn a breather and is currently rangebound. The stock is currently trading at 48 times its TTM earnings. The thing to note here is that in such a company where the growth outlook is pretty strong, markets discount a large part of it in the present. So TTM multiple would not make sense at the moment. If there is a clear visibility on growth as well as earnings outlook, the stock can be looked at after a period of time correction. 

Articles

Comments