Borosil Renewables
Is it a decent play on the green energy revolution sweeping across India and the world?
Disclaimer: Please do not consider this post as an investment advice. I am not a registered financial advisor. Please consult a registered financial advisor before making any investments.
Credits: Most of the content of this post is public information that has been referred from the company website, annual reports and conference call transcripts.
In this post we are going to understand and analyze a direct beneficiary of the green energy adoption - Borosil Renewables. So strap in and lets get started.
A brief about the company
Borosil Renewables Ltd. is the first and only solar glass manufacturer in India
It 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
It recently expanded the existing solar glass production capacity to 2.5 GW per annum
It is working on the next expansion to add another 2.5 GW equivalent and be a 5.0 GW equivalent of solar glass manufacturer by Q1 FY22
It won a National Award 2021 for Successful Commercialisation of Indigenous Technology Known for the pioneering achievements like
The development of the “World’s First” fully tempered 2 mm thick solar glass
Solar glass with the lowest iron content giving the highest glass efficiency
“World’s First” Antimony-free solar glass
It has benchmarked low energy consumption in manufacturing process
The company is maintaining a carbon footprint 22% lower in comparison with the default score for glass manufacturing in Life Cycle Assessment by M/s. Solstyce, a reputed French institute
Before going further, if you would like to read more about the solar glass industry, do read my earlier post about the topic.
A brief about the management
Borosil is a family run business with 3 generations of the family involved in the business. The family hails from Kolkata.
Pradeep Kheruka
Executive chairman
Here is what his LinkedIn profile says:
Experienced Chairman with a demonstrated history of working in the glass industry. Skilled in Negotiation, Business Planning, Business Development, Strategic Planning, and International Business. Strong business development professional with a B. Com (Hons.) focused in Commercial Studies including law and Economics from St. Xavier's Collegiate School, Kolkata, India.
He has spent ~22 years as director and later as managing director of Borosil Glass Works Ltd. He is also the chairman of Borosil Ltd.
Shreevar Kheruka
Vice chairman
Here is what his LinkedIn profile says:
Completed his schooling in Kolkata and went on to purse higher studies in University of Pennsylvania. He holds a BS - Finance, Entrepreneurship and a Bachelor’s degree in Internation relations and affairs from the university.
He has close to ~11 years of experience with the Borosil Ltd. and is now the MD and CEO of Borosil Ltd.
A brief history of Borosil group
Legacy of manufacturing specialty glass (1960-1991)
1960 - Window Glass Ltd. incorporated in Kolkata by BL Kheruka (F/O Pradeep Kheruka).
1962 - Borosil goes public after acquiring the Industrial and Engineering Apparatus company.
1963 - Starts a technical and financial collaboration with the Corning Glass Works, USA (yes, its the same company that manufactures glass for your high-end mobile phone!). The collaboration is name “Borosil Glass Works”. The name was inspired by borosilicate glass, the company’s main product category.
1988 - Kheruka family takes over Borosil Glass Works from Corning Glass.
1991 - Gujarat Borosil Ltd., a subsidiary of Borosil sets up a manufacturing plant for architectural glass in Baruch, Gujarat.
Pioneers in solar glass (2010-2021)
2010 - Gujarat Borosil Ltd. sets up India’s first and only Solar glass production line with 180 TPD capacity in Baruch.
2013 - Introduced anti-reflective coating for solar glass, a first of its kind in India.
2014 - Develops world’s first antimony-free solar glass. (Antimony is a highly toxic substance)
2017 - Develops world’s first fully tempered solar glass with just 2mm thickness.
2019 - Capacity expansion to 450 TPD (~2.5 GW/annum). Introduction of new varieties of solar glass.
2020 - Amalgamation of Gujarat Borosil with Borosil Glass Works which was renamed as Borosil Renewables.
2021 - National award was successful commercialization of indigenous technology.
2024 - Aspiring to reach 1000 TPD (~10 GW/annum).
Products
Low Iron Textured Solar Glass - Higher transmission and lowest iron content solar glass in the world
Shakti: Solar Glass in Matt-Matt Finish - The transmission value reaching upwards of 94.0% with use of an appropriate AR Coating. This product forms ~50% of the sales.
2 mm Fully Tempered Solar Glass - World’s 1st Manufacturer of 2 mm fully tempered solar glass. It is 2 times stronger than heat-strengthened glass.
Antimony-Free Solar Glass - Antimoney is a highly toxic used in current solar glasses. Borosil has been able to successfully remove the Antimony from Solar glass
Selene: Antiglare Solar Glass - It uses a diffusion mechanism to diffuse the reflected light off the surface. Selene is suitable for Solar PV installations near Airports.
Anti-Refelective Solar Glass - The Anti-reflective coated solar glass gives transmission beyond 94%.
Anti-Soiling Solar Glass - Dirty solar modules tend to cause loss in energy production. Solar glass treated with Anti-Soiling coating soils less quickly and is easier to clean.
Revenue Segmentation
The company gets 77% of its revenue from India and the remaining 23% from exports mainly to USA , Turkey and Europe. Export business has grown at a CAGR of 33% in the last 3 financial years.
Expansion Plans
During FY20, the company successfully raised 200 Cr through QIP and the money raised through the issue was utilized for its expansion to 450 TPD. In FY21 the company further disclosed it plans to increase capacity by another 50 TPD. Looking at the strong demand the company plans to more than double its solar glass production capacity from 450 tons per day to ~1000 TPD.
Margins
The company currently seems to be enjoying super-normal operating margins upwards of 35%. However the company has repeatedly disclosed in several conference calls that this is due to a sudden shortage of glass from China and the current low prices of key raw materials.
The management has indicated that operating margins of ~15% are more realistic to build long term estimates.
As per my analysis, since the company is innovating new types of solar glasses to address niche requirements it might be able to garner OPM higher than 15%.
If you would like to understand about the solar glass industry and how its margins are impacted, please do read my earlier post about the topic.
Improving return on equity and capital
As the company was going through capacity expansion and the demand for solar glass was picking up at a slower than expected pace, the ROE and ROCE were depressed for several years. As the new capacities come online and demand meeting expected growth the return ratios are improving significantly.
Factors that make it a good bet
Transition towards green energy
Since the Industrial Revolution, the energy mix of most countries across the world has become dominated by fossil fuels. To reduce CO2 emissions and local air pollution, the world needs to rapidly shift towards low-carbon sources of energy – nuclear and renewable technologies.
In 2008, the total solar energy installation around the world was ~15 GW. In 2020, this went over 700 GW. That is a growth of 46x over 11 years. Check this link to understand the pace of growth.
India's solar installed capacity was 44.3 GW as of 31 August 2021. The government’s target is to increase this capacity to 450 GW by 2030. Going forward as the growing economies like India also adopt solar energy to secure their power demand, the sector could see tremendous growth.
Electric Vehicle Infrastucture
The EV adoption has begun in India via 2-wheelers. However, in order to make the masses adopt EV 4-wheelers we need EV charging infrastructure. Many power companies in collaboration with the government are planning to setup country-wide infrastructure for EVs. This infrastructure is also envisioned to be self-sufficient and would be mostly powered via renewable sources such as solar energy.
This will further drive the demand for companies products.
A culture of innovation
As can be seen from the products highlighted, the company seems to be continously innovating through R&D and coming up newer varieties of solar glasses to cater to niche industries. Due to this relentless pursuit, the company has many products that are introduced for the first time in the world. This culture seems to have been rubbed-off from their 15 years association with Corning Glass.
Conservative management
It can be deduced from many TV / Youtube interviews and conference calls of the management that they are not over-optimistic and try not to get ahead of themselves by being conservative in growth prospects and expansion plans. This indicates that the management is level-headed and not allowing the story of green revolution cloud their judgement.
Anti-thesis factors
Solar glass prices are driven from China, which is the largest supplier of solar glass.
Domestic companies manufacturing solar glass are heavily dependent on government support to implement anti-dumping duties on cheap chinese imports.
The raw materials used to make solar glass are commodities whose prices fluctuate as per demand and supply dynamics.
If in the future the government decides to make the sector competitive the cheap imports could have significant pressure on the prices.
Since the end-consumer of solar glass are mostly power generation companies which are either government run or higly in-debted, the company may face some issues in collecting payments on time, as can be seen in FY 17,18 and 19 where there was significant build-up of receivables.
If you would like to understand these factors in depth, do read my earlier post about the topic.
Summary
In this post we analyzed the first and only solar glass manufacturer in India - Borosil Renewables. The solar glass and the overall solar industry is going through massive growth and expansion in India. This growth will drive the demand for solar glass into the coming decade and the company would be a direct beneficiary of the same.
The company can be seen as a “shovels and picks” supplier in the EV and green energy revolution.
I hope this article helped you in understanding the business and prospects of Borosil Renewables.
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Until next time. Take care.
Best regards,
Sahil