Tuesday, 14 July 2015

Gujarat Borosil Ltd: Sun will Smile on It

For earlier post on Gujarat Borosil: Click here and here

Gujarat Borosil is still under scrutiny and I am buying it very slowly at every fall. But due to current scenario of solar power in india and globally , I feel it is better to wait for some more time to let the things fall in place and in order. However one of our reader Sh Sridhar has posted some interested queries on Gujarat Borosil. I am trying to answer them with this post.

First, let us have a firsthand detail of the solar panel industry. Solar panel is a combination of many components, which are encapsulated and bind together. First quartz sand (silicon) is processed into polysilicon, which is a very energy intensive and costly process. Around $100 million are required for setting up 1000 tonnes polysilicon facility. So no wonder, we have none here in india. Around 70% market share is with top 3 companies from Germany, USA and China. This Polysilicon is used to make ingots and then ultrathin Wafers which are finally used for making a solar cell. This is also a capital intensive process. This process of sand quartz to solar cell accounts for around 60% of total cost of a solar module.

Cell manufacturing involves creating the all-important pn-junction, coating and layering. It is an important step in the value chain responsible for about 20% of the total value addition, and it is here where significant technical differentiation is created.

While the largest Indian manufacturer has the cell production capacity of less than half Gigawatt (500MW), the average being less than 100 MW, Chinese manufacturers have the average capacity of morethan 1 GW. This is the combined cell manufacturing capacity of all Indian producers. Even the US has anaverage manufacturing capacity of about half a GW. China’s total annual production is around 40 GW.

Due to this smaller size, Indian cell manufacture companies are unable to reap the benefits of scale of operation. Also during the good times of 2005-2007, when Europe was on a growth phase and Govt were supporting solar power big time by giving high tariff and huge subsidies; all this resulted in huge solar cell manufacturing capacity which was way above demand. So when recession crept in Europe, Governments there discarded their renewable energy bandwagons. This coupled with rise of china resulted in huge global over capacity and prices crashed world over.

Indian opportunist companies, which didn’t have technical and financial clout for solar business, also joined the race somewhere around 2006-2008. But they were just assemblers…they imported everything and then made solar modules (Indian Module capacity is around 2700 MW) of them without any value addition and they were very happy that they would capture the Indian market after initially focusing on export market as they were thinking that with low cost assembling they would be able to penetrate into global arena (poor dreamers). Yes, they added small cell manufacturing capacity also but this was not a very high tech process. But they underestimated Chinese producers who came with a bang and shaken everybody.

So after Global meltdown and death of many western solar producers, Chinese and western producers started dumping their solar panels everywhere in order to capture market share and to recover some of fixed costs. They suffocated tiny Indian producers with their cheap prices. Indian Government is investing big on solar power to stave off the coal crisis and providing power to the farthest corners of india which are far away from the grid. Cheap solar panels from Chinese and western producers brought the cost from 15 Cr per MW to 7 Cr and now it will achieve grid parity soon.

 Indian producers were forcing Indian government to impose anti dumping duties on them as they were dumping their products. Although they were right but Indian government did not approve the same. Indian producers cannot meet the high capacity requirements of solar power producers who are investing big in solar power and so far around 3000 MW capacity has been  created in india. Indian Government has plans of 100000 MW by 2022 and Indian producers are just not capable of supplying this much solar panels. So any imposition of duty will only raise the cost of solar power and will defeat the very purpose of affordable power to all.

Moreover unless we create big capacities for upstream raw materials like Polysilicon in india, we can’t harvest the best out of this whole solar power process. So even if we create huge cell manufacturing capacity, the benefit to Indian economy is minimum as long as we continue to import Polysilicon wafers. This is just the other side of the same coin, at one side we are importing 100% for 50 and on the other we are importing 90% and after adding 10% we are paying 80. This is just wastage of resources.

Indian solar power producers are using Thin film solar panels which are cheaper as compared to Polysilicon solar panels, but they require more land. The term "Thin film solar panels" refers to the fact that these types of solar panels use a much thinner level of photovoltaic material then polysilicon solar panels. Thin film solar cells consist of layers of active materials about 10 nm thick compared with 200- to 300-nm layers for crystalline-silicon cells.

So where land is not a issue, producers are using it. But they are not efficient, with their efficiency is around half of polysilicon cells. So you take into account high land cost, high installation cost per MW due to more panels per MW, Lower efficiency, rapid decrease in power production and all the cost benefits disappear. Against a global average use of 10%, Indians are using it at 60%, which is way high and i think it will come down with more rational policies from the Government.

Now coming to the Glass part of the Game: For crystalline cells, solar glass is used for protection and performance enhancement. In the case of thin films, glass is used as a substrate. Solar cell inside the panel is a very delicate and costly component, so it should be protected from any external shock and dust which can impact its performance badly. Glass is best for this due to its strength, durability and most of all it can allow uninterrupted transmission of solar rays and with some coating can prevent reflection of sun light of its surface. All this is just perfect for solar cell.

Contrary to silicon, india is having all the ingredients available for making high quality solar grade glass starting from raw material to technology. Saint Gobain is doing the same in india. Gujarat Borosil was only Indian company to do the same and it has got all the necessary European certifications for export. Gujarat Borosil manufactures low iron glass all the way from making glass from silica and then curing the iron impurities.

So far it is supplying the glass to Indian cell manufactures (with only 1000 MW capacity!!!) which are just working at only 30-40% capacity (only 300 MW). It is also exporting some of its production.
I am putting by faith on Gujarat Borosil due to some reasons. Like, Some Chinese companies will surely look to shift some of their manufacturing base to india in order to stave off the high import duties imposed on Chinese solar products by USA and European union. By sourcing solar panels from india, Chinese manufacturers can become more competitive in the U.S. and the E.U. The move could lower the duties and related trade-restrictions that they face on its cells and modules that are currently manufactured in China. Earlier this year, the U.S. International Trade Commission approved the imposition of final duties on Chinese and Taiwanese photovoltaic imports, anti-dumping duty of 30%40 and a countervailing duty of 50-60%.

Infact , One Chinese company Trina solar has big plans to invest $500 Million india for creating 2 GW solar manufacturing capacity. Apart from avoiding USA trade restrictions, It can take advantage of low labour cost of india. The hourly labor cost in India for manufacturing averages $0.92, compared with $3.52 in China, according to Boston Consulting Group. Although I think they will only create Cell and Module capacity in india, but Gujarat Borosil can take advantage of this. Due to its integrated production capabilities, it can compete. Actually Glass is a heavy product, it comprises a low value part of a solar panel, but it comprises of 60% of weight of a solar panel. So it is very costly to transport glass to long distances…so I am very doubtful that any company can cater to global markets from a single source. Glass market will be regional. Gujarat and Rajasthan Governments are supporting solar power big time, so Gujarat Borosil will surely capture the major part of this market.

Also, at present indian solar power producers are importing Thin Film solar panels, which use glass as base, hence these can't be imported without glass. but when indian producer will focus more on Crystalline solar panels due to their benefits and life cycle cost advantages, then it will be best for them to import them without glass to reap the benefits of low transportation costs and then encapsulating the panel in Glass in India. This game can be played also by foreign supplier who can create Glass assembling facilities in india to compete with others. There can be another face of this game like any big indian solar panel producer can do the same by importing solar cells and supplying them to solar power producers in india after adding Glass onto them. But it is best if Glass is applied here in India...it will surely save big costs along with breakage during transit.

I am sure Indian Government will make supporting policies for local industry but only when it will be big enough. We will surely see big investments in solar panel manufacturing in india.
I  think Gujarat Borosil is doing right by waiting at the corner. It can enhance its production capability any time when scenario will turn favorable. Its low debt will enable to take debt for any such capacity enhancement. It is recognized globally due to high quality of its products. 

(Views are personal and should not be taken as a recommendation for buying or selling a stock. Stock markets are inherently risky so kindly do your Due Diligence before investing)


  1. Hi Gurpreet ,
    Its great to understand about the solar manufacturing , risks to the sector along with where G.borosil stands out. That is where we really gets confidence to make decision.Thank you once again for spending out lot of your time in providing a detailed note.

    For some reason,I am not receiving the emails despite added "Follow by Email" . Could you please help in verifying whether any issue from your end. I have verified in my spam too.

    1. Thanks Dear...Regarding Email...i have checked mine and it is working fine. However i have sent the message to some of my friends to confirm the receipt of emails from the Blog.

      Meanwhile, you can do one thing, unsubscribe to it and then again resubscribe to it...hope it may work.

      Borosil is on the run ever since i have written this post...it has touched 26 from 20. I wanted to buy more of it..but could not although i am having good quantity.

      But if its June-15 quarter results are good, then we will see it touching the sky.


  2. Dear Sir,
    I too face the same problem , which Mr Seidhar faces I too am not getting your email. I will also try the same as indicated by you.
    Very informative on Gujarat Borosil. Can we initiate the trade or shall I wait ?
    Thanks and regards.
    Vakharia Mahesh

  3. Hi Gurpreet ,
    I added my another gmail account to verify as I don't see unsubscribe option. Too much of spurt in price immediately after this post , waiting for some minor dips to add on.Its tough too add after watching the price of 18-20 range and all of a sudden at 26 to buy.

    Now tech. analysts are on Indian Hume , Thanks for helping in identifying that stock.

    1. Dear Sir,

      You can unsubscribe by going into any last email sent to your email Id from this blog...at the end of the email, you can see the unsubscribe option. All of my friends are receiving the updates from this blog onto their emails. So try this.

  4. Hi Gurpreet , Unfortunately I haven't received any email so far. However when I tried to add in the "follow by email" it says " I am already subscribed ". As you have confirmed from one of my fren's request that you have added manually in ur mail list, I may get it now.If the issue still persists , I will try to close the "feed-burner account" and re-open . Thank you.

  5. Dear Sir,

    You will receive the mail whenever i add a new post into the blog. You will not receive the old blog posts via emails now.
    You can wait for Borosil...but there is one catch if its q1 results are moderately good, we will not be able to catch it.


  6. Thanks Dear , The issue is resolved now and receiving the emails.

  7. Hi Gurpreet

    The new solar policies for 2015 are announced in Gujarat and can be find in the below link

    Here are the highlights:

    1. The new policy will also facilitate the usage of solar power in agriculture and it will be the first state to announce an Agro-Solar policy
    2. It also talks about stand-alone solar and solar home lighting systems in remote areas, where grid connection is not feasible
    3. Other schemes for promoting canal top solar systems and solar cooking & water heating systems are also included.