Operator: Thank you. Over to you, ma'am.
[Company Representative] (Go India Advisors): Thank you, Aisha. Good evening, everyone, and welcome to Borosil Renewables Limited earnings call to discuss Q2 and H1 FY27 results. We have the senior management of the company on call: Mr. PK Kheruka, Executive Chairman, Mr. Ashok Jain, Director, Mr. Melwyn Moses, Chief Executive Officer, Mr. Sunil Roongta, Whole-Time Director and CFO, Mr. Dhaval Patel, AVP Investor Relations. We must remind you that the discussion on today's call may include certain forward-looking statements and must be therefore viewed in conjunction with the risks that the company may face.
[Company Representative] (Go India Advisors): May I now request Mr. PK Kheruka, sir, to take us through the company's business outlook and financial highlights. Subsequent to this, we will open the floor for Q&A. Thank you, and over to you, sir.
P. K. Kheruka: Good afternoon. Welcome to the Borosil Renewables Q2 FY27 Investor Call. The standalone and consolidated results for the quarter and half year ended 26 September, as approved by the board today, and an updated presentation have been uploaded at both the stock exchange and company's website. We will now discuss the operations of company on a standalone and consolidated basis. Standalone results half yearly, sales at INR 801.8 crore, including INR 15.4 crore sales of solar kits, registered a rise of 12.8% versus INR 710.7 crore in H1 FY26.
P. K. Kheruka: The EBITDA rose by 18.5% to INR 258.3 crore from INR 218 crore in H1 FY25-26. Coming to the quarterly sales, total sales during the quarter stood at INR 396.2 crore, including solar kits, which accounted for INR 14.1 crore. Solar glass sales stood at INR 382.1 crore versus INR 378.4 crore in Q2 FY26 and INR 405.7 crore in Q1 FY27. There was negligible EBITDA in sales of solar kits. EBITDA INR 116.34 crore stood at 30.4% based on sales of solar glass versus INR 125.5 crore in Q2 FY26 at 33% and INR 142.0 crore in Q1 FY27 at 33.8%. There was a small drop in margins compared to Q2 FY26 due to lower production.
P. K. Kheruka: I should inform our investors that in the quarter that went by, we had a decline in solar glass volumes, which was because of furnace maintenance and also a price decline of 2.8% as collection of fuel surcharge on sales was reduced, looking at the correction in gas prices.
P. K. Kheruka: The production was also being adjusted by the production team to correct small anomalies and come to a finer tuning, which would eventually result in higher production, which worked very well, and production has gradually increased from middle of September to levels which are higher than at any time before in the history of the company. During the month of October, we have had exceptionally good production, which we hope is going to continue for the rest of the quarter. With more positive results in the current quarter, we feel it will be possible to make good the shortfall in the rest of the year.
P. K. Kheruka: The average ex-factory selling price during Q2 FY27 was INR 155.9 per millimeter as compared to INR 147.5 per millimeter in Q2 FY26 and against INR 160.3 per millimeter in Q1 FY27. The surcharge levy to offset the fuel cost increase after outbreak of West Asia war was partially rolled back in July, looking at decline in gas prices on the hope of improvement in war situation. However, this was short-lived. Disturbances resumed after a brief time, taking prices of oil and gas to higher levels as compared to before, putting an additional cost burden on the company operations.
P. K. Kheruka: We have recently taken steps to raise the fuel surcharge to offset this. As production and selling prices have normalized in the current quarter, we expect the margins to move back to higher levels at the end of this quarter. Solar manufacturing continues to show strong growth on the back of government support. The module manufacturing capacity on the support by way of PLI, BCD, and ALMM List-I has reached 233 gigawatts as against annual installations of about 62 gigawatts on DC basis.
P. K. Kheruka: Solar cell manufacturing supported by ALMM List-II is leading to speedy increase in capacity, which is expected to rise to about 75 gigawatts by 2027 from about 38 gigawatts currently, as significant capacities are under installation. We expect the annual solar installations to maintain at a level of 45 gigawatts, which translates to 62 gigawatts on DC basis, while other emerging sectors like EV, data centers, and green hydrogen may take this to a higher level going forward.
P. K. Kheruka: Thus, solar glass demand for domestic installations can be expected at least at 62 gigawatts, leaving a huge supply gap. In view of supply gap and its customer relationships, the company does not foresee any challenges in selling the additional production.Work on our ongoing 60% capacity expansion, adding production facilities of 600 tons per day at our existing location is in full swing, and we expect the commissioning of the project towards the end of Q4 FY27.
P. K. Kheruka: While the existing furnaces are operating at full capacity, we may have to take furnace 1 and 2 for a temporary shutdown of 75 days each for rebuild, which may happen in H1 of the next financial year 2027-2028. The 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 net revenue for Q2 FY27 and had a negative EBITDA of INR 0.11 crore, as against net revenue of INR 0.43 crore and negative EBITDA of INR 5.08 crore in Q2 FY26.
P. K. Kheruka: The consolidated net revenue for the quarter stands at INR 396.7 crores and EBITDA of INR 116.22 crores, as compared to net revenue of INR 378.88 crores and EBITDA of INR 120.42 crores in Q2 FY27. With that, I would now like to open the floor to questions that you may have.
Operator: Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking the question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Pankaj Kumar from Kotak Neo. Please go ahead.
Pankaj Kumar: Thank you. Thanks for taking my question. Good evening, sir.
Operator: Mr. Pankaj, please go ahead.
Pankaj Kumar: Am I audible?
P. K. Kheruka: Yes. Hello?
Pankaj Kumar: Am I audible? Hello? Audible?
Operator: Since Mr. Pankaj is not audible, the next question is from the line of Deepak Purswani from SVAN Investments. Please go ahead.
Deepak Purswani: Yeah. Hi. Thank you for the opportunity. Sir, just wanted to check it out. Hello? Am I audible?
P. K. Kheruka: Can you check whether there is any problem in the line? People are not able to connect.
Operator: Sure, sir. Please hold for a minute. Mr. Deepak Purswani.
Deepak Purswani: Hello? Am I audible?
P. K. Kheruka: Yes.
Operator: Yes, you are audible now.
P. K. Kheruka: Yeah, please carry on.
Deepak Purswani: Yeah. Thank you for the opportunity. Sir, just wanted to check out regarding this production disruption which we saw. If you can also quantify what was the revenue loss in this quarter and what was the revenue and EBITDA loss in this quarter because of this? Secondly, there seems to be power and fuel cost seems to be a little on the higher side if I were to look at as a percentage of revenue. Just wanted to check out whether incremental basis this all rise in power and fuel and other raw material cost, is it getting passed on to the customer at the current juncture?
Deepak Purswani: Net of fuel surcharge, how are the realizations shaping up in the industry? If you can throw some light on all these aspects.
Sunil Roongta: Yeah. The production was down by close to 4.5% because of this maintenance. But the happy part is that after the repair is done, we have not only come back to the earlier levels, but we are actually exceeding, as Chairman Mr. PK Kheruka has just said in his opening remarks. So that shortfall which has happened will be made good.
Sunil Roongta: As regards the cost of gas and other items, the cost actually, as you know, initially in the beginning of July, because there was some understanding between the countries who are engaging into the war, that there will be some peace, and that lived for only about 2 weeks or so. After that, the prices again resumed. They are running at an even higher level. When the prices were down and there was a challenge in terms of module manufacturing because of the ALMM List-II, we agreed to reduce the fuel surcharge.
P. K. Kheruka: Post that, the fuel cost has remained elevated, which has also impacted our profitability. But in October, we have again gone back to the customers to come back to the original fuel surcharge. So this was a very moderation, you can say, which happened in the last quarter. But we hope to be back to the previous levels in terms of the earnings. Also the earnings turnover will increase because the production is rising even higher than the earlier levels.
Deepak Purswani: Okay. Would it be fair to say, on the broad basis, there could be a revenue loss to the extent of INR 20 crore because of the shutdown or maintenance?
Sunil Roongta: Well, this was about INR 15 crores, I think.
Deepak Purswani: Okay. Secondly, I think on the new project, we had revised the CapEx to the extent of INR 1,100 odd crores.
P. K. Kheruka: Yes, that was by adding equipment.
Deepak Purswani: Okay. Sir, if you can share a little more detail on that part, that would be really helpful.
Sunil Roongta: So we had in the last board meeting, which happened in September, we had decided that this scope of the project needs to be widened a little bit to incorporate some costs which were not budgeted earlier. A small part was regarding the exchange fluctuation which happened because of the devaluation of rupee vis-à-vis dollar. That was about say 20% of the increase, about say INR 150 crore, about 20% was the increase on account of exchange. But the major part was on account of basically two factors. One was regarding some items of fuel cost saving, which will have its own payback.
Sunil Roongta: That was a major part of the increase. The second item was regarding building in more redundancies against the power failure. Because constant and robust power supply is very important in this industry, and power fluctuations can cause serious disturbances in the furnaces. So we have to build even higher amount of redundancy in the project, so that we don't suffer any losses on account of power.
Sunil Roongta: So that also is about say INR 25 crore or so. All this put together, board has decided to increase the project by INR 150 crore, which will of course be funded internally and without any increase in the loan amounts from the banks.
Deepak Purswani: Okay. Thank you and wish you all the best, sir.
Sunil Roongta: Thank you, Deepak.
Operator: Thank you very much. The next question is from the line of Kaushal Sharma from Equinox Capital Venture Private Limited. Please go ahead.
Kaushal Sharma: Hi, sir. Very good evening. I just want to know about your realization per unit in this quarter as compared to the last quarter.
Sunil Roongta: Realization, you are saying realization per square meter?
Kaushal Sharma: Yeah, per square meter quarter basis.
Sunil Roongta: This quarter was INR 155.9, and last quarter was INR 160.3. There was a drop of about INR 4.4 per square meter, which happened because the reduction in fuel surcharge as was communicated. Now we are back to the original numbers.
Kaushal Sharma: Okay. In Q3, you are expecting the original number of 150?
Sunil Roongta: Well, we are gradually inching towards that, and by the end of quarter, we will expect that the number is achieved.
Kaushal Sharma: Okay. And sir, your new furnaces would be commenced by end of 2027. Are we on track on this?
Sunil Roongta: Can you say loudly? We are not able to hear properly.
Kaushal Sharma: I am saying, sir, your new furnaces would be commenced by the end of this year. Are we on track on this?
Sunil Roongta: Yes, we are on track to fire the furnaces in February and March, respectively. There are two furnaces. One we want to fire in February, another in March. We are on course to be on time to do this.
Kaushal Sharma: Okay. We are expecting some 75% of capacity in the next H1 because of this capacity addition?
P. K. Kheruka: Sorry, we could not understand what you said.
Kaushal Sharma: You had told in your original remark that 75 days of your furnaces will be on hold in the H1 of the next year.
Sunil Roongta: The earlier furnaces, they are like what we call them furnace 1, SG1 and SG2, have been in operation for 7 years. After 7 years, they can fall due for repair or rebuild anytime, depending on the health of the furnaces. Currently, we have done the repair work already, and we expect the furnaces to continue production until at least March 2027. We will, of course, be monitoring continuously, but we will take a call in February, March, whether the furnaces have to be put down in the next financial year. Gradually, one by one, we will plan that, depending on the health of the furnace, of course.
Sunil Roongta: This will be most likely done in next financial year H1. Whenever we start doing that for 75 days, there will not be any production from that furnace. We will do furnace first, like SG1, and then do furnace 2. In the meantime, our additional production from the new plant will be already coming in. We will not be out of production, or we will maintain our supply to the customers seamlessly.
Kaushal Sharma: There would not be a production loss like in this quarter as we have foreseen in the next year?
Sunil Roongta: Until March.
P. K. Kheruka: Current year, we do not expect any production loss. That is not planned, nor expected.
Kaushal Sharma: Okay. The low production is because of this issue, like repair and maintenance of the existing furnaces, right, in this quarter? In the last quarter, sorry.
Sunil Roongta: Yeah, maintenance and all adjustment of parameters to fine-tune them to deliver better performance. Both have been simultaneously done, which seems to be working very well, more than our expectation at this point in time. We will make good the loss which has happened in July and August in the rest of the year.
Kaushal Sharma: We will be able to maintain our 31% to 32% of the EBITDA for this current year and next year?
Sunil Roongta: Yes, we hope to do that.
P. K. Kheruka: Based on current parameters, yes.
Kaushal Sharma: Got it. Thank you very much for answering my question.
P. K. Kheruka: Thank you.
Operator: Thank you very much. The next question is from the line of Sanyam Dhoka from Front Wave Research. Please go ahead.
Sanyam Dhoka: Hi, sir. Good evening. Thank you for the opportunity for this question line. Sir, based on our calculations, we expected that around next year, we will have 60% increase in revenue with the 50% increase in our capacity. But with this SG1 and SG2 going down for 75 days each, that brings down our growth from 60% to 48%.
P. K. Kheruka: Actually, both these furnaces, after repair, are expected to give higher output.
Sanyam Dhoka: Okay.
P. K. Kheruka: That remains to be seen whether there will be any decline or not. It may not be.
Sanyam Dhoka: It may not be. We are saying that it would be giving out more output than it is giving out currently.
P. K. Kheruka: Correct.
Sanyam Dhoka: The growth remains constant even by them being down.
P. K. Kheruka: Correct.
Sanyam Dhoka: All right. My second question would be, sir, about the 600-odd crores that we have in our investment. Sir, how are we handling that? I see they are in liquid mutual funds and debt markets. Are we seeing any higher realization from there?
Sunil Roongta: We are investing that money temporarily and in secured investments because it is project money. We, of course, do not want to enter into any kind of risk from the perspective of safety of the money. We try to increase revenue to the extent it is permissible within the guidelines given by the board. Of late, we have been trying to invest into, say, AAA securities as well, where we can ensure the yield by about, say, half percent or so. All said and done, the yield is going to be, say, within, say, 7.5%, 7% to 7.5%.
Sanyam Dhoka: Right now, it is at 7% to 7.5% is what these 600-odd crores are yielding us, right, sir?
Sunil Roongta: Right now, they are at little less than 7%, but we want to raise it to 7.3% to 7.5%, which we are doing already.
Sanyam Dhoka: Okay. AAA securities is our next thing to add on because of the repo rate and everything that is going on right now.
Sunil Roongta: Yes.
Sanyam Dhoka: All right, sir. Noted. Thank you, sir. Thank you so much.
Sunil Roongta: Okay.
Operator: Thank you very much. The next question is from the line of Saket Kapoor from Kapoor & Co. Please go ahead.
Saket Kapoor: Yes, sir. Namaskar, sir. Hope I am audible.
P. K. Kheruka: Namaskar.
Saket Kapoor: Yeah, ji, sir. Firstly, pertaining to the previous reply, jo hum planned shutdown lenge for during the first quarter of next financial year, the volume loss would be made up during that year itself, and for the next year, we can look forward at 1,600-ton capacity to be fully available to us. That is what your reply was, sir?
P. K. Kheruka: Aisa hai ji ki, this is a speculative answer. We cannot guarantee that we will make up the volume loss. This is a question of what we are planning to do or what we are attempting to do. Our company is making glass at a higher rate than anywhere else in the world. Per square meter, we have the most efficient glass melting anywhere in the world, and we are going to make it even more efficient than what it is now. This is a planned operation with a lot of thought and understanding, so I hope that it works out.
P. K. Kheruka: This is all speculative that we expect that we would be able to make up whatever we have lost at the time of shutdown by the operations of the furnace afterwards.
Saket Kapoor: Okay. And sir, in your opening remark, you also mentioned that there were some underlying factors which give us the confidence that the expanded capacity will be also easily sold out. Can you just reiterate those three, four factors for the sake of repetition?
Sunil Roongta: Yeah. Actually, the demand for solar glass continues to be robust at about 62 gigawatt modules are being read. And the domestic supply is very limited at this point in time. The domestic players are able to supply about 18 gigawatt, and rest is imported. So, when we come into production by, say, end of March, even at that point in time, the demand will be higher and supply will be much lower than demand. There is no challenge in terms of the demand.
Sunil Roongta: Now, depending on, or since we are the largest player, we have been the first mover, we have relationship with the customers, we are hopeful and we are, say, confident that we will be able to sell that volume, extra volume without any problems. To do that, we are already in discussion with the customers and also additional customers whom we have not been able to supply so far because of the limited capacity, to onboard them so that when it comes to the furnace, that time we do not have any challenge in terms of the customers' availability and to whom to sell to.
Sunil Roongta: So, that confidence is available with our team due to which we are confident that there will not be any issue in terms of selling the extra volume.
Saket Kapoor: Right, sir. Sir, when we look at our capital work in progress closing balance, as on September, it is at INR 349 crore. So, this is up from INR 107 crore for March. So, the entire INR 349 crore is pertaining to the 600-ton capacity for which we have envisaged INR 1,100 crore as the total amount?
Sunil Roongta: Yes, the entire amount is related to the project, and a lot of LCs are in place, about INR 750 crore plus, for which material is in pipeline. We also paid a lot of advances. So, all that is for the project only. We are expecting delivery of machines now. Building is more or less complete. So, we will have the construction in, or we will have the installation starting in somewhere in the end of the quarter.
Saket Kapoor: Sir, for the entire project, what kind of debt have we looked into and have we tied up, and what is the rate and what is the thought process for the debt?
Sunil Roongta: The entire funding is already in place. INR 1,100 crores will be funded internally by INR 800 crores, and INR 300 crores is the debt which we had signed much earlier. We have not yet drawn the debt as such, but the equity is already arranged. We did the preferential issue of warrants and preferential issue of equity and the money is already with us. It is fully funded, and the company does not foresee any challenge in meeting the fund requirement.
Saket Kapoor: Okay. Just to reiterate, sir, you mentioned that the kind of outage we had in Q2 has been overcome. The yields have improved for the month of October. So, H2 looks, as of today, on better efficiency terms, and we returning to our previous EBITDA margin trajectory of 31% plus. That should be the likelihood, barring unforeseen circumstances.
Sunil Roongta: You are right.
Saket Kapoor: Right, sir.
Sunil Roongta: Yeah.
Saket Kapoor: Okay, sir. Theek hai, sir. I will just join the queue, sir. Thank you, and all the best to you.
Sunil Roongta: Thank you.
Operator: Thank you very much. Ladies and gentlemen, in order to ask a question, please press star and 1 on your touchtone telephone. I repeat, in order to ask a question, please press star and 1 on your touchtone telephone. The next question is from the line of Adit from AG Capital. Please go ahead.
[Analyst] (AG Capital): Hello, sir. Am I audible?
Sunil Roongta: Yes, please.
[Analyst] (AG Capital): Okay. Sir, I had majorly two questions. One was, wanted some color on the rooftop solar business and how do we intend to scale this new business?
Sunil Roongta: Rooftop business?
[Analyst] (AG Capital): Yes.
Sunil Roongta: Yeah, so rooftop business is, we have been mentioning it is more to use the experience and relationship which we have, and the brand, Borosil, which is quite well-recognized in the household, to develop a business in our adjacencies of making solar glass. So, this is how we have started. It has received very good response from the customers. In fact, a lot of distributors are very excited to associate with Borosil in this business. We have started in four states initially, where the demand, we perceive demand to be good.
Sunil Roongta: Also, the appointment of distributors has been done. Some projects were already done by our team. We have a lot of projects already signed up for the current quarter, and the response is quite encouraging. Moreover, the performance of whatever equipment we have supplied in terms of the power output has been very encouraging. Customers are actually giving us signed letters that your modules have been performing very well and all, and they are getting much better generation of power.
Sunil Roongta: As you know, Borosil is recognized for its quality, maintenance of its quality, and service, which is what we are providing over here. Although module manufacturing is done by many other people, our quality control, our checks, our bill of material specification, everything is so robust that we are able to deliver a better product. We hope to build this up to a greater height. But after we have reached a particular size, we will start thinking more about it, maybe by end of the financial year, which will allow us to come back to you, how do we perceive for the next round of growth in this rooftop business.
[Analyst] (AG Capital): Okay. So, sir, we are seeing a good response, right?
Sunil Roongta: Yes, extremely good.
[Analyst] (AG Capital): Okay. And sir, one was that, how sustainable is the company's profitability, sir? Considering the volatility in gas prices and other energy costs, how do we see the profitability being affected or not?
Sunil Roongta: You see, for last six, seven quarters, we have been delivering very robust numbers, EBITDA in the range of 30% or thereabouts. Even after the gas price increase, which has been prevailing for last two, three quarters, we have been able to maintain the momentum. There is a buoyancy in the market, and the demand is high, which is why we are able to get good working. Our anti-dumping duty, which is there against China and Vietnam, is in place until 29 December. We do not foresee any challenge in terms of maintaining the margins.
Sunil Roongta: The domestic solar glass capacity remains short of the demand, which gives an assurance that the prices will be maintained, and there should not be any challenge in maintaining the margins.
[Analyst] (AG Capital): Okay. Okay, got it, sir. Just one more question, if I can ask. What is the expected revenue contribution from the new capacity that we have, and any margin improvement that we can see from that?
Sunil Roongta: We are expanding by 60%, so similar percentage rise we can expect in the turnover.
[Analyst] (AG Capital): Revenue.
Sunil Roongta: In terms of the EBITDA margins, I think we should be happy to have additional 2%, 3% operating leverage out of the new facility because of the distribution of overheads over a larger production. That is the range we can probably look at.
[Analyst] (AG Capital): Okay, sir. Got it. Thank you, sir. And best of luck.
Sunil Roongta: Thanks.
Operator: Thank you very much. The next question is from the line of Pankaj Kumar from Kotak Neo. Please go ahead.
Pankaj Kumar: Yeah. Good evening, sir. Am I audible?
Sunil Roongta: Yes.
Pankaj Kumar: Yeah. Sir, on this raw material cost, if you look at the gross margins in this quarter, we have seen the quarter-on-quarter decline in the gross margin, and the raw material costs have gone up. So, what could be the reason behind that? I understand that there was a shutdown for 15 days, but the raw material costs have also seen an increase.
Sunil Roongta: Yeah, so raw material costs, basically, there are two, three cost drivers. One is the prices of soda ash have been slightly increased by the various vendors in India. After a lot of negotiation, we have got a very good price, but still, it is higher than the previous quarter. We accepted a certain price increase from the soda ash manufacturers. The second item is the import of dolomite and limestone, which we have to do because the quality and grade which we require to maintain our quality of glass, we have to get from imported sources.
Sunil Roongta: Of course, partially, we mix it with the local material, but for the imported item, we are paying a much higher price. As you know, in the last couple of months, the freight rates have gone up from China, and one of the items which is imported from China, the freight cost is substantially higher. These things are leading to a sudden rise in the cost. We, on our part, are making an effort to minimize the base cost or raw material cost. We are also taking steps to change the domestic and import mix in favor of domestic.
Sunil Roongta: We are currently doing about 30% to 40% domestic for, say, dolomite, but we want to reverse it in the next couple of months. That will save us from this cost rise. In terms of the soda ash, we have to live with it because this has been done after a lot of negotiation, and we don't foresee it to come down soon. But we will try to economize on other fronts by which we can offset these cost increases. Like, say, if the production, which is increasing substantially compared to the previous quarters, it will pay for itself in terms of the or it will offset the increase in the cost.
Pankaj Kumar: These we cannot pass, like what we have seen in the case of gas, where we have a surcharge or something. In fuel, we don't have that kind of arrangement with the clients.
Sunil Roongta: In fact, there is no such arrangement of fuel cost surcharge also because the prices were being charged by us in par with the landed cost of imports. This was a one-off situation, force majeure situation, where the war was thrown on the entire world, and this became impossible for us to bear. So we requested the customers to bear this additional charge. We were fortunate that during that time, in that sense, the rupee devaluation took place, which increased the cost for the imported glass also for the customers. So they were able to agree to this.
Sunil Roongta: As we are selling the goods as per the market price, there is no cost plus or pass-through mechanism for the other items of cost. We have to improve our efficiencies, we have to do productivity improvements in order to offset these costs, which we are doing actively.
Pankaj Kumar: With all these productivity measures, we will be able to cover that because if you see the quarter-on-quarter basis, there is a 400, roughly 500 basis points decline in the EBITDA margin, and the gross margin are around 400 basis points decline. I mean, whether we would be able to go back to this 30% plus kind of EBITDA margin?
Sunil Roongta: Yeah, we already said that this production deficit which took place is already out of the way. In fact, we are producing more, so obviously, it will generate more output and more sales. The second important item is about the selling price. We also have gone back to the earlier levels of fuel surcharge, which again protects the margin from that angle. With the other measures like sourcing the product indigenously in terms of raw materials like dolomite and all, we will be having those savings. So we expect to do much better actually, but we will certainly be able to reach the earlier margins.
Pankaj Kumar: Sir, you said you have increased the level of production with the modification which you did in the recent capacity shutdown that you had in Q2. So what kind of increase in capacity that we saw?
Sunil Roongta: See, this production dipped by about 5%, but we are actually up by about 15% from that. We are higher by 8% to 10% compared to the earlier levels. But this is very early to commit that number to you on a sustained basis. We are trying to work around it and trying to maintain that level of production. That means whatever loss has taken place in 2 months, not only that will be recovered in terms of the plan for the year or plan for the next half, but we might do better actually.
Pankaj Kumar: And sir, we have also seen the increase in the employee expenses. This is largely for the new capacity or there is some one-off impact?
Sunil Roongta: Headcount was increased in between for certain extra work which we had to do around this furnace repair time and all. Also there were some more people engaged to do additional activity on the ground in terms of maintaining the production flow. But this was temporary, I think, and we should be able to come back to the earlier levels. For the new project, we have not yet hired so many people. We are going to do it now.
Pankaj Kumar: Okay. And sir, if I may ask one more question. In terms of future capital allocation plan, of course, with this CapEx, we will be done with what we have announced. Have we thought of the future CapEx or the growth plans if you have worked out on that, or by when we can expect the CapEx?
P. K. Kheruka: For the future, the option of increasing further production in solar glass is always there. We are meanwhile exploring other options. Borosil is well-known for specialty glass. When we entered the field of solar glass in 2008, it was a brand new field and few people had heard about it, and this was a very, very sunrise kind of a product. As time goes by, two things have happened. Other people have entered, number one. Number two, the other thing that has happened is our skill in its production and reduction of cost has also taken place.
P. K. Kheruka: So we are much more efficient today than we have ever been in the past. So, we continue to be very well-positioned if we were to increase in solar glass. Meanwhile, the country has a new requirement. There are many new products which are hanging over our head, and we are exploring many, many different opportunities. Perhaps within the end of this financial year, we should be a little better poised to take a call on what to do next. For the time being, our energies are focused on getting production up and running in the two new furnaces that are coming up and stabilizing on that.
P. K. Kheruka: So I think in terms of time, our time will be spent a lot on ensuring that production takes place on time and good quality and good quantity.
Sunil Roongta: So that being said, we are actively evaluating opportunities as they come by, and we are taking help of others also, like external consultants, to scout for the opportunity to suggest areas of growth which will be suitable to Borosil Renewables, and also looking at the investment size and other things.
Sunil Roongta: So this work should get over before end of the financial year, and we should be in the position to that time take a call, because we will remain net cash positive by end of March as we foresee, and the next financial year's cash flows will be available for us to deploy for any new growth areas, on which we are already working upon, and we should be able to come back before end of financial year.
Pankaj Kumar: Okay, sir. Thanks for answering the question and all the best.
Operator: Thank you very much. The next question is from the line of Daksh Malhotra from HSBC Global. Please go ahead.
Daksh Malhotra: Yeah, namaskar, sir, and season greetings to all of you. My question was also centered mostly around FY27. You have given a fair enough outlook. FY28 also, even after the SG1 and SG2 production slowdown, or going into maintenance for 75 days each, you have said we will mostly make up and probably be able to do the 50% to 60% growth by the end of the year. That is really nice to hear. As the previous participant asked, what beyond 2028, and you have explained you are looking at newer options. That is good. Just if you can add some more color here.
Daksh Malhotra: Also on rooftop solar, that is the second question. The rooftop, we were anticipating a revenue of about INR 100 crore from the first year. My numbers might be a little off, you can check. You are saying that the initial response is good. How big is this space? Because it is a B2C arena, are the margins much lower? Will it be quite dilutive? Just some light on this as well. Yeah, and once again, wish you all a happy Diwali.
Sunil Roongta: Thank you so much. So rooftop, as we have been maintaining that this is very early stage of our entry, and we have only the confidence of our team to talk to you. They are quite confident about the numbers which they have spoken about. I mean, it is easier to get any contract in the way the demand is right now. PM Surya Ghar Yojana itself is very large, and the country has done only about, say, 50 lakh homes until now, and another 50 lakhs are supposed to be done. So there is a huge opportunity there, which can be captured. Besides that, the C&I demands are very high.
Sunil Roongta: Large companies are even doing 100 megawatts and 120 megawatts of projects. We have entered for a smaller segment. In C&I also, we are doing smaller segments. But we are being cautious about it, and we are building up slowly and gradually. So we can expect more contracts to come in. We already have a lot of other contracts in hand, which will be executed in this quarter. In terms of the margins, yes, you are right.
Sunil Roongta: The margins are low because it is more of a trading. It is also that there are a lot of competitive strengths playing in this business because a lot of players are there in the market who are offering the same products, same means, same solutions. But Borosil, of course, gives a much better product in that sense. So margins will remain low, and they will not be supporting in terms of the growth in margins. But yes, once we have a certain level of operations, then we can probably earn better margins and make it more profitable for the company. Does this answer your question?
Daksh Malhotra: Yes, it does. What about any light on any time beyond FY28, once we have ramped up the capacity? Is it only the efficiency improvement that we expect going forward, or are we-
Sunil Roongta: FY28, we will have the production from the new line for the full year. After that, whatever growth will come will be coming from the new investment, which we hope to get into by March 2027. Whatever we plan will have certain periods, certain gestation, implementation period, after which the new area of new stream of revenue will come. Depending on what kind of project we get into and what are the timelines, it will be seen at that point in time. But for 2027-2028, I think that 1,600 ton production is what we can expect.
Sunil Roongta: For ensuing year, from FY29, there could be something coming out from the new project, which whenever we decide and implement it, that will generate additional revenue.
P. K. Kheruka: I have to say something here, that as a company in corporate philosophy, we do not believe in overstretching ourselves to the point that management suffers. With the 60% increase in production, which is envisaged for the financial year 2027-2028, that is going to be a big jump over what we are doing today. We need to manage that and land on our feet after taking that kind of a rise. We do not feel that it is appropriate for our investors, based on the trust that they have on us, to be reckless in any way.
P. K. Kheruka: Yes, we will proceed in time, and we absolutely have every intention of continuing to expand in profitable directions.
Daksh Malhotra: Understood, sir. Thank you so much.
P. K. Kheruka: Thank you.
Operator: Thank you very much. The next question is from the line of Saket Kapoor from Kapoor & Co. Please go ahead.
Saket Kapoor: Yes, sir. In response to a participant wherein you mentioned that there were some price changes in terms of soda ash. Out of the total raw material basket, what percentage constitute soda ash contribution as a percentage of RM?
Sunil Roongta: As a percentage of RM, it is about 30%, 32%.
Saket Kapoor: What have been the price hikes, sir, if we take that into Q1 into factor?
Sunil Roongta: Price hike is about 10%.
Saket Kapoor: There has been a 10% price hike from June versus September quarter.
Sunil Roongta: Yeah.
Saket Kapoor: Sir, secondly, when we look at our P&L, there is some purchase of stock-in-trade component also for INR 14 crore. What would you attribute this number to?
Sunil Roongta: This basically represents the solar module and solar inverters which we have bought for this solar kit business. This is the purchase cost of those items.
Saket Kapoor: Okay.
Sunil Roongta: Against which the sales is reflected in the sales. Sorry?
Saket Kapoor: Yeah, no. Continue, sir.
Sunil Roongta: Against which the sales are already included in the revenue.
Saket Kapoor: Okay. The INR 396 crore includes around INR 14 crore to 15 crore worth of the solar kit trading number.
P. K. Kheruka: That is right.
Saket Kapoor: Okay. What is the thought process now, sir, going ahead? We will continue with this exercise, or what are we trying to garner going ahead with solar kit as a vertical, or what exactly is
P. K. Kheruka: See, this is a very promising avenue for the company, because if we are able to generate a strong sale of solar kits, then this is going to be very good for our sales of solar glass, because the people from whom we are buying the solar modules currently, they always use our glass. This strengthens our supply chain position in the market, and also it brings us in direct touch with the customer to know exactly what the customer needs, what is valuable to the customer, and so we become more market-friendly as a company.
Saket Kapoor: Okay. So, more of an awareness exercise this is translating into, and this is more of the entire solar module kit that we supply to the EPC players. That is what the end product is?
P. K. Kheruka: Yes. We are also deploying our glass into the manufacture of modules because we are buying these modules from our own customers to whom we sell glass.
Saket Kapoor: Okay. Will this run rate continue with the quarterly run rate, or can we see the ramp-up there also, the 13, 14 number?
P. K. Kheruka: Right now, we are very cautious in selling. We are not overselling at all. In case we open the floodgates, I think our sales will rise dramatically. We are not doing that. We are doing it in batches so that we evaluate the sale, we evaluate the customer response, we go back to the customer asking how was his experience, what is his ongoing experience. We compare that with sales of other kits by other vendors, because finally, it is the customer who is paying for it.
P. K. Kheruka: There is a huge outlay from the government under the Pradhan Mantri scheme for solar households, and this is what Borosil specializes in, because in our other businesses, we are customer-facing directly. Here again, we are going into a customer-facing situation.
Saket Kapoor: Two small points. Sir, firstly, pertaining to the warrant issuance, our equity is completely. When the full dilution has happened, there are no pending warrants or money pending from your investors or from the promoters?
P. K. Kheruka: No. Everything has been realized. It is all squared up. Some people who had been issued warrants were not able to pay the remainder of the fee, and according to the SEBI law, we were obliged to forfeit their initial deposit, which we have reported. In the case of promoters, it was always equity issuance, not warrants, so they had already paid in 25 February the entire money against the equity shares. As of date, nothing is outstanding from anybody.
Saket Kapoor: No further dilution is anticipated since we have already tied up for everything for the CapEx that we are-
P. K. Kheruka: Yes, at the moment, in the foreseeable future, there is no dilution.
Saket Kapoor: Okay. Lastly, about the tax rates, sir. Now, taking into account the current stand, now we have only the standalone as also the consolidated similar numbers. So, how is the entity taxed, at what rate? How are the-
Sunil Roongta: We are
Saket Kapoor: Yeah, sir, please tell after this.
Sunil Roongta: We are taxed at 25%.
Saket Kapoor: Okay. Sir, when we look at our cash flow, our direct tax payment is to the tune of INR 39 crore. That is attributable to that till, I think, for September, it is 45% advance tax that is to be paid. This amount is attributable to that number of INR 39 crore?
Sunil Roongta: Basically, we are liable to pay 25% tax on our income, and I do not have exact understanding on that INR 39 crore which you are saying. If you really want
Saket Kapoor: Cash flow is, yeah. If we look at the cash flow part, under the direct tax refund paid net, the number is INR 39 crore for 26 September. Previous year, it was INR 42 crore. This is where the cash flow is page number, I think, of the submission. My point was that since, yeah.
Sunil Roongta: You can write to Dhaval, our Investor Relation VP. He will get it clarified from the finance team and will answer your question on this.
Saket Kapoor: Lastly, sir, on the surcharge part of the power and fuel.
Operator: Sir, sorry to interrupt.
Saket Kapoor: Ma'am, just to end, conclude, if you allow. Otherwise, if other participants are here, then I'll.
Sunil Roongta: Please complete your question.
Saket Kapoor: Sir, for this power and fuel surcharge part, what we could understand is that it was a recovery exercise that we did because of the unexpected increase in the gas, which was again reversed in the next quarter. Now, sir, since again the prices and how are the price trends currently for the input cost for gas currently, and whether again we can go ahead with the pass-on to our customers? What is the thought process currently?
Sunil Roongta: The earlier levels, that means the levels prevailing in Q1, have been breached again in the last 1 month or 1 and a half month because, you know, how the Brent price and how the gas price have gone up to $115 in case of Brent. When we passed on the price to customers, that time it was at about $100 or so. When we gave the price reduction, it went down to $75, $80 or so. This has been moving a number. As we speak, the current gas prices are higher even compared to Q1.
Sunil Roongta: We are trying to come to the Q1 level at least for the time being, and we will see whether there is an opportunity to even close that because the cost per millimeter, the increase which we saw in the first quarter, that has been exceeded already in the current month. We will have to work on that, whether we can increase by small percentage higher than the earlier fuel surcharge. The good part is that in case of the consumptions or whatever parameters which we can work upon in terms of operational efficiency, the team has been able to deliver substantial savings, which will offset this difference.
Sunil Roongta: Also, our this power production from the captive power has been helping us to reduce our cost. In the last 6 months, we have saved close to INR 10 crore on that. This is also helping us to cut down on the cost. We have to balance it out between the selling price and operational efficiency and optimizing the cost, and try to ensure that we come to the level of at least 30% EBITDA going forward.
Saket Kapoor: Right, sir. Thank you. We will take a call going ahead of-
Sunil Roongta: Yes
Saket Kapoor: pass on the cost. No call to pass on ahead of. Yeah, yeah.
Sunil Roongta: Right.
Saket Kapoor: Thank you once again, sir, and best wishes to the team for a prosperous Diwali and a happy new Samvat coming ahead for all of us.
Sunil Roongta: Thank you.
P. K. Kheruka: Thank you very much. Thank you.
Operator: Thank you very much. As there are no further questions, I would now like to hand the conference over to management for closing comments.
P. K. Kheruka: Thank you very much, dear investors, for all your questions. Thank you for studying the balance sheets and our performance. We always look forward to the future with great anticipation and excitement. So far, it seems that everything is looking very good for us, for the future, for the country at large. So thank you very much and good luck to everybody. Wish everybody a very happy Diwali.
Sunil Roongta: Wish you happy Diwali to everyone.
Operator: Thank you very much. On behalf of Borosil Renewables, that concludes this conference. Thank you for joining us, and you may now disconnect your line. Thank you.
