'We Are Not Fighting With Any Company, But The Whole Beijing Factor'

In a comprehensive interview with Gyanesh Chaudhary, CEO and MD, Vikram Solar, Gyanesh shares how there is no level playing field for Indian manufacturers in solar, who have to compete with the cheap modules imported from China, losing out on quality.

You are one of the biggest names in the solar manufacturing. How's the business propelling?
We are today, the largest manufacturer with a GW of capacity. Last year we closed with over 80 per cent of growth than the previous year. Overall there is a lot of volatility in the market. So there is a bit of cautious optimism.

When you say volatility, in what terms are you referring?
If you are benchmarking what is happening in the solar industry, there is a steep drop in the prices. Although the volumes are increasing, there is inconsistency in the price drop, which is creating a stir in the market. Now withstanding that, there is always the volume part which comes into play. As an Indian manufacturer, we always try to find our safe haven, but that is challenging.

There are not many solar modules manufacturers in India. So how do you compete with that benchmark of cheap Chinese modules, being flooded in India?
It is always challenging because we are not fighting or competing with a specific company, but the whole Beijing factor. More than that, we are competing with those huge amounts of subsidies and kickbacks provided by that government, causing injury to the Indian manufacturers at large. It's not a level playing field.

So, hasn't the government pitched it to tackle this particular problem?
Not yet. I mean, they do try, but it would take time. But we are yet to see some ground level action.

Last year, you mentioned about opening up another facility dedicated to solar cells in India?
Yes, that is happening this year. The first phase would be in Bengal because the facility is ready to receive new investments. Going forward we would be looking at new locations like Andhra Pradesh, Karnataka. The idea is to have some base load, as solar cells are an input for us. Currently, we are importing from China, Taiwan, Korea and others. So the idea is to have 25-30 per cent of the inputs for self-consumption. The rest of it will be imports because we would still want to hedge our risks.

And what about you're the solar module's manufacturer, any plans of expanding that?
It will be an integrated expansion with the solar cells in these mentioned locations.

All this expansion would require a huge amount of capital, say about 300-400 crores. Do you plan to raise funds from outside?
We always have the availability of conventional fundraising mechanisms. We are eventually looking at going to the markets. When that would be, is uncertain at the moment. We are not looking at Private equity (PE) right now, but yes, capital markets. We are still in discussion about the timelines.

What kind of challenges you undergo as a manufacturer because the industry hasn't been picked up momentum when it comes to manufacturing in India?
For any technology related industry to do well, one needs to be able to get the right kind of push from the government, for being the best in class. That requires a lot of incubation. Whereas you need incubation, you also need to have the kind of bandwidth in the market to grow. India with 'make in India' and 'solar mission', had a huge potential to provide both. But unfortunately, the government machinery and the stakeholders were not able to capitalise on that and set it up in a way which would be beneficial for the industry.

We are still importing more than 85 per cent of the equipment. So that kind of foreign exchange and the taxpayer's money is going out of the ex-chequer.

Are we then also loosing out on quality from that aspect?
Yes. The kind of products that we are getting loose a lot on quality expectation and still not up to the mark. There is a lot of emulation that can be done by the leaders in the solar space. For instance, there is a top runner program run by the Chinese government where they bring in the best in class technology companies, fund them and provide higher PPA tariffs for higher efficiency technology. That ways, they are benchmarking the higher efficiency projects and at the same time allowing regular technology to upgrade themselves.

Whereas in India its all about lower price, lower price and the lowest price. This is the downward spiral, which is not a good sign. It's a very big conscious decision to abandon the technology and quality objective, not knowing that every time you take a decision on solar, that panel has to last for around 25 years.

Plus, how are they making money, the margins are so low…
The margins are low and the return on equities are going down. This is worrisome.

Talking about the quality, how about the anti-dumping, has the government been proactive on that front?
Somehow there are multiple forces at play, which don't allow this discussion to reach the right decision makers, which is unfortunate. India now has a capacity of more than 6 GW of domestic manufacturers, whereas India's capacity for setting up is about the same, so there is a good cause for anti-dumping to come to play now.

How about the cost of capital, is it good enough. Has that come down as everyone is talking about?
It is never good enough. As manufacturers, borrowers, lenders, we always look for low-cost financing. It is definitely a better scenario as two years back. But there is a lot of ground that needs to be covered. If you compare with Singapore, Germany, you can raise funds at 2% as compared to India which stands at 10%. There is a very big gap there, but things are better and we see things improving.

To sum up, how has been Vikram Solar's journey in solar as you have seen the industry grow from scratch to this giant, it is today?
It has been quite a journey of trail blaze. Solar has never kept us sitting constantly. There have been upheavals every year and there has been a phenomenal growth. The company had a CAGR of 50%. We aim to take the India products to the world. India has been able to manufacture the best in class products, adhering to the global standards, much before anybody else.

Going forward, our idea is to be a full-service company, where we offer EPC. The idea is to offer value at the lowest costs per energy generated and we are very well poised for that.