Targeting 50% revenues from exports by year-end: Surana Solar

Surana Solar is on a major drive to expand exports to Europe and expects 50 percent of its revenues to come from exports by the year-end, Managing Director Narender Surana says.Speaking to CNBC-TV18, Surana said that Chinese imports had been eating into the share of domestic players in the local market and that with the government's focus on solar energy, he hoped to relief in the form of interest subvention.

"The total market for photovoltiac cells is 6000-7000 MW per year and Indian manufacturers only supply around 1000-1500 MW per year," he said, adding that local taxes make it unviable for domestic products to compete with Chinese imports.Still, shares of Surana have seen activity in the equity market, rising 40 percent of the last one month.Below is the transcript of Narendra Surana’s interview to Nigel D’souza and Reema Tendulkar on CNBC-TV18. Nigel: In the last month or so, we have seen a big run on the stock, but we need to understand your business model. So, can you tell us what is your current market share in this solar business that you are conducting? Could you explain to us the business and also could you tell us the industry on the whole, what is the demand? A: Basically, the government has rightly encouraged this sector in the last couple of years because of the shortage of power in the country and dependence on fossil fuel for generating power. So, this has definitely given a big boost to the solar sector in India. However, most of the market has been taken away by the Chinese companies. The total demand in the country is about Rs 6,000-7,000 megawatts whereas the Indian companies are producing 1,000-1,500 megawatts and we are stuck in that range basically because the product from China comes cheaper on account of two reasons. One is, some of the raw materials for the local sector are taxed customs duty and we also have to pay a sales tax when we sell the product within India. Whereas, the imported who gets it directly from China gets it at no taxes being paid at all and he uses the product straightaway. However, the silver lining that we have and we are trying to focus more on that area is looking at exports towards Europe and US. Europe and US have predominantly, recently put a anti-dumping duty on products from China, Taiwan and Malaysia which has made it comparatively easy for Indian companies to export to Europe and US. But this is the silver lining that we are seeing and we have started getting good export orders. As we speak now, we are also exhibiting in one of the largest exhibitions in US and we were in the exhibition in Munich as well last month. Reema: On the domestic side, are you seeking any kind of a protection from the government to combat cheaper Chinese imports and secondly, with respects to exports, where you are seeing a silver lining, what percentage of your revenues come in from exports? How much can you scale it up? What would be your export order book? A: What we are looking from the government is some interest rate subvention to beat the imports from China because when we import from China, we are able to get it at 1-1.5 percent customs duty spread over three-year period, whereas I cannot offer similar terms to my customers in India. So, I am definitely at a disadvantage there. So, that is one area. Second is, we have asked for zero customs duty for all raw materials inputs going into solar since the finished product is at zero customs duty. And the third is, hopefully, with the goods and services tax (GST) introduction, sales tax should be equalised everywhere, so we are looking forward to GST introduction soon. On the export front, our total sales are approximately 30 percent of our sales are currently exports and we are moving towards 50 percent hopefully by this year end. And, maybe it will go to 60 percent by next year because, the price is better, when we export we get certain small benefits in exports like 3 percent certain benefits are there, given by the government. And we are looking at exporting more, because that seems to be an easier market than the domestic market. Nigel: Could you tell us what exactly is your current order book? What is in the pipeline? And also, I believe that your wind power business is making some losses, what is the plan over there? Are you looking to sell it? A: Basically, the wind power is not losing money. We only have one wind turbine in this company. Although in the group we have about 16-17 megawatt of wind and we are making approximately Rs 10-11 crore profit there or returns. So, it is not a loss, but we are looking at hiving off the total wind business. We are doing power projects locally within the country and about 31 megawatt is in the pipeline which will consume 31 megawatts of solar modules which equates to approximately 30 percent of our production for the year and we have approximately Rs 20 crore of export orders. So, we have approximately 5-6 months of export orders seeing our last year’s production rate. We also do a lot of solar power projects, we are an engineering, procurement and construction (EPC) company now. We have done about six projects already.