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Ratul Puri: "PV has played out to the assumptions on a text book basis"

Ratal Puri of Moser Baer discusses his strategy as he switches focus from Optical storage to Photovoltaics

Published: Jul 27, 2009 04:00:30 PM IST
Updated: Dec 9, 2009 05:57:49 PM IST

Q: So, it was in 2004 that you realized that your storage media business was going through a phase of struggle?
I think what we saw in the core business (optical media); two things that happened. First growth rate slowed down. Growth rates in the global markets fell off from 3 years prior CAGR of 70-80% down to a CAGR of 15-20%. So you saw a significant slowdown in growth rates. That was scuttled with two factors. One was the petrochemical cycle which started to see an upsurge and that caused input costs to go up for us. And we saw a period of oversupply develop. So, 2004 onwards till about 2007, the industry was still trying to sort out its oversupply problems. And typically these cycles take anyway between two to four years to work themselves out of the system. There was a third factor which was that Blu-ray which is a very critical factor; every five years the optical industry needs a new format to come in and drive growth. Blu-ray got caught in a series of difficulties. So, Blu-ray which was a new format that needed to come in and reinvorigate the market, because when a new format comes in you typically start at very high margins, it is a very profitable product. But, once the product gets commoditized your margins fall off. So, we had costs increasing in the commoditized product, we had over supply developing and the next generation format which could drive growth, which could potentially solve oversupply and other problems continuously get pushed back.

Q: That’s when you started looking around?
This business [optical media] has been significantly cash generative and that is one of the factors that led us to start looking at what the options were for us to potentially to do with the cash. And that’s how we identified some of the diversification and growth opportunities.

Our core skills centers around the ability to coat very thin films on substrates and that’s what we identified. At that stage we identified photovoltaics (PV) as the area which potentially met these core competencies and also exhibited the other characteristics you want. PV exhibited other characteristics which were in the area of say, this is going to be a significant global growth market, its plugging into a value chain which is a trillion dollar value chain globally. We identified PV in the later half of 2005 and started investments in early 2006. The PV market grew between 2004 and 2008 at a CAGR of 55%. Very few businesses in size and scale potentially grow at a CAGR of 55%. PV globally is an 18-20 billion dollar industry that grew from 6 billion to 20 billion in a period of about three years.

Q: What was the strategy for the PV business?
We were able to combine that history and the learnings we had from manufacturing technology and applied them to the PV landscape. So, our goal will be to scale in those technologies. While we would start effectively carrying out R&D in technologies of tomorrow, and part of that exercise we said that we would go and acquire technologies by picking up stake in start up companies that have some promising technologies. So we went out and did a series of that.

Along with that spent in extensive R&D facilities and link those together between the Netherlands, Japan and India. So, we built up a R&D hub which spanned three continents which have been the centers of PV innovation. Combine that together with the R&D capabilities we had in India and then started to invest pretty aggressively into manufacturing and built up manufacturing pretty aggressively in 2007 and 2008. We built up the size many times compared to players in the Indian PV industry. Most Indian companies were buying the cells, putting them in the modules and selling the finished product.

Q: Is there a product differentiation strategy in your PV offering?
I think there are three things you have to factor into account. The first is that there are many points of differentiation you build within the overall technology class. Crystalline silicon, thin film is a technology class. Now the specific solution you adopt within that technology class, R&D you do and the technology you adopt is what effectively drives the differentiation. It’s like I am producing an automobile. Nano is also an automobile and Rolls Royce is also an automobile. But they are different products potentially utilizing different technologies. So, whichever area you look at it from a thin film perspective, we have the largest form factor plate on the thin film side. So you got 5.7 m form factor.

There are two large advantages that large form factors drive in the market place. The advantage is that it significantly cuts down the mounting panels that you need, so you get 8-10% saving in your system cost. Part of it comes from the supporting infrastructure and part of it from much lesser cabling. The panel’s output I somewhere in the region of 600 watts versus a conventional crystalline silicon panel which has an output of 250 watts. The number of inverters you need, the enabling systems you need, all of it reduces.The first driving factor was a strategy around a very large form factor. We chose an amorphous silicon approach from a technology perspective. That is a simpler technology to drive. The benefit is that we have huge experience of working with amorphous silicon.

Leaving aside the PV business, we coat more amorphous silicon on discs in comparison to any other company in the world. We said we want to utilize all the expertise and learnings that we have built up over there on to the thin film side. The process that we have laid out, we believe, gives us an extremely low cost advantage. In fact we believe that today we have industry meeting costs on the thin film side. We came in pretty aggressively of setting up an 80 MW plant on the crystalline silicon side. The we built another vertical which was on the thin film side, we started with 40 MW capacity which was pretty aggressive for thin film.


Q: Do you think that a lot of the overcapacity problem of the PV industry has to do with the pace at which the Chinese manufacturers grew?

Under capacity existed for the last four years. What happened at the end of 2008 has got nothing to do with the Chinese creating too much capacity. It happened due to the European credit markets. If you look at analyst research going back a few years, you would find supply shortages existing up to 2009 and a possible equilibrium by 2010. The challenge was not coming from a supply perspective but it came because of a credit crisis.

The credit crisis drove a slowdown in the installations of PV plants in Europe which then resulted in the oversupply. So capacity was created based on a forecast of what the demand was going to be. Demand actually fell off in the fourth quarter amounting to a 20-25% contraction in the fourth quarter. Three quarters of the world’s solar installation takes place in a solar farm configuration. So, if you have a 10 MW form which is in the 50 million euros out of which 20% is mostly equity and the rest is debt.

The challenge was that banks froze up. I think our strategy is addressing different segments in a differentiating manner. There isn’t going to be a one fit, solve all solution. I don’t think grid parity has been achieved by any player in the world. I think grid parity will be achieved somewhere around 2010-2011.

Q: What were the initial targets you had in mind for the PV business?
The idea was to install 250 MW by March 2009 which means a second crystalline silicon and a second thin film line. Both of these are currently in work in progress and will be installed in the next 1-2-3 months. We today are operating at 80 MW crystalline and 40 MW thin film so that makes it 120 MW. The 40 MW thin film will be expanded to 65 MW so that will take us to 145 MW cumulatively. There is an incremental 165 MW of capacity that is under installation so that will take us to in the region of 330 odd MW in the next few months.

Then we have got a ramp. The ramp centers around two factors. Concentrators and thin film. Thin Film ramp centers around building up a facility in. It is not the best environment to be closing out a large, capital intensive project. I think we have done close to Rs. 2000 crore worth financial closure in the last four months alone. Chennai is about $700-800 million financial closure so we will in the next 6 to 12 months do the financial closure around Chennai.

Q: Where is the storage technology business headed?
The optical business continues to be our core business. It is effectively being driven by three factors. The first is rationalization of supply. The second is the introduction of Blu-ray. I think Blu-ray has been an extremely successful product. We have finally started to see some traction, some volume and we expect 2009 to be the year when Blu-ray will take off and generate volumes in the market place. I think most analysts are forecasting 8 to 10 X growth in blue ray volumes between 2008 and 2009.. Blu-ray is going to go on a very steep volume ramp. I think a combination of these two factors combined with the easing up of the petrochemical cycle is going to be benefiting us. I think for the next three years, blue ray is certainly going to be the driver. Then there are multiple technologies beyond blu-ray like Holographic. So blu-ray gives you 50 GB of storage on a single platter whereas Holographic would get you to maybe 300-600 GB of storage.

That is I think the next generation beyond blu-ray.

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  • Dhawan

    Seriously people are so hopeful about new government and acche din, no words. (sic) There is nothing called magic, perseverance is the key and nothing can happen in a month or two.

    on Jul 7, 2014
  • Anuj

    What are the plans to compete with low cost offerings from china? That is where some indian company has to develop a niche. Mr Ratul Puri, if you are looking at expansion please focus on competing with Chinese counterparts and not within India.

    on Jul 2, 2014
  • Anuj

    good article sir

    on Jul 2, 2014
  • Mohit

    The worst is over, brighter days are near.

    on Jul 1, 2014
  • jwhenry

    Both trucks are car qualify for the Cash For Clunkers but not the motorcycles. Henry Blogger www.cashforclunkersfacts.info http://www.cashforclunkersfacts.info

    on Jul 28, 2009