Kindly share with us the company's revenue share break up in terms of various industries like liquor, other soft drink beverages, pharma industry, FMCG industry etc.

Broadly, nearly 65% of our sales come from Liquor industry, 15% from food industry, 12% from pharma and the rest from soft drinks, toiletries and other miscellaneous industries.

To which sector of the above, the company is seeing or/and anticipating the growth/future growth.

Liquor industry will continue to grow at 14-15% every year in India. The reason is the young generation of India, which believes in working hard, gaining more, earning more and enjoying the lifestyle. Further, slowly but surely, liquor is also getting accepted in society. So this industry will continue to grow.

Further food and pharma will also continue to grow in double digits. Although there are concerns that plastics and PET bottles are replacing container glass usage in many foodstuffs and pharma products, beyond a point it is not possible. This is due to various reasons such as usage of plastics do not ensure long lasting of the product with due quality and there can be chemical and leeching reactions which results in health issues. The aroma, taste and charm of product in glass will be better than any other packaging material.

Container glass industry grew around 8% CAGR in past 5 years. This is very low? What are the reasons? At what rate the company anticipates to grow and the future growth drivers?

What you are talking about is the growth in new bottles. Remember that in container glass industry there is a threat of re-use of glass bottles without undergoing the adequate cleaning and processing mechanism. In many industries and many unorganized players reuse the glass bottles without recycling process which hurts the industry's growth. It is difficult to determine the size of this market but with more and more health issues and more awareness, one thing is sure that the recycling market is de-growing and definitely not growing.

Update us on size of container glass industry in India, market share of organized/unorganized segment and the competition scenario particularly from China

It is difficult to determine the unorganized sector share, but the organized sector of container glass industry is somewhere between Rs 3000-3400 crore and growing at around 8-10%. There are no threats from Chinese competition in a sense, glass is more of a volume game and nearly 60% of the weight is the airspace. So beyond 500 km of distance the product will loose its cost advantage due to increase in logistics, freight cost etc.

Was the organized player in general and company in particular was able to gain the market share in turbulent times when credit did not reach the unorganized weaker sector? How is the current situation?

During the turbulent times and slowdown in the general economy, the good thing is that volumes never took a hit. Of course, the market may not have grown, but neither the company nor the industry was left with huge inventory or stuff like that. We have 6 plants at different locations ensuring meeting the customer's requirements all the time. A strong relationship has been built with various customers ensuring their requirements in time.

Soda Ash, sand, limestones are some of the major raw material of the company. Kindly throw some light on the raw material sourcing strategy? What % of total raw material is imported? Do we have firm tie up with vendors or is there any plans to acquire mines on lease etc?

Soda Ash would constitute around 35-40% of the total raw material cost on value basis. Yes, we have firm tie up plans with major raw material producer in the company. These are all long-term agreements and fluctuations of raw material in major way do not affect us. We always work on formula of X amt of quantity to be lifted in Y period of time and at Z price. The question of imports or local depends upon the costing,. We do import raw material and will increase the import content provided it is available at better price.

Are we able to pass on the rise in raw material cost to customers? Typically how the contract with the clients is formed are they annual or are reviewed quarterly? Thus basically want to understand the business right from the order till the delivery.

Basically the contracts are based on Transaction to Transaction. Every transaction, an order comes and depending upon our marketing strategies and strong relation that we have with the customers we know normally how much demand of glass container come. Unless, the prices of raw material differs signifantly on both the sides, the price determined at the previous transaction remains the same for every subsequent transaction.

Do the industry in general and company in particular has the pricing power? What is the USP of the company?

We have pricing power to some extent as discussed previously that we have strong relationship with clients and our 6 different plants ensures the requirements of clients at all times and we are cost competitive. Put together all plants, we have capacity to produce 2700 tons per day of container glass from 11 furnaces and 44 different lines of container glass production at 6 different locations meeting the customer's requirement.

How much of the sales are from domestic market and how much is from exports? Which market or segment of market is growing faster and where the margins are better

For the nine months ended Dec'09, we have exported about Rs 70 crore of container glass of our total turnover of around Rs 980 crore for Dec'09. Exports have been largely to Middle East, South East Asia, Nepal, Bangladesh and very few exports to US and EU markets. The exports have been largely in liquor segment.

Company has mentioned in the past that it is looking aggressively for acquisition of international company in container business. Explain the strategy of the company to cater to the global market considering the fact that still global economy is struggling to recover.

We have made two acquisitions in India one in 2005 and other in 2007 both in container glass industry and looking at the success of these two acquisitions and our management skills and experience from these acquisitions, we are very confident that we can turnaround the business. We are seriously looking at global acquisitions where many factories have been shut down or are in losses due to the slowdown. Due diligence is on way and we will come out at the appropriate time.

If I look at FY'09 performance vis a vis previous couple of years, I request for some clarification on certain points as mentioned below: -

• The Operating profit margins (excluding other income) stood at 16.3%. Kindly share the reasons. However subsequent to that the OPM for 9 months ending Dec'09 stood at 23.8%. (Excluding other income). Why? What are the sustainable margins going forward?

Before seeing the FY'09 margins, let me clarify some things. There was a forex derivative loss of Rs 16 crore due to a complex structure of foreign transaction, together with a further forex loss of Rs 16 crore due to currency fluctuation on our imports. There was an additional cost of Rs 20 crore due to repairs and additional stores and spares expenditure that incurred in our Bahadurgarh plant in Haryana due to some technical problems. In contract to that, for the nine months ended Dec'09, there was no such complex derivative contract, there was a forex gain of Rs 3 crore and there is an energy cost saving of Rs 10 crore due to fall in crude prices on y.o.y basis. So if you adjust all these fluctuations, on long term sustainable basis EBIDTA margin of around 23-24% is very much sustainable in my business.

• Capex plans for last quarter and for FY'11 and the funding arrangements. Are there any plans to raise money?

We are planning a green field expansion in container glass industry in Andhra Pradesh with a capex of around Rs 360-400 crore with capacity of 400 TPD, which will be operational within 24 months. The capex will be funded in combination of internal accruals and debt. Further we have 6 existing plants and there is a normal capex of around Rs 200-250 crore every year on replacements etc to ensure plant work on continuous basis. Of course, these replacement capex also increases the installed capacity to some extent due to efficiency. With all these efforts in next couple of years, our installed capacity will be increased to about 3100 TPD which due to better efficiencies can be enhanced to about 3400-3500 TPD.

• In FY'09 there was a tax credit of Rs 39.26 crore (including deferred tax). We are paying around 15% ie MAT tax so far for 9 months ending Dec'09. Kindly update us the tax rate going forward.

Uptil FY'10 we will continue to remain under MAT while however since then we will be under full tax regime. Of course due to deferred tax and all, our overall tax rate will be around 25%.

• As seen in many industries, the topline growth has still not returned to the company? When will the company see the topline growth of double digits?

In the container glass industry it is not possible to grow beyond 8-10% every year, given the nature of business and existence of glass being reused, unless you grow inorganically or through capacity expansions. Apart from the normal growth, as discussed we are expanding in Andhra Pradesh and looking for inorganic growth as well.

The company holds certain shares under trust. Kindly throw some more light on the same.

Nearly 20% of the total shareholding in the company is held under trust and this is largely due to the shares not cancelled out at the time of merger and acquisition. The trust has decided to sell the shares whether through PE mode or in secondary market and the surplus money will be used for company's growth areas of expansion and acquisitions

Who owns the HNG brand? What sort of expenditure as a % to sales is planned for brand building exercise?

HNG brand is owned by the company and hence no royalty or such expenditure is paid

Total cash & bank balance and debt and average interest cost of debt in books of accounts

We do not keep much cash and bank balances as whatever internal accruals are generated goes to reduce our overdraft used for our working capital requirement. Our cash and bank balance will be around Rs 6 crore and total debt including working capital as on Dec'09 is about Rs 550 crore with interest cost of around 8%.

Kindly share with us the dividend policy of the company

Normally we follow a conservative dividend policy of around 10% given the nature of business which requires capex and given our growth strategy of growing inorganically as well.

Questions on Green field expansion through the subsidiary HNG Float Glass

Details on the shareholding pattern of the subsidiary? Does the company have option to increase the stake?

HNG Float Glass Company is not a subsidiary of the company as it holds 40% stake in the company. The remaining 10% is held by International Finance company (IFC) and DEG. The remaining stake ie of 50% is held by the promoters of HNG in their individual capacities. As of now there is no such thought to increase the stake.

Details on the capacity, capex incurred, debt and equity of the subsidiary

The HNG Float Glass is into float glass business with a capacity of around 600 TPD with a capex of around Rs 600 crore. Nearly Rs 350 crore is in debt and balance in equity form. The manufacturing facility is at Halol in Vadodara of Gujarat State. The company has just started its commercial production. We expect to break even the company in FY'11 and to generate profits from Q1 FY'12 onwards.

Some of the key float glass industry players like Asahi is suffering miserably in the float glass segment and doing wonders in auto glass segment. According to other float glass players, there is a severe overcapacity in float glass industry and it is yet to recover. Margins are severally under pressure. In such a scenario, why the company is going for a green field expansion in float glass segment

No doubt there is currently over capacity built up in float glass segment. But that is largely due to the slowdown in commercial and residential construction space and slowdown in various other infrastructure spending. We clearly have seen revival in residential construction space and the revival in commercial space has just started. Further all the float glass plants are continuous plants and the players have piled up huge inventories and hence you are seeing the over capacity. Once the demand kicks in the inventories will be absorbed and capacities will be back on stream. Only large players will be able to survive and grow. I can tell you that there is a tremendous scope of float glass business in India, given we have just started to use glass in residential and commercial space and in infrastructure space. If the demand revives and plant is stabilized, EBIDTA margins of around 30% is very much possible in float glass plant.