The Indian Glass industry has been growing across all segments. This growth has been driven primarily by India's growing automotive and construction sectors in which glass is used. The container glass industry benefits from growing awareness on account of rising hygienic packaging demand, growing population, increasing per capita income of average Indians and low per capita glass consumption. Incidentally, the per capita glass consumption in India for container glass is 1.2 kg, which offers tremendous scope for rise.

The growth of Indian market for glass and glass products in the past few years has been phenomenal. In geographical terms, the South Indian region dominated by Bangalore, Chennai and Hyderabad remains to be a major market for glass and its products. Efforts by manufactures to create awareness among the users for glass have increased the demand further more. Many international players are also entering the Indian glass market, thereby paving way for world-class standards of quality. This is also a factor that is driving growth in this sector.

In the quarter ended September 2011, the profitability of many major glass and glass products manufacturing companies was dampened by the raising raw material, power and fuel cost costs and interest rates. Major players such as Hindusthan National Glass, are planning for further price hikes in order to offset the higher cost and also to mitigate the cost pressure of the past.

The aggregate Net Sales of 14 glass and glass product manufacturing companies remained flat at Rs 1230 crore during the quarter ended September 2011. Their OPM declined by massive 1400 bps to 16.7% impacted mainly due to the increasing raw material prices. As a result, the operating profits declined by 14% to Rs 205 crore during the quarter under review. Interestingly, the other income improved by 333% to Rs 13 crore which restricted the fall in PBIDT to 10% at Rs 218 crore. The interest cost fell by 3% to Rs 77 crore as result the PBDT declined by 12% to Rs 141 crore. The 4% dip in the provision for depreciation to Rs 91 crore led the PBT to fall by 24% to Rs 50 crore. After accounting tax of Rs 13 crore, down by 32% from the corresponding quarter last year, the Net Profit declined 21% to Rs 37 crore.

Net Sales of the largest producer of container glass, Hindusthan National Glass grew by 14% to Rs 421.85 crore during the quarter ended September 2011. But the OPM contracted by 300 bps mainly due to the sharp hike in the power and fuel cost and raw material cost. This led the operating profits to improve by only 1% to Rs 69.80 crore. Other income zoomed 308% to Rs 2.90 crore helping the PBIDT to increase by 2% to Rs 72.70 crore. However, the 86% hike in the interest cost to Rs 22.38 crore pulled the PBDT down by 15% to Rs 50.32 crore. Further more, Depreciation cost inched up by 15% to Rs 28.96 crore which led the PBT to decline by 38% to Rs 21.36 crore. Taxation surged 34% to Rs 4.60 crore, as result of which the PAT declined 39% to Rs 16.76 crore.

Naidupeta unit at Andhra Pradesh is one of the upcoming projects of HNG with a total cost of Rs 800 crore and is expected to get completed by the quarter ended June 2012. Another expansion project of HNG at Nasik in Maharashtra will get completed by the quarter ending March 2012. The total expenditure of this project is Rs 725 crore. In May 2011, HNG also acquired Agenda Glass of Germany. The company expects that increasing volumes and realizations in the coming quarters should enable the company to post improved margins. As the additional capacities go on stream, the production and sales volume are expected to improve significantly.

HSIL plans long term investments of about Rs 1000 crore

Net Sales of HSIL witnessed robust 38% growth to Rs 296.61 crore for the quarter ended September 2011, on the back of 61% surge in Container Glass business sales to Rs 153.76 crore. In addition, Building products business has also witnessed good 15% growth to Rs 144.79 crore for the same period contributing 48% to total sales. However, OPM fell by 180 basis points to 18.5% on account of 180 basis points rise in Power & Fuel costs and 80 basis points rise in other expenses. However, Consumption cost fell by 220 basis points resulting operating profit to grew by 23% to Rs 55.25 crore. Interest cost lowered by 4% to Rs 9.31 crore and marginal dip in depreciation by 1% to Rs 13.50 crore has facilitated the PBT to grow by robust 52% to Rs 33.25 crore. Thanks to the fall in effective tax rate by 560 basis points to 30.8%, net profit grew by 65% to Rs 23 crore.

HSIL has plans to invest Rs 500 crore to set up a Greenfield plant in Gujarat and expects it to get completed by FY13. It has also bought 55 acres near Dahej in Bharuch district, Gujarat for a new plant with a planned total investment of Rs 500 crore. The Company is confident of achieving more than 30% growth in sales and profits for the FY'12 as it expects robust demand for its products in both the divisions outpacing supplies as the plants are currently running at full capacities.

Piramal Glass has planned a total capex of Rs 260 crore across FY'12 and FY'13

Piramal Glass's Net Sales grew by 8% to Rs 329.75 crore for the quarter ended September 2011. Revenues from Cosmetics and Perfumery segment grew by 19%, while the revenues from the Specialty food and Beverage segment grew by 26% during the quarter. However, revenue from Pharma business fell by 24% on of account on reduced capacity allocation. OPM improved by 600 bps to 24.1% leading the operating profits to increase by 8% to Rs 79.61 crore. Interest cost fell by 4% to Rs 16.37 crore, while the depreciation cost remained flat compared to the corresponding quarter last year. As a result, the PBT grew by 21% to Rs 36.81 crore. After accounting tax of Rs 9.36 crore, up by 35%, the Net Profit inclined by 17% to Rs 27.45 crore.

The company has planned a total capex of Rs 260 crore across FY'12 and FY'13. It expects 16-18% CAGR growth in revenues for the FY'13, on the back of 28-30% CAGR growth from premium C&P segment.

Forex losses haunt Asahi India Glass

India's largest automotive glass producer Asahi India Glass slipped into red with a net loss of Rs 18.14 crore in the quarter ended September 2011 as against profit of Rs 4.98 crore in the corresponding previous quarter. During this period, its net sales grew by 5% to Rs 398.13 crore. The company's financials were affected badly by forex loss of Rs 22.10 crore in the quarter ended September 2011, as against forex gain of Rs 4.43 crore in the corresponding previous quarter.

Outlook

The rising costs have dented the margins of the Indian glass sector. However, the major players have initiated price hikes, which can partly restore their margins. Considering strong demand growth projections for the medium term, the industry is in the midst of capacity expansions and introducing new technologies. The Glass industry in India is poised grow rapidly owing to the raising disposable income, increasing consumption and higher penetration level.

The sluggishness in key user industries like automotive and construction etc has affected the pace of growth in demand of the sector. With interest rate hikes over, and as India is entering the pause pace, interest sensitive sectors like automobile, construction etc can witness acceleration in the pace of growth in demand, which can add glow to the Indian glass sector.