Key Sector Data Market Cap (Rs. crore) 4313 Market Cap (USD Million) 784 P/E 21.5 P/BV 1.9 Debt/Equity 2.2 ROA (%) 2.6 ROE (%) 8.6 EV/Sales 1.6 EV/EBITDA 9.5

	Sales	PBDIT	PAT	PBDIT margin	PAT margin
	% chg YoY	% chg YoY	% chg YoY	%	%
Dec 2011	16.00%	-10.00%	-54.00%	16.60%	2.80%
Mar 2012	14.00%	9.00%	10.00%	16.80%	5.00%
Jun 2012	17.00%	-17.00%	PL	14.80%	-0.04%
Sep 2012	7.00%	-21.00%	PL	14.00%	-2.60%
Dec 2012	7.00%	-25.00%	PL	11.70%	-4.60%
2011-12	19.00%	170.00%	34.00%	57.50%	6.00%
2012-13 (F)	14.00%	-61.00%	-26.00%	19.50%	3.90%
2013-14 (F)	12.00%	-9.00%	-38.00%	15.80%	2.10%
PL : Profit to Loss
Source : Capitaline Databases

Indian Glass industry has been categorized into flat, container and other. Flat Glass or glass sheet is commonly used for windows, glass doors, transparent walls and windshields. Most flat glass is soda lime glass, produced by the float glass process. Flat glass segment comprises of float glass and rolled glass, which are mostly used in architectural and automotive applications. Container Glass is a type of glass for the production of glass container such as bottles, jars, drink ware and bowls. Container Glass stands in contrast with the flat glass. Container glass, which is the largest segment in the glass sector, comprises of glass packaging for consumer goods and pharmaceuticals. The other glass segment mainly includes glass used in optical and lens industry and in manufacture of cutlery, electrical insulation and various other sectors.

The glass industry in India is rapidly transforming. The consumption of processed glass in architectural segment is growing at a fast pace. In the past couple of years there has been a huge amount of investments in architectural downstream processing. A huge challenge in the industry in the coming years would be significant excess capacity. Till the domestic demand grows to be large enough to absorb this additional capacity, the industry needs to focus on exports. Saint Gobain glass India has a large international network for exporting all over the world and it would leverage it fully. Thus, the market will pose a challenge in the medium terms at least for the next three years.

The construction and automotive industries are the most important consuming sectors. Cement industry is showing positive growth behind its peak season for construction sector while, the automobiles production and sales attained negative growth during March 2013. The domestic production of Glass sheet registered positive growth in Jan 2013 on YoY after falling continuously in past two months. It grew 23% to 10,418 thousand sq. meters in Jan 2013 on YoY while, it increased 17% during the same period on MoM basis.

On the other hand, Fibre glass production continued to show negative growth for the third consecutive month. It decreased 6% in Jan 2013 to 3435 tonnes on YoY followed by decrease of 4% in Dec 2012 at 3430 tonnes. However, Fibre glass items output remained flat during the period on MoM front. Fiber glass is regularly used in protective equipment, such as helmets because of its light weight and durability. It is also used to make storage tanks, roofing laminate, door surrounds, chimneys and in pipe systems.

The WPI index of fiber glass & glass sheet continued to grew from last consecutive three months by 4% in March 2013 on YoY while, it improved 1% on MoM during the same period.

Trend in Glass Sheet Production in Thousand Square Meters
Month	2012 - 13		2011 - 12		2010 - 11
	Production	% Chg.	Production	% Chg.	Production	% Chg.
Apr	9250	14	8101	3	7870	-5
May	9649	10	8745	3	8454	21
Jun	9431	11	8499	2	8369	23
Jul	9463	2	9286	12	8304	11
Aug	8253	-13	9505	26	7522	0
Sep	8887	5	8480	18	7200	-12
Oct	10037	29	7796	1	7682	0
Nov	8314	-12	9403	30	7231	6
Dec	8902	-18	10845	24	8755	14
Jan	10418	23	8445	2	8242	16
Feb	--		7775	3	7573	6
Mar	--		9264	-3	9567	27
% Chg : Year on Year Difference
Source : Central Statistical Organisation

Trend in Fibre Glass Production in Tonnes
Month	2012 - 13		2011 - 12		2010 - 11
	Production	% Chg.	Production	% Chg.	Production	% Chg.
Apr	3940	23	3195	5	3052	37
May	3858	14	3390	6	3194	77
Jun	3582	5	3418	8	3152	87
Jul	3533	1	3486	5	3305	75
Aug	3404	-2	3463	4	3315	76
Sep	3757	7	3498	9	3212	70
Oct	3667	3	3577	10	3247	72
Nov	3389	-6	3598	3	3484	85
Dec	3430	-4	3583	5	3427	18
Jan	3435	-6	3636	9	3348	7
Feb	--	0	3713	18	3143	0
Mar	--	0	4115	23	3337	3
% Chg: Year on Year Difference
Source : Central Statistical Organisation

Toughened Glass is also made from float glass that has been specially heat treated. It is a type of safety glass processed by controlled thermal or chemical treatments to increase its strength compared with normal glass. It is commonly used for side and rear windows in automobiles. Toughened glass production growth in India has been accelerated to robust 44% to 3,24,731 sq. meters in Jan 2013 while on Mom, it decreased 5% during the same period on MoM basis. The WPI index of laminated glass and toughened glass remained flat in March 2013 both sequentially and YOY basis on the account of increased supply.

Trend in Toughened Glass Production in Square Metres
Month	2012 - 13		2011 - 12		2010 - 11
	Production	% Chg.	Production	% Chg.	Production	% Chg.
Apr	221726	3	215975	8	199794	32
May	222912	8	206411	3	199943	29
Jun	283849	37	206825	5	196198	27
Jul	320611	40	229769	0	228953	46
Aug	313154	36	230027	-1	231185	37
Sep	284525	20	236899	7	222398	31
Oct	319354	40	227477	-1	229283	32
Nov	302705	36	223139	9	205051	9
Dec	343189	43	240461	1	237474	26
Jan	324731	44	225037	3	219533	17
Feb	--		213296	-1	214357	7
Mar	--		222947	1	220172	10
% Chg: Year on Year Difference
Source : Central Statistical Organisation

The demand for the container glass is driven by the growth in the user industry i.e. liquor & beer, pharmaceuticals, cosmetics & perfumery, food and beverages. The primary raw materials engaged in the manufacture of container glass are sand (silica and quartz), limestone (calcite), cullet (broken glass), soda ash, dolomite and feldspar. . Indian glass container market is estimated to be around USD 1.1 billion and is growing at the rate of 10% per annum. The per capita glass container consumption is 1.5 kg in India lower compared to other countries.

Bottle glass production continued to deplete since September to fall 14% in Jan 2013 on YoY while on MoM front, it went up 1% during the same period. The WPI index of glass bottles & bottle ware grew 5% in March 2013 on YoY due to hit in output and it also rose 1% during same period on MoM basis

Soda ash is one of the major raw materials in the manufacturing of glass. Its cost constitutes about 30% in production of glass products. Major manufactures of Soda ash in India are Tata Chemicals, Gujarat Heavy Chemicals, DCW and NIRMA. They continue to rule the Indian market by fixing the prices of soda ash. Major portion of soda ash demand for glass sector is met through imports. Thus, domestic prices of soda ash are fixed based on the landed costs of imports.

Tata's Soda Ash prices continued to remain flat at Rs. 24 per Kg in March 2013 from last two consecutive months while, it is down by 33% during the period compared to the corresponding period of last year. Besides, Birlas's soda ash prices are flat at Rs. 22 per Kg in 2013.The decline in prices was on subdued demand in China with the over supply and gloomy economic conditions.

China PR, EU, Kenya, Pakistan, Iran, Ukraine and USA are the major sod ash producers, which constitutes around 80% of total world production. India's Ministry of Finance has imposed anti-dumping duty on import of soda ash from these countries during June 2012. The duty varies from USD 2.38 per tonne to USD 38.79 per tonne, depending on the manufacturer and the country of exports. The anti-dumping duty would last for five years.

Asahi India Glass (AIS), India's largest integrated glass company, manufactures a wide range of safety glass, float glass, architectural processed glass and glass products. For the quarter ended December 2012, it has registered sharp 23% growth in its sales turnover at Rs. 517.88 crore on YoY. This notable growth was aided by significant performance across the segments. Automotive glass, float glass and other segments recorded growth of 26% at Rs. 274.24 crore, 19% at Rs. 235.38 crore and 8% at Rs. 28.71 crore respectively. Adding to this, reduction in foreign currency exchange loss at Rs. 3 crore against Rs. 10.5 crore in Q3FY11 lead OPM to improve 90 bps to 8.1%. Therefore, operating profit increased 37% to Rs. 41.87 crore. But, spike in interest and depreciation costs lead company to record LBT of Rs. 36.87 crore against Rs. 38.84 crore in Q3FY11.Finally,after considering the tax expenses and share of profit from associates, company posted net loss of Rs. 24.32 crore against Rs. 27.12 crore in Q3FY11.

AIS Auto Glass caters to around 72% of the passenger vehicles segment through the OEM route and has remained a market leader in the segment. AIS Auto Glass has recently taken fresh initiatives to remove some bottlenecks and raise its capacity. The same is aimed at bringing down the overhead and freight costs. The ensuing expansion involves enhancement of direct production and supporting equipment. Total project outlay, is estimated to be around Rs.125 crore. AIS Float Glass commands 25% share in the Float Glass market. AIS expects that the growth in Float Glass segment is expected to pick up once the interest rates start softening leading to increasing demand for real estate.

Hindustan National Glass (HNG), the largest container glass packaging solutions provider in India, net turnover declined 11% to Rs. 456.77 crore for the quarter ended December 2012. Adding to this, increase in staff and other expenses, OPM deprived whopping 870 bps to 5.9%.Thus, operating profit declined 64% to Rs.26.82 crore. But, spike in interest and depreciation costs lead company to post LBT of Rs. 99.47 crore against PBT of Rs. 21.75 crore in the corresponding period of last year (CPLY).However, with the tax gain of Rs.32.92 crore against expenses of Rs. 4.30 in (CPLY) resulted into net loss of Rs. 66.55 crore against PAT of Rs. 17.45 crore in CPLY.

In order to optimize the cost, company is implementing various processes and systems across the manufacturing units. The company is sourcing power through IEX, and it has entered into long term tie ups with mine owners for captive processing and supply of silica sand. Therefore, company expects the margins to improve as the initiatives start yielding cost benefits in the coming quarters. Further, company is in plans to expand to 5,015 TPD by 2015 from existing 4,235 TPD of capacity (including Naidupeta). HNG expects its overall operations to break even in FY2013. Hence, from the extended capacities and increased capacity utilizations, management expects the production and sales volumes to improve significantly.

Piramal Glass that manufactures glass containers for the Pharmaceuticals, Cosmetics & Perfumery (C&P) and Speciality Food & Beverage (F&B) industry registered 15% growth in net turnover at Rs. 398.81 crore for the quarter ended December 2012 on YoY. Of the total sales, India accounts for about 57%, USA about 29% and Srilanka 14%.The premium market was very sluggish and there were no new products launched during the quarter. Growth was seen due to new product line within the existing customers. Latin America and Asian markets did well. US market continues to remain sluggish.EU markets continue to see excess capacities and plants continue to shut down and shift the capacities to India. But, on increase in staff, energy and other expenses, OPM declined 730 bps to 18.1%. On the top of that, technical issues in 255 TPD plant and a Rs. 18 crore loss in sales of Pharma division was the main reason for drop in margins. Therefore, operating profit declined 18% to Rs. 72.14 crore. With the increase in interest and depreciation costs, PBT further fell 68% to Rs. 9.84 crore. Finally, on reduction in tax expenses by 79% to Rs. 1.34 crore, the fall in PAT was constrained to 66% to Rs. 8.50 crore. After adjustment of minority interest, bottom line further crashed 80% to Rs. 4.21 crore.

The new plant in Piramal of 160 TPD, achieved the efficiency level of around 80%, but the plant, which was intended for high margin C&P segment, was operating for the mass container glass segment due to the C&P market being flat. As a result of which the margins were very low and thus affected the overall EBIDTA margin. The glass container market is already bleeding because of excess capacity due to slowdown in liquor sector. For 9 months ending Dec'12, sales from C&P constitute about 52% and grew by 17% YoY, Pharma stood at 25% and grew by 30% YoY and SF & B stood at 23% and grew by 18% YoY. Within the C&P segment, the Premium category grew by 6% while the mass segment grew by 33% for Q3 FY'13 and for 9 months ending Dec'12, Premium grew by 14% and mass grew by 22%.

Outlook

Recent Union Budget 2013-14 has proposed to deduct the interest up to Rs. 1 lakh for a person taking first home loan up to Rs. 25 lakh during period 1.4.2013 to 31.3.2014. This will promote home ownership and give a fillip to a number of industries including glass .Further, Growth in Float Glass segment is expected to pick up once the interest rates start softening leading to increasing demand for real estate. Thus, buoyed by increased demand from housing and infrastructure sectors, India's glass consumption is likely to expand further in FY2013-14.Finally, players who have taken initiatives for new product line as well for cost controls will benefit with relatively better margins.

Glass consumption growth is expected to increase in all the major sectors such as consumer goods, pharmaceuticals, automotive and construction driven by up tick in demand. The lower per capita consumption of 1.5 kg in India as compared to the other countries and the strong economic drivers for end user segments (liquor, beer, pharma, food, cosmetics etc) will boost the demand for the industry.