Key Sector Data Market Cap (Rs Crore) 4228 Market Cap (USD Million) 769 P/E 21.1 P/BV 1.8 Debt/Equity 2.2 ROA (%) 2.6 ROE (%) 8.6 EV/Sales 1.6 EV/EBITDA 9.4

	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 demand for the glass has reduced mainly due to slackness in the real estate and automobile sectors. Cement industry is showing modest growth behind its peak season while, the automobiles production and sales attained negative growth during April 2013. The Glass products output has shown a decreasing trend from last five consecutive months as industry is operating at lower capacities on fall in demand. The Glass Sheet production growth had decelerated to 7% in Feb 2013 at 8,331 Thousand Sq. Meters from 23% in Jan 2013 while, on MoM front, it dwindled by 20% in Feb 2013. On the other hand, the negative growth of Fibre glass production, started since November 2012 had worsened to 16% at 3,128 tonnes in Feb 2013 on YoY from 6% in Jan 2013. Also, it fell 9% on MoM in Feb 2013 followed by flat growth in previous two months. Fibre 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 grew 3% in March 2013 on YoY followed by continuous growth of 4% in last consecutive three months while, it remained flat 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	83310	7	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	3128	-16	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 57% to 3,34,694 sq. meters in Feb 2013 while on Mom, it increased 3% during the same period followed by decline of 5% in previous month. 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	334694	57	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 16% in Feb 2013 on YoY while on MoM front also, it went down by 8%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 remained flat during same period on MoM basis

Trend in Glass Bottle Production in Tonnes
Month	2012 - 13		2011 - 12		2010 - 11
	Production	% Chg.	Production	% Chg.	Production	% Chg.
Apr	108983	10	98907	2	96793	9
May	120754	18	102272	5	96995	7
Jun	119911	20	99757	9	91198	1
Jul	122033	23	99178	6	93784	-3
Aug	111695	4	107205	17	91850	-6
Sep	96884	-10	107348	14	93813	1
Oct	96510	-12	109669	14	96424	7
Nov	94181	-12	106834	11	96404	10
Dec	95021	-15	111360	11	100404	3
Jan	96985	-14	112499	9	102821	6
Feb	89291	-16	106158	19	89227	1
Mar	--	0	110733	3	107118	6
% Chg : Year on Year Difference
Source : Central Statistical Organisation

Soda ash is one of the major raw materials in the manufacturing of glass. Its cost constitutes about 30% in production of glass products. The demand in the country in 2012-13 showed healthy growth of 10-11%, led by healthy growth from the detergents and chemicals segments. However, a large part of the demand was met by rising imports, up 15-20% to around 6,50,000 tonnes. 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 April 2013 from the beginning of 2013 while, it is down by 6% during the period compared to the corresponding period of last year. Besides, Birla's soda ash prices are flat at Rs. 22 per Kg in 2013. Besides, the cost of shipments remains an issue. A little over 80% of the country's soda ash making capacities is in Gujarat. For every tonne transported from Gujarat to the southern and eastern markets, the logistic costs are USD 75-80 per tonne; whereas for the Chinese and European manufacturers, the logistics costs are only USD 35-40 a tonne to these ports. Recognizing the problem, the government is likely to impose anti-dumping duties on imports of soda ash from Russia and Turkey within the next 60 days as per the Industry source. Though costs of soda ash makers have gone up by 5-10%, companies have been unable to pass on these cost hikes to customers till now. Thus, with the implementation of ADD on exporting countries, soda ash manufacturers would be able to increase the prices on par with the expected rise in landed costs of imports.

In July 2012, India had imposed anti dumping duty of USD 2.38 a tonne – USD 38.79 a tonne on soda ash imports from seven countries, namely, Iran, Pakistan, China, Ukraine, Kenya, European Union and the US.

Primal Glass that manufactures glass containers for the Pharmaceuticals, Cosmetics & Perfumery (C&P) and Specialty Food & Beverage (F&B) industry registered 8% growth in net turnover at Rs. 439.75 crore for the quarter ended March 2013 on YoY. However, OPM deprived 440 bps to 13.6% on increase in staff and energy costs as % of adjusted net sales. Thus, operating profit declined 18% to Rs. 59.80 crore. Further, spike in interest and depreciation costs, led PBT to fall by 82% to Rs. 5.85 crore. Finally, after considering the tax gain of Rs. 1.40 crore against cost of Rs. 6.38 crore and minority interest of Rs. 2.04 crore against Rs. 1.49 crore resulted net profit of Rs. 5.21 crore, down by 79% on YoY.

For Cosmetic & Perfumery market, clearly the premium market was growing, but the pace of growth was slower. In mass C&P market in India, company was able to garner the market share. It is likely that company would continue its focus on C&P market. During FY13, C&P grew by about 17%, Pharma segment grew by about 27% and Specialty food and beverage segment grew by about 8%.High growth in Pharma segment, was due to the fact that during FY13, the 65 TPD furnaces was fully available for the segment as compared to fY12, where it was relined. During FY13, there was unprecedented fall in production due to technical issue with the 255 TPD furnaces which was finally resolved by Q4FY13. Also the new 160 TPD furnace was operating at lower capacity and company incurred additional depreciation and interest on the same. Product mix was also adverse in FY13. Also there was unprecedented gas price rise, where the prices paid to GSPC increased by about 25% to average of about USD 10 per mmbtu. All these factors led to a 560 basis point erosion in EBIDT margin at 19.5% in FY13.Finally, for FY14, company expects sales growth of around 15% with EBIDTA at same level of FY2013.

Company's subsidiary in Sri Lanka, Piramal Glass Ceylon PLC has on April 26, 2013 agreed to sell part of its Land at Rathlamalana for a consideration of Sri Lankan Rupees 355 million (equivalent to INR 151.69 million approximately). The final sale transaction is likely to be completed on or before June 30, 2013.

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. Recently, it has informed that it has received an amount aggregating to Rs. 50 crore from Asahi Glass Japan (one of the promoters of the Company) as advance share application money towards its entitlement under the proposed right issue of the Company. 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. 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.

Glass packaging industry in India was under pressure in FY2013, with capacity being added by about 25% YoY with not much increase in demand to absorb the supply. As per Piramal Glass, two of the top glass manufacturing companies in Indi are financially bleeding. Globally, there was a clear slowdown in Pharma packaging market and the slowdown was not only in US and EU, but was visible in countries like Turkey, Russia, Latin America and Brazil etc.

Outlook

Glass items except toughened glass output continued to show decreasing trend from last few months due to fall in demand. However, Recent Budget provisions are likely to 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 uptick 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.