Key Sector Data Market Cap (Rs Crore) 3736 Market Cap (USD Million) 633 P/E (-) P/BV 1.7 Debt/Equity 2.2 ROA (%) (-) ROE (%) (-) EV/Sales 1.4 EV/EBITDA 10.7

	Sales	PBDIT	PAT	PBDIT margin	PAT margin
	% chg YoY	% chg YoY	% chg YoY	%	%
Mar-12	14.00%	9.00%	10.00%	16.80%	5.00%
Jun-12	17.00%	-17.00%	PL	14.80%	-0.04%
Sep-12	7.00%	-21.00%	PL	14.00%	-2.60%
Dec-12	7.00%	-25.00%	PL	11.70%	-4.60%
Mar-12	5.00%	-42.00%	PL	9.20%	-6.20%
2011-12	19.00%	170.00%	34.00%	57.50%	6.00%
2012-13	9.00%	-26.00%	PL	11.90%	-3.30%
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 anguishing with modest growth amidst monsoon season while, the automobiles production and sales attained negative growth during June 2013. The Glass products were shown decreasing trend in their output from last five consecutive months as industry is operating at lower capacities on fall in demand.

The Glass Sheet production showed negative growth on both YoY and MoM front during May 2013 on slow demand. It fell 7% at 8,949 Thousand Sq. Meters on YoY while, it declined 17% on MoM basis. On the other hand, the decreasing trend of Fibre glass production continued since November 2012 and fell 20% at 3085 tonnes in May 2013 on YoY basis while, it dropped 7% during the period compared to previous month. 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 continued to grew 3% in June 2013 since March of this year while, it remained flat on MoM during the same period.

Trend in Glass Sheet Production in Thousand Square Meters
Month	2013-14		2012 - 13		2011 - 12
	Production	% Chg.	Production	% Chg.	Production	% Chg.
Apr	10791	17	9250	14	8101	3
May	8949	-7	9649	10	8745	3
Jun			9431	11	8499	2
Jul			9463	2	9286	12
Aug			8253	-13	9505	26
Sep			8887	5	8480	18
Oct			10037	29	7796	1
Nov			8314	-12	9403	30
Dec			8902	-18	10845	24
Jan			10418	23	8445	2
Feb			83310	7	7775	3
Mar			10570	9	9264	-3
% Chg : Year on Year Difference
Source : Central Statistical Organisation

Trend in Fibre Glass Production in Tonnes
Month	2013-14		2012 - 13		2011 - 12
	Production	% Chg.	Production	% Chg.	Production	% Chg.
Apr	3316	-16	3940	23	3195	5
May	3085	-20	3858	14	3390	6
Jun			3582	5	3418	8
Jul			3533	1	3486	5
Aug			3404	-2	3463	4
Sep			3757	7	3498	9
Oct			3667	3	3577	10
Nov			3389	-6	3598	3
Dec			3430	-4	3583	5
Jan			3435	-6	3636	9
Feb			3128	-16	3713	18
Mar			3470	-16	4115	23
% 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 accelerated from 29% in April to 31% in May 2013 on YoY, while it inched up 2% during the same period on MoM basis. The WPI index of laminated glass remained flat on YoY as well MoM while, toughened glass price index went up 1% and remained stable on YoY and MoM respectively in June 2013.

Trend in Toughened Glass Production in Square Metres
Month	2013-14		2012 - 13		2011 - 12
	Production	% Chg.	Production	% Chg.	Production	% Chg.
Apr	286007	29	221726	3	215975	8
May	292851	31	222912	8	206411	3
Jun			283849	37	206825	5
Jul			320611	40	229769	0
Aug			313154	36	230027	-1
Sep			284525	20	236899	7
Oct			319354	40	227477	-1
Nov			302705	36	223139	9
Dec			343189	43	240461	1
Jan			324731	44	225037	3
Feb			334694	57	213296	-1
Mar			306610	38	222947	1
% 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 18% in May 2013 at 9,9486 tonnes on YoY while on MoM front went up 6%during the same period. The WPI index of glass bottles & bottle ware remained flat on YoY as well MoM in June 2013.

Trend in Glass Bottle Production in Tonnes
Month	2013-14		2012 - 13		2011 - 12
	Production	% Chg.	Production	% Chg.	Production	% Chg.
Apr	93626	-14	108983	10	98907	2
May	99486	-18	120754	18	102272	5
Jun			119911	20	99757	9
Jul			122033	23	99178	6
Aug			111695	4	107205	17
Sep			96884	-10	107348	14
Oct			96510	-12	109669	14
Nov			94181	-12	106834	11
Dec			95021	-15	111360	11
Jan			96985	-14	112499	9
Feb			89291	-16	106158	19
Mar			97190	-12	110733	3
% 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. 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 July 2013 from the beginning of CY2013. Besides, Birla's soda ash prices are flat at Rs. 22 per Kg in 2013.

On the other hand, 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 to these ports are only USD 35-40 per tonne. 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 these onto customers till now. Thus, with the implementation of Anti Dumping Duty (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, and Kenya, European Union and US.

Primal Glass that manufacturer's 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.

Asahi India Glass (AIS), India's largest integrated Glass Company, registered 10% growth in top line at Rs. 503.26 crore for the quarter ended March 2013 on YoY aided by significant growth across the segments. Float glass sales grew 27% to Rs. 237.51 crore, automotive glass sales grew 3% to Rs. 274.61 crore and others grew 14% to Rs. 28.04 crore. Consequently, increased sales coupled with the decrease in raw materials and purchases costs as % of adjusted net sales though curtailed by rise in staff and other expenses led OPM to improve 40 bps to 10.1%. Thus, operating profit grew 15% to Rs. 50.70 crore. Rise in other income by whooping 171% to Rs. 1.52 crore led PBDIT to grow 17% to Rs. 52.22 crore. Spike in interest and depreciation costs led company to post LBT of Rs. 30.03 crore against Rs. 31.36 crore in corresponding period of last year (CPLY). Besides, increase in tax expenses by 26% to Rs. 11.76 crore resulted a loss of Rs. 18.27 crore against Rs. 22 crore in CPLY. Finally, after considering the share of profit from associates and minority interest, net loss of Rs. 18.13 crore was recorded against Rs. 23.39 crore in CPLY.

Hindustan National Glass (HNG), the largest container glass packaging solutions provider in India, net turnover dropped 4% to Rs. 499.82 crore for the quarter ended March 2013 on YoY. Adding to this, increase in raw material, power, and staff costs as % of adjusted net sales led OPM to record at 1.9% against 14.1 % in corresponding period of last year (CPLY) though it was constrained by decrease in other expenses. Thus, operating profit declined 87% to Rs.9.45 crore. Further, spike in interest and depreciation costs led company to post LBT of Rs. 115.90 crore against PBT of Rs. 19.23 crore in the CPLY. However, the tax gain of Rs.31.46 crore against Rs. 11.35 crore in CPLY, resulted net loss of Rs. 84.44 crore against PAT of Rs. 30.58 crore in CPLY.

HNG and other promoters of HNG Float Glass had signed a Joint Venture Agreement with Trakya Cam Sanyii as of Turkey with the intention of jointly pursuing and developing under HNGFL, the float glass manufacturing business in India. Accordingly, HNGIL on June 11, 2013, has sold and transferred to Trakya 5,86,26,995 Equity Shares of HNGFL having face value of Rs. 10 each. With this transfer, the shareholding of HNGIL in HNGFL, as on date, stands diluted from 47.4% to 18.31%.

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 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 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.