Key Sector Data Market Cap (Rs Crore) 4384 Market Cap (USD Million) 696 P/E (-) P/BV 2.0 Debt/Equity 2.2 ROA (%) (-) ROE (%) (-) EV/Sales 1.5 EV/EBITDA 11.6

	Sales	PBDIT	PAT	PBDIT margin	PAT margin
	% chg YoY	% chg YoY	% chg YoY	%	%
Jun 2013	6.00%	34.00%	LP	18.70%	0.80%
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; LP : Loss to Profit
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 grew 11% to 10,535 Thousand Sq. Meters during July 2013 on YoY but dropped 2% on MoM during the same period. On the other hand, the decreasing trend of Fibre glass production continued since November 2012 and fell 8% to 3263 tonnes in July 2013 on YoY basis while, it dropped 12% 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 of fiber glass & glass sheet marginally went up by 1% on YoY but remained flat on MoM during August 2013.

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	10792	14	9431	11	8499	2
Jul	10535	11	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	3055	-20	3858	14	3390	6
Jun	2901	-19	3582	5	3418	8
Jul	3263	-8	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 in India decreased 9% in July 2013 on YoY, while it remained flat during the same period on MoM basis. The WPI of laminated glass and toughened glass remained flat on YoY as well MoM in August 2013.

Month	2013-14		2012 - 13		2011 - 12
	Production	% Chg.	Production	% Chg.	Production	% Chg.
Apr	286007	29	221726	3	215975	8
May	278400	25	222912	8	206411	3
Jun	277863	-2	283849	37	206825	5
Jul	292217	-9	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 29% in July 2013 to 87,182 tonnes on YoY while it also went down 6% during the same period on MoM. The WPI of glass bottle & bottle ware eased 1% on YoY during August 2013 while it remained flat on MoM during the same period.

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 August 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 a 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 had imposed anti-dumping duties on imports of soda ash from Russia and Turkey for a definitive five-year period as per the Industry source. The duty in the case of Turkey will range from USD 18.39 per mt to USD 75.16 per mt, depending on the producer and exporter. The duty on Russian imports into India is USD 35.99 per mt. 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, Kenya, European Union and US.

Piramal Glass that manufacturer's glass containers for the Pharmaceuticals, Cosmetics & Perfumery (C&P) and Specialty Food & Beverage (F&B) industry registered 11% growth in net turnover at Rs. 428.52 crore for the quarter ended June 2013 on YoY. However, OPM eased marginally 50 bps to 20.8% on increase in staff, energy and other expenses as % of adjusted net sales. Thus, operating profit growth was moderated to 9% at Rs. 89.03 crore. Besides, decrease in interest costs, PBDT accelerated to 53% to Rs. 66.85 crore after considering the depreciation costs, PBT boost to 162% to Rs. 32.73 crore. Finally, PAT after considering the minority interest, stood up 137% to Rs. 17.66 crore.

On the long term view, Company will continue to focus on Cosmetics & Perfumery (C & P) segment. During the year this segment grew by 17% from Rs. 705.2 crore to Rs. 823.2 crore. The growth is being driven by new customers; new products developed and sold gloablly. Company renewed focus on Speciality Food & Beverages (SF & B) segment. During the year this segment grew by 8% from Rs. 350.3 million to Rs. 378.9 million. In the Pharmaceutical segment, company maintained their leadership position in the domestic market. During the year this segment grew by 27% from Rs. 322.3 crore to Rs. 409.0 crore.

Asahi India Glass (AIS), India's largest integrated Glass Company, registered 3% growth in top line at Rs. 496.97 crore and reported net loss of Rs. 29.70 crore for June 2013 quarter against Rs. 24.98 crore in the corresponding period of last year(CPLY).During the period, PBDIT dropped 23% to Rs. 30.90 crore.Later, after considering interest and depreciation costs, company reported LBT of Rs. 43.96 crore against Rs. 36.97 crore in CPLY.

Hindustan National Glass (HNG), the largest container glass packaging solutions provider in India, net turnover increased 5% to Rs. 504.11 crore for the quarter ended June 2013 on YoY. On the account of other income of Rs. 76.95 crore against Rs.0.77 crore, PBDIT of Rs. 125.58 crore was posted against Rs. 69 crore in corresponding period last year. Due to further, increases in interest and depreciation costs, PBT fell 92% to Rs. 0.63 crore. Finally, with the tax gain of Rs. 7.66 crore against absolutely null in CPLY, PAT registered 8% growth at Rs. 8.29 crore. During the quarter, the Company, along with the promoters of HNG Float Glass Limited (HNGFL) (HNG Group) has entered into a Joint Venture agreement on an equal basis (50:50) with Trakaya Cam Sanyaii AS of Turkey (joint venture partner) for jointly pursuing the Float glass business through HNGFL in India. Accordingly, 586.27 lakhs equity shares in HNGFL have been divested by the Company in favour of the joint venture partner and profit of Rs 7,598.06 lakhs arising in this respect included in Other Income in the above results.

In order to optimize the cost, HNG is implementing various processes and systems across the manufacturing units. HNG 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. The FY2012-13 was extremely stressful for AIS due to volatile economic conditions, input costs inflation and depreciation of Rupee which has an adverse impact on the performance of AIS. Thus, costs grew rapidly than sales. The Net sales of the company increased 16.26% to Rs. 1913.44 crore but operating profit decreased 5% to Rs.178.13 crore. Finally, company posted net loss of Rs. 91.79 crore against Rs. 58.73 crore in previous year. 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. Growth in Float Glass segment is expected to pick up once the interest rates start softening leading to increasing demand for real estate. However, RBI has kept the key rates and CRR unchanged during its monetary policy. Besides, RBI has also cut the GDP growth forecast for FY14 to 5.5% from earlier forecast of 5.7%. Therefore, India's glass consumption is likely to expand further in FY2013-14, only with the increase in demand from housing and infrastructure sectors. 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.