The Flat glass segment comprises of float glass and rolled glass. Float glass is slowly emerging as the preferred flat glass product. The demand of float glass segment continues to be primarily driven by construction sector, in the residential and the commercial or retail segment of real estate. According to industry estimates, the demand for float glass is expected to increase by 10-12% in the next 3-5 years. India has only 8 float glass lines as compared to 196 in China. The total installed capacity for float glass is estimated to be 4700 tpd whereas float glass imports is estimated at 100000 tonne largely from China and Indonesia.

Another large segment is the specialty glass, which is mainly used in technical applications such as electronics and engineering. On the other hand, fiberglass is an immensely versatile material which combines it light weight with an inherent strength to provide weather resistant with a variety of surface textures. Fiber glass are mainly used in surfboards, boats, sports car, lorries, high end bicycles and large commercial wind turbines blades.

The aggregate Net Sales of 13 Glass and glass products manufacturing companies grew by 13% to Rs 1416 crore during the quarter ended June 2012. At the operating levels, the margins contracted by 500 bps to 13.8% due to the increase in the input cost leading the Operating Profits to fall by 17% to Rs 195 crore. Other Income increased by 25% to Rs 10 crore. Interest cost rose by 17% to Rs 108 crore, while the depreciation increased by 10% to Rs 102 crore resulting the PBT to turn red at Rs 5 crore. After the Rs 3 tax credit during the quarter under review, the Net Loss stood at Rs 2 crore against the Net Profit of Rs 34 crore in the corresponding quarter last year.

Asahi India reported loss of Rs 24.98 crore in the quarter ended June 2012, as against profit of Rs 3.11 crore in the corresponding previous quarter. This is despite 24% rise in net sales to Rs 482.95 corre during this period. Segment wise data evidences fall in margins in all the three segments – automotive glass, float glass and others.

Excluding Asahi India from aggregates, the sector would have still reported fall in profits, but would not have ended in losses at aggregate level.

The rising household income levels, growth in the other sectors such as construction, automobiles, electronic goods, consumer durables and the growing preference of glass containers as packaging medium are also the factors that will provide a helping hand in driving the demand for the glass and glass products in the medium term.

Despite decent growth in demand, the industry suffered due to steep rise in input costs, surge in power and fuel costs and higher fixed cost on expanded capacities. The players are selectively hiking prices, which could moderate the pace of fall in margins. With players expanding capacities at a time when demand growth decelerates, margin pressure can intensify in the short term.