Piramal Glass Ltd


BSE: 532949 | NSE: PIRGLASS | ISIN: INE748E01018 
Market Cap: [Rs.Cr.] 1,121 | Face Value: [Rs.] 10
Industry: Glass & Glass Products

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MANAGEMENT DISCUSSION AND ANALYSIS

Business Overview:

Piramal Glass Limited (PGL) is a manufacturer of glass containers for the Cosmetics& Perfumery, Pharmaceuticals and Specialty Food & Beverage industries. PGLmanufactures a wide range of glass bottles and jars, in sizes ranging from 2 ml to 2.5litres. PGL has manufacturing facilities in India, USA and Sri Lanka.

Market Overview: Market Size

• Cosmetics & Perfumery Global market size is estimated to be US$ 2.4 –US$ 2.7 billion.

• Pharmaceutical Global market size is estimated to be US$ 2.1 – US$ 2.4billion.

• Specialty Food & Beverages is estimated to be US$ 1.5 – US$ 1.7billion.

Cosmetics & Perfumery Business:

The glass containers manufactured in Cosmetics & Perfumery are used to fill nailpolish, perfumes, skin care creams, foundations, attars, etc. The main raw materials forglass manufacturing are semi snow quartz, soda ash, lime stone powder.

This market is broadly classified into five segments depending on the end bottle price.

• Select Clubbed as Premium Segment
• MNC - Mass
• Low Mass Clubbed as Mass Segment
• Skin Care
• Nail Polish or Colour Cosmetics

The C&P glass packaging constitutes 52% of the current sales and has been growingat a CAGR of 19.8 % over the last 5 years. For FY 14, C&P division grew at 10%.

The Cosmetics and Perfumery Division of Piramal Glass caters to international marqueecustomers like LVMH, Yves Rocher, YSL, Coty, Unilever, Revlon, L’Oreal, P&G,Elizabeth Arden, Estee Lauder etc. apart from local C&P brand owners in internationalmarkets like Erkul Kozmetic, Compagnie De Diffusion, Cosmed, Expak, Baralan International,Estico Ltd., Revolline Ltd. These customers use the glass bottles and jars for productslike nail polish, make-up foundations, perfumes, skin care creams etc.

Pharmaceuticals Business:

It caters to the requirements of Pharmaceutical Industry for packaging like moldedvials for injectibles and bottles for syrups, droppers and infusions In the Indian market,PGL enjoys a leadership position in the domestic market.

Products manufactured conform to US, Indian and European pharmacopeia in Type I, TypeII and Type III formulations. PGL is a leading supplier of glass containers to bothmultinational and Indian pharmaceutical companies like GlaxoSmithKline, Pfizer, Cipla,Abbott, Alembic, Ranbaxy, E-Merck, Aventis, Dabur, Himalaya drugs, Dr. Reddy’sLaboratories etc.

In FY-14, this segment continued to see competition in the form of replacement with PETespecially in the Oral formulations and amber glass bottles in the range of 60 ml to 100ml. PGL has focused on export markets, mainly USA, and currently 51% of PGL Pharmaceuticaldivision comprises of exports.

The high-end Borosilicate Glass (or Type-I Glass) market has been an attractive growthsegment for PGL, particularly for exports to USA as also "deemed exports" inIndia as more and more injectibles manufacturing facility in India receive US FDAapproval.

Specialty Food and Beverages Business:

The Specialty Food & Beverages division provides bottles for wine, liquor and foodwhich are often unique in design and decoration. This business is very freight intensiveand hence localized. Piramal Glass is catering to this segment from Sri Lanka and USA. PGLhas consciously grown in exports from Sri Lanka, earlier mainly to India, and today to FarEast and Australia. In Sri Lanka the strategy has been to migrate to more and more premiumcustomers. In USA, focus is on winning new customers and new brands in the specialtyliquor segment.

Since the US acquisition, we have gradually been able to increase our sales in thissegment through acquisition of new customers and retaining old ones. USA operations havean edge over its European competitors due to lower freight. PGL caters to global customerslike Diageo, Pernod Ricard, Cadbury Schweppes, UB Group, etc.

Performance summary : Rs. in million
Particulars FY 2014 FY 2013
Sales and Profit: _
Total Operating Income 17,930.7 16,438.6
EBIDTA 2,845.2 2,760.0
PBT (after exceptional items) 699.0 403.1
PAT (after prior period items) 558.5 357.7
Margins:
EBIDTA % 15.9% 16.8%
PBT % (after exceptional items) 3.9% 2.5%
PAT % (after prior period items) 3.1% 2.2%
Growth:
Total Operating Income 9.1% 16.8%
EBIDTA 3.1% (17.2%)
Net Profit 56.1% (67.0%)

Results review summary:

Total Operating Income for the year ended 31st March 2014 grew by 9.1% toRs. 17,930.7 million compared to Rs. 16,438.6 million in FY2013.

Earning before Interest, Depreciation, Tax and Amortizations (EBIDTA) for the year wasat Rs. 2,845.2 million, a growth of 3.1% over FY2013 EBIDTA of Rs. 2,760.0 million.

Net interest was at Rs. 1,037.3 million, as compared to Rs. 1,043.2 million in FY2013.The total consolidated debt as on 31st March 2014 was Rs. 14,024.4 million,Non-operating income includes profit on sale of land in Sri-Lanka of Rs. 303.0 millionDepreciation for the year ended was Rs. 1,411.9 million compared to 1,313.7 million inFY2013. Further, taxes were at Rs. 140.5 million, compared to Rs. 45.4 million in FY2013.

As a result, there was a Net Profit of Rs. 558.5 million, compared to Rs. 357.7 millionin FY2013.

Net sales analysis: Rs. in million
Consolidated Sales break-up % Salience FY 2014 FY 2013 % Growth
Domestic Sales
Cosmetics & Perfumery 8.4% 1,481.2 1,206.9 22.7%
Pharmaceuticals 13.2% 2,319.4 2,166.9 7.0%
Specialty Food and Beverages 2.1% 377.5 560.6 (32.7%)
Sub-total – India 23.7% 4,178.1 3,934.4 6.2%
Global Sales
Cosmetics & Perfumery 43.2% 7,611.4 7,024.7 8.4%
Pharmaceuticals 13.9% 2,447.2 1,922.8 27.3%
Specialty Food and Beverages 19.2% 3,381.7 3,228.6 4.7%
Sub-total - Outside India 76.3% 13,440.3 12,176.1 10.4%
Consolidated Total Sales 100.0% 17,618.4 16,110.5 9.4%

Notes:

Global Sales are Total Consolidated sales outside India. % Salience is percentage ofsales in the category to net sales

Manufacturing facilities review:

Piramal Glass continues to focus on its strategy of developing a strong front end inWestern market while building a robust manufacturing base in low cost countries.

PGL Group’s current manufacturing facilities across different regions are asfollows:

Piramal Glass Limited (PGL):

PGL has production facilities at Jambusar and Kosamba in Gujarat, India. The Companyhas ISO 9001, ISO 14001 certification and OHSAS (Occupational Health, Safety AnalysisSeries) i.e. ISO 18001 certification.

Furnace location and number Installed Capacity TPD * Type of glass containers manufactured
Jambusar (3)
1 270 TPD Soda Lime Amber – Pharmaceuticals
2 125 TPD Soda Lime Flint – Cosmetics & Perfumery,
3 160 TPD Pharmaceuticals, Specialty Food & Beverages
Kosamba (6)
1 45 TPD Borosilicate Amber & Flint – Pharmaceuticals
2 40 TPD Soda Lime Flint–Pharmaceuticals/Nail polish
3 55 TPD
4 35 TPD Soda Lime Flint – Cosmetics & Perfumery, skincare
5 95 TPD
6 100 TPD

* Tons per day

Piramal Glass USA Inc (PGI):

PGI has manufacturing facilities in USA. The installed capacity of the facility is asfollows:

Furnace location and number Installed Capacity TPD * Type of glass containers manufactured
Flat River (2)
1 100 Soda Lime Flint – all segments
2 95

* in US Tonnes

Piramal Glass Ceylon PLC (PGCP):

PGCP manufactures bottles in flint, amber and other colors with sizes ranging from 50ml. to 2,500 ml. It caters to liquor, food & beverage, and wine industry customers.

Furnace location and number Installed Capacity TPD * Type of glass containers manufactured
Horana (1) 250 Specialty Food & Beverages – Amber & Flint

Power & Energy:

Power and Energy cost increased by 13.4% to Rs. 3,890.1 million as compared to Rs.3,429.7 million in FY13. This increase is mainly on account of increase in gas rate inIndia, power rate in Ceylon and the rate variation in foreign currency conversion.

Manpower:

The PGL Group seeks to recruit and retain quality industry professionals and providethem with a high performance environment. During the financial year, total consolidatedworkforce of PGL was 3987 as compared to 3997 in FY2013.

The workforce details are as follows:

Consolidated manpower break-up FY2014 FY2013 +/–
Piramal Glass Limited 3,079 3,047 32
Piramal Glass – USA, Inc. 502 531 (29)
Piramal Glass Europe SARL 4 3 1
Piramal Glass Ceylon PLC 402 416 (14)
Total 3,987 3,997 (10)

Business risk factors:

Replacement threat:

Glass packaging for Pharmaceutical segment faces the risk of replacement by otherpackaging solutions such as plastic and other forms of packaging.

Capital intensive

The glass packaging needs significant capital expenditure in creating infrastructureand regular relining of Production furnaces.

Glass industry is Energy intensive

Exposure to exchange rate fluctuations :

With 76% of sales from global markets, any change in currency dynamics will have animpact on the margin.

Disclaimer:

Certain statements included above may be forward looking and would involve a number ofrisks, uncertainties and other factors that could cause actual results to differmaterially from those suggested by the forward-looking statements.

Annexure to MD&A: Financial Highlights (Consolidated)

Income Statement Rs. in million
Year ended 31st March 2014 Year ended 31st March 2013 % Growth (De-growth)
Net Sales 17,618.4 16,110.5 9.4%
Investment Income 13.8 16.0 (13.5%)
Other Operating Revenue 298.4 312.2 (4.4%)
Total Operating Income 17,930.7 16,438.6 9.1%
EBIDTA 2,845.2 2,760.0 3.1%
EBIDTA as % to Total Income 15.9% 16.8%
Interest 1,037.3 1,043.2 (-0.6%)
Depreciation 1,411.9 1,313.7 7.5%
Profit before Tax and Exceptional items 396.0 403.1 (1.7%)
Exceptional Items / Other Income 303.0
Profit before Tax 699.0 403.1 73.4%
% of Total Income 3.9% 2.5%
Provision for Taxation- Current 60.9 74.7
– Mat Credit Entitlement (36.1) (42.9)
– Deferred 115.7 13.7
Profit After Tax 558.5 357.7 56.1%
% of Total Income 3.1% 2.2%

Net Sales

During the year Net sales increased by 9.4% to Rs. 17,618.4 million as compared to Rs.16,110.5 million in FY 2013. The detailed analysis of it is discussed earlier in thereport.

Other Operating Revenue

Other operating revenue was at Rs. 298.4 million in FY2014 as compared to Rs. 312.2million in FY2013.

Profit before Interest, Depreciation & Tax (EBIDTA) & Margin

EBIDTA grew by 3.1% to Rs. 2,845.2 million. EBIDTA as a % of total income was 15.9% inFY 2014 as compared to 16.8% in FY 2013.

Interest

Net interest cost reduced by 0.6 % to Rs. 1,037.3 million as compared to Rs. 1,043.2million in FY 2013.

Balance Sheet Rs. in million
As at 31st March, 2014 As at 31st March, 2013
SOURCES OF FUNDS
Share Capital 809.2 809.2
Reserves & Surplus 2,968.9 2,858.5
Minority Interest 701.5 671.6
Loan Funds 14,024.4 13,129.7
Deferred Tax Liability (Net) 274.3 180.9
TOTAL 18,778.3 17,649.8
APPLICATION OF FUNDS
Fixed Assets 10,932.7 10,994.6
Investments 1.1 1.1
Net Working Capital 7,844.5 6,654.1
TOTAL 18,778.3 17,649.8
Key Ratios:
Particulars FY 2014 FY 2013
Debt Equity Ratio 3.1 : 1 3.0 : 1
Return on Capital Employed 7.9% 8.7%
Return on Net Worth (%) 12.7% 8.5%
Asset Turnover Ratio 1.6 1.5
   

Peer Comparison

Company Market Cap
(Rs. in Cr.)
P/E (TTM)
(x)
P/BV (TTM)
(x)
EV/EBIDTA
(x)
ROE
(%)
ROCE
(%)
D/E
(x)
Asahi India Glas 2,017.73 0.00 7.69 11.82 0.0 0.0 8.00
Hind.Natl.Glass 1,284.05 0.00 1.43 28.16 -17.4 -1.3 2.41
La Opala RG 1,206.70 41.98 12.34 14.81 34.9 40.3 0.26
Piramal Glass 1,121.41 46.05 2.27 8.44 5.1 8.3 1.77
Borosil Glass 570.92 18.00 0.87 5.84 5.1 5.7 0.00
Empire Inds. 462.12 12.33 3.87 5.35 33.0 23.1 0.74
Shreno Ltd 433.52 0.00 7.32 0.00 4.8 8.0 0.50
Saint-Gob. Sekur 196.80 166.15 2.68 14.17 0.4 0.9 0.08
Guj. Borosil 152.77 29.09 3.92 2.50 12.2 6.4 0.41
Haldyn Glass 89.04 4.84 0.82 1.77 25.5 33.7 0.13
Banaras Beads 24.53 10.36 0.63 1.31 6.7 11.0 0.07
Sezal Glass 18.05 0.00 0.16 48.07 0.0 0.0 0.46
Triveni Glass 16.94 1.90 0.30 41.25 113.8 1.4 0.00
Victory Glass 15.61 0.00 0.56 0.00 2.8 10.6 1.26
Haryana Sheet 15.20 0.00 -0.13 295.77 0.0 0.0 0.00

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Key Information

Key Executives:

Ajay G Piramal , Chairman  

Vinita Bali , Director  

Vimal Bhandari , Director  

Dharendra Chadha , Director  


Company Head Office / Quarters:
Piramal Tower,
Ganpatrao Kadam Marg,
Mumbai,
Maharashtra-400013
Phone : 91-022-30466969
Fax : 91-022-24908824
E-mail : complianceofficer.pgl@piramal.com
Web : http://www.piramalglass.com
Registrars:

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