L N Mandhana, CFO, Hindusthan National Glass & Industries Ltd

“The company may make an announcement regarding the setting up of the second line at Halol in the next six months.”

Apr 01, 2010 10:04 IST India Infoline News Service

Hindusthan National Glass & Industries Ltd. (HNGIL) is engaged in the manufacture and distribution of glass containers. The company has Pan India manufacturing locations and marketing offices. The company was incorporated in 1952. HNGIL is the leader in the glass container industry. The company commands a market share of 65%. HNGIL has a well-diversified and a strong client base, which includes United Spirits, Pernod Ricard, Diageo, Radico, SAB Miller, Pfizer, Cipla, GlaxoSmithKline, Hindustan Unilever Ltd. (HUL), Dabur, Heinz, Nestle, Coca-Cola etc. HNGIL has been successful in acquiring sick/loss-making companies in the glass container business and making them profitable. HNGIL recently entered the float glass business has high potential for growth, driven by user industries -real estate and automobiles.

Mr. L N Mandhana is the chief financial officer (CFO) of Hindusthan National Glass & Industries Ltd. (HNGIL) and HNG Float Glass Ltd. He is a CA and CS by qualification with about 22 years’ of post-qualification experience. Mr. C.K. Somany, who is the company’s chairman, has more than five decades of experience in the glass container business, while his two sons, Sanjay Somany and Mukul Somany, have more than two decades of experience.

Speaking exclusively with Hemant P. Maradia of India Infoline, Mr. Mandhana, CFO of HNGIL, says, “The company may make an announcement regarding the setting up of the second line at Halol in the next six months.”

When did you start production at Halol? 

HNG Float Glass Ltd. (HNGFL) set up a 600 tpd float glass line at Halol with an investment of Rs6bn. That line became operational in February 2010.  

Hindustan National Glass & Industries Ltd. (HNGIL) entered the float glass business through its associate company, HNGFL, where it holds a 47% shareholding. 

Is HNGFL planning to double float glass capacity at Halol? 

Right now there are no such plans. But, we may look at it at an opportune time, once the existing furnace has been streamlined and the products are successfully established in the market.  

We have scope for putting up the second float glass line at our Halol plant. If everything goes as per plan, we may make an announcement regarding the setting up of the second line at Halol in next six months. 

The second line capacity could be around 800 tons per day (tpd).  

What additional investment will you require for doubling capacity at Halol? 

The capex for the second float glass line at Halol could be close to Rs6bn for an 800 TPD Furnace.

What kind of market share are you looking at in float glass?  

The HNG group plans to have a 25% share of all India float glass production within the next three years. 

Could you throw some light on float glass segment’s growth? 

The float glass segment in India has seen explosive growth in the last three months, growing at around 15%, buoyed by demand for both architectural and automotive glass. 

What will be float glass business’ contribution to total revenues?  

Roughly Rs400mn will be the revenue of float glass in FY10.  

Next year it will be aroundRs3bn. 

When do you expect to reach the full capacity in float glass? 

We expect to reach full capacity at Halol in the first quarter of next fiscal year i.e. 2010-11.

What will be the proportion of institutional-retail sales of float glass?

This is still being worked out. It is too early to give any numbers. Our products have been out in the market for only two months. 

Tell us about your marketing plans for float glass? What kind of dealer network have you set up?  

We have set up a network having more than 400 dealers and we are exploring further options.  

Do you plan to enter the automotive glass segment also? 

Our furnaces are already capable of producing automotive glass and we plan to start automotive glass production at Halol next fiscal year. 

Once the architectural glass business is firmly established, we will step up our presence in the automotive glass segment as well. 

What is your capacity in container glass segment? Are you planning any capex in this segment? 

The company has a production capacity of 2800 tpd in container glass bottles. 

HNGIL enjoys a dominant position in the glass container industry. The company has a market share of about 65%. 

What will drive growth in the glass container business? 

Demand for glass containers is expected to be driven by healthy growth of its user industries – such as liquor, beer, pharmaceuticals, foods and beverages.

The liquor and beer industries are the main users of glass containers with 65% share, followed by pharma at 12%, food at 15%, carbonated drinks at 5%. Cosmetics & others account for the balance. 

This trend is expected to continue, driven by favourable demographics and rising disposable incomes.

What is the current capacity utilisation at container glass plants?  

The company's six container glass manufacturing units in India are located at Bahadurgarh near Delhi, Rishra near Kolkata, Rishikesh, Neemrana in Rajasthan, Nashik in Maharashtra and Pondicherry. 

Current capacity utilization is between90% and 95% at different plants. 

Are you planning any expansion in the container glass segment? 

We are planning to put 500 tpd Greenfield plant at Naidupeta in Andhra Pradesh and 100 tpd cosmetic Furnace at Nashik. 

Are you open to inorganic growth? 

Yes, the company is scouting for potential acquisitions abroad to further strengthen its container glass portfolio. 

HNG has zeroed in on some possible units, one in South East Asia and the other one in the MENA region. Both the companies are in the container glass segment. 

We expect to finalise a deal in the next six months. 

Are you in talks with Belgium-based BMT Group for a joint venture?

Yes, the BMT Group, one of the largest manufacturers of glass container moulds in the world, is likely to form a joint venture shortly with HNG. 

Discussions for the JV with BMT group are still underway. 

Which route will you prefer for fund raising?  

We are open for External Commercial Borrowing (ECB) as well as term loan depending upon the interest rate scenario.

Treasury shares in HNGIL may also be sold based on the prevalent market conditions.

In addition, debt:equity is also very comfortable for HNGIL, offering a large scope for further raising of debt in the company. Our debt is about Rs5.3bn on a networth of Rs10.3bn. 

What is the debt-equity ratio? 

HNGIL has a strong balance sheet with low gearing. The debt-equity ratio of the company stood at 0.58x at the end of December2009. 

How much do you export?  

Exports are roughly 3-5% of total sales. 

How are you managing the raw material costs? How do you see margins going forward? 

Raw material costs are fairly steady. We do not foresee any problems on the raw material side. Soda ash prices are a pass-through. 

Container glass EBIDTA margins will be around 26-27% in next two years.  

Are you looking for a strategic investor or a financial investor?  

Yes, we are talking to a few investors for selling stake in HNGIL. We are open to selling 10% of the company’s equity.  

The investors include both, Private Equity firms as well as financial institutions. 

What step are you taking to reduce the emission of Co2?  

We are converting our furnaces more and more from furnace oil-based to gas-based and also making them energy-efficient.

HNG is also a carbon credit positive company. We have recently earned CERs (Carbon emission reduction units).

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