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The country’s largest container glass maker Hindusthan National Glass and Industries Ltd (HNG) has expanded production capacity by nearly four times in the last decade through both organic and inorganic channels.
At 1,100 tonnes a day in 2001, it is set to increase to nearly 4,300 tonnes a day by the end of this year.
In an interview to Business Line , Laxmi Narayan Mandhana, the company’s Senior Vice-President and Chief Financial Officer speaks about the company’s strategy to beat the slowdown and improve profitability.
You acquired Agenda Glas of Germany recently (2011). Are new acquisitions on the cards?
With the European economy taking a beating in the last two years there are a number of acquisition opportunities in Europe. But we aren’t too serious about acquisitions now. We do not want to bite more than what we can chew. Focus will be on optimum utilisation of the German unit. The unit should break even by the end of this fiscal.
HNG is spending nearly Rs 1,600 crore on capacity expansion at the Naidupeta and Nashik units. By when do you think they’ll give returns?
Our Nashik plant went for commercial production in July and Naidupeta will go on-stream by the end of this quarter. By December 2013 we expect both of them to start running at 100 per cent capacity. Though there will be short-term pressure on margins (till both these units start running at full capacity), margins will start improving from January 2014 onwards.
How is the slowdown likely to impact profitability?
There has been no slowdown in terms of output off-take. However, there is pressure on margins. That is more to do with the rise in input prices, particularly power and fuel. Though we took a corresponding hike in prices, it did not prove to be adequate as cost increase was higher (close to 30 per cent) than what we could pass on (25-26 per cent) in the last two years. Margins have shrunk by nearly 500 basis points. We are mulling a 6-7 per cent hike in product prices.
How soon will HNG dispose its treasury stocks accrued following the merger of group entities?
Around 16.5 per cent is held in the form of treasury stocks. There is room for dilution. The treasury stocks could fetch nearly Rs 300 crore at current valuation. The company has time to decide when it wants to disinvest treasury stocks. It is held by a trust and there is no defined time-period for offloading the stock.
Any plans to bring down the promoters’ holding to fund growth?
As on date, promoters hold 70 per cent. There is scope for dilution and bringing down the stake to 51 per cent, which is a comfortable level to run the company. But there are no immediate plans to disinvest.
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