30 | Hindusthan National Glass & Industries Limited
Management discussion and analysisGlobal industry perspectiveIn 2007, the global packaging industry was estimated at
US$410 billion; the glass segment comprised 8% with an
estimated size of around US$34 billion (Source: Glass
Packaging GIA Report). The hygienic product attributes had a
positive impact on the industry’s growth as organic consumers
rated glass six to eight points higher than competing
packaging materials in terms of environmental safety, flavour
retention, shelf life, form, purity and quality (Source: Newton
marketing survey).
Geographic growth
Region Total CAGR
volume sold 1998-2007
(in billion units) (in %)
North America 70 3.1
South America 46 5.5
Middle East and Africa 15 5.5
Europe 164 5.0
Asia Pacific 146 4.2
Indian perspectiveIndia’s Rs 60,000-crore packaging industry is growing at
around 15%. The glass segment accounts for around 10% of
the total packaging industry. The untapped potential of the
Indian market is reflected in a per capita glass consumption of
around 1.40 kg when compared with 5.9 kgs in China, 4.8 kgs
in Brazil, 10.2 kgs in Japan and around 27.5 kgs in the
developed countries of the West. The double-digit growth in
downstream segments, catalysed by enhanced branding, will
accelerate the industry growth.
Growth and requirements of the end-user
segments
Applications Type of glass Percentage
catering to
application
Beer Amber 70
Pharmaceutical ( < 60 ml) Amber 30
Indian made foreign liquor Flint 42
Soft drinks Flint 21
Pharmaceutical ( > 60 ml) Flint 21
Cosmetics Flint 6
(Source: www.indiamarkets.com)
Growth drivers Economy: GDP growth drives consumer offtake, which, in turn,
accelerates the demand for container glass. In this respect, the
economy has performed attractively: average 8.8% growth in
four years (2003-04 to 2006-07) with 9.6% (in 2006-07) being
the highest in 18 years followed by 9% in 2007-08. This makes
India the fastest-growing economy in the world and the
second-fastest growing country.
India’s glass industry
� Organised market with 18 players
� 80% of the production controlled by the top three players
� Installed capacity 14,66,000 tonnes per annum
� Production of around 11,10,400 TPA of flint glass bottles,
8,35,650 TPA of amber glass and 2,74,750 TPA of other glass
bottles
Hindusthan National Glass & Industries Limited | 31
GDP growth %
2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08
4.4 5.8 4.0 8.5 6.9 8.4 9.4 9
[Source: CSO]
Disposable incomes: India’s per capita income strengthened
from US$460 in 2000-01 to US$825.07 in 2007-08 [Source:
Central Statistical Organisation (CSO)], widening its middle-
class, influencing lifestyle changes, evolution from joint to
nuclear families, from single bread earners to working couples.
There has been a marked increase in the use of packaged
foods and beverages, benefiting the container glass industry.
India accounts for 6% of the world’s millionaire population
(Source: Survey by Capgemini SA and Merrill Lynch and Co.),
increasing by 20.5% to 1,00,015 in 2007-08, after Singapore’s
21.2% growth. The total annual income of Indian households is
predicted to grow from Rs 23.5 trillion in 2007 to almost Rs 90
trillion in 2025.
Rising per capita income (Rs)
2004-05 2005-06 2006-07 2007-08
Per capita income 23,890 25,696 27,784 29,786
(Source: Economic Survey 2007-08)
Changing demographics: The country houses the youngest
population in the world with one-fifth of the world’s under-24
population living here. Housing one of the highest proportions
of working population (aged 15 to 64) of around 62.9% in 2006
inevitably paved the path for growing consumerism. Population
in the consuming age bracket (defined as consumers in the 15-
64 age group) as a proportion of the total population has
grown from 61.4% in 1999 to 63.5% in 2004, and is likely to
grow to 65.2% by 2009. The increase in consuming population
coupled with the 1.8% increase in general population is likely to
create a sustained demand for packaged products.
Low-cost producer: India is a low-cost container glass
producer on account of a low relative cost of skilled labour. The
country possesses an abundant source of silica sand,
limestone, dolomite and feldspar. As a result, the cost of
production per pack of glass containers is comparatively lower
in India than abroad.
Capacity relocation: European and American container glass
capacities are being relocated to developing countries. India is
attractively placed to capitalise on this reality due to its
strategic geographical location. The landed price of our
container glass in Europe and the US is competitive with
alternative supplies from other country.
Demand-supply gap: The demand for glass containers
outweighs supply in India on account of growing downstream
consumer segments like food processing, liquor, beer and
pharmaceuticals growing at 20%, 12-16%, 15-20% and 6-8%,
respectively.
Consumption preference: Discerning customers are selecting
glass as a packaging option because it is a pure packaging
choice, the only packaging material for foods and beverages
that is chemically inert. Glass provides a barrier to oxygen and
moisture, protecting a product’s taste and shielding it longer
and better than any other packaging material. When a product
is packaged in glass, it communicates a premium image, taste
and quality.
Safety: Glass is the only packaging material categorised as
‘generally recognised as safe’ by the US Food and Drug
Administration.
Environment friendly: Glass is 100% recyclable. Glass bottles
don’t lose their quality, purity and clarity even after continual
recycling. They can go from recycling bin to the store shelf in
30 days. Using recycled glass (cullet) in the manufacturing
process saves raw materials, lessens energy demand and
reduces air emission. For each 10% of recycled glass used,
melting energy reduces by approximately 2.5%.
32 | Hindusthan National Glass & Industries Limited
Downstream industry drivers
FMCG
India's fast moving consumer goods (FMCG) sector is the
fourth-largest sector in India. The country’s FMCG market
expanded by 18% to US$18 billion in 2007-08 and is expected
to reach US$33.4 billion in 2015 (Source: IBEF). The FMCG
growth story is optimistic on account of an increase in rural
demand for branded products (rural India has a large
consuming class with 41% of India's middle-class and 58% of
the country’s total disposable income, according to
Assocham), rise in modern trade and health and wellness
awareness.
Liquor
Indians consume 350 million cases of alcohol and 250 million
cases of country liquor a year (Source: All India Distillers’
Association). With an increasing trend towards social drinking,
India has emerged as one of the fastest-growing alcohol
markets (9-10% annually) with the organised sector sales
crossing Rs 6,000 crore in 2007-08 (Source: SSKI). An annual
growth of 30% enabled the Indian wine market to cross a
million cases in 2008. A growing Indian market has attracted
large global players like E&J Gallo, Moet Hennessy, Vuove
Cliquot, Diageo and Pernod Ricard India to enhance their
Indian exposure.
Beer
With a growing acceptance of beer as a non-alcoholic drink,
India’s beer consumption grew 14.5% in 2007-08 and beer
shipments increased from 137 million cases to 158 million
cases (7.8 litres each) in 2007-08. The low per capita
consumption of beer in India (0.8 litres as opposed to 22 litres
in China) leaves substantial scope for increase in demand. The
high price of Indian beer has catalysed the use of robust glass
containers.
Food processing
The food processing industry is estimated at US$70 billion. The
sector’s growth nearly doubled to 13.7% in only four years and
is estimated to grow by 20% by 2015 (Source: Ministry of State
for Food Processing Industries). With proposed investments of
US$23.5 billion in the pipeline and only a mere 1.3% of food
processed in India (80% in the developed world according to
India Food Report 2008), there is a huge industry opportunity.
Further, an adoption of stricter government norms and rising
industry standards in quality will boost glass packaging.
Currently, only 6% of the entire country’s food is packed in
glass. An interesting observation on the demand-supply gap is
that small and medium players in industries like confectioneries
and pickles had to shut production because of a shortage of
glass containers in 2007-08.
Carbonated drinks
Growing at 6-8% per annum, the carbonated soft drinks
segment accounts for Rs 6,000 crore of the Rs 9,500-crore
packaged beverages industry (Source: Business Standard).
The per capita consumption of soft drinks in India is a mere 6
bottles, compared with Pakistan's 17, Sri Lanka's 21, Thailand's
73, the Philippines 173 and Mexico's 605. The demand for soft
drinks in India is expected to grow at an annual rate of 10% per
annum between 2006-12, with demand at 805 million cases by
2011-12 (Source: FMCS;IBEF report). The low capita
consumption, coupled with the projected demand, indicates
ample room for additional bottling units.
Cosmetics
The domestic cosmetics and toiletries segments have been
growing at 15-20%, touching US$950 million. With increased
awareness, the industry size is expected to grow to US$1.4
billion in three years (Source: Assocham). This optimism is
derived from the fact that despite a growing penetration of
cosmetic items and entry of new foreign brands, India's per
capita consumption of cosmetic and toiletries is lower than in
other Asian countries: US$0.68 as against US$40 in Hong
Kong, US$10 in Malaysia and Taiwan, US$12 in Japan and
US$1.5 in China.
Pharmaceuticals
India is among the fastest-growing pharmaceutical markets in
the world. The domestic pharmaceutical market recorded sales
of US$7.3 billion in 2006 with a growth of 17.5% over the
previous year. Average consumer spending doubled over the
past decade and per person spending on prescription drugs is
expected to double from US$761 in 2007 to US$1,537 by 2016.
Hindusthan National Glass & Industries Limited | 33
Around 75% of the Indian population is under 40 and
employable, creating an optimism of sustainable industry
growth.
Operational reviewHNGIL at work
Manufacturing
The Company is the largest manufacturer of container glass in
India with a cumulative capacity of 2,575 TPD across six
manufacturing units.
Installed capacities (MT per day)
FY07 FY08
Rishra 720 720
Rishikesh 365 365
Bahadurgarh 710 710
Neemrana 140
Pondicherry 320 320
Nashik 320 320
Total 2,435 2,575
Manufacturing glass is technically challenging, involving the
balanced use of over 10 raw materials to produce a mix
conducive for a particular container type. Even as the raw
materials are fed in batches, the manufacturing process is
continuous.
From raw material to glass
Production planning process: The raw materials offloaded
from incoming trucks are tested for chemical suitability in the
laboratory. Based on its chemical composition, the raw material
batch is prepared for onwards manufacture either as flint,
amber or green glass. A raw material batch is prepared after
weighing and mixing the raw materials in the right proportion,
according to the type of glass to be manufactured. Raw
material is fed into the furnace and is melted into molten glass
at temperatures ranging from 1600-18000C, which, in turn, is
fed into the individual section(IS) machines to be converted into
bottles (mould management process).
Mould management process: The molten glass is poured into
the IS machines fitted with moulds to provide the desired
shape. The mould is customised and designed according to
the customer specifications received, varying for every bottle.
Thereafter, the hot bottles are moved into the annealing lehr
where the bottles are cooled and heated concurrently, reducing
the chances of stress being developed due to extreme
temperature conditions.
SQC process: The cool bottles are passed through human
sorters who discard those containers which do not match the
specifications mentioned on the sheet. The remaining bottles
form the final product called the ‘pack.’ The discarded bottles
are reused in the production process as raw material (cullet).
There are about 140 possible defects and the sorters are
trained to detect the defective bottles from the resulting pack.
HNGIL has a ‘draw-to-pack’ ratio of 90%, an industry
benchmark in India, and we aim to improve it to the
international best of 93%.
The sorted product is finally packaged for storing and dispatch.
We offer three kinds of packaging depending on customer
needs. One, where the bottles are packed into cardboard
boxes, sealed and dispatched to customers. Second, the
bottles are packed on cardboard trays and then shrink-wrapped
through the heating systems installed at the packaging centre.
Some products like beer bottles are packed in gunny bags as
manufacturers wash the bottles before filling them.
An in-house ceramic printing division allows us to use glass
colours to print labels on the glass containers. Generally used
for reusable bottles like soft drinks, the glass colours ensure
that the colours do not fade after repetitive use, reducing the
subsequent packaging cost of the customer.
Our efficient stacking system on pallets reduces breakage due
to storing to hardly 0.1% of the production.
The high demand for glass containers helps liquidate our
finished goods inventory within 15 days of production. The
warehouses are located in the factory precincts itself, from
where the bottles are dispatched to customers directly.
The national demand for amber glass is fed from our factory at
Rishra and Bahadurgarh. We maintain warehouses in Mumbai
to feed our customers in the western region.
34 | Hindusthan National Glass & Industries Limited
� The manufacturing process has two ends. The hot end
beginning with the raw material batch mix entering the furnace
silos and ending with the annealing process. The cold end
starts at the sorting stage and ends with product dispatch
� Production planning process involves a wide range of
activities from procuring the raw material to converting the
same into molten glass
� Mould management process involves activities ranging from
converting the molten glass into bottles as per customer
specification to cooling the same in annealing chambers
� SQC process comprises activities from sorting the cooled
bottles to dispatching the same to customer bottling units
Outlook
The Company is reinforcing performance through the following
initiatives:
� Redesigning of furnaces nearing obsolescence
� Installation of a ‘clean room’ so that bottles can pass through
the cold end of the manufacturing process without any contact
with the external environment
� Proposed increase in furnace capacity through booster loads
to improve the draw; proposed increase in machine capacity
through enhanced machine speed (cycles per cavity)
� Proposed acquisition of a pelletiser to automate packaging
1952 1999-2000 2000-01 2001-02 2004-05 2006-07 Present
Together constitute ACEcontainers
GR
OW
TH
Acquisition ofassets of Neemrana
plant – capacity2575 TPD
Capacity at2435 TPD
L&T plantacquisition –capacity at2150 TPD
Capacityat 1800 TPDfrom OwensBrockway acquisition
Expandedcapacity
to 1100 TPDInstalledcapacity
of 30 TPD
Hindusthan National Glass & Industries Limited | 35
� Superior management techniques resulted in an increase in
performance, productivity and profitability
� A successful rollout of TPM techniques at Bahadurgarh and
Rishra led to a 300 basis points increase in productivity
� Testing 11 lean Six Sigma projects
� Initiated the process of implementing a SAP ERP to
streamline operations and ensure real time data availability
HNGIL at work
Management practices
At HNGIL, we recognise the importance of superior
management tools that enhance performance, productivity and
profitability. The Company implemented a number of such
tools and techniques, strengthening its shop floor
effectiveness.
Total Productivity Maintenance: Based on the eight principles
of productive maintenance. This comprises quality
maintenance, kaizen, autonomous maintenance, etc. and is a
productivity enhancing tool rather than being a cost centre.
Each machine operator is given the responsibility of running
the machine at optimum levels; any increase is incentivised.
TPM was implemented at Bahadurgarh and Rishra, improving
the draw-to-pack efficiency by around 300 basis points.
Lean Six Sigma: Combines the best practices adapted from
the lean management system of Toyota and the Six Sigma
practices of Motorola. This helped reduce non-value added
time (between production completion and revenue generation).
Six Sigma practices helped minimise deviations from
specifications leading to superior product quality and
productivity. The Company adopted 11 projects for enhanced
performance.
ERP rollout: The first phase of the Company’s ERP solution will
be rolled out in Bahadurgarh, Rishra and the head office by
December 2008 across the sales distribution, production
planning, plant maintenance, materials management, quality
maintenance, warehouse management and engineering chain
management (ECM) and data management systems (DMS).
This will facilitate real time information management for timely
decision-making, superior inventory management, elimination
of data mismatch and redundancies and uniform multi-unit
design changes.
HNGIL at work
Quality
At HNGIL, quality is defined as all the product attributes that
enable a bottle to resist breakage during transportation and
filling.
At HNGIL, our quality commitment comprises the ability to
produce according to demanding customer dimensions with
checks across 140 defect parameters and well within tolerance
limits defined by customers.
Raw material vigilance
At HNGIL, quality control comprises the following processes
and stages:
� Random sampling for chemical composition of incoming raw
materials and onward mixing as per batch needs
� Regulation of furnace temperature, resulting in appropriate
glass viscosity and distribution
� Analysis of molten glass across characteristics like glass level,
raw material mix, glass viscosity and temperature, influencing raw
material and chemical consumption
36 | Hindusthan National Glass & Industries Limited
Quality management
The moulded glass is monitored hourly across 15 dimensions
by the production and quality departments, the deviations
reported and the mould redesigned. The bottles are cooled in
the annealing lehrs and thereafter subjected to alternate
cooling and heating spells to minimise bottle stress. Thereafter,
the bottle is passed through a lighting station where sorters
examine bottles; the defective bottles are discarded for use as
glass cullet in the manufacturing process. The quality of shrink-
wrapped packaging minimised in-transit contamination and
breakage. The Company is tightening its process discipline in
line with ISO 22001:2000 certification, which will make it a
preferred vendor for the food processing industry.
� The Company is ISO 9000: 2000-certified
� Quality control is ensured across two stages. One at the raw
material stage handled by glass technologists and the other at
the production stage handled by engineers and the quality
control department
NNPB technology vs. Blow and Blow technology
The Press and Blow Process is an improvement upon the Blow
and Blow process for the following reasons:
- The parison facilitates precision in control
- Enhanced glass distribution throughout the bottle
- Lighter in weight, hence a lower consumption of molten glass
- Lower costs
HNGIL at work
Research and development
At HNGIL, we are engaged in a continuous exercise to
enhance our product and process efficiency, reflected in lower
costs, better product, stronger quality and enhanced
productivity.
Over the years, the Company worked closely with furnace
technology providers with the objective to increase furnace
load (more material can be generated through the same power
consumption) and the use of technically advanced shervo
gobs to minimise deviations.
The Company selectively introduced the narrow neck press
and blow (NNPB) technology in 2007-08 – superior to the
conventional blow and blow process used for narrow neck
bottles, leading to a saving of molten glass per bottle without
compromising product strength. This technology facilitates
superior glass distribution. In turn, this superior distribution
reinforces the bottle’s resistance to pressure on the filling line,
suited for carbonated and beer brands; the concurrent weight
saving implies savings for the Company and customers – a
reduction in logistics cost and increasing consumer
acceptability. The first successful bottle rollout of the new
technology was the dextrose glucose bottle, used in
intravenous applications.
The Company’s R&D efficacy also translated into direct
benefits. The Company leveraged its deep understanding of
the product, technology, aesthetic and end-customer
applications to offer customers suggestions in enhancing line
efficiency, enabling them to accelerate their filling speed,
reduce breakages and strengthen their overall viability.
Hindusthan National Glass & Industries Limited | 37
� The introduction of a lighter, stronger dextrose glucose bottle has enabled us to capture the entire market for that product
� Light-weighting has led to a 35 gms saving of molten glass per bottle in this particular case
� Fuel costs are being optimised by increasing the furnace load.
HNGIL at work
Marketing and distribution
In the business of container glass, products must be made and
marketed to enhance their preference over competing
packaging alternatives as well as competing container glass
competitors. The Company’s edge was conclusively
showcased in its market share in excess of 65% in 2007-08.
During the year under review, the Company has faced the
following challenges: growing competitiveness from alternative
packaging materials and an increase in material costs, making
it imperative to absorb costs, enhancing the price-value
proposition and preventing a shift to alternative materials.
The Company retained its share of a growing market through
the following initiatives:
�Growing adaptation and customisation of the end product with
the objective to reduce costs
� Progressive graduation from mere product delivery to complete
packaging solutions
� Integration of line friendliness, customer friendliness, consumer
friendliness and environment friendliness into the overall value
proposition
� Proactive light-weighting of bottles – a win-win for the Company
and customer – resulting in lower material and logistics cost
�Quicker sale through the complement of the Company’s scale,
versatility, product flexibility and a pan-India presence
� Stable pricing of end products as opposed to a volatile raw
material environment
The highlights of the Company’s achievements in 2007-08
comprised the following:
� An increase in installed capacity at a time when demand
exceeds supply, reinforcing customer relationships
� A growth in market share across most product segments
� A decline in the cycle time required to service customers from
the design to market stage
� An increase in realisations in line with cost push inflation and
global benchmarks
� The launch of light-weight bottles, resulting in lower costs and
better value for customers
� A growing ability to service multi-locational, multinational
customers through our multi-locational units
The Company reinforced its price-value through relatively
stable pricing even as raw material contracts were revised on
four occasions during the year under review. HNGIL reinforced
its position through the prudent graduation from vendor to co-
product developer through technical consultancy services.
We are optimistic of our prospects on account of glass
container demand growing faster than supply. Besides, an
increase in disposable incomes, nuclear families, processed
food purchases and beer consumption will drive bottle offtake,
reinforcing the Company’s prospects.
The Company expects to capitalise on this reality through a
greater proportion of NNPB products, increased sales,
enhanced realisations derived from value-addition, superior
service and a growing proportion of exports.
38 | Hindusthan National Glass & Industries Limited
� Air emissions are the only form of pollution
� Alternative fuel choices like natural gas have made HNGIL
eligible for carbon credits
� The demand for container glass is higher than supply
� HNGIL is acquiring plants at periodic intervals to increase
capacity, instilling confidence in its large portfolio of clients
� India is the lowest cost producer of glass in the world and is
poised to grow globally
� With renowned brands switching to Indian-manufactured
glass containers, the Company has room to enhance volumes
� Despite a slowdown in the consumption of non-essential
items, the Company is confident of its growth as it caters to the
top 10 companies in each of the segments in which it operates
� No person-days were lost due to safety failures
�Management practices for enhancing safety for employees are
being developed
HNGIL at work
Technical consumer services
In the business of container glass manufacture, the marketing
team works closely with the research and development team to
develop technical consumer services. The latter comprises
consultancy to clients on how to improve bottle design with the
objective to enhance the filling-line efficiency, accelerate
payback and translate a one-off transaction into an ongoing
relationship.
HNGIL’s consultancy is offered at two stages: before bottle
production (pre-consultancy stage), comprising design, line
and equipment suggestions; following bottle production (post-
consultancy stage) with a view to enhance efficiency of the
Company’s bottles on the customers’ bottling lines.
The result is that the Company has graduated from a vendor
into a technology partner, enhancing throughput on the
customers’ lines, reinforcing their viability and encouraging
them to enhance production. In one of the high points of
achievement, the Company successfully converted successful
Indian and multi-national brands who hitherto imported their
requirement of bottles into committed customers.
HNGIL at work
Safety
Some of the Company’s operations are hazardous, warranting
the need for safety. In view of this, the Company invested in
safety equipment, processes, practices and people.
The Company deputed a professionally qualified safety, health
and environment officer in each of its manufacturing facilities. It
is adopting practices necessary for the OHSAS (ISO
18001:2000) certification. It periodically reviews processes with
an eye on the probability of accidents, severity, frequency,
production loss, etc. with ratings on each according to their
occurrence and significance. These ratings are then multiplied
and the result is compared with a standard set for each
process. If the resulting figure is higher than the standard, then
that particular area is classified as accident prone; if the figure
is significantly higher, then it is classified as a danger zone.
Thereafter, scientific management techniques are employed to
reduce the ratings below standard levels for enhanced process
safety. The effectiveness of our procedures can be gauged
from the fact that despite increased production in 2007-08, the
Company did not experience any major accident.
HNGIL at work
Environment
The manufacture of container glass does not entail any
hazardous liquid or solid waste. Water used in cooling towers
is reused, as is the glass from rejected bottles as cullet. Being
ISO 9001:2000-certified, the Company monitors and
documents pollution levels, which are subsequently audited by
an external agency.
The Company consumes eco-friendly options like natural gas
and its carbon dioxide emissions have progressively declined.
It has embarked on the process to obtain the ISO 14001:2000
certification.
Hindusthan National Glass & Industries Limited | 39
Internal control systems and their adequacy
The Company has an adequate internal control system, which
commensurates with the Company’s size and the nature of its
business. It has well established and documented operational
procedures, ensuring that transactions are recorded,
authorised and reported correctly apart from safeguarding its
assets against wastage, unauthorised use and removal. This is
regularly reviewed and updated.
Physical verification of fixed assets is done periodically. The
Company appointed independent and qualified external
agencies that submit detailed reports on internal control
system and their adequacy to the Audit Committee of the
Board of Directors, periodically.
� Number of saleable bottles increased as a result of enhanced manpower productivity
� Downtime declined
HNGIL at work
People management
Glass manufacture is more knowledge-intensive than most
businesses for some good reasons: the process of
manufacture is complex, the customer’s quality requirements
are becoming increasingly stringent, the cost of error is high
and the amount of individuals required to man each machine is
higher than in other industries.
At HNGIL, our primary asset is our intellectual capital,
represented in the collective knowledge and experience of our
people. The Company is the largest employer in its industry
space in India, with over 3,000 employees as on
March 31, 2008.
The Company recruits individuals from the best glass
technology colleges as well as mechanical, production and
chemical engineers from reputed institutes. Their academic
understanding is reinforced through classroom training, which
is subsequently appraised though periodic written tests.
This enhanced training is catalysed by a cross-factory sharing
of the best practices and measured in the Company’s
production efficiency, linked to monthly incentives.
The effectiveness of the Company’s labour relation practices is
reflected in its record of years of working uninterrupted by any
labour unrest.
Increasing manpower training hours
Year 2007-08 2006-07 2005-06
Training hours/years (hrs) 31883. 5157 11189
Rising manpower productivity
Years 2007-08 2006-07 2005-06
Productivity (MT/person) 192 126 122
Declining labour cost
Year 2007-08 2006-07 2005-06
Labour cost/tonne (Rs) 790.00 1,931.00 1,119.00
Executive grade people skill
Qualifications %
MBA 03.70
CA/CS/ICWA 03.58
ME/MBBS/MSW 01.60
Post graduate 11.13
Technical diploma 28.90
Graduate 31.30
ITI 07.00
Inter/SSE 09.80
Below SSE 03.00
40 | Hindusthan National Glass & Industries Limited
Reviewing our key numbers
Income accounting method
The financial statements of the Company were prepared in line
with the generally accepted Accounting Principles and the
Accounting Standards as per Section 211(3C) of the
Companies Act, 1956. The financial statements of the
Company were prepared under historical cost convention basis
and disclosures made in accordance with the requirement of
Schedule VI of the Companies Act, 1956 and the Indian
Accounting Standards. The Company followed the mercantile
system of accounting and recognised income and expenditure
on accrual basis. The Company made all relevant provisions as
were applicable as on March 31, 2008. The absence of any
material qualifications in the Company’s Auditors’ Report
indicates that the Company’s financials present a true and fair
view of the Company during the year under review.
2007-08 vs 2006-07
The Company’s performance is captured in the following
numbers:
� Gross revenue increased by 92.87% from Rs 59,539.68 lacs
in 2006-07 to Rs 1,14,833.90 lacs in 2007-08
� EBIDTA increased by 107.92% from Rs 10,324.87 lacs in
2006-07 to Rs 21,467.11 lacs in 2007-08
� PAT increased by 368.22% from Rs 3,424.46 lacs in 2006-07
to Rs 16,033.89 lacs in 2007-08
� Cash profit (PAT + depreciation +/- deferred tax liability)
increased by 194.24% from Rs 6927.39 lacs in 2006-07 to
Rs 208383.16 lacs in 2007-08
� EPS (basic) increased from Rs 31.01 in 2006-07 to Rs 91.79
in 2007-08
The Company’s margins strengthened across the Board on
account of superior economies of scale, widening national
presence and relevant cost-cutting:
� EBIDTA margin increased 135 basis points from 17.34% in
2006-07 to 18.69% in 2007-08.
� Net profit margin increased 821 basis points from 5.75% in
2006-07 to 13.96% in 2007-08.
� Return on capital employed increased from 12.07% in 2006-
07 to 15.63% in 2007-08
Mitigating risks at HNGIL
Industry risk A slowdown in the
downstream industries
could affect demand.
� Demand has been buoyant from the processed foods, beverages,
beer, liquor, pharmaceutical and organised retail sectors
� The Company caters to the top 10 companies present in these
segments, growing faster than the industry average
� Demand is higher than the existing supply
Competition risk The Company’s success
might attract competition.
� The container glass industry is capex and working capital-intensive
� The Company has the largest installed capacity in India
� The Company enjoys longstanding customer relationships with
multinationals
� The Company pioneered the introduction of light-weighting
technology in India
Risk mitigationRisk explanationRisk identification
Hindusthan National Glass & Industries Limited | 41
Risk mitigationRisk explanationRisk identification
Raw material risk An inability to procure
adequate raw materials at
the right price may affect
the Company’s
competitiveness.
� A subsidiary company owns silica sand reserves
� The Company is already in the process of acquiring limestone and
dolomite mines on lease
� The Company enjoys extended raw material supply contracts (three
months) on account of its large volume
Environment risk Tight environment
regulatory policy could
affect operations.
� The Company’s operations were periodically certified by the Pollution
Control Board
� The waste water was re-used in the cooling towers
Quality risk An inferior quality of end
product can dent the
Company’s brand equity.
� The Company follows stringent quality control, comprising a
thorough inspection of raw materials, in-process materials and finished
products reinforced by hourly checks
� The Company possesses the ISO 9000:2000 quality certification
Talent risk The development of a
company could be stunted
without the necessary skill
sets.
� The Company continues to attract the best in the industry with
attractive growth opportunities presented for personal development of
individuals
� At HNGIL, we incentivise performance to retain the best talent
� The Company provides in-house training to enable employees to
develop skill sets specific to the glass industry, ensuring loyalty and
competence
� As a result, HNGIL enjoys one of the lowest attrition rates in the
industry
Technology
obsolescence risk
The advent of new
technologies could make
the existing processes
obsolete, threatening the
Company’s growth.
� The Company is a front-runner in technological advancements with a
consistent first mover’s advantage
� The Company pioneered the light-weighting technology and the
NNPB (Narrow Neck Process Blow) technology on a large scale
� Its insight into plant fabrication has facilitated low-cost
de-bottlenecking and asset turnaround
� Its technical skills reflected in relevant productisation for the liquor,
beverages and food processing sectors