An estimate by Crisil Ratings says sharp increase in Covid-19 vaccination-led pharma demand and expected healthy growth in end-user sectors like automobiles and construction is expected to drive up revenues by 12 per cent year-on-year for domestic glass makers in financial year 2022.
Asahi India, Borosil, La Opala RG, Saint-Gobain,
, Hind National Glass, , Insilco and Banaras Beads are some of the listed glass manufacturers in India.
“A strong surge in vaccination-led demand for glass vials coupled with growth in auto volumes will drive revenue growth of glass makers in fiscal 2022. Despite recent partial lockdowns due to the surging second wave, glass makers are expected to maintain their profitability this financial year,” said Dinesh Jain, Director, Crisil Ratings.
The recovery for the industry, already visible since the second half of financial year 2021, is expected to continue in this year, albeit there will be some headwinds of a second wave of Covid-19 in the first quarter of the current fiscal, an analysis of 25 Crisil-rated glass-makers shows.
Glass is sold in two forms: flat and container. Flat glass accounts for 55 per cent of total glass sales at Rs 12,000 crore, mainly to automotive and construction sectors. Container glass accounts for the remaining 45 per cent of total glass sales at Rs 10,000 crore.
“Rise in vaccinations will support demand for glass vials and other labware with sales at Rs 1,000 crore. This is estimated to have grown 20 per cent in fiscal 2021, and will increase more this fiscal, as vaccination demand rises to counter the resurging second wave of Covid-19,” the rating agency said.
Government policy decisions are also supportive of growth. India has levied anti-dumping duty on some varieties of float glass imports from Malaysia for five years in November 2020; countervailing duties were levied on imports of tempered glass from Malaysia in March 2021.
However, in the short term, there may be some slowdown due to operational challenges, especially shortage of oxygen. The recent surge in Covid-19 positivity rate and partial lockdowns have resulted in disruptions in availability of industrial oxygen, a key process input for cutting glass.
Gas prices, meanwhile, which forms about 25 per cent of the total cost for the glass makers, is likely to remain suppressed at around $2.5 per mmBtu in the near term, on account to resurgent second wave. This is likely to support the input costs for glass makers in the first quarter of current fiscal. But it will eventually rise in subsequent quarters, which will increase input costs. However, glass companies are expected to pass these on to customers.
“Higher revenues and steady profitability should result in better cash accruals, supporting incremental working capital requirements. Internal cash flows will be sufficient to meet any capacity expansion and working capital needs in the wake of demand surge,” Crisil Research said.
Krishna Ambadasu, Associate Director at Crisil Ratings said the gearing levels of glass makers is expected to remain below 0.8 time in the near-to-medium term. “Also, operating profitability of glass makers will sustain at 12 per cent in fiscal 2022, and interest coverage at over six times. That should support credit profiles,” he added.
