Management Discussion & Analysis

A. ECONOMY /INDUSTRY OVERVIEW

The macroeconomic environment continued to pose challenges in the Fiscal Year 2014-15, Though there has been a marginal growth in GDP, the consumer sentiment continued to be weak. Despite the rate of inflation being on the lower side, years of high inflation in the past have left continuing impact on disposable income and Final Private Consumption Expenditure. Every geography has been seeing ups and downs in short spells making it difficult to forecast and work on a stable marketing plan.

While certain macro factors like fiscal deficit, inflation, foreign investor interest etc., show improvement besides structural correction initiatives by the New Government, these are yet to have any impact on the consumer demand and employment generation. It is expected that if reforms like land acquisition, recodification of labour laws, GST, and initiatives like infrastructure development, power generation and development of smart cities are kick started, India can get back to growth rates in excess of 7% in the coming years. Your Company operates in the Glass processing segment with a wide range of product processes. The product processes consist of Toughened glass, Heat strengthened glass, Insulated glass, Laminated glass, Decorative glass and fire rated glass. The market for glass processing is shared amongst organized branded players and unorganized players. The market for organized brands is estimated at about 70% of the total market.

Company Overview:

The Electronic commerce or e-Commerce as is known today has evolved as businesses (end to end process) started to shift from real time market to digital market. A lot of businesses today take place on the internet, sitting in the comfort of one's own home. The Company has during the year under review had tied up with snapdeal for sale of its decor products. The Company has as a beginning started with selling of its glass mirrors on line through snapdeal, and the concept is slowly picking pace. The Company proposes to gradually add few more categories of retail home and office interior products for online sales in the near future.

B. GLASS INDUSTRY OVERVIEW

Global Overview And Demand

• The global glass market has reached about 83 million tonnes in 2014 up from 60 million tonnes in 2011.

• The Global Flat Glass market is poised to grow at a CAGR of 7.3% over the period 2014-2019.

• The use of float glass is largely in the Building and Construction and Automotive sectors.

• Flat glass is also used in solar equipment such as solar thermal panels and photovoltaic modules.

• Flat glass finds application in interior fittings and decorations, furniture, and electronic equipment.

• Flat glass is classified into float, sheet, and rolled.

One key trend upcoming in this market is the demand for fabricated flat glass products for use in buildings and construction. Demand for fabricated flat glass products such as solar glass panels and electronic displays are on the rise.

0 Indian Glass Industry

According to a recent study conducted by the Associated Chambers of Commerce and Industry of India (ASSOCHAM) the domestic glass industry is poised to grow to Rs. 340 billion by 2015, which will be triggered by the growth in the real estate sector, infrastructural development, retail sector, automotives sales and food & beverages sector. The current value of Indian glass industry is Rs. 225 billion.

Indian glass market is set to increase at a compound annual growth rate (CAGR) of 15 per cent over the next three years. The glass consumption growth is expected in construction (10-12 per cent), automotive (20 per cent), consumer goods (15-20 per cent) and pharmaceuticals (15-18 per cent) sectors.

The glass industry employs more than 40 lakh people. The organized sector accounts for 35 lakh and unorganized sector provides direct jobs to around 5-6 lakh people. A large number of man-power is involved indirectly in the sector, most of whom are unskilled workers.

About 75 per cent of the total glass industries are concentrated in U.P, Maharashtra, Gujarat, Karnataka and Andhra Pradesh. Gujarat employs the highest number of people in the glass industry followed by Uttar Pradesh, Maharashtra and Andhra Pradesh.

The glass packaging industry is facing tough competition from alternative medium. But with the key properties such as inertness, transparency and recyclability, glass will overcome the issues of fragility and bulkiness, which will satisfy the  consumers.

The increasing prices of the raw material is the biggest challenge faced by Indian glass manufacturers. With some steps taken by the government towards control in the increasing prices of raw materials and regularizing the cullet collection system in India, would help the industry to counter the competition from other alternative uses for glass.

The per capita glass consumption in India is 1.2 kg, compared with 8-9 kg in developed countries and 30-35 kg in the US. Also, glass recycling is very high in developed countries at 70-80 per cent, whereas in India, only 40-45 per cent of the finished products come for recycling and the rest go for land filing. Recycling saves 10-20 per cent energy, 30 per cent air pollution and improves furnace efficiency by 20 per cent. The glass industry mainly consists of four segments-Container glasses, Specialty glass, Flat glass and Fiberglass. Container glass is the largest segment in the glass sector, catering to glass packaging for consumer goods and pharmaceutical industry. The specialty glass is used in technical applications such as electronics and engineering. Flat glass segment comprises of float glass and rolled glass, which are mostly used in architectural and automotive applications.

0 Glass Processing Industry

The glass processing industry is highly fragmented in the country. It is clustered in six geographical locations that fall near the six industries or metro cities. The processing clusters are located in and around Delhi, Mumbai, Chennai, Hyderabad, Kolkata and Bangalore. Because of its fragmented nature, the glass processing industry in India is dominated by small players who put little effort to improve customer service, reducing costs, or systematically developing markets. The industry is also weighed down by the spiraling cost of manufacturing. Energy costs are increasing, as are those of raw materials and infrastructure.

The glass processing involves lending various properties to glass in order to enhance life and aesthetic appeal of the glass as well as to customize it for the intended use. The glass processing units are required to be located in proximity to the major float glass producing centers as well as the markets of consumption to minimize losses on account of breakages and logistics cost.

Processed Glass types

• Heat strengthened glass

• Fully toughened glass

• Insulated glass

• Noise insulating glass

• Laminated glass

• Decorative glass

• Fire resistant glass

Real estate: Driving growth

The growth of the float glass industry is dependent on construction and architecture activities. The construction sector is the largest consumer of float glass. Around 70% of the total production is used by the construction sector. Real estate sector use flat glass for windows, doors, partitions and a host of other applications.

It is expected that demand growth in this segment is going to be strong, as architects are increasingly seeking to bring natural environmental factors into the interior of buildings by maximizing natural daylight. This has been achieved through the use of larger glazed areas in facades and roofs, and through entirely glazed facades, where the glass is a structural component of the building.

Interestingly, use of value-added glass has gained popularity in commercial buildings in the recent years. However, residential buildings, which are a major source of demand for these glass types, are not using much of these products. This is one area that is going to drive growth in the country.

Automotive Sector: High Potential

In India auto industry is a growing industry with an expected turnover of US$113 billion by 2020. The automobile sector is a big user of flat glass. The consumption of glass in this sector is likely to see a growth of close to 20 per cent in the coming year as glass is being increasingly used on cars, and strongly contributes to their design.

C. HUMAN RESOURCES

The Company believes in the highest standards of people management and personal growth. It instills in each of the members of the Sejal family a feeling of ownership, responsibility and performance to the par of excellence in each of the operations pertaining to production and servicing. The Company aspires to set the highest standards of internationally benchmarked human resource practices, which would be exemplary for other manufacturers. The industrial relations were cordial and the management thoroughly acknowledges the support from the employees at all levels.

D. INTERNAL CONTROL SYSTEM

The Company has an adequate system of internal controls to safeguard and protect from loss, unauthorized use or disposition of its assets. All transactions are properly authorized, recorded and reported to the management.

The Company is following all the Accounting Standards for properly maintaining the books of accounts and reporting of financial statements. The Company has a full-fledged Internal Audit department and also external Internal Auditors to review various areas of the operations of the Company. The management and the Audit Committee of the Board review the audit reports periodically.

E. RISKS AND CONCERNS

The Company is exposed to normal industry risk factors of competition, economic cycle and uncertainties in the international and domestic markets and credit risk. The Company manages these risks, by maintaining a conservative financial profile and by following prudent business and risk management practices.