Chairman
The year 2012-13 marks sixty years of HNG’s manufacturing operations. It was in
1952 that our first plant at Rishra rolled out the first bottle, which it continues to do
even today. It has been an eventful six decades during which India – and the world
– has changed dramatically. So has the way of running business.
Some things however remain the same and among the most enduring paradigms is the
cyclical nature of the economy and industry. In the last twenty years alone businesses in
India have faced several roller-coaster ups and downs, starting with the liberalization of
the early nineties when the proverbial ‘Hindu Rate of Growth’ broke the shackles
and crossed 7% (1995-97). It then averaged below 5% (2001-03), skyrocketed past 9%
(2006-08) before falling again in the last two years. And every swing of revival and
retreat has seen accompanying moods of hope and fear.
It is well known that for the Indian industrial economy FY 2012-13 has been one of the
worst in recent memory with high inflation and interest rates coupled with sluggish
growth. Through most of the year indices of industrial growth remained flat, or even
negative, as demand stalled and costs spiraled. In particular companies that had bet on
the Indian Growth Story during the last decade found themselves badly hit as capex
commitments and expanded capacities raised costs without commensurate revenue due to weak
demand. Many companies were forced to find ways of cutting expenses and – since one
company’s expense is another company’s income – this had a domino effect.
By Q4, with burgeoning deficits, falling rupee and a government mired in policy paralysis,
the entire India Growth Story was being held in doubt by the skeptics.
However, as the decades have shown, both the optimism and pessimism tend to be
overdone. If we take the entire time horizon since 1991, the average Indian today earns
nearly 4 times more than two decades ago in real terms. The difference is even more marked
in the middle class and above. For example, there are almost 20 times as many cars on the
road today as compared to 1991. Most consumer industries have been averaging double digit
growth despite slowdown in other sectors and even at 5% India is growing faster than most
other countries. If issues of policy and implementation can be sorted out I have no doubt
that a decadal growth average of 7%+ will be maintained through the 2010s.
In my view, for established companies and market leaders like HNG, what matters is not
the booms and blips of short economic cycles but the ability to build enduring assets that
can best leverage decadal trends. In this regard I believe we are well placed to take on a
buoyant future as well as withstand the intermittent dips. We are one of the few companies
internationally to have an in-depth understanding of glass making. We are also the market
leaders in India with an enviable reputation for quality. We have aligned our production
to the Indian Growth Story by nearly quadrupling our capacities since 2000. At the same
time we have continued to deliver highest standards of quality products to our clients
through consistent investments in world-class equipment and deep-rooted culture of
quality. Our cost structures have been fine-tuned by our constant efforts to go beyond the
established norms and ensure maximum utilization on resources. These factors have
translated into an ability to offer quality products at competitive prices, which has
enabled us to win customer confidence.
Apart from being an opportunity for improving business efficiencies, adverse situations
also bring about a need to introspect and look at business plans without the tints of rosy
optimism. A result of this introspection has been our decision to divest our majority
stake in HNG Float Glass Limited in favour of a strategic international partner, Trakya
Cam Sanayii A.3. The partnership brings in strong technological knowhow for value-added
float glass and automotive grade glass segments, both of which have considerable growth
potential in India. Further, in the automobile glass the entry of Trakya Cam into the
Indian market will open up significant opportunities in OEM markets on account of their
global reputation and tie-ups. International management skills and global industry
expertise can also be expected to positively impact efficiencies. Trakya Cam’s
technical, financial and manpower strengths, coupled with HNG’s strength in
India’s glass industry are sure to result in much better and deeper inroads in the
markets going forward.
Before I conclude I would like to touch upon another long term aspect that businesses
today need to take cognizance of. These are issues that pertain to the environment and
society at large which are becoming essential for sustainable growth. Increasingly and
globally there is pressure to ensure that production and consumption do not cause long
term damage to environment and communities. We are proud to manufacture an eco-friendly,
recyclable product that has no substitute in many packaging applications. Internationally,
the trend today is in favour of a greener future. At home, we are also proud to play an
active role in the betterment of environments and societies around our manufacturing
units. We recognize that sustainable development is the only way forwards and that our
business has prospered – and will continue to prosper – because we work in
harmony with the future.
Chandra Kumar Somany
Chairman