Borosil Q1FY18 Concall Summary


Business Highlights

  • During April and May, both Lab and Consumer department showed a healthy growth but observed a sharp decline in the month of June due to destocking by retailers over uncertainty over GST.
  • In July, sales performance showed a decent increase.However, recovering lost sales for Consumer ware is not certain. There is reasonable certainty is  for recoveey in Lab ware segment .
  • GST is beneficial from long term perspective and it is already showing benefits in terms of interest from tax compliant organized players.
  • The Company is focusing on threeprinciple growth drivers: LabQuest,Klasspack & Export.
  • Q1 has seen good increase in the piece of products however profitability has been wiped out because of inefficiency of furnace, which is a short-term phenomenon.
  • Scale benefits will start to kick in & Sales along with EBITDA margins are expected to increase faster over next two years.
  • Shareholders’ approval awaited for a planned ESOP and also for a proposal to reduce face value of each share from INR 10 to INR 1.
  • Board has also approved a scheme of amalgamation, however, statutory approvals are still awaited.
  • Significant investment has been put into Larah and new warehouse in Jaipur.
  • Traditional sale contributes to majority of business (60%). Modern trade constitutes 20 to 25% and rest is occupied by CSD and e-commerce.

Financial Highlights

Borosil Q1FY18 Sales Highlights.png
Borosil Q1FY18 Financial Highlights.png
  • The lab ware division had a minor de-growth of 0.3% on standalone basis. Klasspack, the entity that was acquired by Borosil last year, registered a 14% YOY growth on standalone basis (Not on book as on last year). Overall lab ware division registered a 29.5% growth.
  • The consumer ware division declined by 7% on standalone basis and Hopewell comprising the brand Larah, declined by about 11.5%. Overall Consumer division registered a 7% decline.
  • The company revenue grew by 4% primarily fueled by revenue from Klasspack division.
  • EBITDA declined to 8.4% of topline compared to 12.9% of toplinelast year. Lower EBITDA margin was due to decline in Hopewell (Larah) & rebuilding of furnace.
  • PAT is down to 5 Crores this year from 10 Crores last yeardue to dismal Hopewell show and change in base year for calculation of capital gains tax.
  • Gujrat Borosil achieved a sale of 43 Crore with an EBIDTA margin of 19.3%.
  • Company has cash surplus of roughly 200 Crores which is put aside for future acquisitions.
  • Company board has also approved the disposal of 68 Crores non-core assets. These non-core assets include some residential apartments in Mumbai and outside Mumbai.
  • The current funds are being invested in mix of fixed income and liquid funds.
  • Company has reduced its advertising expense in this quarter. Ad spend was about 3 Crores this quarter compared to 5 Crores in the same quarter last year.
  • Equity has reduced substantially as a part of broader strategy to move from investment portfolio to traditional corporate treasury.
  • There may be a fund raising activity for Gujrat Borosil in near future.
  • Large CAPEX is meant for refurbishment of Hopewell furnace and the new warehouse.
  • The company expects business to normalise by Q2FY18
  • Restocking is expected by early Diwali 2017

Company Overview

  • Company is doing fairly well in exports.
  • In consumer segment, growth in microwave segment is supplemented by the newly introduced storage products.
  • Borosil is also coming up with new advertising campaign on Lunchbox. This product has received fantastic reviews from the customers.
  • Larah also won large contracts & its distribution penetration & customer acceptance are increasing.
  • Company will start receiving input credits after implementation of GST.
  • EBIDTA margin of Gujrat Borosil decreased because of a production trial of thinner glass material in newly implemented CAPEX facility. It is still not commercialized, but, the company expect to boost profitability for the same.
  •  No permanent loss in sales is expected expect certain distribution channel like expected
  • Brosil’s primary business is in borosilicate glassware and there is no anti-dumping duty on that.
  • Distribution of channels for consumer business: Traditional Trade: 60%, Modern Trade: 20-25%, CSD: 10-15% & E-Commerce: 5-6%.
  • Borosil would earn margin by increasing quantum of sales and not trade.  Certain tax credit can be availed after implementation of GST.
  • By second half of 2017, Hopewell should have acapacity of 150 to 170 Crores.
  • Kitchen appliance segment grew well despite almost no marketing in Q1FY18
  • The company focuses its marketing spend on beon storage & Larah brand.
  • The Company is a C class supplier in pharma industry. Product is of importance but of low value.
  • Klasspack vials are entirely for pharma and 70% lab glass business is from pharma sector.
  • Exports have been doing well for lab space. Company has been exporting to Middle East Africa and Southeast Asia in pharma space.

Industry Overview

  • The Ministry of Commerce has recommended applying anti-dumping duty to Chinese solar glass imports & only Ministry of Finance approval is pending. It is a good sign for the company.
  • Another separate antidumping duty is applied on Chinese opal glass. Company is happy to compete in the level playing field created by the Government.
  • Two separate antidumping duty which company applied for its two separate lines of businesshas gone to companies favour. This will boost company’s top-line in the short to medium run.
  • There is antidumping duty applied to soda lime glassware also. However, Borosil is not really involved in that business.
  • Fall in solar price is artificial and due to Chinese government subsidizing exports. With recommendation of new anti-dumping duty, the margins are expected to improve
  • In UAE import duty has been reduced to 4.45% from 30-31%. However, most of the imports are from China & not from UAE, because of high cost structure. There are some undeclared Opalware import observed from Iran & Europe.
  • Opal ware segment has market size of 500 Crores and it is growing rapidly at a rate of 15-20%.
  • After implementation of GST, there could be substantial reduction in unbranded products from China. There will also be stocking of branded products.
  • With anti-dumping duty imposed on melamine, bone china and porcelain by government, opal has good opportunity to grow and take market share
  • Pharma sector has been in distress for past 2 years and pricing in some pharma companies has been a challenge. Company had to offer some discounts to counter this challenge.


  • Borosil competes against La Opala, Cello & Treo in Opal-ware category.
  • In pharma packaging, the company has only one major competitor-Schott Kaisha