India's largest glass bottle-maker by market share, which primarily focuses on liquor and food and beverage bottles, wants to expand its market among drug manufacturers, both locally and internationally. Hindusthan Glass is likely to pay between two billion and four billion rupees for the company, which has an existing client base in the pharmaceutical sector, said Mukul Somany, vice chairman and managing director of Hindusthan Glass.
"An acquisition in the drug space, where we wanted to grow further, would not only help us enter foreign markets, but also to have several new global clients," he said
Mr. Somany declined to share details about the target firm, but said his company had looked at acquisitions in the Middle East, South East Asia and Europe. Hindusthan Glass, which earns nearly 95% of its revenue from its local business, hopes to garner a bigger share from foreign sales.
The glass-maker has engaged Rothschild Consulting and PricewaterhouseCoopers to advise on the deal, according to a person familiar with the acquisition plan, who didn't want to be named.
To fund the acquisition, the company plans to sell a part of its 16.76% treasury stock to institutional investors, and a few potential buyers had shown interest. Treasury stock is shares held by the issuing corporation and available for resale.
Hindusthan Glass' treasury stock was created in 2002, when it merged Owens Brockway India Ltd with itself. In June 2010, the U.S.-based private equity firm Sequoia Capital acquired a stake of at least 7% in the company, partly from the sale of treasury stock and from the promoters, the Kolkata-based Somany family, for about 1.27 billion rupees.
As part of the increasing focus in pharmaceutical sector, the company raised its production capacity at its local factories, recently.
The company said its Bahadurgarh unit was revamped, upgrades include realignment of furnaces and installation of new machinery and equipment for automatic inspection.
Hindusthan Glass' revenue from the pharmaceutical sector was 1.66 billion rupees in the last fiscal. The company is expecting a turnover of 1.95 billion rupees in the current fiscal, which started April 1.
The pharmaceutical industry in India is expected to continue its double-digit growth, and glass, the preferred packaging material of this sector, will be in much demand. Hindusthan Glass expects to see the impact of some of its recent expansion measures in this sector this year.
In the past year, the company saw its market share drop to 55% from 65% as rivals expanded their capacity and took a bigger share of the demand, according to a report from rating agency Crisil Ltd. Hindusthan Glass' medium-term plans to add higher capacity will help restore its market share, the report added.
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