Piramal Glass has, according to managing director Vijay Shah, decided that it will move part of its US operations to India as part of restructuring operations, and will also lay off around one-third o…
Piramal Glass has, according to managing director Vijay Shah, decided that it will move part of its US operations to India as part of restructuring operations, and will also lay off around one-third of its 540 US employees. The company, which makes glass packaging for pharma, perfume and speciality food and beverage sectors, just managed to avoid the bankruptcy caused by huge debt and its suffering US unit. We have created huge additional capacities in our manufacturing locations in India, and shifting the manufacturing from the US facility to these locations will directly result in saving cost by more than 50%, Shah said. By doing this, we hope the US subsidiary will also break even by the end of this year. Piramal Glass is among the world“s top five glass bottle makers with regards to sales in the pharma segment, and is also the third largest manufacturer of cosmetics bottles by capacity. As of March 2009, it had a costly debt of INR 1,357 crore due to additional investments in the US entity, as well as to increase capacity in India, while its net value was INR 260 crore. Piramal Glass acquired US-based Glass Group Inc. in 2005 to enter the perfume market, and gain access to the latest technologies. The US acquisition was in a hurry and we didn“t have enough time to look at many of the critical aspects pertaining to the operations of the company, said Shah. Other than the initial acquisition cost of about USD 18 million (about INR 90 crore then), Piramal Glass also invested around INR 300 crore in the US firm over the years. It also spent a further INR 50 crore to set up additional capacity in India. Debt costs for these investments, along with adverse market conditions, including foreign exchange losses, resulted in a net loss of INR 23 crore in 2007-08 and INR 103 crore the next fiscal. The company returned to profit in the second quarter of 2009-10, led by a turnaround in its US unit, and made a quarterly profit of around INR 2 crore. The investments that we have made in the last 3-4 years are now fructifying… All our manufacturing assets have been approved after stringent audit norms by top perfumery manufacturers like Procter and Gamble, LVMH, Yves Rocher, Coty, among others, in the last couple of years, said Shah. Chunduru Srinivas, vice-president strategic planning and investor relations at Piramal Glass, said the company now expects to make a consolidated profit in 2009-10. A rights issue to raise about INR 188 crore in 2009 helped the firm pare part of its debt, which now totals INR 1,030 crore.