Saint-Gobain recently announced that it would expand its world glass complex in Chennai, by adding three new facilities, including a third float-glass line. The company made a 1,200-crore-rupee investment in the plant, which it pledged at the TN Global Investors Meet, in late January.
The investment now means that Saint Gobain’s cumulative investments at its Chennai plant stands at well over Rs 3,400 crore, with production capacity totalling to a mammoth 1.2 million tonne. The expansion also means that Saint-Gobain will see a 35 percent increase in capacity.
Saint-Gobain’s chairman and CEO, Pierre-Andre de Chalendar spoke exclusively to CNBC-TV18 about how the expansion could potentially help Saint-Gobain export to faraway markets like the United States and Europe.
He also spoke the kind of opportunities the company sees in India, and whether the global economic situation is a cause for concern.
What does Saint-Gobain’s expansion of its World Glass Complex in Chennai mean for your India business?
We started with glass in India, in 1996. We started the first float-glass plant here, in 2000. Since then, we’ve had a fantastic expansion, and we’ve just launched our third float-glass line in this complex. This has been done to follow the market, and expand towards more value-added glass. We want to offer more solutions — and not just glass — for automotive and architectural applications.
So, which are the newer segments you are looking to target? Is it merely Automotive and Architectural Applications?
It’s both. But the Indian market for flat-glass is growing at 8 percent per year. So, just following that growth requires investments, and we have a significant share of the market. So, we will follow that growth in the automotive segment — as we have in our second plant, in Rajasthan — while this float-line plant is going to be mostly for architectural glass purposes.
Nearly 95 percent of all your products in India are made locally. So, that pretty much means you’re a ‘Make in India’ company. But you also do a fair bit of exports from this facility. So, what does this expansion plan now means, for your export base?
Globally, our products don’t travel very far. So, we produce for markets we’re in. So, we do products here, for India. But as our site becomes larger, it allows us to do a lot of complex products, make them value-added, and then they travel. So, we have a good export base for the Gulf, South East Asia, parts of Africa where we export from here. This facility, with three float lines, will be able to increase the bulk of value-added glass, and then increase exports.
So, do you hope to retain these export bases or are you looking to expand the number of markets you want to export to?
I think the most relevant geographies are the ones I just mentioned. But we can go further for specialty products, where the value of the product is such that additional transportation is less relevant. We could go to the US or Europe. But there’s a booming market in South East and booming projects in the Gulf. So, the Middle East and South East Asia will continue to remain main markets for India.
The Indian economy is poised to grow at 7.5 percent in FY20 and 7.7 percent in the next fiscal, according to the IMF. How do you plan to capitalise on these growth opportunities, especially given lower commodity prices in India at the moment?
If I look at the last 20 years, we’ve growth grown at a CAGR closer to 20 percent, than 8 percent. So, we are growing faster than the market. India also still has a low penetration rate for our solutions. Our solutions provide comfort and sustainability. If you take the consumption per head for glass in India, it is still much lower than countries like China — it is about 1:5 or 1:10. So, there’s (scope for) higher penetration going forward, and we hope to take advantage for that. That’s why our plan for the next ten years is to triple our sales.
While India is in a relatively good place in terms of growth, globally, markets are expected to grow at only about 3.5 percent, with Europe causing some concern on the growth projections front. Does this cause you worry?
We had a very good 2017 and 2018, where growth peaked. But I think we will continue to have growth this year. We keep having cycles in the market, and we are not at the peak of our present cycle. So, we will continue to have growth as far as Saint-Gobain is concerned. There are some geopolitical concerns, like the trade war between China and the US. But most of what we do is local, so we should be less affected than others.
There’s a fair bit of worry about Brexit, given the talk that the Theresa May government may end up with a ‘No deal’ Brexit, and that parliamentary intervention could well be a possibility. How worried are you about the uncertainty?
From a political standpoint — and although I respect the British vote — I think Brexit was a mistake. It’s going to be very difficult for the UK and it’s not good either for Europe. For Saint-Gobain, we are not as concerned because like I’ve said, a big part of what we do is done locally, in each country. But globally, I don’t think it’s a good situation and I hope the British find a way to settle from where they are today — which is a bit of a mess.