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 Unprofitable (negative) financial leverage - this type of leverage is opposed to the

first one. The funds costs are larger than earnings of the company. Negative financial
leverage can be called unfavourable.

A negative value means that a business is operating under its break-even point, i.e., it has

an operating loss. A positive ratio indicates that the level of business activity exceeds the
break-even point.

 Debt Restructuring - Conversion of Short Term Loans to Long Term Loans

After the successful rights issue of the company it is evident that the shareholders are still
confident about the company. So now at present the company should try to convert its short
term debts to long term debts to spread out its interest payment which in turn will improve its
cash flows without altering its overall loan obligations. The company has said to have reduced its
long term borrowings by the equity infusion through rights issue. The company should try to
now improve its credit ratings by obligating to immediate interest payments and hence should
come up with an FPO or OFS to get more capital through equity.

 Improve Working Capital Requirements

They need to maximize their asset utilization. Improve its annual receivables turnover and
industry turns. Optimize its operating cost and make efficient use of the capital in their hands.

 Optimize Manufacturing facilities

Effectively use all their machinery and equipment. They can decide to sell off the old machinery
which may not be now working at optimum levels and actually have higher cost to run and
maintain and resort to a certain level of outsourcing. In this way they can gain some capital and
also reduce its depreciation expenses. It has been mentioned in the case that the capacity
utilization of architectural and mirror segment was just 17% and 16% respectively. Immediate
changes should be imposed to resolve the utilization shortage in these segments. They can also
temporarily shut down its operations in segments that have a beaten down demand in the
market and focus on more efficiently manufacturing products like float glass which contributes
to a major chunk of its revenues.
 Hedge Foreign Exchange risk
It has been mentioned in the case that the company also suffered a lot due to the weakening of
the rupee as compared to other currencies. To further protect the company from such a risk
they should plan to hedge their foreign exchange risks by resorting to currency swaps and other
such instruments.

 Focus more on Exports

They can leverage the reputation and market presence of their promoter company and
maximize their exports. This not only gives them a chance to raise their revenues but also solves
their problem of currency rate fluctuations and helps them to cope up with their borrowings
which are in foreign currencies.

 Take advantage of diversification and vast product portfolio

They need to make use of the vast basket of products they manufacture to foray into other
sectors like pharmaceuticals and electrical equipment to boost its sales. The company has made
its presence majorly in passenger cars segment. Within the auto segment it should plan to make
use of its synergies and make products for buses and heavy vehicle too.