Analysis Asahi Glass

Analysis: Asahi India Glass Ltd
 Published: 20-Oct-22
Modified: 20-Oct-22
1. Asahi India Glass Ltd: Detailed Fundamental Analysis
2. Analysis Summary
The current section of the “Analysis” series covers Asahi India Glass Ltd, India’s leading
producer of automotive and float glass. The company is a part of the AGC Group, Japan,
which is one of the largest glass manufacturers in the world.
Please note that to benefit the maximum from this article; an investor should focus on the
process of analysis instead of looking for good or bad aspects of the company. She should
learn the interpretation of different types of data and transactions and pay attention to the
parts of annual reports etc. used to get the information. This will help her in improving her
stock analysis skills.
Asahi India Glass Ltd: Detailed Fundamental Analysis

Asahi India Glass Ltd publishes both standalone as well as consolidated financials because,
on March 31, 2022, it has three subsidiaries and four associate companies.
FY2022 annual report, page 114:
Investment in Subsidiaries:
 AIS Glass Solutions Limited (82.55% stake)

 GX Glass Sales & Services Limited India (93.48% stake)
 Integrated Glass Materials Limited India (100.00% stake)
Investment in Associates:
 AIS Distribution Services Limited India (49.98% stake)

 AIS Adhesives Limited India (47.83% stake)
 Timex Group Precision Engineering Limited India (30.00% stake)
 Fourvolt Solar Private Limited (40.00% stake)
We believe that while analysing any company, an investor should always look at the company
as a whole and focus on financials, which represent the business picture of the entire
company including its subsidiaries, joint ventures, associates etc. The consolidated financials
of a company present such a picture.
Further advised reading: Standalone vs Consolidated Financials: A Complete Guide

Therefore, in the case of Asahi India Glass Ltd, during the last 10 years (FY2013-FY2022),
we have analysed consolidated financials.
With this background, let us analyse the financial performance of Asahi India Glass Ltd.
Financial and Business Analysis of Asahi India Glass Ltd:
Sales of Asahi India Glass Ltd have grown at a pace of 6% year on year from ₹1,944 cr in
FY2013 to ₹3,170 cr in FY2022. Further, sales have increased to ₹3,492 cr in the last 12
months ended June 2022 i.e. July 2021-June 2022). Asahi India Glass Ltd has seen volatility
in its business performance in the last 10 years because its sales have seen multiple periods
of decline.
In FY2015, sales of Asahi India Glass Ltd declined to ₹2,099 cr from ₹2,217 cr in FY2014.
Thereafter, during FY2019-FY2021, sales of the company declined sharply from ₹2,913 cr in
FY2019 to ₹2,421 cr in FY2021.
On an overall basis, the operating profit margin (OPM) of the company improved from 9% in
FY2013 to 24% in FY2022 and further to 25% in the last 12 months ended June 2022 (July
2021 – June 2022). During this period, OPM declined once in FY2020 from 18% in FY2019 to
16% in FY2020.
The net profit margin (NPM) of Asahi India Glass Ltd had seen a remarkable change during
the last 10 years (FY2013-FY2022). During FY2013 and FY2014, Asahi India Glass Ltd faced
large losses. However, from FY2015 onwards, its performance improved and in FY2022, it
reported an NPM of 11%, which further improved to 12% in the last 12 months ended June
2022 (July 2021 – June 2022).
To understand the reasons for the financial performance of Asahi India Glass Ltd, an investor
needs to read the publicly available documents of the company like its annual reports from
FY1997 onwards, letter of offer for its rights issue in 2013, credit rating reports, corporate
announcements as well as other public documents. Then she would understand the factors
leading to an overall increase in its sales and profit margins over the years with fluctuations in
between.
In addition, she should also read the following article, which explains the key factors
influencing the business of auto ancillary companies like Asahi India Glass Ltd: How to do
Business Analysis of Auto Ancillary Companies
After going through the above-mentioned article and the company’s documents, an investor
notices the following key factors, which influenced the business of Asahi India Glass Ltd,
which she needs to focus on before making any predictions about the performance of the
company.
1) Cyclical business of Asahi India Glass Ltd:
Asahi India Glass Ltd sells its glass products mainly to customers in two industries:
automobiles and real estate. Both these industries go through alternate periods of boom and
bust linked to general economic cycles. As a result, Asahi India Glass Ltd faces cyclicity in its
business performance.
Credit rating report by CRISIL, February 2022, page 1:

These strengths are partially offset by susceptibility to inherent cyclicality in the end-user
industry
Asahi India Glass Ltd faced the impact of cyclicity in its customers’ industries in FY2020 when
a slowdown in the automobile and real estate industries led to a decline in its sales.
Credit rating report by CARE, September 2020, page 3:
The primary reason for decline in sales on y-o-y basis is the overall slowdown in the
automotive and real estate sectors, aggravated by the breakout of COVID-19 towards the end
of FY20.
Even historically, the business of Asahi India Glass Ltd was impacted significantly whenever
the automobile industry faced challenges. In 1998, when the auto industry faced tough times,
then the net profits of Asahi India Glass Ltd declined by more than 50%.
the automobile industry has been suffering from overcapacity, fragmentation, low volumes
and relentless price cutting. The impact of this slump on the component industry has been
direct and immediate.
In FY2004-FY2005, when the economy recovered from the dot-com bubble-induced
recession, then both the automobile and real estate sector started performing well. As a
result, Asahi India Glass Ltd got so much demand for its products that despite operating at full
capacity utilization, it could not fulfil all the orders.
In laminated windshields, we are operating at a nearly 100 per cent capacity utilisation…In
the float glass segment, we are currently operating at 108 per cent of rated capacity.
increase in the after-market sale did not keep pace with increase in OE sales in 2004-05
largely on account of capacity shortfall, which impacted after-market sales directly
Because of excessive demand, Asahi India Glass Ltd increased its capacity significantly by
starting a large integrated plant at Roorkee. However, when the plant was completed then the
economic cycle turned into a downturn. As a result, the company reported losses in FY2009.
The timing of depletion of the external environment could not have been worse. Post
completion of the major phase of expansion program in 2007-08 – the largest ever by AIS –
your Company had positioned itself to cater to the potential explosion in demand in the
expanding automotive and construction sectors, the global recession stepped in
During this downturn, two float glass manufacturers in India shut down their plants.
In the float glass business, with the shut down of two glass plants, namely, Triveni’s Chinese
float plant (250 TPD) and HSG’s sheet glass plant (180 TPD), which squeezed supplies in the
market
When the economy recovered after the global recession, in FY2011, Asahi India Glass Ltd
again started operating at full capacity. If fact, it realized that it is getting demand from all
across India whereas its manufacturing capacity is concentrated in North India and it had to
ship its products over long distances.
FY2011 annual report, pages 5, 21:
Our auto glass plants operated at peak capacities
The capacity constraint and mismatch in locational demand and supply resulted in the SBU
incurring heavy costs on premium freights to ensure that the goods reaches customers on
time. Besides this, the SBU also lost on high-margin sales in the burgeoning aftermarket.
During this period, Asahi India Glass Ltd announced capital expenditure to increase
production capacities. However, the demand euphoria of FY2011 was short-lived and in the
following downturn, Asahi India Glass Ltd reported losses in three subsequent years, FY2012,
FY2013 and FY2014.
our growth is primarily driven by growth of automotive and construction sectors. Both these
sectors depend a lot on borrowings and bore the brunt of higher interest rates leading to
slowdown in growth of demand
The economic downturn leading to a decrease in demand was so severe that Asahi India
Glass Ltd faced severe challenges in making repayments of debt raised by it to complete
capacity expansions. During this time, a few glass manufacturers went out of business.
This is unsustainable as is evident from some of the market developments – one new player
has sold out, another is in a corporate debt restructuring and a third has got fresh equity via a
strategic international partner. Even we had to inject fresh capital through our Rights Issue.
The downturn of FY2012-FY2014 was a very severe phase for Asahi India Glass Ltd. It was
carrying a large debt and was not generating sufficient cash flow to repay it. It reported large
losses during FY2012-FY2014 and had to raise money via the rights issue to survive.

Today, the challenge is of a higher magnitude with severe liquidity crunch arising out
of slowdown in demand at a time when your Company has undertaken a massive debt funded
expansion.
Therefore, while in an overview of the financial performance of the last 10 years (FY2013-
FY2022), it may seem that the company’s business has grown consistently with an
improvement in profit margins; however, an investor should never forget that the business of
Asahi India Glass Ltd is highly dependent on two of the most cyclical industries, automobiles
and real estate. In the past, downturns in the auto and real estate industry have significantly
affected the performance of Asahi India Glass Ltd. These factors are not expected to go away
and may affect its performance in the future as well.
Therefore, an investor should always keep in her mind the susceptibility of Asahi India Glass
Ltd.’s performance to the cyclical demand from the automobile and real estate sectors.
Advised reading: How to do Business Analysis of a Company
2) Intense competition in the glass manufacturing industry:
Manufacturing both auto-glass and architectural float glass is a very competitive industry
where very large global players dominate the market. In both segments, float glass as well as
automotive glass, 3-4 players control almost 65%-70% of the global market.
Letter of offer, August 2013, page 39:
The global glass industry is quite concentrated, with four companies – Asahi Glass Co.
Limited, Japan, NSG/Pilkington, Saint-Gobain and Guardian, producing 67% of the total high
quality float glass in the world.
For automotive glazing, there are only three major players – Asahi Glass Co. Limited, Japan,
NSG/ Pilkington, and Saint-Gobain – who along with their respective associates meet nearly
75% of the world’s Original Equipment (OE) glazing requirements.
All these players are very large in business size and financial strength. As a result, they are
able to sustain downturns better than smaller players and even buy out weaker players that
face problems. As a result, the glass manufacturing industry continues to be
consolidated/concentrated.
In the past, the Indian market as well has witnessed consolidation where global players have
bought out smaller players.
It is also witnessing some consolidation. For example, in May 2011, Saint Gobain Glass India
limited acquired the float glass plant of Sezal Glass Limited.
Further, the industry recently witnessed some consolidation with 50% stake of HNG Float
Glass being taken over by a Turkish Company – Trakya
Large global glass players compete intensively for acquiring market share and as a result,
price competition in the industry is high. Asahi India Glass Ltd. highlighted the state of intense
competition to investors in the letter of offer in August 2013.
We operate in a highly competitive industry, and we expect that competition will continue to
increase. The glass business, especially the architectural glass segment, is facing
increased competition from domestic players and cheaper imports.
In addition, due to the cyclical nature of demand, glass manufacturers witness frequent
periods of supply-demand mismatch. Whenever the demand goes down in any country, then
it starts aggressively exporting its glass products to other countries.
Exporting glass even at cheaper prices becomes necessary for manufacturers with excess
supply capacity because glass production is a continuous process. Glass is manufactured in
a furnace at a very high temperature. It takes a lot of time for the furnace to reach such high
temperatures and then stabilize its production at an optimal level.
Therefore, once a glass furnace has started functioning then it cannot be stopped at a short
notice if demand declines. Stopping and starting the glass furnace is both costly and
uneconomical. Therefore, the glass manufacturer has to continue to produce glass even if the
demand goes down in the country. In such a situation, countries with an excess supply
aggressively export glass to other countries even at a very low price, even if it is lower than
their cost of production, which is called “dumping”.
This creates a big problem of competition from cheaper imports for glass producers in India
like Asahi India Glass Ltd. This is because glass production is a continuous process and
Indian players have to continue glass production even if the demand is low or the prices are
uneconomical.
Credit rating report, CARE, September 2020, page 5:
Since float glass production is a continuous process, and therefore, the Domestic
Industry has no choice but to continuously produce the float glass despite poor off-take in the
market adding to their financial stress.
Over the years, Asahi India Glass Ltd has faced intense competition from cheaper imports
from glass surplus countries, which has significantly affected its performance. In the past,
countries like China, Indonesia, UAE, Malaysia, and Pakistan have exported glass to India at
very cheap prices.
decline in domestic prices mainly due to dumping of float glass, especially from China
In FY2007, excessive imports of float glass at very cheap prices led to a sharp decline of
about 30% in prices, which significantly affected the business of Asahi India Glass Ltd.
The profitability of AIS Float Glass was adversely impacted by a sharp decline in prices of
float glass in the domestic market from a peak of Rs. 56/mm/m to Rs. 50/mm/m by March
2007. The prices declined further to Rs. 40/mm/m in the subsequent months. The price
decline was largely on account of a sudden influx of imports.
Asahi India Glass Ltd intimated to its shareholders in the FY2008 annual report that Indian
glass manufacturers are not able to match the prices offered by Chinese companies. This, in
turn, has hurt the business performance of the company. Asahi India Glass Ltd also
mentioned that the threat of competition from cheaper imports from China is so much that it
threatens the viability of any new glass manufacturer looking to enter the Indian market.
Thus, the prices at which Chinese glass is imported are difficult to match by Indian
manufacturers.
Chinese imports may further threaten the viability of new entrants

Asahi India Glass Ltd faced one of the toughest periods of its operating history and reported
large losses for three consecutive years, FY2012-FY2014, defaulted to lenders and had to
raise money by rights issue to survive. During this phase, in FY2013, Asahi India Glass Ltd
highlighted to its investors that due to rising energy prices, Indian players have become
uncompetitive against cheaper imports from countries with low energy prices, which led to
losses for the company.
The problem is almost 15,000 metric tons per month of imports coming in from energy surplus
countries who are selling gas at less than 5% of what we pay here in India. . Naturally,
the domestic industry becomes uncompetitive.
prices were under severe pressure due to cheap imports being dumped into India, notably
from Saudi Arabia, UAE & Pakistan. Consequently, the SBU incurred losses.
Once again in FY2020, when the automobile and real estate industries were facing a
slowdown, low-cost imported glass, this time from Malaysia, started affecting the business of
Asahi India Glass Ltd.
Further domestic float glass industry was grappling with the domination of low cost imports
from Malaysia as a result companies had to realign their prices or were losing their share to
the imports.
Advised Reading: Credit Rating Reports: A Complete Guide for Stock Investors
Therefore, an investor should keep in her mind that due to the continuous nature of glass
production, its players suffer significantly when they face low demand and market prices.
Glass manufacturers have to continue producing glass. If demand is low in their own country,
then they have to export glass even if at a price lower than the cost of production. Similarly,
Indian players like Asahi India Glass Ltd, have to continue to produce glass even if domestic
prices are uneconomical.
An investor should always keep this position of helplessness of glass manufacturers in

controlling production due to the continuous nature of glass furnaces while she assesses any
glass player.
3) Very low pricing power:
Many factors take away the pricing power from the hands of glass manufacturers. Their
customers are large automobile and real estate developers who command greater bargaining
power due to their large order sizes. These customers can easily switch their glass suppliers
whereas a glass manufacturer has to be on a continuous lookout for customers due to the
uninterrupted nature of glass production. Intense competition from low-priced imports further
reduces the pricing power of Indian glass manufacturers.
Over the years, there have been numerous instances when automobile players forced Asahi
India Glass Ltd to reduce its prices.
In 1999, Asahi India Glass Ltd had to reduce prices due to strong pressure from its auto
customers, which led to a decline in the profits for company.
This put a severe strain on the car manufacturers in the country, which was passed on to
vendors such as Asahi India, by way of demands for price reductions. In this difficult
period, AIS reduced prices, in an effort to help shore up the industry. This allied with
increasing costs…resulted in a squeeze on profitability.
In FY2001, once again, the profit margins of Asahi India Glass Ltd declined as it reported
higher sales over FY2000; however, the net profit declined over FY2000. The company cited
the intense pressure from automobile customers as one of the reasons. Due to its low pricing
power, the company could not increase prices to its customers even if its costs have
increased significantly.
AIS has in no case found it necessary to approach its customers for compensation for cost
increases, even when these cost increases have been totally beyond our control.
The pressure, from automotive companies, on pricing is getting fiercer by the day.
In FY2006, Asahi India Glass Ltd once again highlighted to investors, the difficulties it faces in
getting a price hike from customers despite increasing raw material costs. The costs were
increasing and product prices were stagnant.
current situation is one where we face a squeeze – with product prices at best stagnant, with
a tendency to decline, and input costs rising substantially.
In FY2008, the company’s situation worsened because, in addition to increasing input costs
and pricing pressure from customers, cheaper imports from China put further pressure on the
profit margins.
The year witnessed unprecedented increase in the costs of key inputs – fuel, soda ash and
PVB, which severely impacted operating margins. Input costs pressures coupled
with dumping of cheap Chinese float glass into the country multiplied the stern effect on AIS’s
operations.
In the next year, FY2009, Asahi India Glass Ltd reported losses, because, despite a
significant increase in manufacturing costs, it could not get a price hike from its customers.
Once again, in FY2012, the company faced the tough situation of increasing input costs when
it could not get sufficient price hikes from its customers and it reported losses.
Cost pressures emanated primarily from increasing cost of inputs including raw materials,
power & fuel and sharp depreciation of Indian Rupee against US Dollar. Energy costs have
almost doubled during last year.
the increase in cost is so vast that factors like scale, technology and efficiencies cannot
offset the incremental costs and prices have to increase.
In FY2013, when the company reported its second year’s losses in succession, then its
desperation was clearly visible as it explained its inability to get a price hike despite a
significant rise in inputs costs due to very low pricing power resulting from intense competition
from within India and cheaper imports.

So, in 2012-13, the glass industry got squeezed both ways. On the one hand, competition has
intensified further for market share in a slowing market; on the other, inexorably soaring input
cost inflation further squeezed margins. Additionally, increasing imports from energy
surplus countries capped prices of finished goods
Asahi India Glass Ltd highlighted that despite an increase in input costs of more than 50%,
due to intense competition, the prices of glass products could increase only by about 10%. As
a result, it could not cover its costs and reported losses in FY2013.
Let’s look at clear glass. Cost have risen by more than 50% in the last three years due to
increases in input prices for soda ash, sand, energy, packing material, freight and interest
rates. Price, however has, at best, increased by only 10%…Yet, the industry is not being able
to improve its pricing power.
The credit rating agency, CARE also highlighted the low pricing power of Asahi India Glass
Ltd in its report for the company in August 2012:
in view of limited pricing flexibility given surplus capacities in the float glass segment
In FY2014, when Asahi India Glass Ltd reported losses, then once again, it highlighted that
due to intense competition from domestic suppliers and cheaper imports, the Indian glass
manufacturers do not have pricing power. Despite a 70% increase in costs in the last 3 years,
the glass product prices did not increase. Such a situation resulted from a higher bargaining
power in the hands of the customers and intense competition among glass manufacturers.
FY2014 annual report, page 9, 20:
the cost of making ordinary float glass, went up 70% in 3 years, while prices did not budge.
Prices did not move because new entrants jumped into the market, and although took
hideous losses, did create a supply /demand imbalance…new plants in the Mideast…dumped
material into India and other countries.
The float glass industry in India has seen some large investments in the last few years
to create new capacities. One of these came on stream in FY14. With increased
supply coming into the market, competition is getting intense
To counter the threat from cheaper imports, which at times are below the cost of production of
glass, the govt. of India imposes anti-dumping and safeguarding duties on imports of glass.
In FY2003, India imposed anti-dumping duty on the import of glass from China and Indonesia.
However, the pressure eased with the imposition of provisional anti-dumping duties on
imports of float glass from China and Indonesia.
India continued its anti-dumping duty on the import of float glass from China in 2009 for a
further period of 5 years.
Government of India has recommended the continued imposition of anti-dumping duty on

float glass from China for a further period of five years starting from January, 2009.
In FY2020, India imposed an anti-dumping duty on the import of float glass from Malaysia.
FY2020 annual report, page 21
India has recently recommended a “reference price” anti-dumping duty on dumped imports of
clear float glass from Malaysia.
Anti-dumping duty on imports limits the competition in the industry and allows domestic glass
producers to sell products at profitable prices. The recent increase in the operating profit
margin of Asahi India Glass Ltd from 16% in FY2019 to 25% in the last 12 months ending
June 2022 (July 2021-June 2022) is due to reduced competition in the domestic market due
to a decline in imports from Malaysia (due to anti-dumping duty) and China (due to anti-
emission policies).
Credit rating report, CARE, August 2022, page 1:
operating margin of float glass segment has improved over the last two years, as float glass
has benefitted from the anti-dumping duty levied on the glass imported from Malaysia in
December 2020 (for a period of five years) along with reduced imports from China on account
of the decarbonisation drive taken by the country.
China, which has a very large manufacturing capacity of float glass i.e. about 250 plants vis-
a-vis 11 plants in India, has implemented tough environmental regulations, which has led to
the closure of more than 50 Chinese plants. As a result, imports of float glass have declined,
leading to improvement in prices and profit margins of Indian float glass players like Asahi
India Glass Ltd.
With 50% of the world’s capacity, 250 float plants to India’s 11, a 50+ old plants shutdown in
China has reduced supply considerably. Demand, however, has grown in China, creating
supply shortages and higher prices across the world
Advised Reading: How to study the Annual Report of a Company
However, before an investor starts to project its current profit margins into the future, she
should note that restrictive measures like anti-dumping duty work only for a little time.
Thereafter, the exporters find ways around the duties and the imports resume.
During FY2007-FY2008, when India had put anti-dumping duties on glass imports from
China, still, China was able to sell its glass products in India at a very low price, which
seemed due to under-invoicing of imports.
…seeking extended and wider application of antidumping duties and curbing the menace of
under-invoiced imports.
In spite of anti-dumping duties, Chinese float glass manufacturers sell their produce at very
low prices
Even after a decade, in FY2016-FY2018, glass manufacturers from other countries were able
to find ways to circumvent anti-dumping duties and sell their cheap glass products in India.
relentless dumping of glass continued through the year from some countries inspite of anti-
dumping duties being in place.
Even more concerning is the fact that imports from some countries blatantly circumvented the
existing duties in place and the legal framework.
Therefore, an investor should always be aware of the fact that if manufacturers of foreign
countries are determined to dump their glass products at a very low price in India, then
measures like anti-dumping duties protect domestic manufacturers only for a short period.
Soon, the foreign manufacturers find out loopholes in the regulations and continue to supply
cheaper glass products to India, which increases the intense competition and reduces the
profit margin of domestic players.
Therefore, an investor should be cautious before she projects the current elevated profit
margins of Asahi India Glass Ltd into the future. The current margins are supported by anti-
dumping duties on imports from Malaysia and due to a reduction in imports from China. Over
time, manufacturers in these countries will find ways to export their glass products to India,
which will again increase the pricing pressure on Indian glass manufacturers.
4) Capital-intensive business of Asahi India Glass Ltd
Glass manufacturing is a highly capital-intensive business, which requires significant

investments in installing the manufacturing plant as well as in the working capital. Due to a
large amount of investment in creating a glass manufacturing plant, it takes a long time for the
plant to recover its investment leading to a long gestation period.
Glass is a capital intensive business, and projects – especially for float glass – have a long
gestation period.
Large investment requirements along with a long gestation period act as an entry barrier for
new players in the glass manufacturing business.
Being a capital intensive, technology driven, high gestation industry, it is not easy for new
entrant to compete with integrated players like AIS. Chinese imports may further threaten the
viability of new entrants
As per Asahi India Glass Ltd, a large capital requirement in the business puts Indian glass
manufacturers at a disadvantage over foreign manufacturers because, in India, the cost of
capital is very high when compared to many foreign countries.
Glass manufacturing is also very capital intensive and AIS like many other players in the
industry believing in the potential for glass in a growing India, has made large investments in
creating appropriate capacities. These investments using domestic capital, which is priced
significantly higher than global capital have put severe financing cost pressures in the initial
stage of production ramp up
Once a company starts construction of a glass manufacturing plant, then it takes a significant
time for the plant to complete and be ready for commercial production. During this period,
usually, the economic cycle takes a turn, which creates problems for the glass manufacturers
who have recently completed an expansion project.
During the economic upcycle when demand is more than the supply of glass, many glass
manufacturers announce the capacity expansion. However, when the expanded capacity gets
ready, the economic cycle enters into a downturn and the manufacturer is left holding a large
debt-funded project when there is a very low demand for glass.
Asahi India Glass Ltd faced such difficulties twice in the past when it completed major capital
expenditures. First, when it completed its large integrated glass-manufacturing complex in
Roorkee and the global recession hit the company and it reported losses in FY2009.
The timing of depletion of the external environment could not have been worse. Post
completion of the major phase of expansion program in 2007-08 – the largest ever by AIS –
your Company had positioned itself to cater to the potential explosion in demand in the
expanding automotive and construction sectors, the global recession stepped in
The second time, in 2020, when Asahi India Glass Ltd completed phase 1 of its large
expansion plant in Gujarat for Suzuki, then the automobile industry went into a downturn. As a
result, the financial performance of the company suffered.
The rating is further constrained on account of…past debt-funded capital

expenditure undertaken by the company which has also resulted in the moderation of its
capital structure without any incremental contribution to AIS’ total operating income and delay
in the commercial start date of its recently completed Gujarat Auto glass plant.
Such phases of demand-supply mismatch increase the impact of economic cycles on glass
manufacturers and at times lead to bankruptcy and closure of business as well.
In FY2012, the financial stress in the company reached such a level that it could not repay its
lenders. It withdrew money from its working capital loans to repay its long-term loans. It could
not repay its suppliers on time.
Further, in the recent past our Company has been unable to generate sufficient internal
accruals to meet repayments of certain long term loans. Part of such repayment was funded
from our unused working capital facilities and partly by delaying payment to regular trade
creditors…Further, such use of working capital facility in breach of the terms of the financial
arrangements may result in adverse financial implications.
In FY2012 and FY2014, the management of the company clearly pointed out to the investor
that the debt of the company has reached unsustainable levels.
I am concerned with the ₹620 short-term borrowings which are a result of combination of
higher inventory and under recovery vis-à-vis our budget…We also realise that some amount
of equity capital needs to be injected
The quantum of debt on our books, especially short term debt, is a cause of concern and debt
servicing has been challenging.
The main aim of its rights issue (₹250 cr) in 2013 was to get money for repaying loans to
lenders (₹200 cr) (Source: Letter of offer, August 2013, page 83).
During the Covid pandemic, when most businesses suffered, debt-free companies and those
with a lower debt could survive the lockdowns well without much support from promoters or
Govt. However, those companies, which had a large amount of debt had to take protection
under moratoriums provided by the Reserve Bank of India (RBI). Asahi India Glass Ltd was
one such company, which found it difficult to make its debt payments and had to take a
moratorium during April-August 2020.
Company availed moratorium on payment of instalments/interest fallen due, from 1st April,
2020 to 31st August, 2020…Due to availment of said moratorium, Company had deferred
term loan repayments by ₹ 6853 lakhs and interest outgo by ₹ 2375 lakhs in FY 2020-21
The necessity of raising money from equity shareholders and taking a moratorium to survive
and repay lenders by a player having a strong global brand and more than 75% market share
in Indian auto OEMs shows the vulnerability of the business model of glass manufacturers. It
looks like a very tough business model without any pricing power; however, requiring a large
amount of capital.
An investor should always keep this aspect of the glass manufacturing business while she
makes any future prediction.
Further advised reading: Asset Turnover Ratio: A Complete Guide for Investors
5) Highly energy-consuming business of glass manufacturing:
Glass production is a highly energy-intensive business and requires the burning of a large
amount of fuel in the furnace. As a result, fuel prices (oil, natural gas etc.) have a significant
influence on the financial performance of Asahi India Glass Ltd.
Fuel prices primarily depend on crude oil prices, which are highly volatile and cyclical in
nature. The below chart of historical crude oil price movements from Macrotrends shows a
high level of volatility during the period 2000 to 2022.
As a result, Asahi India Glass Ltd keeps on facing alternate periods of high and low fuel
prices. During periods of high energy prices, Asahi India Glass Ltd finds it difficult to report
profits.
During FY2012-FY2014, when Asahi India Glass Ltd reported losses for three consecutive
years, then persistent high-energy prices were a key reason for its high expenses.
unprecedented high costs, primarily energy costs, which gravely impacted our last year’s
profitability
Both soda ash and sand prices remained at high levels and this energy-dependent industry
continued to grapple with the impact of high oil, gas and energy prices.
During the previous phase of sharply increasing crude oil prices, FY2006-FY2009, Asahi India
Glass Ltd faced many challenges in its operations. In FY2006, the company had to bear a
large impact on its profitability.

Float glass manufacturing being highly energy intensive, phenomenal rise in oil prices is a
serious cause of concern.
rise in fuel prices over the last one year itself had an adverse impact of over Rs. 250 million
In FY2008, oil prices increased sharply and Asahi India Glass Ltd saw its fuel prices increase
by more than 40%.
Manufacturing float glass is energy intensive and furnace oil or low sulphur heavy stock
(LSHS) oil is used to run the furnaces at AIS’s manufacturing plants…. AIS had to face a 41%
increase in LSHS prices during the year.
Due to very low pricing power, the company could not pass on the impact of increasing fuel
costs to its customers and had to take a hit on its profit margins.
rise in input costs of AIS Float Glass were largely absorbed internally in 2007-08
Due to low pricing power, in FY2009, when crude oil prices touched an all-time high
exceeding $140 per barrel, Asahi India Glass Ltd reported losses.
A large part of this was on account of increase in material and manufacturing costs (28.9%
increase over last year) and by power and fuel expenses (up by 17.5% over 2007-08)
During phases of declining crude oil prices, Asahi India Glass Ltd has witnessed its profit
margins increase. This has been one of the major reasons for the increase in the operating
profit margins (OPM) of the company during FY2014-FY2016.
Operating profit (EBITDA before forex losses, extraordinary & exceptional items) increased
25.95%…as the Company benefitted from decline in oil prices.
Due to a sharp decline in crude oil prices, power & fuel costs as a percentage of overall costs
declined from a high of 25% in FY2014 to 14% in FY2017.
The energy cost declined to 14% of cost of sales in FY17 as against 15% in FY16, 20% in
FY15 and 25% in FY14.
The high impact of rising fuel costs has forced Asahi India Glass Ltd to implement numerous
strategies to control its energy costs.
In FY2009, it thought of hedging the prices of its oil purchases.
AIS is putting into place permissions to participate in oil hedging transactions,

Previously, in the early 2000s, the company used to run its only manufacturing plant at Bawal,
Rewari on diesel generators. During FY2001 when diesel prices increased sharply, then the
company decided to shift to generators able to use cheaper fuels like heavy furnace oil
(HFO).
AIS presently generates its entire requirement of power, using generating sets that use High
Speed Diesel (HSD) as a fuel. With continual increases in prices of HSD, ( the cost of HSD
has risen a staggering 70% since October 1999) the growing price differential between HSD
and alternate fuels like, Heavy Furnace Oil (HFO) makes it economically attractive for us to
procure and instal generating sets using HFO.
By FY2003, the company installed generators using furnace oil and as a result, it could save
on power costs.
engine of 4,6 MW capacity (slow speed) was commissioned on heavy fuel (HFO) in March,
2003. This has resulted in a saving of 0,90 paise / unit in power generation cost over light
diesel oil,
When crude oil prices increased to a lifetime high at $147 per barrel in 2009, then Asahi India
Glass Ltd modify its furnaces to use natural gas.
Taloja plant examined ways and means of substituting furnace oil with natural gas…Taloja
has now stabilised its manufacturing process using natural gas for fuel – and AIS has reduced
power and fuel costs by 7.6% during the year.
In FY2012, the company decided to shift its Roorkee plant also to natural gas.
We are on the verge of converting our Roorkee float operations to natural gas.
Currently, almost all the plants of Asahi India Glass Ltd are versatile to use either furnace oil
or natural gas as a fuel depending upon the price differential between the two.
company is now in a position to change the fuel mix as per the fuel’s respective prevailing
prices to enable optimum savings in the fuel cost after upgrading its facilities to allow use of
furnace oil and/or natural gas as fuel.
However, an investor should keep in her mind that glass manufacturing is highly energy
intensive. In such a business, when crude oil prices increase sharply, then the natural gas
prices also increase. As a result, during very high fuel prices, even the use of natural gas is
not able to protect the profit margins of the company. Asahi India Glass Ltd faced this
situation in FY2013 when the company reported large losses.
FY2013 annual report, pages 4-5:
Although we have converted both our float glass plants to natural gas, our energy cost still
remains high due to the recent increase in prices of natural gas.
Therefore, during times of increasing fuel prices, an investor may expect the profit margins of
the company to go down.
Advised reading: How to do Financial Analysis of a Company
6) Exposure to foreign exchange fluctuations:
The business of Asahi India Glass Ltd is highly exposed to fluctuations in the value of the
Indian Rupee (INR) against foreign currencies. The main reason for it is the high proportion of
raw material purchases that Asahi India Glass Ltd makes from overseas entities of AGC
group, Japan.
AIS is exposed to forex fluctuation risk on account of imports forming about 69% of total raw
material cost and the foreign currency term loans
Asahi India Glass Ltd also raises funds in foreign currency from either its parent entity, AGC
group, Japan or from overseas lenders. In the past, Asahi India Glass Ltd did not use hedging
for controlling foreign exchange (forex) risk as mentioned in the letter of offer.
Since we do not hedge against currency rate fluctuations on long-term basis in respect of our
business transactions including purchase contracts and foreign currency loans, this exposes
us to exchange rate movements which may have a material and adverse effect on our
operating results
Due to the absence of hedging against forex movements, the company faced large losses
due to currency movements in the past. In FY2009, a sharp depreciation of INR against the
US Dollar leading to a forex loss of ₹38.3 cr was a key reason for its overall losses.
30% depreciation of Indian rupee against US Dollar…Company reported losses of Rs. 3,833
lakhs on account of foreign exchange fluctuation in 2008-09
In FY2012, the depreciation of INR contributed to the losses of the company.
gains made on revenue front, however, were set-off by unprecedented increase in input cost
owing to the rising prices and depreciating Rupee. Loss stood at ₹65 crores compared to
profit of ₹17 crores in the previous year.
In FY2014, the company lost about ₹38 cr on account of forex movements (FY2014 annual
report, page 86).
In FY2016, it lost about ₹23 cr due to forex movements (FY2016 annual report, page 120).
In FY2019, the company lost ₹13.5 cr due to foreign exchange movements (FY2019 annual
report, page 152).
In FY2020, the company lost ₹18.6 cr due to forex movements (FY2020 annual report, page
149).
An investor would notice that since FY2014, the business of the company has grown
significantly and the foreign exchange losses are relatively lower than in FY2014. This seems
because Asahi India Glass Ltd has taken two steps to reduce its foreign exchange exposure.
First, it has started hedging its foreign currency loans by entering into interest-rate swap
transactions.
foreign currency loan of the company is fully hedged (company has entered into CIRS
(Currency Interest Rate Swap) against any rupee vs dollar movement in the future.
Second, it has attempted to do backward integration by producing raw automotive glass in its
Taloja plant, which reduces its import dependence.
the capex done by the company for cold repair of its float glass manufacturing facility at Taloja
with upgrading its capability to manufacture auto glass, which will reduce the imports of the
company
Going ahead, an investor needs to pay continuous attention to the foreign exchange exposure
of Asahi India Glass Ltd. This is because, due to high import dependence, forex movement
has the potential to significantly affect the financial performance of the company.
The tax payout ratio of Asahi India Glass Ltd has been in line with the standard corporate tax
rate prevalent in India. The company has decided to continue with the old tax regime and has
postponed shifting to a new lower tax regimen as it has unexpired MAT (minimum alternate
tax) credits, which it intends to use before shifting to the new tax regimen.
decided to continue with the existing tax structure until utilization of accumulated Minimum
Alternate Tax (MAT) credit.
Nevertheless, the one-time remeasurement of deferred taxes in line with the changed tax
rates led to a lower tax rate in FY2020.
Company has evaluated the outstanding deferred tax liability, and written back an amount to
the extent of ₹ 4190 lakhs to the Statement of Profit and Loss. This is arising from
remeasurement of deferred tax liability i.e. expected to reverse in future when the Company
would migrate to new tax regime.
Operating Efficiency Analysis of Asahi India Glass Ltd:
a) Net fixed asset turnover (NFAT) of Asahi India Glass Ltd:
Over the years, the NFAT of the company has declined from 1.8 in FY2014 to 1.4 in FY2021.
The NFAT touched its lowest level of 1.1 in FY2021.
The decline in NFAT primarily seems due to aggressive capacity expansions done by the
company to increase its production capacities in the last decade, which have not yet been
fully utilized.
Since FY2014, Asahi India Glass Ltd has invested more than ₹1,800 cr in capital expenditure
and it has plans to invest an additional amount of ₹1,700 cr to ₹1,900 cr in the next 3 years.
A highly capital-intensive business model has led to a low NFAT of less than 2 for Asahi India
Glass Ltd and successive capital expenditures have led to a steady decline in its NFAT level
over the years.
Going ahead, an investor should keep a close watch on the NFAT of the company to assess
whether it is able to use its newly created manufacturing capacity optimally.
Further advised reading: Asset Turnover Ratio: A Complete Guide for Investors
b) Inventory turnover ratio (ITR) of Asahi India Glass Ltd:
In the past (FY2014-FY2022), the inventory turnover ratio (ITR) of the company has been
stable at 4.6 indicating that the company has maintained the efficiency of its inventory
utilization.
During FY2020, the ITR witnessed a sudden decline to 3.7 because, during the lockdown in
March 2020, the company was stuck with a high inventory. March usually is the month with
the highest sales for Asahi India Glass Ltd and it was prepared with a high inventory to
support the expected high demand. However, due to Covid related lockdown, in March 2020,
the sales did not materialize and the company was stuck with a large amount of inventory.
March is the highest sales month historically…The sudden stop in March caught us on both
ends : diminished sales and high inventory.
Nevertheless, as the business has started returning to normalcy after a decline in the Covid
pandemic, its ITR has improved to 4.6 in FY2022.
Going ahead, an investor should keep a close watch on the ITR of the company to assess
whether it is using its inventory efficiently.
Further advised reading: Inventory Turnover Ratio: A Complete Guide
c) Analysis of receivables days of Asahi India Glass Ltd:
Over the years, the receivables days of Asahi India Glass Ltd have improved from 53 days in
FY2014 to 30 days in FY2022. Better performance in receivables collection seems due to
financially strong auto OEM customers that make payments on time to their vendors.
While comparing trade receivables in the standalone and consolidated financials of Asahi
India Glass Ltd, an investor notices that on the consolidated level, the receivables are less
whereas, on the standalone level, the receivables are more.
It indicates that third-party customers are making payments to the child entities on time;
however, the subsidiaries/child entities are keeping the money with themselves and delaying
payments to the parent/standalone Asahi India Glass Ltd.
Moreover, the amount of receivables withheld by subsidiaries/child entities is increasing every

year. In FY2022, the child entities have withheld about ₹134 cr of receivables.
An investor may contact the company to know the reason for this withholding of money by the
child entities of Asahi India Glass Ltd about whether it is due to some conditions put by the
lenders who have given loans to the child entities.
Going ahead, an investor should monitor the trend of receivables days of Asahi India Glass
Ltd in both the standalone as well as consolidated financials to assess whether it is able to
collect its receivables on time and keep its working capital position under control.
Further advised reading: Standalone vs Consolidated Financials: A Complete Guide
An investor should keep a close watch on receivables because as per the “Ageing Analysis of
Trade Receivables” section in the annual reports, about 8%-10% of its receivables generally
remain outstanding beyond 6 months from the date they became due for payment.
In FY2019, ₹40 cr worth of receivables constituting about 15% of overall receivables were
outstanding for more than 6 months from the date on which they became due for payment
(FY2019 annual report, page 158).
Receivables usually are outstanding for a long period after the due date when either the
customer is facing financial stress or the customer is disputing the receivables or the invoices
issued by the company.
In the past, there have been instances when Asahi India Glass Ltd and customers did not
agree on the price of the products before the sale. In such instances, the auditors have
pointed out the dispute regarding pricing in the annual reports. Such transactions are prone to
turn into disputed receivables.
In one instance, in FY2002, the customer of the company issued the purchase order at a
lower price; however, Asahi India Glass Ltd booked sales in its accounts at a higher price and
then started negotiating with the customer for a higher price. This led to inflation of profit
reported in the P&L and the auditors pointed it out in their report.
Note No. 6 regarding non acceptance of purchase order rates given by a customer resulting
in aggregate to Profit for the current year being shown higher by Rs. 175.41 Lakhs.
Even in FY2006, the auditor of the company could not determine the exact amount of excise
duty liabilities because Asahi India Glass Ltd and its customer had not agreed on a price
when the annual report was published.
excise duty liability of Rs. 3.13 million could not be ascertained timely due to delay in
reconciliation of price revision with a customer.
Such events create disputed receivables where as per the customers, they had already paid
the full amount; however, in the annual report of the company, the difference will stay as dues
pending from the customer.
As per the FY2022 annual report, the company has about ₹8 cr of disputed receivables
where the customer is either not happy with the products supplied or is denying the
acceptance of material.
In such scenarios, it becomes essential to closely track receivables collection.
Further advised reading: Receivable Days: A Complete Guide

When an investor compares the cumulative net profit after tax (cPAT) and cumulative cash
flow from operations (cCFO) of Asahi India Glass Ltd for FY2013-2022, then she notices that
over the years (FY2013-FY2022), the company has converted its profit into cash flow from
operations.
Over FY2013-22, Asahi India Glass Ltd reported a total net profit after tax (cPAT) of ₹1,133
cr. During the same period, it reported cumulative cash flow from operations (cCFO) of
₹3,087 cr.
It is advised that investors should read the article on CFO calculation, which would help them
understand the situations in which companies tend to have the CFO lower than their PAT. In
addition, the investors would also understand the situations when the companies would have
their CFO higher than PAT.
Further advised reading: Understanding Cash Flow from Operations (CFO)

Learning from the article on CFO will indicate to an investor that the cCFO of Asahi India
Glass Ltd is higher than the cPAT due to the following factors:
Depreciation expense of ₹1,240 cr (a non-cash expense) over FY2013-FY2022, which is

deducted while calculating PAT but is added back while calculating CFO.
Interest expense of ₹1,449 cr (a non-operating expense) over FY2013-FY2022, which is

deducted while calculating PAT but is added back while calculating CFO.
The Margin of Safety in the Business of Asahi India Glass Ltd:
a) Self-Sustainable Growth Rate (SSGR):
Read: Self Sustainable Growth Rate: a measure of Inherent Growth Potential of a

Company
Upon reading the SSGR article, an investor would appreciate that if a company is growing at
a rate equal to or less than the SSGR and it can convert its profits into cash flow from
operations, then it would be able to fund its growth from its internal resources without the
need of external sources of funds.
Conversely, if any company attempts to grow its sales at a rate higher than its SSGR, then its
internal resources would not be sufficient to fund its growth aspirations. As a result, the
company would have to rely on additional sources of funds like debt or equity dilution to meet
the cash requirements to generate its target growth.
An investor may calculate the SSGR using the following formula:
SSGR = NFAT * NPM * (1-DPR) – Dep

Where,
 SSGR = Self Sustainable Growth Rate in %
 Dep = Depreciation rate as a % of net fixed assets
 NFAT = Net fixed asset turnover (Sales/average net fixed assets over the year)
 NPM = Net profit margin as % of sales
 DPR = Dividend paid as % of net profit after tax
(For systematic algebraic calculation of SSGR formula: Click Here)
While analysing the formula of SSGR, an investor would note that it is dependent on NFAT,
which indicates the efficiency with which a company is able to manage its plants & machinery.
In the case of Asahi India Glass Ltd, the business of glass manufacturing is highly capital-
intensive with a very low NFAT. As a result, the company has a very low SSGR of 1% – 3%.
A low SSGR indicates that the company is not able to grow its sales at the rate of 6%, which
is achieved by Asahi India Glass Ltd over the last 10 years (FY2013-FY2022). The company
has achieved this growth by investing money raised from outside sources like equity dilution
(rights issue for ₹250 cr in 2013) and debt-funded capital expenditures.
In the past, the company had raised a lot of debt to meet its capital expenditure requirements
due to which its debt reached unsustainable levels.
Credit rating report, CARE, February 2013, page 2:
capital structure of AIS is highly skewed towards debt with overall gearing of 16.01x as on
March 31, 2012 on the account of debt-funded expansions in the past and reliance on short-
term debt to meet cash flow mismatch.
The debt of the company had reached such a high level that it had to use money from short-
term sources like working capital funding to meet its long-term funds’ requirements like capital
expenditure and repayment of long-term debt. An investor may note that using short-term
funds for long-term purposes creates cash flow mismatch and usually is the first sign of
financial stress in any company.
In FY2013, the auditors reported that the company had used about ₹160 cr of short-term
funds for long-term purposes.
we report that short term funds of ₹ 15989 Lakhs have been used for long term investments.
As the company was investing more money than what it could generate from its internal
resources; therefore, it started delaying repayments to its lenders and it had to raise money
by rights issue to repay its lenders.
Asahi India Glass Ltd had faced similar situations of liquidity crunch in the past as it had used
short-term funds for long-term purposes.
In FY2007, the company used about ₹79 cr of short-term funds and invested it in long-term
assets i.e. capital expenditure.
we report that short term funds of Rs. 7933 Lakhs raised by the Company from banks have
been used for long term investments in capital assets.
In FY2005, the company used short-term funds of about ₹60 cr for long-term investments.
FY2005 annual report, page
we report that the Company has used funds raised on short term basis of Rs. 60 Crores for
long term investment.
Therefore, it becomes evident that Asahi India Glass Ltd has invested money more than what
it could generate from its internal resources in its capital assets to achieve growth. On
occasions, the debt has reached unsustainable levels where it delayed repayments and
breached many financial conditions imposed by the lenders.
Our Company is in breach of most of these covenants including the financial covenants, for
instance the debt to EBITDA ratio and total debt to net worth ratio.
The company had to dilute equity as a desperate measure to improve its financial position.
An investor may note that the massive ₹1,700 cr – ₹1,900 cr capital expenditure planned by
Asahi India Glass Ltd over 2022-2025 will also involve a significant amount of debt financing.
AIS is actively pursuing on plans to undertake a capex in the range of ₹1,700-₹1,900

crore over fiscals 2022-2025 for capacity expansion (including capex of ₹250 crore on phase-
2 and phase-3 of auto glass plant in Gujarat) to be funded by a mix of debt and internal
accrual.
The business of Asahi India Glass Ltd is exposed to cyclical factors of boom and bust. In the
past, it has faced situations where the completion of its large capex coincided with a
slowdown in demand leading to financial strain for the company. Therefore, going ahead, an
investor should keep a close watch on the financial position of the company so that she can
adjust her views about the company promptly.
b) Free Cash Flow (FCF) Analysis of Asahi India Glass Ltd:

While looking at the cash flow performance of Asahi India Glass Ltd, an investor notices that
during FY2013-FY2022, it generated cash flow from operations of ₹3,087 cr. During the same
period, it made a capital expenditure of about ₹1,875 cr.
Therefore, it may seem that during this period (FY2013-FY2022), Asahi India Glass Ltd had
a free cash flow (FCF) of ₹1,212 cr (=3,087 – 1,875). However, throughout this period, the
company consistently had a large debt of about ₹1,500 cr for which it had to pay a large
amount of interest payments.
Interest in under-construction projects is already reflected in the capital expenditure as it gets
capitalized in fixed assets. However, over and above capitalized interest, the company had to
pay interest expense of ₹1,449 cr, which it deducted from P&L.
After factoring in the interest expense of ₹1,449 cr, it comes out that Asahi India Glass Ltd
had a negative free cash flow of (₹237) cr (= 1,212 – 1,449) cr. Asahi India Glass Ltd had to
meet this cash shortfall by doing the rights issue of ₹250 cr in 2013.
Therefore, an investor would note that the business of Asahi India Glass Ltd is capital
intensive, which needs a significant investment in fixed as well as working capital. The funds
requirement of the company is much more than what it is able to generate through its
operations. As a result, the business requires external capital of equity dilution and debt for its
growth.
Going ahead, an investor should keep a close watch on the free cash flow generation by
Asahi India Glass Ltd to understand whether the company continues to consume cash from
outside sources or it starts to generate surplus cash from its business and reduce its debt
levels.
Further advised reading: Free Cash Flow: A Complete Guide to Understanding FCF
Self-Sustainable Growth Rate (SSGR) and free cash flow (FCF) are the main pillars of
assessing the margin of safety in the business model of any company.
Further advised reading: 3 Simple Ways to Assess “Margin of Safety”: The Cornerstone
of Stock Investing
Additional aspects of Asahi India Glass Ltd:
On analysing Asahi India Glass Ltd and after reading annual reports, letter of offer, credit
rating reports and other public documents, an investor comes across certain other aspects of
the company, which are important for any investor to know while making an investment
decision.
1) Management Succession of Asahi India Glass Ltd:

Asahi India Glass Ltd is promoted by AGC group, Japan (22.21% stake), Maruti Suzuki India
Ltd (Suzuki group, Japan, 11.11% stake) and the Labroo family and other individuals (India,
about 21% stake).
The company has consistently received managerial and technical guidance from its Japanese
promoter groups. AGC group, Japan is one of the largest glass manufacturers in the world
and Maruti Suzuki is India’s largest car company and Asahi India Glass Ltd.’s largest
customer.
Until now, the day-to-day management of the company is handled by the Labroo family with
the founder promoter, Mr B. M. Labroo (aged 91 years) as chairman and his son Mr Sanjay
Labroo (aged 60 years) as MD & CEO of the company.
As of now, it seems that no member of the next generation of the Labroo family has joined the
company, as the annual reports do not contain any such details. It seems that the company is
relying on professionals to provide leadership to the company.
An investor may contact the company directly to understand the succession planning of the
company. This is important because apart from the absence of the next generation of
promoters in the business, there are a few other instances as well that gain investors’
attention.
When the company did the rights issue in FY2014, then the promoter-chairman of the
company, Mr B. M. Labroo did not subscribe to the rights issue i.e. decided not to put
additional money in the company. As a result, his stake in the company declined from 8.62%
in FY2013 to 5.67% in FY2014.
An investor would notice that during FY2014, the number of shares owned by Mr B. M.
Labroo stayed constant at 13,783,920 indicating that he did not participate in the rights issue.
An investor would note that when promoters participate in the rights issue, then it indicates
their commitment to the company and their willingness to support the company financially
during a crisis.
Moreover, promoters have pledged a part of their shareholding in Asahi India Glass Ltd to
lenders for taking loans for personal purposes. On June 30, 2022, 6.09% of the stake owned
by promoters is pledged to lenders.
When promoters pledge their shares in the company for taking loans for personal purposes,
then it is tantamount to taking away the economic value of shares without selling them.
In such a situation, it is essential for an investor to continuously monitor the promoters’ stake
in the company, pledge levels and signs of succession planning.
Advised reading: How to know if Promoters are Losing Commitment to the Company
2) Managerial remuneration:
Asahi India Glass Ltd seems to reward its leadership generously as the senior management
team including the MD & CEO, Mr Sanjay Labroo, received an increase in remuneration even
during FY2012-FY2014 when the company was continuously making large losses; was facing
troubles in making repayments to lenders and had to raise equity by rights issue to repay its
lenders.
The remuneration of MD & CEO, Mr Sanjay Labroo during this period is as follows:
 FY2012: ₹6,399,080 (FY2012 annual report, page 30); the company made a loss of
₹95 cr
₹98 cr
₹47 cr
On many occasions, the remuneration paid by Asahi India Glass Ltd exceeded legal limits,
and the company had to take special central govt. approval to pay those salaries, and at
times, it had to recover the excess remuneration paid to promoters/senior managers.
In FY2009, the company paid a remuneration, which was more than legal limits.
Company has paid Rs. 83 Lakhs as remuneration to managing and other directors which is in
excess of the limits
In FY2013, again, the remuneration of MD exceeded legal limits for which Asahi India Glass
Ltd had to seek central govt. approval.
remuneration paid of ₹ 68 Lakhs is in excess of limits as per Schedule XIII of The Companies
Act, 1956. The Company has made an application to the Central Government for approval of
such excess remuneration
In FY2014, the remuneration paid by the company exceeded legal limits and the company
had to ask for the central govt.’s approval.
In FY2016, one of the subsidiaries of the company paid remuneration above legal limits.

one of the subsidiary companies, the auditors have drawn attention to pending recoverable
directors remuneration of ₹ 18 lakhs
As the company has a history of paying excess remuneration to senior management;
therefore, going ahead, an investor should keep a close watch on the remunerations of
promoters/senior management.
Advised reading: How to identify Promoters extracting Money via High Salaries
3) AGC group, Japan sold its sick company to Asahi India Glass Ltd:
In FY2002, AGC group, Japan sold one of its companies in India operating in the float glass
business to Asahi India Glass Ltd for an equity value of ₹1. This company, Floatglass India
Limited (FGI) had about 26% market share of Indian float glass production. It had a
manufacturing plant at Taloja (Mumbai) and annual sales of ₹242 cr.
we acquired financial and management control of Floatglass India Limited, a leading

manufacturer of float glass in India with sales of Rs. 244 crores in 2001-02.
a market share of 26 % of the Indian float glass market
AGC’s equity stake in FGI (amounting to 75 % of FGI’s total equity capital of Rs. 78 crores)
transferred to Asahi India for a consideration of Re.1/- in February, 2002.
From an overview, it seemed like a very good deal for the shareholders of Asahi India Glass
Ltd that they got a leading float glass manufacturing set up for ₹1.
However, on further analysis, one notices that AGC group seemed to be tired of running
Floatglass India Limited by putting in more and more money in it because Floatglass India
Limited was finding it difficult to survive in the intense competition in the Indian float glass
industry from domestic players and cheaper imports. This was despite Floatglass India
Limited having a 26% share of the market.
Over the years, Floatglass India Limited (FGI) had accumulated losses of ₹133 cr; its net
worth was down and it was declared a potentially sick company.
cost overruns and adverse market conditions hurt FGI’s performance in earlier years
accumulated losses of the Company as at March 31, 2002, stood at Rs. 13,311.52 Lakhs. As
such, in terms of Section 23 of the Sick Industrial Companies (Special Provisions) Act, 1985
(SICA), the Company remains a ‘Potentially Sick’ Company
By selling FGI to Asahi India Glass Ltd, Asahi Group, Japan had ensured the recovery of its
investment of ₹231 cr in FGI. This is because, Asahi Group, Japan, asked Asahi India Glass
Ltd to repay loans of ₹225 cr given by it to FGI along with ₹6 cr of preference shares (it
waived off ₹143 cr out of total preference shares of ₹149 cr).
Foreign Currency loans of FGI of approximately Rs. 225 crores taken over by AGC and
restructured…USD denominated loan for 10 years, with 0 % interest in the first 8 years and
LIBOR +0.75% in the last 2 years.
Of the Rs. 149 crores preference shares held by AGC in FGI, Rs. 143 crores, together with
accumulated dividend thereon, written off by AGC.
As mentioned earlier, the float glass business continued to face immense competition from
the dumping of cheap float glass by China and other nations. As a result, despite a large
market share in the float glass business, this division could not help in improving the financial
position of Asahi India Glass Ltd.
The repayment of foreign currency loans of AGC group, Japan added to the financial troubles
of Asahi India Glass Ltd during FY2011-FY2013 when INR depreciated significantly against
USD and contributed to the losses of the company.
AGC Group, Japan had to bail out the company by putting it more equity in the form of rights
issue. In fact, at that time Asahi India Glass Ltd was in such desperate need of money that
AGC group, Japan had to give an advance of ₹50 cr even before the actual rights issue was
opened.
AGCL has paid the Company an amount aggregating to ₹ 50 crore as advance share
application money towards its entitlement under the Issue.
The float glass furnace in Taloja acquired by Asahi India Glass Ltd as a part of the FGI
acquisition had to be shut down in 2014 as it had become very old and its inefficient
operations were leading to losses. It also had an increased risk of accidents.
in the first quarter of FY15 the operation of this furnace has been stopped. More so, the
Taloja furnace was not operating efficiently over the last few months owing to its age and we
did not want to compromise on safety. This decision will only cut down our losses
The closure of the Taloja furnace was the key reason for the decline in sales of Asahi India
Glass Ltd in FY2015.

Net sales decreased marginally from ₹ 2,138.14 crores in FY 2014 to ₹ 2,096.58 crores in FY
2015. It was due to the shutdown of Taloja glass furnace in May 2014.
In its place, in FY2018, Asahi India Glass Ltd had to install a new float glass furnace.
Our Taloja plant refurbishment with state-of-the-art was completed in Q3 of FY 2017-18 which
has enhanced the production capacity of float glass by 550 metric tons per day
The entire transaction of sale of FGI by Asahi Group, Japan to Asahi India Glass Ltd at an
equity value of ₹1 looks like a stress sale. In this transaction, the foreign parent company
(Asahi Group, Japan) could get rid of a sick company and it could recover its ₹231 cr worth of
loans from a relatively financially strong publicly listed company (Asahi India Glass Ltd).
Moreover, Asahi Group, Japan, continued to charge its royalty payments from Asahi India
Glass Ltd even during FY2012, and FY2013 when the company was making large losses and
was facing financial stress.
Our Company has recorded/booked ₹ 20.45 crores during Fiscal 2012 and ₹10.40 crore
during Fiscal 2013 as royalty payments to AGCL and its group companies.
Going ahead, an investor needs to be cautious while analysing such sale transactions
between foreign promoter groups and public companies.
In May 2022, Asahi India Glass Ltd announced the acquisition of another promoter Group
company, Shield Autoglass Limited in which the Labroo family (Allied Fincap Services Private
Limited) and Auto Glass Company Limited, Japan each own a 45% stake.
The corporate announcement at BSE, May 25, 2022, pages 21-22:
The Company and Shield Autoglass Limited are related parties…purchase of 8,24,850
shares, constituting 45% of the capital of Shield Autoglass Limited from Allied Fincap
Services Private Limited. In this regent, please note that the Company and Allied Fincap
Services Private Limited have common directors, namely Mr. Sanjay Labroo and Mr. B. M.
Labroo, who are also the promoters of the Company.
Asahi India Glass Ltd would pay ₹52.42 cr for a 100% stake in Shield Autoglass Limited,
which has a turnover of about ₹31 cr in FY2021. The announcement does not contain
information on the profits of Shield Autoglass Limited. Therefore, it is not certain whether
Shield Autoglass Limited makes any profit or not.
An investor may do her own diligence in this transaction and may contact the company
directly for any further information and clarifications.
Advised reading: How Promoters benefit from Related Party Transactions
4) Project execution by Asahi India Glass Ltd:
Over the years, Asahi India Glass Ltd has consistently increased its manufacturing capacity.
In the early 2000s, the company had a single plant at Bawal in Rewari, Haryana. However,
over the last twenty-five years, the company has established manufacturing in multiple places
like Roorkee (Uttarakhand), Chennai, Taloja (Mumbai), and Patan (Gujarat) in addition to the
first plant at Bawal, Rewari.
During this time, Asahi India Glass Ltd has worked on new greenfield plants as well as
increasing capacity at existing locations by adding new manufacturing units and
debottlenecking existing capacities.
As per the earliest available annual report of FY1997, Asahi India Glass Ltd had a
manufacturing capacity of 0.75 million laminated windshields and 1.137 million square meters
of tempered glass in 1997.
the installed capacity in the laminated plant increased to 7,50,000 windshields and the
installed capacity in the tempered plant increased to 11,37,000 square metres
Over the last 25 years, in FY2022, the manufacturing capacity of Asahi India Glass Ltd for
tempered glass increased more than 11 times to 12.90 million square meters and the capacity
for windshields increased more than 9 times to 6.8 million pieces.
Credit rating report, CARE, August 2022, pages 3-4:
As on March 31, 2022, total installed capacity stood at 12.90 million square metres for
tempered glass, 6.8 million pieces for laminated glass and 78.32 million converted square
metres (CSQM) for float glass.
In addition, the company had created a significant capacity of float glass by establishing
plants in Roorkee and installing a new furnace at the Taloja plant.
During this period, Asahi India Glass Ltd could complete most of its expansion plans within
reasonable time limits. For example
 It could complete the commencement of its plant in Chennai in January 2005 against
an initial estimated timeline of November 2004.
 In FY2005, it could complete the Architectural Processing Unit at Taloja (Mumbai),
which had December 2004 as the initial estimated date of completion.
 When the company started construction of its plant at Roorkee, then it had estimated
the commencement of commercial production of the float glass unit in December 2006
and it could start commercial production in January 2007.
 For automotive glass units at Roorkee, the estimated completion date was August
2007, which it could complete by October 2007.
 The company had to close its float glass furnace in Taloja (Mumbai) in FY2014 as after
19 years of operation, it had run its life (FY2014 annual report, page 11). When Asahi
India Glass Ltd started building a new furnace at Taloja, then it estimated completion
date of December 2017 (FY2017 annual report, page 3). The company could complete
the construction of this furnace by December 2017 (FY2018 annual report, page 3).
 In FY2018, the company announced its plans to construct a “bus & truck” furnace at
Chennai and to complete its construction by Q1-FY2020 (FY2018 annual report, page
26). The company could complete this furnace ahead of schedule in FY2019 itself
(FY2019 annual report, page 40).
However, there have been some instances when the company could not meet its stated
timelines for project completion and witnessed delays.
 While starting the work of laminated furnaces in Bawal for 0.7 million laminated pieces
for passenger cars and trucks, the company estimated that it would complete the work
by FY2013 (FY2012 annual report, page 7). However, the work was completed in
FY2016 (FY2016 annual report, page 28).
 When Asahi India Glass Ltd started work on its plant at Patan, Gujarat, then it had
estimated that the work would be completed at a cost of about ₹500 cr (FY2017 annual
report, page 3) and the first phase would commence production by June 2019 (FY2018
annual report, page 3). However, later on, the project witnessed both cost and time
overruns. By FY2018, the company had increased the cost estimates to ₹600 cr
(FY2018 annual report, page 26) and phase 1 of the project could start construction
only in February 2021 (FY2021 annual report, page 32).
As delays in projects can lead to significant cost overruns, which can affect the financial
position of a leveraged entity; therefore, an investor should keep a close watch on the
ongoing and planned capacity expansions of Asahi India Glass Ltd.
 Solar glass plant in collaboration with Vishakha group being constructed at Mundra
proposed to be completed in 2023 (FY2022 annual report, page 27).
 Phase 2 & 3 of the plant at Patan, Gujarat proposed to be completed in FY2024 and
FY2026 respectively. (Credit rating report, CARE, August 2022, page 2)
As per CARE, Asahi India Glass Ltd has planned capital expenditure of about ₹1,700 cr –
₹1,900 cr during 2022-2025. An investor needs to monitor the progress of these projects
closely.
Further advised reading: How to do Management Analysis of Companies?
5) Weakness in internal controls and processes at Asahi India Glass Ltd:

During analysis, an investor notes numerous instances of weaknesses in internal controls and
processes at Asahi India Glass Ltd. These instances relate to noncompliance with legal
requirements, nonpayment of dues etc.
5.1) Noncompliance with legal requirements:
In FY2021, the company had to pay a penalty because it did not meet the requirement of a
minimum number of independent directors on its board. NSE and BSE, which are the first-line
regulators, imposed a penalty of ₹815,000/- each on the company.
company was short of one Independent Director since the date of resignation of an
Independent Director from the Board till 10th September, 2020…hence National Stock
Exchange of India Ltd. and BSE Ltd. had imposed penalties amounting to ₹ 8,15,000
each which was paid by the company in due time.
In FY2017, Asahi India Glass Ltd was penalized by NSE and BSE for delays in filing results
for December 2016 quarter.
company submitted its financial results for the quarter ended 31st December, 2016 after the
expiry of timeline…hence National Stock Exchange of India Ltd. and BSE Ltd. had imposed
penalties amounting to ₹ 5,000 each which was paid by the company in due time.
In the letter of offer, in August 2013, Asahi India Glass Ltd intimated to investors that it has
not complied with the requirement of dematerialization of 100% of promoters’ holding in the
company.
Our Company is in non-compliance with requirement regarding 100% of promoter and

promoter group shareholding to be in DMAT form which may lead to our scrip being shifted
for settlement on trade-to-trade basis.
In the past, govt. authorities pointed out issues in the information disclosed by the company in
its annual reports.
Pursuant to the technical scrutiny of the Annual Report of the Company for the FY 2000-
01 carried out by the Office of Registrar of Companies…a notice was issued…Thereafter, the
Company regularised the alleged technical defaults in the Balance Sheet for the FY 2002-03
and applied suo-moto for compounding of the offence(s)…Taking cognizance, the Hon’ble
Regional Director…compounded the offence. The compounding fees have been deposited by
the Company
In FY2003, SEBI initiated proceedings against the company for making delays in disclosing
information to stock exchanges.
SEBI had launched adjudication proceedings against the Company for non-compliance with
the provisions of Chapter II of the SEBI (Substantial Acquisition of Shares And Takeovers)
Regulations, 1997 for delay in making the disclosures to the stock exchanges.
In FY2014, at the time of the rights issue, Asahi India Glass Ltd intimated to its stakeholders
that it is not able to find some of its important legal records.
Letter of offer, August 2013, pages 21-22:
We are unable to locate records of our required periodic filings with ROC and records relating
to export obligations.
5.2) Instance of noncompliance with accounting standards:
At times, auditors of Asahi India Glass Ltd have highlighted accounting practices by the
company, which are not in line with the prescribed accounting guidelines.
In FY2001, the company reported a higher profit because it followed practices, which were
not in line with the approved accounting guidelines.
inclusion of value of advance licences in export incentives (which is not in accordance with
the opinion of Expert Advisory Committee of the Institute of Chartered Accountants of India)
Had the Company not shown the above as income and expenditure respectively the profit
before tax would have been lower by Rs. 48.74 Lakhs
In FY2000, the auditor pointed out that the profits of the company are higher than what it
should because the company has not followed the guidelines advised by ICAI.
regarding accounting of leave encashment liability on accrual basis, No.ll regarding inclusion
of value of advance licences in export incentives (which is not in accordance with the opinion
of expert Advisory Committee of the Institute of Chartered Accountants of India) and in
purchase of raw materials, No.13 regarding change in basis of valuation of inventories
resulting in aggregate to profits for the current year being higher by Rs.38.72 Lakhs
Asahi India Glass Ltd had reported higher profits in FY1999 as well by using accounting
assumptions, which were not in line with the ICAI’s approved guidelines.
regarding inclusion of value of advance licences in export incentives (which is not in

accordance with the opinion of expert Advisory Committee of the Institute of Chartered
Accountants of India) and in purchase of raw material resulting in aggregate to profits for the
current year being higher by Rs.14.78 Lakhs,
In FY1998 as well, the company reported higher profits by using accounting assumptions,
which were not in line with the ICAI’s approved guidelines.
regarding interest on acquisition of Fixed Assets capitalised net of depreciation, No. 9

regarding inclusion of value of Advance Licence in export incentives (which is not in
accordance with the opinion of Expert Advisory Committee of the Institute of Chartered
Accountants of India) resulting aggregate to profits for the current year being higher by Rs.
50.23 lacs
The company also reported a higher profit in FY1998 by showing sales in the revenue that
was yet to be approved by the customers.
No. 12 regarding increase in sales on account of price revision of Rs. 14.98 lacs yet to be
formally approved by the customer.
5.3) Delays in payment of undisputed statutory dues by Asahi India Glass Ltd:
There have been numerous instances where Asahi India Glass Ltd did not pay its dues
regarding which there was no dispute, to govt. authorities on time. At times, such delays were
more than 6 months from the time these undisputed dues were supposed to be paid.
For example, in FY2016, the company had delays in the payment of service tax, sales tax,
excise duty and tax deducted at source (TDS).

except some delays in respect of Service Tax, Sales Tax, Excise Duty and Tax Deducted at
Source . We are informed that there are no undisputed statutory dues as at the year end,
outstanding for a period of more than six months from the date they become payable
except Tax Deducted at Source of ₹ 3 Lakhs.
Asahi India Glass Ltd had similar delays in depositing undisputed dues to govt. authorities in
FY2018, FY2017, FY2015, FY2014, FY2013, FY2012, FY2006, and FY2004.
Nonpayment of undisputed statutory dues indicates that the internal business processes at
Asahi India Glass Ltd have a scope for improvement.
An investor would appreciate that companies with weak processes are exposed to risks of
employee fraud. In fact, Asahi India Glass Ltd had witnessed fraud by employees in the past.
5.4) Frauds on the company:
On occasions, stakeholders of the company could do fraud on the company and

misappropriate money, which might indicate the scope for improvement in the internal
processes at Asahi India Glass Ltd.
In the letter of offer, the company intimated that an employee of one of its subsidiaries, AIS
Glass Solutions Limited (AGSL) had conducted financial fraud on the company by altering the
account books and stealing the records.
Accused have committed certain financial bungling and irregularities in AGSL’s accounts
resulting in losses to AGSL of approximately ₹ 56.81 lakhs. Further, AGSL has also alleged
that the Accused…wilfully altered, falsified and misappropriated the account books and
records of AGSL.
Once a sales representative misappropriated funds of about ₹37 lac of the company.
a sales representative has misappropriated funds to the tune of Rs. 37 Lakhs during
the year.
An investor may read another example of a company that faced fraud by its managing
director due to weakness in internal processes & controls in the following article: Analysis:
National Peroxide Ltd
There have been numerous instances where employees of the company have stolen goods
from its premises. At the time of the rights issue in 2013, Asahi India Glass Ltd disclosed
many such instances of theft.

Accused had committed the offence of theft of certain raw materials from the factory
premises situated in Roorkee.
As per the letter of offer, August 2013, in the past, Asahi India Glass Ltd had saved duties by
utilizing duty drawbacks from one Mr Manoj Garg who had allegedly availed those duty
drawbacks by doing fraud. As a result, Asahi India Glass Ltd got a notice from the Directorate
of Revenue Intelligence (DRI).
notice dated November 5, 2008 issued by the Directorate of Revenue Intelligence, Delhi
Zonal Unit informing our Company that Mr. Manoj Garg has been found guilty of fraudenlty
availing duty draw back…as result of which the duty entitlement pass book
scheme purchased by our Company from Mr. Garg may be considered invalid
Going ahead, an investor should look for signs of weaknesses in the internal controls and
processes at Asahi India Glass Ltd.
6) Investment in equity shares of other companies:
Over time, Asahi India Glass Ltd has made investments in equity shares of other companies,
both listed as well as unlisted. Some of these investments attract investors’ attention.
In FY2000, the company indulged in short-term trading in shares of companies where it sold
shares even before they could be transferred to the company.
The following investments have been purchased and sold during the year before transferring
the same in the name of the company: Satyam Computers Limited, Silverline Industries
Limited
In FY2009, the company increased its stake in its associate company, AIS Adhesives Ltd.
AIS Adhesives Limited 1049895 (349965) equity shares of Rs. 10 each (699930 equity
shares purchased during the year
This investment draws the interest of investors because, in FY2009, Asahi India Glass Ltd
was facing a liquidity crunch and had defaulted to its lenders in payment of about ₹25 cr and
had asked them for rescheduling its loan repayments.

delay of 3 days and 25 days in repayment of two loan instalments of Rs. 417 Lakhs each and
repayment of Rs. 2000 Lakhs due on 31st March, 2009 for which the Company
has approached for rescheduling
Asahi India Glass Ltd has impaired some investments within a very short time after the
original investment. For example, it made fresh investments in Fourvolt Solar Private Ltd in
FY2020 (page 90 of FY2020 annual report). However, in the very next year, in FY2021, it
impaired this investment by more than 35% (FY2021 annual report, page 142).
Such instances where recently done investments are impaired in a very short-time raise
questions in the mind of investors about the due diligence done by Asahi India Glass Ltd
before making such investments.
7) Information provided in annual reports:
At times, in the annual reports, Asahi India Glass Ltd has disclosed the minimum required
information without considering whether investors would need more details to make better
decisions.
For example, Asahi India Glass Ltd makes a large amount of sales to its related parties. In
FY2022, it sold more than ₹530 cr of goods to its related parties. However, it did not provide
information about which related parties are its biggest customers with the amount of sales for
each of them.
Only once, Asahi India Glass Ltd had shown such a company-wise breakup for sales and
purchases done from related party entities. It was disclosed in the letter of offer before the
rights issue (August 2013) on page 295. Other than that, Asahi India Glass Ltd has not
disclosed such details in any annual report. Whereas most other companies show the names
of related parties, which are their largest customers and the sales done to them during the
year in their annual reports.
In FY2018, Asahi India Glass Ltd acquired a stake in Timex Group Precision Engineering
Ltd., a part of Timex Group, USA (Source: Asahi India Glass acquires Timex Group Precision
Engineering, December 1, 2017). The media article quoted the MD & CEO of Asahi India
Glass Ltd highlighting it as a strategic investment for backward integration and diversification.
Sanjay Labroo, MD and CEO, AIS said, “This is a strategic and long-term investment for AIS,
which will not only help in securing supply chain integrity through a backward integration, but
also diversify our operations
However, in the FY2018 annual report, the company devote any space to explaining this
transaction to investors in its directors’ report, management discussion & analysis, chairman’s
speech or Q&A with ME & CEO. Instead, it simply included the name of Timex Group
Precision Engineering Limited as the subsidiary of an associate in the related party
transactions section.
Similarly, in the FY2022 annual report, Asahi India Glass Ltd has not provided any elaboration
on its proposed acquisition of the promoters’ stake in Shield Autoglass Ltd.
Most of the time, companies elaborate their strategic vision around such acquisitions in their
annual reports so that investors can understand the business decision. However, Asahi India
Glass Ltd did not include such details in its annual report.
In the indirect method of calculating cash flow from operating activities (CFO), companies add
interest expense in their profits to arrive at CFO and then show interest as an outflow under
cash flow from financing activities (CFF). These steps ensure that CFO includes only
operating transactions and CFF includes all the financing transactions.
However, in the past, Asahi India Glass Ltd showed interest expense as an outflow under
CFO. For examples see this section of CFO calculation from the FY2010 annual report, page
94 showing calculations for FY2009 and FY2010 where interest expenses of ₹129.36 cr and
₹126.98 cr are deducted while calculating the net cash from operating activities.
The company stopped this practice in FY2018 when it adopted Indian Accounting Standards
(IndAS) and started showing interest expense as an outflow under CFF.
An investor should read between the lines while going through the annual reports of Asahi
India Glass Ltd so that she may get a good understanding of its business position.
The Margin of Safety in the market price of Asahi India Glass Ltd:
Currently (October 20, 2022), Asahi India Glass Ltd is available at a price-to-earnings (PE)
ratio of about 35 based on consolidated earnings of the last 12 months ending June 2022
(July 2021 – June 2022). An investor would appreciate that a PE ratio of 35 does not offer any
margin of safety in the purchase price as described by Benjamin Graham in his book The
Intelligent Investor.
However, we recommend that an investor may read the following articles to assess the PE
ratio to be paid for any stock, which takes into account the strength of the business model of
the company as well. The strength in the business model of any company is measured by
way of its self-sustainable growth rate and the free cash flow generating the ability of the
company.
In the absence of any strength in the business model of the company, even a low PE ratio of
the company’s stock may be a sign of a value trap where instead of being a bargain; the low
valuation of the stock price may represent the poor business dynamics of the company.
 3 Principles to Decide the Ideal P/E Ratio of a Stock for Value Investors
 How to Earn High Returns at Low Risk – Invest in Low P/E Stocks
 Hidden Risk of Investing in High P/E Stocks
Analysis Summary
Overall, Asahi India Glass Ltd seems a company, which has grown its sales almost
consistently over the last 10 years (FY2013-FY2022) with improving profitability. The fact that
it is the largest automotive glass manufacturer in India with about 75% stake in the OEM
market and a large player in the float glass market may give the impression that the business
model of the company is very strong with many competitive advantages.
However, the historical performance of Asahi India Glass Ltd indicates that its business is
cyclical with alternate periods of boom and bust, which are accentuated by a very capital-
intensive business with a long gestation period, which faces intense price-based competition,
especially from cheaper imports from countries like China and Malaysia.
A glass furnace must be run continuously as it is not possible to switch it on and off at short
notice. Therefore, players in surplus countries like China have to continue producing glass
even if there is less demand leading to the dumping of float glass in India and Indian players
have to continue producing glass whether prevalent prices are economical or not.
This compulsion to keep the furnace running despite adverse market conditions severely
hurts manufacturers and takes away their pricing power. Many players close businesses
during downturns and the surviving ones become larger by buying them out. No wonder only
3-4 glass manufacturers control about 70% of global glass manufacturing.
Due to capital-intensive business, Asahi India Glass Ltd had to do many debt-funded
expansions, which affected its financial position when the business hit a downturn. During
FY2012-FY2014, reported large losses in consecutive years and it could not repay its lenders.
Asahi India Glass Ltd had to raise equity through a rights issue to survive.
Glass manufacturing is a highly energy-intensive process and therefore, an increase in crude

oil prices significantly affects the business. Over FY2014-FY2016, the profit margins of Asahi
India Glass Ltd increased due to a sharp decline in crude oil prices.
In recent years, the profit margins have increased due to the anti-dumping duty imposed by
India on glass imports from Malaysia and the closure of many float glass furnaces in China
due to the pollution control drive. As a result, there is a shortage of float glass in India, leading
to the highest margins for Asahi India Glass Ltd. However, import restrictions like anti-
dumping duty etc. work only for a short period and the imports find their way into India, which
may bring down the profit margins.
In the past, AGC group, Japan has sold off its sick glass unit (Taloja) to Asahi India Glass Ltd
and recovered its loans of ₹250 cr from the company. These repayments added to the
financial stress of Asahi India Glass Ltd during the downturn of FY2012-FY2014. Going
ahead, an investor needs to be cautious about the purchase of promoter group companies by
Asahi India Glass Ltd.
The company has made investments in equity shares of many companies where it has taken
decisions like doing short-term trading, impairing value within a short period of investment etc.
Investors should closely monitor the equity investments of Asahi India Glass Ltd.
The company has a history of paying remuneration over the legal limit to its managers and
even giving increments during years of losses. An investor should keep a close watch on
managerial remuneration paid by the company.
The company has completed most of its expansion projects on time. However, in some
cases, there have been delays. Asahi India Glass Ltd has planned large debt-funded
expansions in the coming years. An investor needs to closely track the progress of these
projects.
Many instances indicate scope for improvement in the internal processes and controls at
Asahi India Glass Ltd like noncompliance with statutory guidelines, delays in disclosures and
undisputed statutory dues payments, theft and misappropriation of funds by employees etc.
An investor needs to actively look for signs of weak controls at the company to avoid negative
surprises later on.
Going ahead, an investor should keep a close watch on its profit margins, debt levels, the
progress of expansion projects, any disputes in receivables, management succession
planning, managerial remuneration, transactions with promoter groups, noncompliance with
statutory guidelines, investments in equity shares and disclosures in annual reports.
All these aspects should be monitored by an investor to keep a continuous check on the
financial performance of Asahi India Glass Ltd.
Further advised reading: How to Monitor Stocks in your Portfolio

These are our views on Asahi India Glass Ltd. However, investors should do their own
analysis before making any investment-related decisions about the company.
You may use the following steps to analyse the company: “Selecting Top Stocks to Buy – A
Step by Step Process of Finding Multibagger Stocks”
I hope it helps!
Regards,
Dr Vijay Malik
P.S.
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Disclaimer
Registration status with SEBI:

I am registered with SEBI as a research analyst.
Details of financial interest in the Subject Company:

I do not own stocks of the companies mentioned above in my portfolio at the date of writing
this article.
 Tags: Cyclical Stocks, Management Analysis
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Analysis: Asahi India Glass Ltd

Asahi India Glass Ltd: Detailed Fundamental Analysis

 AIS Glass Solutions Limited (82.55% stake)

 AIS Distribution Services Limited India (49.98% stake)

Further advised reading: Standalone vs Consolidated Financials: A Complete Guide

1) Cyclical business of Asahi India Glass Ltd:

Credit rating report by CRISIL, February 2022, page 1:

Credit rating report by CARE, September 2020, page 3:

FY1998 annual report, page 9:

FY2004 annual report, page 26:

FY2009 annual report, page 31:

FY2007 annual report, page 30:

FY2011 annual report, pages 5, 21:

Our auto glass plants operated at peak capacities

FY2013 annual report, page 23:

FY2014 annual report, page 5:

Advised reading: How to do Business Analysis of a Company

2) Intense competition in the glass manufacturing industry:

Letter of offer, August 2013, page 39:

FY2011 annual report, page 23:

Letter of offer, August 2013, page 15:

Credit rating report, CARE, September 2020, page 5:

FY2007 annual report, page 29:

FY2008 annual report, page 33:

Chinese imports may further threaten the viability of new entrants

FY2013 annual report, pages 21, 23:

An investor should always keep this position of helplessness of glass manufacturers in

3) Very low pricing power:

FY1999 annual report, page 15:

FY2006 annual report, page 28:

FY2008 annual report, page 9:

FY2012 annual report, pages 6, 7:

FY2013 annual report, page 22:

FY2013 annual report, page 23:

FY2014 annual report, page 9, 20:

FY2003 annual report, page 30:

FY2009 annual report, page 31:

Government of India has recommended the continued imposition of anti-dumping duty on

FY2020 annual report, page 21

FY2021 annual report, page 33:

FY2007 annual report, page 30:

FY2016 annual report, page 19:

4) Capital-intensive business of Asahi India Glass Ltd

Glass manufacturing is a highly capital-intensive business, which requires significant

FY2008 annual report, page 33:

FY2013 annual report, page 5:

FY2009 annual report, page 31:

Credit rating report, CARE, September 2020, page 1:

The rating is further constrained on account of…past debt-funded capital

Letter of offer, August 2013, page 14:

FY2012 annual report, page 8:

FY2021 annual report, page 152:

5) Highly energy-consuming business of glass manufacturing:

FY2012 annual report, page 5:

FY2006 annual report, pages 23, 26:

FY2008 annual report, page 26:

FY2008 annual report, page 26:

FY2009 annual report, page 19:

FY2016 annual report, page 26:

Credit rating report, CARE, September 2017, page 1:

In FY2009, it thought of hedging the prices of its oil purchases.

FY2009 annual report, page 31:

AIS is putting into place permissions to participate in oil hedging transactions,