For

ASAHI INDIA GLASS LIMITED: LEVERAGE,

SWORD1

Professors Sanjay Dhamija and David Sharp wrote this case solely to provide material for class discussion. The authors do not
intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names
and other identifying information to protect confidentiality.

This publication may not be transmitted, photocopied, digitized or otherwise reproduced in any form or by any means without the
permission of the copyright holder. Reproduction of this material is not covered under authorization by any reproduction rights
organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Ivey Business School, Western
University, London, Ontario, Canada, N6G 0N1; (t) 519.661.3208; (e) [email protected]; www.iveycases.com.

Copyright © 2015, Richard Ivey School of Business Foundation

Asahi India Glass Limited (AIS), India’s largest integrated glass solutions company, had successfully
raised INR2.5 billion through a rights issue2 of equity shares in August 2013. This long-awaited equity
infusion helped marginally to deleverage the capital structure of the company and reduce its interest
burden; however, given the company’s high debt-to-equity ratio, even these changes were not sufficient to
fully ease the pressure. The company had always pursued a highly leveraged capital structure to maximize
its return on equity; however, the slowdown in the business segments in which it operated made it
difficult to sustain the interest burden.

The equity infusion through the rights issue had provided breathing space to AIS, but its situation was far
from comfortable. AIS management realized that the company would need to maintain its focus on reducing
its interest burden by improving working capital management and by substituting high-cost borrowings with
low-cost borrowings and through continuous and sustained cost reduction in all its operations. However, the
company also needed to explore opportunities for further infusions of capital. Doing so would not be an
easy task, given the losses it had suffered in recent years — but it needed to be done.

THE BEGINNING

AIS was set up as a joint venture in 1984 by three parties: the Labroo family; Asahi Glass Company
Limited, Japan (AGC); and Maruti Suzuki Limited (Maruti). Over a period of time, it emerged as the
largest integrated glass manufacturer in India, with significant market share presence in the auto glass,
architectural glass and consumer glass segments. 3

Sanjay Labroo, a graduate in finance and management

Pennsylvania, had been the managing director and chief e
company’s other co-promoter, AGC, was one of the world’
1 This case has been written on the basis of published sources only. Consequently, the interpretation and perspectives
presented in this case are not necessarily those of Asahi India Glass Limited or any of its employees.
2 In a rights issue, new shares are offered not to the public, but only to existing shareholders in proportion to their existing
shareholding.
3 Asahi India Glass Limited, www.aisglass.com/aboutus/company-profile, accessed September 11, 2015.

This document is authorized for use only by Rojin Ghamari in F650 - Summer '23 (GROUP CASES)

For

Page 2

operations comprised flat glass, automotive glass, display glass, chemicals, electronics and energy. AGC
had evolved as a top multinational glass manufacturer with a leading share of the global market in most of
the key glass products.4 Maruti, a subsidiary of Suzuki Motor Corporation, Japan, was India’s largest car
manufacturer. The company had manufactured and sold more than one million cars annually in India
since 2009/105 and enjoyed a market share of more than 40 per cent in the Indian passenger car segment.

AIS made its initial public offering (IPO) of 40 per cent of the company’s total equity. The promoters’
holding was shared by the Labroo family (24 per cent), Asahi Glass Company (24 per cent) and Maruti
Suzuki Limited (12 per cent). The shares of the company were listed on India’s leading stock exchanges,
the National Stock Exchange and the Bombay Stock Exchange Limited. The company made its first profit
in the accounting year6 1990 and declared its first dividend the same year. It maintained an uninterrupted
track record of profits and dividends for the next 17 years.

THE GROWTH PHASE: 1991–2008

The Indian economy had a watershed year in 1991. India had made a seismic shift from a closed economy
to an open economy, according a larger role to market forces and the private sector. Describing India’s
path to economic reform, Montek Singh Ahluwalia, former deputy chairman of the Planning
Commission, wrote:

India was a latecomer to economic reforms, embarking on the process in earnest only in 1991, in
the wake of an exceptionally severe balance of payments crisis. The need for a policy shift had
become evident much earlier, as many countries in East Asia achieved high growth and poverty
reduction through policies which emphasized greater export orientation and encouragement of th
private sector. India took some steps in this direction in the 1980s, but it was not until 1991 that
the government signaled a systemic shift to a more open economy with greater reliance upon
market forces, a larger role for the private sector including foreign investment, and a restructurin
of the role of government.7

Liberalization, privatization and globalization became the buzz

The Indian automotive industry was also delicensed and attracted substantial private investment, which
gave rise to many new joint ventures for car manufacturing with investments from major automotive
players such as General Motors, Toyota, Honda and Ford. AIS, which was already well established by
this time, was able to diversify its customer base by becoming an original equipment manufacturer
(OEM) for new customers such as Toyota, Tata Motors, Mahindra and Mahindra, and General Motors.
AIS garnered more than 60 per cent of the market share in the OEM passenger car segment in India. It
catered both to the original equipment component market and the after-sales service segment.

In 2001, AIS diversified from automotive glass into the float g

facilities of Floatglass India Limited and subsequently mergin
the float glass business would contribute approximately 40

4 Asahi Glass Company, Asahi Glass Company Overview, September 2015, www.agc.com/english/ir/pdf/c_overview.pdf, pp.
2–4, accessed September 11, 2015.
5 Maruti Suzuki India Limited, www.marutisuzuki.com/ourfinancials.aspx, accessed September 11, 2015.
6 The company prepared its accounts for the 12-month period starting on April 1 and ending on March 31 of the following year.
7 Montek Singh Ahluwalia, “Economic Reforms in India Since 1991: Has Gradualism Worked?,” Journal of Economic
Perspectives, Summer 2002, 16(3), pp. 67–88.
8 Float glass is primarily used in the construction of architectural exteriors and interiors, shop windows, showcases, mirrors,
furniture and tabletops.

This document is authorized for use only by Rojin Ghamari in F650 - Summer '23 (GROUP CASES)

For

Page 3

company made its foray into the consumer glass segment, offering automotive and architectural
solutions directly to end users. The company also identified the solar glass segment for future growth.

AIS’s 2004/05 annual report stated that “AIS has been guided by the financial goal of generating free
cash flows from operations to earn a rate of return on capital employed (ROCE) of 40 per cent and to pay
out 25 per cent of profits as dividends.”9 AIS had achieved robust growth from the time of its inception
until 2006. Consistent growth was shown by all the key performance indicators — sales, EBITDA
(earnings before interest, tax, depreciation and amortization) and profit after tax (PAT). Due to its small
equity base, the company was able to declare healthy earnings per share and return on equity up to 2006.

Driven by an all-pervasive sense of optimism, AIS focused on expansion — both in size and capacity —
by undertaking massive capital expenditures. The net fixed assets of the company grew by more than four
times between 2004 and 2008 and exceeded INR3 billion. By 2008, AIS’s turnover had grown from a
modest INR115 million in its first year of operations to more than INR10 billion, with EBITDA of more
than INR2 billion.

THE SETBACK
The year 2009 was a dampener not only for AIS but for the global economy as a whole. The sub-prime
crisis in the United States and its subsequent impact on the global economy resulted in the stagnation of
demand for AIS’s products, which were mostly used in the construction and automobile industries — the
two worst hit sectors of the Indian economy. The lack of liquidity and resultant credit squeeze also had a
significant adverse impact. The slowdown in demand, increase in input costs and steep fall in the rupee
led to the first net loss since the company’s inception, despite healthy revenue growth. Increased interest
costs also contributed to AIS’s financial woes.

In response to this dire scenario, AIS embarked in 2010 on a new initiative, called “Look within: look
beyond,” whereby the company focused on improving internal processes and efficiencies in the areas of
productivity, inventory management, receivables management, product mix and cash flow. The initiative
had two broad objectives. “Look within” aimed to maximize return on capital employed by enhancing
productivity, saving costs and optimizing working capital management across all processes and activities.
“Look beyond” involved both scanning the environment to meet stakeholders’ expectations and
identifying opportunities to create products and services required by its customers.

Sales continued to grow in the subsequent years, although profitability remained weak. Not only did
AIS’s operating margin decline but higher depreciation and interest costs also led to a steep drop in
profitability and to eventual losses. Although AIS reported its first loss in 2009, the signs had already
begun to appear much earlier. Its PAT declined by more than 51 per cent and 68 per cent in 2007 and
2008, respectively, compared with the previous years. AIS was able to declare a marginal profit for 2010,
thanks largely to other income and a deferred tax adjustment. After showing a marginal recovery during
2011, the company plunged into deeper losses in 2012 and 2013, substantially eroding its shareholders’
funds, despite strong revenue growth (see Exhibits 1 to 3).

During 2012, the company achieved average capacity utilization of 86 per cent for its float glass and
reflective glass business, 66 per cent for the toughened glass business and 76 per cent for the laminated
glass business. However the capacity utilizations in respect of the architectural glass segment and the
mirror segment were 17 per cent and 16 per cent respectively. 10

9 Asahi
India Glass Limited 2004/05 Annual Report, p. 15.
10 Securities
and Exchange Board of India, Letter of Offer by Asahi India Limited,
www.sebi.gov.in/cms/sebi_data/attachdocs/1376463351771.pdf, p. 119, accessed April 1, 2014.

This document is authorized for use only by Rojin Ghamari in F650 - Summer '23 (GROUP CASES)

For

Page 4

The company took several measures to reduce costs and mitigate operating risks in procuring the key
inputs for float glass manufacturing — soda ash, sand, power and fuel. For example, AIS switched from
high-cost furnace oil to lower-cost natural gas. This change not only reduced costs but also mitigated the
risk of volatility in crude oil prices. With respect to another key input, sand, where transportation costs
constituted a major portion of the cost, AIS acquired mining leases to indigenize its sand procurement.
The company was thus able to procure sand closer to its production facilities, resulting in substantial
savings. These measures helped to some extent, but the company continued to post losses.
The financial performance of the company was also reflected in the company’s share price, which had
reached a high of INR212 in 2006, but gradually declined to below INR50 by 2013, in line with its
dwindling profitability (see Exhibit 4).

CAPITAL STRUCTURE OF THE COMPANY

The company invested aggressively in capacity expansion to position itself as the dominant player in the
industry. The total funds deployed (shareholders’ funds plus borrowed funds) grew 3.61 times from
INR4,140 million in 2004 to INR14,969 million by 2013. Since the company had made no equity infusions
after its IPO in 1987, its entire capital expenditure was funded from retained earnings and borrowings. The
Indian primary market for equity remained active during this period; however, AIS did not tap this market
and continued to rely on internal accruals and borrowed funds to fund its expansion (see Exhibit 5).

In 1997, the share capital of the company consisted of 1.85 million equity shares, each with a face value of
INR10 (aggregating to INR18.5 million), of which 40 per cent was raised through AIS’s initial public
offering in 1987. Its share capital increased to INR74 million through two successive bonus issues 11 in the
ratio of 1:1 in 1998 and 2002. The company’s share capital increased further in 2002 to INR80 million,
following its merger with Floatglass India Limited. The same year, the face value of its shares fell to INR1
each through a 10 for 1 split of shares. AIS made its third bonus issue in the ratio of 1:1 in 2005. Almost 85
per cent of the shares outstanding had been issued as bonus shares through the capitalization of reserves.
The company had ploughed back a large part of its profits over the years into reserves and surplus, which
amounted to INR2,785 million as on March 31, 2008. However, due to losses suffered during the
subsequent years, its reserves and surplus stood at a mere INR388 million as on March 31, 2013. For the
shareholding pattern of the company as on June 30, 2013 see Exhibit 6.

From the very beginning, the company had maintained an aggressive debt-equity ratio to fund its capital
expenditures. Its very first project was funded with a debt-equity ratio of 5.5:1. The debt level of the
company increased significantly from 2004 onward, resulting in a substantial increase in interest costs.
Interest was a tax-deductible expense under the Indian Income Tax Act, 1961. With AIS’s corporate tax rate
of more than 30 per cent, the after-tax cost of debt was much lower due to this tax shield. Further, as per the
applicable Indian accounting standards, the interest on borrowed funds used to acquire or construct a long-
term asset could be capitalized until the asset was ready for its intended use, rather than including it in the
income statement of the relevant year. However, once the facilities were put into operation, the interest on
borrowed funds was treated as revenue expenditure, thereby reducing profitability.

A large portion of the loans were secured with the company’s assets as
imposed significant restrictive covenants on the company and required it
information (see Exhibit 7).

11 Bonus shares (stock dividends) are issued to existing

capitalization of reserves without consideration.

This document is authorized for use only by Rojin Ghamari in F650 - Summer '23 (GROUP CASES)

For

Page 5
Many of the company’s loans were in foreign currency (see Exhibit 8) including interest-free loans from
AGC. The interest rate on foreign currency loans was usually lower than the interest rate on rupee loans.
However, the depreciation of the rupee against foreign currencies led to foreign-exchange losses, raising the
real cost of the foreign currency loans (see Exhibit 9). In its 2005/06 annual report, the company stated:

Glass is a capital intensive business, and projects — especially for float glass — have a long
gestation period. We are currently in this process, i.e., putting in the investments into projects to
build capacities and capabilities with a focus on capturing and leveraging each element of the
auto and architectural glass value chains. The existing debt level reflects the fact that these
projects are in execution phase and have yet to add to our top and bottom lines. Although most o
our projects will be commissioned in the last quarter of the current fiscal, they will effectively
contribute from next fiscal (2007-08) onwards, resulting in improved cash flows. This will help
reducing the debt levels significantly and improve the structural ratios from 2007-08 onwards. 12

The borrowings of the company increased further in 2008. The

The increase in borrowings of AIS has been mainly short term borrowings on account of
increased working capital requirement. There are no major capital expansion programs in 2008-
09, hence, long term borrowings are not expected to increase. Routine capital expenditure
programs shall be met from internal accruals. The major concern remains the volatility of the
Indian rupee against the U.S. dollar. AIS has substantial foreign currency borrowings and if the
Indian rupee continues to depreciate against the U.S. dollar, profitability of 2008-09 may be
negatively impacted.13

The borrowing level of the company continued to increase in the subsequent years, resulting in a higher
interest burden. AIS delayed the repayment of two loan installments of INR42 million each to the lending
banks by three days and 25 days, respectively, and requested its bank to reschedule the repayment of
INR200 million in 2009.14 With increased losses and difficulties in debt servicing, AIS, in its 2008/09
annual report, took note of its high level of borrowings:

The Company is fully cognizant of the fact that there is need to reduce the borrowings and thus
the interest cost and has been objectively working towards it. On the operations side, AIS is
making all efforts to manage its working capital, including optimizing its inventory and
maximizing debtors’ realizations so that working capital needs are reduced to the feasible
minimum. AIS is in discussions with its lenders to restructure the tenor of some of the loans
which would allow the Company to improve its cash flow without altering its overall loan
obligations or interest cost. Some of these discussions are in advanced stages. AIS has also been
successful in converting some of its short-term borrowings into longer tenors whereby again,
operational cash flows would be positively impacted. 15

The company was able to reduce its debt marginally in 2010. However, there was no major change in the
financial leverage of the company. The management addressed this issue in its 2009/10 annual report:

The overall quantum of debt still remains an are

also be appreciated that a certain amount of debt
12 Asahi India Glass Limited 2005/06 Annual Report.
13 Asahi India Glass Limited 2007/08 Annual Report, www.aisglass.com/sites/default/files/investor_relations/annual-report-
2007-2008.pdf, p. 33, accessed September 11, 2015.
14 Asahi India Glass Limited 2008/09 Annual Report, www.aisglass.com/sites/default/files/investor_relations/annual-report-
2008-2009.pdf, p. 54, accessed September 11, 2015.
15 Ibid p. 31

This document is authorized for use only by Rojin Ghamari in F650 - Summer '23 (GROUP CASES)

For

Page 6

to pursue growth opportunities. The Company is taking all possible measures both to optimize t
debt quantum as well as reduce the average cost of debt. A significant portion of the Company’s
debt is denominated in foreign currency. With the Rupee having stabilized and, indeed,
strengthened, the Company expects to be able to address its debt obligations better. AIS’s debt
will start tapering down from 2012 onwards, and with the interest and loan installment burdens
reducing, both profitability and cash flow are expected to improve significantly. With growth
being projected through 2010-11 and beyond, AIS’s financials are expected to look bright in the
near future.16

AIS managed to reduce its long-term borrowings by INR1,195 million between

during the same period, its short-term borrowings increased by INR1,905 million.

The uncertain environment, dwindling profitability and increased level of borrowings also reflected on the
company’s credit rating. The credit rating for its long-term borrowings declined from CARE BBB− in
2012 to CARE BB in 2013. Likewise, the credit rating for its short-term borrowings was downgraded
from CARE A3 to CARE A4 in the same period (see Exhibit 10). In justifying the downgrade, CARE
Rating, the second largest rating agency in India observed:

The ratings revision takes into account lower-than-expected performance of AIS with continuing
net losses resulting in erosion of net worth coupled with delay in executing capital infusion plan
The ratings continue to be constrained by weak solvency position with increasing reliance on de
and higher refinancing risks, susceptibility of profitability to volatility in crude oil prices and
foreign exchange fluctuations and high working capital intensity of operations. Furthermore, the
capital structure of AIS is highly skewed towards debt with overall gearing of 16.01x as on Mar
31, 2012 on the account of debt-funded expansions in the past and reliance on short-term debt to
meet cash flow mismatch. Moreover, erosion of net worth along with the increase in debt furthe
affected the overall gearing and coverage indicators as on September 30, 2012. AIS was
contemplating capital infusion from the promoters, however the process has been delayed when
compared with the initial timeline and the company’s ability to execute the same remains to be
seen.17

Any further downgrade would not only result in higher borrowing costs for both existing
borrowings but would also increase the difficulty of accessing additional borrowed funds. 18

RIGHTS ISSUE
To reduce its debt level, AIS made the much-awaited equity infusion in 2013. AIS had two options for
deleveraging. One was to issue the promoters preference shares, which had a fixed rate of dividend and
were redeemable. The dividend was paid only out of distributable profits. In the event that profits were
insufficient in any year to pay the preference dividend, the dividend could be carried forward to future
years. The dividend on preference shares was not a tax-deductible expense and did not enjoy a tax shield.
The other option was a public issue of equity shares. For a company that had posted losses in the two
previous years, eliciting a sufficient response for the public issue, and that too at a fair valuation, would
have been difficult. Its flotation cost also would have been high.

16 Asahi India Glass Limited 2009/10 Annual Report, www.aisglass.com/sites/default/files/investor_relations/annual-report-

2009-2010.pdf, p. 15, accessed September 11, 2015.
17 CARE Ratings, “Brief Rationale,” July 14, 2014, www.careratings.com/upload/CompanyFiles/PR/ASAHI%20INDIA%20
GLASS%20LTD-07-14-2014.pdf, accessed September 11, 2015.
18 Letter of Offer by Asahi India Limited, August 10, 2013, op. cit.

This document is authorized for use only by Rojin Ghamari in F650 - Summer '23 (GROUP CASES)

For

Page 7

The company finally made the rights issue of 83.16 million equity shares with a face value INR1 each at
the issue price of INR30 per share, aggregating to INR2,495 million. The proceeds of the issue were to be
used primarily for the repayment of certain loan facilities and for payments to overdue trade creditors.
The new shares were offered to existing shareholders at a ratio of 13 equity shares for every 25 equity
shares held by shareholders on the record date. As the promoters fully subscribed to the shares offered to
them, their shareholding post-issue remained unaffected. Since the shares were issued to existing
shareholders, the success of the issue depended on the support of all the shareholders, particularly the
promoters, who held more than 50 per cent of the share capital. The issuance cost of a rights issue was
estimated to be lower than a public issue. AIS successfully completed the rights issue in 2013.

FUTURE OUTLOOK

Notwithstanding the recent setbacks, the future looked bright for AIS. A November 2013 article in The
Economic Times quoted D. S. Rawat, the secretary general of the Associated Chambers of Commerce and
Industry of India (ASSOCHAM), as saying, “Indian glass market is estimated to increase at a compound
annual growth rate of 15 per cent over the next three years. The glass consumption growth is expected in
construction (10 to 12 per cent), automotive (20 per cent), consumer goods (15 to 20 per cent) and
pharmaceuticals (15 to 18 per cent) sectors.” 19 ASSOCHAM predicted that the size of the glass industry
would increase from INR225 billion in 2014 to INR340 billion by 2015.

An increase in the demand for float glass in the future was expected to be driven by the growth of the
automobile, construction and realty sectors, and by greater awareness about the uses of float glass.
According to an industry report published in 2010:
 The float glass market of India has huge growth potential. It is seen that general awareness abou
glass as a building material is increasing. The construction and automobile sectors which are the
largest users of float glass are expected to grow with a CAGR [compound annual growth rate] o
20 per cent and 15 per cent respectively. Once the legislation for the usage of right type of glass
for windows etc. is legislated by the government, the usage of float glass will get a further boost
Low per capita consumption of glass in India, which is 0.88 kg only, compared with other
developing countries such as China 12 kgs, Thailand 9 kgs, Malaysia 13 kgs, Indonesia 4 kgs, is
clear indicator of huge potential for growth of this industry. 20

The company, having surplus capacity, was in a position to grow sales without any additional capital
expenditure. In the previous 10 years, its revenue had grown at a compound annual growth rate of 16 per
cent. For 2013, the manufacturing, selling, marketing and administrative costs were 91 per cent of
turnover. The operating cycle of the company was 159 days. 21 The company would be helped in
generating additional cash flows by sales growth of 16 per cent, a 3 per cent reduction in expenses and a
10-day reduction in the operating cycle; however, an infusion of additional capital was also required.

The company now needed to consider the best way forward — how to finance the company at the lowest
cost and risk in this rapidly growing market.

19 “Glass Industry to Touch INR 340 Billion by 2015: Assocham,” PTI, The Economic Times, November 26, 2013,
http://articles.economictimes.indiatimes.com/2013-11-26/news/44486923_1_piramal-glass-glass-industry-sezal-glass,
accessed April 17, 2014.
20 “The Glass Industry in India: An Analysis,” Kanch, July-September 2010, 3(4): pp, 21–23. Kanch is the quarterly journal of
the All India Glass Manufacturers Federation.
21 The operating cycle is calculated as trade receivables plus inventories divided by average daily turnover. For 2013, it is
calculated as (INR3,646 million + INR4,712 million) ÷ (INR19,134 million ÷ 365).

This document is authorized for use only by Rojin Ghamari in F650 - Summer '23 (GROUP CASES)

For

Page 8

EXHIBIT 1: FINANCIAL PERFORMANCE OF ASAHI INDIA GLASS LIMITED, 2004–2013

(For the Year Ended March 31 in INR millions)

2004 2005 2006 2007

Operating Revenue 4,898 5,887 5,877 7,618
Other Revenue 149 74 36 227
Total Revenue 5,047 5,961 5,913 7,845
Manufacturing, Selling, 3,739 4,673 4,826 6,205
Marketing and
Administrative Expenses
EBDIT 1,308 1,288 1,087 1,640
Depreciation 501 403 67 653
EBIT 807 885 1,020 987
Interest 24 32 108 355
Profit Before Tax 783 853 912 632
Tax 60 67 49 209
Profit After Tax 723 786 863 423

Note: EBDIT = earnings before depreciation, interest and tax; EBIT = e

Source: Author’s calculations based on Asahi India Glass Limited annual repo

EXHIBIT 2: BALANCE SHEETS OF ASAHI INDIA GLASS LIMITED, 2004–2013

(As of March 31 in INR millions)

2004 2005 2006 2007

Equity Share Capital 80 80 160 160
Preference Share Capital 139 60 60 60
Reserves & Surplus 1,217 1,673 2,349 2,651
Advance against Rights Issue
Shareholders’ Funds 1,436 1,813 2,569 2,871
Borrowed Funds 2,704 4,451 8,667 12,397
Total Funds Deployed 4,140 6,264 11,236 15,268
Deferred Tax Liabilities 39 239
Other Liabilities & Provisions 1,011 1,094 1,335 2,265
Total Equity and Liabilities 5,151 7,358 12,610 17,772
Fixed Assets 3,042 4,805 9,718 13,030
Investments 27 58 64 59
Deferred Tax Assets
Inventories 1,080 1,168 1,497 2,415
Trade Receivables 619 745 315 704
Cash and Cash Equivalents 121 95 81 240
Loans and Advances 215 411 833 1,200
Other Assets 47 76 102 124
Total Assets 5,151 7,358 12,610 17,772 19,176 20,881 18,950 20,413 22,549 23,384

Source: Author’s calculation based on Asahi India Glass Limited annual report

This document is authorized for use only by Rojin Ghamari in F650 - Summer '23 (GROUP CASES)

For

Page 9

EXHIBIT 3: FINANCIAL INDICATORS FOR ASAHI INDIA GLASS LIMITED AND TWO INDIAN
COMPETITORS FOR THE YEAR ENDED MARCH 31, 2013
(in INR millions)
 Piramal Glass Hindu
Share Capital 809 175
Reserves and Surplus 3,985 9,684
Share Application Money 0 146
Shareholders’ Funds 4,794 10,004
Borrowed Funds 7,662 23,984
Inventories 1,918 4,982
Trade Receivables 3,607 4,896
Total Revenue 10,376 18,323
Profit After Tax 48 –1,718
Book Value Per Share (INR) 59.25 112.87
Market Price Per Share (INR) 76.45 197.45
Days Sales Inventories (DSI) 67 99
Days Sales Outstanding (DSO) 127 98
Operating Cycle (Days) 194 197

Source: Author’s calculation based on the annual reports of the respective companies.

EXHIBIT 4: YEARLY HIGH AND LOW SHARE PRICES OF ASAHI INDIA GLASS LIMITED ON THE
BOMBAY STOCK EXCHANGE, MUMBAI, 2004/05 TO 2012/13

Year High (INR)

2004/05 190.00
2005/06 211.90
2006/07 152.00
2007/08 137.40
2008/09 68.90
2009/10 79
2010/11 123.70
2011/12 108.30
2012/13 74.40

Source: Asahi India Glass Limited annual reports for the years 2004/05 to 2012/13.

EXHIBIT 5: NUMBER OF ISSUES AND EQUITY RAISED BY INDIAN COMPANIES, 2004/05 TO

2012/13
Year Number of
Issues
2004/05 55
2005/06 138
2006/07 121
2007/08 120
2008/09 45
2009/10 72
2010/11 80
2011/12 51
2012/13 49

Source: Securities and Exchange Board of India, Handbook of Statistics on Indian Securities
www.sebi.gov.in/cms/sebi_data/attachdocs/1404362427338.pdf, p. 18, accessed September 23, 2014.

This document is authorized for use only by Rojin Ghamari in F650 - Summer '23 (GROUP CASES)
 For

Page 10

EXHIBIT 6: ASAHI INDIA GLASS LIMITED’S SHAREHO

Category
Promoters’ Holdings
Labroo Family & Relatives
Maruti Suzuki Limited
Foreign Promoters
Non Promoters’ Holdings
Institutional Investors
Others

Source: Securities and Exchange Board of India, Letter of Offer by Asahi India Limited,
www.sebi.gov.in/cms/sebi_data/attachdocs/1376463351771.pdf, p. 74, accessed April 1, 2014.

EXHIBIT 7: NEGATIVE COVENANTS IMPOSED ON ASAHI INDIA GLASS LIMITED BY ITS LENDERS
(Excerpted from Asahi India Glass Limited’s Letter of Offer)

1. The Company cannot without approval of the lender(s), inter alia, undertake
a. Permit change in its constitution or management, including change in its Memorandum and Articles of
Association, or capital structure, which may have an adverse impact on its repayment capacity;
b. Create any mortgage, charge, lien or other encumbrance in any form whatsoever of any of its properties an
assets constituting security for any loan, except a pari-passu mortgage/charge in favour of bank/financing
arrangements;
c. Undertake or permit any reorganization, amalgamation, reconstruction, reconstitution, takeover or any othe
scheme of compromise or arrangement;
d. Implement a new scheme of expansion or take up an allied line of business or manufacture;
e. Declare or pay any dividend or make any other distribution of profits after deduction of taxes, except where
installments of principal and interest payable to the bank are being paid regularly and there are no
irregularities;
f. Invest any funds by way of deposits or loans or in share capital of any other concern (including subsidiaries
so long as money is due to the bank, other than security deposits in the usual course of business, or
required for the business;
Permit any change in the ownership or control whereby effective beneficial ownership or control will chang
g.
Effect any material change in the management of the business;
h.
Repay unsecured loans from promoters, subordinating them to lender(s) loans, so long as monies are due
i.
and outstanding
Assume, guarantee, endorse or in any manner become directly or contingently liable for or in connection
j. with the obligation of any person, firm, company or corporation except for transactions in the ordinary cours
of business; and allow transfer or disposal of shareholding of any of the promoters in our equity/quasi equi
capital or permit withdrawal of any of our subordinated loans or deposits, obtained at any time, from our
directors and their friends and associates to finance a part of the working capital requirements or make
prepayment of any long term debt.

2. Upon occurrence of financial default under the terms of the lo

director to the board of directors of the Company. Further, such dire
qualification and will not be liable to retire by rotation; and
3. The Company is required to maintain insurance, to the extent
financially sound and reputable insurers, approved by the lende
assured and sole loss payee in each insurance policy.
Source: Securities and Exchange Board of India, Letter of Offer of Asahi India Glass Limited,
www.sebi.gov.in/cms/sebi_data/attachdocs/1376463351771.pdf, p. 203, accessed April 1, 2014.

This document is authorized for use only by Rojin Ghamari in F650 - Summer '23 (GROUP CASES)

For

Page 11

EXHIBIT 8: COMPOSITION OF ASAHI INDIA GLASS LIMITED’S BORROWED FUNDS, 2011–2013

(As of March 31 in INR millions)

Long-term Borrowings
Secured Term Loans from Banks
· Foreign Currency
· Rupee
Secured Term Loans from Others
· Foreign Currency
· Rupee
Unsecured Loan from Related Party
· Foreign Currency
Long-term Maturities of Lease Obligations
· Secured
· Unsecured
Short-term Borrowings
Secured Loans
· From Banks
· From Others
Unsecured Loans
· From Banks
· From Others
Total

Source: Author’s calculations based on Asahi India Glass Limited annual repo

EXHIBIT 9: MOVEMENT OF THE INDIAN RUPEE AGAINST SELECTED OTHER CURRENCIES,

2003/04 TO 2012/13

Year U.S. Dollar Pound

 2012/13 54.3893 82.3209
2011/12 51.1600 81.7975
2010/11 44.6450 71.9163
2009/10 45.1350 68.0188
2008/09 50.9450 72.8575
2007/08 39.9850 79.5138
2006/07 43.5950 85.5938
2005/06 44.6050 77.7963
2004/05 43.7550 82.1125
2003/04 43.4450 79.6813

*Rupees per unit of foreign currency except yen. The data on exchange rate for y
Source: Reserve Bank of India, Database on Indian Economy,
accessed November 11, 2014.

This document is authorized for use only by Rojin Ghamari in F650 - Summer '23 (GROUP CASES)

For

Page 12

EXHIBIT 10: DETAILS OF CREDIT RATING ASSIGNED TO ASAHI INDIA GLASS LIMITED, 2010/11
TO 2012/13

Period Date of Rating: Interpretation

Receipt of Long
Letter Term
2010/11 October 20, CARE Instruments with this
2010 BBB− rating are considered to
2011/12 September 21, CARE have a moderate degree
2011 BBB− of safety regarding timely
servicing of financial
obligations. Such
instruments carry
moderate credit risk.

2012/13 August 14, CARE Instruments with this

2012 BB+ rating are considered to
2012/13 January 23, CARE have a moderate risk of
2013 BB default regarding timely
servicing of financial
obligations.
Note: Modifiers {“+” (plus) / “−”(minus)} can be used with the rating symbols for the categories CARE AA to CARE C. The
modifiers reflect the comparative standing within the category.

Source: CARE Ratings, “Ratings Symbols and Definitions,”

accessed April 21, 2014.

This document is authorized for use only by Rojin Ghamari in F650 - Summer '23 (GROUP CASES)
 the exclusive use of R. Ghamari, 2023.

W15457

A DOUBLE-EDGED

The authors do not

guised certain names

y means without the

production rights
siness School, Western

Version: 2015-10-07

ad successfully
g-awaited equity
uce its interest
were not sufficient to
ructure to maximize
ated made it

ts situation was far

n its focus on reducing
-cost borrowings with
erations. However, the
o would not be an

lass Company
emerged as the
n the auto glass,

n finance and management from the Wharton School of Business,

anaging director and chief executive officer of AIS since 1990. The
AGC, was one of the world’s leading glass producers. The company’s
and perspectives

tion to their existing

15.

F650 - Summer '23 (GROUP CASES) taught by William Huggins, McMaster University from May 2023 to Oct 2023.

the exclusive use of R. Ghamari, 2023.

9B15N018

s and energy. AGC

al market in most of
India’s largest car
nually in India
enger car segment.

The promoters’
cent) and Maruti
g stock exchanges,
made its first profit
d an uninterrupted

m a closed economy
escribing India’s
anning

s in earnest only in 1991, in

need for a policy shift had
d high growth and poverty
on and encouragement of the
ut it was not until 1991 that
th greater reliance upon
vestment, and a restructuring

balization became the buzzwords in the new economic environment.

nvestment, which
jor automotive
l established by
manufacturer
General Motors.
ment in India. It
egment.

motive glass into the float glass 8 business, taking over the manufacturing
ed and subsequently merging the company with AIS in 2003. (By 2013,
ontribute approximately 40 per cent of AIS’s total revenue.) Next, the

pdf/c_overview.pdf, pp.

15.
31 of the following year.
al of Economic

, showcases, mirrors,

F650 - Summer '23 (GROUP CASES) taught by William Huggins, McMaster University from May 2023 to Oct 2023.

the exclusive use of R. Ghamari, 2023.

9B15N018

hitectural glass
r future growth.

generating free
per cent and to pay
e of its inception
es, EBITDA
). Due to its small
equity up to 2006.

ze and capacity —
w by more than four
d grown from a
EBITDA of more
e. The sub-prime
the stagnation of
le industries — the
squeeze also had a
p fall in the rupee
Increased interest

ok within: look
ies in the areas of
low. The initiative
ed by enhancing
esses and activities.
tions and

. Not only did

steep drop in
gns had already
ent in 2007 and
nal profit for 2010,
al recovery during
its shareholders’

float glass and

for the laminated
egment and the

August 10, 2013,

F650 - Summer '23 (GROUP CASES) taught by William Huggins, McMaster University from May 2023 to Oct 2023.

the exclusive use of R. Ghamari, 2023.

9B15N018

ocuring the key

AIS switched from
also mitigated the
nsportation costs
nd procurement.
g in substantial
ses.
price, which had
line with its

inant player in the

61 times from
e no equity infusions
and borrowings. The
d not tap this market
ee Exhibit 5).

with a face value of

’s initial public
bonus issues 11 in the
o INR80 million,
s shares fell to INR1
1 in 2005. Almost 85
zation of reserves.
and surplus, which
during the
h 31, 2013. For the

to fund its capital

bt level of the
in interest costs.
IS’s corporate tax rate
ld. Further, as per the
or construct a long-
n including it in the
ation, the interest on

collateral. The lenders also

to regularly share financial

shareholders in proportion to their existing shareholding by

F650 - Summer '23 (GROUP CASES) taught by William Huggins, McMaster University from May 2023 to Oct 2023.

the exclusive use of R. Ghamari, 2023.

9B15N018
est-free loans from
ate on rupee loans.
nge losses, raising the
e company stated:

oat glass — have a long

nvestments into projects to
ging each element of the
ects the fact that these
tom lines. Although most of
scal, they will effectively
cash flows. This will help in
s from 2007-08 onwards. 12

reased further in 2008. The management justified the increase by saying:

wings on account of
pansion programs in 2008-
e capital expenditure
ains the volatility of the
ency borrowings and if the
lity of 2008-09 may be

ulting in a higher
each to the lending
e repayment of
S, in its 2008/09

e the borrowings and thus

operations side, AIS is
g its inventory and
duced to the feasible
or of some of the loans
ering its overall loan
d stages. AIS has also been
er tenors whereby again,

major change in the

0 annual report:

of debt still remains an area of concern for the Company; however, it must
at a certain amount of debt funds will remain in the Company’s books for it
ations/annual-report-

ations/annual-report-

F650 - Summer '23 (GROUP CASES) taught by William Huggins, McMaster University from May 2023 to Oct 2023.

the exclusive use of R. Ghamari, 2023.

9B15N018

measures both to optimize the

t portion of the Company’s
ilized and, indeed,
gations better. AIS’s debt
d loan installment burdens
gnificantly. With growth
pected to look bright in the

2011 and 2013, but

also reflected on the

CARE BBB− in
as downgraded
wngrade, CARE

ance of AIS with continuing

cuting capital infusion plans.
h increasing reliance on debt
y in crude oil prices and
perations. Furthermore, the
earing of 16.01x as on March
iance on short-term debt to
the increase in debt further
30, 2012. AIS was
ess has been delayed when
te the same remains to be

ng and future
nds. 18
 two options for
e of dividend and
that profits were
orward to future
enjoy a tax shield.
sses in the two
valuation, would

ations/annual-report-

AHI%20INDIA%20

F650 - Summer '23 (GROUP CASES) taught by William Huggins, McMaster University from May 2023 to Oct 2023.

the exclusive use of R. Ghamari, 2023.

9B15N018

alue INR1 each at

the issue were to be
trade creditors.
every 25 equity
e shares offered to
to existing
particularly the
rights issue was
in 2013.

13 article in The
s of Commerce and
ase at a compound
owth is expected in
er cent) and
the glass industry

e growth of the
f float glass.
 hat general awareness about
mobile sectors which are the
ound annual growth rate] of
usage of right type of glass
lass will get a further boost.
compared with other
13 kgs, Indonesia 4 kgs, is a

ditional capital
owth rate of 16 per
1 per cent of
helped in
in expenses and a
s also required.

mpany at the lowest

ber 26, 2013,

stry-sezal-glass,

the quarterly journal of

over. For 2013, it is

F650 - Summer '23 (GROUP CASES) taught by William Huggins, McMaster University from May 2023 to Oct 2023.

the exclusive use of R. Ghamari, 2023.

9B15N018

IMITED, 2004–2013

2007 2008 2009 2010 2011 2012 2013

7,618 9,935 12,182 12,627 15,182 16,457 19,134
227 601 115 339 167 120 108
7,845 10,536 12,297 12,966 15,349 16,577 19,242
6,205 8,487 10,877 10,622 12,624 14,706 17,460

1,640 2,049 1,420 2,344 2,725 1,871 1,782

653 1,005 1,135 1,245 1,184 1,265 1,486
987 1,044 285 1,099 1,541 606 296
355 848 1,243 1,278 1,278 1,474 1,692
632 196 (958) (179) 263 (868) (1,396)
209 59 (556) (282) 108 (281) (478)
 423 137 (402) 103 155 (587) (918)

ation, interest and tax; EBIT = earnings before interest and tax
India Glass Limited annual reports for the years 2004/05 to 2012/13.

MITED, 2004–2013

2007 2008 2009 2010 2011 2012 2013

160 160 160 160 160 160 160
60 – – – – – –
2,651 2,785 1,736 1,885 2,024 1,319 388
500
2,871 2,945 1,896 2,045 2,184 1,479 1,048
12,397 13,914 16,173 14,706 15,349 13,564 13,921
15,268 16,859 18,069 16,751 17,533 15,043 14,969
239 285
2,265 2,032 2,812 2,199 2,880 7,506 8,415
17,772 19,176 20,881 18,950 20,413 22,549 23,384
13,030 12,954 13,931 12,271 12,237 12,801 12,136
59 59 64 70 84 157 163
241 270 161 442 920
2,415 3,631 3,504 3,192 3,800 4,754 4,712
704 1,080 1,761 1,807 2,389 3,123 3,646
240 164 169 122 217 166 603
1,200 1,146 1,080 1,082 1,370 1,103 1,195
124 142 131 136 155 3 9
,950 20,413 22,549 23,384

dia Glass Limited annual reports for the years 2004/05 to 2012/13.

F650 - Summer '23 (GROUP CASES) taught by William Huggins, McMaster University from May 2023 to Oct 2023.

the exclusive use of R. Ghamari, 2023.

9B15N018

ED AND TWO INDIAN

 Asahi India Glass Limited
175 160
9,684 388
146 500
10,004 1,048
23,984 13,921
4,982 4,712
4,896 3,646
18,323 19,242
–1,718 –918
112.87 34.25
197.45 48
99 89
98 69
197 159

e respective companies.

S LIMITED ON THE

Low (INR)
90.00 81
11.90 69
52.00 70.00
37.40 60.10
8.90 30
9 36
23.70 59
08.30 48.50
4.40 46.00

2004/05 to 2012/13.

PANIES, 2004/05 TO

Amount Raised
(in INR billions)
24,388
27,372
32,901
79,739
14,272
54,875
57,667
12,857
15,473

Market 2013,
4.

F650 - Summer '23 (GROUP CASES) taught by William Huggins, McMaster University from May 2023 to Oct 2023.
 the exclusive use of R. Ghamari, 2023.

9B15N018

SS LIMITED’S SHAREHOLDING PATTERN AS ON JUNE 30, 2013

% Holding
21.84
11.11
22.21

0.28
44.56

August 10 2013,

BY ITS LENDERS

lender(s), inter alia, undertake the following:

morandum and Articles of
payment capacity;
ever of any of its properties and
e in favour of bank/financing

nstitution, takeover or any other

or manufacture;
duction of taxes, except where
arly and there are no

concern (including subsidiaries)

l course of business, or

wnership or control will change;

ns, so long as monies are due

ly liable for or in connection

nsactions in the ordinary course
moters in our equity/quasi equity
ained at any time, from our
pital requirements or make

efault under the terms of the loan agreement, the lender(s) may appoint a nominee
Company. Further, such director will not be required to hold any

ntain insurance, to the extent of market value of security, on charged assets with
surers, approved by the lender(s), and also name the lender(s) as additional
 August 10, 2013,

F650 - Summer '23 (GROUP CASES) taught by William Huggins, McMaster University from May 2023 to Oct 2023.

the exclusive use of R. Ghamari, 2023.

9B15N018

FUNDS, 2011–2013

2011 2012 2013

3,048 3,122 2,388
1,864 1,472 891
100 100 76
170 221 158
2,129 2,429 2,591
0 1 12
0 14 6,116
7,311 7,359 5,066
4,677 4,461 1,744
1,223 1,745 505
5,900 6,206 490
13,211 13,565 7,805
13,921

India Glass Limited annual reports for the years 2010/11 to 2012/13.

THER CURRENCIES,

Pound Euro Yen*

 82.3209 69.5438 57.7600
81.7975 68.3550 62.4250
71.9163 63.2350 54.0175
68.0188 60.5913 48.4338
72.8575 67.4713 51.8900
79.5138 63.0963 40.0650
85.5938 58.1513 37.0338
77.7963 54.1875 38.0188
82.1125 56.5863 40.8075
79.6813 53.1725 41.6725

The data on exchange rate for yen is in rupees per 100 yen.
Economy, http://dbie.rbi.org.in/DBIE/dbie.rbi?site=publications#!2,

F650 - Summer '23 (GROUP CASES) taught by William Huggins, McMaster University from May 2023 to Oct 2023.

the exclusive use of R. Ghamari, 2023.

9B15N018

S LIMITED, 2010/11

ion Rating: Interpretation

Short
Term
s with this PR3 Instruments with this
considered to rating are considered to
derate degree CARE have a moderate degree
garding timely A3 of safety regarding timely
f financial payment of financial
. Such obligations. Such
s carry instruments carry higher
credit risk. credit risk as compared to
instruments rated in the
two higher categories.
s with this CARE Instruments with this
considered to A4+ rating are considered to
CARE have a minimal degree of
derate risk of
A4 safety regarding timely
arding timely
payment of financial
f financial
obligations. Such
.
instruments carry very
high credit risk and are
susceptible to default.
AA to CARE C. The

Definitions,” www.careratings.com/resources/rating-resources.aspx,

F650 - Summer '23 (GROUP CASES) taught by William Huggins, McMaster University from May 2023 to Oct 2023.
mari, 2023.
mari, 2023.
mari, 2023.
mari, 2023.
mari, 2023.
mari, 2023.
mari, 2023.
mari, 2023.
mari, 2023.
mari, 2023.
mari, 2023.
mari, 2023.