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    Asahi Case Solution

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    Amit Biswal
    AIS management needs to take steps to reduce debt and deleverage the company. They should issue more shares to raise equity, focus on cost management and efficiency initiatives, invest in new technologies, liquidate unneeded assets, and expand into new markets. However, deleveraging faces difficulties as investors may not view AIS favorably given its risk level, rights issues and public offerings incur floatation costs, selling assets could hurt future potential in the glass industry, and deleveraging may hinder capital-intensive operations and reduce revenue.

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    Asahi Case Solution

    Uploaded by

    Amit Biswal
    598 views1 page
    AIS management needs to take steps to reduce debt and deleverage the company. They should issue more shares to raise equity, focus on cost management and efficiency initiatives, invest in new technologies, liquidate unneeded assets, and expand into new markets. However, deleveraging faces difficulties as investors may not view AIS favorably given its risk level, rights issues and public offerings incur floatation costs, selling assets could hurt future potential in the glass industry, and deleveraging may hinder capital-intensive operations and reduce revenue.

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    AIS management needs to take steps to reduce debt and deleverage the company. They should issue more shares to raise equity, focus on cost management and efficiency initiatives, invest in new technologies, liquidate unneeded assets, and expand into new markets. However, deleveraging faces difficulties as investors may not view AIS favorably given its risk level, rights issues and public offerings incur floatation costs, selling assets could hurt future potential in the glass industry, and deleveraging may hinder capital-intensive operations and reduce revenue.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    598 views1 page

    Asahi Case Solution

    Uploaded by

    Amit Biswal
    AIS management needs to take steps to reduce debt and deleverage the company. They should issue more shares to raise equity, focus on cost management and efficiency initiatives, invest in new technologies, liquidate unneeded assets, and expand into new markets. However, deleveraging faces difficulties as investors may not view AIS favorably given its risk level, rights issues and public offerings incur floatation costs, selling assets could hurt future potential in the glass industry, and deleveraging may hinder capital-intensive operations and reduce revenue.

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    Q3. What should AIS management do now? Identify the difficulties of deleveraging.

    Ans:

    The management of AIS has to take significant measures to prevent the company from going into
    more debt in the future. Therefore, to reduce their financial leverage in the future they should focus
    on the following measures:

    1. They should aim to reduce their borrowing through issue of more shares of the company to
    existing investors or some other method which will be beneficial to the company on the long
    run. They should get rid of their borrowing and maintain a healthy debt to equity ratio. This
    will further help them in improving their credit rating and hence improve their credibility
    and hence borrowing power in the future.
    2. Introduce efficient initiatives. Just like their initiative ‘Look within: Look Beyond’ they should
    give way to further initiative which will help strengthen the company’s core competency and
    enhance their waste management through following methodologies such as Kaizen, which
    will help in preventing redundancy in the working cycle of the company.
    3. Focus on cost management of the company. AIS should focus on reducing their costs by
    efficient cost management techniques and preventing wastage of resources and time. Just
    like how they switched to cheaper alternatives of input fuel to prevent the risk faced by the
    volatility of crude oil in the market.
    4. Switch to efficient methods and invest in new machines and technologies to help with their
    top line while reducing their costs and in return get an acceptable profit for their company.
    5. Along with investing into new technologies and capital expansion of the company, they
    should also focus on liquidating the assets which will be no longer required in the future and
    hence take advantage of the salvage value of these assets.
    6. Look for prospective markets to expand further. Although a major portion of their revenue is
    through float glass and through automobile industry. They should look for markets which
    will have a good synergy with their existing products and also will have less risk for the
    company to invest in.
    7. Reducing the working cycle of the company will also be beneficial to the company and the
    time taken to get their trade receivables will also be less hence helping the company
    deleverage their company.

    Difficulties of deleveraging:

    1. Choosing methods of efficient infusion of equity becomes difficult for the company because
    if they want to issue shares in the market through normal means, a potential investor won’t
    keep AIS in high regard as it has a high risk for the investor. In such a case the brand equity
    of the company and value of the firm plays a crucial role. Also, there Is no guarantee the
    existing shareholders will accept the tender offer of the company.
    2. Rights issue and public issue will also contain a certain amount of cost to it (floatation cost).
    3. Since there is a very high potential for the glass industry in the future, selling of their existing
    assets might turn out to be detrimental for the company in the long run.
    4. As the glass industry is a capital-intensive business, deleveraging will hider their operations
    of the company and hence might reduce their top line in the future.

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