1. Analyze the AISs current capital structure position as per the case study.

2. What is the order of financing flowed by AIS? Did the company follow Pecking Order Theory?

3. What are the consequences of high financial leveraging for AIS both positive and negative?

4. Why did AIS choose a right issue to deleverage?

5. Suppose you are the Core Finance Team members supporting the CFO of AIS. What are the measures you would have taken to save the company in such a situation?

Answer the question it should not have ai detection AIS, India's foremost integrated glass solutions company, faced financial strain due to a high debt-to-equity ratio, compounded by a slowdown in its operating segments. Despite a 2013 equity infusion through a rights issue of INR 2.5 billion, the company still struggled with the interest burden and sought to alleviate it by focusing on working capital management, cost reduction, and substituting high-cost borrowings with low-cost options.

Established in 1984 as a joint venture involving the Labroo family, Asahi Glass Company Limited (AGC), and Maruti Suzuki Limited, AIS grew into India's largest glass manufacturer, excelling in auto, architectural, and consumer glass segments. Sanjay Labroo led AIS as the CEO since 1990, while AGC and Maruti held significant stakes in the company.

Between 1991 and 2008, AIS witnessed substantial growth in the wake of India's economic reforms, diversifying its customer base and achieving a dominant market share in the OEM passenger car segment. Expanding into float glass, consumer glass, and venturing into solar glass further broadened its product offerings.

However, the 2009 global economic downturn hit AIS hard, resulting in its first net loss due to decreased demand, increased input costs, and rupee devaluation. Initiatives to optimize internal processes and efficiency, such as "Look within: look beyond," aimed to improve productivity and cash flow but could not reverse the declining profitability.

AIS's capital structure was heavily leveraged, with substantial debt funding its expansion endeavors. Despite attempts to manage debt and restructure loans, the company faced credit rating downgrades and struggled with profitability, reflected in declining share prices.

To address its debt burden, AIS opted for a rights issue in 2013, offering existing shareholders additional equity shares. The proceeds aimed to repay loans and overdue trade creditors. Despite setbacks, industry forecasts hinted at significant growth potential in the glass market, especially in construction, automotive, and consumer goods sectors, providing optimism for AIS's future.

The company, with surplus capacity, sought to capitalize on this potential growth but needed further capital infusion. Determining the best financing strategy at a low cost and minimal risk became crucial for AIS's sustained success in the expanding market.