Asahi India Glass successfully concluded ₹1,000 crore qualified institutional placement (QIP) last week, at an issue price of ₹845. Almost three-fourths of the QIP funds will be used for debt repayment.
The stock hit a new 52-week high of ₹933 on Thursday. Balance sheet deleveraging has comforted investors, as the debt-to-Ebitda ratio was almost 3.5X in FY25. Also, equity dilution is earnings per share (EPS) accretive because the increase in the number of equity shares is 5%, whereas the boost to net profit from lower interest costs could be about 25% based on annualized financials of Q1FY26.
The sharp increase in Asahi’s debt burden was a fallout of cumulative capex of ₹2,300 crore over the last two fiscal years. Capex had to be funded with debt as it exceeded the cumulative cash of ₹1,300 crore generated from operations. The capex was primarily for the backward integration project of a new float glass manufacturing plant in Rajasthan that was commissioned in March 2025. While the debt issue arising from capex has now been taken care of with the raising of equity funds, the extent of gain from the capex for float glass manufacturing remains to be seen.
Low margin, high volume
Float glass is needed to manufacture automotive and architectural (construction and white goods) glass. Asahi’s 70% of revenue comes from automotive glass, and the remaining from architectural glass. However, the manufacturing process of float glass requires soda ash and is power intensive.
Costs of raw materials such as soda ash or its derivatives and fuel accounted for 41% and 20%, respectively, of the total cost in Q1FY26. Backward integration through float glass manufacturing would mean reduced dependence on imports and a steady supply, but it does not insulate Asahi from the volatile soda ash price cycle.
Asahi’s gross margin was squeezed by 870 basis points to 62.7% in FY24 from 71.4% in FY22 as soda ash prices spiked. The current phase of the soda ash cycle is benign, but it is difficult to forecast future movements.
Though Asahi has a dominant market share of 75% of India’s passenger car market, it cannot increase the price of automotive glass sharply to expand its Ebitda margin in view of stiff competition from imports, especially from China. Ebitda is short for earnings before interest, depreciation, and amortization.
Also, Asahi may not have a strong bargaining position with most original equipment manufacturers (OEMs) such as Maruti Suzuki, Hyundai Motors, Mahindra & Mahindra, and Tata Motors. Even in the architectural glass market, where Asahi commands a market share of 27%, the pricing power is constrained by imports.
With limited scope for margin expansion through higher prices, Asahi is banking on higher volumes for profit growth. If the goods and services tax (GST) cut on automobiles, lower interest rates, and the reduction in individual income tax spur demand for vehicles, it will trickle down to Asahi as well.
Investors looking to play on the potential boom in auto and auto ancillary companies can consider Asahi. But valuation remains steep, in line with other auto ancillary companies. Based on the annualized Ebitda of Q1FY26, Asahi’s EV/ Ebitda is estimated at about 30X. However, considering the fact that it has not been able to cross its Ebitda of ₹809 crore in FY22 in the last three fiscal years, the valuation certainly looks expensive unless there is a big growth surprise.
