The Hindu Business Line : Asahi India Glass: Hold

Though the financial performance of Asahi India Glass in the last few quarters has not been very impressive, recent initiatives will help it get back into the growth trajectory.

Investors may continue to hold the stock while fresh exposures may be considered after clearer signs emerge of growth in its earnings.

The efforts to move up the value chain and the thrust on the architectural glass market are positive features.

Asahi India is aggressively expanding capacity that will help it exploit the growing demand for automotive glass.

Auto factor

Asahi India is the largest manufacturer of automotive safety glass in the country.

It has a dominant position in the original equipment market and caters to almost all automobile producers in the country.

Its clientele includes auto majors such as Maruti, Hyundai, Ford, Mahindra & Mahindra, Tata Engineering and Toyota.

Aided by strong growth in automobile production, the company has managed to record a steady growth in earnings in recent years.

The performance, however, took a knock in recent quarters on disruption of production facilities due last year's rains in Mumbai. This affected the production facilities at the Taloja plant.

Apart from the disruption in production and the consequent strain on capacity, the cost involved in repairs at the Taloja plant also affected the performance in the previous fiscal.

This plant resumed production in November 2005.

Expansion plans

Meanwhile, the company commissioned expanded capacities in Chennai recently.

It also commissioned facilities for architectural glass at its unit near Chennai.

This should result in improved operational efficiency on account of proximity to customers such as Ford and Hyundai.

Besides, the company will also be better placed to tap the export market with these facilities going on stream.

Asahi India is setting up an integrated architectural glass unit at Roorkee, Uttaranchal. This unit is expected go on stream in December. In a bid to reduce exposure to the automobile market, the company has ventured into the architectural and consumer durables segments. It has opened retail outlets to tap the replacement market.

With production facilities spread across the country, the company is well placed to cater to its wide client base.

Taking into account all these factors, the company appears set on a steady growth path. The opportunities flowing from the steady growth in automobile production and the possible increase in after-market sales will help the company.

The boom in the construction business will act as a demand driver for the architectural glass segment.

Asahi India is a long-term portfolio candidate. The stock has remained range-bound since our earlier "buy" recommendation (December 2005). We advise investors to hold on, as the long-term prospects appear positive.

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