Asahi India Glass Ltd

To be well positioned in India at this time is to be Lucky. AIS with 37 years of sweat and expertise has earned the Right to Step Up its performance and ride the great and evolving India Story.

Dear Shareholders,

FY 2023-24 was definitely a year of many surprises. Most of these were happy, positive ones but a few were cause for reflection and countermeasures.

A simple 2X2 matrix of macro and micro is quite illustrative:

The macro performance of our dear country held many surprises (most of them salutary). No one expected an incredible growth of 8.2% in our GDP, a consensus 6.5-7% for FY 2024-25; core inflation further reduced from 4.3% in April 2023 to 3.1% June 2024; a CAD of 0.7 %; fiscal deficit of 5.6 %, reducing to 4.9 % by FY 2024-25, highest corporate profitability @ 4.8 % of GDP, NPA?s at 3.4 %; plus many more indicators pointing to the robust health and improved resilience of the Indian economy.

As we Step Up to 2030, the prospects look very favorable and sustainable. A doubling of GDP in nominal terms, of PV?s in Auto, 500 GW?s of renewable energy, real estate at $ 1 Trillion – so many indicators pointing to a virtuous cycle in a massive country, a young country, one that believes in entrepreneurship and education, which is only at less than $3,000 per capita income with a long runway to $5,000 by 2030, and $15,000 by 2047- all of it very doable because even that massive number of 2047 is 25% of what the developed world is today.

Should this be humbling because we are so far behind the developed world? Or a cause for great optimism with the enormous opportunities this realistic prospect will generate.

The balanced view must look at both positives and negatives. In that, global political risk, rising protectionism, climate crises, rising populism, and in India low consumption, low private investment, and level of unemployment, need addressal. At least the weak forces internal to India seem to be on the cusp of improvement: rural demand, private capex and therefore consumption are all set to rise. A look at Auto OEM and component investments – with just MSIL investing more than Rs 1 trillion by 2030 – is a huge cause for optimism. A virtuous cycle will also improve employment and the many initiatives to improve skills and employability will match the supply of vast numbers to the demand for them with the correct skill sets.

To be well positioned in India at this time is to be Lucky. AIS with 37 years of sweat and expertise has earned the Right to Step Up its performance and ride the great and evolving India Story.

AIS Performance:

AIS had the highest revenue at Rs 4,366 Crs in its history. Unfortunately, our margins slipped and our overall profitability and health ratios were lower than last year:

The simple explanation would be the reduction in Float margin from 30.03% in FY 2022-23 to 17.70% in FY 2023-24 caused by a surge in imports at dumping prices and addition to capacity in India. This by itself more than explains the compression of profit and margins. But there were other weaknesses that also contributed to this compression, namely: Slight delays in vertical startup of new projects and cost increases in certain inputs like raw materials and energy.

Our operational performance got impacted due to various external and internal reasons. Our dedicated employees, supplier partners, and customers are working tirelessly to improve the same. In an era where volatility is the norm, disruption is the standard, our agility and response time to adapt, adjust and control needs to get better and faster.

It?s a work in progress which we will convert into an opportunity to be a stronger organization. For that robustness, we are working assiduously to be: Flexible; increase local design and development; reduce cost of wastages; improve operational excellence; harness the power of digitalization, machine learning, manufacturing 4.0, AI; localization; sustainability; skill advancement; tier 2 improvement; cyber security; all of it under the umbrella of a holistic TQM management?s rigor and discipline.

At the same time, we are scaling up and investing strongly with world-class facilities but with financially prudent norms.

Progress on AIS?s Plan

1. Phase 2 expansion of Patan Automotive glass plant is completed - Work on phase 3 has started

2. Successful development of "Illuminated laminated panoramic sunroof"

3. Successful development of laminated sidelites for EVs

4. Award from Hyundai for "Excellence in Sustainability Drive"

5. Our Sunroof business grew 60% last year and is expected to continue to grow much faster in the coming years

6. Our 3rd Float plant in Soniyana, Rajasthan (F3) is nearing its date to start production by the end of 2024.

7. Use of "Green Hydrogen" at our F3 plant – first in Indian Float Glass Industry

8. Our FRG (fire rated glass) plant is operational

Our capex in FY 2023-24 was at Rs 901 Crs. With major capex of another ~Rs 1,500 Crs in FY 2024-25, we would have largely completed our capex plans to Step Up to the next level of revenue and profitability. Most of this spend is for Auto and vertical integration of Auto through F3 as part of our deep localization program with much lower risk.

The debt we are incurring is judicious for buildup of profitable assets in existing businesses, and sensible amounts for futuristic businesses. We believe the increase in debt from Rs 1,353 Cr to 1,878 Cr in FY 2023-24 is prudent with a D/E ratio of 0.8 and is only for productive purposes. The benefits of a healthy mix of debt and internal accruals funded expansion will start flowing in FY 2024-25 and hopefully really accelerate in the years after.

I am also very proud to update that our biggest customer- MSIL has continued to repose faith in AIS by allowing us a plot of land for "On-Site Assembly Unit" at their plant under construction at Kharkhoda (Haryana). We thank MSIL for this opportunity and are fully geared up to partner with MSIL in its journey to 4 million.

I am also happy to update that AIS continued to make good progress on all fronts of its ESG commitments. Besides the required compliances, AIS is evaluating all its GHG emissions and taking suitable countermeasures to reduce our carbon footprint. At AIS Auto plant, we are deeply grati_ed that approx. 33-50% of our energy requirements at many plants are met through renewable sources. We are working with experts and state governments to find ways to substantially increase our use of renewable energy in all our plants. Last year, we took a significant step in the use of "green hydrogen" at our upcoming greenfield F3 plant in Rajasthan. We are continuously exploring more avenues to substantially reduce our carbon footprint.

We deeply miss the loss of our Director Mr. GS Talwar who passed away on 27th Jan, 2024. Mr. Talwar has been a doyen of Indian entrepreneurship whose advice and guidance to AIS Board will be immensely missed. Besides bringing his global expertise and strategic value to all discussions at the board, Mr. Talwar deeply believed and encouraged AIS in taking sensible risks for profitable growth. Mr. Taguchi and Mr. Rahul Rana, Independent Directors completed their respective terms successfully during the year as we welcomed Mr. Yoshino to our Board. On behalf of the Board, a special thanks to Mr. Rahul Rana for his 19 years of service on AIS Board, and for always being a friend and guide to AIS. Mr. Rana?s contribution as Member and Chairman of the Audit and Risk Management Committee of AIS is highly valued. I thank all my Board colleagues for their constant support and guidance to AIS throughout the year. Based on the financial performance of AIS and our large investments ahead, I am happy that the Board recommended a dividend of Rs 2/- (200%) on equity shares of AIS for FY 2023-24. The same shall be remitted to all our shareholders post-approval at our Annual General Meeting as per due compliance.

Looking Ahead

We firmly believe our biggest strength is the trust of our customers and employees. It is our greatest pride that we hardly ever lose an important customer and have extremely low attrition in our key management and associate personnel. Everything we do is built on this foundation of long-term trust and belief.

We are keenly attuned to the rapidly evolving SEQCDDM requirements of our customers. Along with once in a generation opportunity, there is also highly enhanced volatility. Waves of change in customer tastes, customer a_ordability, regulatory tightening, global standards, brutal competition, and unprecedented advancement of technological change with digitalization, online commerce, RPA, flexible manufacturing, AI, Machine Learning, Augmented Reality, EV and Hybrid Powertrains, to name just a few, bu_eting society as a whole with a new set of winners and losers. Earlier, one or two game-changing technology breakthroughs would define a generation. Now there may be 8-10 that are upending the marketplace in a decade. The environment is fraught with hard to define risk.

At AIS, we embrace this complexity and uncertainty. It gives us an opportunity to differentiate ourselves with our fact-based management system of PDCA (Plan, Do, Check, Act) which constantly identifies gaps, looks for root causes, and acts with speed and agility to close any Gap. Equally, it anticipates change and allows us to position ourselves in advance of our customer requirements. Our auto plant at Patan is an example of this PDCA approach.

While in 2017, it was not at all clear that Gujarat/ Western India could justify an Auto demand for 2.5 million glass sets per annum, we believed after the full optimization of North and South, our major customers would definitely invest in global scale in the West for the local market and also for the forecasted boom in exports. Today, that leap of belief in investing in a state-of-art, environmentally friendly, global-scaled plant is fully justified with a strong likelihood of further expansion in a few years, even more than we had anticipated. In all our businesses we are constantly striving to meet the holistic needs of our customers. Without a deeply satisfied customer, every day, every year, forever, there is no business case for prosperity or even survival. The team at AIS lives and breathes this belief 24/7/365. We will answer your call in 3 rings and be at your service.

On behalf of the Board, I would like to thank all our stakeholders, including our customers, employees, partners, suppliers, shareholders, policymakers, and the communities around our various manufacturing facilities for their continued support to AIS in FY 2023-24. We continue to look forward for your support and encouragement in coming years as well.

Sanjay Labroo

Chairman & Managing Director