MANAGEMENT DISCUSSION INDUSTRY STRUCTURE & DEVELOPMENTS
Indian Steel Industry is one of the core sectors which spurs Indian economy and hadhelped the economy sustain its growth even during the global economic crisis The industryhas its own inherent strength that it could withstand the global economic crisis of2008-2009 while other sectors Were somewhat struggling under the pressure of economicconsis
The Industry has also been successful in putting the name of the Country on world mapof Major Steel Manufacturing Countries and has made the Country proud of being named the5th largest producer of steel World Steel Production is expected to be 1 30 billion tonnesin 2010 up from 1 22 billion tonnes in 2009
According to Ministry of Steel, steel production rose to 4 2 per cent to reach 60million tonnes (MT) in 2009-10 On doubling the crude steel capacity to about 124 milliontonnes (MT) in a couple of years India will become the worlds 2nd largest steel producerby 2015 -2016 The usage of steel in Automobile, Construction, Infrastructure, Oil and Gasand other key sectors like Tube manufacturing, ball bearing, defence etc are bound toimprove the performance of the steel industry in the years to come
In expectation of continuing economic growth, per capital steel consumption is alsoexpected to go up considerably
OPPORTUNITIES & THREATS
Domestic steel sector has already attracted a staggering investment of about US $ 236billion and various steel plants and production capacities are expected to come up invarious states of the country such as West Bengal, JharKhand, Orissa Chhattisgarh,Karnataka, Gujarat and Maharashtra In view of the several ongoing Greenfield andBrownfield projects, Government investment in infrastructure, growth in automobile andconstruction sectors, estimated growth trends are likely to be exceeded and it isenvisaged that in the next five years demand will grow at higher annual average growthrate of over 10% as compared to arourid 7% growth achieved between 1991-92 and 2005-2006
In spite of spurt in demand for steel products, the steel industry is facing the threatin the form of import as they tend to be cheaper compared to domestic prices Imports wereto the tune of about 18% of the over all steel demand during the first four months of2010-2011 compared to 11% in the corresponding period of previous year
Fluctuating demand and supply position in world market is also a threat the steelindustry is constrained to face from time to time
Due to a sharp fall in international prices, over supply of steel coupled with lowdemand in the world market, Indian steel industry has neither been in a position to passon increase in prices of raw materials and other inputs nor to bring down the prices tomatch the overseas prices
PRODUCT / SEGMENTWISE PERFORMANCE
The company is manufacturer of long steel products The end products are used inautomobile and seamless tube sectors The company is operating in single segment only Dueto lock out continuing during the 18 months period too there were no production activitiesto comment upon OUTLOOK
The outlook for the industry appears broght with the Government backing in the form offavourable industrial reforms and private sector backing in the form of investments worthbillions of dollars The steel industry's sustaining power and steady growth have attractedeven the Global steel giants who have turned their attention towards our country
The future outlook, even though appears brought, should be considered as being subjectto the industry, for its turn, cutting costs, modernizing the existing facilities andputting in place updated technology which will take care of any adverse eventuality RISK& CONCERNS
The company is aware of risk arising out of delayed restart and revival of itsoperations and treats the same as most important concern for it to address the issue onurgent basis The company has sought to revive its operations under the aegis of HonourableBoard for Industrial & Financial Reconstruction under the provisions of The SickIndustrial Companies (Special Provisions) Act, 1985 The present condition of plant andmachinenes due to non operation for a long time, selection of competent persons to putback the company on revival track, availability of working capital funds, recapturing thelost market share are some of the other important concerns which the company looks into toavoid any problem at the time of restart of operations The company has taken a number ofsteps in this connection which are certain to help the company at the appropriate timeEffective steps have been taken to insure the assets of the company adequately on thebasis of market value (indemnity) Security is in place at plant premises for safeguardingthe properties of the Company
INTERNAL CONTROL SYSTEMS & THEIR ADEQUACY
The Company's existing internal control systems and procedures are considered adequateunder the present circumstances of continued closure of operations This internal controlsystem is monitored, reviewed and up dated from time to time The Company has appointedinternal auditor to carry out necessary checks and balances and confirm adequacy ofinternal control system
FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE
| | | Rs in lacs |
| S.No | Particulars | 18 Months Financial | 18 Months Financial |
| | Period ended | Penod ended |
| | 30.06.2010 | 31 12 2008 |
| 1 | Sales /Income from Operations | - | - |
| 2 | Increase / (Decrease) in stock | - | - |
| 3 | Other Income | 3.71 | 11.15 |
| 4 | Total | 3.71 | 11.15 |
| Less | | |
| 5 | Excise Duty | - | - |
| 6 | Total | 3.71 | 11.15 |
| 7 | Total Expenditure | 314.03 | 245 37 |
| 8 | Profit / (Loss) before interest & financial charges, depreciation, deferred revenue expenses and exceptional items | (310.32) | (234 22) |
| 9 | Interest and finance charges | 0.04 | 460 |
| 10 | Depreciation | 5492.74 | 5492 73 |
| 11 | Deferred revenue expenses written off | - | - |
| 12 | Profit / (Loss) before exceptional items | (5803.10) | (5731 55) |
| 13 | Exceptional items (Net) | - | - |
| 14 | Profit /(Loss) before tax | (5803.10) | (5731 55) |
| 15 | Provision for Taxation (Net) | | |
| -Current | - | - |
| - Deferred | - | - |
| | | Rs in lacs |
| S.No | Particulars | 18 Months Financial | 18 Months Financial |
| | Period ended | Penod ended |
| | 30.06.2010 | 31 12 2008 |
| 16 | Fringe Benefit Tax | 0.37 | 3.28 |
| 17 | Net Profit /(Loss) after tax | (5803.47) | (5734.83) |
| Add: | | |
| 18 | Profit / (Loss) brought forward | (79122.11) | (73387.28) |
| 19 | Profit / (Loss) earned to next year | (84925.58) | (79122.11) |
In view of the continued lock-out, during the period under review, no productionactivity-was carried out
HUMAN RESOURCES / INDUSTRIAL RELATIONS
The period was marked with discussion and continued negotiation with the labour union,in congenial atmosphere, in a bid to reach an amicable settlement between the company andlabour
CAUTIONARY STATEMENT
Statements in this Management's Discussion and Analysis detailing the Company'sobjectives expectations may be "forward- looking statements within the meaning ofapplicable securities laws and regulations Actual results could differ materially fromthose expressed or implied Important factors that could make a difference to the Company'soperations include global and Indian demand - supply condition, finished goods pricesfeedstock availability and prices, cyclical demand and pricing in the Company's principalmarkets, changes in Government regulations, tax regimes, economic developments withinIndia and the countries within which the Company conducts business and other factors suchas litigation, labour negotiations and support sought from all the concerned agencies