fact enterprise ltd Management discussions

we are striving to do better in Innovation, cost efficiency, operational excellence and sustainability. We are continuously working towards scaling new heights and strengthening our leadership in the

steel industry.

1. OVERVIEW

The following operating and financial reviews are intended to convey the Managements perspective on the financial and operating performance of the Company at the end of Financial Year 2022-23.

The objective of this report is to convey the Managements perspective on the external environment and steel industry, as well as strategy, operating and financial performance, material developments in human resources and industrial relations, risks and opportunities, and internal control systems and their adequacy in the Company during the Financial Year 2022-23. This Report should be read in conjunction with the Companys financial statements, the schedules and notes thereto and other information included elsewhere in this Report. The Companys financial statements have been prepared in accordance with Indian Accounting Standards (‘Ind AS) complying with the requirements of the Companies Act, 2013 as amended and regulations/ guidelines issued by the Securities and Exchange Board of India (‘SEBI) from time to time.

1.1 ORGANISATIONAL OVERVIEW

The Scan Group is renowned name in Iron and Steel Industry backed by more than two decades of experience in steel making. Scan Steels Limited is the flagship company of “Scan Group” of industries and represents integrated Steel Plant located at Rajgangpur, Odisha near Rourkela and other factory is in Bellary (Karnataka). Scan Steels is a complete integrated steel manufacturing unit having its own captive power plants, sponge iron and SMS.

The company is a pioneer in starting DRI unit in the State of Odisha. Over the years the Company

has added many upstream as well as downstream value adding installations to attain better control over its processes, minimize production cost, wider market penetration and minimize energy dependence on the state grid by means of installing a Captive Power Plant. During a decade the Company form merely being a rolling mill became Integrated Steel Producer. The Company expanded its activities by way of acquisition at present is having manufacturing facilities in the States of Odisha and Karnataka. We have vast range of rolled steel TMT products which ranges from 8mm to 32mm. Focusing on innovation, technology, sustainability and people, we strive to become the most respected and valuable steel company in India.

With a focus on meeting consumer needs and an expanding range of product grades, we have successfully achieved improved profit margins and enhanced brand value. Our products not only contribute to our business success but also play a vital role in promoting environmental sustainability. We are committed to driving positive change through our consumer-oriented approach and innovative product portfolio. While pursuing our strategic Objectives, we actively contribute towards reducing our environmental footprint and making a meaningful difference in the Lives of our Employees, Partners and Communities.

2. ECONOMIC OVERVIEW

2.1 GLOBAL ECONOMY

Macro-economic volatility and geo-political factors have dominated the global business environment during FY2022-23. The World Economy maintained a steady growth trajectory at the start of CY 2022, following a gradual recovery from the pandemic, but it was disrupted by the outbreak of the Russia-Ukraine conflict. The war worsens persistent inflation across developed economies. However, the recent reopening may lead to a faster than expected recovery in 2023. The Russia- Ukraine conflict induced a global energy crisis, supply chain tightness, semiconductor shortage- related issues, and inflationary pressures. As central banks prepared to squeeze out excess liquidity to rein in inflation, constrained supply chains were further aggravated by economic sanctions on Russia and Chinas Stringent Shutdown to contain the spike in COVID-19 cases. All these together impacted the steel demand- supply balance and resulted in a significant contraction in steel price to raw material spreads through the year. Indian steelmakers were further impacted by the introduction of a 15% export duty from May 2022 until November 2022, which created a supply imbalance compared to historical trends.

Global GDP grew by 3.4% in 2022, down from 5.9% in 2021. The global GDP growth projection for FY 2023 is 2.8%, and for FY 2024 it is 3.0%. The global inflation forecast for CY 2023 is 6.6% and for CY 2024 is 4.3%, led primarily by Asian economies such as India and China and other developing economies. The growth rate in 2023 in the USA is expected to be 1 .6%, while the eurozone is expected to remain strained at 0.8%. Aggressive monetary tightening by central banks started to have the desired effect on demand. Tightening financial Conditions in most regions and reducing liquidity in global markets led to a strong appreciation of the US dollar, further aided by its ‘safe haven status during periods of uncertainty.

Chinas Long-term headwinds to growth include a contraction in real estate, a shrinking population, and slowing productivity growth. Chinas ‘ZERO COVID Policy weakened local demand, which had a spill-over effect overseas, keeping global supplies under pressure and inflation higher.

Chinas economy is set to rebound to 5.2% as mobility and industrial activity pick up after the lifting of pandemic restrictions. Chinas earlier than expected re-opening at the end of 2022 paved the way for a rebound in global economic activity and commodity prices. However, as global demand weakened, commodity prices started easing in the third quarter.

2.2 ECONOMIC OUTLOOK

The global economy is sustaining the momentum gained in Q1 of CY 2023 despite still elevated yet moderating inflation, tighter financial conditions, banking sector stress, and lingering geopolitical conflicts. The IMF expects global inflation to drop to 6.6% (from 8.8% in 2022) in CY 2023 and further to 4.3% in CY 2024 on the back of lower commodity prices. but still stay above the prepandemic levels of about 3.5%. The factors that drove inflation in 2022 are already reversing. These include increases in commodity prices, expansive fiscal and monetary policy, and supply chain disruptions. Headline inflation has eased, though core inflation is yet to peak. Inflation has already peaked in the US and Europe in early 2023. It is also declining in other major economies, including Japan, China, and India. In response, the pace and intensity of interest rate hikes by major central banks are likely to be benign, but interest rates are likely to remain higher for longer. Going forward, inflation trends, central bank actions, the expected recovery in China, and the Russia- Ukraine conflict will determine the course of the worlds economic growth in CY 2023.

Due to tightening monetary and fiscal policy, economic growth in the US is expected to be slower in 2023. The US economy is decelerating, which, combined with high wage inflation and banking sector issues, could lead to a slowdown in H2 CY 2023. In the US, the labour market remains tight, but the consistent decline in inflation could improve sentiment. The Feds pivot to a less aggressive monetary policy could set the tone for CY 2023. This will help cool inflation but may affect growth. Ongoing financial sector stress could force a pause in further rate hikes. There is a risk that the US will be pushed into a recession in CY 2023 with a significant decline in residential investments, despite the strong jobs market and healthy balance sheets of households. Contrary to late 2022 estimates, the US will avoid a recession due to declining energy prices, strong employment growth, and an easing of supply chain stress.

China is expected to grow at 5.2% in CY 2023. Slowing exports and a lacklustre property market are headwinds. Fiscal and monetary policy are expected to be supportive as inflation remains low in China. Chinas recovery, post-Zero COVID policy, is being driven more by services than manufacturing. while growth forecasts for India range between 5.9 and 6.5% for FY 2023-24. Asia could very well be the sweet spot, with India and China at the forefront.

According to the International Energy Agency (IEA), possibilities of a further decline in delivery of Russian natural gas to the Euro area could further dampen growth, especially in the case of a lower availability of liquefied natural gas, which accounted for the majority of gas demand, and weather factors such as a dry summer and a cold winter in Q4. In Europe, wages and consumer spending have fallen significantly. Elevated natural gas prices are fueling inflation and driving down purchasing power. The Euro area averted a severe recession due to good energy management helped by a mild winter, and manufacturing and services are picking up. Goods and commodity inflation has cooled significantly, but service inflation in developed markets remains elevated due to tight labour markets. Aggressive policy tightening by the central banks in the US and Europe to control inflation has impacted growth and also led to banking sector turmoil recently, which has the potential for further downside risks.

2.3 INDIAN ECONOMY

The Indian economy stayed on a steady growth path, demonstrating strong resilience to multiple headwinds stemming from elevated inflation and a volatile global macro environment. Indias growth continues to be resilient, underpinned by the Governments capital outlay and buoyant private consumption. Indias GDP is estimated to have registered a growth of 6.8% in FY2022- 23 and is expected to continue to be the fastest- growing large economy for the third consecutive year, driven by strong private consumption, steady manufacturing, and the normalisation of contact-intensive service sectors. Although inflation remained above the upper band of the RBIs comfort range of 4-6% for most of FY 2022-23, it started easing during the third and fourth quarters as the central bank hiked its policy rates by 250 basis points cumulatively to contain inflation. In April 2023, the RBI put a pause on its rate hike cycle and is widely expected to maintain it if a benign inflationary environment persists.

Indias steel consumption grew by over 10% Y-o-Y to 117 million metric tonnes in FY2022-23. Given the current stage of development of the Indian economy and the focus on infrastructure development, steel demand growth in India is expected to keep pace with GDP growth over the next decade. Demand from key steel-consuming sectors such as construction, capital goods, railways, and automotive is expected to remain robust. The growth of the Indian economy stems from the resilience seen in the rebound of private consumption, which seamlessly replaces export stimuli as the leading driver of growth. The uptick in private consumption has also given a boost to production activity, resulting in an increase in capacity utilisation across sectors. Capital investment of close to 3.3% of GDP is expected to crowd in private investment, strengthen job creation and demand, and raise Indias overall growth potential. Focus is expected in the energy sector, with significant capital investments in the energy transition and the green hydrogen mission.

Indias trade sector remained resilient in FY 2022-23. Imports (merchandise and services) rose 17.4% y-o-y to US$90 billion. Import demand was driven by the domestic recovery. At the same time, adverse shocks in trade and demand for gold led to an expansion of the merchandise trade deficit. A strong trend in service exports and capital inflows governed by foreign direct investments (FDIs) offset the pressure on the current account balance. With little need for external funding, the reserves built up resilience for the trade sector despite global trade disturbances. Overall, the key steel-consuming sectors are expected to perform well in FY 2023-24, supported by a rise in infrastructure spending by the Government and gradually improving semiconductor supply. The capex of the central government, which increased by 26% in FY 2022-23, was another growth driver in the current year. High CAPEX allocation in key steel-consuming sectors such as railways, national highways, and housing is expected to drive steel consumption. A sustained increase in private capex is also imminent with the strengthening of the balance sheets of the corporations and the consequent increase in credit financing it has been able to generate.

The much-improved financial health of well- capitalised public sector banks has positioned them well to increase the credit supply.

However, the conflict in Europe necessitated a revision in expectations for economic growth and inflation in FY 2022-23. Brent oil prices are expected to remain rangebound in 2023, given the continuing war in Ukraine and sanctions imposed in response by the USA and European Union. India meets nearly 80% of its oil needs through imports. High oil prices will also have a trickle- down effect on the prices paid by consumers for goods and services. Despite an unfavourable

trade environment, exports rose 1 4% y-o-y to US$770 billion. Exports are expected to remain steady with a rise in international demand and favourable price conditions. The risks to Indias restoring trade balance persist from the slow growth of advanced and emerging economies, higher energy prices, and supply chain changes that occurred during CY 2022, the effects of which might continue in CY 2023.

EFFORTS CARRIED OUT TO REVIVE ECONOMIC GROWTH

The government is focusing on increasing the share of manufacturing in Indias GDP, as global supply chains are getting realigned and multinationals are seeking to diversify their risk in terms of sourcing manufactured goods and components. Indias digital infrastructure is redefining last-mile delivery, from banking to welfare schemes. Further, the Government is concentrating on building and improving physical infrastructure to increase productivity and increase Indias competitiveness.

The India government has stressed on making India ‘Atmanirbhar and has laid down various incentives and policies. The Union Budget 202324 proposed a 33% increase in infrastructure spending to 10 trillion, or 3.3% of GDP, with the highest ever capital outlay of 2.4 trillion for railways. It has also identified 1 00 critical transport infrastructure projects for last mile logistics and allocated 75,000 crore towards it. For regional air connectivity, a budget outlay of 3,100 crore will be allocated to build 50 additional airports, helipads, water aerodromes, and advanced landing fields.

The Emergency Credit Line Guarantee Scheme (ECLGS), introduced as a part of the COVID-1 9 relief package, was extended to boost credit growth. To promote manufacturing and reduce Indias import dependence, the Indian government had launched its flagship programme, Production Linked Incentive Scheme (PLI), for which 08,083 crore was earmarked for FY 2023-24. Under the

PLI scheme, 6,322 crore has been allocated to the steel sector. There was 33% Increase in infrastructure spending as per Union Budget 2023-24.

The Indian growth story continues unabated, propelled by a strong human capital base, robust domestic consumption, and expanding manufacturing capabilities. The government aims to increase the share of manufacturing in GDP to 25%. The global supply chains are experiencing realignment, with a defined shift towards a China + 1 sourcing approach, benefiting India, as global buyers seek cost-effectiveness and stability. Indias impressive infrastructure developments- propelled by the Gati Shakti project-metros, airports, freight corridors, waterways, high-speed trains, and road networks, will further accelerate growth.

These factors bode very well for domestic steel demand, and Scan Steels aims to serve Indias growing steel requirements.

INDIAN ECONOMIC OUTLOOK

Indias growth story remains fundamentally strong, propelled by strategic interventions from the government and a relatively lower dependence on foreign demand. The robust balance sheets of Indian corporations and banks serve as additional catalysts, bolstering the momentum in private investments, supportive domestic policies, easing inflation, and robust consumption. These favourable conditions, combined with other factors, are expected to contribute to a projected real GDP growth rate of 6.5% in FY 2023-24. The government has chosen an investment-led growth approach, which includes well-planned medium-term fiscal consolidation and expenditure in 2023 to ensure macroeconomic stability.

The governments Capex, amounting to 3.3% of GDP, is anticipated to crowd in private investments and spur an increase in output through the multiplier effect. Capital expenditure efficiency, high-quality infrastructure spending, and process improvements are expected to increase transparency and drive growth. The expected rural recovery could provide the required tailwinds. Further, the outlook for residential real estate, the auto sector, and renewables remains optimistic. Consumer and business confidence is expected to sustain going forward as India continues on its high-growth trajectory to assert its strength in the global economic order. Additionally, the government is expected to remain focused on bridging the infrastructure gap and promoting technologies and investments that align with Indias 2070 net-zero target.

The downside risks posed by inflation have moderated with a fall in global commodity and food prices. The cumulative increase in the policy repo rate by 250 bps, a stable exchange rate, and a normal monsoon are expected to steer the inflation trajectory down to 5.2% in FY 2023-24 from the average of 6.7% witnessed in FY 202223.

The Union Budget in India focused on Infrastructure, manufacturing, and Defence, which is a positive for steel consumption. The fiscal position benefits from lower energy prices, a sharp drop in fertiliser subsidies, and strong tax collections. The manufacturing sectors capacity utilisation has been consistently above 72% since December 2021, which is supportive for private sector capex. Banking credit growth has been in double digits for the last 14 months (April 2022 to May 2023). Improving rural consumer sentiment, healthy reservoir storage levels, and improving rural wage growth point to an ongoing recovery. Demand for commercial vehicles, tractors, and passenger vehicles remains healthy, while recovery in two-wheeler demand is expected to be in line with the rural and semi-urban economies.

SCAN STEELS VIEW:

The world is seeing an uncertain geopolitical and economic environment with cross-border tensions, constrained supply chains and multidecade high inflation and interest rates. Amid these uncertainties, India stands out with its vibrant economy, demonstrating its resilience in a volatile world, and strengthening its position in the global economy. The Indian economy is estimated to have grown by 7.2% in FY 2022-23.

The Indian economy is likely to be on a sustained growth path, as it takes confident strides to become a ‘developed one over the next two decades. Steel will remain the metal of choice to support infrastructure- and construction-led growth, aided by the growing share of manufacturing in the countrys GDP. Given steels versatility and recyclability, Indian steel is in a sweet spot with globally competitive prices to contribute towards building a sustainable future.

At Scan Steels, we measure and disclose our progress on all key performance indicators against the set targets across all our focus areas of sustainability performance. We are not only improving the sustainability quotient of steel but are also making a meaningful contribution towards meeting Indias Nationally Determined Contributions. We are Aligning our efforts with the government to support economic development Contribution towards Indias infrastructure vision to ‘Make in India.

Scan steels stand strong with India and domestic economys growth possibilities and is focused on contributing towards its overall growth. The Companys capacity expansion plans are on track and are aligned with the anticipated growth in Indias steel consumption. the Management has engaged a Business Continuity Plan that guides operations and ensures productivity, across the organisation. On the economic front, the ‘Atma Nirbhar Bharat Abhiyan will help boost economy and small business as well as create domestic demand. With efficient integrated operations and a clear vision for the future, we are executing our strategic growth plan in line with Indias increasing

demand for steel, to drive its sustainable development story.

3. STEEL INDUSTRY

3.1 GLOBAL STEEL INDUSTRY

The year witnessed very high volatility in raw materials, especially coking coal, on account of the on-going geopolitical concerns and supply chain bottlenecks that weighed on steel prices, with margins coming under pressure for most major steelmakers. Global Steel Demand was impacted by high inflation and the consequent aggressive monetary policy tightening by major central banks. The recovery momentum of the global economy after the pandemic has been affected by persisting inflation, US monetary tightening, Chinas economic deceleration, and continued supply disruptions due to the Russia-Ukraine war.

In 2022, the developed economies experienced a significant decline in steel demand due to factors such as monetary tightening, surging energy expenditure, High energy prices, rising interest rates, and falling confidence. Following a substantial decrease of 6.2% during CY 2022, there is anticipation of a modest rebound with a projected 1.3% increase in steel demand for CY 2023. Looking ahead to CY 2024, a more substantial recovery of 3.2% is expected. Further, the looming energy crisis in the EU led to weakened sentiments, aggravated by the fear of potential gas rationing in the absence of Russian supplies. Chinas steel demand contracted by 4% in 2022. However, positive factors like Chinas re-opening, Europes resilience during the energy crisis, and a preliminary easing in supply chain bottlenecks will lead to a Y-o-Y rise in global steel demand of 2.3% (1,822 MnT) in 2023.

In CY 2022, total crude steel production stood at 1,885 MnT, down 3.9% y-o-y, as steel producers reduced output in response to weak demand and weak margins due to falling steel prices and elevated raw material costs. The worlds largestnsteel producer, China, recorded production of 1,018 MnT, a 1.6% y-o-y decline, and Japans production fell 7.4% y-o-y to 89.2 MnT. This was partly offset by a 6.0% y-o-y increase in production to 125.3 MnT in India.

Chinas muted growth and weak real estate sector amid COVID-19 lockdowns and continued focus on sustainability led to a sharp fall to $80/t in October 2022. Led to a 3.5% decline in 2022. Chinese steel demand is expected to grow by 2% in 2023. The growth may be attributed to the base effect and a slight uptick in real estate. However, Iron ore prices saw a sharp rebound to $125/t in early CY 2023 following an earlier-than-expected China re-opening and renewed optimism about the demand outlook. Moreover, during March, due to the Russia-Ukraine conflict, coking coal prices surged to over $600/t.

Demand in the US is expected to grow moderately by 1% in CY 2023, supported by the infrastructure sector following the 2021 Infrastructure Law and Inflation Reduction Act. The European steel demand is expected to fall further by 0.4% in 2023 after an 8% decline in 2022. A strengthening construction sector, an easing supply chain, and exports could boost steel demand in Japan and South Korea. Meanwhile, Indias Steel demand is on track, with infrastructure investments and urban consumption driving demand for automobiles and capital goods. While the Russia-Ukraine conflict temporarily lifted steel prices in early 2022, the prices corrected sharply from April/May 2022 onward and stabilised towards the end of 2022. Iron-ore prices averaged $120 per tonne in 2022, after touching $150 in early 2022 following the outbreak of the Russia-Ukraine conflict. Prices are expected to remain stable, backed by Asian economies like China, Japan, and South Korea.

3.2 OUTLOOK

Commodity prices are likely to remain volatile in 2023, given the ongoing Russia-Ukraine conflict and the expected slowdown in the three largest economies in the world?the US, China, and the EU. Further, the embargo on energy exports from Russia to the EU could lead to a realignment of supply chains. Meanwhile, iron ore prices are likely to soften in the second half of CY 2023 due to a seasonally stronger supply environment amid a depressed steel demand environment on the back of Chinas property market weakness and global manufacturing headwinds. Similar to the global economic scenario, the adverse factors that influenced the global steel industry are subsiding. Encouraging developments, such as Chinas reopening and the alleviation of supply chain pressures, are expected to drive a YoY increase of 2.3% in global steel demand, reaching 1,822 million metric tonnes (MT) in 2023, according to the WSA.

Chinas domestic steel demand has fallen 5% year-to-date, while potential weakness in exports due to depressed prices could lead to lower steel production targets for CY 2023 and, in turn, weigh heavily on iron ore demand as well as prices. Chinas steel demand is projected to experience 2% YoY growth, primarily driven by the anticipated robust recovery of the Chinese economy. Japan, the third-largest steel producer, has recorded 16 consecutive months of falling steel production, with the majority of output being directed for the Aisa market. Further, European steel demand is expected to undergo another year of contraction as high inflationary pressure takes a toll on steel demand there. With Europe now ramping up capacity utilisation, there would be limited scope to increase steel exports. Demand in the US is expected to show a moderate increase of 1% YoY in 2023, owing to the focus on infrastructure by the current US administration.

India is likely to remain an outlier with a healthy steel production growth outlook, but the risk of government measures to protect the supply of high-grade ore persists, such as the export tariffs imposed in CY 2022.

Further, the recovery of steel production, excluding China, driven by the restart of blast furnaces in Europe could keep coking coal prices elevated into CY 2023. In Europe, 14 MTPA of BF capacity is estimated to have returned, translating into 9 MnT of coking coal demand, assuming 80% utilisation. With 11 MTPA of BF capacity still to return, demand for raw materials will continue to increase going forward.

Meanwhile, overstocking and a warm winter led to a regional inventory buildup of gas and coal. European coal demand is expected to remain strong until the start of next winter. Coal importers, including China, Southeast Asia, and India, continue to buy Russian coal. Further, the reduction in Russian pipeline gas exports to Europe prompted many countries to consume more coal.

3.3 INDIAN STEEL INDUSTRY

Having managed inflation well, the Indian economy is on a healthy growth track, with a rising share of investment in GDP, appropriate budget allocations, expenditure by the Government in the infrastructure segment, strong domestic consumption, and favourable dynamics in the international market. India aims to be an economic powerhouse with a Total domestic installed capacity of 27.7 MTPA. India remains the ‘bright spot for global steel demand. After growth of 8.2% in 2022, demand is expected to show healthy growth of 7.3% in 2023.

The Indian steel demand grew at 13.3% YoY in 2022 to reach 119.86 MT, compared to 105.75 MT in the previous year. On the supply side, domestic crude steel production increased by 5% YoY to reach 126.25 MT compared to 120.29 MT in the previous year. Domestic finished steel production stood at 1 22.28 MT, which was a 7.6% YoY increase compared to the previous year. India is the second-largest producer of crude steel in the world, with an output of 126.2 MnT in FY 2022-23.

According to the Ministry of Steel, during FY 2022-23, India exported 6.7 MT of finished steel, which was 50.2% lower as compared to the previous year. On the other hand, there was a notable increase in the import of finished steel, reaching 6.02 MT during the same period, marking a growth of 29% compared to the previous year. These figures can be attributed to two main factors. Firstly, the sluggish demand for steel in Advanced Economies and the imposition of export duties on steel by the Indian government contributed to the decline in Indias steel exports. Secondly, the strong domestic demand prompted the need for additional steel imports to meet the growing requirements within the country. India also faced supply disruptions due to raw material constraints and the volatility of prices. Together, these factors explain the contrasting trends in Indias steel trade, with weak global demand and stronger domestic consumption influencing the figures.

Indias steel exports dipped by 54.1 % to 47.41 lakh metric tonnes from April to December 2022, largely due to weak global demand and the imposition of a 15% export duty on steel products between May 2022 and November 2022. Further post-withdrawal of export duty in November 2022, the import duty on coking coal, anthracite/PCI, and ferronickel, which are used as raw materials in steel making, was hiked to 2.5%. Import duty for coke and semi-coke was raised to 5% from zero, making Indian steel uncompetitive in global markets. On the other hand, finished steel imports jumped 27.4% year-on-year between April 2022 and December 2022, as the slowdown in the US and Europe prompted large steel producers like South Korea, Japan, and Vietnam to divert excess production to the Indian markets.

The India government has set a target to increase crude steel production capacity from 160 MTPA in FY 2022-23 to 300 MTPA by FY 2030-31 under the National Steel Policy. Further, the

NITI Aayog has stated that India will become the worlds production centre for green steel and pave the way for its worldwide adoption. With the fourth industrial revolution, Industry 4.0, underway, the Indian steel industry is leveraging the power of Machine Learning (ML), artificial intelligence (AI), and smart manufacturing to improve efficiency and strengthen sustainability. Further, the governments push for infrastructure and social development continued to be firm. The NHAI pipeline for the next three years remains strong, and InvITs are gaining traction with continued interest from foreign players. The NIP, PLI scheme, and defence indigenization are driving private capex. Infrastructure boosts and capex investments by the government augur well for the MHCV and tractor segments going forward. The auto sector also stands to benefit from the PLI boost. However, the commercial vehicle space is expected to grow slowly due to weak transporter profitability and delayed buying. In the reporting period, the urban residential real estate cycle remained strong with robust new launches and high affordability, despite higher interest rates. Renewables saw large investments driven by increasing power consumption and the green energy transition.

The key opportunities boosting the steel demand are as follows:

Infrastructure and construction account for 60-65% of steel consumption in India. The India governments efforts to kickstart an investment cycle led by robust public capex, coupled with strong corporate and bank balance sheets, is likely to provide impetus to private Investments and consumption. Projects Like High-Speed Rail, Dedicated Freight Corridor, PM Gati Shakti are also key drivers of domestic Steel consumption. Further, the extended Credit-Linked Subsidy Scheme (CLSS) Until 2027, will not only bridge the affordability gap in residential real estate, but also boost demand for structural Steel.

~2.5 MnT - Estimated steel Consumption in Mumbai - Ahmedabad Bullet train project; the highest ever in any infra projects in India.

2.4 trillion capital outlay to redevelop railway stations and make them into a multi-modal transit facility Rs10 Lakh Cr. - Budgeted government outlay for infrastructure in FY 2023-24, accounting for 3.3% of GDP and up 33% y-o-y

Governments focus on strengthening the domestic manufacturing base under the flagship “Atmanirbhar Bharat” programme. The Production Linked Incentive scheme has been introduced to boost the manufacturing sector in industries like automobile & auto components, consumer durables, solar equipment, telecom, etc. These are expected to boost steel consumption. Also, Rising urbanisation and per capita income levels, Potential for per capita steel consumption to grow to 158kg by FY 2030-31

Domestic production of specialty steel has been given a boost with an outlay of Rs 6,322 crore under the PLI scheme. Seven applications from 30 companies have been selected under the scheme. This will attract committed investment of Rs 42,500 crore with potential downstream capacity additions of 26 MTPA and generation of 70,000 employment opportunities. the Government significantly increased capital expenditure on infrastructure projects to build back medium-term demand and aggressively implemented supply-side measures to prepare the economy for a sustained long-term expansion.

Infrastructure spending of Rs 111 lakh crore under the National Infrastructure Plan (NIP) and the National Monetisation Pipeline (NMP) involving 6 lakh crore is expected to be completed by FY 2024-25. A full recovery inaggregate demand is, however, dependent on a better recovery in private investments.

- Rs 75,000 crore including 15,000 crore from private sources towards promoting transport infrastructure efficiency to ensure first and last-mile connectivity for ports, coal, steel, and food grain sectors

- Sector-wise, India saw a resurgence in the manufacturing and services sectors. Manufacturing PMI for May 2023 was at 58.70 and Services PMI was at 61.20. India has the potential to become a manufacturing hub of the world as more and more MNCs are looking to make their supply chains less reliant on China and diversify to other developing and emerging economies.

- 79,000 crore (up 66%) for the PM Awas Yojana Urban to address the urban housing shortage for lower strata of society.

- Gross tax revenues (GTR) grew by 22% year- on-year in FY 2022-23. Goods and Services Tax (GST) collections averaged 1.51 trillion during the period under review. In March 2023, GST revenues crossed 1.60 trillion ? the highest monthly collection since April 2022. The strong tax revenues indicate buoyant economic activity and enables the government to maintain its healthy spending during the run-up to the General Elections in 2024

- Under the Scrappage Policy 2022, the central and state governments offer a 25% tax rebate on road tax for vehicles purchased after scrapping older ones. This will benefit automotive replacement demand and, in turn, drive steel consumption.

OUTLOOK

Indias domestic demand grew 13.3% year on year in FY 2022-23, recording consecutive two years of double-digit growth. Domestic steel demand

is estimated to grow at 7-8% in FY 2023-24, supported by a strong GDP growth forecast, private consumption, Government expenditure, and strong demand from end-user industries such as construction, infrastructure, automobiles, real estate, and consumer durables, enabling steel players to maintain high-capacity utilisation levels. Indias capital goods sector is also expected to benefit from the momentum in infrastructure and investment in renewable energy. Automotive and consumer durables are expected to maintain healthy growth, driven by sustained growth in private consumption.

The benefits of easing raw material prices are expected to flow through Q2 of FY 2023-24. Integrated Steel Players will continue to add capacity in FY 2023-24, and utilisation levels are expected to remain healthy at 80%. Further, the rollback of export duties should support exports, though the near-term outlook remains challenging. Against the backdrop of a soft global economic outlook, India remains a bright spot with rising demand for steel.

STRENGTH

Scan Steels is transforming every aspect of its business by embracing the best available and emerging technologies across functions? Corporate, Human Resources, Manufacturing, Mining, Marketing, and Supply Chain. The Company is driving cultural change, augmenting customer experiences, and developing innovative products. Further, through digitalization, the overarching objective is to create sustained value for all stakeholders while enhancing sustainability across the value chain.

Company having fully integrated sufficient steel making multi-location manufacturing facilities and the various plants comprises of:

? DRI Unit

? Induction Furnace with Concast

• Steel Melting Shop

• TMT Rolling Mills

??? Captive Power Plant

• Coal Washery

Company has a production Installed capacity of 3,34,400 MT of TMT. The brand name “SHRISHTII TMT” is the renowned household name within Odisha state. It is the largest TMT manufacturing plant in Odisha with total integration. The marketing network of the company is very well organized. It fulfills the demand and requirements of all type of customers in urban area as well as in rural areas.

RISK AND CONCERNS

We operate in a dynamic environment that not only provides opportunities but also exposes the business to various risks. To identify and manage key risks for achieving our strategic objectives, we have put in place a well-defined, robust Risk Management framework that has matured over the past several years.

During FY 2022-23 Overall, its strategic and operational risks were well mitigated and did not disproportionately affect its overall competitiveness. The Company does not perceive any inherent risk in the long run, with the exception of certain primary concerns that have afflicted the progress of our industry in general, like:

• shortage of Labour

• rising manpower and material costs,

• Approvals and procedural difficulties.

• Lack of adequate sources of finance.

The Company is exposed to risks from market fluctuations in interest rates and stock market fluctuations in share prices.

Our strategy planning process is guided by the Vision, Mission, and Values of the organisation, along with the strategic direction provided by the Board and Senior Leadership Team. As part of the process, we examine both the external and internal business environment and factor in potential risks and opportunities that could disrupt the industry. Materiality assessment provides insights into the changing needs of all our stakeholders.

Pursuant to the requirements of Regulation 21 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, and the Companies Act, 2013, the Company has this risk management framework in place. The Risk Management Committee (‘RMC) of the Board provides oversight and sets the tone for implementing the Risk Management framework across the organisation. RMC ensures that our Risk Management framework effectively addresses aspects like: Intended risks are taken prudently to plan for the best and be prepared for the worst; Execution of decided strategies and plans with a focus on action, Unintended risks are avoided. The probability or impact thereof is reduced through executive management, policies, processes, inbuilt system controls, and internal audit reviews, among others.

The risk appetite of the organisation is aligned to the SSL Vision. Risk Appetite is driven by the following:

• The health and safety of our employees and the communities in which we operate are our prime concerns, and our operating strategy is focused on the above objective.

• All business decisions are aligned with the Scan Steel Code of Conduct.

• Management actions are focused on continuous improvement.

• Environment and Climate Change impacts are assessed on a continuous basis.

• The long-term strategy of the Company is focused on generating profitable growth and sustainable cash flows that create long-term stakeholder value.

Risk Owners may accept risk exposure in their Annual and Long-term business plans, which, after implementation of mitigation strategies, is aligned with our risk appetite.

The health and safety of employees and the communities in the vicinity of our operations continues to be the top priority for the Company, while simultaneously ensuring the continuity of our business operations.

A detailed overview on the Few risks landscape and mitigation strategies

Macroeconomic Risks

Overcapacity and oversupply in the global steel industry, as well as increased levels of imports, may adversely affect steel prices, impacting profitability. Fast-paced technological changes and shifting customer preferences may necessitate a change in strategy.

key mitigation strategies Diversification of the product portfolio, Development of alternate markets, etc.

Commodity Risk

Raw materials (mainly coal and iron ore) are a significant contributor to the input cost of steelmaking. These commodities have global supply chains, and their prices get impacted by various factors such as the dynamic geopolitical landscape, supply-demand imbalances, weather patterns, policy interventions by governments in key sourcing and consuming countries (especially China), etc.

key mitigation strategies Developing predictive analytics tools to have advance information on price direction so as to optimise buying decisions helps to curtail the Risk. The captive or domestic raw materials provide another avenue to guard against volatility as they have a relatively stable cost and price. Scan Steels has undertaken a risk assessment to assess the capabilities of key vendors. We proactively engage in assessing the risk of single-geography sourcing, and mitigations have been put in place to diversify sourcing and/ or find alternate materials.

Regulatory Risks

Our operations are governed by various statutes encompassing laws and regulations for the environment and climate change, trade measures, competition, taxes, mining, and others. Any deviation in compliance and adherence has the potential to not only impact our operating performance but also dent our reputation. The continuously evolving regulatory scenario, resulting in changes to the statutory provisions and the introduction of new ones, makes compliance more complex. Non-compliance with increasingly stringent regulatory and environmental norms may result in liabilities.

key mitigation strategies as we have a zero- tolerance policy towards non-compliance, we are continuously scanning the regulatory canvas to understand the changing statutes and their implications that could influence our procurement decisions and market footprint to protect and generate business value. A compliance management system is in place to Focus on compliance. Dialogue with regulatory authorities for greater clarity and availing of legal consultations for timely clearances; Working with industry associations towards simplification of rules; a predictive policy regime; and a transition time for regulatory changes Employees are regularly sensitised about the need to comply and educated about the compliance requirements of the role.

Operational Risks

The steel industry is capital-intensive, and the maintenance of critical assets is vital. The industry is also prone to a high proportion of fixed costs and volatility in the prices of raw materials and energy. Limitations or disruptions in the supply of raw materials could adversely affect the Companys profitability. Failure of critical information systems or servers that control the Companys manufacturing plants may adversely impact business operations. Conventional maintenance practises may be inadequate to deliver the highest standards of equipment reliability, leading to unplanned interruptions of operational processes.

key mitigation strategies focus on the formulation and execution of advanced maintenance practises to improve plant availability and reliability. Enhancing in-house capability and leveraging past learnings and expertise Establishing sources of supplies from alternate geographies.

Market Related Risks

Steel is a cyclical industry, and excess volatility in the steel and raw material markets may adversely impact the Companys financial condition. Competition from substitute materials or changes in manufacturing processes may lead to a decline in product demand, resulting in a loss of market share.

key mitigation strategies the only way to beat this cycle is by offering solutions. Development of value-added products and enhanced services and solutions Strengthening contractual agreements. Developing strong customer relationships and gaining brand equity requires continued focus on cost and a timely response on cost control to stay competitive.

Occupational Health and Safety Risk

We operate across multiple manufacturing locations and are subject to various stringent safety laws and regulations. Non-adherence to process and workforce safety requirements, safety laws, and regulations may impact business continuity and reputation.

key mitigation strategies We have created a strong safety governance structure and established a robust safety management system. Safety trainings are conducted to meet the

requirements of employees, contractors, and other relevant stakeholders as a part of the safety competency and capability enhancement initiative. Standard operating procedures have been developed and disseminated across the organisation. Periodic Safety inspections and internal and external safety audits ensure that our systems are properly implemented and compiled. Mandatory usage of PPEs such as safety shoes, safety helmets, appropriate hand gloves, etc. is strictly implemented at all our plants. Adherence to these is being implemented and monitored vigilantly to ensure a safe workplace. We invest in training and developing our leaders to cultivate a culture of safety excellence. Through the deployment of best practises, we strive to lead by example and inspire others to prioritise safety.

Supply Chain Risk

The supply chain network is subjected to Weather disruptions, physical and environmental destruction, trade restrictions due to geopolitical tensions, and disruptions at suppliers. The developing rail, road, and port infrastructure, handling facilities, and dependence on outsourced partners may lead to disruption of operations. Also, Political instability is a threat to raw material suppliers.

key mitigation strategies Scan Steels has a dedicated team focused on managing its supply chain. We are continuously working towards diversification in sourcing and expanding our vendor base from other geographies to manage supply chain disruptions. Measures like logistics network optimisation, improving operational capacity at loading and unloading points, and upgrading existing facilities are being undertaken.

Cyber Security Risk

Cybersecurity risks could damage reputations and lead to financial losses. Such threats arise from: Theft of corporate information Theft of financial information (e.g., financial results and bank details) Ransomware: Cyber extortion

Disruption to business (e.g., inability to carry out SAP transactions, online payments) Loss of business or contract

key mitigation strategies Firewall hardening rule sets were implemented, Strengthening the cybersecurity posture Self-assessment and continuous monitoring, A cybersecurity awareness programme was conducted across all locations in view of the growing threats of cyber attacks due to increased online trades and transactions, monitored threats, and responded to, investigated, and remedied cybersecurity- related incidents and data breaches.

FINANCIAL RISK AND MANAGEMENT

The companys few portions of activities are exposed to variety of financial risks i.e., credit risk, liquidity risk and market risk. The companys primary focus is to foresee the unpredictability of financial market and seek to minimize potential adverse effects on its financial performance. The companys financial instruments (excluding receivables from related parties) are influenced mainly by the individual characteristics of each customer. The companys exposure to credit risk is the concentration of risk from the top few customers and the demographics of the customers.

A. Credit Risk

Credit risk refers to the risk of default on its obligation by the counter party resulting in a financial loss. The maximum exposure to the credit risk at the reporting date is primarily trade receivable from customer other than government entities. These Trade receivables are typically unsecured and are derived from revenue earned from domestic and foreign customers. Credit risk is managed through credit approvals, establishing credit limits and continuously monitoring the credit worthiness of customers to which the company grants credit terms in the normal course of business. On account of adoption of Ind AS 109, the company uses expected credit loss model to assess impairment loss or gain. The company uses a matrix to compute the expected credit loss allowance for trade receivable. key mitigation strategies Credit risk is managed on instrument basis. For banks and financial institutions, only high rated bank/ institutions are accepted. For other financial instruments, the company assesses and maintains an internal credit rating system. The finance function consists of a separate team who assesses and maintain internal credit rating system. Internal credit rating is performed on a company level basis for each class of financial instrument with different characteristics.

VL1: High-Quality assets, negligible credit risk

VL2: Quality assets, low credit risk

VL3: Standard assets, moderate credit risk

VL4: Sub -standard assets, relatively high credit risk

VL5: Low- quality assets, very high credit risk

VL6: Doubt full assets, credit - impaired

The company considers the probability of default upon initial recognition of asset and whether there has been a significant increase in credit risk on an ongoing basis throughout each reporting period. To assess whether there is a significant increase in credit risk the company compare the risk of a default occurring on the asset as at the reporting date with the risk of default as at the date of initial recognition. It considers available reasonable and supportive forward - looking information. Especially the following indicators are incorporated:

1. Internal credit rating

2. External credit rating (as far as available)

3. Actual or expected significant adverse changes in business, financial or economic conditions that are expected to cause a significant change to the borrowers ability to meet the obligation.

4. Actual or expected significant changes in the operating results of the borrower.

5. Significant increase in credit risk on other financial instruments of the same borrower

6. Significant changes in the value of the collateral supporting the obligation or in the quality of the third-party guarantees or credit enhancements.

7. Significant changes in the expected performance and behavior of the borrower, including changes in the payment status of borrowers in the group and changes in the operating results of the borrower.

8. Macro-economic information (such as regulatory changes, market interest rate or growth rate) is incorporated as part of the internal rating model.

B. Liquidity Risk

Prudent liquidity risk management implies maintaining sufficient cash and marketable securities and the availability of funding through an adequate amount of committed credit facilities to meet obligations when due and to close out market positions. Due to the dynamic nature of the underlying businesses, the company treasury maintains flexibility in funding by maintaining available under committed credit lines. key mitigation strategies Management monitors rolling forecasts of the companys liquidity position and cash and cash equivalents on the basis of expected cash flows. This is generally carried out at local level in accordance with practice and limits set by the company. These limits vary by locations to take into account the liquidity of the market in which the entity operates. In addition, the companys liquidity management policy involves, projecting cash flows in major currencies, considering the level of liquid assets necessary, monitoring balance sheet liquidity ratios against internal and external regulatory requirements and maintaining debt financial plans.

C. Financial Market Risk

The company is not an active investor in equity market. It continues to hold certain investment in equity for long term value accretion which are accordingly measured at fair value through other comprehensive income. Accordingly, fair value fluctuations arising from market volatility is recognized in other comprehensive income.

(i) Foreign Currency Risk

The company dont have foreign currency exposure hence no foreign exchange forward contracts are required to hold and to mitigate the risk of foreign exchange fluctuation.

(ii) Cash flow and fair value interest rate risk

The companys main interest rate risk arises from long term borrowings with variables rates, which exposes the company to cash flow interest rate risk. Group policy is to maintain most of its borrowings at fixed and variable rate using interest rate swaps to archive this when necessary.

The companys fixed rate borrowings are carried at amortized cost. They are therefore not subject to interest rate risk as defined in Ind AS 107, since neither the carrying amount not the future cash flows will fluctuate because of a change in market interest rates.

(iii) Price risk

The companys exposure to equity securities price risk arises from investments held by the company and classified in the balance sheet either as fair value through OCI or at fair value through profit or loss.

Profit for the period would increase/ decrease as a result of gains/ losses on equity securities classified as at fair value through profit or loss. Other components of equity would increase/ decrease as a result of gains/ losses on equity securities classified as fair value through other comprehensive income.

Capital Management

The companys objectives when managing capital are to:

(a) Safeguard their ability to continue as a going concern, so that they can continue to provide returns for shareholders and benefits for other stakeholders, and

(b) Maintain an optimal capital structure to reduce the cost of capital. in order to maintain or adjust the capital structure, the company may adjust the amount of dividends paid to shareholders, return on capital to shareholders or issue new shares.

Other key mitigation strategies

Apart from this, there could be an oversupply position due to capacity expansion, the setting up of new projects in the steel industry, and the scarcity of raw materials. Industry is highly labourintensive and subject to stringent labour laws. Your Company has identified the major thrust areas to concentrate on, which it believes are critical to the achievement of organisational goals. The company annually reviews the ‘List of Risk Areas to identify potential business threats, and suitable corrective actions are initiated. Confirmations of compliance with appropriate statutory requirements are obtained from the respective units or divisions. A corporate governance policy clearly laying down the roles, duties, and responsibilities of various entities in relation to risk management is in place.

MEDIUM -TERM AND LONG-TERM STRATEGY

Our strategy planning process is influenced by the Vision, mission, and Values of the organisation, along with the strategic direction provided by the Senior Leadership Team. As part of the process, we examine both the external and internal business environment and factor in potential risks

and opportunities that could disrupt the industry. Materiality assessment provides insights into the changing needs of all our stakeholders. Our long-term strategies and annual business plans are formulated as an outcome of the integrated strategy planning process. The overall strategy and plans are cascaded down to individual divisions or departments with clearly defined responsibilities across all employee levels.

The Company focuses on the following strategy to make its competitive position and progress of the company:

1) In-house research, reports from specialised agencies, and interactions with all concerned to help track the macroenvironment

2) Internal meetings ensure multi-disciplinary stress testing and regular tracking of assumptions to proactively respond, and a due diligence review before dealing with uncertainties.

3) Compliance with norms through selecting the right equipment, processes, competencies, inputs, and Security arrangements like access monitoring systems, vigilance, and mock drills

4) The executive committee and other unit or functional meetings closely monitor operational plans; cost optimisation, inventory, collections, and vendor credit Initiatives have been taken up.

SEGMENT WISE PERFORMANCE:

The Company is engaged in only one segment viz. Steel Manufacturing and as such there is no separate reportable segments as per IND AS -108 “Operating Segment.”

PRODUCTS AND MARKET PERFORMANCE

It is imperative that we keep pace with the growing needs of our customers, primarily those in the Automotive and Construction sectors. We aim to deliver enhanced benefits through customised services and solutions and value-added products throughout the customers purchase journey.

A SNAPSHOT

Scan Steels recorded finished steel production, for FY 2022-23, at 1,01,410 MT. Besides this, the company has also produced 1,77,956 MT intermediary steels (i.e., Sponge Iron) in the FY 2022-23.

1. PRODUCT HIGHLIGHTS

1.1 LONGS Volume

Long products are comprised of almost 50 % of product portfolio (in terms of sales value) in FY 2023. Long products are manufactured at Rambahal & Budhakata unit.

Sector

Long Product in India is largely consumed by Construction & Infra and Industrial & Engineering sector.

2. OPERATIONAL REVIEW

The company is engaged in the manufacturing of TMT Rod, Sponge Iron, MS billets, and ingots, as well as generating power for captive consumption. The Company has a semi-Automatic Rolling Mill.

2.1 Facilities: -

The company has its four Units at different places of India: -

Unit - 1 is situated at Rambhahal, At- Keshramal, Rajgangpur, Sundergarh (Odisha) with the facilities of Rolling Mills - 2, Sponge Iron-2, Induction Furnace - 2.

Unit - 2 is situated at Gangajal, Budhakata, Sundergarh, Odisha with the facilities of Sponge Iron- 4, SMS Billet Caster -3, Captive Power Plant - 1 and Coal Washery -1.

Unit - 3 is situated at Bai-bai, Tudalaga, Sundergarh, Odisha with the facilities of Induction Furnace - 2.

Unit - 4 is situated at Vill- Veniveerapura, Bellary, Karnataka with the facilities of Sponge Iron 2.

2.2 Overview

Scan Steels is an Integrated Steel Plant. It manufactures TMT Bars to fulfill the requirement of the state. It is a local brand in Odisha.

2.3 Turn Over: -

Gross turnover, including other incomes, for the year 2023 stood at 1096.78 lakhs, which was around 9.42% upward in comparison to fiscal 2022. During the year, the company initiated the trading of steel products during the period of installation of a new rolling mill and achieved a trading turnover of 7333.24 lakhs, compared to 145.66 lakhs for the last fiscal year. Your company continues to focus on the quality and strength of its products. Your Company has initiated steps to explore new markets in addition to developing existing ones.

2.4 Quality: -

Your Company continues to concentrate on quality, and the strict adherence to this policy continues to benefit your company in price realisations.

3 FINANCIAL PERFORMANCE Highlights FY 2022-23

Financial Data	2022-23	2021-22	Growth (%)
Total Icome	1096.78	1,002.34	9.42
Operating EBIDTA	48.60	85.45	(43.12)
EBIDTA margin (%)	4.43 %	8.53%	(48.07)
Depreciation and amortization expenses	13.29	12.81	3.75
Interest Cost	19.31	8.94	115.99
Profit before Exceptional Items	22.00	65.86	(66.59)
Exceptional Items	-	-
PAT	15.32	50.77	(69.82)
Earnings per shares (diluted)	2.93	9.70	(69.79)

Note: The figures are in bracket shows negative Other key Financial Indicators:

SL. RATIOS NO.	2022-23	2021-22	CHANGE	%CHANGE
1 Debtors Turnover (No. Of days) *	16	8	8	(50.00)
2 Inventory Turnover (No. Of Days)	47	46	1	(2.17)
3 Interest Coverage Ratio **	2.52	9.80	(7.28)	(74.29)
4 Current Ratio	1.84	2.26	(0.42)	18.58
5 Debt -Equity Ratio	0.31	0.30	0.01	(3.33)
6 Operating EBITDA (Margin %) #	4.43	8.53	(4.10)	(48.07)
7 Net Profit Margin (%) #	1.40	5.07	(3.67)	(72.43)
8 Return on Net worth (%) #	4.19	14.47	(10.28)	(71.04)

Note:

*Trade receivables turnover is high due to slow collection from debtors

* * Interest coverage ratio has gone down due to payment of RoR amount to State Bank of India amounting to Rs 1041.51 lakhs

#Operating EBITDA, Net Profit and Return on Net worth have gone down due to higher input cost in respect to procurement of energy.

AThe figures are in bracket shows negative

4 OPERATIONAL PERFORMANCE

4.1 PRODUCT WISE GROSS SALES: Breakup [Rs in crores)

PRODUCT	2022-23	2021-22	% CHANGE
TMT REBARS	546.85	539.86	1.29 %
SPONGE IRON	142.54	227.12	-37.24%
MS INGOT/MS BILLET	272.65	194.36	40.28%

4.2 PRODUCT WISE SALES QUANTITY: Breakup (Qty in MT)

PRODUCT	2022-23	2021-22	% CHANGE
TMT REBARS	1,01,599	1,09,469	- 7.18%
SPONGE IRON	44,356	75,456	-41.21%
MS INGOT/MS BILLET	59,174	43,974	34.56 %

In the financial year 2022-23, the companys TMT Rebar turnover improved by 1.29%, whereas quantity movement of the same product stood at 7.18% lower than FY 2021-22, showing a higher realisation price per MT of TMT sale.

FINANCIAL MANAGEMENT

Senior management reviews the requirement for funds for projects under implementation periodically, and after assessing the financial market, decisions are taken to identify the lenders. A part of the fund requirement is arranged by way of borrowing from Banks on competitive terms, and the balance is met from internal accruals.

The finance department is working at the Bhubaneswar & Factory establishment and is manned by qualified and experienced personnel. The department properly records all financial transactions, and proper financial reports are periodically sent to senior management. Proper controls are in place, and audits are conducted regularly.

INDUSTRIAL RELATIONS AND HUMAN MANAGEMENT

Our communities, customers, and suppliers are critical to our business continuity and social licence to operate. We believe in building long term, transparent, and trust-based relationships with them through continuous stakeholder engagement and innovation. We aim to strengthen the supplier relationships by holding vendors meet and supplier relationship programmes.

We recognise that the success of our business relies on the integral role played by our suppliers and business partners. Our key focus areas are Timely Payment, continuity of orders, capacity building, which helps in Sustainable supply chain practises, and Local procurement. As one of our core stakeholders, they ensure the seamless operation of our business and contribute to our achievements. We firmly believe in establishing mutually beneficial relationships by selecting partners who align with our values, business ethics, and commitment to sustainable practises.

The total number of employees as of March 31, 2023 was 2002. The corner stone of Scan Steels ambitions for becoming a bigger, better, and more efficient steel producer rests on the drive and ability of its people. The Human Resources Department [HRD) works continuously to maintain healthy working relationships with workers and other staff members. We embrace diversity and inclusivity in our workforce, fostering equal opportunities for all, regardless of gender, age, ethnicity, religion, or background. Our recruitment policy champions

a rich tapestry of talent, uniting individuals from diverse areas of expertise, cultures, and age groups. Through our comprehensive strategy, we forge an inclusive workforce, empowering women and minority groups to actively contribute and thrive.

The Company has adopted a progressive employee-friendly policy for helping employees develop their organisational skills, knowledge, and abilities to achieve efficiency while keeping them in-step with the latest technologies and industry-relevant skills. To enable the organisation to attain its full potential, it is imperative for us to create and maintain an ideal work culture, thus creating an engaged and skilled workforce capable of delivering on the commitments to our stakeholders and, in the process, making us ‘Future Ready?structurally, financially, and culturally. Training programmes are regularly conducted to update their skills and apprise them of the latest techniques. Senior management is easily accessible for counselling and redressal of grievances. The HR department continuously strives to maintain and promote harmony and coordination among workers, staff, and members of senior management. Social awareness and cultural and sports programmes are arranged regularly to create interest in living a meaningful life and release tensions.

INTERNAL FINANCIAL CONTROL SYSTEMS AND INTERNAL AUDIT

The Company has an Internal Financial Controls (‘IFC) framework commensurate with the size, scale, and complexity of the Companys operations. The Board of Directors of the Company is responsible for ensuring that IFC have been laid down by the Company and that such controls are adequate and operating effectively. The Audit Committee regularly reviews audit plans, significant audit findings, the adequacy of internal controls, compliance with accounting standards, and so on. The internal control framework has

been designed to provide reasonable assurance with respect to recording and providing reliable financial and operational information, complying with applicable laws, safeguarding assets from unauthorised use, executing transactions with proper authorization, and ensuring compliance with corporate policies. The Companys internal financial control framework is commensurate with the size and operations of the business and is in line with the requirements of the Companies Act, 2013.

The Company believes in systematic work and the placement of proper checks. Proper systems are in place, and regular reviews are held at higher levels to check the efficacy and relevance of these systems. These reviews also prescribe changes wherever required. The Company has laid down Standard Operating Procedures and policies to guide the operations of each of its functions. Business heads are responsible for ensuring compliance with these policies and procedures. Robust and continuous internal monitoring mechanisms ensure the timely identification of risks and issues. The internal auditors of the company conduct audits of various departments and areas. Their reports are placed before the Audit Committee, which reviews these reports and the comments and suggestions of the Internal Auditors. The Audit Committee also oversees financial systems, procedures, and internal controls and is competent to request any information or document from any department. The management, statutory auditors, and internal auditors have also carried out adequate due diligence on the control environment of the Company through rigorous testing.

The scope and authority of the Internal Audit function are defined in the Internal Audit Charter. To maintain its objectivity and independence, the Internal Audit function reports to the Chairman of the Audit Committee. The Internal Audit team develops an annual audit plan based on the risk profile of the business activities. The Internal Audit plan is approved by the Audit Committee, which also reviews compliance with the plan. The Internal Audit team monitors and evaluates the efficacy and adequacy of internal control systems in the company and their compliance with operating systems, accounting procedures, and policies at all locations of the Company.

Based on the report of the internal audit function, process owners undertake corrective action in their respective areas and thereby strengthen the controls.

Significant audit observations and corrective action(s) thereon are presented to the Audit Committee. The Audit Committee, at its meetings, reviews the reports submitted by the Internal Auditor. Also, at frequent intervals, the Audit Committee has independent sessions with the statutory auditor and the Management to discuss the adequacy and effectiveness of internal financial controls.

STATUTORY COMPLIANCE

The Company has in place adequate systems and processes to ensure that it is in compliance with all applicable laws. The Company Secretary is responsible for implementing the systems and processes for monitoring compliance with the applicable laws and ensuring that the systems and processes are operating effectively. The Chief Financial Officer places a certificate before the Board at each meeting where the Financial Results are approved about the Fairness of the data. The Company Secretary also confirms compliance with Company law, SEBI regulations, and other corporate laws applicable to the Company. Through Stringent compliance measures, we guarantee transparency and maintain the integrity of our operations.

CORE VALUES AND CULTURE

Corporate success is based on certain core values and the corporate culture developed by the

Company. Ethics are at the core of our operations. Our Code of Conduct prohibits corrupt practises, conflicts of interest, and unethical conduct. We emphasise information security and foster ethical competition, creating an environment of trust and integrity. Underlying this is a firm belief that teamwork and motivation rooted in fairness are the keys to success in business. The group sets benchmarks for itself in these areas and strives to achieve them, believing in seeking the active participation of everyone in decision-making rather than relying on the imposition of central diktats. Quality, productivity, and optimal utilisation of resources?human and material?woven around the concept of the welfare of the community as a whole are central to the managements philosophy.

CORPORATE SOCIAL RESPONSIBILITY

The Corporate Social Responsibility (CSR) programmes of Scan Steels strive to make a difference in the communities around its area of operations. And ensure that all developmental activities and initiatives undertaken are accessible to the most marginalised segments, such as children, women, the elderly, and those with disabilities. This would reflect particularly in the fields of education, healthcare, sanitation, community welfare, skill development, employment generation, infrastructure development, and sustainable livelihoods. We intend to collaborate with key stakeholders, especially the local administration and institutions, to facilitate development through initiatives in the mentioned thematic areas. The initiatives are strategically designed on the basis of community needs assessment, mapping, participatory planning, and local feasibility. The CSR programmes supplement the local governments efforts in development, besides striving to have the communities own the initiatives and sustain their impact over time. Most of our programmes are centred in and around Sundergarh and other districts of Odisha

RESEARCH AND DEVELOPMENT A PRIORITY:

A research and development focus has provided strong scientific support to the groups quantitative growth with continuing enhancements in the quality of the product. The research and development policy keeps the groups long-term interests in view and believes in anticipating the needs of the future. It is committed to modernization and encourages it in every field.

CAUTIONARY STATEMENT

This report contains projections, estimates, expectations, etc., which are just “forward looking statements”. Actual results could differ from those expressed or implied in this report. Important factors that may have an impact on the Companys operations include economic conditions affecting demand, supply, and price conditions in the domestic and overseas markets, changes in government regulations and policies, tax laws and other statutes, and other incidental factors. The Company assumes no responsibility to publicly modify or revise any forward-looking statements on the basis of any further events or new information. Actual results may differ from those mentioned in the report.

CONCLUSION

At Scan Steels, innovation and responsibility have been at the core of building a sustainable enterprise and exploring possibilities for creating a better future. Whether by developing high- strength steel or offering new solutions for construction and mobility, we relentlessly focus on delivering products that are synonymous with quality and durability. We also deploy the best available technologies and processes to drive resource efficiency and develop materials of the future that are superior, sustainable, and affordable. We have focused on strengthening our balance sheet, upholding the highest standards in ethical and responsible business practises, and striving towards a shared future of prosperity.

Place: Bhubaneswar Date: 25th August, 2023

FOR AND ON BEHALF OF THE BOARD

Sd/-

Ankur Madaan,

Whole- Time Director

(DIN: 07002199)

Sd/

Praveen Patro,

Director

(DIN: 02469361)