ANNEXURE E TO DIRECTOR’S REPORT

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

SCENARIO OF STEEL INDUSTRY:

GLOBAL STEEL INDUSTRY

In 2014, the geopolitical events and a slow recovery from the previous economic slowdown countered some of the optimism that was felt towards the end of 2014. Macro data for developed nations continued to strengthen during the year, however, China, ASEAN, MENA and other regions which were expected to grow, continued to show sluggish signs of economic recovery. Oil prices fell to record lows, while iron ore prices fell to below USD 70 per tonne, leading to the exit of several small scale mining operations from the global mining industry. Overall economic sentiments and growth remained at almost the same levels as 2013.

In 2014, global steel demand expanded by a mere 0.6% to 1.537 billion tonnes, primarily due to contraction of demand in emerging economies like China, Brazil, Russia and Turkey. Chinese demand fell by 3.3% in the year to 710.8 million tonnes, with the outlook for 2015 and 2016 showing signs of reducing further by 0-5% year-on-year (yoy). Developed nations like USA, Germany, South Korea and Japan continued to show growth support during the year. The global steel demand for 2015 and 2016 is forecast to grow by 0.5% and 1.6% respectively to a level of 1.544 and 1.565 billion tonnes.

Overall global crude steel production expanded by 1.2%, to 1.66 billion tonnes, from 1.64 billion tonnes in 2013.

The following table shows the crude steel production volume of the top 5 steel producing nations:

in million tonnes

Rank Country 2014 2013 Change %
1 China 822.7 815.4 0.9
2 Japan 110.7 110.6 0.1
3 United States 88.3 86.9 1.7
4 India 83.2 81.3 2.3
5 South Korea 71.0 66.1 7.5

Source: World Steel Association (WSA)

A critical point that affected the industry was the slowdown of demand in China. Huge investments in infrastructure had increased Chinese demand from 2000 to 2010. However, as a consequence of the Chinese Government changing its stance to pursue sustainable economic growth, steel demand and supply began slowing down. Cited environmental concerns and curtailing of debt to the indigenous steel industry have led to a number of inefficient and polluting units shutting down operations permanently. This, in tandem with slowing demand due to limitations on infrastructure growth and slowing down of overall consumer sentiments, has effectively pushed down the growth of the Chinese steel industry. Oversupply, falling raw material prices and record high exports have emerged as a result of the same. This scenario is likely to persist in 2015 with a high impact on the global steel trade markets.

WSA has projected Indian steel demand to grow by 6.2% in 2015 and by 7.3% in 2016 as compared to global steel use growth of 0.5% and 1.4% respectively. Chinese steel use is projected to decline in both these years by 0.5%.

STEEL INDUSTRY IN INDIA

In 2014, India retained its position as the 4th largest steel producing country in the world, behind China, Japan and the USA. The crude steel production grew by 2.3% to 83.2 million tonnes, while steel demand grew by 2.2% to 75.3 million tonnes.

The Indian GDP growth expanded to 7.2% in 2014 due to improving economic sentiments post the election of a new government. However, demand at the grass root level remained stagnant and is only expected to pick up from 2015. Consequently, steel demand grew at 2.2% in the year, though the domestic steel industry suffered due to the influx of cheap imported products, especially from China. This led to India becoming a net importer of steel in the year, a trend which had been successfully reversed in 2013. During the year, steel exports from India were at 5.3 million tonnes while imports registered at 7.8 million tonnes. Indian GDP is likely to grow at a rate higher than 7.5% in 2015, while steel demand is expected to grow by 6.2% in the year. The automobile sector is on the path to recovery and likely to grow from 3.8% in 2014 to 11.4% in 2015. Meanwhile, the construction sector is expected to grow by 6.9%, compared to a growth rate of 4.1% in 2014.

OVERVIEW OF THE COMPANY AND ITS BUSINESS:

Gyscoal Alloys Limited is engaged in the business of manufacturing of Stainless Steel and Mild Steel Long Products from scrap since 1999. The plant for the production activities & registered office of the Company is located at Ubkhal, Kukarwada, Vijapur Taluka, Mehasana District. The Corporate office of the company is situated at 2nd Floor, Mrudul Tower, Near Times of India, Ashram Road, Ahmedabad.

The Company has the capacity to manufacture all grades of Stainless Steel Products from 200 series to 400 series. The products are primarily used in the construction in chemical plants, Pharmaceutical plants, building construction, railways and other sectors for structural purpose. The Company s products adhere to high quality standards and it has got ISO 9001:2008 certification for the manufacture and supply of stainless steel and mild steel based angles, channels, flats, round, square, bright, twisted bars, billets and ingots adhering to IS 2062 & IS 1786 from BSI Management Systems. The Company has also been successful in producing goods according to needs and specifications of its domestic & foreign buyers.

During the financial year 2010-11, the Company entered the Capital Market with Initial Public Offer (IPO) aggregating to approximately Rs. 5467 lacs. The details of Utilization of IPO proceeds forms part of Director s Report of the Company.

FINANCIAL PERFORMANCE OF THE COMPANY

• During FY15, the company recorded a total income of Rs. 17791.01 lacs, of which income from the operations was Rs. 17636.45lacs.

• For the year FY15, Earnings Before Interest, Depreciation, Tax and Amortization (EBIDTA) was Rs. 1708.75 lacs

• For the year FY15, Depreciation was Rs. 557.67 lacs, Interest and Finance charges were Rs. 1051.27 lacs and Profit before Tax (PBT) was Rs. 99.81 lacs. And Profit After tax (PAT) was Rs. 20.30 lacs

• Basic & diluted Earnings Per Share (EPS) was Rs.0.13

• As on March 31, 2015 the Net worth of the company was Rs. 9278.67 lacs

SWOT ANALYSIS OF THE COMPANY :

Strength:

• Management depth and ability to manage client relationships.

• R & D capabilities to develop efficient and cost effective process at short notice having a State of the Art dedicated R & D Center.

• Multi-purpose and multi-production facilities having Quality Certifications.

• Enhanced presence in the market through clientele basis.

Threats:

The Company faces stiff competition from medium and larger well-established players. The Company is smaller in size compared to the market leaders. However with capital expenditure in the project of the company it intends to make it good and face competition more confidently.

RISKS AND CONCERNS :

Your company is mainly focusing on R & D and manpower and the intelligence. Apart from the risk on account of interest rate and regulatory changes, business of the company are exposed to certain operating business risks, which is mitigated by regular monitoring and corrective actions.

INDUSTRIAL RELATIONS & HUMAN RESOURCE MANAGEMENT :

The Company believes that human resource is the most important assets of the organization. It is not shown in the corporate balance sheet, but influences appreciably the growth, progress, profits and the shareholders values. During the year your company continued its efforts aimed at improving the HR policies and processes to enhance its performance. The vision and mission of the company is to create culture and value system and behavioral skills to insure achievement of its short and long term objectives.

The company as at year end has 57 employees on its role and continues to attract talent both from within and outside India to further its business interests. Industrial relations continue to be cordial.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

Internal Financial Control that encompass the policies, processes and monitoring systems for assessing and mitigating operational, financial and compliance risks and control over related party transactions, substantially exist. Your Company has appropriate internal control system for business processes, with regards to efficiency of operations, financial reporting, compliance with applicable laws and regulations. In the Company, the Board of Directors is responsible for ensuring the adequacy and effective monitoring of internal financial controls. The Internal Audit Program is designed in consultation with the Statutory Auditors to ensure accuracy and reliability of accounting data and is monitored by the Audit Committee. Audit observations and recommendations are reported to the Audit Committee, which monitors the implementation of the said recommendations. The Company s internal audit team also carries out extensive audits throughout the year, across all functional areas.

CAUTIONARY STATEMENT

Statement made in the Management Discussion & Analysis describing the company s objectives, projections, estimates, expectations may be Forward-looking statements within the meaning of applicable securities laws & regulations. Actual results could differ from those expressed or implied. Important factors that could make a difference to the Company s operations include economic conditions affecting demand supply and price conditions in the markets in which the company operates, changes in the government regulations, tax laws & other statutes & other incidental factors.