rama steel tubes ltd Management discussions

ECONOMY OVERVIEW Global Economy Overview

The global economy grappled with the challenges posed by continued geopolitical tension, inflationary pressure and a resurgence of Covid-19 in China, in 2022. This prompted several central banks to adopt stringent monetary policies. Led by the several challenges and the cautionary stance, global economic growth stood at 3.4% in 2022. Advanced economies grew 2.7% while Emerging Market and Developing Economies (EMDEs) grew 4% in 2022. Towards the end of the year, supply side witnessed early signs of easing bottlenecks and declining transportation costs. These led to deceleration in input prices pressures across sectors. Global headline inflation appears to have peaked in the third quarter of 2022. Fuel prices and prices of nonfuel commodities are declining, lowering headline inflation.

Global growth is estimated at 2.8% in 2023 and 3% in 2024. Advanced economies are expected to witness 1.3% growth in 2023 and 1.4% in 2024. EMDEs are expected to grow at 3.9% in 2023 and 4.2% in 2024. In emerging markets and developing economies, growth bottomed out in 2022 and is expected to pick up, led by China, with the full reopening in 2023. With inflation subsiding gradually and easing of supply bottlenecks economic activity is expected to pick-up in 2024 in both groups. About 84% countries are expected to have lower headline (consumer price index) inflation in 2023 than in 2022. Global inflation is set to fall from 8.7% in 2022 to 7% in 2023 and 4.9% in 2024 when the impact of tight monetary controls will begin to show benefits.

Source: World Economic Outlook April 2023, IMF

Indian Economy Overview

Amidst a challenging macro global environment, the Indian economy exhibited resilience due to strong domestic consumption and government expenditure. In FY23, India became the worlds fifth largest economy, measured in current dollars to become a US$ 3.5 trillion economy. The I ndian economy is poised to grow at 7.2% in FY23, as per the Provisional estimates of National Income 2022-23. The economic growth was driven by pickup in manufacturing activity, recovery in private investment and domestic consumption. In the industrial sector, the growth of main economic activities such as mining, manufacturing, and the construction sector grew by 4.6%, 1.3% and 10% respectively in FY23 despite a high base of 12.6%, 10.5%, and 10%, respectively, in FY22.

Macroeconomic environment witnessed stability on various fronts in FY23 including improved current account deficit, robust banking system and easing inflation pressure. Private consumption hit the highest level since FY07 at 58.5% and gross fixed capital information is at the highest point since FY14 at 34% of GDP. Retail inflation is expected to moderate in line with wholesale inflation, which fell to a 25-month low in January 2023. The easing of global inflationary pressure led by falling international commodity prices and strong government measures are expected to aid economic growth in India. Coupled with robust revenue collections, there are increased expectations of a fall in the current account deficit in FY 2022-23 and FY 2023-24, and strengthening of the Indian Rupee in near future.

The inflation trajectory will be influenced by multiple factors including extreme weather conditions such as heatwaves and the possibility of an El Ni?o year, volatility in international commodity prices and pass-through of input costs to output prices. In FY24, inflation is expected to remain at moderate levels within 5-6% range, with risks evenly balanced. The Economic Survey 2022-23 and the RBI have estimated the Indian to grow at 6.5% in FY24 despite high global uncertainties. The robust growth outlook stems from the strong measures taken by the government to boost economic growth and a huge capital expenditure allocation. The ndianI economy remains resilient even amid volatile global developments.

INDUSTRY OVERVIEW GLOBAL STEEL INDUSTRY

I n 2022, the global economy being severely impacted by continued geopolitical tension, persisting inflation, monetary tightening by major central banks and Chinas economic deceleration, was faced with slowdown in demand in steel consuming sectors. According to World Steel Study, the global finished steel demand decline to 1,782 million tonnes in 2022, down 3.2% as compared to 1,842 million tonnes in 2022. Chinese steel demand, which forms the lions share of global demand, contracted in both 2021 and 2022 as the Chinese economy decelerated sharply due to unexpected lockdowns. Steel demand in the developed economies suffered a sizable contraction of 6.2% in 2022 to 375.2 million tonnes, mainly due to monetary tightening and high energy costs. Steel demand dynamics in emerging and developing economies were diverging. Developing Asia excluding China showed more resilience than elsewhere, remaining flattish at 0.3% in 2022. India remained a bright spot in the global steel industry in 2022, exhibiting 8.2% growth in demand.

Source: worldsteel-Short-Range-Outlook-April-2023_FINAL.pdf

I n 2022, global crude steel production witnessed 4.3% decline to 1,879 million tonnes as compared to 1,960 million tonnes in 2021, according to the World Steel Association. Barring India and Iran, all other major steel producing countries witnessed decline in production. The biggest decline in production was witnessed in Russia and other CIS countries and Ukraine, of 20.2% YoY. The total crude steel production in Europe decreased by ~11% YoY. In the United States production declined by 5.5% YoY. In Asia and Oceania, production witnessed the least decline of 2.3% YoY with output in China and Japan declining 2.1% and 7.4% YoY respectively. Only two countries, India and Iran reported growth in output, by 5.5% and 8% respectively.

Source: World Steel in Figures 2023 - worldsteel.org

Outlook

I n 2023, persistent inflation and high-interest rates in most economies is expected to limit the recovery of steel demand, despite positive factors like reopening of Chinas economy, Europes resilience in the face of the energy crisis, and the easing of supply chain bottlenecks. According to the World Steel Short Range Outlook April 2023, global steel demand is expected to rebound by 2.3% to reach 1,822.3 million tonnes. I n 2024, demand growth is likely to be driven by regions outside China but will face global deceleration due to Chinas anticipated flat growth, overshadowing the improved environment. Steel demand is forecasted to grow by 1.7% in 2024 to reach 1,854 million tonnes. Manufacturing is expected to lead the recovery, but high interest rates will continue to weigh on steel demand. Post the sharp decline in 2022, steel demand is expected to increase by 1.3% in 2023 and 3.2% in 2024. Steel demand in emerging and developing economies excluding China will show growth of 3.6% in 2023 and 3.9% in 2024.

Source: worldsteel-Short-Range-Outlook-April-2023_FINAL.pdf

INDIAN STEEL INDUSTRY

Steel production and consumption are frequently seen as measures of a countrys economic development because it is both a raw material and an intermediary product. In ndia, the steel sector has been a majorI contributor to manufacturing output, about 2% of GDP and directly and indirectly providing employment to 500,000 Indians. The sector has benefited from strong economic growth as the correlation between growth in steel demand and GDP growth is quite strong. The Indian steel industry is modern, with state-of-the-art steel mills. It has always strived for continuous modernisation of older plants and up-gradation to higher energy efficiency levels.

I ndia remained a bright spot in the global steel industry in 2022, amidst gloomy global economic environment. I ndia was the second highest steel producer globally, in 2022. India successfully reigned in inflation, that was a major dampening factor of growth even in major advanced economies. Driven by rising construction activities, Indias total steel demand was at 119.86 million tonnes in FY23, according to the Indian Steel Association (ISA). The growth was driven by robust performance of steel consuming sectors.

Trade scenario in FY22

I ron ore and coal are the major raw materials used in steel making. These are sourced from both indigenous and foreign sources. In FY23, steel exports fell by 50% to 6.72 million tonnes from 13.49 MT in FY22. Imports grew 29% to 6.02 million tonnes in FY23 from 4.67 MT in FY22. Despite the sharp fall in exports, India continues to be a net exporter of steel since FY20.

The Indian economy is on a healthy growth track with a rising share of investment in GDP led by strong government spending on infrastructure

(roads, railroads, and defence manufacturing). The residential sector is also expected to grow, backed by affordable housing projects and urban demand. Private investment is improving on the back of the Production Linked Investment (PLI) Schemes. 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. Government schemes like Domestically Manufactured Iron and Steel Products (DMI&SP) Policy, the Quality Control Order (QCO), Promotion of R&D in the Iron & Steel Sector, etc are providing significant boost to the overall performance of the Indian steel sector.

Outlook

Driven by strong momentum in infrastructure spending and sustained growth in urban consumption, steel demand in India is expected to expand by 8-9 million tonnes each year in FY24 and FY25. According to the ISA, in FY 2024, the domestic steel demand is expected to grow at 7.5% to reach 128.85 million tonnes and 6.3% in FY 2025 to reach 137 million tonnes. All the steel-using sub-sectors are expected to grow at 6% or above in both FY24 and FY25. The association expects the rising share of investment in GDP, backed by strong capital expenditure outlay by the government and improving private investments will drive the construction, railways, and capital goods sector. The consumption-driven steel-using sectors particularly, automotive and consumer durables, are expected to maintain healthy growth. Private consumption will largely be sustained by urban consumption while rural consumption is expected to witness a steady recovery. Huge scope for growth is offered by Indias comparatively low per capita steel consumption and the expected rise in consumption due to increased infrastructure construction and the thriving automobile and railways sectors.

I mportant growth drivers for steel production in India include:

Rising Demand y Strong growth expected in automobile and consumer durables y 6% or above growth in all steel consuming sub sectors

Investment Boost y About USD 40 billion foreign investment in the sector in the coming years y Key players have signed multiple MoUs

Infrastructure Development y Government policies like PMAY, smart cities mission and huge allocation to capital expenditure y nfrastructure consuming 9% of total steel is expected to witnessI robust 11% CAGR till FY26 y nI the near future, several airports construction throughout the country will increase steel consumption by over 20%

Rural Area Penetration y Rural areas undergoing significant development with more houses and roads being built are likely to witness increase in per capita steel consumption y Government focus on providing housing for all is giving rise to steel consumption in rural India

Governmental Initiatives

The government has taken various steps to boost the steel sector including the introduction of National Steel Policy 2017 and allowing 100% Foreign Direct Investment (FDI) in the sector under the automatic route.According to the Department for Promotion of Industry and Internal Trade (DPIIT), between April 2000-September 2022, Indian metallurgical industries attracted FDI inflows of USD 17 billion. In 2019, the Government introduced Steel Scrap Recycling Policy with an aim to reduce import. The industry is also benefitting from the developments happening across various industries.

Rapid rise in production has resulted in India becoming the second largest steel producer globally during 2018-2022, from being the third largest in 2017. The country was also the largest producer of Sponge Iron or DRI in the world and the second largest finished steel consumer in the world after China.

National Steel Policy 2017: The policy has laid down the broad roadmap for encouraging long term growth for the Indian steel industry, both on demand and supply sides, by FY31. The Government has also announced a policy for providing preference to domestically manufactured I ron & Steel products in Government procurement. The policy aims to increase the per capita steel consumption to 160 kgs by FY31. The Government has also promoted policy which provides a minimum value addition of 15% in notified steel products covered under preferential procurement.

PLI scheme: The government has also approved a Production-linked ncentiveI ( PLI) Scheme for Specialty Steel. tI is expected that the specialty steel production will become 42 million tonnes by the end of FY27. This will ensure that approximately 2.5 lakh crores worth of specialty steel will be produced and consumed in the country which would otherwise have been imported.

300MT by 2030: The steel industry has significant growth potential aims to achieve 300 MT production capacity by 2030. The government has allocated USD 1.4 trillion for the National Infrastructure Pipeline (NIP) between FY19 and FY25 which will accelerate the growth of the steel sector.

PMAY scheme: The government aims to construct 2.95 Crores houses under the Pradhan Mantri Awas Yojana-Gramin (PMAY-G) by FY24. The houses have been already sanctioned and funds have been allocated to different states and UTs. This is expected to boost steel consumption in rural areas.

Vehicle scrappage policy: The new Vehicle Scrappage policy will help in reducing the steel prices since the policy enables recycling the materials used in old vehicles. By promoting formalisation of recycling in the auto industry, the policy will aid the electronics, steel, and automotive industries to recover inexpensive resources.

Additionally, the policy will increase sale of new vehicles thus boosting growth of steel industry.

Gati Shakti Plan: The governments Gati Shakti Plan aims to enhance the impact of each large project by coordinating planning across various sectors, including industrial corridors, roads, railways, ports, telecom, urban development projects, petroleum pipelines, renewable energy, and the social sector. The Network Planning Group (NPG) approved five highway projects, amounting to Rs15,683 Crores, across four states in 2023. The Gati Shakti plan is poised to rejuvenate Indias infrastructure and transform its multimodal logistics landscape by integrating economic and infrastructural planning with development, paving the way for a robust and interconnected transportation network. This will boost demand for and growth in the steel sector.

Jal Shakti Plan: The Government of India launched Jal Shakti Abhiyan wherein officers, groundwater experts and scientists helped in promoting water conservation and water resource management by focusing on accelerated implementation of five target interventions, viz., water conservation and rainwater harvesting, renovation of traditional and other water bodies/ tanks, reuse and recharge of bore wells, watershed development and intensive afforestation. The Government is also implementing Jal Jeevan Mission-Har Ghar Jal, aimed at providing potable water in adequate quantity of prescribed quality on regular and long term basis to every rural household including tribal areas of the country through tap water connection by 2024. These initiatives bode well for demand of steel sector for use in tanks, pipes etc, which are key resources in these projects.

GLOBAL STEEL TUBES & PIPES INDUSTRY

Steel pipes are used in various industries and infrastructural applications as cylindrical steel tubes globally. They are used widely for product formation and equipment installation with the main aim of subterranean transportation of liquids or gases such as oil, gas, and water. Carbon steel pipes are commonly employed in industrial operations that involve severe cold, intense heat, or the transmission of gases such as steam. The market is highly influenced by various factors like economic conditions, infrastructure development and demand from key steel consuming sectors. The major drivers of the global steel pipe market include rising oil and gas demand, flourishing transportation industry and rising construction activities post pandemic. Additionally, led by high tensile strength, fire resistance, corrosion resistance, and long durability, steel pipes find application in a number of industrial and domestic use. Growing investment in research and development for stronger production facilities is also one of the major factors to support the market growth.

The on-going geopolitical tensions led to spike in the prices of steel especially in Russia since January 2022. Both, Russia and Ukraine, major providers of steel and its raw materials, saw reduced trade thereby impacting global supply. In 2022, the global steel pipe market was valued at USD 146.87 billion. Rapid industrialization, growing urbanization, increase in the population, favourable government policies for bolstering the automobile sector and rise in the growth in the manufacturing sectors, especially in developing economies are the major factors among others boosting the steel pipes market. The steel tubes and pipe market witnessed slow growth due to challenging macro-environment.

North America has traditionally dominated the steel pipe market as it is a significant producer of oil and gas. The U.S . oil & gas industry is among the primary end-users for steel pipes and tubes. The product is used in upstream, midstream as well as downstream processing of crude oil. Steel pipe demand in the United States has benefited from robust economic development, which has been fuelled by government-led fiscal stimulus, resulting in high corporate confidence. However, Asia-Pacific is expected to be the fastest growing region during 2022-2027. This is attributed to rising consumption volume led by increased transportation and trade. The markets in China, India, South Korea and Japan have become significant production centres due to the presence of huge manufacturing, petroleum, and petrochemical sector. These countries have a strong development potential and their capacity to manufacture steel pipes and tubes is very competitive. The replacement of ageing pipelines in Europe is likely to rise rapidly in the coming years. Due to expansion of oil and gas industries in the Middle East and Africa there has been increase in demand and market growth in these regions.

The global steel pipe market is projected to USD 325.64 billion in 2027 at a CAGR of 8.24% from 2022 to 2027.The growth in the market is expected to be led by the rapidly expanding oil and gas sector, growing demand from transportation, and increase in construction activities, among others. The demand of steel pipes is witnessing rapid growth in the emerging economies due to rapid development. The primary trend gaining traction in the steel pipes and tubes market is technological advancement. Major players are focusing on introducing innovative products to increase their market position.

S ource: Steel Pipe Market Analysis : Size & Forecasts (globalmarketestimates.com)

INDIAN STEEL TUBES & PIPES INDUSTRY

I ndia has emerged as one of the top three manufacturing hubs globally after Europe and Japan for manufacturing steel pipes and tubes led by low cost of production, better productivity and quality and geographical advantages along with rising domestic demand. The steel pipes and tubes industry, is one of the significant portions of the Indian steel sector, contributing around 8% of total domestic steel utilisation. The Indian steel pipe market is estimated to be Rs50,000-55,000 Crores. The majority of the demand for stainless steel pipes comes from HNIs, government colleges, medical colleges, hospitals, hotels, and traditional centres. The primary demand is for drinking water and RO pipes.

The steel pipes and tubes industry is classified into two segments, namely, Electric Resistant Welded (ERW) and Submerged Acr Welded and Seamless (S&S). The industry is split equally between the ERW and S&S segments in value terms. In volume terms, the domestic market is split 70:30 between the ERW and S&S segments.

During the pandemic, the industry saw muted growth. In FY22, the industry gradually recovered with strong growth in overall economic activity which in turn led to the growing consumption volume of steel pipes and tubes. Stainless steel pipes are increasingly becoming popular due to their durability and functionality as they are far less vulnerable to corrosion and chemical leaching.

Source: Amid Inflation Where Does Indian Steel Pipes Tubes Market Stand - BW Businessworld

Major growth drivers for steel tubes and PiPes industry

The steel tubes and pipes industry is poised for robust growth in the future.

y Stainless steel is a superior replacement for plastic plumbing and is steadily becoming the go-to-choice for commercial, industrial, and residential real estate projects. y Around7-12%ofthetotalcapitalallocationinrefiners,petrochemicals and oil & gas is allocated towards steel pipes. y n the case of power projects, 5% of the capex is towards steel pipes.I y Substantial government investment to expand the gas pipeline network across the country. y Huge capital allocation of Rs10 lakh Crores announced for infrastructure projects in Budget 2023-24. y Enhanced allocation for PM Awaas Yojana by 66% to over Rs79,000 Crores giving a boost to affordable housing y Several government policies including PM Gati Shakti Plan, PMAY, etc focusing on developing logistics, connectivity, road and highway, railways and overall regional connectivity. y Rising demand for oil and gas, automobile, and housing and construction sectors

COMPANY OVERVIEW

I n operations for nearly five decades, Rama Steel Tubes Limited (hereafter referred to as "RSTL" / "the Company") is a pioneer and leading manufacturer in the Indian steel tube and pipes industry with pan India presence. Founded by lateShri. Harbans Lal Bansal, the global business is being successfully run by his son Mr. Naresh Kumar Bansal and grandson Mr. Richi Bansal. The Company is primarily involved in the manufacturing and trade of Steel Tubes & Pipes & Galvanised Iron Pipes. The Company has been striving to improve its performance by increasing sales, share of value-added products, innovating new products and aggressive cost optimization. The Company has a diversified product portfolio and is continuously innovating new products to cater to the ever-evolving market demands. The Company not only has a strong domestic presence but has business operations in more than 16+ countries across 4 continents including United Kingdom, the Middle East, Africa, and South America. The products are marketed under the brand name "TTT Rama" have earned strong brand equity globally.

RSTL has a subsidiary in UAE and a step-down subsidiary in Nigeria which has strengthened the Companys presence in global markets.

RSTL has the worlds latest technology, plant and machinery, which also includes sophisticated testing equipment. RSTL has four state-of-art manufacturing facilities located at Sahibabad (U.P.), Khopoli (Maharashtra) and Anantpur (Andhra Pradesh) and has a strong distributor network spread across India. The Company is in the process of setting up a plant in Raipur, Chhattisgarh in the eastern region of India. RSTL has recently acquired 51% stake in Ashoka Infrasteel (Partnership firm) and 50% stake in Hagar Mega Mart Private Limited. RSTL also have 25% stake in Peer Panchal Construction (JV) and has got strong distributor network spread across India. Strategic presence across the country enables RSTL to have an edge over competition as it is able to better cater to the local market demands along with enjoying advantages of local sourcing.

RSTLs specialty products include MS ERW black pipes from 15mm to 200mm diameter pipes confirming to lS: 1239, lS:1161, lS:3589, lS:3601, &lS:4270 and G.l. Pipes from 15mm to 150mm NB in light, medium and heavy sizes. The Companys products are utilised in numerous industries, including automobiles, infrastructure, irrigation, and real estate. The Companys primary products include:

Steel Tubes and Pipes: The Companys primary products in this segment are ERW galvanised tubes and pipes, ERW Black steel tubes and pipes, scaffolding tubes and pipes, pre-grooved pipes, swaged poles, etc. Its MS ERW black pipes ranges in diameter from 15mm to 200mm and confirm to IS: 1239, IS:1161, IS:3589, IS:3601, and IS:4270. The Companys G.I. Pipes are available in light, medium, and heavy sizes ranging from 15mm to 150mm NB. Major application areas include water pipelines, agriculture and irrigation, deep tube wells and casing pipes, fencing tubes, gas pipe lines, and cross-country pipelines.

Telecommunication Transmission Tower & Substation Structure:

Over the years, RSTL has gained expertise in the design and maintenance of highly configurable high & light towers, such as Legged Square Lattice Steel Towers and Three Legged Tubular Steel Towers, etc. Other application areas for the Company include Radar Towers and Railway Electrification Structure.

Structural Steel Products: These comprise Square / Rectangular Tubes & Pipes with hollow sections and are largely used in furniture industries, hand railings, cranes, material storage racks, pallets, stairs, cabins, bus stops, milk booths, truck & bus body members trusses, trolleys, columns, and purlins etc.

BUSINESS STRENGTHS

Dominance in the industry: Being a pioneer, RSTL enjoys leadership position in the Indian steel tubes and pipes industry with a rich legacy, pan India presence and long standing customer relationships. The Company has an edge over competition due to rich promoter experience, in-depth market understanding, strong brand equity and diversified business operation both geographically and in terms of portfolio.

Strategically Located Manufacturing Facilities: The Companys four technologically advanced manufacturing facilities are strategically located in North, South, and West India. The Company is also expanding its presence in the eastern part of the country with an upcoming facility in Raipur, Chattisgarh.

As of March 31, 2023, the Companys total installed capacity stood at 2,94,000 metric tonnes. The Company enjoys a coveted place and leverages its presence across India in local sourcing and delivering superior service to its customers. The diversified presence also enables the Company to reduce transportation cost of finished goods. In FY22, capacity utilisation was 44% with 87,598.65 metric tonnes, which increased to 1,74,641.95 metric tonnes in FY23 at 60%.

Robust International Presence: The Company has spread its operations globally to over 16+ countries, mainly in the UAE and in Africa. The products of RSTL are exported worldwide, namely to the United Kingdom, United Arab Emirates, Sri Lanka, Ethiopia, Kenya, Uganda, Somalia, Ghana, Sudan, Kuwait, the Republic of the Congo, Yemen, Guyana, Germany, the United States, South Africa, Zambia, and Malta, among others. RSTL closely monitors worldwide changes in an effort to meet global demands to the greatest extent possible.

Broad Client Base: The Company continuously strives to provide complete integrated solutions to its customers, executing the entire project on their behalf. The Company has earned itself a unique brand reputation in the steel and pipe industry. Its superior quality of products and services has developed a strong trust among its diverse and prestigious customer base. SAIL, GAIL, RIL, Airtel, BSNL, BSES Rajdhani Power Limited (BSES), Gujarat Gas Limited, J&K Rural electrification, Purvanchal Vidyut Vitran Nigam Limited, UP & Uttrakhand Peyjal Nigam, L&T, GMR, DLF, TATA, ADANI , Ashok Leyland, HPCL Bhatinda & Manglore Refinery Project etc. are among the key clients. With a dealer network of more than 300 around the nation, the company has clients in more than 300 cities distributed across 17+ states and the Union Territory of India.

Cutting-Edge Technology: The Company believes that technology adoption is imperative to remain relevant in the business and develop an edge over competition. RSTL strives to introduce technologically advanced innovative products and incorporate modern technology in its business operations as well. This helps it in cost optimization, providing superior quality products and enhancing market dominance. To carve a niche for itself, the Company has constructed a technologically advanced, high-speed tube mill based on the newest technology of Japanese market leader M/s Kusakabe.

BUSINESS STRATEGIES

Continuous Capacity Expansion to Multiply Future Growth: The Company is committed to expand its capacity for sustainable business growth. tI aims to upgrade its plants and bring in modern technology to produce superior quality products. The Company is in the process of modernization of its Sahibabad, Uttar Pradesh plant with a major goal of de-bottlenecking operations. This is expected to increase yield per tonne of finished products. The backward integration at the Andhra Pradesh plant is in full swing, wherein the process of Cold rolling and Galvanizing Steel Sheets will lead to an in-house raw material support of 50,000 metric tonnes in the upcoming years. The recent expansion of the Khopoli plant by ~30,000 metric tonnes and the setting up of new facility with 50,000 metric tonnes planned capacity in Raipur, Chhattisgarh, will lead capacity expansion to 3,94,000 metric tonnes by FY25.

Expanding Capacity for the Solar Energy Sector and Government Schemes: The Company caters to a wide spectrum of industries with a broad-based portfolio. It services the diverse domestic infrastructure needs, including those related to roads, building construction, urban transportation, water supply, and electricity transmission and distribution. The Company plans to foray into the market for solar energy goods, led by the growing popularity of clean energy. Various countries adopting targets for clean energy is giving significant boost to the solar energy market which in turn will result in a large demand for steel pipes. I n addition, various government initiatives PM Awas Yojna, affordable housing, smart cities, the national highway development programme, the Swachh Bharat mission, NAL Se JAL, the Jal Shakti Scheme, the Rajiv Gandhi Grameen Vidyutikaran Yojana, the Deen Dayal Upadhyaya Gram Jyoti Yojana, etc. are expected to give a significant boost to steel demand in the country.

Additionally, RSTL is in the process of entering certain specialised markets, such as the provider of steel pipes and tubes to City Gas Distribution and solar energy power plants. The Company has received a big order from UPPCL (Uttar Pradesh Power Corporation Limited) for the supply of 2500 electric poles, totaling about 580 MT during FY22. The Company is in the process of foraying into certain niche segments like supply of steel pipes and tubes to City Gas Distribution and Solar Energy power generation units. The Company plans to dedicate at-least 25% of its installed production capacity to cater to the demand of the Government sector in the coming years. These products have an EBITA margin of 9%-10%.

Focusing on Marketing and Distribution: The Company has established a strong distribution network of authorised dealers dispersed throughout North, South, and West ndia.I As of March 31, 2023, the Company has connectivity in the majority of Indian cities with a dealer network of more than 300 contact points or SKUs. The Company is committed to provide complete range of solutions to its customers with a wide range of over 1300 SKUs. The Company is looking to add 10 SKUs each month in future to double its offerings to 2500 by FY25.

FINANCIAL OVERVIEW

RSTL clocked 86% growth in sales volume in FY23 to 198,902.23 metric tonnes as compared to 106,943.41 metric tonnes in FY22. Total consolidated revenue from operations increased significantly by 74% to Rs1,336.75 Crores in FY23 as compared to Rs768.17 Crores in FY22. The EBIDTA (earnings before interest, depreciation and tax) increased by 12.51% to Rs58.24 Crores in FY23 as compared to Rs51.76 Crores in FY22. nterestI expenses almost doubled to Rs20.21 Crores in FY23 from Rs10.89 Crores in FY22. The profit before tax (PBT) after including share of associates and joint ventures stood at Rs34.96 Crores in FY23 as compared to Rs35.95 Crores in FY22. The PAT remained flattish at Rs27.44 Crores in FY23 as compared to Rs27.32 Crores in FY22. EPS for FY23 was Rs1.22 as compared to Rs16.41 in FY22. The reduction is led by the increase in average weighted number of shares from 1,67,94,000 in FY22 to 23,12,04,805 shares in FY23.

The Companys debtor turnover ratio increased to 9.73x in FY22 from 7.56xin FY21 mainly due to increase in net sales and decline in average debtors.

y At the end of March 31, 2023, the Companys net worth stood at Rs250.11 Crores as compared to Rs126.66 Crores as on March 31, 2022. The total debt increased to Rs192.79 Crores in FY23 to Rs138.02 Crores in

y FY22. Debt/equity ratio stood at 0.78 as compared to 1.09 in FY22. The cash and cash equivalents stood at Rs12.61 Crores for FY23 as compared to Rs18.71 Crores for FY22.

y EBIDTA Margin stood at 4.36% in FY23 as compared to 6.74% in FY22.

OUTLOOK

The Company remains positive on its outlook on the overall steel industry in India and is upbeat about its volume led growth. During the year, the Company added 30,000 metric tonnes of capacity, all for value added products with high demand in domestic and the export markets. The Company is in process to complete the merger of Lepakshi Tubes, to bring in operational synergy and cost savings. The Company clocked a robust volume growth in FY23 amidst a challenging global environment, exhibiting strong resilience. The products have a high demand in the market and the Company aims to cater to varied consumer needs with its broad-based product portfolio. The Company aims to increase its SKU offerings by 10 SKUs monthly to over 1,300 and increase its installed capacity to 3,94,000 metric tonnes by FY25. This will help strengthen the relationships with distributors by offering a complete range of products and make RSTL one of the leading suppliers of Steel Pipes and Tubes in the forthcoming years.

The Company is progressing well in entering certain niche segments like supply of steel pipes and tubes to City Gas Distribution and Solar Energy power generation units. The aim is to dedicate at-least 25% of installed production capacity of 3,94,000 metric tonnes to cater to Government sector demand, having an EBIDTA margin of 9-10%. This will aid in overall margin improvement which came under pressure in FY23 owing to falling steel prices. Going forward, the Company is targeting increasing its share of value-added products to at least 30-40% to aid margin improvement.

The Company is setting up a new plant of 50,000 metric tonnes per annum capacity which will aid in catering to the demand in the eastern region. The Company is also in process of modernization of its Sahibabad, Uttar Pradesh plant with a major goal of de-bottlenecking operations. This is expected to increasing yield per tonne of finished products. The Company is also working on backward integration at its plant in Andhra Pradesh in process of Cold rolling and Galvanizing Steel Sheets. This will lead to an in-house raw material support of 50,000 metric tonnes in the upcoming years.

CORPORATE SOCIAL RESPONSIBILITY

The Company truly believes that social and economic development is imperative for the evolution of a sustainable society and strives to contribute positively towards this. The well-defined Corporate Social Responsibility ("CSR") Policy outlines the beneficial contributions the Company embarks on towards the economic, environmental, and social well-being of communities. The Company is committed to make a positive influence in the communities in which it operates. It is striving tirelessly to become a consistent, credible, and responsible business partner. The Companys CSR Committee develops the CSR Policy and advises the Board about it. The Committee is responsible for monitoring various activities like waste management, sanitation initiatives, skill-based education, improving the lives of underprivileged, eradicating hunger and women & youth empowerment, as per focus area in a particular year. The Committee also supports initiatives for national missions, disaster relief and environmental sustainability. During FY23, the Company invested Rs27.43 lakhs towards eradicating hunger and feeding for poor people and education and care for underprivileged children.

RISKS AND MITIGATION STRATEGIES

Economic Risk: The demand of the steel sector is highly dependent on the steel consuming sectors, like oil and gas, construction, capital goods, consumer durables, autos, etc. Economic downturn thus will have a strong bearing on the steel demand.

Mitigation strategy: The Company has strategically diversified its geographical presence and built a strong brand equity to reduce its exposure to business cycles. In addition, a broad range of superior quality products, catering to a variety of end user sectors, enables the Company to build a resilient business model. The robustness of the business model is well-reflected in the robust volume growth witnessed in FY23 despite global economic slowdown.

Supply-Demand Risk: In the event of oversupply and/or overcapacity, there will be a rise in low-cost imports to India. In such an event, steel prices may fall, impacting indigenous players.

Mitigation strategy: The Companys rich experience in the industry, global presence, broad client profile, long-standing customer relationships, technological investments and robust manpower, enable it to tap the pulse of the market. The Company closely monitors the global steel demand and market dynamics to maintain an ideal production capacity based on a realistic view. This enables the Company to reduce supply-demand risk.

Competition Risk: Given the lucrative growth prospects of the steel industry, the Company face intense competition from existing players and new entrants. Any change in marketing strategies of the existing players or introduction of superior technology may lead to intensified competition.

Mitigation Strategy: The Company leverages its in-depth market knowledge, long standing customer relations and state-of-the-art technology to produce superior quality value added advanced products. The Company is on top of its marketing game and ensures robust brand equity. The Company prioritises maintaining profitable and efficient manufacturing processes. To meet the ever-evolving needs of its customers, the Company significantly invests in capacity expansion and capabilities of its strategically positioned manufacturing sites.

Input Risk: Raw materials form a significant cost component for the Company. Volatility in prices of key raw materials, thus has a significant bearing on earnings. In addition, limited availability or unavailability of any raw material may hamper the production process.

Mitigation Strategy: The Company closely monitors the fluctuation in prices of its raw materials and modifies its strategy or initiates corrective actions to ensure input risk is avoided. To reduce supply chain risk, the Company uses diversified raw material sources, both geographically and in terms of multiple vendors. Buffer inventory, long term contracts with suppliers, and close monitoring of stock levels as per demand-supply dynamics, enables the Company to minimize input risk.

Regulatory Risk: The global steel industry is highly regulated and competitive. The Company needs to comply with all applicable regulations. Failure to comply with a regulation, be it an existing one or any new one, may impact normal course of business.

Mitigation Strategy: The Company closely monitors the ever-evolving regulatory environment to ensure compliance with all applicable laws and statutes. The Company is prompt in bringing about necessary changes as may be required to comply with new/modified regulations. I n addition, to enhance compliance, the Company invests in automated systems and training.

Foreign Exchange Risk: T he Company has exposure to foreign currency due to trading of raw materials and finished goods across international geographies. The Company also deals in additional payments in foreign currency. Any volatility in forex rates impacts the earnings of the Company.

Mitigation Strategy: A comprehensive Foreign Exchange (FX) risk management system enables the Company to effectively analyse and monitor currency movements. Accordingly, the Company hedges its forex position to reduce risks related to currency movement. To further reduce foreign exchange risk, the Company uses a variety of derivative financial instruments, including forward contracts.

ENVIRONMENT, HEALTH AND SAFETY (EHS)

The Company gives utmost importance to the health and safety of its workers and the environment it operates in. The Company provides a clean, hygienic and safe working environment to its employees and provides them with appropriate training to carry out their duties safely. The Company strictly adheres to all EHS-related laws and regulations.

Specialised teams are responsible for monitoring workplace safety at production facilities. Open communication enables the Company to ensure zero hazards at the workplace. The Companys EHS management is connected with other software systems, such as ERP to accomplish comprehensive sustainability management. All EHS policies and procedures are reviewed and updated on an ongoing basis and comply with the highest industry standards.

QUALITY

The Company is committed to leverage its strong Quality Management System for the benefit of its customers and other stakeholders by delivering superior quality products. The Company strives to manufacture highest quality products conferring to the industry quality standards. The Company has in place various checks and quality testing processes, throughout the manufacturing process from procurement of raw materials through to manufacturing and distribution of the products. To produce products with latest technological advancements and expertise the Company has automated its production facilities and controls them centrally, ensuring highest possible quality. Throughout production, Total Quality Control (TQC) is ensured along with strict adherence to applicable operational settings. The Company ensures that detailed systems and procedural quality standards are closely monitored with strict enforcement of all safety procedures.

INTERNAL CONTROL SYSTEMS

The Company has devised a comprehensive internal control system effective in protecting all its assets and assuring operational excellence. The internal control framework is commensurate with the type, size, scope, and complexity of operations. The framework enables strict adherence to regulatory compliance and proper documentation of all transactional information. To ensure that transactions are properly authorised, documented and reported the Company has robust and effective internal financial control mechanisms in place. To ensure robustness of operations, the Company conducts internal audits and checks regularly.

To guarantee smooth and effective operations, the audit committee is entrusted with the responsibility of establishing and maintaining suitable internal financial controls. The Committee reviews the various issues and material weaknesses highlighted by the Internal and Statutory Auditors, on a periodic basis. Prompt and adequate corrective actions are undertaken as deemed fit to mitigate any risks.

HUMAN RESOURCES

Human resource is considered a crucial asset at RSTL. The employees have meaningfully contributed in the organizational growth journey and have strived hard to help it achieve a coveted market position. The Company duly recognizes the zest and efforts of its employees with great pride. The Company fosters a safe, productive and progressive workplace culture. The executive leadership is responsible for creating a positive work environment. The policies of the Company are focused on the core thrust areas of becoming the employer of choice, fostering an inclusive culture, developing a strong talent pipeline, and enhancing the Companys strengths. The Companys HR policies are aimed at providing professional growth opportunities while striving to align personal goals with organizational goals. For this, various programmes are conducted like individual training, skill up-gradation, an employee management relationship-friendly environment, and equal opportunity. The Company has built a diverse and inclusive work place over the years through focus on enhancing leadership skills and providing a respectful workplace. The key core competencies for strong and effective leadership govern the leadership development framework. As of March 31, 2023, the Company had a workforce of 250+ people including contractual workers and employees.

CAUTIONARY STATEMENT

This Statement contains forward-looking statements about the business, financial performance, skills and prospects of the Company. Statements about the plans, intentions, expectations, beliefs, estimates, predictions or similar expressions for future are forward-looking statements. Forward-looking statements should be viewed in the context of many risk issues and event that could cause actual performance to be different from that contemplated in the Directors Report and Management Discussions and Analysis Report, including but not limited to, the impact of changes in oil, steel prices worldwide, technological obsolescence and domestic, economic and political conditions. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the Companys operations include economic conditions affecting demand/supply and price conditions in the domestic and overseas markets in which the Company operates, changes in the Government regulations, tax laws and other statutes and incidental factors. The Company disclaims any duty to update the information given in the aforesaid reports.