Pursuant to the regulation 34 read with the Schedule V of the SEBI (Listing obligations
and Disclosures Requirements) Regulations, 2015 your Directors wish to report as follows:
a) Industry Structure & Developments:
STEEL INDUSTRY SCENARIO
Steel Industry plays a vital role in the development of any modern economy and is
considered to be a yardstick to measure the level of socio-economic development and living
standard of its countrymen. Steel industry derives its demand from other important sectors
like infrastructure, aviation, engineering, construction, automobile, pipes and tubes,
etc. Thus, its intense integration with other important industries makes it a strategic
sector for the Governments as well.
The Indian economy is currently poised for its next waveof growth supported by the
recent reforms launched by the government, showing a tremendous opportunity for the steel
industry to grow exponentially. The Indian Steel market has witnessed growth in both
production and consumption. Steel production in India have grown by 5.7% in January 2018
as compared to January 2017.
Indian Domestic steel consumption also rose by 6.8% in 2017-18 as compared to
2016-17.The demand driven by rising infrastructure development, growing demand for
automotive, construction, housing and ground transportation, special steels in engineering
industries such as power generation, petrochemicals and fertilizers is expected to
continue through 2018-19.
The Indian steel sector enjoys advantages of domesticavailability of raw materials and
cheap labour. Iron ore is also available in abundant quantities, though the continued
mining restrictions have put a strain on its availability as well as price. This abundance
has been providing a major cost advantage to the domestic steel industry.
b) Opportunity & Threats:
Indias capacity expansion in steel is driven by the sustained growth in domestic
consumption. Governments focus on infrastructure, real estate, affordable housing and
smart cities will enable a demand growth of minimum 7-8% over the next 5 to 10 years. In
line with the growth demand, the countrys steel ministry is framing a new steel policy to
increase the capacity of steel production to 300 million tonne by 2030 in line with the
growth.
Increase in per capita incomes in the country and various social sector schemes
including Pradhan MantriAwasYojna-Housing for All, Pradhan Mantri Gram SadakYojna, Urban
Infrastructure Development Scheme for Small & Medium Towns (UIDSSMT), Sardar Patel
Urban Housing Mission, 100 Smart Cities Mission (by 2022), National Heritage City
Development and Augmentation Yojana (HRIDAY), Bharatmala project, 24x7 Power for All
initiative, Development of Industrial Corridors & National Investment &
Manufacturing Zones and many others provide a bright outlook for the demand of steel in
the country.
Given the favorable global scenario, our countrys steelexports also grew by 102% to
8.24 million tons, while there has been a decline in imports by 37% to 7.42 million tons.
With the domestic availability of key raw material, the outlook remains to be positive
both in terms of availability and pricing driven by strong domestic demand and positive
global outlook.
c) Segment-wise or Product-wise Performance:
Since your Company operates only in one Segment, segment-wise or product- wise analysis
of performance is not applicable.
d) Outlook
The steel industry with the roll out of the National Steel Policy-2017, it is envisaged
that the industry will be steered in creating an environment for promoting domestic steel
and thereby ensuring a scenario where production meets the anticipated pace of growth in
consumption, through a technologically advanced and globally competitive steel industry.
This will be facilitated by Ministry of Steel, in coordination with relevant Ministries,
as may be required. To accomplish PMs vision of ‘Make in India Policy for providing
preference to domestically manufactured Iron & Steel products in Government
procurement was approved on 3rd May, 2017.The policy is envisaged to promote growth and
development of domestic steel Industry and reduce the inclination to use, low quality low
cost imported steel in Government funded projects. We hope that every Government Agency
would take the responsibility and ensure for implementation of this policy.
Indias average Gross Domestic Product (GDP) growth has been estimated to grow by 7.4
per cent in 2017-18 and 7.8 per cent in 2018-19, up from 7.1 per cent in 2016-17 .
According to World Steel Association, the demand of steel in India is expected to grow
by 5.7% in 2018 against a global growth in demand of 1.6% in 2018.
e) Risk & Concerns :
As per the requirement of Regulation 17 of the Securities Exchange Board of India
(Listing Obligations and Disclosure Requirements) Regulations, 2015, the Company has
adopted steps for framing, implementing and monitoring the risk management plan and
accordingly the Directors have put in place critical risk management framework across the
Company for identification and evaluation of all potential risks. The Company is
continuously evolving and improving systems and measures to take care of all the risk
exigencies involved in the business. All inherent risks are identified, measured,
monitored and regularly reported to the management. The management decides measures
required to overcome these risks and ensures implementation of proper risk mitigation
plans. The risk report and mitigation plans are presented to the Board of Directors
periodically. Some of them are mentioned herein below:
The domestic steel industries run the risk of normal industry cycle as under:
• High cost of capital
• Delay in absorption in technology by existing units.
• High cost of basic input and services
• Poor quality of basic infrastructure like road, port etc.
• High logistics cost
The Company is exposed to the normal industry risk factors and manages these risks by
prudent business and risk management practices. The Company has made efforts to lower the
cost of steel production by improving productivity, maximizing production of high value
added Special steels, Improving plant efficiency, reducing energy consumption etc.
The Company has made efforts to mitigate the risk by enhancing the Quality of steel
produced and higher use of Hot Metal in Electric Arc Furnace.
f) Internal Control System and Their Adequacy:
In order to attain the corporate objectives, strict internal controls systems are
required to be implemented across the organization. The same is ensured by the senior
management through a mix of periodic reviews, implementation of Standard Operating
Procedures, defining Delegation of powers and constant upgradation of IT systems. The
efficacy of internal controlsystems is ensured as a combined result of the following
activities:
• Operational performance is reviewed each month by an executive committee
comprising members of Senior Management.
• Performance of each function is closely monitored by the Senior Management
through various Weekly / Monthly review meetings. Reviews of all independent functions are
regularly undertaken. Simultaneously, cross functional activities are also subject to
periodic review.
• Various policies are introduced from time to time, to ensure effective
functioning of various independent departments, such as, Marketing, Finance, HR, etc.
• Delegation of power is regularly reviewed and revised, based on feedback
received from Directors and process owners. The documents clearly specify the authorities
of various divisional /functional heads etc. Hence, the financial and non-financial
authorities stand clearly defined. Reports of Internal audit and management response
thereto are subject to regular review by Audit Committee. Adequacy of internal audit is
also reviewed by the Audit Committee.
g) Discussion on Financial Performance with respect to Operational Performance and
state of Companys affairs:
The finance cost of the Company remains the same as compared to previous year and
earnings before Interest, Tax, Depreciation & Amortisation (EBITDA) of the Company has
improved marginally as compared to the previous year due to change in production mix and
higher realization. The financial health of the Company has also improved marginally as
compared to the previous year due to various measures taken by the management towards the
cost cutting and improving efficiency and also supported by policy measure taken by the
Central Government to support the Indian Steel Manufacturers like imposition of
anti-dumping duty and safe guard duty on imports of steel.
h) Human Resources and Industrial Relations:
The Companys human resource policies and strategies seek to ensure a high level of
motivation among employees so that they play a significant role in achieving the Companys
goal. The Company has initiated various in-house training programs for skill advancement.
The Company accords highest priority to ensure safety and protection of health of its
employees which are essential to, and form an integral part of every HR development
endeavor.
The Company has a medical Centre at its Wardha complex providing round the clock
medical assistance to its employees. Health checkup is also carried out periodically, for
all employees. Total employees as on 31st March, 2018 were 1017.
i) Cautionary Statement:
The Management Discussions and Analysis describe Companys projections, expectations or
predictions and are forward looking statements within the meaning of applicable laws and
regulations. 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 and supply and price conditions in domestic and
international market, changes in Government regulations, tax regimes, economic
developments and other related and incidental factors.
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