AA Plus Tradelink Ltd Management Discussions

Industry Structure and Developments

A. INDUSTRY STRUCTURE AND DEVELOPMENTS

Global Growth:

- In 2025, the global economy grew at an estimated rate of 3.4% despite significant turbulence. The year was marked by record increases in U.S. tariffs and heightened trade policy uncertainty, a raft of trade deals the impact of which is yet to play out, and a surge in AI linked investments. Key factors impacting economic activity included the weaponisation of trade, and the ongoing transition towards technology-driven growth, particularly in North America and Asia. Geopolitical risks intensified during the year, with escalating conflict in the Middle East. These developments heightened uncertainty across energy markets and global trade corridors, increasing volatility in commodity prices and disrupting cross-border logistics. These challenges and uncertainties are continuing into FY 2026-27.

Inflation:

- During FY 2025-26, the steel industry witnessed fluctuations in input costs and steel prices, influenced by changes in global commodity prices, energy and coking coal costs, domestic demand conditions, import trends and broader macroeconomic factors.

- While inflationary pressures on key raw materials and operating costs continued to affect the industry, the overall impact varied across product categories and market segments. Steel manufacturers and traders remained focused on cost optimisation, operational efficiency and prudent inventory management to mitigate the impact of cost fluctuations.

- Going forward, the performance of the steel industry is expected to remain dependent on infrastructure and construction activity, automotive and manufacturing demand, global steel prices, raw material availability and prevailing economic conditions.

Risks & Policy Backdrop:

- The steel industry operates in a cyclical and competitive environment and remains exposed to fluctuations in steel prices, raw material and energy costs, global demand-supply conditions, import competition, geopolitical developments and foreign exchange movements. Global overcapacity, changing trade policies, tariffs and safeguard measures may impact domestic prices and profitability. The industrys transition towards low-carbon and sustainable steel production, along with increasing ESG, carbon emission and environmental requirements, may also necessitate investments in technology and cleaner production processes.

- The Government of India continues to provide policy support through infrastructure development, manufacturing promotion, the National Steel Policy, PLI schemes for specialty steel and initiatives such as the Green Hydrogen Mission. Continued infrastructure and construction activity is expected to support domestic steel consumption. Going forward, industry performance will depend on domestic demand, steel prices, raw material availability and costs, global trade conditions and the pace of decarbonisation, with companies focusing on cost optimisation, operational efficiency, supply-chain resilience and technology adoption to manage associated risks.

B. INDIAN ECONOMY OVERVIEW (FY 2025-26)

- India retained its position as the fastest-growing major economy in the world.

- India continues to be a global leader in steel demand growth, with consumption expected to grow at a healthy rate of 7-8% in FY 2026-27. Apparent Steel Use is projected to reach 176-178 MT in FY 2026-27, driven by the National Infrastructure Pipeline and emerging segments like data centres, defence, and renewable energy.

- Government commitment remains strong, with public infrastructure spending remaining robust. While production is expected to outpace demand growth due to massive capacity, India is transitioning toward becoming a sizeable net exporter.

- Steel production outpaced consumption during the year with new capacities going on stream and crude steel output increasing by 11%. Growth in iron ore output lagged at 7.4%, leading to a sharp spurt in imports of iron ore, though from a small base.

- Steel exports recovered in FY 2025-26, erasing much of the decline seen in the previous year. Imports, on the other hand, declined after the imposition of safeguard duty. Indias trade in steel was broadly balanced in FY 2025-26 after two years of being a net importer and recorded a small net export.

C. EXTERNAL ENVIRONMENT & RISKS (FY 2025-26)

- The steel industry is cyclical and exposed to fluctuations in steel prices, raw material costs, energy prices and global demand-supply conditions. Volatility in iron ore, coking coal, scrap and energy prices may impact production costs, margins and profitability.

- Changes in government policies, import/export regulations, geopolitical conditions, foreign exchange rates and logistics costs may affect the Companys operations and financial performance. Intense competition and global supply-demand imbalances may also create pricing pressure.

- The industry is subject to increasing environmental, regulatory and sustainability requirements, including emission reduction and energy-efficiency norms. Compliance with evolving regulations and adoption of cleaner technologies may require additional investments, while the long-term outlook remains positive due to infrastructure, urbanisation and manufacturing growth.

D. CAUTIONARY STATEMENT

Statements in the Management Discussion and Analysis describing the Companys objectives, projections, estimates and expectations are "forward-looking statements" within the meaning of applicable securities laws and regulations. Actual results may 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.

STEEL INDUSTRY

INDUSTRY OVERVIEW:

One of the primary forces behind industrialization has been the use of metals. Steel has traditionally occupied a top spot among metals. 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. Therefore, it would not be an exaggeration to argue that the steel sector has always been at the forefront of industrial progress and that it is the foundation of any economy. The Indian steel industry is classified into three categories - major producers, main producers, and secondary producers.

India is the worlds second-largest producer of crude steel, with an output of 168.4 MT of crude steel and finished steel production of 160.90 MT in FY26.

Indias domestic steel demand is estimated to grow by 9-10% in 2025 as per ICRA. According to the Ministry of Steel, finished steel consumption reached 164 MT in FY26, registering a 7-8% growth, driven by strong domestic demand from infrastructure, construction, railways, and manufacturing sectors.

INVESTMENTS/DEVELOPMENTS:

The steel industry and its associated mining and metallurgy sectors have seen major investments and developments in the recent past.

Between April 2000-March 2026, Indian metallurgical industries attracted FDI inflows of Rs. 1,20,932.23 crore (US$ 19.30 billion).

Some of the major investments in the Indian steel industry are as follows:

On May 5, 2026, Indias Production Linked Incentive (PLI) Scheme for Specialty Steel has realized Rs. 23,022 crore (US$ 2.42 billion) in investments, generating 2.4 million tonnes of specialty steel production and 13,264 direct jobs. The scheme has also created 24 million tonnes of specialty steel capacity, strengthening domestic manufacturing and reducing import dependence.

On February 19, 2026, Indias steel sector is witnessing a fresh wave of investments through capital market activity, with around 10 steel and related companies planning to raise Rs. 5,000–7,000 crore (US$ 554.52-776.31 million) via IPOs over the next 8–10 months. These fundraises reflect strong investor confidence driven by infrastructure demand and supportive policies, and the capital is expected to be used for capacity expansion, modernization, and growth of steel operations in the country.

On February 18, 2026, Indias steel industry is expected to attract nearly Rs. 9.01 lakh crore (US$ 100 billion) in investments to achieve its 2030 capacity targets, supporting large-scale expansion, modernization, and a shift towards sustainable production technologies.

On January 21, 2026, Tata Steel reiterated an investment of Rs. 11,000 crore (US$ 1.21 billion) in Jharkhand for green steel development, aimed at advancing low-carbon production, generating employment, and strengthening the regional industrial ecosystem.

On March 28, 2025, AM/NS India has secured 890 hectares of land in Rajayyapeta, Anakapalli district, Andhra Pradesh for a new integrated steel mill with planned capacity of about 7 MTPA of crude steel, expanding beyond its Hazira operations to meet rising domestic demand.

On July 7, 2025, Tata Steel signed a Memorandum of Understanding with Australias InQuik Group to bring modular bridge construction technology to India, using prefabricated steel formwork filled with concrete on site to enable faster, cost-effective, climate resilient and scalable bridge infrastructure, especially useful in remote regions.

As of August 2025, JSW Steel and Japans JFE Steel are planning to jointly invest Rs. 5,845 crore (US$ 682 million) to expand capacity for cold-rolled grain-oriented electrical steel (CRGO) to 3,50,000 tonnes per annum by FY28 by scaling up the Nashik plant from 50,000 to 2,50,000 TPA and increasing the Vijayanagar units capacity to 1,00,000 TPA.

On August 18, 2025, JSW Steel and South Koreas POSCO signed a non-binding Heads of Agreement to explore setting up a 6 MTPA integrated steel plant in India via a 50:50 joint venture with Odisha among the key locations under consideration. Feasibility studies, resource availability and investment terms yet to be finalised.

Under the second round of the Production Linked Incentive scheme (PLI) for specialty steel, 25 companies committed Rs. 17,000 crore (US$ 1.98 billion) to produce high-end steel domestically, aiming to reduce imports and boost self-reliance. The scheme targets five key steel product categories with applications across various industries like automobiles and transformers.

India and Japan held the third Steel Dialogue on Feb 4, 2025, in New Delhi, discussing economic trends, steel trade, and industry developments. India highlighted policy initiatives, green steel efforts, and investment opportunities for Japan.

In February 2025, JSW Group announced a Rs. 1,00,000 crore (US$ 11.60 billion) investment to set up a 25 MT steel plant in Maharashtras Gadchiroli district over seven to eight years. The project, expected to be the worlds largest and most eco-friendly, will drive economic growth and job creation in Vidarbha.

GOVERNMENT INITIATIVES:

Some of the other recent Government initiatives in this sector are as follows:

On May 5, 2026, the Government announced key initiatives to promote low-carbon steel, including a Rs. 20,000 crore (US$ 2.10 billion) CCUS outlay under Union Budget 2026-27 and continued implementation of the Steel Scrap Recycling Policy, 2019 to strengthen sustainable steel production in India.

On January 12, 2026, Indias steel exports grew by nearly one-third during April–December 2025, supported by government measures aimed at boosting domestic production and exports, reflecting improved competitiveness and policy backing for the sector.

December 26, 2025 The government is sharpening its focus on increasing steel output and ensuring raw material security as India moves toward its 2030 capacity targets. Key initiatives include securing coking coal supplies, strengthening supply chains, and encouraging investments across the steel value chain.

In November 2025, Indias Ministry of Steel launched the third round of the PLI Scheme for Specialty Steel (PLI 1.2) to attract new investment in advanced steel products with incentives of 4% to 15% on incremental sales and broaden high-end steel capacity to support domestic manufacturing and global competitiveness.

Indian government plans to reduce imports by 50% in FY26 to become net exporter of steel in the near future. The Directorate General of Trade Remedies (DGTR) has recommended a 12% provisional safeguard to protect domestic players from surge in imports and potentially increasing their profitability. This development could potentially lead to a decrease in imports and increase market competitiveness.

Up to December 2024, RINL dispatched about 1,400 MT of steel to Northeast projects, including National Highways Authority of India (NHAI) and National Highways and Infrastructure Development Corporation Limited (NHIDCL). Plans are in progress to set up a two-tier steel distribution network in Guwahati.

Union Minister Mr. H. D. Kumaraswamy launched Steel Import Monitoring System 2.0 (SIMS 2.0) on July 25, 2024. SIMS 2.0 improves data transparency, quality control, and integration with government portals to support steel sector growth and better import management.

The Union Ministry of Steel launched PLI Scheme 1.1 on January 6, 2025, with a Rs. 6,322 crore (US$ 733.40 million) outlay to boost specialty steel production and attract investments. Covering five key product categories, the scheme eases norms to reduce imports, enhance domestic manufacturing, and improve energy efficiency, with applications open until January 2025.

The Ministry of Steel is facilitating the setting up of an industry driven Steel Research and Technology Mission of India (SRTMI) in association with the public and private sector steel companies to spearhead research and development activities in the iron and steel industry at an initial corpus of Rs. 200 crore (US$ 30 million).

ROAD AHEAD:

The steel industry has emerged as a major focus area given the dependence of a diverse range of sectors on its output as India works to become a manufacturing powerhouse through policy initiatives like Make in India. With the industry accounting for about 2% of the nations GDP, India ranks as the worlds second-largest producer of steel and is poised to overtake China as the worlds second-largest consumer of steel. Both the industry and the nations export manufacturing capacity have the potential to help India regain its favourable steel trade balance. The Government of Indias Production Linked Incentive (PLI) scheme for specialty steel has witnessed strong progress, with investment commitments exceeding Rs. 43,800 crore (US4.83billion) and additional commitments of around Rs.11,887crore (US4.83 billion) and additional commitments of around Rs.11,887crore(US 1.34 billion) under PLI 1.2, reflecting robust industry participation on February 9, 2026 and November 4, 2025. The initiative, including its third round, is focused on expanding capacity, with an expected addition of 8.7 million tonnes by FY31, while promoting high-grade and emerging steel categories such as CRGO steel, super alloys, and coated products. This is expected to strengthen domestic manufacturing, reduce import dependence, support key sectors like defence and infrastructure, and enhance Indias global competitiveness in advanced steel production.

The National Steel Policy, 2017 envisage 300 million tonnes of production capacity by FY31. The per-capita consumption of steel stood at 100 kgs in FY26 (April-August 2025) and the National Steel Policy aims to increase it to 160 kgs by FY31. While, in FY23, per capita consumption of steel in rural India was estimated to be between 21.3 kg per annum.

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.