Aanchal Ispat Ltd Management Discussions

OVERVIEW

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 FY 2024-25. This should be read in conjunction with the Companys
financial statements, the schedules and notes thereto and other information included elsewhere in this
Report and Annual Accounts 2024-25. 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 issued by the Securities and Exchange Board of
India (SEBI) from time to time.

INDUSTRY STRUCTURE AND DEVELOPMENTS

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.

India is the worlds second-largest producer of crude steel, with an output of 125.32 MT of crude steel
and finished steel production of 121.29 MT in FY23.

The growth in the Indian steel sector has been driven by the domestic availability of raw materials such
as iron ore and cost-effective labour.

Consequently, the steel sector has been a major contributor to Indias manufacturing output.

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.

According to a report the demand for steel in India is projected to grow significantly over the next
decade, with annual growth rates expected to range from 5% to 7.3%.

In FY24, the exports and imports of finished steel stood at 7.49 MT and 8.32 MT, respectively compared
to 6.7 MT and 6.02 MT exports and imports respectively in the FY23.

In FY 2024-25, the Indian iron and steel sector witnessed steady growth driven by strong domestic
demand and supportive policy initiatives. Crude steel production increased by approximately 6% year-
on-year, reaching an estimated 140 million tonnes, as India continued to consolidate its position as the
worlds second-largest steel producer. The growth was primarily supported by robust demand from
infrastructure, housing, construction, and automotive sectors, aligned with the governments continued
focus on large-scale capital expenditure projects including highways, railways, and urban development
under schemes like PM Gati Shakti and Smart Cities Mission.

While steel exports were subdued due to global economic uncertainties and increased competition,
imports of cheaper finished steel products rose marginally, prompting the government to monitor unfair
trade practices. Despite volatility in global coking coal prices, domestic iron ore availability remained
stable due to consistent output from public sector mining companies. Digitalization and automation also
advanced during the year, with increasing adoption of AI-driven quality control, predictive
maintenance, and energy efficiency technologies across large integrated plants.

PRODUCT WISE PERFORMANCES

The company is engaged in manufacturing of: Mild steel Structural Re-bars, angles, channels, MS
Round and other sectional products as per order. Products are broadly categorized as the Re-bars in the
Steel Industry. The main application of the products currently being manufactured are used in the
Infrastructure and Construction Industry. Existing manufacturing unit is ISO 9001:2008 certified from
BSCIC Quality Management Systems.

OPPORTUNITIES & THREATS

> OPPORTUNITIES

• Infrastructure Development and Urbanization:

The global push towards infrastructure development, especially in emerging economies, is expected to
drive demand for iron and steel products. Government initiatives in countries like India, China, and
those in Southeast Asia to build smart cities, improve transportation networks, and develop urban
infrastructure will likely boost finished steel consumption.

The ongoing construction boom in residential, commercial, and industrial sectors offers significant
opportunities for the iron and steel industry.

• Green Steel Production:

The shift towards sustainable and green steel production methods presents an opportunity for companies
that can adapt quickly. Innovations like hydrogen-based steelmaking and carbon capture technologies
are gaining traction, supported by government incentives and rising consumer demand for
environmentally friendly products.

Companies investing in green technologies can gain a competitive edge as global standards and
regulations become stricter.

• Technological Advancements:

The adoption of Industry 4.0 technologies, such as automation, AI, and IT, can enhance operational
efficiency, reduce costs, and improve product quality. Smart manufacturing and predictive maintenance
can lead to better resource utilization and lower production costs.

Advanced materials and alloy development can open new markets and applications for steel products.

• Growing Demand from Automotive Sector:

The automotive industrys shift towards electric vehicles (EVs) and lighter, stronger materials is driving
demand for advanced high-strength steels (AHSS). This trend is expected to create new opportunities
for steel producers who can supply the necessary materials.

The growing global demand for EVs is expected to bolster steel demand for manufacturing battery
packs, body frames, and other components.

• Government Policies and Trade Agreements:

Favourable government policies, including subsidies for domestic production and protective tariffs
against imports, can provide a boost to local iron and steel manufacturers.

Bilateral and multilateral trade agreements can open new markets and reduce export barriers for steel
producers.

> THREATS

• Raw Material Price Volatility:

The iron and steel industry is highly sensitive to fluctuations in the prices of raw materials, such as iron
ore, coking coal, and scrap metal. Any significant increase in these prices can erode profit margins,
especially for producers who rely heavily on imported raw materials.

Supply chain disruptions, driven by geopolitical tensions or natural disasters, could exacerbate these
challenges.

• Environmental Regulations:

The tightening of environmental regulations worldwide poses a significant threat to traditional
steelmaking processes, which are carbon-intensive. Compliance with stricter emission norms can
increase production costs and require significant capital investments in cleaner technologies.

Failure to adapt to these regulations could result in penalties, loss of market share, and reputational
damage.

• Global Economic Uncertainty:

Economic slowdowns in key markets, such as Europe and China, could dampen demand for steel
products. Additionally, global inflationary pressures and rising interest rates could reduce investment
in infrastructure and construction, key drivers of steel demand.

Uncertainty around trade policies, especially in major economies like the U.S. and China, could lead to
disruptions in the global steel trade, impacting export-oriented producers.

• Overcapacity and Competition:

Overcapacity remains a persistent issue in the global steel industry, leading to intense price competition.
Producers in countries like China continue to operate at high levels, contributing to global supply gluts
and downward pressure on prices.

The emergence of low-cost producers in developing countries could further increase competition,
making it challenging for established players to maintain market share.

• Technological Disruptions:

The rise of alternative materials, such as aluminium and composites, particularly in the automotive and
aerospace industries, poses a threat to steel demand. These materials are often lighter and more
corrosion-resistant, making them attractive substitutes for steel in certain applications.

Failure to keep pace with technological advancements in steelmaking and material science could lead
to obsolescence and loss of competitive advantage.

OUTLOOK

Looking ahead, the Indian economy is expected to continue its growth trajectory, supported by strong
domestic demand, strategic investments, and ongoing reforms. However, challenges such as inflation,
global economic uncertainties, and environmental issues will require vigilant policy management and
adaptive strategies.

For FY 2024-2025, the Indian economy presents a picture of robust growth amidst a complex global
and domestic landscape. With a focus on infrastructure, investment, and economic reforms, India is
well-positioned to sustain its growth momentum while addressing key challenges and leveraging
emerging opportunities.

RISK AND CONCERN

The company operating in a highly competitive and regulated Iron and steel sector, is exposed to various
business, financial, operating and environmental risks. The company is committed to identifying these
risks and implementing effective mitigation strategy to ensure sustainable operations and long-term
value creation.

• Raw material price volatility: Fluctuation in price of iron ore, coal, and other inputs due to
geopolitical events supply disruptions, and regulatory changes.

The company enters into long-term supply agreements with reliable vendors, diversifies
sourcing channels, and maintains optimal inventory levels to manage cost variability.

• Market demand Uncertainty: Demand fluctuations arising from macroeconomic instability,
reduced infrastructure activity, slowdown in user industries.

The company focuses on strengthening relationship with institutional buyers, and continuously
monitoring market trends for timely adjustments in production and sales strategies.

• Regulatory and Environmental Compliance: Increasingly stringent environmental
regulation and statutory compliance requirements may increase operational costs.

The company proactively invests in pollution control equipment, energy- efficient technologies,
and environment friendly manufacturing practices, it also conducts regular internal audits to
ensure strict compliance applicable laws and standards.

• Workplace Safety and workforce Management: Potential hazards associated with steel
manufacturing process and challenges in maintaining skilled manpower.

The company, comprehensive safety protocols, periodic training programs and strict adherence
to industry best practices are implemented. The company also fosters employee engagement
and welfare to ensure workforces stability.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

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 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 has laid down Standard Operating Procedures and policies to guide the operations of
each of its functions. Business heads are responsible to ensure compliance with these policies and
procedures. Robust and continuous internal monitoring mechanisms ensure timely identification of risks
and issues. The management, statutory auditors and internal auditors have also carried out adequate due
diligence of the control environment of the Company through rigorous testing.

The Internal Audit team monitors and evaluates the efficacy and adequacy of internal control systems
in the Company, its compliance with operating systems, accounting procedures, and policies at all
locations of the Company and its subsidiaries. Based on the report of internal audit function, process
owners undertake corrective action(s) in their respective area(s) 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, the
Audit Committee at frequent intervals has independent sessions with the statutory auditor and the
Management to discuss the adequacy and effectiveness of internal financial controls.

FINANCIAL PERFORMANCE

The Company had prepared its financial statements based on Indian Accounting Standard (Ind AS).The
financial statements were prepared under the historical cost convention on an accrual basis. Figures of
the previous years were reclassified/ regrouped to confirm the presentation requirements under Ind AS
and the requirements laid down under Schedule III of the Companies Act, 2013.

The Companys revenue in FY 2024-25 was Rs. 15, 113 lakhs compare to Rs. 10, 939 lakhs in the
previous financial year. EBIDTA stood at Rs. (471.07) lakhs in FY 2024-25 compared to Rs. (673.01)
lakhs in the previous financial year. The Company reported a post-tax loss of Rs. 1,332.09 lakhs in FY
2024-2025 compared to a post-tax loss of Rs. 625.30 lakhs in the previous financial year.

HUMAN RESOURCE

The Company recognizes the importance of human resources in realizing its growth ambitions and
believes in nurturing talent within the organization to take up leadership positions. The Company
believes in investing in people development and process improvements, aligned with Companys vision
and values. As of March 31, 2025, the Company has 116 employees.

DETAILS OF SIGNIFICANT CHANGES:

Sl. Analytical Ratios No.	31st March 2024	31st March 2023	% Of Change
1 Current Ratio (Current Assets/Current Liabilities)	0.92	0.82	-11.6%
2 Debt - equity Ratio (Total Debt/Shareholders Equity)	-	5.00	100.0%
3 Inventory Turnover Ratio (Cost of Goods sold or Sales/Average inventory) Average inventory is (Opening + Closing balance/2)	14.30	7.81	-83.0%
4 Operating Margin (%) (Earnings before interest and Taxes less other income/Net Sales)	-11.95%	-3.72%	-221.0%
5 Net Profit Margin (%) (Net Profit/ Net Sales)	-8.87%	-5.71%	-55.2%
6 Trade Receivables Turnover ratio (Net Credit Purchase/ Average Trade Payables) Average trade payable=(opening + Closing balance /2)	4.87	1.97	-147.3%
7 Interest Coverage Ratio (Earnings Before Interest and Taxes (EBIT) / Interest Expense)	NIL	NIL	NIL

CAUTIONARY STATEMENT

Statements made in Management Discussion and Analysis Report describing the Companys objectives,
estimates, expectations, or predictions are "Forward-looking Statement" within the meaning of
applicable laws and regulations. They are based on certain assumptions and expectations of future
events. Actual results could differ materially from those expressed or implied. Important factors that
could make a difference to the Companys operation include global and Indian demand-supply
condition, raw material availability, trained manpower, changes in Government regulations, tax
regimes, economic development within India, and the countries within which the Company conducts
business and other incidental factors.