Aditya Ultra Steel Ltd Management Discussions

Industry Structure and Developments:

A. Industry Structure:

TMT (Thermo-Mechanically Treated) bars are high-strength reinforcement steel used widely in construction industry due to their exceptional strength, ductility, and corrosion resistance. Manufactured through a process of quenching, selftempering, and atmospheric cooling, TMT bars feature a tough outer surface and a ductile core, making them ideal for earthquake-resistant structures. They offer superior weldability and cost- effectiveness by reducing the amount of steel needed. Commonly used in building frameworks, infrastructure projects, and reinforced concrete structures, TMT bars come in various grades (like Fe-415D, Fe-500D, Fe- 550D, Fe- 600D) and sizes (6mm to 50mm in diameter), catering to diverse construction requirements.

TMT Size	Product Feature
8 MM	8 MM TMT bar is mainly used in construction industry. It is used for making rings which are attached or fitted in pillar structure and linter structure. It helps in providing the support to pillar structure or linter structure in the process of construction.
10 MM	10 MM & 12 MM TMT bars which are used for building up of roof top in RCC slab which is recommended for carrying heavy loads in many RCC structure such as columns, beams, slabs, cantilever, etc.
12 MM
16 MM	16 MM TMT bar is mainly used for construction that is ground floor plus one and above. For such type of construction, 16mm TMT bars are recommended in order to bear the load of upper floors.
20 MM	20MM, 25 MM & 32 MM TMT bars are advised for bringing up the foundational work stronger, the thickness of such rods provides more grip that sustains the load of the upper floors. Such bars are taken up for construction of huge projects.
25 MM
32 MM

Global Steel Industry:

From 2020 to 2024, the global crude steel industry experienced a tumultuous period characterized by significant fluctuations. The compound annual growth rate (CAGR) during this period stood at a (-0.6%), underscoring the volatility and challenges faced by the sector. The COVID-19 pandemic in 2020 was a major disruptor, causing a notable decline in steel production as industries worldwide grappled with lockdowns and reduced economic activity. However, the industry demonstrated resilience with a sharp rebound of 4.1% in 2021 as economies began to recover. This recovery was short-lived, as 2022 saw a steep decline of -3.7%, indicating a persistent and underlying slowdown in the industry. In 2024, the global crude steel product again contracted by 2.8% after experiencing a flat 0.1% growth in the previous year.

a) Global Steel Production Trends:

China, the worlds largest producer of crude steel, has played a pivotal role in shaping global production trends. Chinas steel industry benefits from abundant iron ore reserves and favorable labor policies, which provide a significant cost advantage. Despite facing tighter environmental regulations and policies aimed at reducing carbon emissions, Chinas share in global crude steel production remains around 54.7%. This dominance is bolstered by the countrys extensive industrial base and continuous investments in infrastructure development.

India, the second-largest producer, has also been a key player in the global steel market. According to World Steel Association, gross production of crude steel in India stood at 149 million tonnes in 2024 marking a 6.3% increase over 2023. The country leverages its rich iron ore reserves and supportive government initiatives, such as the National Steel Policy 2017, to enhance its production capabilities. Indias booming economy, with growing demand from sectors like construction, automobile manufacturing, and white goods production, further fuels its steel industry. The governments focus on infrastructure development and the Make in India initiative has also contributed to increased domestic steel consumption.

Current Overview of Indian Steel Industry:

India, the second-largest crude steel producer, has also been a key player in the global steel market. As per the Ministry of Steel, Indias crude steel production capacity has increased from 142.3 Mn tonnes in FY 2020 to 179.5 Mn Tonnes in FY 2024 (provision as per Ministry of Steel), registering a compounded annual growth of 6%. While its production has increased at CAGR of 7.2% between FY 2020-24 to reach 144.3 Mn tonnes. During Apr-October FY 2025, Indias crude steel production observed 3.6% y-o-y growth and measured 85.4 Mn tonnes.

B. Industry Developments:

1. Union Budget 2023-24 Announcement & Steel:

• The budget included a continuation of the waiver on customs duty for ferrous scrap, raw materials used in manufacturing Cold Rolled Grain Oriented (CRGO) steel, and nickel cathode. This is seen as a positive step for steel manufacturers.

• The inclusion of "specialty steel" under the Production Linked Incentive (PLI) scheme was announced as a positive development for the industry. This scheme aims to provide financial incentives for domestic manufacturing of these specific steel products.

• Tariff rate of scrap of iron or steel is reduced to 2.5% from 5%. Therefore, once the exemption from duty on these scraps expire, the BCD rate shall operate through tariff.

• Rescinds anti-dumping or countervailing duty on following products of steel are revoked with effect from February 1, 2022:

> Straight length Bars and Rod of alloy Steel from China PR,

> High Speed Steel of Non-Cobalt Grade from China PR, Brazil, Germany.

> Flat rolled products of steel (Al or Zinc coated) from China PR, Vietnam, and Korea RP.

> Hot rolled and cold rolled stainless steel flat products (from China PR).

2. Increase in Railway Construction and Its Impact on TMT Bar Demand

From FY 2021 to FY 2026, the union budget has significantly ramped up its allocation toward railway sector. The total outlay provided for Capital Expenditure in Budget Estimate 2025-26 of INR 2,652 billion. The Gross Budgetary Support for Railways in FY 2025-26 stands at INR 2,520 billion, which has reduced in compare of previous year, however the budget has significantly rise from the level of INR 1,122 billion in FY 2021. The railway will continue to utilize the money in essential infrastructure projects like rail track expansion, rolling stock procurement, electrification, signaling improvements, and station modernisation. The Government also provided for INR 100 billion from extra budgetary resource to meet its expenses & modernize. The total outlay also includes Nirbhaya fund of INR 2 billion and INR 30 billion for internal resources.

Railway sector improvement is a major driver of TMT bar demand.

The expansion of railway networks increases the need TMT bars as railway bridges and stations require substantial amounts of TMT bars for reinforcing concrete beams, columns, and slabs to ensure stability and earthquake resistance. Indirectly, the growth in railway projects stimulates related sectors like logistics, warehousing, and manufacturing hubs near railway stations, further boosting the demand for TMT bars. Urbanization along railway lines also leads to the development of commercial buildings, residential complexes, and public infrastructure, all of which depend on TMT bars for reinforcement. Furthermore, specific types of railway projects, such as high-speed rail or dedicated freight corridors, may necessitate specialized TMT bars with higher strength or corrosion resistance, influencing the demand within the TMT bar market.

3. Airport Infrastructure in India

India has witnessed massive growth in air travel in the recent years, with annual rate of growth in air passengers trumping the growth rate in passengers carried by railways. India is today the third largest civil aviation market in the world, in terms of total number of air passengers carried per annum. The total passengers carried by Indian airlines has increased at CAGR of 2.5% increasing from 341.01 million in FY 2020 to 376.43 million in FY 2024 while during 9M FY 2025 it registered 8.7% y-o-y growth over the corresponding period last year (CPLY).

4. Residential Real Estate: Annual Sales & Launches

The Indian residential real estate sector has been witnessing a steady recovery since 2021. During 2024, 350,612 new residential units were launched across the top 8 cities, which was slightly lower (-0.04%) than the previous year level, however, sales volume continued to grow stronger to 372,936 units, registering y-o-y growth of 13.3%. Increased savings during lockdowns, minimal income disruptions for mid and high-income brackets, and a robust economic growth forecast have fueled demand in Indias residential real estate market. Additionally, the upward trend in house prices since 2021 has created a positive sentiment among prospective buyers, boosting sales. Between CY 2020-24, the new launches grew at a CAGR 24.4% while sales volume by 24.7% CAGR.

Opportunities and Threats:

Opportunities:

1. Infrastructure Growth:

o Government focus on infrastructure (e.g., roads, bridges, railways, housing) boosts demand.

o Initiatives like PM Gati Shakti, Bharatmala, Smart Cities in India are strong demand drivers.

2. Urbanization and Industrialization:

o Rapid urban growth in emerging economies leads to increased consumption of steel in construction and manufacturing.

3. Make in India & PLI Schemes:

o Policies encouraging domestic manufacturing and exports support steel producers. o The PLI scheme for specialty steel incentivizes innovation and value addition.

4. Automotive and Engineering Sectors:

o Rising automotive demand (especially EVs) increases need for high-grade steel.

o Machinery, shipbuilding, and defense also offer growing markets.

5. Green Steel and Technological Innovations:

o Shift to low-carbon or hydrogen-based steel (green steel) opens new business lines and export opportunities. o Investment in automation and AI for predictive maintenance, quality control.

6. Export Potential:

o Competitive pricing and growing global demand allow India to become a key exporter, especially to Southeast Asia, Africa, and Europe.

7. Raw Material Security via Integration:

o Vertical integration by acquiring mines or beneficiation plants improves margins and supply chain stability.

Threats:

1. Raw Material Price Volatility:

o Prices of iron ore, coking coal, and energy are highly volatile and impact margins.

o Overdependence on imports for coking coal (especially from Australia) is a key concern for Indian players.

2. Environmental Regulations and ESG Pressure:

o Steel is a major polluter-emission norms, carbon tax, and ESG pressures increase compliance costs. o Transitioning to green technologies requires significant capital investment.

3. Global Overcapacity and Dumping:

o Excess capacity in China and other countries can lead to dumping, hurting domestic industry. o Trade wars and tariffs create uncertainty in global markets.

4. Substitute Materials:

o Alternatives like aluminum, composites, and polymers are increasingly being used in automotive and packaging sectors.

5. Logistics and Infrastructure Bottlenecks:

o High logistics costs in India due to poor multimodal connectivity and inefficient port handling.

6. Economic Cyclicality:

o Demand for steel is cyclical and sensitive to GDP growth, construction activity, and industrial performance.

7. Geopolitical Risks:

o Conflict zones (Russia-Ukraine, Middle East) and shifting trade dynamics impact both exports and input prices.

Segment - wise or product - wise performance:

Segment Reporting as defined in Ind AS 108 is not applicable, since the Company operates in only one segment.

Outlook:

The Company was incorporated on 27^th July, 2011. The Company is engaged in the business of manufacturing of rolled steel product

i.e. TMT bars under the Kamdhenu brand catering mainly to the construction industry and for infrastructure development. The Company manufactures TMT bars from billets through reheating furnace and rolling mill. Your company have a history of more than 13 (Thirteen) years in manufacturing of TMT bars industry. Your company design and manufacture TMT bars and sell it on B2B Basis. The companys customer base is mainly spread across the State of Gujarat. Manufacturing plant of the company located in Survey No- 48, Wankarner Boudry, Bhalgam, National Highway 8-A, Wankaner, Rajkot, Wankaner, Gujarat-363621, India which is equipped with testing laboratories, workers accommodation, canteen and well-connected transport facilities.

The manufacturing plant is located at Bhalgam, Rajkot within the State of Gujarat. The manufacturing plant has infrastructure facilities such as power supply, roads, water supply etc. The manufacturing plant enjoys the good connectivity through roads which makes the

movements of the raw-material as well as finished goods easy and hassle free. Thus, it helps in smooth procurement of raw material from the various suppliers spread in the State of Gujarat and dispatch of finished goods to our various distributors and dealers located in the State of Gujarat.

The Companys growth is the result of rise in our share of business with existing customers, acquiring new customers and our ability to respond to emerging industry trends towards steel and iron industries. The Company intend to be a cost-efficient steel manufacturer and penetrate deeper in our regional market to capture a higher share of our existing markets, resulting in higher margins due to lower transportation costs of supplying to our local customers and better logistics management. We intend to strengthen our relationships with our existing customers and explore opportunities to grow by expanding the production capacities in the array of products that we offer to our customers. We have demonstrated the ability to grow, adapt and integrate in response to our customers needs. We intend to leverage our relationships with existing customers to increase our wallet share and repeat business with them as well as new business, and potentially become a key vendor for such customers for specific products.

Risk and Concerns:

Company is facing competition from various small-scale manufacturers of industry. Manufacturing cost and administrative costs are also increasing day by day. But Company is equipped to meet the challenges by better marketing tactics and effective management of cost and expenses.

The Company is also required to follow and maintain the norms laid down by Gujarat Pollution Control Board (GPCB) for discharge of its effluents. The Company is adhering to the norms laid down by GPCB and has spent a large amount of funds on changing the old machinery and erecting new machines which adhere to the new stringent laws of GPCB.

Internal Control Systems and their adequacy:

The Company has an adequate system of Internal Control relating to purchase of stores, raw materials, plant & machineries, equipments & various components and for the sale of goods commensurate with the size and nature of business of the Company.

The system of Internal Control of the Company is adequate keeping in mind the size and complexity of your Companys business. Systems are regularly reviewed to ensure effectiveness.

Operational Performance and Financial Performance:

Operational capacity of the Company is approx. 80% to 90% of installed capacity. Due to increasing in demand for our product and our factory being operated at its maximum operational efficiency. During Financial year 2023-24, Company has upgraded its furnace by replacing existing bricks with high quality brick which would help maintaining the high temperature. In addition to that the rolling section underwent an upgrade with the installation of more efficient machinery and high speed rolls which will enhance the movement of TMT Bars on rolling line. As a result of these two significant upgrades, the production plant was collectively non-operational for approximately one month. Financial preformation of the company discussed in the affairs of the company in Directors Report.

Material Developments in Human Resources / Industrial Relations:

The iron and steel industry is strength and durability driven, considering this aspect we continue to build our team with high quality talent. The Company is putting thrust on providing training both in-house and outside. The key personnel are technically qualified and fully trained to run TMT bar manufacturing mill.

The Company 158 number of people employed as on closure of Financial Year,

The Company maintains cordial & harmonious relation with its employees.

Details of Key Financial Ratios are given below:

Ratios	2024-25	2023-24	Change %	Details of significant changes
Debtors Turnover	20.20	20.34	-0.69%	-
Inventory Turnover	8.84	10.64	-16.97%	-
Interest Service Coverage Ratio	1.64	2.11	-22.02%	-
Current Ratio (In times)	1.75	1.26	37.98%	Refer note no. 1
Debt Equity Ratio (In Times)	0.77	1.14	-32.60%	Refer note no. 2
Operating Profit Margin %	6.12	5.77	-0.35%	-
Net Profit Margin %	1.59%	1.31%	21.84%	-
Return on Net Worth %	12.67%	23.63%	-46.38%	Refer note no. 3

Note:

1. Increase in current ratio compared to previous year indicates the improvement in entitys short term liquidity.

2. Equity of the company has increased during the year due to which the ratio has improved as compared to the previous year.

3. Average Equity of shareholder has increased during the year benefit of which is yet to be realized by the company leading to reduction in ROE ratio.

Disclosure of Accounting Treatment:

In the preparation of financial statements, there is no treatment different from that prescribed in an Accounting Standard has been followed during financial year under review.

Regd Office:	By order of Board of Directors of
Survey No-48, Wankarner Boudry,	ADITYA ULTRA STEEL LIMITED
Bhalgam, National Highway 8-A,
Wankaner, Rajkot- 363621

 

Date: 04/08/2025	Sunny Sunil Singhi Chairman & Managing Director
Place: Rajkot	DIN: 07210706