Balasore Alloys Ltd Management Discussions.

Global Economy

The global economy recorded a healthy growth of 3.6% in 2018. During the second half of the year, however, the global economy lost some momentum, mainly on account of the increased trade frictions between the US and China, and the tightening of financial conditions. International Monetary Fund (IMF) expects growth to decelerate to 3.3% in 2019 and its projections suggest that all three major engines of the global economy, viz. US, China and Euro area are likely to decelerate in 2019. On the positive side, however, IMF expects world economic output to recover and grow at 3.6% in 2020.

Of late, there have been a few growth-supportive factors such as the announcement of economic stimulus in China and halt to the process of monetary policy tightening in developed countries. But the business sentiment has become somewhat clouded with challenges arising from the apparent setback to the US-china trade talks, the spread of trade frictions to technology sectors and the increased intermingling of economic policies. These challenges signal that global commodity prices could be under pressure.

The World Economic Outlook (WEO) projects a further softening of growth to 3.3% during the year 2019. The economy is expected to pick up from the second half of 2019 and global economic growth expected to return to 3.6% during 2020. The growth is expected to stabilize around 3.5% beyond 2020, bolstered mainly by China & India. (Source: IMF)

Indian Economy

Despite softer growth, the Indian economy remained one of the fastest growing amid rising global volatility. The Indian economy registered a growth rate of 7% during FY 2018-19 as per the advance estimates of the Central Statistical Office.

The Index of Industrial production (IPP) with base 2011-12 for the April - January period for 2018-2019 registered a 4.4% growth yoy (Year-on-Year). While the domestic consumption remained the primary growth driver on the demand side, gross fixed capital formation and exports made growing contributions.

The liquidity tightness prompted the RBI to cut the repo rate by 25 bps to 6%, the second cut in three months, making India the only economy in Asia to have had implemented two consecutive policy rate cuts. The combined 50 bps cut also reflected the RBIs intent of infusing liquidity to kickstart the economy which is experiencing a soft patch.

However, the industrial output contracted by 0.1% in March 2019. A sustained decline in food prices, softening of oil prices and simultaneous appreciation of the Indian Rupee kept inflation at 3.5% well within the RBIs target.

Despite a positive outlook, the Indian economy remains vulnerable to certain domestic and geopolitical risks. Though inflationary pressures look benign, concerns have risen on the twin deficit problem- current account deficit & fiscal deficit - especially as portfolio investments remain subdued while trade deficit stays high. While fiscal expansion holds key to the economic growth, it may weigh on government coffers if private investment loses stem. Further, Indias Industrial output shrank by 0.1% in March 2019 that may pose a challenge for the new Government.

According to the IMF, India is expected to grow at 7.3% in CY 2019 and 7.5% in CY 2020, driven by a continued recovery in investment (9.4% growth) and robust consumption. Going forward, the Indian economy is expected to contribute 13.7% to total world economic growth, which is higher than that of several developed countries, including the US (Source: Bloomberg).

The Indian government has rolled out several initiatives, such as the National Mineral Policy and National Electronic Policy, to fast-track development. Similarly, the Agriculture Export Policy was introduced with a mandate to double agriculture exports to $60 billion by 2022. India has set a target of becoming a $5 trillion economy by 2024, and to bring that target within the remain of reality, the government is likely to spend heavily on developing social as well as economic infrastructure.

Indias medium-term growth prospects continue to be robust. Significant reforms undertaken in the recent years such as GST and insolvency code would raise Indias growth potential in the coming years, amplifying the effect of the long-term structural cornerstones of the Indian growth story such as demography and urbanization. In the near-term, however, uncertainly over the forthcoming monsoon season and the heightened global risks present headwinds for FY20. Accordingly, the outlook for the Indian economy in FY20 is one of cautious optimism at this juncture.

Industry Outlook

Ferro Chrome is an essential raw material for stainless steel production for its anti-corrosion property. Almost 80% of worlds Ferro Chrome production is consumed by the stainless steel sector thus making it the biggest growth driver for this industry.

The global stainless steel production reached 51.35 Million Ton (Mn.T) during 2018 consuming 13.07 Mn.T of Ferro Chrome with Asian market being the largest consumer led by China. The Chinese market alone consumed about 7.79 Mn.T of Ferro Chrome during 2018. Though the market is currently subdued, Industry experts project a 4% growth yoy in Ferro Chrome consumption globally.

Chrome ore industry overview

The global chrome ore & concentrate (incl. UG2) production stood at 33.71 Mn.T during 2018 with the African continent producing 19.91 Mn.T. The Indian Chromite ore production stood at 4.23 Mn.T for the same year. Out of the total chrome ore production, 31.63 Mn.T was consumed for metallurgical application globally. (Source: ICDA)


Global Overview

Stainless steel is well known for its inherent properties such as anti corrosion, longevity, resistance to impact, superior weldability, formability, elongation and hygiene. Hence, stainless steel has become an important raw material for the automotive, railway & transport (ATR) sector, Buildings & Construction, Clean energy production, Food processing, Medical science etc.

Global stainless production stood at 51.35 Mn.T in 2018, up by 6% yoy. even though the market is currently subdued, stainless production is expected to reach 52.94 Mn.T in 2019, up 3% yoy as estimated by market analysts.

Domestic Overview

India has now become the second largest producer of stainless steel just behind China. Stainless steel production in India stood at 4.02 Mn.T, up 12% yoy.

Considering Indias GDP growth and the fact that our per capita consumption of stainless steel is approx. 3 Kg vis- a- vis the world average of 6 Kg, there is ample scope for growth in the future.


The global Ferro Chrome production stood at 13.42 Mn.T for the year 2018. The Chinese Ferro Chrome production stood at 4.99 Mn.T followed by the African continent with an output of 4.22 Mn.T. In the export scenario, South Africas share stood at 50.5%, followed by Kazakhstan with 19% share. Exports from India constituted 12.7% of the global trade.

Future Prospects

Though the market is currently dull & prices are under pressure, market analysts predict that the Ferro Chrome consumption is expected to reach 13.6 Mn.T representing an increase of 4% in 2019. Global Stainless steel production is also expected to increase by 3% for the same period.

Domestic Overview

India is one of the dominant players in Ferro Chrome industry representing 12.7% of the global trade in 2018. Indias annual production stood at 1.3 Mn.T in the year 2018.

In view of some of the Governments development initiatives such as rolling out Euro VI emission norms for the auto sector by 2020 & converting railway coaches to safer LHB technology, the Indian stainless steel sector is expected to grow in the future propelling demand for Ferro Chrome.



While 2019 has started with a weak footing, global economy is expected to pickup from the second half of the year as pointed out by IMF. Stainless steel sector, the biggest consumer of Ferro Chrome is also expected to grow with the global production expected to reach 52.94 Mn.T in 2019, up 3% yoy as predicted by industry experts.


• The decision of withdrawing GSP benefit to Indian exports by US govt. may put pressure on Ferro Chrome exports to the US market.

• Looming Sino- American trade war & a no- deal Brexit may dampen the overall economic scenario.


On its pursuit towards excellence, the company continued its initiatives of TPM (Total Productive Maintenance) and Six Sigma. Several projects and activities have been carried to complement the cost reduction, process optimization and achieving operational efficiency targets and goal. After the adoption of Malcolm Baldrige business excellence model, the company leaped towards establishing the culture of excellence through its sustained implementation and its evaluation. Moreover, all the initiatives were categorically converted into systems and regular practices of the organization by the robust execution of the management systems through IMS (Integrated Management System). All business processes were linked to the excellence journey and further contributed towards sustenance of practices in the company.


The Company has adopted the globally acclaimed Malcolm Baldrige Business Excellence Model of USA for long term competitiveness and business sustainability through strategy formulation and execution to achieve its stated Vision and Mission. The Baldrige Excellence Model empowers the organization to reach its goals, improve results, and become more competitive. These core values and concept are the foundation for integrating key performance and operational requirements within a results-oriented framework that creates a basis for action, feedback, and ongoing success.

The company created the BAL Business Excellence Framework with the objective of building competitive advantage and creating sustainable business. Periodical review system has also been institutionalized for monitoring and supporting. Deployment is practiced through internal and external assessment which starts with preparing the Business overview by Senior Management, preparation of application document, coalition/compilation of Baldrige category specific results.

All Business Processes have been mapped end to end and classified into Management Processes, Value Creation Processes and Support Processes. Efficiency and effectiveness measures have been identified and are monitored regularly to assess the business impact of these processes. The Business Excellence framework is creating a cultural change by strengthening the Enterprise DNA thus ensuring continual improvement in all the Business processes.

Lean Six Sigma:

The Six Sigma initiative has significantly contributed in transforming business by breaking myths of conventional wisdom. The Company has a well-designed process flow for driving Six Sigma initiative across the organization. These initiatives continue to significantly contribute in process optimization, productivity, inventory reduction and quality improvement and significant cost reduction in the production of Ferro Chrome. Highlights of activities carried out in FY 2018-19 as follows:

• Development of statistical model to obtain the efficiency of operations.

• In-house capability building programmes conducted by Master Black Belts.

• Development of a unique Six Sigma Handbook for the organization.

• Industrial engineering study like time-motion, logistics controlled done successfully.

Total Productive Maintenance (TPM):

Manufacturing excellence in todays competitive climate depends upon the implementation of multiple complimentary & proven strategies. We have adopted a proven TPM philosophy in our plant since long period. In this journey we have achieved various milestones and are now getting ready for TPM Special Award in 2020.

TPM involves and engages employees through 10 pillar concept. Many initiatives rolled out during this year to improve plant performance are as follows:

1. Celebrated Quality month focussing on kaizens related to customer and product quality enhancement.

2. Established a robust 5S monitoring and improvement system in the plant.

3. Equipment competent operators were developed during JH step 4 journey across production machines.

4. Visual controls implemented at operational areas for better monitoring of equipment conditions.

5. Proactive approach through Safety, Health & Environment (SHE) pillar carried out to plan mock drills, safety audits, Poka Yoke, Hazard elimination etc for different areas of the plant.

6. Loss & Cost tree techniques used to identify and mitigate losses.

7. As a part of Office Total Productive Maintenance (OTPM), Maki Gami (paper roll analysis) was conducted to eliminate NVAs.

8. The plant members have been developed to record their improvements in form of MP sheets, Kaizens, QC stories etc.

Integrated management systems (IMS)

IMS integrates all business processes across the value chain in addition to integrating the processes involved in Management Initiatives and all forms of ISO Management Systems like Quality Management System (QMS), Environment Management System (EMS), Occupational Health & Safety Management System(OHSAS), Energy Management System (EnMS), Information Security Management System(ISMS), Asset Management System (AMS) and Social Accountability Management System (SA).

During the financial year, your Company continued to have latest certification of ISO 9001:2015 (QMS), ISO 14001:2015(EMS), ISO 55001:2014 (AMS), ISO 27001:2013 (ISMS) and SA8000:2014(SA), OHSAS 18001:2007 certification (OHSAS) System and ISO 50001:2011 (EnMS). Mines also continued with ISO 9001:2015, ISO 14001:2015, OHSAS 18001:2007 and SA8000:2014. In this year, Sukinda plant also certified to ISO 9001:2015, ISO 14001:2015 and latest certificate of occupational, health and safety i.e. ISO45001:2018 and as a result of which business processes are getting streamlined, re-engineered or re-designed, duplications eliminated, and processes standardized.

Information Technology

The company adopts the most advanced technologies into all of its manufacturing processes to ensure desired quality and of its products while ensuring On Time In Full (OTIF). The advanced process technology and sophisticated equipment have been acquired from World leaders of Metals & Ferro Alloy equipment like ELKEM, MINTEK, Tenova-Pyromet.

The manufacturing process is fully automated using advanced control systems acquired from Rockwell Automation. SCADA systems were introduced in 1989 that has been upgraded to new generation "control Logix" system of Rockwell Automation 2007 to facilitate operation of furnace electrode, weighing and batching system to maintain the consistency of the operation.

A highly sophisticated real-time computerized system enables better monitoring and control of all aspects of furnace operation in real-time. Sophisticated web-based real-time monitoring systems enable the production team to visualize the process from anywhere across the globe.

The manufacturing process of Ferro Chrome is power intensive and power is sourced from the regional grid. The company has a fully mechanised "Metal Recovery Plant" to extract the entrapped metal from slag which is a major initiative in waste recovery and environmental protection. The company also has Chrome Ore Beneficiation plant to enrich low grade Chromite ore at Mines site.

With an objective of improved business process, the company has implemented SAP ECC 6.0 in order to meet the changing and growing needs of the business. This technology solution automates business processes and facilitates accurate and real-time data acquisition across the organization for a faster and informed decision-making. In order to keep pace with changing technology, the company is investing in several digital initiatives and business transformation projects. The business runs seamlessly on SAP with Disaster Recovery Site located in western India. The company has been front runner in implementing SD WAN network.

The Knowledge Exchange (Portal), is a ‘one-stop-knowledge-shop enabling the employee to find information without reaching out in a public domain. This ensures knowledge built within organisation is retained to develop new resources.

A secure Virtual Private Network (VPN) has been implemented, for secure access and communication within and outside the company.

The company has also implemented and is certified Information Security Management System (ISO27001) to ensure confidentiality, Integrity and availability of all its electronic information systems and physical records in order to manage information risk effectively.


Balasore Alloys Ltd is a ISO 9001:2015 (Quality Management System) certified company and became the first Ferro Alloys Company in the world to receive the prestigious certificate on JIS G2303:1998 for our product from Japan Quality Assurance Organization.

Company is already certified for BIS 1170:1992 from Bureau of Indian standards and also having DIN 17565 registration from DIN CERTCO, GERMAN.

The Quality Control R&D Lab has been accredited to ISO 17025:2005 by NABL(National accreditation Board for testing & Calibration Laboratories) -a watermark of aligning its products standards to global benchmarks.


Balasore Alloys accord top priority to the safety of its people and safeguarding of the environment.

Environment management: The Company has institutionalized a structured environmental management system as per ISO 14001:2015, which ensures that it complies with all waste discharge standards, specified by various regulatory bodies.

The Company operates on a zero-discharge concept for liquid waste - wastewater is treated and recycled for dust suppression and horticulture purposes etc. The Company has also implemented rainwater harvesting & artificial recharge systems for increasing the ground water table and installation of Piezometers for measuring the ground water level.

Installed Continuous Ambient Air Quality Monitoring Station (CAAQMS) is a Real time & Robust monitoring system, which helps in assessing the level of pollution w.r.t ambient air quality & thus we can better control over the functioning of equipments meant for reducing the Air Pollution Level.

Solid waste is used in various construction activities, as a replacement for stone chips. Gas cleaning units attached with every furnace facilitates in adhering to the prescribed standard of stack gas emission.

Hazardous & Other Wastes like Used Oil, Used Battery, E-Waste and Plastic Waste are disposed through authorized recyclers or as per prescribed norms of Pollution Board. Flue Dust (Gas Cleaning Plant Dust) is being reused within our Plant Premises.

Green cover: The Company continued its plantation programme at local villages along with initiating sizeable plantation drives at its mines and manufacturing facility. In addition, the Company facilitated avenue plantation in the nearby peripheral area.

Energy Conservation: To conserve energy and optimize our energy performance & continual improvement of energy efficiency, company has implemented an Energy Management System in accordance with ISO 50001:2011.

Currently PAT Cycle - II is going on as per the BEE (Bureau of Energy Efficiency of India) guidelines and Monitoring & Verification (M & V) is under progress, M & V Audit will be conducted by BEE Empanelled Accredited Energy Auditor. After Submitting the M & V Audit report along with Form A & Form B than the BEE will evaluate or verify the documents.

Safety: Safety is one of the core values of our organisation. Safety of employees and interested parties are of the prime concern of the management. Company has implemented best safety practices in its occupational health & safety management in compliance to international standard OHSAS 18001: 2007 (now working on new standard ISO 45001:2018) to ensure that safety standards are regularly followed across its facilities (mines and manufacturing units). Contingency plans are developed and implemented to prevent, mitigate and control occupational health and safety hazards.

Hazard Identification and Risk Assessment (HIRA) of each and every activity is done and reviewed in regular interval. Accordingly, counter measures are taken on significant activities to eliminate or minimise the hazards associated with it. Generally manual works are more prone to injury. To minimise the human intervention manual works are converted to mechanised and semi-mechanised work. Safety poka yokes (Mistake proofing) and kaizens implemented at various areas as proactive approach to improve safe workplace. New improved safety management programmes are undertaken to create safer work environment.

In addition, on-site and audio-visual safety trainings are more focussed by the management to create awareness among the workers. The entire team for emergency preparedness are exercised for Mock drills in periodic interval to handle any such emergency situation.

The BAL plant has been covered by fire hydrant facility and fire detectors have been installed at all the buildings and fire prone areas. To raise the awareness among the employees about health and safety many promotional events like national safety week, fire safety week, road safety week are organized and wholehearted participation of the employees has been observed. Also annual medical check-up of all employees is being carried out to ensure their fitness and avoiding any occupational health hazards.


A sound foundation of intellectual capital lies at the core of the competitive advantage of the Company. This capital comprises a rich mix of experience and youth, thereby creating a wholesome culture of excellence.

The Companys people philosophy has played the prime role in shaping the company into a passionate, learning oriented and high performing organization. The management accords special focus in areas like role clarity, organisational development, employee engagement, team work to facilitate a performance driven culture.

The company is moving towards Automation in Human Resource by adopting software to enable efficient and effective way of employee friendly practices. The policies and procedures are undergoing change to in line with the best practices across the industry.

The company has adopted Balanced Score Card approach which is a strategic planning and management system used to align business activities to the Vision and Strategy of the organization by monitoring performance against strategic goals.

The Companys focus on growing the knowledge curve of its people has facilitated in developing a vibrant workforce capable of meeting present and future requirements. The Company has conducted 360 degree competency assessment and designed Individual Development Plan (IDP) for the senior management personnel to be ready during organizations organic & inorganic growth and develop Individuals competency.

The Board records its appreciation for the support of employees at all levels and looks forward to their total involvement in the growth process of the Company.


(Rs. in Lacs)
Particulars Financial year ended 31st March, 2019 Financial year ended 31st March, 2018


Total Income (net of excise duty) 1,27,016.10 1,27,102.44
Profit/(Loss) Before Interest, Depreciation &Tax (PBIDT) 8,029.13 21,113.80
Finance Charges 4,419.83 4,615.16
Depreciation 3,207.30 3,031.47
Exceptional Items 3,683.58 2,661.81
Provision for Income Tax ( Including for earlier years) (365.90) 4,249.78
Net Profit After Tax (2,915.68) 6,555.58
Other Comprehensive Income 69.64 (20.09)
Total Comprehensive Income For the Year (2,846.04) 6,535.49
Profit brought forward from Previous Years 77,375.65 71,255.44
Profit Carried to Balance Sheet 73,616.16 77,375.65

In spite of the loss (PAT) of Rs.(2,915.68) Lacs, the Company has announced a dividend of 8%.

The total income of the company for the year ended March 31,2019 was Rs.1,27,016.10 lacs and exports and book sales of Rs.99,895.69 Lacs, which is higher by 0.79% over the last years figure.

There has been an increase in the cost of consumption of raw materials by 19.15% - from Rs.46,040.99 Lacs to Rs.54,857.35 Lacs.

Power and fuel cost increased by 6.23%, from Rs.32,601.04 Lacs to Rs.34,632.73 Lacs because of increased volume of production as compared to the previous year.

PBIDT stood at Rs.8,029.13 Lacs against Rs.21,113.80 Lacs over the corresponding financial year.

PAT stood at Rs.(2,915.68) Lacs as against Rs.6,555.58 Lacs in the previous year, a decrease of 144.48%. Total Comprehensive Income for the year stood Rs.(2,846.04) Lacs as against Rs.6,535.49 Lacs in the previous year, a decrease of 143.55%. The Basic Earnings per Share (EPS) for the year was Rs.(3.05) as against Rs.7.35 and the Diluted Earnings per Share (EPS) for the year was Rs.(3.05) as against Rs.6.70 for the previous year.

Shareholders funds (Net worth) decreased from Rs.96,656.43 Lacs to Rs.92,966.59 Lacs as on March, 2019, registering a decline of 3.82% over the previous year.


Internal Control can be defined as a system designed, introduced and maintained by the company to provide a substantial degree of assurance in achieving business objective, within a framework of adequate checks and balances and to prevent misuse of power, facilitate timely management of change and ensure effective management of risk.

Based on that premise, the Company remained committed to ensure the prevalence of an effective internal control environment, commensurate with its size and nature of business that provides reliable financial and operational information, to ensure compliance of corporate policies and applicable statutory regulations and safeguard Companys assets. The internal audit process includes review and evaluation of effectiveness of the existing processes, controls and compliances. It also ensures adherence to policies and systems and mitigation of the operational risks perceived for each area under audit.

The system encompasses the major processes to ensure reliability of financial reporting, compliance with policies, procedures, laws and regulations, safeguarding of assets and economical and efficient use of resources. The Company has a comprehensive system of internal controls that enables efficient operations, optimal resource utilisation and compliance with all applicable laws and regulations. Each of these internal controls strengthens the Company and protects loss or unauthorised use of assets by providing adequate checks and balances. The Company authorises, records and reports all transactions.

The Company has carried out an assessment of the adequacy and effectiveness of the Companys Internal Financial Control System by an independent Consultant who did a thorough examination on each and every financial control persisting in the Organisation through TOD (Test of Design) and TOE (Test Of Effectiveness) methodology to analysis the effectiveness of laid down policies, processes, Standard Operating Procedures (SOPs) etc for Internal Controls defined in the Company.

The Statutory Auditors of the Company has also reviewed the Internal Financial Control system implemented by the Company on financial reporting and in their opinion, the company has, in all material aspects, adequate Internal Financial Control System over Financial reporting and such Internal Financial Controls were operating effectively as on 31st March 2019.

For effective business control, there is a full-fledged internal audit function, which is supported by a firm of independent Chartered Accountants to monitor adherence to all internal policies and procedures as well as compliance with all external regulatory guidelines. The Company has an elaborate financial reporting process, which ensures timely review of all financial information. Periodic reviews are undertaken through internal and external audit teams to monitor efficacy of the prevalent systems. Independence of the audit and compliance function is ensured by a direct line of reporting to the Audit Committee comprising of all Independent Directors as members to maintain the objectivity.

The Audit Committee of the Board provides re-assurance to the Board on the existence of effective internal control environment.


Every prospect comes with its fair share of risks and concerns. Yet, we consider it our responsibility to minimize instances of risks in our business.

The Framework: Our integrated risk management system is the core of our risk mitigation strategy, and focuses largely on prudential norms, structured reporting and control. Hence, even though our risk management is initiated at the senior management level, it still gets decentralised across the organisation, reaching key managers at various organisational levels, which in turn prepares them to mitigate risks at every level.

The companys Risk Management Framework is designed to provide reasonable assurance that objectives are met by integrating management control into the daily operations, by ensuring compliance with legal requirements and by safeguarding the integrity of the companys financial reporting and its related disclosures.

Classification of Risks: By segregating all our risks in separate sections, namely potential, operational, financial, strategic, growth and execution we have been able to bring about company-wide reviews by linking the fore mentioned risks with the Annual Business Plans of the Company.

The Risk Review: The risk management procedures are clearly defined and periodically reviewed by the Board of Directors with a view to strengthen the risk management framework and to continuously review and reassess the risk that the Company may confront with. This helps us to ensure the adequacy of our risk mitigation systems in this ever changing business landscape.


Statements in this Management Discussion and Analysis report detailing the Companys objectives, projections, estimates, expectations or predictions may be "forward looking statements" within the meaning of applicable securities 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 global and Indian demand supply conditions, raw material prices, finished goods prices, cyclical demand and pricing in the Companys products and their principal markets, changes in Government regulations, tax regimes, economic developments within India and the countries with which the Company conducts business and other factors such as litigation and/or labour negotiations.