Earthstahl & Alloys Ltd Management Discussions

A. Industry Structure & Developments Pig Iron / Cast Iron

We are producing Cast Iron (CI) through Submerged Arc Furnaces. This industry is fragmented and most of the producers are small and medium industrial units. Submerged Arc Furnaces (SAF) are mostly used for production of ferro alloys.

Cast iron is used as substitute of Pig iron in steel plants / foundries. Pig iron is mainly produced through blast furnace route by primary steel producers using coke as reductant whereas Cast iron produced in SAF uses electricity for reduction /melting. As such, Coke constitutes substantial cost in manufacturing of Pig iron whereas electricity constitutes main cost of production in CI Lumps. However, because of substitutive nature, prices of CI Lumps have strong co-relation with price of pig iron. Because of fall in steel prices the prices of pig iron and Cast iron also fell sharply. Our Average realization also fell sharply from Rs.36500 PMT to Rs. 34800 PMT whereas price of electricity, the major cost in production, went up substantially due to reduction of power load factor incentive to 10% and increase in power tariff by 25 paise per unit affecting the profitability. As against this the cost of producing pig iron has gone down because of fall in prices of inputs i.e. iron ore and coke. Casting is most often used for making complex shapes that would be otherwise difficult or uneconomical to make by other methods. Metal castings find applications almost in all industries.

The Indian foundry industry manufactures metal cast components for applications in automotives, tractors and other farm equipment, water supply infrastructure, railways, machine tools, sanitary, pipe fittings, defense, aerospace, mining and earth moving machinery, textile, cement, electrical, power machinery, pumps/valves, wind turbine generators, etc. There are approximately 5000 foundries in India, which are largely in the MSME sector, with a handful of major players, located in various foundry clusters. Each cluster is known for a particular speciality in terms of the range of products manufactured. Foundries currently produce over 10 million TPA of cast components in ferrous and non-ferrous category as per various international standards. It is about 10% of the global production by weight. The products range in size from a few grams to over 100 tonnes per piece for various applications. The Indian foundry industry has gradually risen from No. 5 to become the 3rd largest globally, having grown by over 43% since 2008.

The Iron & Steel Casting industry can leverage valuable opportunities by prioritizing resilience and innovation. This entails maintaining investment discipline, actively engaging in business ecosystems, and demonstrating a strong commitment to sustainability, thereby underscoring the chemicals industrys pivotal role in driving sustainable solutions.

Furthermore, the Global Iron & Steel Casting Market Analysis Report offers a comprehensive assessment with detailed qualitative and quantitative research, evaluating the current scenario and providing future market potential for different product segments across various applications and end-uses until 2031.

B. Opportunities

We are recycling the hazardous waste generated in the steel plants to improve life cycle and conserve the natural resources. With increased focus on sustainability and social governance, there will be more focus and encouragement for the industry. India is the second largest producer of steel and the only major steel producing country recording positive growth in production. A large capacity addition is lined-up in steel providing huge opportunity for waste recycling. We can also shift to production of ferro alloys after getting necessary environmental clearances. We have installed Briquetting plant for use of hazardous dust generated in steel plants. Necessary approval of use of hazardous material has also been received. That will widen sources of raw material and save on costs.

We are also exploring opportunities for producing cast articles for railway / defence sector, which throws large market for growth. The company has also acquired land in iron ore rich belt of Gadchiroli district of Maharashtra for future growth. A large number of steel manufacturing facilities are coming up in the area which has got huge good quality iron ore reserves.

Threats

The fall in input prices for pig iron produced through blast furnace route poses threat to the cast iron industry because of fall in their production cost whereas production cost of CI Lumps has gone up due to increase in electricity prices.

C. Product-wise Performance

Particulars		CI Lumps	Casting Articles
	2024-25	2023-24	2024-25	2023-24
Production	14631	17859 MT	1100	1050 MT
Sales	13895	18613 MT	976	1052 MT

D. Outlook

The steel market is facing headwinds on account of increased exports from China and cheaper imports in India. Increased cost of power has also affected cost structure. From July 2025, power tariff has again been rationalised, making operation of CI Lumps sustainable. The Pipe fitting demand is fluctuating due to delay in release of orders by state governments for water supply projects. Various safeguard measures taken by the govt. to check cheap imports should augur well for the industry.

E. Risks and Concerns

As discussed in above paragraphs the major risk is fall in selling prices due to slow down in Chinese economy and another risk is sharp increase in electricity prices. These may have effect on profitability of the company. The company has taken effective steps to reduce cost of electricity and also evaluating further steps in this direction for long term sustainability.

F. Internal control systems and their adequacy

Company has adequate Internal Financial Controls System over financial reporting which ensures that all transactions are authorized, recorded, and reported correctly in a timely manner. The Companys Internal Financial Controls over financial reporting provides reasonable assurance over the integrity of financial statements of the Company.

Company has laid down Standard Operating Procedures, Policies and Procedures to guide the operations of the business. Functional heads are responsible to ensure compliance with all laws and regulations and also with the policies and procedures laid down by the management. The company has also appointed independent firm of Chartered Accountants to carry out internal audit to ensure that internal controls are working effectively.

G. Discussion on financial performance with respect to operational performance.

The turnover and profitability both fell during the year because of shutdown of the plant taken in August and Sept. 2024, resulting in fall in selling prices and increase in electricity cost. This has been explained in details in Directors report.

H. Material developments in Human Resources / Industrial Relations front, including number of people employed.

There were no material developments in human resources / industrial relations during the year under review. There were a total of 145 employees in the payroll of your Company as on 31st March 2025.

I. Financial Ratios

SI. No.	Ratios	2023-24	2024-25	% change	Reasons for significant changes
1	Debtors Turnover	34.43	44.13	28%	More sale on advance payments than against LCs
2	Inventory Turnover	8.56	5.51	-36%	Fall in turnover due to shutdown of plant in august & Sept. 2024.
3	Interest Coverage Ratio	6.68	3.93	-41%	Fall in profitability due to increase in power cost.
4	Current Ratio	1.03	0.97	-6%	No significant change.
5	Debt Equity Ratio	0.35	0.49	-39%	Additional borrowing for projects and increased working capital needs.
6	Operating Profit Margin (%)	4.59%	2.62	-43%	Fall in profitability due to increase in
7	Net Profit Margin (%)	2.15%	0.74%	-66%	power cost.
8	Return on Net Worth	6.22%	1.44%	-77%

Forward Looking Statement

Statement in this Management and Discussion Analysis describing your Companys objectives, projections and estimates and expectations may be "Forward Looking Statements" within the meaning of applicable laws and regulations. Actual results may differ substantially or materially from those expressed or implied. Important development that could affect your Companys operations include a downward trend in the domestic industry, monsoon, rise in input cost and significant change in political & economic environment in India, environment standards, tax laws, RBI guidelines, litigations and labour relations.