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. 34800 PMT to Rs. 31,800 PMT whereas price of electricity, the major cost in production, went up due to tariff hike.

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 11% 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 02nd largest globally, having grown by over 50% since 2008 in terms of global export.

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 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

Global economic slowdowns arising from prevailing geopolitical and economic tensions in West Asia continue to pose a significant threat to the industry by impacting overall demand and market sentiment. The continuous increase in power costs remains a major challenge for the Company, as power constitutes a significant proportion of the production cost of cast iron (CI) lumps. At the same time, the realization prices of CI lumps have witnessed a declining trend over the past two to three years, resulting in pressure on operating margins. 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.

C. Product-wise Performance

Particulars	CI Lumps 2025-26	CI Lumps 2024-25	Casting Articles 2025-26	Casting Articles 2024-25
Production	13850	14631 MT	653	1100 MT
Sales	14767	13895 MT	710	976 MT

The production of CI Lumps fell because we have shut down one of two furnaces due to unviable operation. The production of Pipe fittings fell because of poor demand as a result of delay in release of funds of our customers by state governments. The projects under Jal Jivan Mission have slowed down.

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. During current year prices of CI Lumps have improved. The Pipe fitting demand is fluctuating due to delay in release of orders by state governments for water supply projects. The Central Govt. is pushing hard the projects under Jal Jivan Mission. The Govt. has allocated budget of Rs. 67670 crore against actual spend of Rs. 17000 crore in previous year. That should generate good demand for pipe fittings.

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 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 exploring options for the solar energy for long term sustainability. But it may take some time to fructify.

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 Company shutdown one of its two submerged arc furnaces with effect from 1 November 2025 due to unfavourable market conditions. Fall in selling price coupled with the increase in power charges made the operation commercially unviable, which resulted in falling turnover and earnings.

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 112 employees in the payroll of your Company as on 31st March 2026.

I. Financial Ratios

S. No.	Ratios	2024-25	2025-26	% change	Reasons for significant changes
1	Debtors Turnover	44.13	42.95	-3
2	Inventory Turnover	5.51	4.56	-17
3	Interest Coverage Ratio	3.93	-1.19	-130	Losses due to fall in selling prices and increase in cost of production.
4	Current Ratio	0.97	0.85	-13
5	Debt Equity Ratio	0.49	0.46	-6
6	Operating Profit Margin (%)	2.62	-8.12	-410	Losses due to fall in selling prices and increase in cost of production.
7	Net Profit Margin (%)	0.74%	-7.95	-1177
8	Return on Net Worth	1.44%	-13.99	-1075

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.