Electrosteel Castings Ltd Management Discussions.

A. INDUSTRY STRUCTURE AND DEVELOPMENT

• Overview

The Company is engaged in the business of manufacturing Ductile Iron (Dl) Pipes, Ductile Iron Fittings (DIF) and Cast Iron (Cl) Pipes. The Company is the first to set up a Ductile Iron Pipe Plant in India. Today, it is Indias leading pipeline solution provider. It has a strong brand presence around the Globe. Since 1994, the Company has maintained its edge over its competitors. Owing to the high reliability and durability of its products, the Company has always remained the distinct choice for water engineers and domain experts in Ductile Iron Pipes and Fittings.

Industry Outlook

The world is now regaining normalcy after the initial disastrous effect of COVID-19 pandemic. Though the pandemic had slowed down the pace of economic growth considerably, India had handled the pandemic well. A very ambitious vaccination programme, one of the biggest vaccine drive in the world is already helping India to make a strong bounce back to the growth path again.

Water to common people is now getting very high priority from the present Government, the policy makers and the media. The rising concern about future availability of fresh water as well as the deterioration in drinking water quality had prompted the Government of India to already initiate a massive programme termed as "Nal Se JaTand access to drinking water for all is now a declared priority. As declared by the Prime Minister, an amount of Rs. 3.5 lakh crores will be spent in coming 5 years to achieve this target. The Jal Shakti Ministry has set a target of"Har Ghar Nal se JaTby 2024 under the Jal Jeevan Mission.The Government is planning an aggressive target of providing piped water to all households by 2024.This indeed is a massive challenge given the sheer numbers involved - 150mn households across 0.5mn+ villages will have to be brought under the scheme over the next five years. Considering above aspects, time bound completion of schemes is being monitored by Jal Shakti Ministry to achieve the goal of providing tap connection to every rural household. Significant priority to cover water quality affected habitations is also taken up under Jal Jeevan Mission. Apart from the above, the State Governmentsspending on water is expected to increase to fulfill the mission. At the same time, the world demand for Dl Pipes are also gradually looking up after the pandemic.

The Drinking Water and Sewerage Sector

It is widely acknowledged that the Indian economy is one of the fastest growing economy in the world now. With economic upliftment, rapid urbanization is taking place all over India, where villages are being transformed to towns, towns into cities and cities into megacities. As a result, the demand for water has been increasing rapidly in the past few decades. There is no doubt that the Har Ghar Nal se Jal" programme under the Jal Jeevan Mission will greatly augment the governmental spending on water supply, particularly piped supply of surface water in usable form. At the same time, disposal need of used water is also growing simultaneously, warranting more investment in the sewerage and waste water sector.

Dl Pipe in view of its inherent features, like, high mechanical strength, better pressure bearing ability, higher corrosion & abrasion resistance, easy laying and long service life, is the preferred choice over other types of pipes for water and sewerage transportation.

• Irrigation Sector

India is a big country and has a non-uniform pattern of rainfall. The rainfall is seasonal in nature and India has comparatively lower storage capacity to store the rain runoff. As a result, vast areas of the country is dependent on irrigation for sustain farming activity and food production. Until recent past, irrigation in India was mainly canal based. But due to problems being faced for land acquisition and to minimize transmission loss due to percolation and evaporation, the Government is stressing more and more on piped irrigation, thus, creating huge scope for use of Dl Pipes in irrigation network. A number of states have already started implementing piped irrigation projects and more piped irrigation is expected to come in near future.

• Industrial Water

It is the rapidly increasing diverse industrial activities, which is fuelling Indias economic growth. Most industries need large quantity of water to run. Thus, the pipe demand for industrial water supply is also growing with more industrialization. In most of the cases, water is to be brought from a distance, which needs long pipelines to carry bulk water.

As a result, the Indian pipe business for industrial water and waste water is growing rapidly and the demand for ductile iron pipes, in particular, is on a rise due to its high dependability and high durability.

• Demand Drivers for Dl Pipes

The following factors will continue to drive the demand for Dl Pipes:

1. The resolve of the Central Govern ment to provide drinking water and sanitation facility to 100% of the population and making funds available to achieve it under the "Jal Jeevan Missionand"Swachh Bharat Mission".

2. The 500 numbers of AMRUT schemes and 100 Smart Cities Mission launched by the Government are under various stages of implementation.

3. Increasing demand in piped irrigation network.

4. Rising demand for industrial water and process water.

5. Low cost rural housing is picking up in a big way under the "Pradhan Mantri Abas Vikas Yojna".

6. More utilities are focussing on life cycle cost rather than initial cost to have a more durable water supply solution.

7. Rising opportunity of pipe export in new regions like Africa.

8. Due to superior quality, product certification by international agencies, followed by dependable after sales service, the Company continues to maintain its position in the export market against competitors.

• FY 2020-21 vs. FY 2019-20

The Companys Revenue from Operations was reported at Rs. 2,236.12 Crore during the year under review as compared to Rs. 2,479.89 Crore reported in the previous year. There was a decrease of around 22.12% in Export Sales from Rs. 1,024.06 Crore in 2019-20 to Rs. 797.56 Crore in 2020-21.The Companys profit in 2020-21 was Rs. 43.24 Crore as against profit of Rs. 98.59 Crore in 2019-20. All the said reductions were mainly due to the lockdowns and restrcitions imposed for over two months on account of the Global Pandemic caused by the ongoing coronavirus (COVID-19) situation in the first quarter.

B. PRODUCT WISE PERFORMANCE Ductile Iron (Dl) Pipes

The Ductile Iron Pipe Plant produced 2,65,892 MT of Dl Pipes during the Financial Year 2020-21 compared to 3,09,404 MT in the Financial Year 2019-20. The production was lower mainly in the first quarter when business was impacted due to lockdowns and restictions imposed for over two months on account of the Global Pandemic caused by the ongoing COVID-19 situation. Performance strongly improved subsequently during remaining part of the Financial Year taking into consideration numerous strategic decisions by the Management and exemplary performance by all employees and workers of the organization.

The main raw materials used in the production of Dl Pipes are Iron Ore and Coke. Iron Ore is mainly procured from Odisha and Jharkhand and Coke is captively produced at Haldia for which coking coals are imported mainly from Australia.The Dl Pipes produced by the Company are sold in India and globally to nearly 90 countries spread over 5 continents.

• Cast Iron (Cl) Pipes

The Cast Iron Pipe Plant, with a total capacity of 90,000 TPA, produced 37,413 MT of Cl Pipes during the Financial Year 2020-21 compared to 38,206 MT in the Financial Year 2019-20. The production was marginally lower compared to the previous year due to suspension of production because of the lockdowns and restrictions imposed in the first quarter and business slowdown thereafter, as the demand for Cast Iron Pipes remained low.

The main raw material used in the production of Cl Pipe is Pig Iron, which is obtained from domestic sources. The Cl Pipe produced by the Company is sold mainly to the states in Southern India.

• Dl Fittings & Accessories

The Company produced 13,988 MT of Dl Fittings in the Financial Year 2020-21 as against 12,667 MT in the Financial Year 2019-20. Despite more than 2 months lockdowns and restrictions imposed and business slowdown thereafter, the Company could recover performance in the later periods because the Companys teams were focusing on forward looking efforts and initiatives for higher productivity and utilization of capacity at its Flaldia and Khardah Works and improving the performance of these divisions.

Power Plant

The Companys newly installed 5 MW capacity Turbo generator at its Flaldia Works using the potentials of generation of steam from the waste gases of Coke Oven Plant is functioning well and providing cheaper power support to enhance performance of Ferro Alloys Products (Si.Mn) at Flaldia Works and as well as establishing overall environment and energy conservation improvement. In 2020-21, the new power plant has generated 17.73 million units.

With the new Power Plant, Flaldia has generated 101.43 million units of power, out of which 23.48 million units were transmitted to SEB grid in 2020-21 as against 89.28 million units generation and transmission of 28.15 million units in 2019-20.

Captive Coke Oven Plant

The Coke Oven Plant, with a total capacity of 2,25,000 TPA at Flaldia, produced 1,50,468 MT of Metallurgical Coke in 2020- 21 as against 1,65,413 MT in 2019-20, mainly for captive consumption in Blast Furnace at Khardah Works. The production was lower compared to previous year because of lockdowns and stringent restrictions imposed due to COVID-19 situation.

Moreover the production was restricted to the captive requirement level mainly because of post COVID slow-down in the market. The primary raw material for producing Coke that is Coking Coal was imported mainly from Australia.

Ferro Alloy Plant

The Companys newly installed Ferro Alloy Plant at Flaldia Works has produced Prime SiMn. 9,928 MT in 2020-21. Production was lower in the first quarter when the country went into lockdown. The plant commissioned in July, 2019 with SiMn. product and produced 6,277 MT in 2019-20.

Raw Materials Management

The Companys manufacturing facilities are spread across four locations in India. Presently, the business model consists of integrated production facilities which include Sinter Plant, Coke Oven Plant, Blast Furnace, Pig Iron Plant, Sponge Iron Plant, Fittings Plant and Captive Power Plant. The Company has also commissioned Ferro Alloys Manufacturing facility at Flaldia. The integrated manufacturing facility helps the Company to minimise the production cost as the Company strongly believes that cost competitiveness is a key component of success. The Company continuously endeavors to improve the cost competitiveness by adopting various innovative and cost saving measures in the operations.

The Ministry of Mines, Government of India, accorded the approval under Section 5(1) of the Mines and Minerals (Development and Regulation) Act, 1957 for grant of mining lease over an area of 192.50 ha in Village - Dirsumburu of Kodolibad forest in District - West Singhbhum, Jharkhand in the year 2006. The Company had received 1 st stage forest clearance and 2nd stage forest clearance is pending with Ministry of Environment, Forest & Climate Change (MOEFCC) since September, 2014. As per amended MMDR Act, 2015, the sunset date of lease execution was 11 January, 2017. The Company filed a writ petition before the Flonble FHigh Court of Jharkhand on 10 January, 2017, praying, inter-alia, for direction for grant of said lease in favour of the Company. The Flonble FHigh Court in its order, being not averse in granting relief with respect to cut off date, admitted the said petition and the matter is pending before the Court.

Exports

The Financial Year 2020-21 has been unprecedented because of the coronavirus pandemic. The economic fallout has been tremendous with extended lockdowns imposed in India in the first quarter and intermittent lockdowns imposed in various countries at different times. Different countries around the world were suffering at different levels, but, all were undoubtedly affected by the pandemic.

The Company has kept exports running even during the lockdown by making shipments from stock. The Companys customers could get our products to complete their projects creating strong goodwill with all stakeholders in the international market. Although new projects have been slow due to lack of funding of water and sewage projects, the Company has been able to continue the export activities although in a slightly subdued manner. The sharp increase in ocean freight and raw material cost has further added pressure but exchange rate depreciation has slightly helped the Company.

The Company has managed to do well in the EU, Middle East and the Gulf and US but markets in South Asia, South East Asia and Africa have been slow due to lackof demand.The Company is seeing the pandemic as an opportunity to cut cost, gain market share and emerge stronger.

Quality and Approvals

The Company is committed to provide consistent quality products and services since it loaded its first consignment, 26 years back. Electrosteel products have been certified by globally renowned and respected certifying bodies, like, BSI (UK), DVGW (Germany), UL (USA), FM (USA), BV (Italy), OVGW (Austria), IGFH (Croatia), SASO (Saudi Arabia), etc.

Respected auditors from the certifying bodies have been visiting Electrosteel Manufacturing facility every year, since decades, to verify the system and products, as a part of their surveillance audit. Considering the changed situation due to COVID-19, most of the audits are now being performed vide virtual means. Recently, auditors from UL (USA), FM (USA) and DVGW (Germany) have audited our plants through virtual mode. We are glad to share that the Company has passed all the audits successfully.

The Company is committed to ensure long term sustainability of the global system including environmental, social, economic and qualitative aspects over the entire life cycle of its products and services. The Company has framed and maintained its quality management system in accordance with ISO 9001, Environmental Management System as per ISO 14001, Energy Management System as per ISO 50001, Occupational Health and Safety as per ISO 45001 and complies the Social Accountability requirement as per SA 8000.

C. OPPORTUNITIES AND THREATS

• Opportunities

The demand for Dl pipe is expected to grow with the Governments continued focus on water, sanitation and irrigation schemes across India and with the development of smart cities. Recently in May 2019, Government of India has set up a new Ministry of Jal Shakti.The formation of this ministry reflects Indias seriousness towards resolving water challenges and providing drinking water to every household in the Country. The Government of India is continuing considerable investments in Smart City and AMRUT projects which is pushing the demand for pipe upwards. Urban sewerage system is being revamped in most cities which will require more pipes. ECL has always remained the distinct choice for water engineers and domain experts in Ductile Iron Pipes and Fittings.

• Threats

Though the Jal Jeevan Mission has been launched with good intention, the water and waste water sector may face a financing gap as more consistent funding and persistent monitoring is required to achieve the goal. Proper and timely allocations of budgetary resources, more efficient project implementation and greater contributions from water users have to be ensured to maintain sustainability.

A real matter of concern is the increasing cost of raw materials as the market price is not escalating at the same pace, putting stress over the bottom line. Higher input and overhead cost, increasingly expensive pipe transportation/shipping logistics, is creating pressure on margins.

The export market continues to be very challenging due to slow down of world economy in the pandemic situation. Anti-dumping/Anti-subsidy duties imposed on Indian Dl Pipes by European Commission in EU countries has put us in a difficult spot.

On the other side, a number of new Dl Pipe manufacturers have entered into fray in recent years, making the Dl Pipe market more complex with a negative effect on the overall profitability.

But with increasing focus towards backward integration, cost reduction, exploring alternative markets, overcoming logistic constraints and long term planning for raw materials, the Company is confident of maintaining sustained growth.

D. RISKS AND CONCERNS

This has been dealt with separately in the section on "Risk Management".

E. FINANCIAL PERFORMANCE

The highlight of the operations for the year ended 31 March, 2021 and 31 March, 2020 are as under:

a) Financials

(Rs. in Crore)

Particulars Year ended 31 March, 2021 Year ended 31 March, 2020
Gross Sales & Income from Operations 2,236.12 2,479.89
Profit before Interest, Depreciation & Exceptional Items 285.45 396.18
- Finance Expenses 183.83 219.90
- Depreciation 52.67 52.74
Profit before Tax 48.95 123.54
Tax Expenses 5.71 24.95
Profit after Tax 43.24 98.59

b) Companys Sales mix

Year ended 31 March, 2021 Year ended 31 March, 2020
Revenue from sale of Product
D.l. Spun Pipes 1,470.06 1,746.59
D.l. Fittings 210.19 208.02
C.l. Spun Pipes 197.71 183.61
Others 345.21 296.27

Other Financial Matters

During the year:

1. Net Worth of the Company increased to Rs. 2,604.65 Croreas at 31 March, 2021 from Rs. 2,548.55 Croreas at 31 March, 2020.

2. Gross Fixed Assets including Work in Progress & Capital Advances as at 31 March, 2021 increased to Rs. 3,089.44 Crore from Rs. 3,073.95 Crore as at 31 March, 2020.

F. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Companys internal control systems are commensurate with the nature of its business and the size and complexity of operations. It ensures the efficiency of the operations, financial reporting and statutory compliances. These systems are reviewed through risk control matrix, various MIS wherever considered necessary. Apart from the internal control system, an Independent Internal Auditor also reviews all activities in a systematic and structured manner. The Audit Committee regularly reviews scope, observations and suggestions of the Internal Auditors and takes the necessary corrective actions.

G. HUMAN RESOURCES AND INDUSTRIAL RELATIONS

The Company strongly believes that to achieve continual success, a dedicated and devoted workforce is very much required to get high performance and improved productivity. This has been endlessly encouraged by evolving human resource management systems and processes of the Company. The Company has left no stones unturned for enhancing the capabilities of employees across all levels of the Organisation through engagement and continuous learning and development programs. Further, the Company is strongly focused towards utilisation of its manpower to the optimum level.

The positive approach and cordial relationship between the Management and Unions has resulted in smooth industrial relations during the year under review. The relationship has developed over the years and has played a significant role in smooth running of the Company. Any issues/grievances are peacefully addressed and amicably settled through different processes, like, discussion across the table, counseling, workers participation and collective bargaining on mutually acceptable terms. The Company sincerely strives to enhance and value knowledge capital by improving the competence of its employee and their prospective and optimum usage.

The Company has been accredited with Social Accountability (SA) 8000 certification from British Standard Institute (BSI). The SA 8000:2014 audit was conducted successfully by BSI for the Financial Year 2020-21 and recommended for continuation of the Certificate. The Company is taking initiatives to maintain TPM excellence on a continuous basis.

• Safety & Health

Safety and Health management is the foremost priority of the Company, which is under integrated OH&S management system. This management system provides good practices that an organization needs to implement and to demonstrate compliance with the legal requirements and other requirements related to Occupational Health and Safety.

The Company has set its objective for "Zero Accident" & "Zero Health Impairment". For achieving this target, the OH&S management system of the Company always evaluates its existing system and upgrade present system as per requirement of process of plant operation and statutory compliances.

The Company: has established, implemented and maintained an ongoing proactive process to assess work hazards for all routine and non-routine activities through analysis of HIRA for assessment of OH&S risks and other risks. Safe Operating Procedures (SOPs) have been prepared to eliminate hazard and reduction of OH&S risks.

> have formed department-wise safety committees by equal participation of staff and workmen representatives. Safety committee meetings are organized on monthly basis to mitigate work place hazards in time bound program.

> evaluate the OH&S performance and determine the effectiveness of the OH&S management system through monitoring and measuring the key characteristics of safety and health related issues periodically at different levels.

> has formulated on-site emergency plan and conduct mock-drill for emergency situation to prepare for hassle free control in real situation.

> has arranged health check-up activities for all level of employees at regular interval as per statutory requirement to prevent health impairment.

> has formulated and is maintaining COVID PROTOCOL for their employees and visitors with regular monitoring. The Company also conducts periodical awareness programme on COVID.

> has a system of imparting various training to workmen and staff for improving safety skills and increase awareness. These trainingsefficacy is reviewed through proper feedback system.

> has conducted plant inspection on a regular basis by senior officials along with OH&S management team to identify electrical, fire and other hazards and to restore the same on a time bound mitigation program.

> has conducted safety audit through external competent authority for assessing our ongoing safety management system and implements suggestions for further improvement.

> organizes Work Zone Monitoring at regular interval to review the status and keep it updated as per requirement for proper health management.

> celebrates National Safety Day/Week/Month in every year through various activities to enhance safety awareness among all level of employees.

> has received EXCELLENCE AWARDS - SILVER PLUS IN SAFETY HEALTH AND ENVIRONMENT from State Productivity Council- West Bengal.

Being an ISO 45001:2018 and SA 8000:2014 certified company, the Company is always maintaining good practices of OH&S system and enhancing performance of the OH&S management system in order to always improve overall performance level with the OH&S policy and objectives.

Environment

Sustainability is the main focus in the effective Environmental Management System of the Company. The Company is committed to provide cleaner and greener environment through sustainable development in every sphere of plant operation. The Company has carried out various steps to achieve a cleaner environment some of which are:

> Aspect and potential impact of all activities are considered to identify the environmental risk level. Operational control procedures have been prepared and maintained to reduce risk level. Life-cycle prospective are also considered for each process starting from procurement of raw materials to the end use of the product.

> Eco-friendly advanced techniques have been implemented to the possible extent for reduction of natural resource consumption as well as replacing hazardous materials by non-hazardous materials.

> Ambient air monitoring stations have been installed at strategic locations to determine the ambient air quality in and around the factory premises and improvement measures are also taken, if needed.

> Exploring new areas in plant operation for maximum utilization of treated water to increase recycling of water. Parameters of discharged water are always monitored as per statutory guidelines.

> Monitoring and measuring activities are carried out for all key characteristics of the environmental parameters to assess the impact of same in and around the factory premises towards a cleaner environment.

> Plantation of saplings are carried out throughout the year in and around the factory premises to increase the foliage area and to provide greener environment in the locality including plant area.

> Environmental awareness programmes are conducted to increase the environmental awareness focusing on the Companys Environmental Policy. On-the-job training is also imparted for implementation of continual improvement of process, technology, etc. Proper feedback system for training efficacy is also maintained.

> Celebration of World Environment Day is being carried out every year and various competitions are held, to increase awareness towards environment.

> TPM initiatives are also implemented in plant levels to improve the work environment condition through kaizens and good housekeeping practices.

> The Company has an established communication system to evaluate the effectiveness of existing Environmental Management practices time to time through internal audits of ISO 14001 and monthly review by top management.

• Waste Minimization

The Companys well defined waste management cell is taking all initiatives for handling of waste in environmentally safe manner following all the guidelines of regulatory authority. Operational control procedures are followed during storing, handling and transporting of hazardous and non-hazardous waste.

Some of the important initiatives are:

> Some of the process waste has been re-utilized in another process as raw materials without compromising the quality of the product. These helped to reduce the consumption of raw materials and fuel. It also promotes conservation of natural resources.

> Packing wastes are utilized for different purposes as a part of the process of recycling waste.

> Exploring more areas to introduce 4RTechnology (Reuse, Recycle, Reprocess, Reduce) for handling of waste towards cleaner environment.

The Company, being an ISO 14001 certified Company, complies with all the criteria mentioned in the management system and is also committed to implement good environmental practices in line with Environmental Policy.

Corporate Social Responsibility (CSR)

CSRactivityfor the Company is a setup of planned activities, taking into consideration the capabilities of the Company with

a target on significant impact to inspire and excite its local community, responding to the pandemic and building upon its longstanding commitment in near vicinities. The initiative of the Company is to strengthen its operating foundation and being engaged in ongoing efforts to contribute to the Society by enhancing corporate values.

The Company takes into account issues related to external stakeholders and also various range of programs that aim at social and environmental topics. The Companys Code of Conduct anchors its ethics and compliance affairs. It also creates and implements community based initiatives to solve issues in areas, like, education for children, environmental conservation, external cooperation, healthcare and animal welfare, keeping in mind the local culture and society.

Electrosteel Initiatives

• At the outset of the COVID-19 pandemic, the Company had addressed to the food insecurity, provided essential health care supplies and supported health care workers and vulnerable populations in nearby vicinity.

• Setting of drinking water kiosks in local area during the summer season.

• Providing assistance to promote local culture and festivals.

• Carrying out development work in local schools and sports clubs to promote education and sports activities.

• Providing medical help through Charitable Medical Centers.

• Motivating local poor but bright students and distribution of educational kits amongst school children.

• Arranging regular Blood Donation and Medical Camps through agencies and helping local people with Blood Cards as and when required.

• Distribution of clothes/blankets to downtrodden people of local area.

• Providing financial help to people against their appeals.

Implementation of CSR activities is in compliance with the Companies Act, 2013 & OPE guidelines to meet the CSR objectives and also based on the feedback from its stakeholders, customers and the local community.

Information Technology

The Company has embraced Qlik Sense which is a complete data analytics platform that sets the benchmark for a new generation of analytics. With its one-of-a-kind associative analytics engine, sophisticated Al, and high performance cloud platform, it will empower everyone in the Company to make better decisions daily, creating a truly data-driven enterprise.

The Company has set up disaster recovery site for SAP ERP as a part of its business continuity plan. This will ensure that the organization is ready to handle any future disasters in an organized manner, reducing the implications of such disaster. Live drill was conducted to verify whether the solutions are applicable and effective.

The Company has also implemented secure Virtual Private Network so that employees and end users can access SAP and other data remotely and work from home in this pandemic situation. Two factor authentication has been enforced to add an extra layer of security to improve online account access security.

H. DETAILS OF SIGNIFICANT CHANGES IN KEY FINANCIAL RATIOS

i. Operating Profit Margin (%) witnessed a decrease from around 14% in the Financial Year 2019-20 to around 11% in the Financial Year 2020-21 and Net Profit Margin (%) from around 4% to around 2%.

ii. Return on Net Worth witnessed a decrease from around 4% in the Financial Year 2019-20 to around 2% in the Financial Year 2020-21.

I. OUTLOOK

Electrosteel Castings is the pioneer in bringing the first manufacturing technology of Ductile Iron Pipes and Fittings in India, in 1994.The group has the maximum capacity to produce Dl Pipes, Dl Fittings and Cast Iron Pipes in India. Electrosteel is also known for innovation and for adding diversity in its product lines. The Company was instrumental in developing various classes of pipes and various types of protective coatings and huge range of fittings. On the strength of quality, comparable to any other prime international manufactures, Electrosteel Castings Dl Pipes and Fittings are accepted in Europe, Africa, Middle East, Far East and in USA. The Government of India has announced the "Nal se Jal" scheme. This scheme aims to provide piped water supply to every household in India by 2024. With this outlook, the Company is hopeful of having comfortable order position in domestic and export market in the Financial Year 2021-22.

CAUTIONARY STATEMENT

Statements in the Management Discussion and Analysis Report describing the Companys estimates, predictions, expectations may be "forward-looking" within the meaning of applicable securities laws and regulations. Actual results may differ materially from those expressed or implied in the statement. Important factors that could influence the Companys operations include global and domestic demand and supply conditions affecting selling prices of finished goods in which the Company operates, input availability and prices, changes in government regulations, tax laws and other statutes, economic developments within the country and the countries within which the Company conducts business and other factors such as litigation and industrial relations. The Company assumes no responsibility to publicly amend, modify or revise any forward-looking statements on the basis of subsequent developments, information or events.

Risk Management

The Company has proper Risk Management and Control System to ensure that the risks of the Company are identified and managed effectively. The risk and mitigation measures are weaved into strategic plans and are reviewed periodically. Values and Business Principles are important elements of the internal environment for risk management. The main objective of Risk Management is proper compliances with applicable laws and regulations and to ensure that the systems protect the safety and health of the employees, customers and consumers.

The Company has already undertaken an extensive Risk Management effort that includes introducing Risk Management Manual, compiling a comprehensive profile of the key risks to the Company, identifying key gaps in managing those risks and developing preliminary action plans to address those risks. The worldwide activities of the Company are exposed to varying degrees of risk and uncertainty. The Company has identified and categorised the risks associated with its business into Economic Risk, Competitor Risk, Industrial Risk, Environmental Risk, Foreign Exchange Risk and Payment Risk.

• Economic Risk

Economic risk can be described as the likelihood that the output of the project will not produce adequate revenues for covering operating costs and repaying the debt obligations. The causes can be many, for instance, the hike in the price for raw materials, failure to accomplish deadlines, disruptions in a production process, the change of a political regime, change of Industrial/Government policies, court orders, ordinance or natural disasters, etc.

To counter this, the Company has taken various steps including backward integration which comprises brownfield expansions, e.g., Sinter Plant, Sponge Iron Plant, Coke Oven Plant, Power Plant from waste heat recovery, Ferro Silicon Plant, upgrading and expanding manufacturing capacities, exploring alternate source for procurement of critical raw material in case of delay in mining planned earlier, managing resources to meet financial obligation, and increasing efforts on research and development. In addition, cost control measures are an ongoing process.

To avoid price volatility for critical items, the Company enters into contracts for bulk quantity as well as keeps on exploring alternate sources of supply.

• Competitor Risk

As the market is highly competitive with the elimination of physical barriers, the Company is exposed to the competitor risk. Ductile Iron (Dl) Pipe Industry is a technology intensive industry. Staying in tune with customers need is vital to the sustainability of any company; the same can be safely said about the competition. With the entry of new players and the inevitable competition from other alternative industries, the Company constantly analyses the competitors from both marketing and strategic point through the assessment of strength/weakness of each competitor, which helps to identify the opportunities and threats.

The Company continues to focus on increasing its market share and taking marketing initiatives that help customers in taking informed decisions.The quality improvement, global presence through its subsidiaries, and product enhancement efforts have established the brand image of the product as the most preferred brand with the customers. With the thrust given by Government of India on water and water related projects and due to the anticipated growth in water requirement in India, the demand of Dl Pipes is expected to grow substantially in the next few years and the Company is confident of retaining its market share.

• Industrial Risk

The Company ardently believes in recognising its peoples talent & their potential as one of the major source required for achieving success in this competitive market. As a measure to achieve this, the Company continues to pay sincere attention on people development by evolving a continuous learning human resource base to help them in improving their potential and fulfilling their aspiration. It is essential to have employees engagement in various spheres to create a congenial, conducive and healthy work culture. In the process, the Company gives utmost priority to community services, sports, education and medical services to the employees as well as the locality.

The Company undertakes development program to enhance the competency of the employees by imparting required training to make them multiskilled, thereby increasing the job opportunity and scope for redeployment.

The crucial factors in the smooth operation of the plant includes good public relations and liaisoning with statutory bodies, union leaders, community and opinion makers.TheCompanythrough its highly professional team of Management has been successful in maintaining an excellent labour relation over the years. As a consequence of such harmonious relations, the Company has grown by leaps and bounds over the years and will continue to do so over the coming years. Recently, the Company has revised the food prices to share the financial burden of the Company by arriving at a longterm settlement with unions for a period of three years from 1 October, 2020 to 30 September, 2023 amicably.

The Company is optimistic that with a team of loyal, devoted and dedicated workforce, the labour relation will continue to strengthen further and play an important role in the growth and success of the Company.

• Environmental Risk

Environmental risks are associated with any regulatory and non-compliance of environmental requirement conditions that are arising from the Companys plant activities. Environmental risk may occur for non fulfillment of the expected need and expectation of interested parties considering the business ethics. So detection of risk level and its mitigation plan is the main objective in effective Environmental Management System.

It is an integral part of the Companys effective Environment Management System to analyze all the activities and sub activities and its related risk in an established effective method. Best practice engineering methodology and operational control procedures are implemented to handle the environmental risk. Operational control procedures are maintained appropriately in order to ensure compliance with legal and other requirements. Operational Control Procedures are evaluated periodically for further updating for implementing environmental friendly procedures in plant activities.

The main focus of the Companys effective Environment Management System is sustainability in every sphere of the Companys activities considering the life cycle perspectives of all activities from procurement stage to end of life of product. Sustainable use of natural resources, use of green fuel and implementation of environmental friendly waste handling systems lead to a cleaner and greener environment in and around the Companys premises.

Monitoring and measuring the key characteristics of environmental parameters are another integral part in effective Environmental Management System. Evaluation of results are signifying the effectiveness of pollution control devices and also compliance status of statutory requirements. The Company has well established waste management procedures where the 4R (Reduce, Reuse, Recycle, Reprocess) techniques are implemented from long before to handle the waste in environmentally safe manner and also to obey the legal directives from time to time.

Environment Management Cell is well supported by engineering departments for updating the existing pollution control devices and implementing suitable techniques for any stringent requirements in near future or any changing circumstances including developments in legal requirements. Plantation of saplings are carried out all over the year to increase the foliage areas in and around the Company premises. Environmental awareness programme is carried out in coordination with training department throughout the year not only to increase the awareness but also focusing on the Companys Environmental Policy towards a greener environment. Being a ISO 14001:2015 certified Company, Environmental Management System of the Company has adopted good practices that an organization needs, to eliminate all the environmental risks.

A well established communication mechanism is always maintained for resources needed to implement and maintain the good practices for effective Environmental Management System.

Regular periodical review of Environmental Management System at different levels up to Top Management are there to keep this system properly effective to eliminate any risk.

• Foreign Exchange Risk

Foreign Exchange Risk (also known as exchange rate risk or currency risk) is a financial risk posed by an exposure to unanticipated changes in the exchange rate between two currencies. Multinational businesses exporting or importing goods and services are faced with an exchange rate risk, which can have severe financial consequences if not managed appropriately. Considering the large exports and imports of raw material, the Company is exposed to the riskof fluctuation in the exchange rates.

The Company has adopted a comprehensive risk management review system wherein it actively hedges its foreign exchange exposures within defined parameters, through use of hedging instruments, such as, forward contracts, options and swaps. The Company periodically reviews its risk management initiatives and also takes expert advice on regular basis on hedging strategy.

• Payment Risk

Payment risk refers to the possibility of loss on account of non-receipt or delayed or part receipt of payments. For example, in case of incorrect or delayed payments, there are costs arising from transferring funds back, interest charges, replacement costs and other types of charges. In case of not receiving or receiving partial payments, there will be a principal loss.

Since major water infrastructure projects are Government funded or foreign aided, the risk involved in payment default is minimum. Further, evaluating the credit worthiness of the customers has minimised the risk of default by other segment customers. Besides, the riskof export receivables other than subsidiaries is covered under Credit Insurance.

For and on behalf of the Board of Directors
Pradip Kumar Khaitan
Place: Kolkata Chairman
Date: 20 May, 2021 DIN: 00004821