Emergent Industrial Solutions Ltd Management Discussions.

The objective of this report is to convey the Managements perspective on the external environment and steel industry, as well as strategy, operating and financial performance, material developments in human resources and industrial relations, risks and opportunities and internal control systems and their adequacy in the Company during the financial year 2020-21. This report should be read in conjunction with the Companys financial statements, the schedules and notes thereto and other information included elsewhere in this Annual Report. The Companys financial statements have been prepared in accordance with Indian Accounting Standards (‘Ind AS) complying with the requirements of the Companies Act, 2013, (‘Act) and regulations issued by the Securities and Exchange Board of India (‘SEBI), each as amended from time to time.

The Company is primarily into international trading of Steel, Low ash Metallurgical Coke, carbon, iron-ore, Coal, Coke and Petroleum Coke products, Manganese ore, ferro alloys and other allied products etc, for supply to various steel and ferro alloys industries.


Macroeconomic condition

Global GDP contracted by 3.5% in 2020 as governments in both developed and emerging economies took measures to contain the spread of the COVID-19 virus. The response by policy makers prevented a collapse that would have been at least three times worse, and the medium-term losses for the global economy are expected to be smaller than the global financial crisis.

While China is forecasted to continue its rapid growth in 2021, Latin America and the Europe is expected to lag behind. US saw overall GDP decline of 3.5%. Indias economy rebounded quickly from one of the worlds longest and most stringent lockdowns, which also came with steepest fall in GDP in Q2. Real GDP grew by 0.4% in Q3FY2021 after a contraction in the previous two quarters. Real GDP is estimated to have contracted by ~8% in FY 2020-21.

Economic Outlook

The accelerating rollout of COVID-19 vaccines in many advanced economies has set the stage for rapid recovery in the second half of this year and into 2022. Advanced economies are expected to remain less affected by the virus this year and beyond, with low-income countries and emerging markets suffering more. While, the global economy is expected to recover to its pre-pandemic level of output in 2022, the emerging-market and developing economies are expected to take until 2023 to recover to the pre-pandemic level.

Indian Economy

India saw a gradual resumption of economic activity from Q2-FY 2020-21. The initial recovery was driven by government spending on infrastructure, exports and rural economy. The recovery gained momentum since August 2020 with pickup in consumption demand driven by festive buying and return of urban consumption. However, as per World bank the growth projections for FY 2021-22 have been revised to be below 8.3% due to the acute resurgence of the virus in the country, as many cities and states again went into lockdown. While the growth will depend upon the trajectory of the pandemic, the overall impact on the economy is expected to be less severe than last year.

India is expected to witness a full economic recovery in H2FY2022 driven by (a) ongoing vaccination drive supporting the current recovery momentum; (b) restart of investment cycle with significant spending on infrastructure and (c) continued recovery in consumption supported by urban demand, accentuated by work-from-home and preferences for personal mobility along with rising rural income and affordability.

However, normal growth levels are expected to be seen in FY 2022-23 only, provided no further economic disruption occurs and success of the ongoing vaccination drive.

STEEL INDUSTRY Global Steel Industry

Disruption on both demand and supply resulted in global steel demand in 2020 to fall by 0.2% against a growth of 3.7% in 2019. According to World Steel Association the total demand in 2020 was 1,772 MnT against 1,775 MnT in 2019. The impact of COVID-19 has been much more benign for the steel industry due to resurgent demand in China and better than expected post lockdown recovery globally in second half of 2020. China and Turkey were two key countries that saw an increase in finished steel demand of 9% and 13% respectively in 2020. North America and the European Union (‘EU) have experienced strong decline in steel demand owing to the COVID-19 pandemic. Both regions experienced demand decline of around 11%-16%. India also contributed to global declined by 13.7% to 88.5 MnT in 2020 against 102.6 MnT in 2019.

Up to 30% of global steelmaking capacity (excluding China) was idled or production at steel mills significantly reduced in response to a pandemic-induced drop in demand. However, the recovery in automotive production and white goods manufacturing was quicker than expected when the strictest lockdown measures were lifted. The construction sector was less affected, as it was supported by government stimulus schemes in many regions. As a result, steel prices rallied in all regions in late 2020.

Outlook for steel industry

Steel demand is expected to be strong due to recovery in manufacturing businesses around the world and global fiscal stimulus supporting infrastructure projects. The outlook for 2021 is expected to be positive because of the unprecedented fiscal stimulus provided by the governments across Europe, the US, Japan, Korea, Russia and China. These stimulus packages are expected to spur growth in these nations respective infrastructure sectors, boosting steel demand. China is expected to grow by 5% in 2021 with continuation of healthy demand conditions especially in the first half of 2021. Steel demand in key emerging economies (like India, Turkey) and Europe is expected to witness double digit recovery while Asia and Middle-East are likely to grow by 5%.

While it is expected that steel prices will consolidate closer to historical levels, prices are likely to remain high supported by

(i) strong iron ore prices,

(ii) rebound in coking coal prices,

(iii) positive impact from stimulus plans, and

(iv) improved business confidence from the roll-out of vaccines. Strong rebound of demand in 2021, in addition to supply-side reforms in China could lead to higher steel prices globally.

Indian Steel Industry

Indias steel industry has also suffered the production loss due to lockdown last year and recovered gradually since then, initially driven by export followed by gradual recovery in domestic demand. Strong rebound in manufacturing and infrastructure development activity has led to a sharp rise in both production and consumption of steel in India. In 2021, Indias steel demand is expected to grow by 20% over 2020, taking the demand higher than the pre-pandemic level of 103 MnT, driven by strong infrastructure spending and sustained demand of automotive and consumer durables.


In the year under review the company was in 3rd year of its changed line business of trading in steels, coal, coke and related raw materials etc. Due to growth in infrastructure and domestic consumption the company performed well in the current year.

(Rs. in lacs)

2020-21 2019-20
Revenue from operations 51391.12 16578.90
Other income 525.36 135.06
EBITDA 619.70 78.58
Depreciation and amortization expenses 5.55 1.12
Interest expenses 37.18 8.49
Profit before tax 576.97 68.97
PAT 429.33 51.38
Other Comprehensive Income (net of taxes) 2.59 (1.27)
Total comprehensive income for the year 431.92 50.11

During the year under review, the Company generated revenue of Rs. 51,391.12 lacs as compared Rs. 16,578.90 lacs in FY2019-20. It recorded an EBITDA of Rs. 619.70 lacs in FY 2020-21, while in FY2019-20 EBITDA stood at Rs. 78.58 lacs. Net profit of the company is Rs. 429.33 lacs in the year under review as against Rs.51.38 lacs in the previous year. The cash flows of the Company in FY 2020-21 is (-) Rs. 533.55 lacs as compared to (-) Rs. 1414.29 lacs in 2019-20. The Shareholders funds increased from Rs. 1648.58 lacs as on 31st March, 2020 to Rs. 2080.50 lacs as on 31st March, 2021.

Details of significant changes (i.e. change of 25% or more compared to the immediately previous financial year) in key financial ratios, alongwith detailed explanations

Particulars 2020-21 2019-20 Change Change (%)
Current Ratio Note 1 2.08 1.05 1.03 98.10%
Debtor turnover - Note 2 0.02 - 0.02 100.00%
Interest Coverage Ratio- Note 3 16.52 9.12 7.40 81.14%
Operating Profit Margin Note 4 0.45% 0.64% -0.19% -29.69%
Net Profit Margin Note 5 0.83% 0.31% 0.52% 167.74%
Return on Net worth Note 6 20.64% 3.12% 17.52% 561.54%


The Current ratio has increased from 1.05 to 2.08 primarily due to adjustments of advances received from customers in the year under review. This is basically reversal of reduction in current ratio for the year for the 2019-20.

1. Debtors as on 31/03/2021 mainly pertained to LC interest charges receivable from the customers. The Company does not sell material on credit to its customer thus, it is short term in nature.

2. The company did not borrow during FY2020-21, the company booked usance interest paid to bank against LC discontinuing and these charges are reimbursed by the respective customers to the company. Interest received from customers is shown under Interest income.

3. The Operating Profit Margin decreased from 0.64% in FY2020 to 0.45% in FY2021, due to lesser realization of sales in terms of price. It is temporary in nature.

4. Due to increase in non-core income in the year under review, the Net Profit Margin increased to 0.83% in FY2021 from 0.31% in FY2020.

5. The increase in return on Net-worth from 3.12% in FY2020 to 20.64% in FY2021, is in line with increase in Net profit margin during the year under review.



Governments focus on strengthening the domestic manufacturing base under the flagship “Atmanirbhar Bharat” programme. The Production Linked Incentive scheme has been introduced to boost the manufacturing sector in industries like automobile & auto components, consumer durables, solar equipment, telecom, etc. These are expected to boost steel consumption. Government has announced an investment of over 1 trillion in infrastructure over the next 5 years. This would be a key growth driver not only for steel industry but will also be a multiplier of growth across the sectors, boosting steel demand from sectors such as transportation, real estate and infrastructure. Emergence of new trends after COVID-19 such as work from home, preference to physical distancing would create additional demand for furniture, personal mobility, etc. In addition, the rise in e-commerce activity will support the growth of warehousing and light commercial vehicles.


Resurgence of infections leading to fresh lockdowns, both localised as well as regional / national level resulting in disruption in economic activity. Heavy dependence of agriculture sector on monsoon. In last 2 years, a normal monsoon has supported the growth in agriculture sector. Slower recovery in contact-based services, which is an integral part of Indian economy and affects lives & livelihood of service sector. The growth-oriented government agenda will drive Indias steel demand up, while private investment will take longer to recover. Constrained development due to slowdown in economy. Severe competition in the pellet Industry from both domestic and international markets. Divergent global market environment.


The identification and evaluation of risks play a crucial part in the sustainability of any organization. The Company adopted a robust risk management framework for identifying and evaluating risks and opportunities.

Key Risks and concerns

Adverse global and domestic demand-supply dynamics: Global demand and supply dynamics impact the Companys ability to reach beyond the domestic markets and cater to a diverse customer base. The company is growing its presence in various domestic markets and widening its customers base to manage this risk.

Volatility: Demand and raw material prices have both been volatile because of volatility in consumer industries and short-term raw material sourcing contracts. This has created more prospects for integration opportunities in raw materials and energy supply and strategic purchasing options.

Cyclical nature of the steel industry: To overcome the cyclical nature of the steel industry, it is essential to have a foothold in various markets that have different cyclical patterns, as this helps the Company to leverage market opportunities. The company is serving the domestic markets of western and eastern India and is also exploring to cater to international markets.

Disruption of business activities: A proactive risk management approach enables the Company to eliminate disruption of business activities.


Human resource has always been one of the most valued stakeholders and a key differentiator for our company. The company appreciates the determination, drive and dedication of its people, recognizing them as a key to success of the business. To enable the organization to attain its full potential, it is imperative for the company to create and maintain an ideal work culture thus creating an engaged and skilled workforce capable of delivering on the commitments to our stakeholders and in the process, making us ‘Future Ready- structurally, financially and culturally. The employees are encouraged to put in their best. Efforts are made to follow excellent Human Resource Practices.


The Company has Internal Controls systems, commensurate with the size, scale, and complexity of the Companys operations. The Board of Directors of the Company is responsible for ensuring that controls have been laid down by the Company and that such controls are adequate and operating effectively. The internal control framework has been designed to provide reasonable assurance with respect to recording and providing reliable financial and operational information, complying with applicable laws, safeguarding assets from unauthorised use, executing transactions with proper authorisation and ensuring compliance with corporate policies. The Companys internal control systems are commensurate with the size and operations of the business and is in line with requirements of the Companies Act, 2013.


Statements in the Management Discussion and Analysis describing the Companys objectives, projections, estimates, expectations 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 influence the Companys operations include economic developments within the country, demand and supply conditions in the industry, input prices, changes in Government regulations, tax laws and other factors such as litigation and industrial relations.


We, Vikash Rawal, Chief Executive Officer and Nitin Kumar, Chief Financial Officer do certify that:-

a) We have reviewed the financial statements and cash flow statement for the year ended 31st March, 2021 and to the best of our knowledge and belief:

i) these statements do not contain any materially untrue statement or omit any material fact or contain statements that might be misleading;

ii) these statements together present a true and fair view of the Companys affairs and are in compliance with the existing Accounting Standards and applicable laws and regulations.

b) To the best of our knowledge and belief, no transactions entered into by the Company during the year ended 31st March, 2021 are fraudulent, illegal or violative of the Companys code of conduct.

c) We accept responsibility for establishing and maintaining internal controls for financial reporting and we have evaluated the effectiveness of internal control systems of the Company pertaining to financial reporting. Deficiencies in the design or operation of such internal controls, if any, of which we are aware have been disclosed to the auditors and the Audit Committee and steps have been taken to rectify these deficiencies.

d) i) There has not been any significant change in internal control over financial reporting during the year under reference;

ii) The Company has adopted Ind AS from 1st April, 2017 and accordingly complied with the relevant accounting policies and disclosures as per the accounting standards.

i) We are not aware of any instance during the year of significant fraud with involvement therein of the management or any employee having a significant role in the Companys internal control system over financial reporting.


Date: 12.8.2021 (VIKASH RAWAL) (NITIN KUMAR)