Emergent Industrial Solutions Ltd Management Discussions

OVERVIEW

This report presents the Managements perspective on the external environment, global and domestic steel industry developments, the Companys strategic direction, operational and financial performance, human resources, industrial relations, risk management, and internal control systems during FY 2024 25. It should be read alongside the Companys audited financial statements, schedules, notes, and other information included in the Integrated Report and Annual Accounts 2024 25. The financial statements have been prepared in accordance with the Indian Accounting Standards (Ind AS), the provisions of the Companies Act, 2013 (as amended), and applicable regulations issued by the Securities and Exchange Board of India (SEBI).

ECONOMIC OVERVIEW

Global Economy

The global economy demonstrated resilience in CY 2024, although regional growth trends were uneven due to varied local challenges. While parts of Asia and Europe experienced sluggish activity, steady expansion in the United States helped balance overall performance. Global GDP growth moderated slightly to 3.2% in CY 2024 from 3.3% in CY 2023. Disinflation continued, albeit slowly, as service-sector costs remained elevated in major economies and inflationary pressures persisted in select emerging markets. Monetary policies diverged, with some central banks cautiously reducing interest rates while others maintained restrictive stances. Elevated uncertainty stemmed from trade disputes, fiscal pressures, and geopolitical tensions. Advanced economies grew at 1.7% in both CY 2023 and CY 2024, while Emerging Markets and Developing Economies (EMDEs) expanded by 4.3% and 4.2%, respectively. Looking ahead, advanced economies are projected to grow moderately 1.9% in 2025 and 1.8% in 2026 driven largely by domestic demand and varied policy responses. EMDEs, including India and China, are expected to sustain stable growth despite global uncertainties. Recent volatility was triggered by changes in U.S. tariff policy an announced 26% import tariff (later suspended for 90 days) added to investor uncertainty.

Outlook:

The IMF (July 2025) projects global GDP growth of 3.0% in 2025 and 3.1% in 2026, supported by emerging-market domestic demand, gradual trade recovery, and easier financial conditions. The OECD forecasts 2.9% growth in both years, while the World Bank remains cautious at ~2.3% in 2025 and ~2.4% in 2026 due to trade barriers, policy unpredictability, and subdued advanced-economy investment.

World merchandise trade volumes are forecast by the WTO to rise ~0.9% in 2025 and ~1.8% in 2026, following front-loaded shipments in early 2025 ahead of tariff hikes. Risks remain from escalating trade tensions, delayed monetary easing, and geopolitical supply chain disruptions. (source: IMF Data, OECD)

Indian Economy

India remained one of the fastest-growing major economies in FY 2024 25, supported by robust domestic demand, a vibrant services sector, and structural reforms. However, GDP growth moderated to 6.5% from 8.2% in FY 2023 24, reflecting global headwinds, tariff-related disruptions, inflationary pressures, and geopolitical tensions. Growth was underpinned by strong manufacturing momentum, expanding services, and infrastructure investments. Government initiatives including the Production Linked Incentive (PLI) schemes boosted domestic manufacturing and FDI in sectors such as electronics, automotive, and renewable energy. Rising urbanisation and a growing middle class continued to support consumer spending. Inflation moderated, with CPI at 4.6% in FY 2024 25 (from 5.4% for FY 2023-24), and expected to ease further to 3.7% in FY 2025 26. The RBIs Monetary Policy Committee cut the repo rate twice in early 2025, reducing it from 6.50% to 6.00%, shifting its stance to "accommodative" to support growth amid global uncertainties. (Source https://pib.gov.in )

Outlook

Indias GDP is projected to grow 6.8 7.0% in 2025 and 6.6 6.8% in 2026 (IMF/World Bank), driven by sustained capital expenditure, PLI-led manufacturing growth, and resilience in services, IT, and renewable energy. Inflation is expected to remain within the RBIs target band, though food prices may face weather-related risks. Strong remittances and services exports will support the external balance, while merchandise exports may be constrained by global trade softness. (Source https://pib.gov.in )

STEEL INDUSTRY OVERVIEW

Global Steel Industry

In CY2024, global crude steel production declined by 0.9% YoY totaling 1,839.4 million tonnes (MNT), as reported by the World Steel Association. Chinas production in CY2024 reached 1,005.1 MNT, reflecting a 1.7% decrease from the previous year. Japans production fell by 3.4%, totaling 84.0 MNT, while the United States saw a 2.4% reduction, with a production of 79.5 MNT. Russias output was estimated at 70.7 MNT, a decline of 7.0% and South Koreas production declined by 4.7%, totaling 63.5 MNT. Contrarily, Germany reported a 5.2% increase, producing 37.2 MNT and T?rkiye experienced a 9.4% rise, reaching 36.9 MNT. Brazils output grew by 5.3%, reaching 33.7 MNT, while Irans production increased by 0.8%, totaling 31.0 MNT.

Global steel prices declined in CY2024 due to weak demand, a struggling Chinese economy, geopolitical tensions and cautious market sentiment amid elections in major economies. The downward trend was driven by a surge in lower-priced Chinese billet imports and weaker demand in Turkey, a key buyer of Black Sea billets.

Outlook

The global steel industry is expected to experience steady growth driven by strong demand from key sectors such as construction, manufacturing and automotive, particularly in emerging markets like China and India. As urbanization and infrastructure development continue, the need for steel, primarily produced from iron ore, will remain high. While dominant producers like Australia and Brazil are expected to meet global demand, technological advancements and a shift toward sustainable production methods would play crucial roles in shaping the industrys future. However, the market may face challenges such as price volatility, environmental concerns and competition from alternative materials. Overall, the outlook remains positive, with moderate growth anticipated, provided the industry adapts to evolving market and regulatory conditions. Moreover, global and domestic steel as well as raw material prices are likely to remain under pressure or fluctuate within a narrow range due to geopolitical tensions, US tariff measures and continued Chinese exports. (Source: https://worldsteel.org/media/press-releases)

Indian Steel Industry

India is the worlds second-largest steel producer, with crude steel output of approximately 144 MNT in 2024, reflecting a robust 6 7% year-on-year growth. The industry benefits from abundant iron ore reserves, competitive labor costs, and strong domestic demand, driven by infrastructure, construction, manufacturing, and automotive sectors. The Government of Indias initiatives, such as the National Steel Policy 2017, Production Linked Incentive (PLI) scheme for specialty steel, and large-scale infrastructure projects under the National Infrastructure Pipeline (NIP), are bolstering sectoral growth.

Domestic consumption has been expanding steadily, supported by housing schemes, renewable energy investments, and industrial capacity expansion. Indias steel demand in 2025 is projected to grow by ~7 8%, outpacing the global average, with production expected to cross 155 MNT. The medium-term outlook remains strong, with forecasts indicating a CAGR of 6 7% through FY 2026 27. However, the sector faces challenges including volatility in coking coal and iron ore prices, energy transition requirements, and exposure to global trade measures.

Outlook

Indias steel sector is poised for sustained expansion over the next two years, supported by robust domestic demand, continued public infrastructure investment, and strong momentum in manufacturing. Crude steel production is expected to exceed 155 MNT in 2025 and approach 165 168 MNT by 2026, with consumption growth projected at 6 7% annually. Key demand drivers will include government-led capital expenditure under the National Infrastructure Pipeline, the housing sector, renewable energy projects, automotive production, and the expansion of engineering goods manufacturing for exports. The Production Linked Incentive (PLI) scheme for specialty steel is anticipated to attract significant private investment, boosting value-added steel capacity and reducing import dependency.

On the export front, opportunities may emerge from demand recovery in select global markets and Indias competitive cost base, though global overcapacity and trade protectionism could limit upside potential. Technological upgrades, efficiency improvements, and adoption of low-carbon steelmaking processes will remain critical to maintaining competitiveness, especially as India advances toward its 2070 net-zero commitment. Overall, the Indian steel industry is expected to remain one of the fastest-growing major markets globally through 2026, firmly anchored by structural demand growth and policy support. (Source https://pib.gov.in )

Company Outlook

Given the positive medium-term outlook for the Indian steel industry, supported by strong domestic demand, government-led infrastructure investment, and the Production Linked Incentive (PLI) scheme, the Company is well-positioned to leverage growth opportunities in steel and allied trading. With Indias steel consumption expected to grow at 6 7% annually and crude steel production projected to cross 155 MNT in 2025, the Companys diversified product portfolio and robust trading network offer strong prospects for sustaining revenue growth. However, volatility in raw material prices, global trade measures, and geopolitical uncertainties may create short-term challenges. By focusing on efficiency, prudent risk management, and customer-centric strategies, the Company aims to maintain its growth momentum and enhance shareholder value in alignment with the favorable industry trajectory.

Opportunities and Threats

Opportunities

Infrastructure & Industrial Growth: Government allocation of 11.21 lakh crore for infrastructure in 2025 26 and rapid urbanization are driving demand for coal, iron ore, and steel in construction, transport, and manufacturing.

Policy Support: Initiatives such as the DMI&SP policy, zero BCD on ferro nickel, extended ferrous scrap duty exemptions, and anti-dumping duties on select imports are boosting domestic steel production and competitiveness.

Technological Advancements: Automation, AI, and renewable-energy-powered production are improving efficiency, lowering costs, and reducing environmental impact.

Green Steel Transition: The 15,000 crore Green Steel Mission, National Green

Hydrogen Mission, and Steel Scrap Recycling Policy aim to cut emissions, promote renewable energy use, and make India a leader in sustainable steel.

Export Potential: Growing demand in emerging economies offers opportunities for high-quality steel and iron ore exports.

Threats

Regulatory Compliance: Stricter environmental norms increase operational costs and require investment in cleaner technologies.

Supply Chain Risks: Geopolitical tensions, trade restrictions, and raw material shortages can disrupt production and raise costs.

Price Volatility: Fluctuations in coal, iron ore, and steel prices create uncertainty and impact margins.

Rising Input Costs: Higher energy, labour, and logistics expenses challenge cost competitiveness.

Substitutes & Competition: Alternative materials and low-cost global producers may reduce steel demand and put pressure on prices.

COMPANY OVERVIEW

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.

Financial performance

During the year under review the company demonstrates strong operational performance in FY 2024-25, with significant YoY volume growth in its operations and profitability as compared to last financial year:

(Rs. In lacs)

	2024-25	2023-24
Revenue from operations	79674.15	35721.73
Other income	203.48	197.04
EBITDA	980.86	337.53
Depreciation and amortization expenses	10.78	7.89
Interest expenses	436.99	74.16
Profit before tax	533.09	255.48
PAT	396.72	192.51
Other Comprehensive Income (net of taxes)	-0.60	1.71
Total comprehensive income for the year	396.12	194.22

Review of Performance

During the year under review, the revenue grew 123% YoY at Rs. 79674.15 lacs as compared to Rs.35721.73 lacs, supported by higher trading volumes and improved market positioning. EBITDA rose sharply to 980.86 lacs against Rs.337.53 lacs of FY 2023-24, while PAT increased to 396.72 lacs as compare to Rs.192.51 lacs in the previous year. Shareholders funds increased to 2,966.82 lacs (from 2,570.70 lacs FY 2023-24).

Key financial ratios

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	2024- 25	2023- 24	Change	Change (%)
Current Ratio - Note 1	2.03	1.36	0.67	49.26
Inventory Turnover - Note 2	26.34	15.81	10.53	66.60
Trade Payable Turnover Note 3	41.10	22.56	18.54	82.18
Net Capital Turnover Note 4	31.04	15.00	16.04	106.93
Return on Networth Note 5	14.33	7.79	6.54	84.07
Return on Capital Employed Note 6	32.70	12.84	19.86	154.67
Debtor Turnover Note 7	41.83	8.64	33.19	384.14

Notes:

1. Increase in Current ratio is primarily due to significant decrease in Trade Payables and Customers Advances which led to significant decrease in current liabilities.

2. Increase in Cost of Goods sold in comparison to increase in average inventory has resulted in increase in Inventory Turnover.

3. Increase in net credit purchases was higher in comparison to increase in average trade payables resulted higher Trade payable Turnover.

4. Increase in Operating Revenue resulted higher Net Capital Turnover.

5. Increase in net profit after tax resulted in higher Return on Net Worth.

6. Higher Earnings Before Interest and Taxes resulted increase in Return on Capital Employed.

7. Due increase net credit sales in comparison to increase in trade Receivables resulted higher Debtors Turnover Ratio.

RISK MANAGEMENT

Trading businesses carry significant risks, particularly in volatile industries like ours where investments and performance are heavily influenced by prevailing mega-trends. Our ability to fulfil commitments hinges on how these factors impact our operations and future prospects. Factors such as adverse regulatory changes or economic fluctuations in the global market can directly impact our revenue streams.

Internally we view risk management as an ongoing process rather than a one-time activity. Continuous monitoring and regular reviews are essential components of our risk management strategy. This approach ensures thorough identification and assessment of risks, enabling us to implement effective controls. It also serves as a mechanism for learning from past experiences and taking corrective actions.

The Company has identified several significant risks to its business:

i) Strategic Risk: The trading industry is intensely competitive by nature.

ii) Commercial Risks: The business faces potential risks from customers performance failures.

iii) Financial Risks: Non-payment or delayed payments from customers and increased financial costs pose significant threats to profitability and margins. The Company evaluates profitability on a case-to-case basis but prioritizes credit risk management.

iv) Regulatory Risk: Active monitoring of BIS norms, import/export restrictions, and ESG disclosures.

v) Geopolitical Risks: Cross-border trading exposes the company to political and global economic uncertainties.

The Company maintains a robust strategy and risk management framework to mitigate a broad spectrum of risks. The management systematically assesses various factors; analyses risk and implements effective measures. Regular reviews of the management system ensure adjustments are made to align with current market conditions.

Human Resources and Industrial Relations

Human Resources Department ("HRD") works continuously for maintaining healthy working relationship amongst the staff members. The underlying principle is that staff at all levels are equally instrumental in attaining the Companys goals. Training programmes are conducted to update their skills. Senior management is easily accessible for counselling and redressal of grievances. The HR department continuously strives to maintain and promote harmony and coordination among staff and members of the senior management. The total number of employees of the Company as on 31st March, 2025 is 18. The Company has maintained healthy and cordial industrial relations during the year.

Internal Control Systems and their adequacy

The Company has implemented a robust system of internal controls to ensure the safeguarding and protection of all assets against unauthorized use or disposition. Additionally, it ensures that all transactions are properly authorized, recorded and reported. The company maintains an internal audit and control department that oversees, evaluates and updates internal controls regularly. It has established a clear organizational structure, defined authority levels and internal guidelines to govern its business operations effectively. The internal audit and control department conducts audits across all key business areas according to a predefined audit plan, which is approved by the audit committee. This committee regularly reviews compliance with the plan. Audit observations and subsequent actions are reported to the committee, which also periodically reviews audit plans, observations and recommendations related to significant risk areas, ensuring the adequacy and effectiveness of these controls.

Cautionary Statement

Certain statements in the Management Discussion and Analysis Report describing the Companys objective and predictions may be "forward-looking statements" within the meaning of applicable laws and regulations. Actual results may vary significantly from the forward-looking statements contained in this document due to various risks and uncertainties. These risks and uncertainties include the effect of economic and political conditions in India, volatility in interest rates new regulations and government policies that may impact the Companys business as well as its ability to implement the strategy.