Facor Alloys Ltd Management Discussions

This Management Discussion and Analysis Report ( MD&A ) is prepared pursuant to Regulation 34(3) read with Schedule V of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

This report is aimed to highlight management s broad perspective on the external factors that may have bearing on performance of company, as well as strategy, counter measures, operating and financial performance, material developments, risk and opportunities and internal control systems and their adequacy. These discussions and analysis shall be read in the light of company s standalone and consolidated financial statements, the directors report and other information included elsewhere in the Annual Report.

INDUSTRY STRUCTURE, DEVELOPMENT AND OTHER RELATED MATTERS

Ferro chrome is an alloy of chrome and iron with 50% to 68% chrome content primarily used in manufacturing stainless steel. Ferro chrome strengthens and offers corrosion resistance to stainless steel, thereby making it a unique product with multiple applications. The ferro alloy industry is a critical link in the steel manufacturing value chain. Ferro chrome and silico manganese, the primary products in this space, are essential alloying elements in the production of stainless and special steels.

India remains among the leading global producers of ferro alloys, supported by access to key minerals such as chrome and manganese ores and an expanding domestic steel demand. However, the sector is characterised by high power intensity, dependence on raw material linkages, and sensitivity to international pricing.

Globally, ferro alloy production is concentrated in China, South Africa, and Kazakhstan, which also influence global pricing dynamics. India s position has strengthened due to domestic policy support, infrastructure-led growth, and lower-cost production bases. Nonetheless, factors such as elevated power tariffs, regulatory constraints, and environmental compliance continue to challenge standalone producers. On the basis of application, ferro alloy market is segmented into carbon steel, alloys steel, stainless steel and others. Alloy steels have applications in various end use industries such as general engineering, aerospace & defence, railways etc. with increasing investment in manufacturing sector of various emerging nations, the demand for alloy steels is also expected to increase in near future.

The ferroalloys include ferrochrome, ferrosilicon, ferromanganese and ferromolybdenum, among others. Various types of ferroalloys have different purposes in the production of steel. For instance, ferrovanadium in steelmaking is used to provide strength against alkalis and acids such as sulphuric and hydrochloric acid. It provides corrosion resistance and enhances tensile strength of casting & welding electrodes.

Nearly 85 to 90% of all the ferroalloys are used in the production of steel. Therefore, production and consumption of steel and related products have a huge impact on the pricing of ferroalloys and vice versa. Cost of ferroalloy is one of the key criteria for deciding suitable ferroalloy for the production of a particular grade of steel. Specification of steel is also an important factor while calculating the costs of steelmaking. For instance, specific grade of steel with low phosphorous can be manufactured using two methods viz. either through the conventional steelmaking process, which involves the use of expensive ferroalloys with low phosphorus content, or by extending the refining time and increasing the slag basicity to reduce phosphorus to low levels..The Indian Ferro Alloy industry plays a crucial role in the steelmaking process, providing essential inputs for steel production. The industry is composed of a mix of large-scale players, medium-scale units, and several small-scale players. India is among the leading producers of ferro alloys, including ferrochrome, ferromanganese, and ferrosilicon. The sector is driven by the growing demand from the domestic steel industry.

GLOBAL OUTLOOK:

The global ferro alloys market, valued at approximately USD 147.5 billion in 2023, continues to demonstrate steady growth, with projections indicating a CAGR of 5 7% over the coming years. The first half of 2024 has seen sustained demand, particularly from the stainless steel segment, which is supported by robust activity in the construction, automotive, and renewable energy sectors.

However, global trade dynamics remain sensitive to ongoing geopolitical developments, including US-China trade tensions, evolving EU industrial policies, and regional protectionist measures. These factors have influenced trade flows, input costs, and pricing volatility across key ferro alloy markets. Moreover stringent environmental norms, especially in Europe and China are placing pressure on high-emission producers, leading to rising compliance costs and shifting competitive advantages globally.

INDIAN OUTLOOK:

The outlook for the Indian ferro alloy industry in 2025 is positive, with expected growth driven by the increasing domestic steel production and export opportunities. The industry is likely to see further consolidation, technological upgrades, and enhanced focus on sustainability. The growth in infrastructure projects, automobile production, and the manufacturing sector will be key demand drivers.

Recent developments in the industry include technological advancements, energy-efficient production processes, and increased investments in backward integration for raw material security. The government s focus on infrastructure development and the Make in India initiative will provide a significant boost to the steel and ferro alloy sectors.

SEGMENT-WISE OR PRODUCT-WISE PERFORMANCE

The Company primarily operates in the production and sale of high carbon ferro chrome and silico manganese. However, during the year under review, the manufacturing operations remained suspended following the closure of the plant with effect from 31^st October 2023. As a result, there was no production during FY 2024-25.

OUTLOOK

The Company s near-term outlook remains cautious, primarily due to the continued suspension of manufacturing operations and ongoing working capital constraints. However, following the induction of new management in April 2024, various revival and strategic alternatives are actively being explored. These include potential collaborations, asset restructuring initiatives, and the development of new revenue streams.

In their audit report dated 20th May 2025, the Statutory Auditors have highlighted that the Company s manufacturing operations have remained suspended since October 31, 2023. As a result, the Company has reported only minimal revenue from operations for the year ended March 31, 2025. The Company has also incurred significant losses during the year.

These conditions indicate the existence of a material uncertainty that may cast significant doubt on the Company s ability to continue as a going concern. Nevertheless, their audit opinion remains unmodified in respect of this matter. To address immediate financial obligations, the Company has also initiated the monetisation of its assets, pursuant to the approval obtained from shareholders on 10th July 2025. While long-term revival efforts may be subject to market volatility and external challenges, the management remains committed to ensuring long-term sustainability, safeguarding stakeholder interests, and maintaining full regulatory compliance.

OPPORTUNITIES AND THREATS Opportunities:

• Strong Growth in Steel Production: India s expanding steel capacity and production outlook supports sustained demand for ferro alloys and related inputs.

• Export Competitiveness: Cost advantages driven by affordable labour, efficient energy use, and lower conversion costs enhance India s position as a global ferro alloy supplier.

• Rising Demand from Core Sectors: Increasing consumption from infrastructure, construction, automotive, and engineering industries continues to drive domestic demand.

• Favourable Government Policies: Initiatives such as the Production Linked Incentive (PLI) scheme and policy reforms in mining and manufacturing are creating a conducive environment for sectoral growth.

• Strategic Asset Monetisation & Repurposing:

• Complete Shutdown of Manufacturing facilities: The manufacturing facilities at the Plant of the Company situated at SHREERAMNAGAR-535 101, Dist. Vizianagaram, (A.P.) has been under complete shutdown w.e.f. 31.10.2023.

• Raw Material Supply Constraints: The industry is highly dependent on the availability of key raw materials like manganese ore, chrome ore, and electricity. Any disruption in the supply of these inputs can affect production.

• Volatility in Prices: The ferro alloy industry is exposed to fluctuations in global commodity prices, which can impact margins.

• Environmental Regulations: Stricter environmental regulations may increase operational costs and necessitate further investments in cleaner technologies.

• Economic Slowdown: A global or domestic economic slowdown could reduce demand for steel, impacting ferro alloy production and sales.

• Currency Fluctuations: Volatility in foreign exchange rates can affect the profitability of exports and imports of raw materials.

• Compliance with Environmental Norms: Increasingly stringent environmental regulations pose a risk to smaller players who may not have the resources to invest in necessary upgrades.