Gallantt Ispat Ltd. Management Discussions

GLOBAL ECONOMIC OVERVIEW

In the previous FY 2023-24 the global economy exhibited strong resilience despite facing multiple adverse shocks. Positive factors such as ongoing disinflationary trends and strong economic performance in the United States and several major emerging markets and developing economies reduced a severe economic downfall.

According to World Economic Outlook, IMF, the global growth is projected to drop to 2.8% in 2025 and 3% in 2026 in comparison to 3.3% in 2024. Intensifying downside risks dominate the outlook, amid escalating trade tensions and financial market adjustments. Divergent and swiftly changing policy positions or deteriorating sentiment could lead to even tighter global financial conditions. Ratcheting up a trade war and heightened trade policy uncertainty may further hinder both shortterm and long-term growth prospects. Scaling back international cooperation could jeopardize progress toward a more resilient global economy. The path forward demands clarity and coordination. Countries should work constructively to promote a stable and predictable trade environment, facilitate debt restructuring and address shared challenges. At the same time, they should address domestic policy and structural imbalances, thereby ensuring their internal economic stability. This will help rebalance growth-inflation trade-offs, rebuild buffers and reinvigorate medium-term growth prospects, as well as reduce global imbalances.

Source: IMF, World Economic Outlook

Global inflation is projected to ease further in 2025, though the progress will be uneven. The global outlook is predicated on tariff rates prevailing throughout the year. Accordingly, pauses to previously announced tariff hikes between the United States and its trading partners are assumed to persist. Global trade conditions experienced a large shock when the United States announced prospective tariffs on most trading partners, with rates proportional to bilateral goods trade deficits, in addition to previously announced tariffs. A sharp escalation of trade barriers between China and the United States followed.

In addition, in view of recent rapid shifts in trade policies and the potential for a return to even higher tariffs, consumers and businesses continue to grapple with unusually elevated uncertainty. The downgrade to global growth this year is principally driven by advanced economies. This slowdown is projected to be concentrated on investment, including foreign direct investment (FDI) and portfolio flows—which tend to respond more to demand shifts than aggregate output - and trade, with widespread adverse spillovers to other economies.

Apart from trade tensions, geopolitical risks remain significant with continuing conflicts between Russia and Ukraine and in the Middle East.

Monetary policy is entering a new phase of divergence. While the disinflation trend has allowed central banks to pivot toward easing, the pace and scale of rate cuts will vary widely. The Federal Reserve is expected to proceed very cautiously, amid upside inflation risks tied to tariffs. While India, Mexico and South Korea are cautiously easing to support demand, others like Brazil, Nigeria and Turkey are maintaining or tightening policy to anchor inflation and stabilize financial conditions amid ongoing volatility.

Fiscal policy is increasingly constrained by high debt, rising interest costs and political pressure for social spending, tax relief and defense outlays. While some governments are tightening, others are expanding to counter social unrest or weak growth. Even as disinflation allows for monetary easing, real long-term yields are likely to remain elevated, reflecting structural fiscal pressures and reduced policy space.

In the above context and as per the recommendations of the OECD Economic Outlook, policy has a pivotal role to play to tackle uncertainty and boost economic growth. Firstly, it is essential to avoid further trade fragmentation and trade barriers. Agreements to ease trade tensions and lower tariffs and other trade barriers will be instrumental to revive growth and investment and avoid rising prices.

Secondly, given the recent inflationary pressures, monetary policy should remain vigilant. Still, if trade tensions are not intensified and inflation expectations remain anchored, policy rates can be reduced if inflation is projected to decline or remain subdued.

Thirdly, restoring fiscal discipline is key for countries to avoid fiscal sustainability problems and build buffers for future shocks. Given high debt levels and tremendous spending pressures, countries should ensure that public debt is, indeed, on a sustainable path. Clear and credible medium-term fiscal plans are needed to show how countries intend to address pressures on public finances.

Finally, boosting investment will be instrumental to revive economies and improve public finances. Governments should work together to tackle uncertainty and pursue reforms to foster growth and jobs. Trade agreements to resolve existing tensions and lower or eliminate barriers should be accompanied by more efforts to enhance multilateral cooperation.

INDIAN ECONOMY

Indias economy continues to grow at a steady and confident pace, standing out as the fastest growing major economy in the world. The Indian economy is estimated to have recorded a solid growth of 6.5% in FY 2024-25 on top of a strong 9.2% growth in the previous year. The Reserve Bank of India expects the same rate to continue in FY 2025-26. This performance comes at a time when the global economy faces uncertainty, making Indias steady momentum all the more significant.

State of the Indian Economy

Press Information Bureau (PIB)

According to the Indian Economic Survey Press Release, despite global uncertainty, India has displayed steady economic growth. On the supply side, the real gross value added (GVA) is estimated to grow by 6.4%. The agriculture sector is expected to rebound to a growth of 3.8% in FY 2025. The industrial sector is estimated to grow by 6.2% in FY 2025. Strong growth rates in construction activities and electricity, gas, water supply and other utility services are expected to support industrial expansion. Growth in the services sector is expected to remain robust at 7.2%, driven by healthy activity in financial, real estate, professional services, public administration, defence, and other services. It is expected that the real GDP growth in FY 2026 to be between 6.3 and 6.8%.

7.2% growth in FY 2025 led by Information technology (IT), finance, and hospitality.

Government initiatives have sought to boost the manufacturing sector by improving the business environment, enhancing logistics infrastructure, improving tax efficiency and rationalizing tax rates. Besides this, a number of the governments flagship programmes, including Make in India, Start-up India, Digital India, the Smart City Mission and the Atal Mission for Rejuvenation and Urban Transformation is aimed at creating immense opportunities in India. The Government of India has also made commendable efforts to boost renewable energy in the country and green investments through schemes, policies, financial incentives and regulatory measures such as PM - Surya Ghar: Muft Bijli Yojana, National Bio-Energy Programme, National Green Hydrogen Mission and PM-KUSUM. The capacity addition in solar and wind power has lead to a 15.8% YOY increase in renewable energy capacity by December 2024. Some of the initiatives undertaken by the Government to improve the economic condition of the country are enumerated below:

The Reserve Bank of India (RBI) proposed doubling the investment cap for individual foreign investors in listed firms from 5% to 10%, with a combined foreign individual limit increasing to 24% to counter Foreign Portfolio Investment (FPI) outflows.

India, United States and West Asia are expected to collectively add 100 Gigawatts (GW) of solar capacity by 2025, while China is anticipated to continue its leadership in the solar industry.

The Ministry of Finance held the Union Budget and announced that for 2024-25, the total receipts other than borrowings and the total expenditure are estimated at 32.07 lakh crore (US$ 383.93 billion) and 48.21 lakh crore (US$ 577.16 billion), respectively.

The Finance Ministry announced the total expenditure in Interim 2024-25 estimated at 47,65,768 crore (US$ 571.64 billion) of which total capital expenditure is 11,11,111 crore (US$ 133.27 billion).

The Amrit Bharat Station Scheme was launched to transform and revitalize 1309 railway stations across the nation. This scheme envisages development of stations on a continuous basis with a long-term vision.

The Ministry of Environment, Forests and Climate Change has also introduced the Draft Carbon Credit Trading Scheme, 2023.

To enhance Indias manufacturing capabilities by increasing investment and production in the sector, the Government of India has introduced the Production Linked Incentive Scheme (PLI) for Pharmaceuticals.

Since the pandemic, urban unemployment has also improved gradually, especially for female workers, falling from 14.3% in FY 2021-22 to 9% percent in FY 2024-25. Unemployment among urban youth, however, remained elevated at 16.8% in FY 2024-25.

With the narrowing of the current account deficit and strong foreign portfolio investment, foreign exchange reserves touched an all-time high of $670.1 billion in early August 2024.

In the medium term, growth is expected to remain positive, especially in the services sector, reaching 7% in FY 2024-25 and remaining strong through FY 2025-26 and FY 2026-27.

As per reports of the Indian Economic Survey, Indias services-driven economy with a youthful and adaptable workforce, the adoption of AI offers the potential to support economic growth and improve labour market outcomes. Prioritising education and skill development will be crucial to equipping workers with the competencies needed to thrive in an AI-augmented landscape. However, there are at present barriers to large-scale AI adoption which provides a window for policymakers to act. The Government, private sector and academia should collaborate to minimise the adverse societal effects of AI-driven transformation in the labour sector.

On infrastructure front, there is need for continued step-up of infrastructure investment over next two decades to sustain a high growth. Under railway connectivity, 2031 km of railway network was commissioned between April and November, 2024 and 17 new pairs of Vande Bharat trains were introduced between April and October 2024. Port capacity improved significantly in FY 2025, leading to improvements in operational efficiency and reduction in average container turnaround time in major ports from 48.1 hours in FY 2024 to 30.4 hours during FY 2025.

The Government social services expenditure has witnessed an increase of compounded annual growth rate of 15% (combined for centre and states) from FY 2021 to FY 2025. The Gini co-efficient, which is a measure of inequality in consumption expenditure, has been declining in recent years (For rural areas it declined to 0.237 in 2023-24 from 0.266 in 2022-23 and for urban areas, it fell to 0.284 in 2023-24 from 0.314 in 2022-23), reflecting positive impact of Governments initiatives in reshaping income distribution. Regarding school education, the Government is working towards meeting the objectives of National Education Policy 2020 through a range of programmes and schemes. These inter alia include the Samagra Shiksha Abhiyan, DIKSHA, STARS, PARAKH, PMSHRI, ULLAS, PM POSHAN, etc.

The share of Government health expenditure has increased from 29% to 48%. During the same period, the share of out-ofpocket expenditure in total health expenditure declined from 62.6% to 39.4%.

Micro, Small and Medium Enterprises (MSME) sector has emerged as a highly vibrant sector of the Indian economy. To provide equity funding to MSMEs with the potential to scaleup, the Government launched the Self-Reliant India Fund with a corpus of 50,000 crore.

Recent Developments at a Glance

Overall, Indias economic outlook remains strong, driven by robust domestic demand, policy support and sectoral resilience. Improving trade relations with the developed economies will provide the requisite impetus to the economy. The India - UK trade agreement is a positive development in this direction. Rural demand backed by a rebound in agricultural production, an anticipated easing of food inflation and a stable macro-economic environment provides an upside to near-term growth.

To boost growth and create jobs, India will need to harness its global trade potential. In addition to IT, business services and pharma, where it excels, India can diversify its export basket into more labor-intensive sectors such as textiles, apparel and footwear, as well as in electronics and green technology products. At present, however, the rising costs of production and declining productivity have led to a fall in Indias share of global apparel exports - from 4% in 2018 to 3% in 2022.

Overall, India needs to improve its global competitiveness through grassroots-level structural reforms and deregulation to reinforce its medium-term growth potential. India looks well-positioned to navigate global challenges and maintain its trajectory as a leading global economic powerhouse.

(Source: PIB, IEBF, Economic Survey)

INDUSTRY STRUCTURE AND DEVELOPMENTS

GLOBAL STEEL INDUSTRY

The global steel market in 2025 presents a mixed outlook, with some regions showing growth while others face challenges. Overall, demand is expected to recover at a slower pace than previously anticipated, with uncertainties surrounding industrial outlook and global tensions. Excess capacity remains a significant concern, potentially leading to lower capacity utilization and price pressures. While steel demand weakened in China and most developed economies, developing economies like India have demonstrated resilience. Steel demand in the developing world excluding China grew by around 3.5% in 2024, while the developed economies witnessed approximately 2% decline in steel demand in 2024.

Competition in the steel industry continues to suffer from a lack of a level playing field. Some governments intervene heavily with policies aimed at promoting industrialisation, strengthening and/or expanding the domestic steel industry, reducing steel import dependency and/or indirectly supporting downstream manufacturing in higher value added activities. Steel subsidies persist and have become increasingly prominent in regions where steelmaking capacity is growing the fastest, particularly in China and the MENA and ASEAN regions.

According to report of the Economic and Steel Market Outlook, in the first eleven months of 2024, total trade deficit amounted to 1.6 million tonnes per month (1,593 kilo tonnes). In 2023, the total trade deficit reached 1.4 million tonnes per month (1,355 kilo tonnes) compared to 1.6 million tonnes (1,582 kilo tonnes) in 2022. As for finished products, the trade deficit of the first eleven months of 2024 was 1.1 million tonnes per month (1,051 kilo tonnes). This resulted from the combination of a deficit of 1 million tonnes per month (1,038 kilo tonnes) for flat products and a deficit of 14 kilo tonnes per month for long products. The largest trade deficits for finished products with individual trade partners during the first eleven months of 2024 were with India (278 kilo tonnes per month), South Korea (270 kilo tonnes), Vietnam (238 kilo tonnes), Taiwan (210 kilo tonnes), Turkey (183 kilo tonnes), China (135 kilo tonnes) and Japan (128 kilo tonnes). The major destination countries for EU finished steel exports with a finished product trade surplus during the first eleven months of 2024 were the United States (221 kilo tonnes per month), the United Kingdom (129 kilo tonnes), Switzerland (74 kilo tonnes) and the United Arab Emirates (12 kilo tonnes).

The ongoing economic uncertainty is set to continue taking its toll on growth in the future, despite monetary easing by the European Central Bank (ECB), whose effects will not be fully visible in the short-term. Due to U.S. tariffs - both announced and implemented - ongoing economic uncertainty is likely to intensify, weighing on growth also in the coming quarters.

Despite persisting downside factors, steel using sectors output continued to grow in 2023 (+1.6%, revised upwards from +0.9%), albeit with wide differences across individual European economies and sectors and mostly due to the better-than-expected performance of the construction sector in some EU countries (particularly in Italy).

The World Steel Association considers that global steel demand in 2025 will grow by 1.2% over 2024 levels (from 1751 million tonnes finished products in 2024, to 1772 million tonnes). This is equivalent to a 2025 increase in global steel consumption of 21 million tonnes.

Economic challenges, market saturation and supply chain issues are causing major headaches for the metals and steel industry in Asia, with increased credit risk evident in many local markets. In China domestic overproduction and lower prices have squeezed margins, further compounding a tricky market with lower demand from key buyer industry such as construction.

Insolvencies are also an issue for Southeast Asia as the region grapples with poor payments behaviour, particularly in the Philippines and Vietnam. That said, demand is stable across the wider region, driven in particular by increased urbanisation and the resulting growth in the construction, energy and transport sectors.

Global steel prices showed a mixed trend in March 2025 both on a year-on-year and month-on-month basis in major steel markets like China, India, the USA and the European Union.

While some markets saw an uptick in select product prices, some markets saw a decline in prices. Going forward, the movement of global steel prices will be contingent upon a number of factors, including the factors as stated below -

a. US tariff war: US President Donald Trumps America first policy and tariff threats are poised to create an environment of uncertainty and volatility in global trade, besides triggering retaliatory tariff actions from other countries, potentially leading to a trade war.

b. Uncertainties in European market: The ongoing economic uncertainty is set to continue affecting steel market growth from the demand side over the upcoming quarters. The outlook remains dominated by a worsening combination of uncertainties in energy prices, weak manufacturing sectors conditions and inflation still being above target levels.

c. Russia-Ukraine war: There are also consequences due to imposition of sanctions against Russia by the developed world and the collapse of normal trading operations due to the Russia-Ukraine war which are likely to have a significant bearing on the global steel industry.

d. WSA forecast: The World Steel Association in its Short Range Outlook (SRO), released in October 2024, has forecast a 0.9% contraction in steel demand in 2024, followed by a 1.2% growth in 2025. India is considered to be a major driver for domestic steel demand growth with an expected 8% and 8.5% rise in steel demand in 2024 and 2025, respectively, while for China, the SRO predicts a 3% contraction in 2024, followed by a 1% contraction in 2025 in steel consumption.

In the 2024-25 period, global crude steel production stood at 1,884.60 million tonnes (MT). China remained the largest producer with 1,005.10 MT, while India was the second largest, producing 149.40 MT. The global steel market is projected to see a 1.2% year-on-year growth in 2025.

According to the OECD Report, the adoption of hydrogen in iron and steelmaking processes will hold a significant potential to address the carbon footprint of the steel industry. However, the scourge of excess capacity hinders the deployment of hydrogen- based solutions and the achievement of climate goals. Studies have shown that hydrogen based DRI facilities could potentially curb emissions by up to 90% from the traditional BF-BOF route. However, the persistence of excess capacity, by weighing on companies profitability, displaces potential investments in hydrogen-based solutions. The level of investment in hydrogen- based solutions is currently modest posing limited immediate threats to the furthering of excess capacity. In the long run, the deployment of hydrogen-based solutions should not exacerbate existing imbalances. Although steel currently accounts for a minor share of hydrogen use, it is expected to claim a larger share of green hydrogen supplies as it transitions to low carbon production methods. However, securing adequate green hydrogen supplies could be challenging as steel must compete with other sectors for a resource that is and will likely remain scarce in the near future. Renewable-based (green) hydrogen is only available in very limited quantities. In light of its significant potential to reduce emissions in the steel industry compared to other sectors, its use in the steel sector is considered important, calling for prioritising green hydrogen supplies to steel production. At the same time, the potential value of using hydrogen to decarbonise specific steel production pathways should be balanced against the opportunity cost of following other steel decarbonisation routes. Hydrogen-based steelmaking currently faces significant cost and competitiveness challenges, however these will likely attenuate in the future as the technology matures.

According to the World Steel Association, the global steel industry in 2025 is expected to see moderate growth, with India being a major driver of demand. While global steel demand is predicted to increase by 1.2%, Indias demand is expected to grow by 8.5%, driven by infrastructure development and other steel-consuming sectors. Overall, the global steel demand is poised for recovery in 2025 although the industry remains exposed to geopolitical, economic and financial risks. India, however, continues to stand out as a high-growth market, supported by strong domestic demand and investment.

INDIAN STEEL INDUSTRY

The Indian steel industry is expected to see strong domestic demand growth in 2025, with projections around 8-9%, driven by infrastructure development and other steel-consuming sectors. While key economies such as China, Europe and the US witnessed declining steel demand, India remained the sole major economy to reflect strong growth in steel consumption. However, increased domestic production capacity and potential import competition could impact capacity utilization and profitability for some steelmakers.

This expansion is fuelled by growth across all steel-consuming sectors, especially by continued growth in infrastructure investments. The growth in steel demand is primarily attributed to a transition towards metal-intensive construction in the residential and infrastructure sectors. Large-scale government initiatives such as the Pradhan Mantri Awas Yojana (housing for all) and the Gati Shakti Master Plan (infrastructure development) are expected to be major catalysts. Additionally, rising demand from sectors like engineering, packaging, and industrial manufacturing will further contribute to this growth. Analysts also point to increasing urbanization and the shift towards sustainable and durable materials in construction as long-term drivers for steel consumption. The growth in the Indian steel sector has been driven by the domestic availability of raw materials such as iron ore and cost-effective labour. Consequently, the steel sector has been a major contributor to Indias manufacturing output.

The annual production of steel is anticipated to exceed 300 million tonnes by 2030-31. By 2030-31, crude steel production is projected to reach 255 million tonnes at 85% capacity utilisation achieving 230 million tonnes of finished steel production, assuming a 10% yield loss or a 90% conversion ratio for the conversion of raw steel to finished steel. With net exports of 24 million tonnes, consumption is expected to reach 206 million tonnes by the years 2030-2031. As a result, it is anticipated that per-person steel consumption will grow to 160 kg.

Few major investments in the Indian steel industry in recent years are as follows:

Under the second round of the Production Linked Incentive scheme (PLI) for specialty steel, 25 companies committed 17,000 crore (US$ 1.98 billion) to produce high-end steel domestically, aiming to reduce imports and boost self-reliance. The scheme targets five key steel product categories with applications across various industries like automobiles and transformers.

India and Japan held the third Steel Dialogue on Feb 4, 2025, in New Delhi, discussing economic trends, steel trade, and industry developments. India highlighted policy initiatives, green steel efforts, and investment opportunities for Japan.

In February 2025, during the Bengal Global Business Summit, about 50% of the 26,000 crore (US$ 3.02 billion) investment proposals received by Jharkhand government in Kolkata pertain to the steel sector.

In February 2025, JSW Group announced a 1,00,000 crore (US$ 11.60 billion) investment to set up a 25 MT steel plant in Maharashtras Gadchiroli district over seven to eight years. The project, expected to be the worlds largest and most ecofriendly, will drive economic growth and job creation in Vidarbha.

In October 2023, Government e-Marketplace, the national public procurement platform, signed a memorandum of understanding (MOU) with the Indian Steel Association (ISA). This partnership intends to bring all ISA members onto the GeM platform as sellers, promoting a diverse business environment regardless of their size.

In May 2023, the industry body Indian Steel Association (ISA) announced signing an agreement with the ASEAN Iron and Steel Council (AISC) to unlock new avenues of growth and sustainability in the steel sector.

In January 2025, the Ministry of Steel has introduced the Performance Linked Incentive (PLI) Scheme for speciality steel, covering five product categories which aligns with the existing PLI Scheme. This initiative aims to encourage greater participation in response to industry requests for relaxation. The PLI Scheme 1.1 will be open for applications from 6th January to 31st January, 2025 and will be implemented from FY 2026 to FY 2030.

Impact of Steel Industry due to Budget 2025

India is the second largest producer of crude steel and the second largest consumer of finished steel. The impact of Budget

2025 is highlighted below -

Infrastructure remains the backbone of Indias economy and investments in this sector have consistently been a key driver of growth of steel industry, influencing both supply and demand. A substantial 11.21 lakh crore has been earmarked for capital expenditure (CAPEX), consisting 3.1% of GDP, underscoring the governments commitment to infrastructure development, industrial expansion and long-term economic resilience.

The focus on the circular economy, particularly through initiatives in the shipbuilding sector, presents value-added benefits for the steel industry, paving the way for sustainable or green growth.

With India currently being a net importer of steel and exports showing a downward trend, a renewed emphasis on export- driven growth could serve as a significant advantage for the domestic steel sector.

The Budget 2025 introduced significant tax relief measures, including no income tax on earnings up to 12 lakh and relaxed TDS limits for senior citizens. Additionally, the proposals include rationalization of TCS, voluntary compliance incentives, and a reduction in TDS rates and threshold amounts. These measures are expected to enhance disposable income, thereby stimulating demand for consumer durables-an indirect yet substantial driver of steel demand.

While addressing a gathering at the India Steel 2025 meet our Honourable Prime Minister Shri Narendra Modi praised the Indian Steel Industry, its importance in the growth of a new India and making India the second biggest steel producer in the world. Few quotes of the Honourable PM are presented below -

The role of steel in all developed economies has been like a skeleton. Be it sky-scarpers, highways, high speed trains, smart cities, industrial corridors.. .every success story is backed by the strength of steel

The increase in steel consumption signals the direction of the countrys growth, its efficiency and effectiveness

Today country has the base of PM Gati Shakti and national masterplan

We are moving with the goal of building modern and large ships in the country. Our target is that other countries of the world should also buy the steel made in India. Similarly, the demand for pipelines, grade steel and corrosion registered alloys is also increasing in the country. Today, the railway infrastructure in the country is also being developed rapidly

There are infinite possibilities of employment generation in the growth potential of the steel industry. I appeal to both the private and public sectors to develop new ideas, nurture them and share them. We need to move ahead together in the modern technology upgrade in manufacturing. We have to create as many new employment opportunities as possible for the youth of the country,

Indias steel demand is expected to touch 190 million tonnes by 2030. The demand will be largely fuelled by the construction and infrastructure sectors, which contribute 60-65% to the sales. Healthy economic growth and focus of the central government on infrastructure projects adds to the buoyant outlook for the steel sector in the country.

PIB Mumbai, April 24, 2025

While Indias domestic steel demand growth scenario continues to be robust, trade-related developments need to be watched. Import of finished steel (including semis) was elevated at 10.5 million tonnes in FY 2024-25, whereas exports slowed amid rising protectionist measures in other countries. The provisional safeguard duty, enforced with effect from April 21 2025 for 200 days, is expected to act, to some extent, as a speed bump for the import of steel into India. In order to increase the availability of iron ore in line with the National Steel Policy, more than 120 mines have been auctioned in India since 2016. The government is also trying to improve the domestic availability of coking coal by setting up coking coal washeries.

Coal Market in India

All India production of coal was 1047.69 million tonnes during the FY 2024-25 as compared to 997.83 million tonnes in FY 2023-24 with a positive growth of 11.71%. It is a historic milestone achieved by India by surpassing one billion tonnes of coal

production in FY 2024-25. Coal India Limited (CIL) and its subsidiaries accounted for 773.81 million tonnes during FY 2023-24 as compared to a production of 703.20 million tonnes in FY 2022-23 showing a positive growth of 10.04%. Coal production of CIL during FY 2024-25 was 781.08 million tonnes with a positive growth of 0.94%.

According to PIB, Ministry of Coal, the countrys coal imports decreased by 8.4%, leading to substantial foreign exchange savings and a reduction in import dependency. The coal sector remains a crucial contributor to Indias energy mix, powering over 74% of the countrys electricity and sustaining key industries like steel and cement. A focus on coal gasification is positioning India to leverage syngas for producing methanol, fertilizers and synthetic natural gas, promoting environmental sustainability. The Non-Regulated Sector saw a sharper decline of 12.01%, while imports for blending by thermal power plants dropped 29.8%, despite a 3.53% rise in coal-based power generation. Government initiatives like Commercial Coal Mining and Mission Coking Coal boosted domestic coal output by 6.11% during this period, reducing import dependence.

Coal is vital to Indias energy needs, supplying over half of the countrys power. Despite renewable energy growth, coal-based thermal power will remain essential, with its share projected at 55% by 2030 and 27% by 2047.

India imports coal to meet the gap between domestic demand and production, primarily for the steel and power sectors. Coal imports in the country during FY 2024-25 fell by 7.9 %, totalling 243.62 million tonnes as compared to 264.53 million tonnes in the previous fiscal year. This reduction resulted in foreign exchange savings of approximately $7.93 billion (60681.67 crore). As per the present Import policy, coal can be freely imported (under Open General Licence) by the consumers themselves considering their needs based on their commercial consideration.

The Ministry of Coal has been implementing various strategic measures to strengthen domestic production and ensure a secure coal supply aligning with Indias goals of reducing coal imports and enhancing energy security. By prioritizing domestic coal output, the government aims to march ahead towards Viksit Bharat goal by building a self-reliant, sustainable energy framework that supports long-term economic growth.

Details of import of coal and products i.e. coke during the last four years including the current year is as under:

(Million tonnes)

In India, the price of coal, specifically non-coking coal (Grade G17), remained stable at 732 per Ton in March 2025. Indias coal sector is anticipated to maintain its growth and resilience. Production from captive, commercial and other entities is expected to rise by 31.07%, reaching 19.68 million tonnes up from 15.01 million tonnes.

Coking Coal is being imported by Steel sector mainly to bridge the gap between the requirement and indigenous availability and to improve the quality. Other sectors like Power sector, cement etc. and coal traders are importing non-coking coal.

In view of the future surplus coal scenario and the market dynamics, Ministry of Coal has planned to provide to coal linkages for coal consumers without any requirement of specified end use, in addition to the present end-use based linkages. The above would require amendment to the Non-Regulated Sector (NRS) linkage auction policy of 2016.

During the FY 2024-25 three rounds for auctions for commercial mining were launched by the Government. The Coal Mine Development and Production Agreement were signed for 36 coal mines and allocation/vesting orders have been issued for 30 coal mines.

The Ministry of Coal has launched Technology Roadmap of Coal Sector with an objective to implement new technologies and build digital infrastructure to support current and future production ramp-up from the mines. Plans and strategies are underway to implement 5G technology, enhanced utilisation of Drone Technology in mining operations, launching of Integrated Control and Command Centre (ICCC) in each mine area.

Iron Ore Market in India

Iron ore is the basic raw material mainly used in the making of pig iron, sponge iron, steel and alloy steel. Iron & steel industry is the major consumer of iron ore in the country. This industry uses iron ore in lumps and as ore fines after pelletisation, sintering or briquetting. Indias expanding steel industry remains a key driver for iron ore demand, fuelled by Government-led infrastructure projects, urbanization, and industrial growth. The National Steel Policy aims for 300 million tonnes of steel production by 2030, significantly increasing the need for high-grade iron ore. Large steel producers are expanding capacity, which results in higher domestic raw material procurement. Also, policies like Make in India and the Production Linked Incentive (PLI) scheme induce production of steel, strengthening iron ore consumption.

India being the fourth largest producer of iron ore miner has produced a record 289 million tons iron ore in FY 2024-25 compared to 277 million tonnes in FY 2023-24 registering a growth of around 4.33%.

India is one of the major exporters of iron ore in the world and China is the largest consumer of this mineral. India usually ships lower-grade ores to China while imports higher-grade material to blend with domestic ore. However, exports have been trending lower as more iron ore is used by domestic steel plants. The Indian Steel Association has predicted that there will be a shortage of iron ore of more than 100 million tons in coming years, meaning imports will have to increase. India has about 20 million tons of steel capacity currently under construction and a further 155 million planned.

Currently, India has 179 working iron ore mines and 126 blocks have been auctioned so far and 38 of them are already operational and many more are in pipeline although, over 66% of reserves are of medium and low-grade quality and require beneficiation.

Ministry of Mines has already proposed a policy currently under public consultation to promote low-grade ore beneficiation. Policy reforms, including revised royalty rates for limestone and low-grade ore are being pursued to encourage private sector involvement.

Emphasis is also given on the importance of timely utilization of greenfield mines. Delays in operationalizing such assets amount to a waste of national resources. The Ministry is working closely with States and regularly reviewing progress with bidders to expedite mine development. Coordination with the Ministry of Environment, Forest and Climate Change (MoEFCC) has also been enhanced to streamline clearances. Several key guidelines have been issued over the past six months, with further reforms in progress.

A flagship initiative in the name of National Coal Gasification Mission has been introduced which aims to achieve 100 MT of gasification by 2030 with an investment of 8,500 crores. This initiative promotes the use of high-ash, non-coking domestic coal to generate synthesis gas (syngas), a cleaner alternative for DRI (Direct Reduced Iron) steelmaking. Investment in this transformational technology will not only reduce emissions but also enhance energy security and economic value chains.

OUTLOOK

India is steadily progressing on a bold and ambitious path for the steel sector. The National Steel Policy envisions achieving 300 MT of production capacity by 2030-31 and 500 MT by 2047. This means India is expected to continue boosting spending on infrastructure, manufacturing and construction in the coming years. All factors point to improved demand for steel, iron ore, coking coal and scrap. India also aims to secure critical mineral resources like lithium in its broader clean energy plans.

The Indian government has always supported the steel industry and introduced the National Steel Policy in 2017 which envisions the growth trajectory of the Indian steel industry till 2030-31.

Indias total construction investment is likely to increase by 50% over the next 5 years. Overall, the infrastructure segment is likely to grow by 9-10% per year mainly driven by road projects and urban infrastructure. All these are expected to significantly boost steel demand directly and indirectly.

Railways which contributes to 3% of steel demand is growing at a fast pace. Projects such as 100% track electrification, dedicated freight corridors connecting industrial hubs in western and eastern India and high-speed rail corridors are expected to boost steel demand significantly.

The Indian automotive industry is the fourth largest in the world in terms of vehicle production. It contributes to around 9% of steel demand in India. India is the largest manufacturer of two-wheelers, three-wheelers and tractors, the fourth largest producer of passenger vehicles and the seventh largest in commercial vehicles in the world. During FY 2024-25, the Indian automotive sector grew by 7.3% in domestic sales while exports were accelerated by 19.2%. This highlights the strong global demand and heightened competitiveness within India.

Government initiatives such as Smart Cities and Affordable Housing as well as building of industrial corridors will boost Indias steel demand. This means enhanced connectivity, reduced logistical costs and well-distributed development spanning all Indian states. Further support to development of the steel industry is expected to come through the Make in India initiative, which aims to transform India into a global design and manufacturing hub with sectors along the industrial and freight corridors.

As per the Press Information Bureau Release dated December 12, 2024, India is committed to decarbonise the steel sector in alignment with net-zero emission intensity target by 2070. Globally, there is no commonly accepted definition of green steel; However, India is the first nation to release the Taxonomy of Green Steel. The launch of the Green Steel Taxonomy represents a transformative framework in steel production that will help define green steel, foster innovation and create a market for low- carbon products in India.

Salient Features -

a. Green Steel shall be defined in terms of percentage greenness of the steel, which is produced from the steel plant with CO2 equivalent emission intensity less than 2.2 tonnes of CO2e per tonne of finished steel (tfs). The greenness of the steel shall be expressed as a percentage based on how much the steel plants emission intensity is lower compared to the 2.2 t-CO2e/tfs threshold.

b. The threshold limit for defining the star rating of Green Steel shall be reviewed every three years.

c. The scope of emissions shall include Scope 1, Scope 2, and limited Scope 3, up to finished steel production. Scope 3 emissions shall include agglomeration (including sintering, pellet making, coke making), beneficiation, and embodied emissions in purchased raw materials and intermediary products, but shall not include upstream mining, downstream emissions and transportation emissions, both within and outside the gates of a steel plant.

d. The National Institute of Secondary Steel Technology (NISST) shall serve as the nodal agency for measurement, reporting, and verification (MRV) as well as for issuing the greenness certificates and star ratings for the steel.

e. The certificate shall be issued on yearly basis (financial year). In case the steel plants opt for MRV more frequently, then the certificate may be issued more than once in a year as per the requirement.

Indias steel industry is poised to play a major transformative role in shaping the nations future together with the collaboration and support of all industry players.

OPPORTUNITIES AND THREATS

COMPANY OVERVIEW

Your Company is a Steel Manufacturing Company. The Group operates state-of-the-art steel plants in Uttar Pradesh and Gujarat, producing high-quality TMT Rebars that form the backbone of Indias modern infrastructure. Our fully integrated facilities, featuring advanced technologies like automated steelmaking processes, kilns, DRI plants, furnaces, LRFs and rolling mills, ensure unmatched precision, efficiency and quality control.

During the FY 2024-25 Revenue from Operations stood at 4,29,272.89 Lakhs as against 4,22,711.75 Lakhs during the last FY 2023-24. The Profit before Interest, Depreciation and Taxation stood at Rs 71,004.78 Lakhs as against 45,504.79 Lakhs in the

previous year registering a growth of 56.04%. The Net Profit after Tax for the year under review stood at 40,074.24 Lakhs as against Rs 22,533.81 Lakhs in the previous year registering a remarkable growth of 77.84 %. Earnings per Share (EPS) stood at Rs 16.61 (face value of Rs 10/- each) for the financial year ended March 31,2025. During the year Companys performance has been significantly higher as compared to the previous year especially in terms of profitability.

*Sales include captive consumption also

Major Product-wise Turnover (Metric Tonnes)

Company has Integrated Steel Plant facilities at Samakhiyali, Kutch, Gujarat and GIDA - Sahjanwa, Gorakhpur, Uttar Pradesh. Being an Integrated Steel Plant, Company, during the manufacturing process of end products i.e. TMT Bars also manufactures Sponge Iron, Billets etc.

*Sales include captive consumption also.

SIGNIFICANT CHANGES IN FINANCIAL RATIOS

During the year, the significant changes in the financial ratios, compared to the previous year which are more than 25% as compared to the previous year, are summarised below:

KEY ACHIEVEMENTS

Setting up of a Pellet Plant having capacity of 7,92,000 MT which helped to reduce cost of raw materials;

Purchase of own railway rakes (two in number) by the Company for transporting coal to the factory timely and cost effectively which led to reduction in freight cost which in turn has helped to improve the profitability;

Grant of composite licence for Todupura Iron Ore Block, District Karauli in Rajasthan. The said iron ore block has an area of 260.71 hectare and the total deposit of Iron Ore of 85.42 million ton. In-house mining of Iron ore, being the basic raw material of the Company, shall ensure operational flexibility, easy availability and no dependency on international as well as domestic suppliers of Iron Ore for a period of 20-25 years (approximately). Owning and efficiently operating through captive Iron Ore mining, significant cost saving can be realised and sustained which, in turn, would surge the operating as well as net profit of the Company considerably.

RISK MANAGEMENT

The Company has a comprehensive risk management framework designed to identify, evaluate, and mitigate risks that could impact the Companys operations and objectives. The risk management framework is reviewed periodically by the Board and the Audit Committee. The Audit Committee is responsible for monitoring and reviewing the risk management plan and ensuring its effectiveness. The Audit Committee has additional oversight in the area of financial risks and controls.

The major risks identified by the businesses and functions are systematically addressed through mitigating actions on a

continuing basis. Some of the risk elements that the Company is exposed to are:

Commodity Price Risk

Risk of price fluctuation on basic raw materials like Iron Ore, Coal, Chemicals, Scraps as well as finished goods used in the process of manufacturing.

Mitigation measures

The Company commands excellent business relationship with the business associates. In case of major fluctuation either upwards or downwards, the matter will be mutually discussed and compensated both ways. Also by focusing on new value added products helps in lowering the impact of price fluctuation in finished goods.

Mitigation measures

The Company commands excellent business relationship with the business associates. In case of major fluctuation either upwards or downwards, the matter will be mutually discussed and compensated both ways. Also by focusing on new value added products helps in lowering the impact of price fluctuation in finished goods.

Geopolitical Risk

War zones, sanctions or policy changes in Africa, Europe or Middle East may impact overseas sites.

Mitigation measures

We have internal procedure to mitigate geopolitical risks such as diversified procurement base, regional supply redundancy, localised storage and manufacturing

Interest Rate Risk

Any increase in interest rate can affect the finance cost.

Mitigation measures

Any increase in interest rate can affect the finance cost. Dependence on debt is very minimum and we have surplus funds cushion to settle the entire debt in case the need arises. Further, the Company has repaid the Term Loan in full.

Foreign Exchange Risk

Your Company does not have export sales. However, Company imports raw materials from countries outside India. Any volatility in the currency market can impact the overall profitability.

Mitigation measures

The Company commands excellent business relationship with the sellers and suppliers. In case of major fluctuation either upwards or downwards, the matter will be mutually discussed and compensated both ways.

Human Resources Risk

Your Companys ability to deliver value is dependent on its ability to attract, retain and nurture talent. Attrition and nonavailability of the required talent resource can affect the overall performance of the Company.

Mitigation measures

Your Company demonstrates strong HR practices across the industry and carry out necessary improvements to attract and retain the best talent. Also, recruitment is across almost all States of India which helps to mitigate this risk and we do not anticipate any major issue in the coming years.

Competition Risk

Your Company is always exposed to competition risk from Steel and Agro Manufacturers across the region. The increase in competition can cause loss in market share, experiencing reduced profitability, or facing challenges in growth and innovation.

Mitigation measures

By giving continuous efforts to enhance the brand value of the Company, quality, cost, timely delivery and customer service. Aggressive marketing can also help to mitigate competition risk.

Compliance Risk

Increasing regulatory requirements. Any default can attract penal provisions.

Mitigation measures

By identifying risks and mitigating the financial, legal, and operational impacts pertaining to non-compliance and regulatory misalignments. Regularly monitoring and reviewing the changes in regulatory framework. By monitoring of compliance through legal compliance management tools and regular internal audit and secretarial audit.

Industrial Safety, Employee Health and Safety Risk

The Steel Industry is labour intensive and are exposed to accidents, health and injury risk due to machinery breakdown, human negligence etc.

Mitigation measures

By development and implementation of critical safety standards across the various departments of the factory, establishing training need identification at each level of employee. Conduct regular inspections of all operations, equipment, work areas and facilities. Have workers participate on the inspection team and talk to them about hazards that they see or report.

Cyber Security Risk

Cyber security risk deals with the potential for business issues and financial losses due to cyber attack that affects operations or a security breach that results in the theft of Company data. Its closely related to technology risk, but listing it as a standalone type of risk recognizes the significant costs and business damage that cyber security incidents can cause. With the growing instances of cyber-attacks, data security has become a challenge for the Company.

Mitigation measures

Confidential information has been enhanced by implementing best-in-class firewalls. The Company is aware about the current elevated levels of cyber security risks across the globe. All critical IT servers are protected with best-in-class firewalls which are monitored and updated regularly.

All access to critical IT servers, including SAP ERP, for those working remotely, are allowed through security authentication tunnel.

Necessary update patches and security policies are pushed over the internet to all computers of the Company on a daily basis, even if the user is at home or away from office. Deviations and alerts are monitored closely and corrective/preventive actions are implemented as per need.

The Risk Management Committee looks into the monitoring and reviewing of the risk management plan and such other functions, as it may deem fit and such function specifically covers cyber security.

Supply Chain and Sourcing Risks

Fluctuating raw material prices and potential supply chain disruptions can negatively impact cost control and delivery timelines.

Mitigation measures

The Company enhances backward integration through local sourcing, captive power generation capabilities, owning own railway rakes, commissioning own pellet plant and taking on lease iron ore mines. It employs strategic stockpiling and longterm agreements to ensure assured supply.

Technological Risks

Continuous investment in new technologies is required to avoid obsolescence and maintain a competitive edge.

Mitigation measures

The Company is committed to strengthening its R&D efforts, focusing on innovations such as advanced TMT Bars. It also partners with experts to drive technological advancement within its operations.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has an adequate system of internal controls in place. It has documented policies and procedures covering all financial and operating functions. These controls have been designed to provide a reasonable assurance with regard to maintaining of proper accounting controls for ensuring reliability of financial reporting, monitoring of operations, and protecting assets from unauthorized use or losses, compliances with regulations. The Company has continued its efforts to align all its processes and controls with global best practices.

The Audit Committee of the Board of Directors actively reviews the adequacy and effectiveness of internal control systems and suggests improvements wherever needed to strengthen the same. The Audit Committee evaluated the internal financial controls based on the following criteria:

A. Systems have been laid to ensure that all transactions are executed in accordance with managements general and specific authorisation. There are well-laid manuals for such general or specific authorisation.

B. Systems and procedures exist to ensure that all transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles or any other criteria applicable to such statements, and to maintain accountability for aspects and the timely preparation of reliable financial information.

C. Access to assets is permitted only in accordance with managements general and specific authorisation. No assets of the Company are allowed to be used for personal purposes, except in accordance with terms of employment or except as specifically permitted.

D. The existing assets of the Company are verified / checked at reasonable intervals and appropriate action is taken with respect to any differences, if any.

E. Proper systems are in place for prevention and detection of frauds and errors and for ensuring adherence to the Companys policies.

MATERIAL DEVELOPMENTS IN HUMAN RESOURCES / INDUSTRIAL RELATIONS FRONT, INCLUDING NUMBER OF PEOPLE EMPLOYED

We, at Gallantt Ispat, believe that to ensure skill development and to be able to face major challenges, we need teams who deliver and who are motivated. Our human capital is our greatest tool for shaping the future of the Company and is also critical for our smooth functioning. Discovering talented people and retaining them is the key aim of our HR policy. Our people are

our greatest strength as a Company and the bedrock of our organization. Human Resource is a continuous and ever evolving function at our Company. The Company believes that human resources enable the Company to consistently meet customer requirements and deliver exceptional performance for all stakeholders. The Company continues to maintain its record on cordial industrial relations. The Company continues to invest in people through various initiatives such as regularly conducting training programmes to enhance the skills, knowledge, and productivity of employees and keep them updated about the latest techniques. Company also places high importance on the safety of its employees and ensures adherence to safe work practices. As on March 31,2025, the employee strength of the Company was 3,629. The Company has maintained harmonious industrial relations in all units of the Company during the financial year 2024-25.

CAUTIONARY STATEMENT

Statements in this Management Discussion and Analysis describing the Companys objectives, projections, estimates and expectations may be forward looking statements and based on certain assumptions/expectations and current scenario and the input available. Actual results might differ substantially or materially to those expressed or implied. Important developments including global or domestic trends, political and economic environment in India or Overseas might affect the Companys operations.