Gallantt Ispat Ltd Management Discussions.

Forming part of the Report of the Directors for the year ended 31st March, 2019.

ECONOMY OVERVIEW AND DEVELOPMENT

Growth in global trade volumes is likely to slow down to 2.6 per cent in 2019 compared to 3 per cent in 2018, due to rising trade tensions between major economic powers and increased economic uncertainty However, emerging market and developing economies (EMDEs) growth remains constrained by subdued investment. Risks are firmly on the downside, in part reflecting the possibility of a further escalation of trade tensions. It is urgent for emerging market and developing economies (EMDEs) to reinforce policy buffers and to implement reforms that boost growth prospects.

World GDP growth is expected to decline from 2.9 per cent in 2018 to 2.6 per cent in both 2019 and 2020. Trade growth in 2018 was weighed down by several factors, including new tariffs and retaliatory measures affecting widely traded goods, weaker global economic growth, volatility in financial markets and tighter monetary conditions in developed countries, among others," the report stated. Trade growth in 2020 is expected to outpace GDP growth due to faster growth in developing economies.

With trade tensions running high, no one should be surprised by this outlook, said WTO Director-General. "Trade cannot play its full role in driving growth when we see such high levels of uncertainty. It is increasingly urgent that we resolve tensions and focus on charting a positive path forward for global trade which responds to the real challenges in todays economy — such as the technological revolution and the imperative of creating jobs and boosting development."

The value of merchandise trade was up 10 per cent to $19.48 trillion in 2018, partly due to higher energy prices. The value of commercial services trade rose 8 per cent to $5.80 trillion in 2018, driven by strong import growth in Asia.

The US and China have been engaged in a trade war over the past year, imposing retaliatory duties on imports sourced from each other. Several other countries, too, have become increasingly protectionist, introducing a number of tariff and non-tariff barriers on imports.

A few major geopolitical and economic events are expected to have an impact on the economic performance of countries and companies. As a result, it is important for many global organizations to track these events, as they are key steps in the planning process to get insulated from any kind of uncertainty arising during the year. Some events among those are as follows:

• Trade war among major economies: The uncertain terms of the trade war between China and the US are expected to be resolved as the negotiation period between them comes to an end in March 2019.

• Brexit uncertainty: In the UK, a high level of uncertainty is expected to persist as the Brexit Day (March 29, 2019) draws nearer; the government has failed to strike a deal with the European Union and in an extreme scenario, the country might have a second referendum.

• Elections in major economies: High risk political events such as elections in India, Indonesia, Thailand and Australia are also expected to have substantial effects in their respective countries.

• Policy rate decision of major central banks: On the economic front, decisions of major central banks (Fed and ECB) are set to play a crucial role in global prosperity, as they are expected to continue the tightening of monetary policy. The Fed is expected to hike rates twice in 2019 and the possible market repercussions are major causes for concern in 2019.

Major oil exporting countries, such as Saudi Arabia and Russia, will be top influencers on the global political and economic dynamics in 2019.

Overall, many high-risk events are scheduled to take place in 2019 and thus, shape the economic and political scenario for years to come and need to be carefully observed as a result.

INDIAN ECONOMY

India has emerged as the fastest growing major economy in the world and is expected to be one of the top three economic powers of the world over the next 10-15 years, backed by its strong democracy and partnerships.

Indias GDP is expected to grow at 7.3 per cent in the fiscal year 2018-19, and 7.5 per cent in the following two years, Indias growth accelerated to an estimated 7.3 per cent in FY 2018-19 (April to March) as economic activity continued to recover with strong domestic demand. While investment continued to strengthen amid the GST harmonisation and a rebound of credit growth, consumption remained the Strong domestic demand is envisioned to widen the current account deficit to 2.6 per cent of GDP next year. Inflation is projected to rise somewhat above the midpoint of the Reserve Bank of Indias target range of 2 to 6 per cent, mainly owing to energy and food prices.

It said in India the recent introduction of the GST and steps toward demonetisation are expected to Refraining from commenting on the economic performance of the NDA Government that too in an election year, growth performance of India as compared to other Indias growth performance has been quite impressive. Year after year it has delivered strong numbers around its potential growth.

Indias GDP is estimated to have increased 7.2 per cent in 2017-18 and 7 per cent in 2018-19. India has retained its position as the third largest startup base in the world with over 4,750 technology start-ups. Indias labour force is expected to touch 160-170 million by 2020, based on rate of population growth, increased labour force participation, and higher education enrolment, among other factors, according to a study. Indias foreign exchange reserves were US$ 405.64 billion in the week up to March 15, 2019.

Recent Developments

With the improvement in the economic scenario, there have been various investments in various sectors of the economy. The M&A activity in India reached record US$ 129.4 billion in 2018 while private equity (PE) and venture capital (VC) investments reached US$ 20.5 billion. Some of the important recent developments in Indian economy are as follows:

During 2018-19 (up to February 2019), merchandise exports from India have increased 8.85 per cent year- on-year to US$ 298.47 billion, while services exports have grown 8.54 per cent year-on-year to US$ 185.51 billion.

Nikkei India Manufacturing Purchasing Managers Index (PMI) reached a 14-month high in February 2019 and stood at 54.3.

Net direct tax collection for 2018-19 had crossed Rs 10 trillion (US$ 144.57 billion) by March 16, 2019, while goods and services tax (GST) collection stood at Rs 10.70 trillion (US$ 154.69 billion) as of February 2019.

Proceeds through Initial Public Offers (IPO) in India reached US$ 5.5 billion in 2018 and US$ 0.9 billion in Q1 2018-19.

Indias Foreign Direct Investment (FDI) equity inflows reached US$ 409.15 billion between April 2000 and December 2018, with maximum contribution from services, computer software and hardware, telecommunications, construction, trading and automobiles.

Indias Index of Industrial Production (IIP) rose 4.4 per cent year-on-year in 2018-19 (up to January 2019).

Consumer Price Index (CPI) inflation stood at 2.57 per cent in February 2019.

Net employment generation in the country reached a 17-month high in January 2019.

INDUSTRY STRUCTURE AND DEVELOPMENTS

Global Steel Industry

Global steel demand continues to grow in slowing economic environment. Commenting on the outlook, Mr Al Remeithi, Chairman of the world steel Economics Committee said, "In 2019 and 2020, global steel demand is expected to continue to grow, but growth rates will moderate in tandem with a slowing global economy. Uncertainty over the trade environment and volatility in the financial markets have not yet subsided and could pose downside risks to this forecast."

Global steel demand grew by 2.1%* in CY 2018, largely driven by China, coupled with an investment-led recovery in the advanced economies. Global crude steel production reached 1,808.6 million tonnes (MnT) in CY 2018, up 4.6% from CY 2017 levels, pushing capacity utilisation above 70%. Steel spreads were stronger in the first half of CY 2018, driven by strong economic activity and further supported by on going trade tensions between major economies.

In the second half of CY 2018, moderation in the global economic growth led to softening of steel prices, thereby adversely impacting the spreads.

In 2018, global steel demand increased by 2.1% (after adjusting for China induction furnace closures - see note in October 2018 Short Range Outlook), growing slightly slower than in 2017. In 2019 and 2020 growth is still expected, but in a less favourable economic environment. Chinas deceleration, a slowing global economy, and uncertainty surrounding trade policies and the political situation in many regions suggest a possible moderation in business confidence and investment.

Steel demand in the developed economies grew by 1.8% in 2018 following a resilient 3.1% growth in 2017. We expect demand to further decelerate to 0.3% in 2019 and 0.7% in 2020, reflecting a deteriorating trade environment.

In 2017-18, steel demand in the US benefitted from the strong growth of the economy driven by government- led fiscal stimulus, leading to high confidence and a robust job market. In 2019, the US growth pattern is expected to slow with the waning effect of fiscal stimulus and a monetary policy normalisation. Therefore, both construction and manufacturing growth is expected to moderate. Investment in oil and gas exploration is expected to decelerate as well, while a boost in infrastructure spending is not expected.

The EU economies also face the deteriorating trade environment and uncertainty over Brexit. We expect slower growth in demand for steel in the major EU economies (especially in those more export dependent) in 2019. Steel demand growth is expected to improve in 2020, dependent on a reduction in trade tensions.

Japan recorded growth in steel demand in 2018, supported by a favourable investment environment and continued construction activities as well as a boost in consumer spending prior to the consumption tax increase. In 2019 and 2020, steel demand is likely to contract slightly due to a moderation of construction activities and decelerating exports despite the support provided by public projects.

Steel demand in Korea has been contracting since 2017 due to reduced demand from two major steel using sectors, shipbuilding and automotive. Steel demand is expected to continue declining in 2019 due to toughened real estate market measures and a deteriorating export environment. A mild recovery is expected in 2020.

Indian Steel Industry

Indias steel demand is increasing every consecutive year and in 2019, it is being forecasted by world steel that it will overtake the United States in steel demand. "The demand will be supported by improving investment and infrastructure programmes. Stressed government finances and corporate debt weighs on the outlook," the body added in its report.

Indias crude steel production grew 3.3% to 106.56 MnT in FY 2018-19, making it the worlds second largest steel producer, behind China. Steel exports fell 26.4% to 8.54 MnT as global demand weakened due to geopolitical uncertainties and additional tariffs on imports by the US. Finished and semifinished steel imports rose by 4.6% to reach 8.79 MnT. The domestic market saw rising imports from China, Japan and Korea.

National Steel Policy 2017

The new Steel Policy enshrines the long term vision of the Government to give impetus to the steel sector. It seeks to enhance domestic steel consumption and ensure high quality steel production and create a technologically advanced and globally competitive steel industry.

Key features of the NSP 2017:

1. Create self-sufficiency in steel production by providing policy support & guidance to private manufacturers, MSME steel producers, CPSEs

2. Encourage adequate capacity additions,

3. Development of globally competitive steel manufacturing capabilities,

4. Cost-efficient production

5. Domestic availability of iron ore, coking coal & natural gas,

6. Facilitating foreign investment

7. Asset acquisitions of raw materials &

8. Enhancing the domestic steel demand.

The policy projects crude steel capacity of 300 million tonnes (MT), production of 255 MT and a robust finished steel per capita consumption of 158 Kgs by 2030 - 31, as against the current consumption of 61 Kgs. The policy also envisages to domestically meet the entire demand of high grade automotive steel, electrical steel, special steels and alloys for strategic applications and increase domestic availability of washed coking coal so as to reduce import dependence on coking coal from about 85% to around 65% by 2030-31.

Steel Industry

India is currently the worlds fourth largest producer of crude steel (knocking to be the third largest by the year end) and is expected to become the second largest producer by 2020. India holds a fair advantage in cost of production and conversion costs in steel and alumina. Its strategic location enables convenient exports to develop as well as the fast-developing Asian markets.

ADVANTAGE IN INDIA

I. Demand Growth:

Power and Cement industries in India will aid the growth in the metals and mining sector. Increase in iron and steel demand will also benefit the sector.

II. Attractive Opportunities:

The Ministry of Steel, government of India aims to more than double the steel production capacity to 300 million tonnes by 2030-31, indicating new opportunities in the sector.

III. Policy Support:

100 % FDI allowed in the mining sector and exploration of metal and non-metal ores under the Automatic Route.

IV. Competitive Advantage:

India benefits from strategic location that enables convenient exports to developed as well as the fast- developing Asian markets. It also has a fair production and conversion cost advantage in steel and alumina.

Rise in infrastructure development and automotive production are driving growth in the sector. Power and cement industries are also aiding growth in the metals and mining sector. Demand for iron and steel is set to continue, given the strong growth expectations for the residential and commercial building industry.

Global steel demand grew by 2.1%* in CY 2018, largely driven by China, coupled with an investment-led recovery in the advanced economies. Global crude steel production reached 1,808.6 million tonnes (MnT) in CY 2018, up 4.6% from CY 2017 levels, pushing capacity utilisation above 70%. Steel spreads were stronger in the first half of CY 2018, driven by strong economic activity and further supported by ongoing trade tensions between major economies.

In the second half of CY 2018, moderation in the global economic growth led to softening of steel prices, thereby adversely impacting the spreads.

We, at Gallantt Ispat, has the following production data of the Fiscal 2018-19 under the Steel Segment:

Steel Segment products wise Production (in MT)
Sponge Iron 2,62,747.64
Billets 2,88,283.73
M. S. Bar 2,61,055.10
Missrolled Bar 10,085.83

Agro Industry (Wheat Products)

Agriculture is the primary source of livelihood for about 58 per cent of Indias population. Gross Value Added by agriculture, forestry and fishing is estimated at Rs 18.53 trillion (US$ 271.00 billion) in FY18.

The Indian food industry is poised for huge growth, increasing its contribution to world food trade every year due to its immense potential for value addition, particularly within the food processing industry. The Indian food and grocery market is the worlds sixth largest, with retail contributing 70 per cent of the sales. The Indian food processing industry accounts for 32 per cent of the countrys total food market, one of the largest industries in India and is ranked fifth in terms of production, consumption, export and expected growth. It contributes around 8.80 and 8.39 per cent of Gross Value Added (GVA) in Manufacturing and Agriculture respectively, 13 per cent of Indias exports and six per cent of total industrial investment.

India has the 10th-largest arable land resources in the world. With 20 agri-climatic regions, all 15 major climates in the world exist in India. The country also possesses 46 of the 60 soil types in the world. India is the largest producer of spices, pulses, milk, tea, cashew and jute; and the second largest producer of wheat, rice, fruits and vegetables, sugarcane, cotton and oilseeds. Further, India is second in global production of fruits and vegetables, and is the largest producer of mango and banana. During 2017-18 crop year, food grain production is estimated at record 284.83 million tonnes. In 2018-19, Government of India is targeting food grain production of 285.2 million tonnes. Production of horticulture crops is estimated at 306.82million tonnes (mt) in 2017-18 as per third advance estimates. India is among the 15 leading exporters of agricultural products in the world. Agricultural exports from India reached US$ 38.21 billion in FY18 and US$ 34.36 billion during Apr 2018-Feb 2019. Exports of ready to eat items from India reached US$ 689.80 million in FY18 and have reached US$ 545.21 million in FY19 (up to December 2018). The Agriculture Export Policy, 2018 was approved by Government of India in December 2018. The new policy aims to increase Indias agricultural exports to US$ 60 billion by 2022. India was the ninth largest exporter of agricultural products in 2017.

India is expected to achieve the ambitious goal of doubling farm income by 2022. The agriculture sector in India is expected to generate better momentum in the next few years due to increased investments in agricultural infrastructure such as irrigation facilities, warehousing and cold storage. Furthermore, the growing use of genetically modified crops will likely improve the yield for Indian farmers. India is expected to be self-sufficient in pulses in the coming few years due to concerted efforts of scientists to get early- maturing varieties of pulses and the increase in minimum support price.

We, at Gallantt Ispat, has the following production data of the Fiscal 2018-19 under the Agro Segment:

Agro Segment products wise Production (in MT)
Maida (refined wheat flour) 2,62,747.64
Suji (Semolina) 2,88,283.73
Atta (Flour) 2,61,055.10
Choker (Wheat Bran) 10,085.83

The Company has produced 26,70,65,508 Units of Electricity during the year.

OPPORTUNITIES & THREATS

Opportunities

Steel industry or steel per se has huge demand all over the globe which makes it all the more difficult to fulfil that need. There are many benefits and opportunities for the steel industry. Many countries follow similar protocol which leads to the belief that they can make quite a bit of profit and still trade in order to gain more. Some of the most common opportunities are:

• Trade and Investment

• Bilateral Trade Agreements

• Export Support Mechanisms

• Local Content Levels

• Trade Finance

These are some of the self-explanatory opportunities that you cannot miss out in a steel industry.

The Governments continued focus on infrastructure creation, manufacturing and rural development is expected to lead to an accelerated momentum in the investment cycle and steel demand. The main factors that lead to a significant increase in demand for steel are new infrastructure developments and the growing needs of the increasing middle class in India specially in Uttar Pradesh, Bihar, Jharkhand and Delhi. The construction, automobile and manufacturing sectors will attract a high demand for steel over the next decade. The construction sector will be the key consumer of steel in the years to come. A competitive and efficient domestic steel industry is a pre-requisite for India to succeed in its industrial vision for Make in India. We are working towards building a sustainable steel business that can withstand all challenges - present and future. Hence, it is important that we continue to be on the lookout for opportunities to invest wisely and build an enviable portfolio of steel assets. As a measure sustainable growth our proposal of expansion of capacity of various plants are under installation and technical team of the Company is working on it. Steel industry is likely to benefit from the new GST rate for steel which is at 18%, with key inputs like coal, iron ore marked at 5%, which is the lowest slab under GST, could help to lower input costs. Together, with a substantial slash in transport costs due to unified and standard tax rate under GST, this is likely to help steel companies keep steel prices stable.

Aimed at protecting the Indian domestic steel firms, the definitive anti-dumping duty imposed on imports of a clutch of hot-rolled and cold-rolled flat products of steel is likely to benefit domestic firms in more ways.

Threats and Risks

The availability of raw material at right price remains a concern for the steel sector and then there is the threat of cheap dumping from China, say experts and industry players. The government, however, is keeping a brave face and its focus areas for the new year include increasing per capital steel consumption, finding new markets for India-made steel and a shift in the industrys attention towards production of special steel.

Market is possible when consumption also increases. Our focus in the new year will be to increase the per capita steel consumption India and steel sector is considered very important for the overall economic health of the country, given its use in a number of key industries like automobile, process plants, capital goods and defence equipments.

Iron ore and coking coal are two key raw materials used in steel manufacturing, while coal is also used in a big way by captive power plants to generate power. According to Indian Captive Power Producers Association (ICPPA), whose members include players from key sectors such as steel and aluminium, most captive power producers are facing severe shortage of the fuel which may lead to closure of plants. "The coal-based steel, power and aluminium plants continue to face supply-related issues due to unavailability of adequate railway rakes.

SEGMENT-WISE OR PRODUCT-WISE PERFORMANCE

Major Product-wise Turnover

FY 2018-19

FY 2017-18

Qty (MT/ Unit) in Lacs Qty (MT) in Lacs
Agro (MT) 52,413.02 11,549.06 41,957 7,833.54
Steel (MT)* 2,71,140.93 1,10,599.97 1,45,619 49,807.41
Power (Unit) 26,70,65,508 19,961.21 12,83,31,911 8,342.62
Real Estate - 778.04 - 1,047.28
Unallocable - 204.50 - 152.89

*Company has Integrated Steel Plant facilities at Sahjanwa, Gorakhpur. Being an Integrated Steel Plant, Company, during the manufacturing process of end products TMT Bars also manufactures Sponge Iron, Billets etc.

OUTLOOK

The Indian economy started the fiscal year 2018-19 with a healthy 8.2 percent growth in the first quarter on the back of domestic resilience. Growth eased to 7.3 percent in the subsequent quarter due to rising global volatility, largely from financial volatility, normalized monetary policy in advanced economies, externalities from trade disputes, and investment rerouting. Further, the Indian rupee suffered because of the crude price shock, and conditions exacerbated as recovery in some advanced economies caused faster investment outflows.

The Indian economy is likely to sustain the rebound in FY 2018-19—growth is projected to be in the 7.2 percent to 7.5 percent range and is estimated to remain upward of 7 percent for the year ahead. These projections could be attributed to the sustained rise in consumption and a gradual revival in investments, especially with a greater focus on infrastructure development. The improving macroeconomic fundamentals have further been supported by the implementation of reform measures, which has helped foster an environment to boost investments and ease banking sector concerns. Together, these augur well for a healthy growth path for the economy. India has already surpassed France to become the sixth-largest economy. By 2019, it may become the fifth-largest economy, and possibly the third-largest in 25 years.

Road Ahead

Indias gross domestic product (GDP) is expected to reach US$ 6 trillion by FY 27 and achieve upper-middle income status on the back of digitisation, globalisation, favourable demographics, and reforms.

Indias revenue receipts are estimated to touch Rs 28-30 trillion (US$ 385-412 billion) by 2019, owing to Government of Indias measures to strengthen infrastructure and reforms like demonetisation and Goods and Services Tax (GST).

India is also focusing on renewable sources to generate energy. It is planning to achieve 40 per cent of its energy from non-fossil sources by 2030 which is currently 30 per cent and also have plans to increase its renewable energy capacity to 175 GW by 2022.

India is expected to be the third largest consumer economy as its consumption may triple to US$ 4 trillion by 2025, owing to shift in consumer behaviour and expenditure pattern, and is estimated to surpass USA to become the second largest economy in terms of purchasing power parity (PPP) by the year 2040.

RISKS AND CONCERNS

There are multiple threats that a company like ours face on a continuous basis. The swings on commodity prices, the volatility of several currencies across the world, the economic conditions of countries where our suppliers and buyers operate from and intercountry trade issues are some of the uncertainties that we face frequently.

The company mitigates these risks by timely managerial intervention and by carefully to put in place robust risk mitigation strategies and incorporate agility in operations to meet temporary headwinds and create opportunities of growth.

New entities posing competition are taking shape on a local level. To overcome this risk, the Company strives to keep its feet grounded on its core values and satisfy customers need. The Company believes that if it keeps its customers happy, then it can deal with any competition.

Since steel and agro business is a highly competitive market, the Company is prone to risks from price sensitive markets, geographic dependencies and limited customer segments.

The Company tries to counter these risks by forging long term relationships with buyers of products of the Company that again results from meeting end users expectations consistently.

Availability of Raw materials like Iron Ore, Coal etc. at a competitive cost is another area of concern for the Company. High cost of iron ore and coal impacting the EBITDA margin. Availability and cost of required grade of Iron ore are impacted by Global movement and parity of landed cost considering price, freight, tariff and exchange rates and also Domestic demand-supply gap, constraints and vendor actions. All these concern as well as Government policies and their impact on raw materials availability are being tracked regularly.

Exchange rate fluctuation is also an area of concern. Foreign currency - rupee depreciation against USD from Rs. 65 to Rs.74 during the year. Such volatility may increase the cost of the imported raw material and increase the dollar denominated borrowings.

Apart from the above, risk of high borrowing cost impacting the profitability, availability of infrastructure and logistics like various factors can affect movement of enhanced quantity of inbound raw material and outbound goods, Port congestion, unloading / loading infrastructure, rail connectivity and channel blockage.

A safe and healthy working environment for all employees is the number one priority for every world steel member. Our policy is to help all our members reach our goal of an accident-free workplace.

Historically, steelmaking was a dangerous process and accidents were inevitable. Today, many steel companies recognise that this is no longer appropriate for a modern and technically advanced industry.

There is no area, process or type of work that cannot be accident-free. Safety and health requires a permanent 100% commitment from everyone. Most importantly, it requires a strong commitment from top management and all levels of management, which should set the culture in which safety and health is the number one priority and must not be compromised for any other objective.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The company has an adequate internal audit system that promotes reliable financial reporting, safeguards assets, encourages adherence to fair management and ethical conduct. The internal control systems have been designed in a way that they not only prevent fraud and misuse of companys resources but also protect shareholders interest. The Audit committee of Board of Directors on regular intervals and in coordination with internal and statutory Auditors reviews the adequacy of internal control systems within the company.

The Companys Internal Financial Control framework is commensurate with the size and the nature of its operations. These have been designed to provide reasonable assurance about recording and providing reliable financial and operational information, complying with applicable statutes, safeguarding assets from unauthorized use, executing transactions with proper authorization and ensuring compliance of Corporate Policies.

The Company has laid down procedures and policies to guide the operations of the business. The Company has a well-defined delegation of power with authority limits to approve revenue as well as expenditure. Unit/ functional heads are responsible to ensure compliance with the policies and procedures laid down by the management.

The Company has a proper and adequate system of internal control.

DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

The Revenue from Operations for the current year is Rs. 1,22,927.06 Lacs as compared to Rs. 58,688.23 Lacs in the previous year. The Profit before Tax for the year under review is Rs. 16,631.38 Lacs as against Rs. 6,681.97 Lacs in the previous year. Profit after Tax during FY 2018-19 stood at Rs. 13,022.04 Lacs as against Rs. 5,361.80 Lacs in the previous year.

Comparative chart of Segment wise Revenue and Profits are as under:

SEGMENT REVENUE ( In lacs)
2019 2018 % Changes
Agro 11,549.06 7,833.54 47.41
Steel 1,10,599.97 49,807.41 122.06
Power 19,961.21 8,342.62 139.27
Real Estate 778.04 1,047.28 (25.71)
Unallocated 204.50 152.89 33.76
SEGMENT RESULTS
2019 2018 % Changes
Agro 1,229.08 491.82 149.90
Steel 6,959.72 1,951.93 256.56
Power 7,762.60 4,306.78 80.24
Real Estate 660.11 903.58 (26.95)
Unallocated - -

-

Increase in the Turnover and Profitability is due to expansion of capacity of various palnts.

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

The manpower strength of the Company as on 31st March 2019 was 1006 permanent employees including Executive Directors, Chief Executive Officer, Chief Financial Officer, Company Secretary and other management staff across different locations. The Company continued to build capabilities for the workforce by adopting specific and targeted interventions for different categories of the workforce.

The Company adopted various governmental skill developmental programs to build and enhance capabilities and leading to enhanced motivation levels of the human resources. Good industrial relations reduce the industrial disputes. Disputes are reflections of the failure of basic human urges or motivations to secure adequate satisfaction or expression which are fully cured by good industrial relations. Good industrial relations improve the morale of the employees. Employees work with great zeal with the feeling in mind that the interest of employer and employees is one and the same, i.e. to increase production. Every

worker feels that he is a co-owner of the gains of industry. The employer in his turn must realize that the gains of industry are not for him along but they should be shared equally and generously with his workers.

Good industrial relations are maintained on the basis of cooperation and recognition of each other. It will help increase production. Wastage of man, material and machines are reduced to the minimum and thus national interest is protected.

The Company maintained harmonious industrial relations in all units of the Company during the financial year 2018-19.

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:

Financial Ratio FY 18-19

FY 17-18

Change (%)

Reason for change
Debtors Turnover 19.48

17.33

12.45

-
Inventory Turnover 8.01

5.48

46.23

Capacity expanded of various units and major turnover increased from the current fiscal.
Interest Coverage Ratio 18.18

8.80

106.72

Operating profit increased during the year due to capacity utilisation of expanded capacity and overall better performance of steel Industry.
Current Ratio 3.15

1.10

187.92

Due to amalgamation of wholly owned subsidiary and better profitability during the year, outside liabilities decreased significantly.
Debt Equity Ratio 0.37

1.19

-68.81

Due to amalgamation of wholly owned subsidiary the equity increased substantially
Operating Profit Margin (%) 13.19

12.59

4.82

Net Profit Margin (%) 10.58

9.11

16.06

Financial Ratio FY 18-19 FY 17-18

Change (%)

Reason for change

Return on Net Worth 0.17 0.12

41.77

Operating profit increased during the year due to capacity utilisation of expanded capacity and over all performance of steel Industry.

CAUTIONERY STATEMENT

Information set forth in this MD & A may involve forward-looking statements under applicable securities laws. Forward-looking statements are statements that relate to future events. In this context, forward-looking statements often address expected future business and financial performance, and often contain words such as "anticipate", "believe", "plan", "estimate", "expect", and "intend", statements that an action or event "may", "might", "could", "should", or "will" be taken or occur,

or other similar expressions. All statements, other than statements of historical fact, included herein including, without limitation; statements about the timing and completion of the arrangement are forward-looking statements. By their nature, forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the Companys actual results, performance or achievements, or other future events, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The Company assures no responsibility to publicly modify or revise any forward-looking statements on the basis of any future events or new information. Actual results may differ from those mentioned in the report.

On behalf of the Board
Date: August 13, 2019 C. P. Agrawal
Place: Gorakhpur

Chairman