Gallantt Metal Ltd Management Discussions.


Global economic prospects solely rest on the pandemic fading eventually and the stimulus that governments will be able to provide their economies. Commodity prices including oil and metal remained soft. Global GDP growth rate, according to International Monetary Fund (IMFs World Economic Outlook, April 2020 issue) moderated by 70 basis points (bps) to 2.9% (3.6% in 2018). With a growth rate of 3.7%, Emerging Markets and Developing Economies (EMDE) outpaced the 1.7% growth rate of Advanced Economies. The growth rate of world trade volumes decelerated to 0.9% in 2019 from a healthy 3.8% in the previous year.

2019 can be summarised as a year of rebalancing increased protectionism with protracted globalisation that was achieved over the last two and a half decades. Heightened trade conflicts resulting in immediate and arbitrary tariffs, geopolitical tensions across many regions and economic realignments including uncertainty around Brexit resulted in a non-conducive environment for large scale investments and growth in consumption. The year got marked with events like frequent disturbances in Hong Kong and the Persian Gulf and blow hot - blow cold trade negotiations between the US and China.

According to the International Monetary Fund (IMF), global economic growth is likely to witness a steep de-growth of -4.9% in CY 2020, amidst The Great Lockdown led by COVID-19. The contraction in growth seeps down to over 170 nations, and for several of them, this comes as a double whammy as they were already fighting existing headwinds in their economy.

The advanced economies are mostly experiencing widespread outbreak, especially the US, the UK, Germany, France, Italy and Spain, and are therefore deploying containment measures that extract a sizable toll on economic activity. Additionally, adverse market sentiments are also likely to impact economic prospects. Some partial lifting of lockdown measures has been witnessed in recent weeks.

The emerging markets and developing economies are under pressure to balance their public health scenario with their economic development goals. However, emerging and developing Asia group is expected to be the only region with some growth rate in CY2020 due to significant domestic demand and policy responses.


One of the fastest-growing economies in the world until recent years, India recorded below 6% GDP growth on a y-o-y basis for the 1st time in seven years. During the 1st quarter of FY20 India recorded a near 5% growth, the slowest since the fourth quarter of FY13. Three of the four growth engines such as private consumption, private investment, and exports have slowed down significantly. Consumption, the biggest contributor to Indias growth till date, fell to an 18-quarter low of 3.1% in Q1 FY20, pointing to the fragile consumer sentiment and purchasing ability. Private consumption which contributes nearly 60% to Indias GDP, is estimated to have grown at just 5.7% in 2019-20 compared to the 8.1% growth in the previous fiscal year. On the industry side, several core sectors including auto, real estate, and manufacturing were in deep waters for the major part of FY20. The auto sector in 2019 witnessed its worst decline in auto sales in more than two decades. Manufacturing is expected to have grown at just 2% in 2019-20, the lowest growth rate in nearly 15 years, compared to 6.9% in 201819. Exports grew at just 5.7% and have remained volatile owing to global uncertainties around trade and investments and geopolitical tensions. The fourth engine, government consumption, and investment are running out of steam because of the limited elbow room the government has for counter-cyclical spending as the budget deficit remains under pressure.

Recent Developments

The return of a majority government from the same dispensation provided political stability and policy continuity. Aiming to revive growth by way of boosting private investment and consumptions, the Central Government and the Central Bank made many accommodative stances including successive lowering of policy rates and a substantive lowering of corporate taxes. Among the key themes of the year were added thrust to doubling of farmers income, propelling the countrys economy towards the 5 trillion dollar mark, rationalising corporate taxes, attracting global companies to manufacture in India, furthering ease of doing business and expanding exports.

Despite the imminent risks to the economy, Indias growth is expected to gain pace gradually in the coming months, expectedly driven by targeted measures to protect jobs, income support to the vulnerable sections of households and businesses, and encourage investments. The Government of India has already announced a Rs. 20 Trillion package (or ~10% of Indias GDP) to assist the nation and its people in mitigating the economic impacts of this pandemic. Indias economy remains resilient with robust long-term fundamentals, providing large external buffers and reserves, which bolster the countrys potential to increase fiscal expenditure once the pandemic recedes. Moreover, India has the capacity and scale to expand its share in the global supply chain, which has been disrupted by the COVID-19 outbreak.


Global Steel Industry

The global steel industry faced pricing pressure for most parts of CY 2019, in the wake of a protective market environment in key economies. This was further aggravated due to country-specific demand slowdown that fuelled market imbalances.

In line with a conservative trade sentiment, consumer industries of steel undertook active destocking. This led to stunted capacity utilisation and resulted in net excess capacity globally. This was further complemented by addition of new capacities and resulted in downward pressure on steel prices.

Steel demand in developed economies are expected to decline 17.1% y-o-y in CY 2020, due to the COVID-19 impact with businesses struggling to stay afloat and high unemployment levels. Thus, recovery in CY 2021 is expected to be muted at 7.8% y-o-y. Steel demand recovery in the EU markets is likely to get delayed beyond CY 2020. The US market is also likely to witness a slight recovery in CY 2021. Meanwhile, Japanese and Korean steel demand will witness double-digit declines in CY 2020, with Japan being impacted by reduced exports and halted investments in automobiles and machinery sectors, and Korea being impacted by lower exports and weak domestic industry.

Steel demand in developing countries excluding China is expected to decline by 11.6% in CY 2020, followed by a 9.2% recovery in CY 2021.

The World Steel Association (worldsteel) forecasts steel demand to decline by 6.4% y-o-y to 1,654 MnT in CY 2020, due to the COVID-19 impact. However, it has asserted that the global steel demand could rebound to 1,717 MnT in CY 2021 and witness a 3.8% rise on a y-o-y basis. Chinese demand is likely to recover faster than in the rest of the world. The forecast assumes that lockdown measures will be eased by June and July, with social distancing continuing and major steelmaking countries not witnessing a second wave of the pandemic.

Steel demand is expected to decline sharply across most countries, especially in the second quarter of CY 2020, with a likely gradual recovery from the third quarter. However, risks to the forecast remain on the downside as economies make a graded exit from the lockdowns, without any particular cure or vaccine for COVID-19.

Indian Steel Industry

The Indian steel industry, after recovering from the twin shocks of demonetisation and the Goods and Services Tax (GST) reform, was on a fast track growth curve, especially in the latter part of the year-19-20. However, the COVID-19 has put a lot of uncertainty in the steel industry in the world, and more so in India, due to the lockdown announcement towards end of March.

India is the worlds second largest producer of crude steel and is estimated to become the second- largest consumer of finished steel products over the medium term, with the sector contributing 2% of the countrys GDP. The growth in Indias steel consumption is driven primarily by infrastructure, construction and automobile sectors that account for 75% of the domestic demand. The growth in Indias production and consumption of steel is a direct result of its economic development and consistent government efforts to strengthen the industry. However, construction and manufacturing activities were subdued for most part of the year driven by a credit squeeze and prolonged monsoon season. This also translated into softer pricing and weaker spreads for finished steel, notably in the first half of FY 2019-20. Well-placed players in the industry responded by shifting their market focus to exports, to liquidate accumulated inventory. This led to India becoming a net exporter of steel during the year under review, with non-alloy Hot Rolled Coil being the most exported item.

Worth mentioning India was the worlds second- largest steel producer with production standing at 106.5 MT in 2018. The growth in the Indian steel sector has been driven by 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. Indias steel production capacity has expanded to 137.975 million tones in FY19. India surpassed Japan to become the worlds second largest steel producer in 2019, with crude steel production of 111.2 million tonnes.

As a matter of pride, the Indian steel industry is very modern with state-of-the-art steel mills. It has always strived for continuous modernisation and up-gradation of older plants and higher energy efficiency levels.

Government Initiatives

Some of the other recent government initiatives in this sector are as follows:

• Government introduced Steel Scrap Recycling Policy aimed to reduce import.

• An export duty of 30 per cent has been levied on iron ore (lumps and fines) to ensure supply to domestic steel industry.

• Government of Indias focus on infrastructure and restarting road projects is aiding the boost in demand for steel. Also, further likely acceleration in rural economy and infrastructure is expected to lead to growth in demand for steel.

• The Union Cabinet, Government of India has approved the National Steel Policy (NSP) 2017, as it seeks to create a globally competitive steel industry in India. NSP 2017 envisages 300 million tonnes (MT) steel-making capacity and 160 kgs per capita steel consumption by 2030-31

• The Ministry of Steel is facilitating setting up of an industry driven Steel Research and Technology Mission of India (SRTMI) in association with the public and private sector steel companies to spearhead research and development activities in the iron and steel industry at an initial corpus of Rs. 200 crore (US$ 30 million).

• The Government of India raised import duty on most steel items twice, each time by 2.5 per cent and imposed measures including antidumping and safeguard duties on iron and steel items.

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.

The National Steel Policy, 2017, has envisaged 300 million tonnes of production capacity by 2030-31. The per capita consumption of steel has increased from 57.6 kg to 74.1 kg during the last five years.

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.

Huge scope for growth is offered by Indias comparatively low per capita steel consumption and the expected rise in consumption due to increased infrastructure construction and the thriving automobile and railways sectors.


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.

We, at Gallantt Metal, have the following production data of the Fiscal 2019-20 under the Steel Segment:

Product 2019-20
Production Sales*
Sponge Iron (M.T.) 1,93,614.000 1,92,470.020
M.S. Billets (M.T.) 2,52,432.652 2,56,827.670
M.S. Round Bar & Miss Rolled Bar (M.T.) 2,29,776.230 2,25,235.440
Power Generation (KWH) 21,44,23,095 21,44,23,095

*Sales include captive consumption also. Major Product-wise Turnover

FY 2019-20 FY 2018-19
Qty Rs. in Qty Rs. in
(MT/Unit) Lacs (MT) Lacs
Steel (MT)* 2,43,613.790 84,747.22 2,67,257.610 1,03,527.48

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



With several backward and forward linkages in place, several factors catalyse the demand in the steel industry. Traditionally, construction, infrastructure, automobiles and consumer durable sectors generate steel demand, while the availability of raw materials and workforce have an impact on the production. During FY 2020, Indian steel manufacturers continued to face the challenges of imported steel due to elevated level of imports from Japan and South Korea, besides reduced demand from the automobile and its ancillary sectors. However, the government is working towards bolstering Indias steel industry by direct and indirect policy stimuli that are expected to increase demand (multimillion-doNar NIP and fresh investment in power, railways, and water, coupled with renewed interest in the automobile sector) and reduced imports.

Indias domestic steel industry is especially vulnerable to cheaper imports and demand fluctuation. The slump in domestic steel consumption and decrease in investment across sectors have affected the overall growth and profitability of the steel industry. The current wave of protectionism and trade wars is further impacting the industry.

As India works towards becoming a manufacturing powerhouse through policy initiatives like Make in India, the steel industry has emerged as a major focus area given the dependence of a plethora of sectors on its output. India is currently the worlds second largest producer of steel and is set to become the second largest consumer of steel, with the industry contributing about 2% of the countrys GDP. The industry has the potential to help India regain its positive trade balance in steel as well as to drive the countrys export manufacturing capabilities.

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 Gujarat, Maharshtra, Rajasthan etc.. The construction, automobile and manufacturing sectors will attract a high demand for steel over the next decade.

The renewed importance given by Government on affordable housing, roads, sagarmala projects and other infrastructure projects are expected to create steel demand, this will augur well for steel industry also.

Threats and Risks Covid-19

The outbreak of the deadly Covid-19 pandemic, followed by the lockdown in the country has adversely affected the business operations of the Company. Due to the rapid spread of the Covid-19 in the Country, the health of the employees and workers of the Company has become priority of the Company over the business operations. This unproductive lockdown is resulting in the financial burden for the Company. The depressed market conditions due to Covid-19 have further resulted in decrease in manpower requirement resulting in idling of work force.

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.

Indias steel industry is going through an acute shortage of labour that threatens to bring it to a halt. Apart from the labour issue, a slump in demand for the product and squeeze in the supply of a key raw material has added to the woes. The supply of coal, a key raw material has also suffered because South Africa - one of the biggest sources, is itself going through a lockdown.


Major Product-wise Turnover

2019-20 2018-19 % of Change
Production Sales* Production Sales* Production Sales*
Sponge Iron (M.T.) 1,93,614.000 1,92,470.020 2,03,827.000 2,04,326.190 (5.01%) (5.80%)
M.S. Billets (M.T.) 2,52,432.652 2,56,827.670 2,69,872.926 2,70,145.800 (6.46%) (4.93%)
M.S. Round Bar & Miss Rolled Bar (M.T.) 2,29,776.230 2,25,235.440 2,50,918.200 2,50,340.600 (9.43%] (10.03%)
Power Generation (KWH) 21,44,23,095 21,44,23,095 22,07,23,330 22,07,23,330 (2.85%) (2.85%)

*Sales include captive consumption also.

2020 2019 % of Change
Steel 86,504.66 1,06,378.53 (18.68)
Power 15,648.71 15,177.64 3.10
Unallocated 114.21 540.21 (78.86)
Steel (2,595.36) 5,962.37 (143.53)
Power 4,407.71 5,095.92 (13.51)


Indias steel consumption growth is expected to rise over the medium to long term on account of government expenditure on infrastructure and fiscal stimulus to manufacturing industries. Further, the country is looking to modernise, expand and accommodate the aspirations of a growing population where industrialisation, urbanisation and access to technology are the key pillars of the economic growth.

Since, Infrastructure has linkages to other industries like cement, brick and steel through backward and forward linkages. The outlook for the industry looks reasonable, since India has good iron ore deposits, skilled manpower and growing demand for steel. The improved demand is expected to continue in the current fiscal as well on the back of ongoing government funded infrastructure projects. In spite of a downturn in the Global Steel demand, Indian steel demand could survive showing an upward trend, setting a road ahead for the growth of the domestic steel industry in the long run. The upward trend is expected to be continued on account of fiscal measures taken by the Government such as infusion of funds for development of infrastructure sector, introduction of stimulus packages for revival of industry besides factors like increase in consumption and production of steel, upcoming infrastructure and Greenfield projects, stabilization of prices etc. The National Steel Policy has a target for taking Indian Steel production upto 110 MT by 2019-20.


Availability of Raw materials like Iron Ore, Coal etc. at a competitive cost is the main 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.

Global economic uncertainties have affected Indias economy, Key risks synonymous to industry include the global recessionary trend, economic slowdown, increase in financial charges, non-availability (or undue increase in cost) of raw materials, such as, iron ore, coal and labour etc., coupled with market fluctuations. The Company does not apprehend any inherent risk in the long run, with the exception of certain primary concerns that have afflicted the progress of our industry in general, like:

• Shortage of Labour

• Rising manpower and material costs

• Approvals and procedural difficulties

• Lack of adequate sources of finance.

Apart from this Industry is highly labour intensive and is subject to stringent labour laws. 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 inter-country 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.

Since steel 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.


The Company has adequate internal controls commensurate with the nature of its business and size of its operations, to effectively provide for the safety of its assets, reliability of financial transactions with adequate checks and balances, adherence to applicable statutes, accounting policies, approval procedures and to ensure optimum use of available resources. These systems are reviewed and improved regularly.

The Company has a comprehensive budgetary control system to monitor revenue and expenditure against approved budget on an ongoing basis. 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 Revenue from Operations for the current year is Rs. 86,504.66 Lacs as compared to Rs. 1,06,378.53 Lacs in the previous year. The Profit before Tax for the year under review is Rs. 1,289.02 Lacs as against Rs. 10,999.51 Lacs in the previous year. Profit after Tax during FY 2019-20 stood at Rs. 748.23 Lacs as against Rs. 7,162.65 Lacs in the previous year

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


(Rs. In lacs)

2020 2019 % Changes
Steel 86,504.66 1,06,378.53 (18.68)
Power 15,648.71 15,177.64 3.10
Unallocated 114.21 540.21 (78.86)


(Rs. in Lacs)

2020 2019 % Changes
Steel (2,595.36) 5,962.37 (143.53)
Power 4,407.71 5,095.92 (13.51)


We believe that our intellectual capital is the true asset of our business and losing them could have an adverse effect on the Companys performance. At Gallantt Metal, we 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. Thats why our highest priority is to provide a rewarding workplace thats safe, welcoming, and supportive of professional development. 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.

Companys Learning and Development Programs cater to a wide variety of employee profiles addressing Sales and Marketing, Manufacturing and Leadership. Our company enjoys the support of committed and well satisfied human capital. The manpower strength of the Company as on 31st March 2020 was 955 permanent employees including Executive Directors, Chief Financial Officer, Company Secretary and other management staff across different locations.

The Company maintained harmonious industrial relations in all units of the Company during the financial year 2019-20.


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 2019-20 FY 2018-19 Change (%) Reason for change
Debtors Turnover 28.69 24.15 18.77 Debtor turnover increased due to non realistion of debtor in second half of March due to Covid Panademic
Inventory Turnover 6.15 8.27 (25.62) Inventory build up in second half of March due to Covid Panademic.
Interest Coverage Ratio 3.89 33.96 (88.54) Interest coverage ratio declined due to declined of Profit Margin because of steel market adversely affected.
Current Ratio 1.43 2.00 (28.59) Current Ratio declined because of loan taken for the project of the Company.
Debt Equity Ratio 0.36 0.17 112.62 Debt Equity Ratio declined because of loan taken for the project of the Company.
Operating Profit Margin (%) 2.00 10.60 (81.10) Operating profit decreased during the year due to sluggish market situation and overall subdued performance of steel Industry.
Net Profit Margin (%) 0.86 6.70 (87.11) Net profit decreased during the year due to sluggish market situation and overall subdued performance of steel Industry.
Return on Net Worth (%) 1.54 14.88 (89.66) Returned to Net worth declined due to declined in profit margin.


The statements made in the Management Discussion and Analysis describing the Companys objectives, projections, estimates, expectations may be "forward-looking statements" within the meaning of applicable securities laws & regulations. Actual results could differ from those expressed or implied. Important factors that could make a difference to the Companys operations include economic conditions affecting demand supply and price conditions in the domestic & overseas markets in which the Company operates, changes in the government regulations, tax laws & other statutes & other incidental factors.