Godawari Power & Ispat Ltd Management Discussions

The operating and financial review is intended to convey the Managements perspective on the financial and operating performance of the Company for the Financial Year 2023-24, and outlook for the current financial year. This Report should be read in conjunction with the Companys financial statements, the schedules and notes thereto and other information included elsewhere in the Annual Report. This report is an integral part of the Directors Report

1. Global Economy

The baseline forecast is for the world economy to continue growing at 3.2 percent during 2024 and 2025, at the same pace as in 2023. A slight acceleration for advanced economies-where growth is expected to rise from 1.6 percent in 2023 to 1.7 percent in 2024 and 1.8 percent in 2025 will be offset by a modest slowdown in emerging market and developing economies from 4.3 percent in 2023 to 4.2 percent in both 2024 and 2025. The forecast for global growth five years from now at 3.1 percent is at its lowest in decades. Global inflation is forecast to decline steadily, from 6.8 percent in 2023 to 5.9 percent in 2024 and 4.5 percent in 2025, with advanced economies returning to their inflation targets sooner than emerging market and developing economies. Core inflation is generally projected to decline more gradually. The global economy has been surprisingly resilient, despite significant central bank interest rate hikes to restore price stability. (Source: IMF).

2. Indian Economy

The Indian economy demonstrated robust resilience and growth in FY 2023-24, navigating through global economic uncertainties and domestic challenges. The governments strategic focus on infrastructure development, digital transformation, and inclusive growth played a pivotal role in sustaining economic momentum. This period also saw significant policy reforms aimed at boosting investment, enhancing productivity, and ensuring sustainable development.

The Indian economy is projected to have grown at 8.2% in FY 2023-24, driven by strong domestic demand, government spending on infrastructure, and a recovery in private investment.

Sectoral Performance: The services sector continued to be the main driver of growth, followed by industry and agriculture. The IT and IT-enabled services, financial services, and real estate sectors showed significant growth.

Fiscal Deficit: The fiscal deficit is targeted at 5.9% of GDR reflecting the governments commitment to fiscal consolidation while supporting economic recovery. This is an improvement from the 6.4% deficit in the previous

fiscal year.

Revenue and Expenditure: Increased tax collections, particularly from GST and direct taxes, supported revenue growth. Expenditure was focused on infrastructure, health, and social welfare schemes.

(Source: Ministry of Finance, Government of India)

3. Global Steel Scenario

In 2023, the world crude steel production reached 1,892 million tonnes (MT) as per data released by World Steel Association. World Steel Association in its Short- Range Outlook, April 2024 forecasts that steel demand will grow by 1.7% in 2024 and reach 1,793.1 MT after contracting by 1.1% in 2023. In 2025, steel demand will see a further increase of 1.2% to 1,815.2 MT.

India is the second largest producer of crude steel. China was worlds largest crude steel producer in 2023 (1,019.1MT) followed by India (140.8MT), Japan (87.0MT) and the USA (80.7MT). (Source: For India is JRC and World Steel Association for others)

Rer capita finished steel consumption in 2022 was 224 kg for world and 649 kg for China. The same for India was 86.7 kg in 2022-23.

4. Domestic Steel Scenario

Steel is a de-regulated sector. The Governments role is that of a facilitator which lays down the policy guidelines and establishes the institutional mechanism/structure for creating conducive environment for improving efficiency and performance of the steel sector.

In this role, the Government has released the National Steel Policy 2017, which has laid down the broad roadmap for encouraging long term growth for the Indian steel industry, both on demand and supply sides, by 2030-31.

Government of India is implementing a Production-linked Incentive (RLI) Scheme for Specialty Steel. It is expected that the specialty steel production will reach 42 MT by the end of 2026-27.

Indias crude steel capacity was 179.5 mt (provisional) in 2023-24.

5. Performance of Steel sector

Production of pig iron, sponge iron and total finished steel (alloy/stainless + non-alloy) are given in table below for last five years and current year:

Table 1: Indian steel industry: Production (In million tons)

Category	2019-20	2020-21	2021-22	2022-23	2023-24*
Pig Iron	5.42	4.88	6.26	5.86	7.32
Sponge Iron	37.10	34.38	39.20	43.62	51.50
Total Finished Steel	102.62	96.20	113.60	123.20	138.83

Source: Joint Plant Committee; *Provisional

Performance of Steel sector during 2023-24 has been the best ever of any fiscal year. Cumulative production and consumption of steel during the last five financial years are given in the following table and graph below:

Table 2: Production and consumption

Category	2019-20	2020-21	2021-22	2022-23	2023-24*
Crude production	109.14	103.54	120.29	127.20	144.04
Finished Steel production	102.62	96.20	113.60	123.20	138.83
Consumption	100.17	94.89	105.75	119.89	136.25

Source: Joint Plant Committee; *Provisional

The global production of crude steel declined by 0.9% to 625.4 MT in January-April 24 (provisional) against 631.0 MT in January-April23. Among the top 10 countries, China, Japan, the USA, Russia and South Korea reported fall in crude steel production in January-April 2024. The remaining five countries, including India, reported growth in output. Turkey reported a spectacular 22.1% growth in production. It was followed by India which showed a 8.5% growth. Country wise share of crude steel production in January-April, 2024 may be seen from the following graph:

6. International Trade of Steel

During last five years, India was a net exporter of total finished steel in all the years barring only 2023-24 and April-May 2024 when it turned net importer. The Table below contains the details:

Table 3: Exports and Imports

					(In million tons)
Item	2019-20	2020-21	2021-22	2022-23	2023-24*
Export	8355	10784	13494	6716	7487
Imports	6768	4752	4669	6021	8320
Net Exports/Imports	1588	6031	8824	695	833

Source: JPC, *provisional

• Month-wise data of last six months of 2023-24 (provisional)and current year indicates that India alternated its status between net importer and exporter during the period. The country was a net importer of finished steel from October 2023 to January 2024, while it turned net exporter in February and March 2024. During, current year, India was net importer during Apr24 and May24 also. The table and graph below contain the details.

7. INDIAN IRON ORE AND IRON ORE PELLETS OVERVIEW:

A. Industry Overview

The Indian iron ore industry has demonstrated resilience and potential for growth in FY 2023-24. With the governments continued focus on infrastructure development and the Make in India initiative, the demand for iron and steel has been robust, driving the need for raw materials like iron ore and pellets. This period has seen significant developments in terms of production capacity, technological advancements, regulatory changes, and global market dynamics impacting the Indian market.

B. Market Dynamics

Production and Consumption

India remains one of the largest producers of iron ore globally. In FY 2023-24, the production of iron ore continued its upward trend, driven by increased domestic demand and enhanced mining activities. Major mining states such as Odisha, Karnataka, and Chhattisgarh have been pivotal in contributing to the overall production volumes. The introduction of new mining leases and the revival of previously closed mines have further boosted production.

Iron ore pellets, known for their high iron content and efficiency in steel production, have seen increased adoption. Pellet production capacity has expanded, with several new plants commencing operations and existing plants upgrading their facilities. This aligns with the steel industrys preference for pellets over lump ore due to their environmental and efficiency benefits.

Pricing Trends

The pricing of iron ore and pellets in FY 2023-24 has been influenced by a mix of domestic policies and global market trends. On the global front, price fluctuations have been observed due to variations in demand from major economies, particularly China. However, the overall trend has been stable, with periodic adjustments reflecting the balance between demand and supply.

Financial Performance

The financial performance of major iron ore and pellet producers in FY 2023-24 has been robust, driven by strong demand and improved operational efficiencies. Revenue growth has been supported by increased production volumes and stable pricing. Profit margins have also benefited from cost-saving measures and technological advancements. However, companies have to navigate increased operational costs due to regulatory compliance and environmental initiatives.

FY 2023-24 has been a pivotal year for the Indian iron ore and pellet industry, marked by growth, innovation, and regulatory changes. The industrys ability to adapt to these dynamics will determine its trajectory in the coming years. With the right strategies, Indian iron ore and pellet producers are well-positioned to capitalize on domestic and global opportunities, ensuring sustained growth and competitiveness.

(Source: Business Standard. "Indian Iron Ore Production and Consumption trends",Steel360. "Market Dynamics in Indian Iron Ore Industry, The Economic Times. "Impact of Policies on Indian Iron Ore Production, Mining Technology. "Technological Innovations in Mining, Ministry of Mines, Government of India. "Regulatory Changes in Mining Sector", CRISIL. "Financial Performance of Iron Ore Companies¹ )

8. INDIAN FERRO ALLOYS MARKET OVERVIEW

The Indian ferro alloys market plays a crucial role in the countrys steel production industry. Ferro alloys are essential additives used in steelmaking to improve the mechanical and chemical properties of steel. The key ferro alloys produced in India include ferro manganese, ferro silicon, and ferro chrome etc. In FY 2023-24, the Indian ferro alloys market has shown resilience and growth, supported by robust domestic demand, government policies, and increasing exports.

Production and Consumption

A. Production

Capacity and Output: India is one of the leading producers of ferro alloys globally. In FY 2023-24, the production capacity has increased due to the establishment of new plants and the expansion of existing facilities. Major producing states include Odisha, Chhattisgarh, and Karnataka.

Product Mix: The production mix has remained stable with ferro manganese, ferro silicon, and ferro chrome being the primary products. The industry has also seen a rise in the production of value- added ferro alloys to meet specific requirements of the steel industry.

B. Consumption

Domestic Demand: The domestic demand for ferro alloys is primarily driven by the steel industry, which has seen significant growth due to infrastructure projects, automotive production, and construction activities. The increasing focus on high-grade steel for specialized applications has further boosted the demand for specific ferro alloys.

End-Use Industries: Apart from steel, other end-use industries such as foundries, welding electrodes, and chemical industries also contribute to the consumption of ferro alloys.

(Source: Ministry of Steel, Government of India, Indian Ferro Alloys Producers Association (IFAPA))

9. OPPORTUNITIES AND THREATS

A. Major opportunities in the steel sector

The Indian governments Aatmanirbhar Bharat program is aimed at promoting domestic manufacturing, which presents a promising opportunity for steel production and consumption in the country. The production-linked incentive scheme has been introduced to encourage more steel production, which is anticipated to result in increased demand for special steel in sectors such as automobiles, consumer durables, solar equipment and telecommunications. There are several prospects in various sectors, including infrastructure, capital goods, automotive, railways, airports, power and more.

Automotive	The manufacturing industry is a significant contributor to Indias Gross Domestic Product (GDP), accounting for approximately 7.1% of the total GDP and almost 49% of its manufacturing GDP The automotive sector in India is valued at USD 222 billion, while the EV market is expected to be worth USD 2 billion by 2023 and USD 7.09 billion by 2025. The demand for steel from the industry comprises around 10% of the total steel demand in India. As the capacity addition in the automotive industry increases, the demand for steel from this sector is expected to remain strong.
Capital goods	Around 11% of the total steel consumption in India can be attributed to the capital goods industry. By the end of the fiscal year 2025-26, it is expected that this sector will experience a surge of 14-15%. There is significant potential for the capital goods industry to grow in terms of both tonnage and market share. It is anticipated that Indian companies capital expenditures will increase, leading to higher demand for steel products.
Infrastructure	The infrastructure industry currently accounts for 9% of steel consumption, but it is predicted to rise to 11% by 202526 The rising investments in infrastructure projects are expected to drive a surge in demand for steel products in the coming years. It is estimated that approximately 70% of the countrys infrastructure, valued at around 6 lakh crores (USD 89.50 billion), is yet to be constructed. This indicates a significant potential for growth in the steel sector. To address this, the Ministry of Finance has introduced a NIP 2021 plan, with an outlay of 111 lakh crores over the next 5 years. This plan encompasses various infrastructure sectors, such as real estate and power.
Railways	The Dedicated Rail Freight Corridor (DRFC) network in India is presently undergoing expansion and there are plans for further expansion in the near future to enable the smooth movement of freight throughout the country. The demand for steel is likely to increase due to this expansion, along with the introduction of high-speed bullet trains, metro trains, the establishment of new lines, gauge conversion and electrification.
Power	The Indian government has set a goal of achieving a capacity of 500 GW by 2030. The introduction of E20 fuel and an increased emphasis on biofuels has created fresh opportunities for investment in the energy sector. Additionally, the promotion of greener cargo handling through the development of waterways in India is being prioritized. This move is expected to improve both transmission and distribution capabilities, ultimately leading to an increase in demand for steel products from the sector.
Telecom	The telecom industry in India is estimated to grow by USD 12.5 billion every three years. By the year 2025, India is expected to need around 22 million proficient workers who specialize in 5G-related technologies such as Artificial Intelligence (AI), Internet of Things (IoT), cloud computing and robotics. The improved telecom connectivity throughout the country is likely to boost the demand for steel products.
	The real estate & housing sector is one of the biggest consumer of Iron and Steel. The Robust growth in construction of Real Estate & Housing projected is expected to add significantly to Steel consumption.
Real Estate & Housing	By 2030, over 400 million people are expected to live in Indian cities, which occupy only 3% of land but contribute 60% to the countrys GDP (Source: Indian.un.org)
	The Indian affordable housing market is expected to grow 1.5x from 25 million households in 2010 to 38 million in 2030. (Source: smartnet.niua.org)

B. Supporting government policies

Steel is a de-regulated sector, Government acts as a facilitator, by creating conclusive policy environment for development of the steel sector. Government of India has notified National Steel Policy, 2017 which envisages development of a technologically advanced and globally competitive steel industry that provides environment for attaining self-sufficiency in steel production by providing policy support and guidance to steel producers. National Steel Policy covers all aspects of steel sector such as steel demand, steel capacity, raw material security, infrastructure and logistics, Research & Development (R&D) and energy efficiency. Overall projections of domestic crude steel capacity, production and per capita finished steel consumption value envisaged in the National Steel Policy (NSP) 2017 are shown below: -

(In million tons)

S. No. Parameter	Projections (2030-31)
1 Total Crude Steel Capacity	300 mt
2 Total Crude Steel demand/Production	255 mt
3 Per Capita Finished Steel Consumption in kgs	158 mt

Sources: National Steel Policy (NSP) 2017

i. National Steel Policy, 2017: The National Steel Policy aims to increase Indias per capita steel consumption from 77.2 kg to 160 kg within the next decade. To achieve this, the countrys domestic crude steel capacity will also be doubled, reaching a target of 300 MTPA. This will create opportunities for significant growth among major Indian players in the steel industry, as both demand and regulations will drive domestic steel production.

ii. Scrap Recycling Policy, 2019: This Policy plans to establish eco-friendly management systems that promote the processing and recycling of ferrous scrap through well-organized and scientifically advanced metal scrapping centres throughout India. This will

reduce Indias reliance on imported scrap and promote self-sufficiency in the availability of scrap. This development is beneficial for steel manufacturers who prioritize producing steel using the electric arc furnace (EAF) method.

iii. Production linked Incentive (PLI) Scheme: On March 17, 2023, the Ministry of Steel signed 57 Memorandums of Understanding (MoUs) with 27 companies under the governments production-linked incentive scheme, specifically for specialty steel. These MoUs are expected to generate Rs. 30,000 crore in new investments in the Indian specialty steel industry, resulting in approximately 50,000 to 55,000 new jobs and adding value to the steel

sector. The PLI scheme for specialty steel was approved by the Union Cabinet on July 22, 2021, with a five-year budget of Rs. 6,322 crore to promote manufacturing, attract capital investment, generate employment and promote technology upgrading in the steel sector. This initiative is in line with the Make in India policy to boost domestic manufacturing and reduce import bills. By sourcing specialty steel domestically and creating products for export, India aims to address the demand gap in the market. The PLI scheme is expected to draw investments worth approximately Rs. 400 billion (USD 5.37 billion) and increase the capacity of specialty steel by 25 million tonnes, from 18 MT in 2020-21 to 42 MT in 2026-27, while generating employment opportunities for over half a million people.

iv. Steel Quality Control Order (QCO): Ministry of Steel has introduced Steel Quality Control Order (QCO) thereby banning sub-standard/ defective steel products both from domestic producers & imports to ensure the availability of quality steel to the industry, users and public at large. As per the Order, it is ensured that only quality steel conforming to the relevant BIS standards is made available to the end users. As on date 145 Indian Standards have been notified under the Quality Control Order covering carbon steel, alloy steel and stainless steel. Out of these, QCO on 144 Indian Standards have been enforced.

v. Research & Development (R&D): Ministry of Steel is providing financial assistance for pursuing Research & Development to address the technological challenges faced by the Iron & Steel sector. In this regard, in May 2023, Ministry of Steel has sought R&D Project proposals in joint collaborative mode from reputed Academic Institutions, Research Laboratories and Steel Companies for pursuing R&D projects on the identified thrust areas, for providing financial assistance under the R&D Scheme for the Financial Year 2023-24. The thrust areas for providing financial assistance under the R&D Scheme include development of new alternate processes & technologies to address the burning issues faced by the Iron & Steel Sector such as climate change (green steel production, H2 based steel production, CCUS etc.), waste utilization, resource efficiency, etc. The details of the R&D Scheme including guidelines for financial support and an indicative list of R&D projects that can be taken up to address common issues of the Iron & Steel Sector, have been uploaded on Ministry of Steels website in May 2023.

vi. Domestically Manufactured Iron & Steel Products (DMI&SP) Policy for promoting procurement of Made in India Steel by government and public sector projects.

THREATS:

A. Regulatory Hurdles: Navigating the complex regulatory environment remains a challenge for mining companies. Compliance with new environmental standards requires significant investment.

B. Infrastructure Bottlenecks: Inadequate infrastructure, particularly in remote mining areas, hampers efficient transportation and logistics.

C. Overcapacity: The steel industry is currently facing a significant risk in the form of overcapacity, which is considered to be one of the most pressing challenges. In recent decades, numerous nations have endeavoured to augment their steel production capacities, leading to an oversupply predicament within the industry. The consequence of this phenomenon has been a reduction in both prices and profit margins for numerous steel enterprises, compelling them to implement costcutting measures and devise strategies to endure in an exceedingly competitive industry. China has been identified as a primary contributor to the issue of overcapacity, as the country has significantly augmented its steel production capabilities in recent times. The current situation has resulted in a significant surplus of steel in the international market, thereby exerting a substantial impact on steel prices across the globe. The issue of overcapacity in China has been acknowledged by the government, and efforts have been made to reduce production. However, the effectiveness of these measures in resolving this multifaceted problem is yet to be determined.

D. The Concept of Trade Protectionism: The steel industry is facing a notable peril in the form of trade protectionism, which has witnessed an upward trend in the recent years. Numerous nations have adopted strategies to safeguard their native steel sectors, including levies on imported steel, limitations on steel exports, and financial assistance for local steel manufacturers. Although such measures may safeguard the domestic steel industries, they may also result in diminished competition and elevated prices for consumers. In addition, it is noteworthy that such actions have the potential to trigger retaliatory measures from trade counterparts, thereby negatively impacting other sectors and exacerbating trade conflicts.

E. Regulations pertaining to the environment. Environmental regulations pose a significant challenge to the steel industry. In light of the global emphasis on sustainability and carbon emission reduction, numerous nations have enforced more stringent environmental policies on the steel sector. The implementation of such regulations may result in increased expenses for steel manufacturers, who are obligated to adhere to these standards and allocate resources towards environmentally sustainable practices. Although this represents a favorable advancement from an ecological perspective, it can pose difficulties for steel corporations, particularly in developing nations, to remain abreast of these modifications. The aforementioned phenomenon has the potential to result in an expansion of the disparity between nations that have attained a high level of environmental adherence and those that have not, thereby generating broader ramifications for their commercial interactions and worldwide competitiveness.

To sum up, the steel sector is encountering a number of noteworthy challenges, such as excess production capacity, trade barriers, and ecological mandates. In order to thrive in the current fiercely competitive landscape, steel corporations must engage in innovative practices and remain flexible in response to evolving circumstances. This could potentially entail the allocation of resources towards the acquisition of novel production technologies, enhancement of supply chain management practices, and exploration of untapped markets for their merchandise. The ability to effectively overcome these obstacles will determine the capacity of enterprises to prosper and expand in the forthcoming years.

10. REVIEW OF OPERATING & FINANCIAL PERFORMANCE

At the outset we are happy to report that in spite of reduction in the average annual realizations across all the products except iron ore pellets which grew by 8%, the performance of the Company has been satisfactory in view of the volume growth in sponge iron, steel billets, Wire Rods and HB Wires production and benefits of the de-bottlenecking & capacity enhancement program undertaken by the Company. The consolidated net sales revenue marginally decreased to Rs. 5455.35 Crores as compared to Rs. 5753.03 Crores registering a decline of 5.17% over previous year due to decrease in average realizations of finished products and fall in pellet volumes, although the volumes across finished products increased, the consolidated net profit increased by 17.93% to Rs.935.59 Crores YoY from Rs.793.36 due volume growth in finished products, except pellets, increase in realization of iron ore pellets and cost savings measures undertaken by the Company.

The operating & financial performance of the Company during the year under review is discussed below in detail:

Production and sales i. Production

During the year under review, production volumes across various divisions were as follows:

	Production in FY2024 (In MT)	Production in FY2023 (In MT)	Year on year growth
Iron ore mining	2,307,075	2,595,953	-11%
Iron ore pellets	2,438,950	2,616,500	-7%
Sponge iron	593,991	494,991	20%
Steel billets	479,800	325,070	48%
MS Rounds/Wire Rod	238,685	173,139	38%
HB wire	81,500	53,622	52%
Ferro alloys	72570	61416	18%
Power (Units in crore)	99.50	69.04	44%
Galvanized Fabricated Products	83,162	74,857	11%

Iron Ore Mining:

The iron ore mining production during the year decreased by 11%. The overburden dump at Companys Ari Dongri Iron Ore Mines has collapsed partially and the same has resulted into partial impact on the iron ore mining operations at the said mines and lower production volumes in Boria Tibu mines, on account of uneconomical operations. However, the company had achieved full operational capacity at mining operations and the mining volume reached at its normal levels. The impact of partial collapse at mining operations did not have any negative impact on the production of iron ore Pellets. The Company is in the process of expanding Iron ore mining capacity in Ari Dongri Mines to 6 million tons per annum and applied for regulatory approval for the same. The Company expects to receive the approval in the current year and production volumes in Ari Dongri mines shall gradually increase from current year, which will help reduce cost from captive Iron Ore in steel production.

Iron Ore Pellets:

Production of Pellets dropped due to planned maintenance shutdown in Q1FY24. The production of iron ore pellets decreased during the year by 7%. Realization for Pellets increased by 8% to Rs. 10,171/T. The Companys high- grade Pellets commands higher price in the market over the commercial grade of pellet. The Board of Directors of your Company has approved setting up additional Pellet capacity of 2 million ton at existing plant in Raipur and the Company has received environmental approval and consent to set up the project and have also started construction activities. The orders for major equipment have been placed. The Company expects to commission the project in Q1FY26 and start commercial operations from Q2FY26.

Sponge Iron

The Company during the year received the approval for production of sponge iron ore 495000 tons to 594000 tons and operated the sponge iron plant at full capacity and achieved the production volumes of 593,991 MTs (100% of capacity utilization). The plant capacity has been enhanced to 0.594 million tons through efficiency improvements.

Finished Steel & Rolled Products

The Company during the year increased production capacity of Steel Melting shop to 0.525 million ton from 0.40 million tons. The production of Sponge Iron, Steel Billets, Wire Rods and HB Wires increased by 20%, 48%, 38% and 52% respectively during the year. The production of Galvanized Fabricated Products increased by 11%. The overall performance in semi and finished steel was higher as compared to previous year. The Company expects to improve performance in the current year. Further the Company is in the process of modification & de-bottlenecking with capacity enhancement in one of the rolling mills for manufacture of structural steel for fabrication division and low width HR Coils for pipe mill, the commercial operation of which is expected to start from Q2FY25. With the completion in modification of rolling, the fabrication shop will be fully integrated with steel plant as a result of which the operating margins are expected to be enhanced.

Ferro Alloys:

The Company makes silico manganese in its ferro alloys plant, which is used in steel making. There has not been a considerable increase in the production of silico manganese. The production volume in ferro alloys business

during the year under review increased by 18%. However, the profitability of the business suffered due to fall in prices of finished products & raw materials resulting in inventory losses. The Company during the year completed de-bottlenecking process in Ferro Alloy plant of subsidiary Company namely Hira Ferro Alloys Ltd. The Ferro Alloys plants in standalone business and Alok Ferro Alloys Ltd operated at full capacity and volumes in HFAL was lower due to de-bottlenecking process. The overall volumes in current year are expected to improve further.

Captive Power:

The Company along with its subsidiary Companies operates 279 MW of captive power generation capacity, out of which 42MW is waste heat recovery-based power plant, 64 MW thermal coal based, 20 MW bio-mass power and 145 MW Solar. The overall generation of power increased by 44% as compared to previous year.

The Company has commissioned 23 MWp Captive Solar PV Power Plant of the Company situated at Khairagarh (Rajnandgaon) Chhattisgarh which was duly synchronized with the grid and charged on 6th February 2024. The power generated at this Solar Power Plant is being captively consumed at Ari Dongri Iron Ore mining activities, by replacing the high-cost power which was being purchased from State Discom. Further Hira Ferro Alloys Ltd. has commissioned 52 MWp Captive Solar PV Power Plant at Bemitara, Chhattisgarh. The power generated at this Solar

Power Plant is being captively consumed for manufacture of ferro alloys by replacing the high-cost power which was being purchased from State Discom. With commissioning of solar power capacities and generation of additional power, the Company has been able to increase production volumes in Steel & Ferro Alloys businesses and also reduce overall cost of power resulting in higher operating margins, despite fall in selling prices of finished steel products & Ferro Alloys.

The Company has further decided for setting up of 70 MWp Solar Power Plant in order to meet the additional power requirement for proposed expansion in pellet plant capacity by 2 Million TPA.

ii. Net sales/income from operations: Consolidated:

	FY 2024			FY 2023
Product	Sales (MTs) Quantity	Net sales (Rs in crore)	Sales Realization (Per Ton)	Sales quantity (MTs)	Net sales (Rs in crore)	Sales Realization (Per Ton)
Iron ore pellets	1581795	1692.56	10700	1979415	2049.69	10355
Sponge iron	60198	183.11	30418	125575	424.49	33804
Steel billets	233246	1024.81	43937	145186	718.69	49501
MS rounds/ Wire Rods	155876	735.93	47212	116736	619.37	53058
HB wire	81392	398.61	48974	52940	285.51	53931
Ferro Alloys	66133	469.60	71008	57845	543.03	93877
Galvanized Fabricated Products	83872	675.71	80564	72882	592.65	81317
Others		275.02			519.60
TOTAL		5455.35			5753.03

In fiscal 2023-24, the Company achieved consolidated net sales of Rs.5455.35 Crores as compared to net sales of Rs. 5753.03 crores achieved during previous year registering decline of 5.17%. The decrease in turnover is mainly on account of reduction in sales realizations in finished steel & ferro alloys businesses.

Raw Material Cost, Employee Cost and Other Operating expenses:

	Consolidated
	2023-24	2022-23	Change%
Raw-material Cost	2815.87	2961.45	(4.92)
Employee Cost	224.48	206.71	8.60
Other operating expenses	945.48	1047.89	(9.77)

In line with reduction in selling price of finished steel & ferro alloys, raw material prices also declined mainly for thermal coal and manganese ore. The employees cost amounts to 4.11% of the net sales and is in line with the industry trend. The operating expenses reduced by 9.77% mainly due to fall in energy cost and outward freight cost on account of lower export sales volume.

iv. Finance Cost and Depreciation:

Rs. In Crores

Particulars	Consolidated
	2023-24	2022-23	Change%
Finance Cost	59.63	51.39	16.03
Depreciation	141.30	123.53	14.38

The Company is availing banking facilities for working capital requirements including non- fund-based limits from banking systems for import of coal and other raw materials. The finance cost mainly includes Interest on cash credit limits availed from banks and commission of non- fund-based facilities for Letter Credit and bank guarantee limits. The cost also includes processing

charges paid to banks for sanction of limits. The Company is debt free on net basis.

Depreciation during the year increased on account of commissioning of solar power projects and other capex incurred for de-bottlenecking of steel melting shop, new power generation turbine, etc.

v. Operating margins (EBIDTA), Profit/Loss before Tax (PBT) and Profit/Loss After Tax (PAT):

Rs. In Crores

Particulars	Consolidated
	2023-24	2022-23	Change%
EBIDTA	1425.98	1267.75	12.48
PBT	1255.97	1082.57	16.02
PAT	935.58	793.36	17.93

The EBIDTA margins during the year improved to 26.14% as compared to 22.05% led by operating leverage due to higher operating capacities in Sponge Iron & Finished steel plants, lower cost of power due to fall in thermal coal prices, and replacement of high-cost grid power with solar power coupled with higher volumes in power generation despite fall in finished steel & ferro alloys prices.

The PBT and Net profit of the Company increased by 16.02% and 17.93% respectively.

vi. Provision for dividend

The Board of Directors in its meeting held on 24^th May, 2024 has recommended final dividend of Rs.5 per equity share on 13,59,44,988 of Rs.5 each fully paid for the Financial Year 2023-24. The outflow on account of final dividend post buyback of 21,50,000 equity shares shall be Rs.66.89 Crores.

vii. Fixed assets (Amount in Rs. crores)

Particulars	Consolidated
	2023-24	2022-23	Change%
Gross block	3086.52	2650.36	436.16
Less depreciation	813.21	684.88	128.33
Net block	2273.31	1965.48	307.83
Capital WIP	430.42	443.03	(12.61)
Net fixed assets	2703.73	2408.51	295.22

The increase in gross block during the year mainly represents solar power projects, New Power generation and commissioning of higher capacities in steel plant etc. The capital WIP represents capex incurred in modification of rolling mill under process, beneficiation plant in Ari Dongri Iron Ore mines and maintenance capex, etc. viii.Current Assets:

Particulars	Consolidated
	2023-24	2022-23	Change%
Inventories	900.30	810.78	11.04
Sundry Debtors	211.93	295.74	(28.34)
Loans & Advances	151.78	132.78	14.31
Total	1264.01	1239.30	1.99

The overall current assets remained in line with previous year. The change in inventory & receivable levels fluctuated within normal range.

11.FINANCIAL AND OPERATING RATIOS : Consolidated

Ratio	2023-24	2022-23	%change	Reason
Debtors turnover (no. of days)	21.49	17.82	20.60%	Due to reduction in selling price
Inventory turnover (no. of days)	6.38	6.83	-6.65%	Due to just in time approach.
Interest coverage ratio	19.01	18.75	1.40%	Due to reduction in debt.
Current ratio	3.23	2.45	31.76%	Due to increase in liquidity.
Debt equity ratio	0.01	0.08	-85.87%	Due to reduction in debt.
Operating profit margin (%)	26.39%	22.11%	19.31%
Net profit margin (%)	17.15%	13.79%	24.36%	Due to reduction in Operating Cost.
Return on net worth (%)	20.81%	20.31%	2.44%

12. MATERIAL DEVELOPMENTS IN HUMAN RESOURCE/INDUSTRIAL RELATIONS

Your Companys HR Vision is to build a high performing organization, where everyone is motivated to perform to the fullest capacity to contribute to developing and achieving individual excellence with organizational objectives. Your Company continues to maintain positive work environment and constructive relationship with all its employees with a continuing focus on productivity and efficiency.

We believe that our success is driven by the success of our people, who are at the core of everything we do believe in nurturing and creating a workforce for tomorrow while being responsible towards society.

Health & Safety is our first & foremost priority for the employees. The Safety wing of the company is continued to make the employees & contractual workers aware about organizational safety. During the year, your Company has:

Organized program on Safety during Hazardous Processes

Organized program on SWI.

Organized program on Occupational Lungs disease Pneumoconiosis.

Organized program on Emergency Preparedness and Response Plan

Organized program on Electrical Safety

Organized program on Behavior based Safety

Organized program on Carbon Monoxide Poisoning

Organized program on First Aid Training.

Organized program on Importance of House Keeping & Work Permit System

13. RISKS AND CONCERNS

Risk management

Risk is an integral factor in virtually all businesses. At GPIL, risks are adequately measured, estimated and controlled. Irrespective of the type of risk or the activity that creates it, the Companys fundamental approach to risk management remains the same: identify and measure risks, leverage an in-depth knowledge of the business and competitors and respond flexibly in the understanding and management of risks.

A. Economy risk

Domestic challenges like inflation, liquidity crunch, slower industrial growth, depreciating rupee, political instability and increasing commodity prices might affect performance.

Risk mitigation:

GPIL correctly anticipated that the challenge of the future would revolve around the timely availability and affordability of resources and raw materials, which translated into timely backward integration initiatives. As a part of this backward integration, the Company manufactures products that are consumed within and also sold to customers; the ability to provide a large and growing customer base from within has helped reduce marketing and costs of inventory, enhancing overall viability. Besides, the savings from captive supply has helped make the product more competitive for external sale, creating a unique win-win proposition. The Company generates significant per cent of its overall resource, raw material or power requirements by value from within, strengthening its overall competitiveness. As a result, integration is not incidental to the Companys existence; it represents its very core.

B. Industry/Demand risk

The Company may be affected by impact on demand due to the competitive action within the steel sector, import from Asian countries and industry down turn.

Risk mitigation:

The Company has significantly reduced the risks arising from erratic demand through integration of operations and captive production of iron ore and pellets. Besides, the Companys plants are located in a large steel manufacturing belt, making it possible to provide products with speed, periodic delivery and relatively high logistic efficiency, lower working capital cycle within the region. The Companys power sales are secured through merchant power sales agreement.

C. Technology risk

Technology obsolescence could warrant an increase in investments, affect cash flow and impact profitability.

Risk mitigation:

The Company invested in the latest technologies, which enables it to manufacture quality products. After completion of a project, the Company adapts

the technology and builds in-house capabilities for further expansion. It also has a facility for the critical components for the existing units to lower plant downtime and control its operations better. It has also introduced the latest technology in the solar thermal power plant, which will lower the operating expenditure for the Company.

D. Input risk

In the business of steel manufacture, a number of diverse inputs are required to be progressively taken into the next stage. The challenge lies in an ability to procure these intermediate raw materials at the right cost and in the right time.

Risk mitigation:

The Companys integrated business model which makes it possible for the end product of one business to be positioned as the raw material of another, creating a self-feeding ecosystem within minimal inventory, costing and logistic issues. The Company has also secured captive iron ore mines, in order to protect the input cost for its main raw material i.e. iron ore.

The extent of this integration has strengthened the Companys insulation from external pricing and supply shocks, enhancing input security. Besides, the Company is selectively enhancing production capacities, strengthening input security further.

E. Project management risk

Delay in project completion could lead to cost overrun. Risk mitigation:

Over the years, the Company recognized that the principal viability risk was not derived as much from the marketplace as it was from within. Among the factors from within the organization that affected viability, one of the most critical was the ability of the Company to commission its proposed plants on schedule. It is the Companys experience that timely commissioning creates a foundation of moderate capital cost and triggers revenue inflow to start contributing towards project payback. Over the years, the Company invested in project management with the objective to strengthen overall competitiveness: as a result, the focus graduated from timely commissioning to prescheduled commissioning, translating into a probable cost-underrun, accelerated revenue inflow and quicker payback.

F. Location risk

Locational disadvantage could affect logistic and time schedules, affecting viability.

Risk management:

The Companys manufacturing facility is located at the heart of industrial Chhattisgarh at Raipur. The Companys mines are located 150 km from the plant and adjacent to a highway, making logistics management convenient. The Companys location makes it easy to access JNPT port in the West (1,200 kms), Vishakhapatnam port in the South (500 kms) and Haldia and Paradeep ports in the East (800 and 600 kms respectively) for the export for ferro alloys and coal import. The Company markets 50 per cent of its pellet output within 200 km from its manufacturing units.

The Companys Associate pellet plant in Orissa is also located at rich belt of Iron Ore in Keonjhor district, near to is principal raw material i.e. iron ore fines. The railway siding is located at about 3 KM away from plant for transport of pellet, making it an attractive location for such project.

14. INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY

Your Company has in place an adequate system of internal control commensurate with its size and nature of business. The system provides a reasonable assurance in respect of providing financial and operational information, complying with applicable statutes, safeguarding of assets of the Company and ensuring compliance with corporate policies.

Your Company has a business planning system to set targets and parameters for operations which are reviewed with actual performance to ensure timely initiation of corrective action, if required.

Your Company has availed the services of independent professional firm for Internal Audit, which checks the effectiveness of the internal controls with an objective to provide an independent, objective and reasonable assurance of the adequacy and effectiveness of your Companys risk management, control and governance processes. The scope and authority of the Internal Audit activity are approved by the Audit Committee. Internal Auditor reports directly to the Audit Committee of Board. Audit Committee periodically reviews the Internal Audit Reports and issues guidance and advice.

The Audit Committee also seeks the views/opinions of statutory auditors on the adequacy of the internal control systems in your Company. Minutes of the Audit Committee are put up to the Board of Directors.

The Companys Audit Committee reviews adherence to internal control systems, internal audit reports and legal compliances. This committee reviews all quarterly and yearly results of your Company and recommends the same to Board for its approval. The Committee also reviews the performance of the subsidiaries/controlled entities.

15. CAUTIONARY STATEMENT

The above Management Discussion and Analysis describing the Companys objectives, projections, estimates and expectations may be "forward looking statements" within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the Companys operations include external economic conditions affecting demand/supply influencing price conditions in the market in which the Company operates, changes in Government regulations, tax laws, and other incidental factors.