Gyscoal Alloys Ltd Management Discussions.

SCENARIO OF STEEL INDUSTRY:

Global Steel Industry

World crude steel production reached 1,691.2 million tonnes (Mt) for the year 2017, up by 5.3% compared to 2016, based on provisional data released by the World Steel Association (world steel).Annual production for Asia was 1,162.5 Mt of crude steel in 2017, an increase of 5.4% compared to 2016. Chinas crude steel production in 2017 reached 831.7 Mt, up by 5.7% on 2016. Chinas share of world crude steel production increased from 49.0% in 2016 to 49.2% in 2017. Japan produced 104.7 Mt in 2017, down by -0.1% compared to 2016. Indias crude steel production for 2017 was 101.4 Mt, up by 6.2% on 2016. South Korea produced 71.1 Mt of crude steel in 2017, an increase of 3.7% compared to 2016.

In 2017, the EU (28) produced 168.7 Mt of crude steel, an increase of 4.1% compared to 2016. Italy produced 24.0 Mt in 2017, up by 2.9% on 2016. Spain produced 14.5 Mt of crude steel in 2017, an increase of 6.2% compared to 2016. Crude steel production in North America was 116.0 Mt, 4.8% higher than in 2016. The US produced 81.6 Mt of crude steel, up by 4.0% on 2016.

World steels estimation of 2017 crude steel production in the CIS based on available data was 102.1 Mt, the same amount as in 2016. Russia* produced 71.3 Mt of crude steel in 2017, up by 1.3% on 2016. Ukraine* recorded a decrease of -6.4% with a year-end figure of 22.7 Mt.

Annual crude steel production for South America was 43.7 Mt in 2017, an increase of 8.7% on 2016. Brazil produced 34.4 Mt in 2017, up by 9.9% compared to 2016.

Top 10 steel-producing countries

Rank

Country

2017 (Mt)

2016 (Mt)

%2017/2016

1

China

831.7

786.9

5.7

2

Japan

104.7

104.8

-0.1

3

India

101.4

95.5

6.2

4

United States

81.6

78.5

4.0

5

Russia (e)

71.3

70.5

1.3

6

South Korea

71.1

68.6

3.7

7

Germany (e)

43.6

42.1

3.5

8

Turkey

37.5

33.2

13.1

9

Brazil

34.4

31.3

9.9

10

Italy

24.0

23.4

2.9

In December 2017, world crude steel production for the 66 countries reporting to the World Steel Association (world steel)_was 138.1 Mt, an increase of 3.9% compared to December 2016. The crude steel capacity utilisation ratio of the 66 countries in December 2017 was 69.5%. This is 1.8 percentage points higher than December 2016.

Steel Industry in India

India was the worlds third-largest steel producer in 2017.The growth in the Indian steel sector has been driven by domestic availability of raw materials such as iron ore and cost-e_ective labour. Consequently, the steel sector has been a major contributor to Indias manufacturing output.

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.

Indian steel industries are classified into three categories such as major producers, main producers and secondary producers.

Market Size

Indias finished steel consumption grew at a CAGR of 5.69 per cent during FY08-FY18 to reach 90.68 MT. Indias crude steel and finished steel production increased to 102.34 MT and 104.98 MT in 2017-18, respectively. In 2017-18, the countrys finished steel exports increased 17 per cent year-on-year to 9.62 million tonnes (MT), as compared to 8.24 MT in 2016-17. Exports and imports of finished steel stood at 0.99 MT and 1.22 MT, during Apr-May 2018.

INDIAN ECONOMY:

Domestic steel production is expected to remain high in the current year 2017-18 and is likely to rise by around 8-10%, an industry research report by CARE Ratings has said. However, steel prices may rise going forward as steel producers are expected to face increased cost pressure due to supply disruption and a steep surge in coking coal prices on account of Cyclone Debbie in Australia. The latter accounts for around 70% of Indias coking coal requirements that are fulfilled through imports.

OVERVIEW OF THE COMPANY AND ITS BUSINESS:

Gyscoal Alloys Limited is engaged in the business of manufacturing of Stainless Steel and Mild Steel Long Products from scrap since 1999. The plant for the production activities & registered office of the Company is located at Ubkhal, Kukarwada, Vijapur – Taluka, Mehasana– District. The Corporate office of the company is situated at 2nd Floor, Mrudul Tower, Near Times of India, Ashram Road, Ahmedabad.

The Company has the capacity to manufacture all grades of Stainless Steel Products from 200 series to 400 series. The products are primarily used in the construction in chemical plants, Pharmaceutical plants, building construction, railways and other sectors for structural purpose. The Companys products adhere to high quality standards and it has got ISO 9001:2008 certification for "the manufacture and supply of stainless steel and mild steel based angles, channels, fiats, round, square, bright and ingots" from TUV NORD. The Company has also been successful in producing goods according to needs and specifications of its domestic & foreign buyers.

FINANCIAL PERFORMANCE OF THE COMPANY:

During FY 2017-18, the Company recorded a total income of Rs. 9532.17 lacs, of which income from the operations was Rs. 9516.40 lacs.

For the Financial Year 2017-18, Earnings Before Interest, Depreciation, Tax and Amortization (EBIDTA) was Rs.

(250.09) lacs.

For the year FY 2017-18, Depreciation was Rs. 789.34 lacs, Interest and Finance cost were Rs. 1020.24lacs and

Profit before Tax (PBT) was Rs. (2059.68)lacs. And Profit After tax (PAT) was Rs. (1781.31) lacs.

Basic & diluted Earnings per Share (EPS) was Rs. (1.11).

As on March 31, 2018 the Total Equity of the Company was Rs. 5811.65 lacs.

SWOT ANALYSIS OF THE COMPANY: Strength:

Management depth and ability to manage client relationships.

R & D capabilities to develop efficient and cost effective process at short notice having a State of the Art dedicated

R & D Center.

Multi-purpose and multi-production facilities having Quality Certifications.

Enhanced presence in the market through clientele basis.

Threats:

The Company faces stiff competition from medium and larger well-established players. The Company is smaller in size compared to the market leaders. However with capital expenditure in the project of the company it intends to make it good and face competition more confidently.

RISKS AND CONCERNS:

Your company is mainly focusing on R & D and manpower and the intelligence. Apart from the risk on account of interest rate and regulatory changes, business of the company are exposed to certain operating business risks, which is mitigated by regular monitoring and corrective actions.

INDUSTRIAL RELATIONS & HUMAN RESOURCE MANAGEMENT:

The Company believes that human resource is the most important assets of the organization. It is not shown in the corporate balance sheet, but influences appreciably the growth, progress, profits and the shareholders values. During the year your company continued its efforts aimed at improving the HR policies and processes to enhance its performance. The vision and mission of the company is to create culture and value system and behavioral skills to insure achievement of its short and long term objectives.

The Company as at year end has 140 employees on its role and continues to attract talent both from within and outside India to further its business interests. Industrial relations continue to be cordial.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY:

Internal Financial Control that encompass the policies, processes and monitoring systems for assessing and mitigating operational, financial and compliance risks and control over related party transactions, substantially exist. Your Company has appropriate internal control system for business processes, with regards to efficiency of operations, financial reporting, compliance with applicable laws and regulations. In the Company, the Board of Directors is responsible for ensuring the adequacy and effective monitoring of internal financial controls. The Internal Audit Program is designed in consultation with the Statutory Auditors to ensure accuracy and reliability of accounting data and is monitored by the Audit Committee. Audit observations and recommendations are reported to the Audit Committee, which monitors the implementation of the said recommendations. The Companys internal audit team also carries out extensive audits throughout the year, across all functional areas.

CAUTIONARY STATEMENT:

Statement made in the Management Discussion & 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 markets in which the company operates changes in the government regulations, tax laws & other statutes & other incidental factors.