Incredible Industries Ltd Management Discussions

A. ECONOMIC OVERVIEW: i. INDIAN ECONOMY

Steel is one of the worlds most innovative and essential materials. Steel is infinitely recyclable and exceptionally strong and offers an array of sustainable benefits. Since it is produced in every region of the world, steel generates jobs and economic growth. 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.

India continues to be one of the fastest growing major economies. The Indian economy is estimated to have recorded a solid growth of 6.5% in FY 2024-25, on top of a strong 9.2% growth in the previous year. Private consumption expenditure accelerated during the year, whereas gross fixed capital formation decelerated.

Steel is a product of large and technologically complex industry having strong forward and backward linkages in terms of material flows and income generation. It is also one of the most important products of the modern world and of strategic importance to any industrial nation. From construction, industrial machinery to consumer products, steel finds its way into a wide variety of applications. It is also an industry with diverse technologies based on the nature and extent of raw materials used.

India is the worlds second-largest producer of crude steel. The growth in the Indian steel sector has been driven by the domestic availability of raw materials such as iron ore and cost-effective labour. Consequently, the steel sector has been a major contributor to Indias manufacturing output. In the past 10?€“12 years, Indias steel sector has expanded significantly. Production has increased by 75% since 2008, while domestic steel demand has increased by almost 80%. The capacity for producing steel has grown concurrently, and the rise has been largely organic. Indian steel industry is modern, with state-of-the-art steel mills. It has always strived for continuous modernisation of older plants and upgradation to higher energy efficiency levels. Indias domestic steel demand is estimated to grow by 9-10% in FY25 as per ICRA. In FY24, the production of crude steel and finished steel stood at 143.6 MT and 138.5 MT, respectively. In FY25 (until December 2024), the production of crude steel and finished steel stood at 110.99 MT and 106.86 MT respectively. In FY24, the consumption of finished steel stood at 135.90 MT. In FY24, the exports and imports of finished steel stood at 7.49 MT and 8.32 MT, respectively. The annual production of steel is anticipated to exceed 300 million tonnes by 2030?€“2031. By 2030?€“31, crude steel production is projected to reach 255 million tonnes at 90% capacity utilisation achieving 230 million tonnes of finished steel production, assuming a 10% yield loss or a 90% conversion ratio for the conversion of raw steel to finished steel. With net exports of 24 million tonnes, consumption is expected to reach 206 million tonnes by the years 2030?€“2031. As a result, it is anticipated that per-person steel consumption will grow to 160 kg.

ii. GLOBAL ECONOMY

World finished steel demand and crude steel production declined marginally by 2% and 1% respectively in 2024. In the last five years, global steel demand has moved sideways. However, these global numbers hide wide variations across different markets.

China, which accounts for nearly half of the worlds steel industry, recorded a 5% decline in consumption in 2024, mainly due to the structural challenges that its real estate industry is witnessing. India has been a key driver of global steel demand growth in recent years.

World Steel Associations estimates suggest that Chinas steel demand could marginally decline in 2025 at a lower pace than last year. While the downturn in Chinas housing market is likely to continue, the pace of decline is likely to be contained amid various targeted measures by the Chinese government. Chinas fiscal and monetary policy stance is likely to be supportive, which would support demand from other sectors, particularly infrastructure. Robust growth in steel demand is expected in India, Turkey and MENA in 2025, while the trade-related concerns could weigh on the steel demand outlook in ASEAN and Latin America. The outlook for steel demand in Japan and Korea is clouded by constraints on domestic demand, including high costs, low affordability and labour scarcity, besides the weak external environment. In the US and Europe, easing of financial conditions and a weak base could support bottoming out of demand, though the trade-related developments need to be watched. At a global level, steel demand is likely to be broadly flat to slightly improving, depending on the ongoing progress of trade negotiations respectively, in 2024. China produced 86.6 Mt in May 2025, down 6.9% on May 2024. India produced 13.5 Mt, up 9.7%. Japan produced 6.8 Mt, down 4.7%. The United States produced 7.0 Mt, up 1.7%. Russia is estimated to have produced 5.8 Mt, down 6.9%. South Korea produced 5.1 Mt, down 1.7%. Türkiye produced 3.1 Mt, down 2.8%. Germany produced 3.0 Mt, down 6.4%. Iran is estimated to have produced 3.4 Mt, up 4.5%. Brazil produced 2.7 Mt, up 5.0%.

Africa produced 1.9 Mt in May 2025, up 5.5% on May 2024. Asia and Oceania produced 116.6 Mt, down 4.7%. The EU (27) produced 11.4 Mt, down 3.1%. Europe, Other produced 3.6 Mt, down 8.8%. The Middle East produced 5.4 Mt, up 5.3%. North America produced 9.5 Mt, up 3.4%. Russia & other CIS + Ukraine produced 7.0 Mt, down 8.1%. South America produced 3.4 Mt, up 4.2%.

For the future, structural changes in a post-pandemic world will bring about shifts in steel demand shape. The steel industry will see exciting opportunities from rapid developments through digitisation and automation, infrastructure initiatives, reorganisation of urban centres, and energy transformation. All at the same time as the industry is responding to the need to produce low-carbon steel. (Source: World Steel Association)

B. INDUSTRY STRUCTURE AND DEVELOPMENTS:

Iron and steel sector is the backbone of an economy. It is one of the primary vehicles of economic development of a country. The per capita production and consumption of steel is the index of the depth of a countrys economic infrastructure. Increase in the use of iron and steel leads to infrastructural development and rapid industrialization of the country. The Indian steel industry has entered into a new development stage, post de- regulation, riding high on the resurgent economy and rising demand for steel. Rapid rise in production has resulted in India becoming the 2nd largest producer of crude steel during 2018 and 2019, from its 3rd largest status in 2017. In a de-regulated, liberalized economic/market scenario like India, 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. The Government has also announced a policy for providing preference to domestically manufactured Iron & Steel products in Government procurement.

Some of the major investments in the Indian steel industry are as follows:

The production capacity of SAIL is expected to increase from 13 MTPA to 50 MTPA in 2025 with total investment of US$ 24.88 billion.

In a virtual roundtable conference organised by the Indian Chamber of Commerce, Mr. Shin Bongkil, the South Korean Ambassador to India, announced that POSCO, the South Korean steel giant, is planning to set up an integrated steel plant in Odisha at an investment of US$ 12 billion, which would make it the countrys biggest FDI project.

67 applications from 30 companies have been selected under the Production Linked Incentive (PLI) Scheme for Specialty Steel. This will attract committed investment of Rs. 42,500 crore (US$ 5.19 billion) with a downstream capacity addition of 26 million tonnes and employment generation potential of 70,000.

?€? Tata Steel announced a CAPEX of Rs. 12,000 crore (US$ 1.50 billion) and recently signed an MoU with Punjab Government to set up a steel scrap based electric arc furnace steel plant.

Jindal Steel & Power Ltd. announced plans to invest US$ 2.4 billion to increase capacity over the next six years to meet the rising demand from customers.

AMNS India is planning to spend US$ 7.4 billion on expanding capacity and increasing its value-added investments in both its upstream and downstream capacities and enhancing its iron ore capabilities.

In May 2023, JSW Steel and JFE Steel, signed an agreement to set up a JV company to manufacture the entire range of cold rolled grain-oriented electrical steel (CRGO) products at Vijaynagar in Karnataka.

In April 2023, AMNS India, a joint venture between Arcelor Mittal and Nippon Steel, received approval from Indias regulatory body (NCLT) to acquire Indian Steel Corporation.

Tata Steel in April 2023, informed that it has signed an agreement with A&B Global Mining to harness new business development opportunities and deliver mine technical services. The steel major will closely work with ABGM India which will interface with their South African entity to explore business opportunities in India and abroad besides utilising each others technical and strategic strengths to deliver projects across the mining and metals, including the steel value chain.

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

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

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

AMNS India is planning to spend US$ 7.4 billion on expanding capacity and increasing its value-added investments in both its upstream and downstream capacities and enhancing its iron ore capabilities.

Indias growth outlook for FY 2025-26 is likely to be supported by resilient domestic drivers, even though the overhang of global headwinds remains. Consumption will be buoyed by personal income tax cuts, easing food inflation, positive monsoon outlook and the RBIs rate cuts. The Union Budget announced cuts in personal income tax amounting to 1 trillion. The Indian Meteorological Department (IMD) has forecast monsoon rainfall to be above normal in 2025, which bodes well for continued rural recovery. Consumer confidence has shown an uptrend, and the RBIs policy easing and liquidity support will aid consumption demand.

C. GOVERNMENT INITIATIVES:

The Government of India is aiming to scale up steel production in the country to 300 million tonnes (Mt) by 2030-31. Some of the recent Government initiatives in this sector are as follows:

In October 2021, the government announced guidelines for the approved specialty steel production-linked incentive (PLI) scheme.

In January, 2021, the Ministry of Steel, Government of India, signed a memorandum of Cooperation with the Ministry of Economy, Tarde and Industry, Government of Japan, to boost the steel sector through joint activities under the framework of India-Japan Steel Dialogue.

The Union Cabinet, Government of India approved the National Steel Policy (NSP) 2017, as it intends to create a globally competitive steel industry in India. NSP 2017 envisaged 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).

Under the Union Budget 2023-24, the government allocated Rs. 70.15 crore (US$ 8.6 million) to the Ministry of Steel.

In addition, an investment of Rs. 75,000 crore (US$ 9.15 billion) (including Rs. 15,000 crore (US$ 1.83 billion) from private sources) has been allocated for 100 critical transport infrastructure projects for last and first mile connectivity for various sectors such as ports, coal, and steel.

The Government of India raised import duty on most steel items twice, each time by 2.5% and imposed measures including anti-dumping and safeguard duties on iron and steel items.

The Government has implemented various measures to promote self-reliance in the steel industry.

The Union Ministry of Steel launched PLI Scheme 1.1 on January 6, 2025, with a Rs. 6,322 crore (US$ 733.40 million) outlay to boost specialty steel production and attract investments. Covering five key product categories, the scheme eases norms to reduce imports, enhance domestic manufacturing, and improve energy efficiency, with applications open until January 2025.

(Source: India Brand Equity Foundation)

The trend of rising public capex on infrastructure is expected to continue. The central government has budgeted a capex of Rs. 11.2 trillion in FY 2025-26. Long-term interest-free loans for capex purposes to state governments would boost their capex spending. Modernization of railways and development of high-speed highway corridor projects are thrust areas in the development of transport infrastructure.

Residential real estate launches are expected to accelerate in FY 2025-26, with reduced inventory of units. Commercial real estate is witnessing strong traction, helped by the rapid growth of Global Capability Centres and Data Centres.

The public housing programme has received a renewed thrust with the extension of the PM Aawas Yojana (PMAY) with a target of building 2 crore additional houses over five years. Guidelines under the extended phase of PMAY were finalized last year, and the schemes implementation is expected to gather momentum in FY 2025-26.

Your Company is engaged in the production of TMT bars and Wire Rods which are mainly used in the construction industry. As such, the outlook for your Company is closely linked to that of the steel, infrastructure and real estate industry and the demand for TMT and Wire Rods in particular is influenced by the price & availability of raw materials.

D. OPPORTUNITIES AND THREATS:

The outlook for the global economy were mostly positive with growth picking up in the US, India and Southeast Asia, while several emerging markets are experiencing a deceleration in growth. Further, countries and businesses are becoming increasingly interdependent through trade, investment and financial systems across the world. The risks and opportunities in the steel business are getting larger in scale and impact, with their sources becoming more diverse and global. The businesses that ride the next wave of growth will be those that understand the trends and refine their strategies, business models and portfolios according to a truly global mind-set. The steel producers must find the right balance between globalization and customization.

The steel industry is faced with dwindling investments, financial market turbulence and geopolitical conflicts in many developing regions. The industrys low-growth outlook will persist until other developing regions of sufficient size and strength can support another major growth cycle. India has always been seen as a potential for significant steel market expansion. There have been various forecasts at different points, raising expectation of the steel industry and investors about growth prospects of the industry.

India has enormous scope and untapped potential to increase steel consumption in almost all sectors, especially in automobiles, engineering industries and infrastructure development. The consumption of steel per capita in India in last five years is much lower compared to the global average leaving significant headroom for growth. Growing investments for infrastructure, rapid growth in the industrial sector, increase in urban population and strengthening of rural steel market can raise the countrys per capita steel consumption considerably. Indias GDP growth is likely to move higher in the coming years due to compulsive focus by policy makers for development of infrastructures & other sectors.

E. SEGMENT-WISE OR PRODUCT-WISE PERFORMANCE:

The company has identified iron & steel products as its sole operating segment and the same has been treated as primary segment. The Company is mainly involved in the production of steel related rolled products only.

F. FUTURE OUTLOOK:

The steel industry has emerged as a major focus area given the dependence of a diverse range of sectors on its output as India works to become a manufacturing powerhouse through policy initiatives like Make in India. With the industry accounting for about 2% of the nations GDP, India ranks as the worlds second-largest producer of steel and is poised to overtake China as the worlds second-largest consumer of steel. Both the industry and the nations export manufacturing capacity have the potential to help India regain its favourable steel trade balance.

The National Steel Policy, 2017 envisage 300 million tonnes of production capacity by 2030-31. The per capita consumption of steel has increased from 57.6 kgs to 74.1 kgs during the last five years. The government has a fixed objective of increasing rural consumption of steel from the current 19.6 kg/per capita to 38 kg/per capita by 2030-31.So, there is much potential in Indian steel industry in terms of home consumption itself. The New Industrial policy opened up the Indian iron and steel industry for private investment by (a) removing it from the list of industries reserved for public sector and (b) exempting it from compulsory licensing. Imports of foreign technology as well as foreign direct investment are now freely permitted up to certain limits under an automatic route. Ministry of Steel plays the role of a facilitator, providing broad directions and assistance to new and existing steel plants, in the liberalized scenario. The liberalization of industrial policy and other initiatives taken by the Government have given a definite impetus for entry, participation and growth of the private sector in the steel industry. While the existing units are being modernized/ expanded, a large number of new steel plants have also come up in different parts of the country based on modern, cost effective, state of-the-art technologies. In the last few years, the rapid and stable growth of the demand side has also prompted domestic entrepreneurs to set up fresh greenfield projects in different states of the country.

As per Indian Steel Association (ISA), steel demand will grow in coming years. Huge scope for growth is offered by Indias comparatively due to low per capita steel consumption and the expected rise in consumption due to increased infrastructure construction and the thriving automobile and railways sectors.

G. RISKS AND CONCERNS:

The Company follows a well-defined and exhaustive risk management process, which is integrated with its operations. This enables the company to identify, categorize and prioritize operational, financial and strategic business risks. Across the organization, there are teams responsible for these processes who report to the management. The risks are prudently evaluated and necessary preventive steps or actions are taken to mitigate these probable risks.

In the context of the steel operations, although our country has rich and abundant resources of the key inputs for steel making, namely iron ore and coal, the mining sector in the country has witnessed severe obstacles in the past few years on account of regulatory and environmental issues, which has severely affected the development and opening up of new mines. The biggest challenges before any steel company remain to be the tie up of interrupted supplies of coal and iron ore on one hand and the fear of glut of cheap imports from countries like China, Korea and Japan on the other.

Risk Management comprises of three key components as below:

i) Risk Identification

ii) Risk assessment and its mitigation

iii) Risk monitoring and its assurance

Your Company has identified the following aspects as the major risks for its operations:

i. Industry Risk

Demand is dependent on general economic conditions. A downturn can affect business and earnings. The low per capita steel consumption in India coupled with a large population base provides significant growth opportunities to the iron and steel industry. The urgent need towards infrastructure creation and surging consumption growth are visible opportunities that will drive iron and steel demand.

ii. Raw Material Risk Inability of the Company to procure right quality and quantity of raw material at right price could affect business sustainability. Further, the requirements can partly be mitigated by supply from the related companie(s).

iii. Regulatory Risk The Companys business could be affected by potential regulatory and judicial actions.

iv. Operational Risk The Companys business is prone to high proportion of fixed costs and volatility in the prices of raw materials and energy. Mismatches between trends in prices of raw materials and steel, as well as limitations on or disruptions in the supply of raw materials, could adversely affect its profitability. Further, the industry is highly cyclical and a volatility in steel prices may adversely impact its financial condition. The Companys operations and financial condition could be adversely affected if it is unable to successfully implement its growth strategies. However the Company aims to mitigate these risks through development of well-structured processes for effective project planning & management.

v. Health, Safety and Environment Risk Your Company is firmly committed to conservation of natural resources; reduction of emissions and discharges to the environment and preservation of bio-diversity in all its operations. The manufacture of steel involves steps that are potentially hazardous if not executed with due care. The Company maintains the highest safety standards within its operating units and is an ISO certified (ISO 9001:2015, 14001:2015 & 45001:2018) organization. Further, there are team of professionals who conducts regular training programs to implement the concept of maintain safe operations among the employees and to educate the team on safety norms and procedures to be followed in an unfortunate situation. This is progressively taking the Company towards achieving the target of Zero Accidents. Company continues to adopt best safety practices which have resulted into a reduced accident and severity rate.

H. KEY CHALLENGES:

The constant fluctuations in price of raw materials and weak steel prices have put significant pressure on steel margins. However, steel manufacturers have been working hard to become competitive in other ways. They have been taking several steps to gain more control of their raw material pricing, while cost-cutting has led to production cuts in some regions. Several steel manufacturers are also investing a considerable amount of money into R&D for differentiating their products from other players in the market.

I. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY:

The Company has a well-established internal control framework, which is designed to continuously assess the adequacy, effectiveness and efficiency of financial and operational controls. The management is committed to ensure an effective internal control environment, commensurate with the size and complexity of the business, which provides an assurance on compliance with internal policies, applicable laws, regulations and protection of resources and assets. The Audit Committee of the Board oversees the adequacy of the internal control environment through regular reviews of the audit findings and monitoring implementations of internal audit recommendations through the compliance reports submitted to them. The Statutory Auditors of your Company have opined in their report that your Company has adequate internal controls over financial reporting.

J. DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE:

The financial year 2024-25 is overall a good year for Indian steel makers in spite of several challenges. With the increase in government investments in infrastructure as well as demand from other structural sectors, domestic steel prices have been fetching good prices. Thus, the overall profitability of the Company is increased. The overall state of affairs of the Company keeping in mind the present market scenario of iron and steel industry is satisfactory.

K. HUMAN RESOURCES/INDUSTRIAL RELATIONS:

As the Company is moving towards consumer centricity, it is vital to keep the people motivated and constantly aligned to the business vision. The Companys human resource philosophy mainly focussed on empowering employees with essential skills and endowed them with aspirations. Your Company considers its employees as the most valuable resource and ensures the strategic alignment of human resource practices to business priorities and objectives. Your Company strives to provide a conducive and competitive work environment for all its employees to excel and create new benchmarks of work culture, employee engagement, productivity, effectiveness, efficiency and customer delight. Human Resources Department ("HRD") works continuously for maintaining healthy working relationship with the workers and other staff members.

The underlying principle is that workers and staff at all levels are equally instrumental for attaining the Companys goals. Training programmes are regularly conducted to update their skills and apprise them of latest techniques. Senior Management is easily accessible for counselling and redressal of grievances, if any. There are 195 number of permanent employees employed in your Company as on 31st March, 2025. Employees are your Companys most valuable asset and your Companys processes are designed to empower employees and support creative approaches in order to create enduring value. The HR Department strives to maintain and promote harmony and co-ordination amongst workers, staff and members of the senior management.

L. DETAILS OF SIGNIFICANT CHANGES (I.E. CHANGE OF 25% OR MORE AS COMPARED TO IMEEDIATELY PREVIOUS FINANCIAL YEAR) IN KEY FINANCIAL RATIOS, ALONG WITH DETAILED EXPLANATION:

S. No. Key Financial Ratios	2024-25	2023-24	Change (%)	Explanation
1 Debtors Turnover (Number of Times)	17.51	22.96	(23.73)	NA
2 Inventory Turnover (Number of Times)	13.69	15.38	(10.96)	NA
3 Interest Coverage Ratio (Number of Times)	4.80	2.65	80.96	Improved due to improvement in EBIT and reduction in interest cost on ac- count of reduction of debts.
4 Current Ratio (Number of Times)	3.30	2.58	27.88	Improved due to reduction in current liabilities in comparison to last year.
5 Debt Equity Ratio (Number of Times)	0.13	0.27	(50.28)	Improved due to repayment of debts and increase in net worth due to ploughing back of profit.
6 Operating Profit Margin (%)	2.11	1.67	26.06	Improved on account of better realiza- tion.
7 Net Profit Margin (%)	1.65	0.73	126.22	Improved on account of increase in over- all profitability of the Company.
8 Return on Net Worth	0.09	0.05	82.02	Improved on account of increase in over- all profitability of the Company.

M. ENVIRONMENT & SAFETY:

Your Company has always believed in an integrated approach for embedding environment in sustainable business goals & has continually focussed on an effective Environmental Management System. The Company has integrated the environmental concerns and decision making towards achieving its goals. It has taken effective steps to spread environmental awareness among its employees and has always encouraged them to work in an environmentally responsible manner to fulfil the environmental commitment of the Company towards its clients, customers & the public. Company has insisted on consistent improvement in the environmental performance by minimizing the social impact and damage to environment by periodically reviewing the environmental policy of the Company in light of its current and planned future activities. Some of the key areas towards fulfilment of its environmental responsibility are management of natural resources, energy management, carbon emission reduction, conservation of water resources & waste management. The Company is committed to provide a safe and healthy workplace to its employees by operating in compliance with all relevant environmental legislation and by adopting the environmental best practices.

N. CAUTIONARY STATEMENT:

Statement in this "Management Discussion and Analysis" describing the Companys objectives, projections, estimates, expectations or predictions may be "forward looking statements" within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied in the Report. Important factors that could make a difference to the Companys operations include global and Indian demand and supply conditions, finished goods prices, input materials availability and prices, cyclical demand and pricing in the Companys principal markets, changes in Government regulations, tax regimes, economic developments within India and the countries within which the Company conducts business and other factors such as litigation and labour negotiations. The Company assumes no responsibility to publicly amend, modify or revise any forward looking statements, on the basis of any subsequent development, information or events or otherwise.

O. DISCLOSURE OF ACCOUNTING TREATMENT:

Indian Accounting Standard (abbreviated as Ind-AS) is the Accounting Standards adopted by your Company as per the requirements of the Companies Act, 2013 and rules made thereunder and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.