ISMT Ltd Management Discussions.

Company Performance (F.Y. 2018-19):

Total Revenue : Rs. 1832.04 Crore
EBDITA : Rs. 119.87 Crore
Cash Profit/ (Loss) : Rs. (154.35) Crore
Profit/ (Loss) after Tax : Rs. (228.78) Crore

Sales of Domestic and Export seamless tubes and pipes increased by 31% and 51% respectively in the current year over previous year.

Growth in Domestic demand and lower imports consequent on levy of Anti Dumping Duty on imports of the seamless tubes and pipes from China resulted in Domestic seamless tube sales volumes increase over previous year.

Rs. in Crore
Particulars 2018-19 2017-18 Change
Net Sales Domestic 1795 1437 25%
- Tube 1122 858 31%
- Steel 478 450 6%
Tube Exports 195 129 51%


Seamless Tubes Industry

Seamless Tube is a capital intensive industry and deploys high end technology. While the industry competes with other types of pipes and tubes in certain applications, it clearly is a preferred choice when it comes to better surface finish, machine-ability, strength to weight ratio and longer life. Seamless Tubes find applications in Oil and Gas exploration industry, Power Sector, Automotive, Construction Equipment, Bearing, Material handling equipment, Structural Components and host of other Mechanical applications. The Seamless Tube consumption is largely dependent on economic developments and with expected long term economic growth, the Company is assured of a secular market in future.

Steel Industry

ISMT has integrated Steel Plant which uses the Electric arc furnace technology to produce Steel.

ISMT is predominantly engaged in the manufacturing of specialty alloy and bearing Steel. The end user segments are largely Bearing, Automotive, Engineering and Forging Customers apart from some customers requiring steel for specialized application. The fortunes of the specialty and alloy steel products is closely linked to automotive and auto component industry.

Captive Power Plant

The operations of the Captive Power Plant remained suspended during the year on account of non-availability of energy banking facility from Maharashtra State Electricity Distribution Company Limited (MSEDCL).


ISMT is a diversified value added Seamless Tube supplier catering to following major industries:

a. Oil and gas : As casings & Tubings during oil/ gas exploration.
b. Power : In Boilers & Heat Exchangers
c. Construction Equipment : In mining and earth moving equipment
d. Automotive & General Engineering : Applications in two wheeler to four wheeler as front forks, axel, Steeling columns, Air bag system etc.
e. Bearings : Inner and outer races of Bearings
f. Others : In greenfield projects for fluid transportation, Construction of Stadiums and airports, gas cylinders, crane booms etc.

Sales value in absolute terms in all the Industry segments increased over previous year.



The imposition of Anti Dumping Duty on Chinese imports of seamless tubes and pipes for a period of five years continues to be an opportunity especially with the growing Indian economy. An opportunity in increase in export sales can also be expected due to future increase in demand for seamless pipes from developing countries.


There is a continuous threat of imposition of duties from developed economies. Also strict ecological regulations may lead to technological changes.


Your Company is engaged in manufacturing Seamless Tubes and Engineering Steels. Seamless Tube accounted for 73% of ISMTs total external sales value while Steel accounted for the balance 27%. Captive consumption of steel increased to 53% as compared to that of 43% for previous year.

Total sales quantity of both seamless tube and steel put together showed an increasing trend. The same for the year 2018-19 was 318,121 MT as against 280,959 MT for 2017-18 and 214,975 MT for 2016-17.


Levy of Final Anti Dumping Duty on import of seamless tube into India from China coupled with ‘Make in India program of the Government of India is likely to lead to increase in volume of the Companys product in domestic market.


Your Company regularly evaluates and reviews potential risks on account of various factors such as government policies, natural/ man-made disasters, and political risks. Apart from above, the Company is exposed to changes in foreign exchange rates and commodity prices. Any change in laws & regulations, whether domestically or internationally could affect the business and financial condition of your Company.

The long term success of a Company largely depends on effectively identifying and analyzing the risks involved. The Company has adequate risk management system towards identification and evaluation of potential risks and the same are evaluated and reviewed regularly by the management so as to minimize/ eliminate the adverse impact if any.


The Company has adequate and effective internal control systems and processes in place, which are designed to provide reasonable assurance with regards to recording and providing reliable financial and operational information, safeguarding the assets, statutory compliance, executing transactions with proper requisite approvals and ensuring compliance with applicable laws and regulations. The Audit Committee of Directors on a periodic basis reviews the effectiveness and adequacy of the internal control systems and processes and suggests improvements if any. In addition to the Chief Internal Auditor, the Company has also appointed an external Chartered Accountants firm as internal auditors to conduct internal audit of the function and activities of the Company.


Some of the key financial parameters are as under:

Finance Cost

The Finance cost for the year was almost same as that for previous year at Rs. 276 Crore and stood at 15% of Net Revenue.

During the year imported raw material consumption increased to Rs. 328 Crore from Rs. 235 Crore in the previous year. The increase is in line with increase in sales turnover.

Exports are expected to continue its growth trend on account of increase in demand from developing countries. Going forward this should lead to growing net Foreign Exchange inflows. The Companys forex exposure is managed both through a natural hedge and by contracting appropriate treasury products, with a view to balancing risks while optimizing borrowing costs. Appropriate hedging tools are used under the board approved risk management policy framework. The forex risk is reviewed periodically and managed in line with the objectives laid in the policy.

Foreign Currency Term Loans accounted for over 27% of the Companys outstanding term debt as on March 31, 2019. The same accounted for 26% of total outstanding term debt as on March 31, 2018.

The Companys major exports are to North America and Europe and the imports are mainly from USA, Europe, Gulf and South Africa.

Working Capital

While the inventory level in absolute term for the current year is same as that for previous year, the debtors level increased by Rs. 65 Crore over previous year. The increase in debtors was on account of increase in sales turnover. In term of holding period calculated on yearly sales, the inventory level has reduced while debtor level was almost same as that for previous year.

Rs. in Crore
Particulars 2018-19 2017-18
Inventory 341 334
Stock Turnover (times) 5.27 4.31
Debtors 295 225
Debtors Turnover (times) 6.09 6.38
Creditors 100 102
Creditors Turnover (times) 12.48 9.90

The Company is making all possible efforts to keep the inventory and debtors level at the minimum possible in the current stressed financial scenario.

Energy Cost

Energy Cost accounted for 16% of the Companys net revenues at Rs. 289 crore. In the current financial year, operations of the Captive Power Plant remained suspended.

Particulars 2018-19 2017-18 Change
Power consumption
(KWH/ Ton of Production)
- Steel Division 884 839 (5%)
- Tube Division 558 546 (2%)
Avg. Electricity Rate per Unit 8.44 7.44 (13%)
(Rs. / KWH)

There was a increase in electricity rate per unit by 13% as compared to previous year on account of increase in power tariff by state electricity board.

The power consumption per unit of tube production increased marginally by 2% and that of steel division by 5% as compared to previous year.

Your Company is consistently focused on achieving higher energy efficiency across value chain and is simultaneously committed towards utilising environment friendly means in the process.

Particulars 2018-19 2017-18 Change
Furnace oil Consumption (K Ltrs/ Ton of Production)
- Steel Division 32 45 29%
- Tube Division 72 70 (3%)
Avg. Furnace Oil rate Rs. per Litre 36.00 27.19 (32%)

Increase in furnace oil rate per litre is driven by international oil prices which is beyond the scope of the Company.

Increase in melting shop production led to reduction in furnace oil consumption per Metric Ton of production of steel division over previous year. Furnace oil consumption of tube division increased marginally by 3%.

Significant scope exists for reduction in power and Fuel consumption per unit of production once the capacity utilization at manufacturing plants improve.


Some of the key financial ratios for current year as compared to previous year are as under:

Particulars 2018-19 2017-18 Change
Debtors Turnover 6.09 6.38 (5%)
Inventory Turnover 5.27 4.31 22%
Interest Coverage Ratio 0.17 0.12 39%
Current Ratio 0.25 0.26 (3%)
Debt Equity Ratio -ve -ve N.A.
Operating Profit Margin 6.7% 6.0% 11%
Net Profit Margin -ve -ve N.A.
Return on Net Worth -ve -ve N.A.

Owing to the increase in sales turnover and resultant increase in Earnings before Interest and Taxes (EBIT), the interest coverage ratio has almost doubled as compared to previous year. While EBIT increased by 39%, Finance Cost remained at almost same level as that of previous year.


The Industrial relations continued to remain peaceful throughout the year. The personnel expenses increased by 5% during the year over previous year on account of yearly increments. The Company continues to believe that the culture of sharing knowledge within the employees and involving them to be part of the solution, enables the Company curtail costs and excel. In the current economic scenario, the focus was on aligning HR to support cost control and conserve cash, while ensuring organizational confidence and employee motivation, to enable the Company sail through the current challenges and prepare itself for the future opportunities.


As on March 31, 2019

Particulars Total
Managers 254
Officers & Staff 746
Workmen 1141
Total 2141


The statements in the Management Discussion and Analysis describing the Companys objectives, projections, estimates and 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. Important factors that could make a difference to the Companys operations include economic conditions affecting demand / supply and price conditions, in domestic and overseas markets in which the Company operates, changes in the government regulations, tax laws and other statutes and other incidental factors.