Jindal Stainless (Hisar) Ltd Management Discussions.

Economic overview & outlook Global economy

The global economy grew at an estimated 3.7% in 2018, despite weaker performance in some economies, notably Europe and Asia; according to the World Economic Outlook report by the International Monetary Fund (IMF). Emerging market and developing economies were tested by difficult external conditions in the second half of 2018 amid trade tensions, rising US interest rates, dollar appreciation, capital outflows, and volatile oil prices.

Global growth was revised downward because of negative effects of tariff increases enacted in the US and China, and weak momentum in Europe in the second half of 2018. The global economy is now projected to grow at 3.5% in 2019 and 3.6% in 2020, respectively 0.2% and 0.1% point below projections from October 2018.

Indian economy

Financial year 2018-19 was a year of recovery from impact of demonetization and the initial disruption caused by the Goods and Service Tax implementation. Apart from GST, several other important reforms like the Insolvency and Bankruptcy Code, liberalization of FDI norms, reforms in Ease of Doing Business and Labour have been successfully implemented in the last few years. These reforms have gone a long way in improving investments, overall business environment and growth in the country.

The overall GDP growth seen by the Indian economy during the financial year that ended on March 31, 2019, stood at 6.8%, according to the Government data.

The International Monetary Fund (IMF) remains bullish on Indias growth potential and has forecasted growth at 7.3% in FY20 and 7.5% in FY21. This growth is largely expected to be lifted by strong private consumption as well as fading transitory effects of the currency exchange initiative and implementation of the GST.

Global Stainless Steel Scenario

The global stainless steel consumption has been on an upward trajectory in the past few years, primarily driven by a strong spurt in demand from the Asia-Pacific region, specifically China and India. According to International Stainless Steel Forum (ISSF), the total Stainless steel melt shop production increased from 48.1 MT million tonnes in CY2017 to 50.7 MT in CY2018, registering a healthy CAGR of 5.84% over the period. In the past two decades, stainless steel consumption has seen the strongest CAGR as against other major metals such as zinc, aluminium and carbon steel.

According to CRISIL, the global stainless steel consumption in CY 2018 grew over 4.6% year-on-year on the back of strong growth in China which was supported by end-industry growth, construction activity and higher usage in vehicles. The year also witnessed an increase in stainless steel consumption in other economies such as Russia, South Korea, etc. It expects the Stainless steel demand is expected to grow at a healthy pace of 4 5-5.5% over the next five years. The developing countries are expected to continue leading the stainless steel demand; and anticipated to occupy more than 70% of market share by 2022.

Domestic Stainless Steel Scenario

India continues to be the second largest producer and second largest consumer of stainless steel in the world. As per industry estimates, Indias stainless steel flat demand stood at 2.6 MT in FY19, registering a robust growth of 8%. In spite of being the second-largest consumer of stainless steel in the world, Indias per capita consumption stands at 2.5 kg, which is considerably lower compared to global average of 5.7 kg and 14.1 kg in China. Hence, Indias stainless steel sector remains highly under-penetrated and offers significant headroom for growth.

India continues to be the second largest consumer with consistent growth over the years given its low per capita consumption (in kg)

CRISIL Research forecasts stainless steel demand to grow at 8-9% CAGR over the next five years, on the back of the strong growth expected in the Architecture, Building Construction (ABC) and Automobiles, Railway and Transport (ART) segments including white goods and process industries. With emerging trends in building and construction, increased penetration of stainless steel in railways and strong growth in automotive production will provide an impetus for overall consumption of stainless steel.

In India, the consumption of stainless steel has undergone a major transformation. Strong demand from end-user segments has led to higher consumption of stainless steel. Initially, stainless steel was primarily used for kitchenware with some exception for industrial goods. Over the years, there has been increased usage in various applications in automobile, railways, process industries, and building and construction.

Automotive, Railway & Transport (ART) sector encompasses automobiles, railways, shipbuilding and aerospace. It is estimated that the ART segment accounted for 10-12% of Indias total demand for stainless steel in 2018-19. With the changing consumption pattern, especially in the automotive and railways, the demand for stainless steel is expected to witness a significant increase in this segment. Indian Railways is increasing the use of stainless steel in the manufacture of coaches and wagons in order to ensure passenger safety and improve the reliability of the coach. In the recent Union Budget 2018-19, multiple announcements with regards to improvement of the railway infrastructure have been made. One of key focus area has been manufacturing of semi-high speed ‘Train 18 which has a stainless steel body. Overall these announcements are expected to drive the demand for stainless steel.

The Automobiles segment which is currently facing some level of slowdown; the demand for Cars and UVs is only expected to accelerate to 5-7% CAGR through 2022-23 according to CRISIL Research. Additionally, on the back of healthy rural sales, expansion in the distribution network in semi-urban and rural areas, the two wheeler segment is expected to grow healthy at 7.5-85% CAGR till 2022-23. CRISIL Research projects stainless steel demand from the automobile, railway and transport (ART) segment to grow at 8-9% CAGR over the next decade. Growth is expected to be largely driven by the automotive segment and increased stainless steel penetration in railway rolling stock (increased LHB coach production).

Architecture, Building & Construction (ABC) segment:

It is estimated that the segment of Architecture, Building & Construction (ABC) accounted for 8-10% of the total demand for stainless steel in the country. This segment assumes importance due to its evolving and fast-growing application areas. From 2018-19 to 2022-23, CRISIL Research expects this segment to register a growth of 10-11% CAGR. MRTS sector, commercial and retail complexes are expected to drive growth to a large extent. From 2022-23 to 2027-28, with continued investment, demand from the ABC segment is expected to grow by 9-10% CAGR.

Process Industry:

In terms of total demand of Stainless steel in India, Process industry is also one of the largest segments in India and constitutes nearly 12-15% out of the total stainless steel demand. The food processing and pharmaceutical industries are the major end-users of stainless steel, accounting for more than 60% of their total demand within the process industry segment. CRISIL estimates stainless steel demand from the process industry segment to grow at 6.5-7.5% over the next five years.

Consumer Durables and Cookware sector:

Kitchenware items have seen a transformation from being just functional. Traditionally, kitchenware would be made of copper, aluminium, steel, and plastic. With increase in per capita income and rising disposable income, a considerable growth of stainless steel consumption has been witnessed in consumer goods. Today, there is an increased demand for convenient and modern stainless steel kitchenware. With continued economic recovery, rising disposable incomes, and reasonably low penetration levels, CRISIL estimates consumer durables industry to grow at 9-10% CAGR.

Stainless Steel also includes many elements in different proportions which provide their own unique characteristics to the alloy, making it an obvious choice. The various elements present in Stainless Steel are:

Stainless Steel also includes many elements in different proportions which provide their own unique characteristics to the alloy, making it an obvious choice. The various elements present in Stainless Steel are:

• Stainless Steel is one of the fastest growing value-added materials in the country

• It is the most affordable material option when total life cycle costs are considered

• It provides a modern and aesthetically appealing look

• According to the Indian Stainless Steel Development Association (ISSDA), coaches made of Stainless Steel are stronger and can absorb more energy during collision. This ability to withstand impact reduces the chance of casualties during an accident. It is for this reason that Indian Railways is targeting to replace its carbon steel coaches with those of Stainless Steel.

• Stainless Steel contains at least 10.5% of chromium by mass and is generally produced in an electric arc furnance with other alloying elements such as nickel and molybdenum. These are added to achieve desirable properties of hardness, corrosion resistance, strength, machinability, etc.

Due to its superior properties, Stainless Steel is also the chosen material for high-end applications such as seamless tubes in process industries, thermal power plant (in boiler tubes etc.), nuclear reactors, automobiles, building & construction, and railways.

Company Overview

Jindal Stainless Hisar Ltd. (JSHL) is Indias largest stainless steel specialty manufacturer with a diverse portfolio of value added products. JSHL has made its mark of a quality stainless steel globally. Over the years, the Company has gradually grown to become a brand known for export quality products to other countries at a premium.

The Company has been a market leader in domestic stainless steel production over the past four decades with a variety of products used in various applications ranging from cookware to industrial and process engineering. Today, JSHL is the largest producer of Stainless steel strips for razor blades worldwide and the largest coin blanks producer in India. JSHL is also Indias first Company to commercially manufacture high nitrogen steel (HNS) for the defence sector requirements.

The Company operates a stainless steel plant at Hisar, Haryana. The complex has a total stainless steel capacity of 0.8 million tonnes per annum. JSHL creates exclusive stainless steel Lifestyle products with a wide distribution channel and a strong retail presence.

Facilities (Hisar Plant) Unit Capacity
SMS Melting MT 800,000
Hot Rolling - Steckel MT 720,000
HR - Tandem Strip Mill MT 300,000
HRAP & Plates Finishing MT 175,000
Cold Rolling MT 375,000
Specialty Products Division MT 30,000
Coin Blanking MT 10,000
Facilities (Vizag Plant) Unit Capacity
Ferro Alloys MT 40,000

JSHLs growth has been driven by its consistent focus on specialty steel for various applications like Precision Strips, Blades, Coin blanks, and strongly backed by its state-of-the-art R&D wing. Apart from being equipped with a strong R&D facility, the Companys world-class manufacturing infrastructure, efficient distribution network and dedicated human resources have played a vital role in its growth.

Additionally, the Companys leadership positioning for the last 40 years, long term relationships with customers and suppliers gives it a strong edge over other competitors. Given JSHLs leadership in the expanding value-added space, the Company today is well-positioned to capitalize on the immense growth opportunities in the industry.

Specialty Value-Added offerings

Leadership in Specialty Products

Over the years, JSHL has built significant expertise in providing stainless steel for various applications like Precision Strips, Blades, Coin blanks, etc. Apart from being worlds largest producer of stainless-steel strips for razor blades, the Company is also Indias largest producer of coin blanks. JSHL is also the first Company in India to commercially manufacture high nitrogen steel (HNS) for application in the defence sector.

JSHL is also present in the B2C segment through its subsidiary, JSL Lifestyle Limited with well-known brands like ‘Arttdinox, ‘Chrome, and ‘ARC. These brands help the Company to cater to the last mile service requests by consumers. JSL Lifestyle Ltd. works as a catalyst amongst designers, architects, fabricators and other professionals to provide a range of technical support services and produces a wide range of stainless steel products available worldwide.

In FY19, JSL Lifestyle Ltd., commissioned its first dedicated facility for Railways in Chennai. The facility will supply high quality stainless steel components with ‘Just-in-time delivery to the Integral Coach Factory (ICF), Chennai for production of railway coaches. It will produce railway coach sub-assemblies like side-wall, roof arch, trough floor and retention tanks for ICF, Chennai. This new facility is equipped with state-of-the-art robotic spot welding guns which function in the most precise and consistent manner. The proximity of this unit to ICF Chennai will ensure just-in-time deliveries for Indian Railways, and low inventory costs will help in improved cost efficiency.

JSHLs other subsidiary, Jindal Stainless Steelway Limited offers customized just-in-time services like slitting, cut—to—length, polishing, etc. JSHL which holds a significant portion of the Specialty products market in India, aspires to further increase its specialty and value-added products revenue share, going ahead. The Company which has remained at the forefront of new-age application development continues to undertake initiatives to further widen its specialty products portfolio.

Strong emphasis on R&D

Over the years, JSHL has demonstrated a keenness to integrate technological innovations into its operations. Be it investing into cutting-edge equipment or adopting new procedures, JSHL has been the frontrunner in raising the bar across the domestic stainless steel landscape.

The dedicated R&D division of JSHL helps it to continuously innovate and develop high-value specialty products. The team closely interacts with reputed national and international laboratories/scientific institutions/Universities to avail expert services & knowledge for critical investigations.

The strong R&D expertise of the Company has also facilitated it to consistently create value addition in its existing products and processes. It has also enabled the Company to build a strong presence in the manufacturing category of specialty steel for Defence segment. JSHL remains confident that its technological competencies will help it to consolidate its strong leadership position in the stainless steel industry.

Strengthened foray into Defense and Aerospace

The Companys manufacturing process has been optimized for industry scale production to cater to stringent and niche requirements of Indian Defence and Paramilitary forces. Today, JSHL has a strong presence in the manufacturing category of specialty steel for Defence segment.

The Company has been continuously strengthening its foray into Defence and Aerospace segment and working to develop and supply special alloys for various strategic applications viz. Submarine Rocket Launchers, Armored Vehicles, Mine Trawls etc. During the year gone by, JSHL received a prestigious order of special steel sheets from ISRO for Rocket Motor Booster Application (Satellite Launch Vehicle). This is the first time in India when ISRO has procured this from an indigenous source, which involves rigorous qualification processes. Going ahead, JSHL intends to undertake necessary initiatives to further increase its offerings into the Defence and Aerospace space.

Key Strengths and Opportunities

Healthy demand outlook

Today, stainless steel is one of the countrys fastest growing value-added metal. Over the past few years, the increasing awareness of stainless steel benefits has led to a substantial increase of its usage in various applications in automobile, railways, process industries, building and construction. Additionally, some of the important initiatives undertaken by the Indian Government have given further boost to the domestic stainless steel industry.

Railways has been one of the early adopters of stainless steel and is expected to remain one of the biggest consumers of stainless steel over the next 15-20 years. Strong impetus from Government on safety and increasing passenger trains is leading to a strong switch towards stainless steel wagons and coaches instead of traditionally used carbon steel. Metro rail network, which extensively use stainless steel for the construction of its light weight coaches and interiors, are coming-up in multiple cities across India. Railways are also taking initiatives to modernize the railway infrastructure, particularly with use of stainless steel in foot-over, rail-over bridges and station infrastructure. During the year gone by, Indian Railways rolled out Indias first indigenously built engine-less train, the new ‘Train 18 now renamed as ‘Vande Bharat Express. This train has been developed to replace the existing ‘Shatabdi Express and is completely made of stainless steel. This cost-competitive and ‘Made in India train has been generating a lot of interest among multiple countries for imports. Additionally, Indian Railways have undertaken multiple developments and reforms in station redevelopment in the recent past that are expected to further enhance the countrys demand for stainless steel.

During the year gone by, The General Insurance Corporation of India (GIC), Indias State owned reinsurance enterprise, decided to provide funds for 5,000 stainless steel benches as part of their CSR initiative.

The automobile sector is also expected to contribute in growth of stainless steel consumption in India. Stainless steel is the preferred material for various auto components such as vehicle exhausts, fuel tanks, disk brakes, catalytic converters, and specialized parts of diesel turbochargers given the lower lifecycle costs and superior performance. Two-wheelers and passenger vehicles are shifting to stainless steel exhausts. In commercial vehicles, with the introduction of BS-VI norms usage of stainless steel in exhausts is expected to double upto 30 kgs/vehicle compared to 15 kgs/vehicle earlier. While the Auto Industry is facing near-term challenges; the Company expects this segment to grow well in the coming years given the huge opportunity arising due to increased urbanisation, expanding working population, rising replacement demand and easy availability of finance.

Diversified range of product applications

In the past couple of decades, the Indian stainless steel consumption has seen a paradigm shift from its use only in household/durables to use in new value-added categories of ABC, ART and process industries. The change followed a global pattern of countries, where developing countries per capita incomes witnessed growth in-line with developed countries.

JSHL has a broad product portfolio with a wide range of stainless steel products across all product applications (ABC, ART, Process & Engineering and Consumer Products). It has cutting-edge technology that enables it to produce various grades of stainless steel with different specifications relating to width, thickness, finish and weight, based on customers precise specifications. JSHL has a superior product-portfolio which enables itself to leverage its presence across verticals to deliver above industry average growth rates.

Extensive Reach and Scale

JSHL, being a dominant pan-India player in the domestic market, has a wide network with multiple touch points that enable its customers to avail the best of its services. The Company has a well-equipped manufacturing facility at Hisar, Haryana and at Visakhapatnam, Andhra Pradesh. This facility is located strategically closer to ports and key raw-materials. Alongside these, the Company has 14 sales offices spread across the country.

Globally, the Company has extensive reach with 11 International sales offices spread across countries like, Spain, UK , brazil , Italy, the United Arab Emirates, Russia, and Vietnam. JSHLs distribution network of sales offices and service centres drives efficient functioning of its inventory, providing better services to domestic and International customers and in obtaining necessary customer feedback to provide more personalized products.

Trusted and Preferred Customer-centric Brand Portfolio

The “Jindal Stainless” brand has emerged as a trusted and preferred brand in the stainless steel sector in India and in International regions. The Company has been able to garner several tangible and intangible benefits due to its overall positive brand image.

Through its customer centric brand portfolio, JSHL has been able to set new benchmarks in the Indian Stainless Steel Industry. The three well-known brands ‘Arttdinox, ‘Krome and ‘ARC are helping to enhance the overall customer engagement and presence of the Company across product categories. Today, these brands are providing a sustainable competitive advantage by offering wide range of specialty products.

Government Initiatives are supporting demand growth for Stainless steel

Today, regulatory changes such as GST and implementation of e-way bills are leading to a greater shift towards more organized market and curbing the parallel unorganized economy. The demand of stainless steel is witnessing an increase with the help of Government initiatives like ‘Make in India and Smart cities. The Indian Government has also undertaken a number of initiatives to protect the domestic industry from the unwarranted increase in imports and thereby improving performance. The ongoing standardisation process of stainless steel products with the help of BIS standards, including the use of stainless steel fuel tanks and BS-VI compliant exhaust systems are driving the stainless steel demand from the industry.

Strong Marketing and Branding initiatives

Anticipating the avalanche of tirade by competition, undeterred imports and unethical play by unorganized and small fringe players in the stainless steel domain, the Corporate Marketing Department of the Company is relentlessly working over to stitch together a robust Brand / Marketing Strategy that supports & compliments the business objectives, while driving business aspirations of becoming a most admired customer & consumer centric stainless steel conglomerate.

At present, the directive to the Marketing Department is to have a sharp sector-focused approach to drive ‘active awareness, ‘positive consideration & ‘genuine purchase of material made out of JSHL coils & sheets in Pipes-&-Tubes, and Ferritic FDA approved Food Grade Stainless Steel sectors. For the same, a cost-effective yet robust Marketing Plan is activated to build brand affinity, loyalty & purchase of our stainless steel products by prospective and current consumers alike, through multiple media vehicles & on-ground activations.

Risks and Concerns

The Company is committed to recognizing and managing the risks it is exposed to, and has put in place mechanisms to handle the same. The Companys management systems, organizational structures, processes, standards, and code of conduct together form its internal control systems, which govern how it conducts its business and manage all associated risks.

The Company is exposed to risks arising out of macroeconomic factors such as:

Political, legal and regulatory risks

There exists a possibility of a change in the overall duty structure on key raw-materials/finished goods by the Government. Further, the Company has been exporting its products to many countries across the globe which has varying degrees of political and commercial stability. Any instability in such countries could impact the Company and pose challenge to its overall performance.

Change in the Demand-Supply scenario in the Global Stainless Steel industry

Change in the demand-supply scenario can cause disruptions in the global market which could have an adverse effect on the Companys overall performance. Higher production in ASEAN countries including China could pose a threat to the outlook of the domestic industry. Despite having anti-dumping duties in place on certain products from China and other countries, there exists a possibility of these goods getting circumvented through other FTA countries. This scenario could have adverse impact on the Companys performance.

Volatility in key raw-materials

The Company is exposed to price changes to some of its key raw-materials. This aspect could lead to a scenario of demand deterioration when prices fluctuate. The volatility in these materials could lead to an increase in inventories leading to some impact on the Companys performance.

Financial Risks

The Companys debt servicing capabilities could get affected due to any volatility in financial markets. The Company could face incremental challenges in a changing interest rate scenario. Further, the Company is also exposed to currency risks arising due to a considerable amount of import and export of goods it undertakes.

Risks Mitigation

The Company has been undertaking continuous modernization programs to maintain efficient operations of its products and engineering activities. Healthy cash flow generation by the Company has gone a long way in reducing the overall debt. The Company aspires to further strengthen its balance sheet over next 12 to 18 months. Additionally, the management actively benchmarks relevant operational parameters and ensures adequate level of liquidity is maintained for smooth operations.

Audit and internal control system

The Company has well-equipped and adequate internal control systems in place commensurate with the size of the firm and nature of its business. At JSHL, business sustainability risks and opportunities are identified on an ongoing basis and integrate these into our existing risk management framework.

In addition to this, the Company has been undertaking continuous modernization programs to maintain efficient operations of its products and engineering activities. JSHL has also made efforts to mitigate risks by enhancing the quality of its products, investing in latest equipment and technology, reducing energy consumption and improving productivity. The management actively benchmark relevant operational parameters and ensures adequate level of liquidity is maintained for smooth operations.

An extensive program of internal audits and regular reviews by the Audit Committee is carried out to ensure compliance with the best practices.

Performance Highlights - FY2019 vs.FY2018

Standalone

Consolidated

Particulars (Rs. in Crore) FY 2019 FY 2018 YoY (%) FY 2019 FY 2018 YoY (%)
Net Revenue from operations 8,956.40 9,258.67 -3% 10,288.86 10,357.14 -1%
Total Expenditure 8,056.79 8,119.18 -1% 9,250.12 9,126.50 1%
EBITDA 899.61 1,139.49 -21% 1,038.74 1,230.64 -16%
Other Income 95.67 112.20 -15% 102.11 116.05 -12%
Finance Cost 347.56 395.45 -12% 367.12 408.20 -10%
Depreciation 275.78 266.60 3% 289.29 284.26 2%
PBT 403.75 608.08 -34% 569.81 821.10 -31%
Tax 142.10 212.38 -33% 173.61 233.45 -26%
PAT 261.65 395.70 -34% 396.20 587.65 -33%
EPS (Diluted) in INR 11.09 16.77 -34% 16.16 24.50 -34%

The standalone net revenue from operations stood at Rs. 8,956.40 crore as compared to Rs. 9,258.67 crore during previous year 2017-18. The Company witnessed healthy increase in average realizations which supported its revenue performance during the year. Higher contribution from Specialty Products and better product-mix assisted the Company report better realizations. During FY19, the Company also achieved its highest ever sales from Specialties Product Division (SPD).

Standalone EBITDA stood at Rs. 899.61 crore as compared to Rs. 1,139.49 crore during previous year. EBITDA margins witnessed some pressure due to falling raw-material prices which led to negative inventory valuation and higher cost of consumables driven primarily by graphite electrodes during FY19.

During FY19, interest costs declined by 12% to Rs. 347.56 crore. Healthy cash flow generation enabled JSHL to sufficiently utilize this towards its working capital requirements. PAT for the year stood at Rs. 261.65 crore as against 395.70 crore during previous year. Accordingly, this impacted the ROE of the Company which stood at 18.9% in FY19 as compared to 37.4% in the previous year. EPS for the year was Rs. 11.09 against Rs. 16.77 for the previous year.

Description - Borrowings ( crore) As on March 2019 As on March 2018 As on March 2017
Long term debt 2,109 2,356 2,548
Short term borrowing (less than 12 months) 72 442 842
Total Debt 2,181 2,799 3,390
Cash & Investments 19 7 8
Net Debt 2,162 2,792 3,382
Long term debt
Long Term Debt Breakup:
-INR Debt 2,109 2,356 2,548
-Foreign Currency Debt - - -

The Company continues to focus on strengthening its balance sheet. JSHLs total debt was reduced by almost Rs. 1,200 crore in last two years with debt reduction of Rs. 618 crore during FY19. On the back of healthy cash flows, the Company has been able to strengthen its balance sheet as its Net Debt/EBITDA ratio has improved from 3.7x in FY17 to 2.4x in FY19. Similarly, its Net Debt/Equity ratio has improved from 3.9x in FY17 to 14x in FY19. Going forward, JSHL aspires to generate strong free cash flows which would further assist in strengthening its balance sheet position.

Key Financial Ratios

Key Financial Ratios - Standalone FY19 FY18 FY17
EBITDA margin (%) 10.0% 12.3% 13.4%
PAT Margin (%) 2.9% 4.3% 3.2%
Net Debt to Equity 1.4 2.2 3.9
Net Debt to EBITDA 2.4 2.4 3.7
Return on Equity (%) 18.9% 37.4% 28.9%
Return on Capital employed (%) 16.8% 24.4% 24.9%
Debtors Turnover 11.0 9.5 7.4
Inventory Turnover 5.9 5.5 4.6
Interest Coverage Ratio 1.8 2.2 1.6
Current Ratio 1.0 1.0 1.0

The Companys consolidated revenue from operations stood at Rs. 10,288.86 crore as compared to Rs. 10,357.14. The performance was largely stable due to steady stainless steel demand and operational performance. Increased emphasis on growing Stainless steel demand through various market driven initiatives supported JSHLs sales volumes.

Consolidated EBITDA stood at Rs. 1,038.74 crore in FY 2019 as compared to Rs. 1,230.64 crore in FY 2018. PAT for the year at Rs. 396.20 crore as compared to Rs. 587.65 crore during previous year. EPS for the year was Rs. 16.16 against Rs. 24.50 for the previous year.

The subsidiaries of JSHL, JSL Lifestyle Limited (JSLL) and Jindal Stainless Steelway Limited (JSSL) continued to cater end-users through customized and retail product offerings. JSLL registered strong growth performance in line with the Companys strategy to grow end- consumer facing business. The net revenue for JSLL rose by 27%, up from Rs. 356 crore in FY18 to Rs. 453 crore in FY19. PAT posted by JSLL more than doubled to Rs. 49 crore in FY19 as compared to Rs. 22 crore in FY18. JSSL registered a year-on-year revenue growth of 9% over at Rs. 1,560 crore. PAT posted by JSSL for the year stood at Rs. 20 crore in FY19.

Awards and Accolades - FY19

• JSHL received its 19th National Award for Excellence in Energy management 2018 for “Energy Efficient Unit”

• Received Platinum award in Iron & Steel Sector in SEEM Energy Management Award

• JSHL bagged 13 Gold, 9 Silver and 3 Bronze Awards at the Chapter Convention on Quality Concepts (CCQC) 2018

• JSHL won 1 Excellence and 6 PAR Excellence Award at the National Convention on Quality Concepts (NCQC) 2018

INTEGRATED MANAGEMENT SYSTEMS

Quality & Quality Management Systems

Quality Management System (ISO 9001:2015)

The cornerstone of a quality organization is the concept of the customer and supplier working together for their mutual benefit. For this to become effective, the customer-supplier interfaces must extend into, and outside of, the organization, beyond the immediate customers and suppliers. To achieve this, JSHL has adopted the internationally recognized quality management system (ISO 9001) that not only helps JSHL in becoming cost-competitive but also aids in increasing credibility, lower costs and shorter cycle times through effective use of resources. This has led to increased customer loyalty and increased revenue & market share obtained through flexible and fast responses to market opportunities.

Environmental and Health & Safety Management System

JSHL is also ISO 14001:2015 (EMS) & OHSAS 18001:2007 certified. We believe that Health & Safety of its employees, who are an asset to the company, is of utmost importance. These systems ensure that quality of the product is world class, and at the same time, the processes that go into making such products, are environmental friendly and risk free, thus providing a conducive work environment for all. The internal control systems are continuously monitored and improved by means of a rigorous internal audit system, that includes a cross functional team of auditors specifically trained for the above purpose. Attacking environmental aspects and Occupation hazards/risks in order to reduce/minimize their impact is a normal part of our business day. With these systems in place, we aim to strive from customer satisfaction to customer delight.

Energy Management System (ISO 50001:2018)

The need to improve and maintain energy efficiency in industrial utilities is strongly felt to survive in present scenario of rising energy costs and volatile energy markets and to gain competitive advantage. On the other side, consumption of energy resources in industries leads to atmospheric pollution and damages the environment. JSHL, being a responsible corporate, has established practices around the use of energy that reduces business risk and improves productivity and operations, by means of establishing, implementing and maintaining ISO 50001:2018 certificaction (Energy Management System). This voluntary EnMS has helped JSHL to boost its energy productivity and cut costs. ISO 50001 has also helped JSHL by providing a framework in order to achieve our energy goals, and also improving the efficiency within your organizations operations.

AD 2000 Merkblatt W0

The W series of AD 2000-Merkblatter apply to metals for use in different product forms for the manufacture of pressure-bearing components of pressure vessels. The AD 2000-Merkblatt lays down general principles for the quality of the products, their manufacture and testing. The AD 2000-Merkblatter are prepared by the seven associations in Germany who together form the “Arbeitsgemeinschaft Druckbehalter”(AD). The structure and the application of the AD 2000 Code and the procedural guidelines are covered by AD 2000-Merkblatt. The AD 2000 Code can be applied to satisfy the basic safety requirements of the Pressure Equipment Directive, principally for the conformity assessment. The AD 2000 Code can be used as appropriate for other modules of the Pressure Equipment Directive or for different sectors of the law. In order to gain the competitive edge, JHSL has expanded its product portfolio and ventured into the Long Products segment with AD 2000 W0 certification for Long products Pressure Equipment Directives

One of the applications of Stainless Steel is the use as pressure equipment, and whenever we talk of pressure, safety is the most important aspect, as any failure can have devastating impact. Taking this into consideration, the European Union has drafted a Directive known as pressure equipment directive that ensures that any material entering the EU countries fulfils the minimum basic safety requirements. The Pressure Equipment Directive 97/23/EC (PED) of the EU sets out the standards for the design and fabrication of pressure equipment (pressure equipment means steam boilers, pressure vessels, piping, safety valves and other components and assemblies subject to pressure loading) generally over one litre in volume and having a maximum pressure more than 0.5 bar gauge. It also sets the administrative procedures requirements for the "conformity assessment” of pressure equipment, for the free placing on the European market without local legislative barriers. It has been mandatory throughout the EU since 30 May 2002. This is enacted in the UK as the Pressure Equipment Regulations (PER). The set out standards and regulations regarding pressure vessels and boilers safety is also very close to the US standards defined by the American Society of Mechanical Engineers (ASME). This enables most international inspection agencies to provide both verification and certification services to assess compliance to the different pressure equipment directives. The newly developed Long Products at JSHL are also covered under the PED umbrella, apart from the flat products portfolio. Construction Products Regulation

Close to the heels of Pressure Equipment Directive, is the Construction Products Regulation (CE Marking), which seeks to ensure the free movement of all construction products within the European Union by harmonizing national laws with respect to the essential requirements applicable to these products in terms of health and safety. An additional objective of the directive is to standardize the manufacturing of construction products and guarantee the unlimited use of these products within the EU. The objective of CPR is not to define the safety of construction products, but to ensure that reliable information is presented in relation to their performance. This is achieved by providing, mainly in standards, a common technical language, to be used not only by manufacturers, but also by public authorities when defining their requirements on construction works, directly or indirectly influencing the demands placed on the products to be used in them Environment, Health & Safety

Ensuring safe working conditions is a core value for JSHL. The Company strongly believes that all injuries and occupational illnesses, as well as safety and environmental incidents, are preventable. JSHL is committed in ensuring zero harm to its employees, contractors and the communities in which it operates. In an endeavour to achieve Vision “zero incident” in Health, Environment & Safety, to in-grain safe behaviour among employees; a concept of Behaviour based training has been implemented. A total of 99% of employees have been covered in BBS campaign. Average 11 hour/ person / year safety training was imparted on various topics of EHS. 437 EHS audits were carried out by Safety officers as per guidelines of BIS 14489 for identification of unsafe acts & conditions and legal compliance. The Company has digitized safety management system and to make implementation of safety system fast and more effective safety portal has been launched and consequently our identification of observations increased up to 12818 out of it 96.55% of Online portal observation were rectified within stipulated time period. In night shift, NDO are deployed to monitor the safety activity. In FY 18-19, 87 mock drills were carried out, EHS kaizen were implemented, 638 EHS training were imparted by safety officers.

Risk assessment has been conducted and compliance against observations are implemented for Process Safety Management, safety gap Evaluation, Hazard operability study of all critical areas, E -Hazop, Fire safety Audit, Lock out Tag Out, Hazard identification and risk assessment, Lightening protection survey, Electrical Audit and safety survey to identify, analyze and assess safety risk. Review of Behavior based safety- implementation was done by external agencies.

To reduce risks from occupational diseases, we conduct medical health check-up all employees in line with statutory requirements as per Punjab Factories Rule 70 N, those engaged in hazardous operation check-ups are carried out half yearly and in other area as per the associated health hazard periodically. We conduct eye test of all operators, drivers and periodic Spirometry and Audiometry tests on workers operating in dust prone areas and high decibel areas. We have Occupational Health Center complying requirement of Punjab Factories Rule 70-O( Factories Act Section 41-c and112). We conduct pre-employment as well as periodic medical tests to check the overall health and fitness of our existing and newly joined employees. We have developed a wellness calendar to raise awareness on healthy actions that can be taken to improve health and well-being of employees. Further strengthening our employee health management framework, we conduct regular camps and awareness sessions on a monthly basis to coach employees on various aspects related to physical and mental health.

Other Safety Initiatives Implemented in FY 2018-2019:

• Standardization of design of fencing/guard of machines has been done in accordance with Indian Standard

• Regular display of safety theme and safety awareness boards at conspicuous locations & in-line with monthly safety theme safety awareness & training programs were conducted in the month.

• Conducted necessary testing of structural portion on Electric Overhead travelling (EOT) cranes. The cranes which did not pass in relevant tests were removed from service. This resulted in replacement of 10 crane structures.

• Installation of fall arresting system over shed roof to work over roof safely.

• Implementation of safety shift briefing program at 35 Locations in all the shifts to discuss safety issues.

• Organized 15 EHS awareness campaigns like fire safety month, road safety month, LOTO awareness etc.

• Digitization of on line portal and work permit system through SAP made operational

• Review of disaster management plan in accordance with statutory requirement, subsequently on site mock drill was conducted in presence of government officials.

• Installation of infrared guarding on slitting line, and guarding of machineries as per IS norm commenced.

• Necessary training given to plant workers to work at a certain height and in hazardous jobs. Additionally, employee health check-up, trade test and safety training have been made mandatory before deployment at job.

• Usage of reflective jackets has been made mandatory like other PPE.

• Strengthening of fire fighting system by installation of new fire pump house & capacity enhancement of water storage for fire, extension of hydrant lines in HRD & CRD and emergency management plan.

• Implementation of lock out-tag out

• Installation of anti-collision device at EOT Cranes

• Revamping of Carbon Dioxide Flooding system over all rolling mills and its cellar.

• Operation of MVWS through gas leakage detection sensors in Propane Storage area for auto start of MVWS.

• Updation of compliance manager tool to make system effective major compliances incorporated

• Fitness check of all internal vehicles and verification of driving license of all drivers through online RTO portal.

• Corporate recognition award 2018 for outstanding initiatives taken in "Implementation of Behavior- Based- Safety( BBS)”, presented at NITIE-POWAI MUMBAI organized by FORUM OF BEHAVIOURAL SAFETY

• Our training programs and safety initiatives are based on root cause analysis of major incidents. We investigate all accidents and major near misses occurred and made analysis of major causes of accidents and implementing hierarchy of control majors.

• Provided standard C hook and material lifting tools and tackles in place of non-standard C hook/tackles.

• Apex EHS committee meetings were conducted quarterly, under the six sub-committee were conducted audits monthly headed by departmental Heads.

• Departmental SHE committee meetings were conducted monthly under chairmanship of HODs.

Human Resource

The HR department is a catalyst of constant learning and development in the organization. Our human capital strategy is simple- we recognize our employees as a ‘source rather than a ‘resource of immense potential. We have focused on attracting, developing and nurturing the best talent available to make a strong employee workforce. Our constant endeavour at JSHL is to create a conducive and positive organization culture which enables the employees to maximize their performance and fulfil them as an individual.

As on March 31,2019 the Company comprised total on-roll employee strength (including contractual staff) of 5,508. Our inherent belief and conviction is that people are our greatest asset. One of the key initiatives in this direction during FY 18-19 was to implement SAP Success Factors as our HRMS across the entire organization (including subsidiaries).The entire project was implemented successfully in a short span of 6 months, with meticulous change management to support the transition. It has helped us to not only streamline employee experience and deliver HR services effectively but also to provide a digital experience via a mobile interface.

Our internal social media platform Pulse now forms the lifeline of the organization; acting as an interactive medium for employee engagement. Online town-halls SAMPARK with the senior leadership ensures we get connected to all the locations simultaneously, and are continuously listening to our employees as well as informing them periodically about our direction and strategy. Our engagement with employees also continues via year-long events centered on wellbeing and team-bonding.

With workforce becoming increasingly diverse; we need to understand, accept and value differences, striving to build an inclusive and diverse work environment. As a step in this direction, Jindal Stainless has launched STRIDE- an inclusion & diversity initiative with a series of on-going programs and interventions. We revised our Prevention of Sexual Harassment policy (POSH) incorporating best practices beyond the mandated act; reiterating our commitment towards becoming a ‘zero tolerance organization against sexual harassment of women at workplace.

We are continually refreshing our talent by hiring fresh engineering & diploma graduates every year from leading engineering & diploma colleges across India, selecting the best of the best after rigorous online assessments and interviews. The graduate engineering trainees (GET) go through our flagship year long program - ARISE which will “Shape Stainless Engineers” of the future, preparing them for the transition from academic to the corporate world. Industry-Academia partnership through our MOUs with IIT Bhubaneswar, polytechnics, ITIs is also helping us contribute to build an industry-ready workforce.

A flagship leadership development program, Masterful Management has been launched for middle managers. It is a 12 month development journey focusing on leadership capabilities for the changing business landscape.

Way Forward

Several internal and external factors augur well for the Companys future. Today, JSHL is well positioned to capitalize on the enormous growth potential the Stainless Steel industry offers. It has in place sufficient capacity and headroom for growth and has a wide domestic and International presence. JSHLs focus is to carry forward its growth momentum into the next 12-18 months. On a longer-term basis, the Company remains confident that its strategic initiatives will provide levers for high quality growth and fortify its profitability. However, Indian stainless steel primary producers are facing the challenges of higher imports from FTA countries.

FORWARD-LOOKING STATEMENT

This Annual Report includes forward-looking statements regarding guidance, industry prospects, or future results of operations or financial position. We use words such as anticipates, believes, expects, future, intends, and similar expressions to identify forward looking statements. Forward looking statements reflect managements current expectations and are inherently uncertain. Actual results could differ materially for a variety of reasons, including, among others, fluctuations in foreign exchange rates, changes in global economic conditions and customer spending, world events and the rate of growth among others. The Company assumes no responsibility to amend, modify or revise any such statements. The Company disclaims any obligation to update these forward-looking statements except as may be required by law.