jindal stainless hisar ltd Management discussions

ECONOMIC OVERVIEW & OUTLOOK

Global Economy

The global economy, after contracting by 3.1% in CY2020 due to COVID, saw a broad recovery and grew by 6.1% in CY2021. Speedier than expected recovery in the latter half of the year could help in improvement in the earlier estimates. However, the scenario started becoming gloomier in 2022 with the onset of Russia-Ukraine conflict, leading to risks going up substantially.

In its April CY2022 World Economic Outlook (WEO) update, the International Monetary Fund (IMF) had cut its growth forecast by 0.8% and 0.2% for CY2022 and CY2023 to 3.6% and 3.6% respectively. As per the IMF, the negative spill over impact of Russia - Ukraine war, sharp rise in oil prices triggering higher than expected inflation primarily in US and major parts of Europe resulting into tighter financial condition, worse than the slowdown in China on account of COVID-19 induced lockdowns and restrictions have been the primary reasons behind the downward revision of the global growth. GDP growth for Advanced Economies are likely to be 3.3% and 2.4% respectively for CY2022 and CY2023, while for emerging and developing economies GDP is likely to grow at 3.8% and 4.4% respectively.

Indian economy

Adverse impact of COVID-19-induced challenges continued in FY22 as new variants spread across the globe, including India. In Q1FY2022, partial lockdown had to be imposed that impacted the economic activities to some extent. However, underlying growth momentum was strong and industrial activities were encouraged to continue with proper precautions. This helped faster economic recovery. Indias GDP growth was registered at 20.1%, 8.4%, 5.4% and 4.1% in Q1, Q2, Q3 and Q4 of FY2022 respectively. For the full year FY2022, Indias GDP growth was 8.7% as per the National Statistical Office (NSO), after contraction of 6.6% in FY2021.

Spread of COVID-19s third wave, geopolitical tension, and higher oil prices weighed on the economic recovery towards the end of the FY22. Rising inflation resulted in higher interest rates.

As per the World Economic Outlook (WEO) by the International Monetary Fund (IMF) in April 2022 Indias GDP growth projection for FY2023 is revised at 6.9%, down by 0.2% against the January estimates. For FY2022 also, GDP growth projection is revised down by 0.8% to 8.2%.

GLOBAL STAINLESS STEEL SCENARIO

Stainless steel has been the fastest growing metal when compared to other major metals such as aluminium, zinc, carbon steel, etc. with a CAGR of 5.8% (as per ISSF). This can be attributed to the diversified usage and improving replacement demand.

Following an increasing trend since 2015, global stainless steel melt shop production stood at 52.2 million tonnes (MT) in CY2019. COVID-19 pandemic made a temporary dent as global stainless steel melt shop production fell by 0.8% in CY2020 to 51.8 MT. However, in CY2021, the same witnessed a turn around and registered an impressive growth of 12.51% over the previous year to reach 58.3 MT, according to the International Stainless Steel Forum (ISSF) in its latest publication.

DOMESTIC STAINLESS STEEL SCENARIO

As per the Stainless Steel Vision Document 2047, recently published by ISSDA and CRISIL, India will remain the fastest growing stainless steel markets and second largest globally for the next several years. Infrastructure, renewable energy, agricultural industry, smart cities, defence, and aerospace are some sectors showing high potential demand of stainless steel. Moreover, a prioritized approach to favour building long-lasting and maintenance-free infrastructure, and focusing on low life cycle cost and value proposition are encouraging trends for the Indian stainless steel industry. Further, stainless steel is expected to support nation-building and sustainable solutions across sectors where nearly 4% of the GDP is lost to corrosion every year.

Over a period of time, diversified usage of stainless steel in India has increased, along with growth in conventional usage. The trend still continues with more new age applications of stainless steel. Significant thrust by the government on infrastructure development and increase in awareness have also been boosting stainless steel consumption. The scope of further growth is huge as Indias per capita consumption of stainless steel remains at just 2.5 kg against a global average of 5.5-6 kg.

After a dip in CY20, due to COVID-19 impact, stainless steel melt shop production in India bounced back in CY21 to 3.96 million tonnes, registering a growth of 26% over the previous year. Economic recovery and improved liquidity post lockdown boosted revival in demand, both in India and other geographies as well. Railways, infrastructure, and process industries have been witnessing improved demand and are likely to do better going forward. With strong focus of the Government of India on infrastructure development and introduction of promising projects viz. PM Gati Shakti, life cycle cost evaluation for project finalisation, replacement demand, and growing awareness, stainless steel demand in India is likely to remain robust.

Domestic demand for stainless steel clocked a compound annual growth of about 5.2% over fiscals 2016-2020 to reach 3.7 MT. However, the pandemic-led disruptions led to the demand contracting by 14-15% on-year in fiscal 2021 to 3.2 MT. The domestic stainless steel demand bounced back to 3.96 MT in fiscal 2022 supported by alow base, a relatively stable macroeconomic environment, and normalised government spending.

In the medium term, CRISIL expects stainless steel demand to register a CAGR of 6.5-7.5% over fiscals 2022-2025 and reach 4.6-4.8 MT. Further, CRISIL estimates this demand to reach 12.512.7 MT and 19-20 MT by fiscals 2040 and 2047, respectively. Consequently, the per capita consumption of stainless steel is expected to reach 8-9 and 11-12 kg from the current ~2.5 kg. Key contributor segments like construction, infrastructure, and manufacturing are expected to drive this growth.

The demand from the largest end-segment, viz. consumer goods is expected to remain strong in future. Further, work-from-home culture will support the industrys growth, boosting stainless steel demand for consumer durables. Also, the share of organised players is expected to have risen in kitchenware industry, a key component of consumer durables segment.

While the industrial activity has seen a hit over the past year, the demand from the process industry is expected to rise with schemes such as ‘Atmanirbhar Bharat, ‘Make in India, PLI, as well as a revival in investment. Food processing and pharmaceutical industries are expected to remain the major end-users of stainless steel within the process industry segment.

Consumer goods (including kitchenware) account for ~45% of the total demand for stainless steel in India, followed by process industries at ~25% share, with ABC contributing around 20% and ART contributing around 9%-10% of the total mill products demand.

Automobiles, railways and transport (ART): CRISIL estimates demand from the ART segment contributed to 10-11% of the total stainless steel demand in India during FY21. Stainless steel demand from the ART segment grew at 8-9% CAGR between FY15 and FY20. After an estimated drop of about 22% in FY21, demand is expected to have increased back to FY20 level in FY22. While CRISIL estimates a CAGR of ~5.5% between FY22 and FY25, it expects faster CAGR of 7-8% from FY25 till FY30, driven primarily by long-term revival in the auto segment plus incremental demand from new age applications in the railway segment.

Growth in the sector will be largely driven by the automobiles segment and rising penetration of stainless steel in railway, electric vehicles, bus bodies, fuel tanks, etc. Within the automobile segment, two-wheelers and passenger vehicles accounted for the majority share in stainless steel demand. Collectively, these two segments accounted for 85-90% of the total stainless steel consumption in ART.

The Indian Railways has completely switched to LHB coaches which have stainless steel shells. The Indian Railways contributes to a significant share in countrys total demand for stainless steel. Usage of stainless steel in coaches ensures safety and reliability through fire and corrosion resistance. Increasing penetration of stainless steel wagons and coaches, rising usage of the alloy in rail infrastructure, proposed station modernisation, and dedicated freight corridors (DFC) are expected to drive the demand for stainless steel from the Railways.

The overall stainless steel demand from the automobile segment is envisaged to grow at 9-10% and 7- 8% CAGR, over the medium and long-term, respectively. Over FY2022 to 2025, stainless steel demand from other transport segments is expected to grow with a CAGR of ~8.5%.

Architectural, building & construction (ABC): The ABC sector is estimated to have accounted for 19-20% of the countrys total stainless steel demand in FY2021.

The sector registered a CAGR of 11-12% for stainless steel demand over FY2015 to FY2020. Among all the end-use industries of stainless steel, the fall in demand from the ABC sector was the least and estimated at 8-9% on-year in FY2021. Also, the demand from this sector is expected to swell by the highest rate of 28-30% in FY2022 compared with other sectors.

Demand is expected to increase at a CAGR of 6-7% over FY2022 to FY2025. This sectors growth will be largely driven by residential, commercial, airport infra, water supply and sanitation (WSS), MRTS, and commercial complexes. Further, demand from the ABC sector is expected to grow at a CAGR of ~10% on continued investments and touch 1 million tonnes by FY2030.

Further, the governments emphasis on infrastructure modernisation would boost stainless steel demand in applications such as lifts, escalators, modular water kiosks, water ATMs, stainless steel benches, and mass rapid transit systems (MRTS).

Process industry: Process industry sector accounted for 22-24% of the total stainless steel demand in India in FY2021. Within the sector, food processing and pharmaceutical industries are the major end-users of stainless steel.

Stainless steel demand from the industry, as per CRISIL Research, rose by 8-9% CAGR between FY2015 and FY2021. However, the COVID-19 pandemic resulted in an estimated demand slowdown of 4-5% in FY2021 over previous year. CRISIL Research expects stainless steel demand from the process industry segment to register 7-7.5% CAGR between FY2022 and FY2030.

Consumer goods: The stainless steel demand from the consumer goods sector (comprising kitchenware and consumer durables) contributes 45-50% of the overall stainless steel demand. CRISIL Research expects stainless steel demand from the kitchenware segment to expand at a 67% CAGR over FY2020-2030.

Sales of consumer durables logged 7.8% CAGR between FY2015 and FY2020. Demand slowdown following the first COVID-19 wave impacted sales in FY2021. CRISIL Research envisages healthy demand growth for consumer durables in the long-term, in tandem with sustained economic recovery. Growth will be driven by better affordability, shorter replacement cycles, multiple ownership, and low penetration levels. Global manufacturers are launching cost- effective models in the Indian market to boost sales in the mid-range segment. This is expected to change the buying pattern of consumers who are more likely to move to new technology with a focus on water and power saving. Demand is expected to expand at 11-13% CAGR between FY2021 and 2026.

COMPANY OVERVIEW

Jindal Stainless (Hisar) Ltd. (JSHL) is one of Indias leading specialty stainless steel manufacturers with a diverse portfolio of value-added products. Over the years, the Company has gradually grown to become a brand known for exporting quality products to other countries at a premium.

JSHLs products are used in various applications ranging from kitchenware and lifestyle to industrial and process engineering sectors. Companys dedicated R&D division has enabled it to foray into the development of innovative high-value specialty stainless steel products. Today, JSHL is the largest producer of stainless steel strips for razor blades worldwide, and is 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.

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

Facilities (Hisar Plant)	Unit	Capacity
SMS Melting	MT	820,000
Hot Rolling - Steckel	MT	720,000
HR - Tandem Strip Mill	MT	250,000
HRAP & Plates Finishing	MT	175,000
Cold Rolling	MT	400,000
Specialty Products Division	MT	62,500
Coin Blanks	MT	9,000
Facilities (Vizag Plant)	Unit	Capacity
Ferro Alloys	MT	40,000

JSHL has already been in the process to increase its precision strip capacity and plans further expansion in its specialty products portfolio by higher precision strip and blade steel capacity. Both Precision Strip and Blade Steel capacities are getting expanded to 60,000 tonnes per annum (tpa) and 24,000 tpa respectively at a total CapEx of Rs 450 crore in two phases. Phase-I of Precision Strip expansion has been commissioned in Q2FY2022 taking the existing capacity to 48,000 tpa, while phase-II expansion is expected to be commissioned Q4FY2023. In case of Blade Steel, phase-I and phase-II expansions are expected to be commissioned in Q2FY2023 and Q2FY2024 respectively.

Superior positioning 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. As of today, the Company is supplying to major mints of various countries including Finland, Netherlands and Brazil. In India, the Company is currently catering to the requirements of Rs. 5, Rs. 10 and Rs. 20 coins. 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 and ‘ARC. 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. JSHLs other subsidiary; Jindal Stainless Steelway Limited offers customized just-in-time services like slitting, cut-to-length, polishing, etc. of stainless steel products.

JSHL remains at the forefront of new-age application development and continues to focus on improving its product mix by emphasizing on its speciality products.

Strong emphasis on R&D

Over the years, JSHL has demonstrated a keenness to integrate technological innovations into its operations. JSHL has been the front-runner in raising the benchmark across the domestic stainless steel landscape as far as investing into cutting-edge equipment and adopting new procedures are concerned. The dedicated R&D division of JSHL helps it 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 and knowledge for critical investigations.

The strong R&D expertise of the Company has also enabled 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 about its technological competencies and in maintaining its strong leadership position in the stainless steel industry.

Strengthened foray into Defense and Aerospace

The Company has been continuously strengthening its foray into Defence and Aerospace segment and is working to develop and supply special alloys for various strategic applications viz. submarine rocket launchers, armored vehicles, mine trawls, etc. JSHL recently became the first integrated stainless steel manufacturing company in India producing coils, sheets, and plates, and among the select few in the world, to get certified with AS 9100D Certification, a Quality Management System for Aviation, Space, and Defence Organizations. The Certification validates JSHLs competence to constantly meet highly stringent standards of the aerospace industry. It also enables JSHL to get listed in OASIS, the Online Aerospace Supplier Information System database, which showcases the Companys offerings to aerospace manufacturers.

Going ahead, JSHL intends to undertake necessary initiatives to further increase its offerings into the Defence and Aerospace sector.

OPPORTUNITIES

Healthy demand outlook

Over a period of time, stainless steel has seen many diverse applications in many industries along with consistent growth in conventional usage. The Stainless Steel Vision Document 2047, recently released by the Indian Stainless Steel Development Association (ISSDA) in collaboration with CRISIL Research, expects India to remain as one of the fastest growing markets for stainless steel and maintain its second largest consumer position in the world.

Owing to its superior qualities viz. good strength to weight ratio, aesthetics, hygiene that it offers, high heat resistance and complete recyclability, stainless steel has already emerged as the material of choice. These properties enable its application across several end-user industries viz. architecture, building and construction (ABC), automobile, railways and transportation (ART), consumer durables, and process industries.

ABC sector caters to various infrastructure projects including railway infrastructure, MRTS and metro rail projects, airport infrastructure, commercial and retail projects, healthcare etc. CRISIL Research expects these segments to use higher stainless steel going forward. Under railway infrastructure segment, three stainless steel foot over bridges (FOBs) got commissioned in Naupada and Srikakulam in Andhra Pradesh and Bhayandar in Maharashtra. There are many other such bridges in the pipeline to be built using stainless steel. Along with this, in the ABC sector, faqade and cladding, structurals and interiors, plumbing solutions, and support structures are also like to add to stainless steel applications.

Under ART sector, stainless steel has wide range of applications due to its properties. Lower weight and longer life make it suitable for many applications. Going forward, good demand for stainless steel is expected from this segment. In auto and auto ancillaries segments, various unexplored applications exist. With electric vehicles (EVs) getting momentum and focus on fuel efficiency, more use of stainless steel can be expected in the future. In the case of railways, wagons, coaches and metro projects are likely to drive the stainless steel demand. The Indian Railways has completely switched to LHB coaches which have stainless steel shells. Utilization of stainless steel is expected to increase for building rail wagons and the super structure of freight cars as more DFCs become operational.

In process industries, increased usage of stainless steel is expected in containers, pipelines and tubes, heat exchangers, food contact equipment, storage tanks, condensers, processing and packaging machines, etc. In the food processing industry, stainless steel is the most preferred material due to its hygiene factor.

In consumer durables, stainless steel is used in white goods, as it is resistant to corrosion, can be easily fabricated, offers good mechanical properties over a wide range of temperatures, and can be given a range of exclusive finishes. Properties of stainless steel, such as high toughness, ductility, and low maintenance, have increased its utilisation in consumer goods such as cookware, washing machines, refrigerators, delivery boxes, and hard disk covers.

Lots of new age applications of stainless steel across various segments are expected to come in the future. With strong focus of the government on infrastructure, sustainability and growing focus on the health, hygiene and corrosion resistance, demand for stainless steel is likely to see a healthy growth. In the medium-term, CRISIL Research expects stainless steel demand to register a CAGR of 6.5-7.5% over FY2022- 2025 and reach 4.6-4.8 MT. Over the long-term, from FY2025 to FY2030, CRISIL Research forecasts this demand to rise at CAGR of 7-8% to reach 6.6- 6.8 MT.

Diversified range of product applications

Traditionally, stainless steel was primarily used for kitchenware, with some exception for industrial goods. However, there has been increased usage in various applications in automobiles, railways, process industries, and building and construction over the past few years.

The countrys flat stainless steel demand is supported by key end-consuming sectors such as process industries, consumer durables, and the ART sector. Although the ABC sector holds the lowest share in demand, new age applications are expected to improve this over the long-term.

JSHL enjoys a dominant position in the market in the value-added segment. Specialty Product Division of the Company has a diversified product portfolio of precision strips, razor blade and coin blanks. JSHL is the worlds largest producer of stainless steel strips for razor blade and is Indias largest producer of coin blanks, also serving the need of international mints.

Over the years, JSHL has widened its product offerings to have a diversified product portfolio and insulated itself from any slowdown in a particular product or category to de-risk itself.

Today, JSHL has a broad product portfolio with a wide range of stainless steel products across all applications. 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 Visakhapatnam, Andhra Pradesh. Alongside these, the Company has 10 sales offices spread across the country.

Globally, the Company has extensive reach with 12 International sales/representative offices spread across US, EU, 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.

Strong Marketing and Branding initiatives

Over the years, JSHL has consistently undertaken a number of notable marketing initiatives which have enabled it to substantially improve its brand salience and its overall market share. The Corporate Marketing Department of the Company is making persistent efforts to strengthen the demand ecosystem for stainless steel. Some of the recent notable marketing initiatives undertaken by the Company are mentioned below:

1. Skill India: The Company conducted several programs under the governments Skill India banner. 22 training programs were developed to train fabricators in multiple cities and take this activity further. The Company is working closely with NSDC and is in process of signing an MoU to develop an ecosystem for the stainless steel industry. Programs were conducted along with NSDC to discuss the key requirements of the industry for up-skilling both primary producers and downstream industry. As of now, more than 780 participants have qualified under the Skill India Program.

2. Fabricator Training: Over 25 Fabricator training programs were conducted in multiple cities throughout the country with over 1200 participants attending these sessions.

3. Institutes Elective Courses: Under its ‘Stainless Academy banner, JSHL is collaborating with academia by conducting regular classes on stainless steel and its best fabrication practices for students of 6 leading engineering institutes.

4. Exhibitions: In order to inculcate a healthy ecosystem within the industry and promote stainless steel across sectors, the Company participated in more than 10 conferences and multiple exhibitions throughout the country. The highlights of the year were ‘Enterprise Odisha, conducted by CII East Chapter, and IREE 2021, conducted by Railways Ministry, GoI, at Pragati Maidan, Delhi.

5. Channel Partners Training Programs: The Company organised programs for its Channel Partners. It also undertook various training programs for the students of various institutes like NIFTEM, NSI and CIPHET. A remarkable achievement for the year came in the form of the introduction of 3-point elective courses in the curriculum of multiple prestigious engineering colleges in the country like IITs and NITs. The Company also signed an MoU with the Haryana State Board of Technical Education (HSBTE) to introduce a compulsory module on stainless steel comprising 10 lectures. The course has been included in the course curriculum of the 4th semester Mechanical Engineering students across all the 41 Government Polytechnics in Haryana.

6. Business Development: The Company pursued the following key business development activities:

A. Commercialization of Stainless Steel EV Rickshaws: Programs were conducted for EV rickshaw manufacturers, inviting them to understand the benefits of stainless steel used in EV rickshaws. The progress of the initiative and the interest shown by the manufacturers in stainless steel have enabled the production of more than 40% of EV rickshaws in the market in stainless steel.

B. BIS Standards: The Company is working on developing 18 BIS Standards in the food processing Industry. As this industry is quite unorganized with manufacturers/users buying small quantities of stainless steel from channel partners and other distributors, it is difficult to reach them directly. BIS standards will help in providing references to manufacturers, and in turn will contribute to increasing per capita consumption of stainless steel. After regular follow-ups and meetings with BIS, new standards are being built for increasing the usage of stainless steel in food processing and other markets. The Company is assisting BIS in the technical study of stainless steel for various food processing applications to support the process.

C. Industrial Grating: The Company successfully got the samples approved by Indiana Gratings and achieved a weight reduction of 40% with the use of stainless steel gratings.

D. Electric Poles: Stainless steel electric poles were installed in Mumbai. While poles were being tested and tried in the corrosive atmosphere of coastal regions, parallelly, the Company initiated the development of the BIS Standard for electric poles to help spread the use of stainless steel for this application in other non-coastal Municipal Corporations. With the help of its subsidiary - JSL Lifestyle Limited, the Company successfully developed 24 electric poles made of grade 304, and other 4 large poles are being developed in Ferritic Grades for the Hisar plant.

The Company is actively working on creating awareness and opportunities for the usage of stainless steel in varied applications. The Marketing department, in collaboration with Sales and Business development teams, has made a sector-focused approach to drive active awareness, positive consideration, and genuine purchase of material made out of Companys coils and sheets in the pipes & tubes segment. For the same, a cost-effective and robust pipes & tubes marketing plan (P&T Campaign 3.0), with ATL leg that went live in FY22, was activated in 75 cities across India. With the BTL leg running for a couple of months in Oct~Nov 2021 period, the P&T Campaign ran across 235 unique cities and towns pan-India with an intent to promote the ‘Jindal Saathi seal, a unique co-branded seal comprising logos of the Company and respective P&T manufacturers. The campaign was woven with an aim to establish the ‘Jindal Saathi seal as the mark of genuine ‘Made in India stainless steel. The campaign leveraged ATL and BTL media vehicles viz., OOH, Auto Branding, Bus Branding, Cab Branding, Digital and Social Media, with the refurbishing of the retailer as well as the fabricator sign boards, in-shop branding, etc. in order to drive engagement and education about ‘Jindal Saathi seal to various stakeholders.

As a part of this campaign, a digital P&T film was developed in the last quarter of the fiscal year, which was released through social media in March 2022. The film garnered huge success by catching 1 million eyeballs in just 4 days of going live on social media platforms.

The consistent and innovative marketing efforts of the Company have been successful in attracting substantial interest and demand for JSHLs offerings. Going ahead, JSHL will continue to take up various marketing development activities and build brand fondness, loyalty and purchase of JSHLs stainless steel offerings through potential business and existing consumers alike.

Government announcements impacting stainless steel sector

The governments vehicle scrappage policy is likely to benefit the stainless steel makers. This will help in increased availability of local scrap from domestic scrapping facilities, reduce import dependency of scrap, and curtail the import bill. This will aid the steel makers in reducing lead time and will provide flexibility on supply side.

In the Union Budget 2022-23, the Government had temporarily withdrawn the import duty on scrap (stainless steel and mild steel) and nickel imports. This augurs well for scrap-based players in India, where scrap generation is very low and when we are completely dependent on imports for our Nickel requirements.

Further, significant push on infrastructure including emphasis on development of metro rail projects and modernisation of railway infrastructure in different parts of the country and ports through PPP mode is encouraging.

THREATS

JSHL 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 robust internal control systems, which govern how it conducts its business and manages all associated risks.

The business of the Company is susceptible to certain risks and uncertainties arising out of the following macro-economic factors:

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.

Disruption Risks

The Company operates in a global environment and can be affected by the general unprecedented crises like the outbreak of COVID-19 pandemic. This crisis has severely impacted economic activity across the globe. The manufacturing industry globally has been under stress as the supply chain was disrupted with restrictions on movement of goods and growing market uncertainty. The pandemic also resulted in sharp volatility in raw material prices and disrupted the domestic and international demand for stainless steel.

Rising stainless steel imports from China and FTA countries

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 China and ASEAN countries is posing a threat to the outlook of the domestic industry. The Indian stainless steel manufacturers have been exposed to the threat of increased dumping of irrationally-priced imports after the government revoked anti-dumping and countervailing duties on stainless steel imports. This scenario of rising imports from China and FTA countries into India is a real threat to the domestic industry, especially the MSME sector. The suspension of duties is undermining domestic manufacturing and impacting the ‘Make in India campaign. It may impact the overall employment generation in the country and may push the industry into financial stress. This scenario could lead to a steep increase in channel inventories which would severely impact the overall pricing in the Indian market, and in-turn have an adverse impact on the Companys performance.

Lower exports due to exports duty levy

In May 2022, The Ministry of Finance imposed a 15% exports duty on certain stainless steel exports from the country. This has severely impacted the domestic stainless steel industry. On one hand, the domestic market is exposed to highly subsidized and dumped imports from China, Indonesia and other countries as all trade remedial measures were revoked in the last budget while on the other hand, domestic manufacturers are unable to sell in the exports market due to the levy of exports duty.

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.

RISK MITIGATION

To mitigate the negative impact caused due to the COVID-19 pandemic, the Company has taken various initiatives. JSHL has also been closely monitoring the external environment and optimizing operations to align with the market conditions.

JSHL continues to undertake modernization programs to maintain efficient operations of its products and engineering activities. The Company ensures that a majority of the products are contracted with pass-through clauses thereby minimising adverse impact from raw material fluctuation. Consistent focus on value-added products also helps JSHL in being insulated to a great extent from fluctuations in commodity prices.

Healthy cash flow generation and prudent financial management helped the Company in substantially reducing its overall debt. JSHL is confident of maintaining its consistent focus on maintaining a strong balance sheet.

The Company has also been working closely with the Indian Government and other regulatory authorities on the issue of unabated dumping in the country. JSHL is confident that the Indian Government will proactively review all the related issues and take necessary actions to provide a level-playing field to the domestic industry.

KEY MILESTONES ACHIEVED DURING FY22

Merger with Jindal Stainless Limited ("JSL") progressing well

JSHL Board approved merger of JSHL into JSL with a swap ratio of 1: 1.95. For each share held in JSHL, a shareholder will get 1.95 shares of JSL. The appointed date for the deal is April, 1, 2020 and it is likely to conclude in FY2023.

Key rationale of the merger:

Creating one of the largest stainless steel manufacturers in the world

• Merged entity - JSL, as an Indian MNC, to enter the league of top 10 global stainless steel producers

• Consolidation of stainless steel business into one entity with a total capacity of 1.9 million tonnes per annum (MTPA)

Product diversity with 360 degree reach and customer centricity

• Best of both worlds: Narrow/ wider width, >120 grades coupled with value-added specialties (razor blade, coin blanks, precision strips)

• A one-stop shop: Seamless integration of high volumes and niche offerings, catering to ever-growing demand from ABC, ART and SPD sectors

• Single window for sales and after-sales service and enhanced customer satisfaction and engagement

• Stronger global footprint and an extensive pan-India network to further bolster ‘Just-inTime delivery approach

Consolidation of complementing strengths

• Consolidation of modern ‘state of the art technology with experienced talent and R&D

• Enhanced operational synergy: JSLs port and raw material proximity and international finishing capabilities coupled with JSHLs strategically located facility in key domestic consumption centers

• Reinvestment opportunity for growth by leveraging ready infrastructure for cost-effective brownfield expansions

• Higher efficiencies with single listed entity Stronger financial position

• Simplified capital structure along with elimination of cross-holding and inter-company balances

• Stronger balance sheet and leverage ratios; Improving financial flexibility

• Unlocking value for all the stakeholders Progress update:

Post approval of the shareholders and creditors of JSL and JSHL on April 23, 2022, both the companies had filed the second motion petition with Honble NCLT, Chandigarh Bench. Honble NCLT, while hearing the second motion application on July 13, 2022, has directed to issue notice(s) to the sectoral regulator(s).

The meeting of creditors of JSL Lifestyle was also held on April 24, 2022, and the resolution proposing the merger was approved with the requisite majority.

The Company expects the process to be completed in due time within FY2023.

Upgrade in credit ratings

All the major credit rating agencies have increased their credit rating for the Company to AA- for the long term facilities, while credit rating for the short term facilities has been maintained at A1+.

PERFORMANCE HIGHLIGHTS - FY2022 VS. FY2021

	Standalone			Consolidated
Particulars (Rs in crore)	FY 2022	FY 2021	YoY (%)	FY 2022	FY 2021	YoY (%)
Net Revenue from operations	13549.2 9	8399.7	61%	15011. 36	9400. 29	60%
Total Expenditure	11609.3 0	7397.1 3	57%	12858. 09	8273. 25	55%
EBITDA	1939.99	1002.5 7	94%	2153.2 7	1127. 04	91%
Other Income	114.09	95.26	20%	119.07	107.2 2	11%
Finance Cost	112.43	235.71	-52%	131.24	250.9 4	-48%
Depreciation	226.90	265.89	-15%	250.08	290.3 8	-14%
PBT	1714.75	636.3	169%	2435.6 3	880.0 8	177%
Tax	439.52	158.52	177%	488.39	184.4 8	165%
PAT	1275.23	477.78	167%	1947.2 4	695.6	180%
EPS (Diluted) in INR	54.05	20.25	167%	82.33	29.4	180%

The standalone net revenue from operations stood at Rs. 13,549.29 crore in FY2022 as compared to Rs. 8,399.7 crore during previous year 2020-21. The sales volumes stood at 702,168 metric tonnes, registering a year-on-year increase of 22% as strong demand recovery could be seen backed by improved economic activities. The Company reported a robust 32% year-on-year growth in its Specialty Products division during the year.

Standalone EBITDA stood at Rs. 1939.99 crore as compared to Rs. 1,002.57 crore during previous year, showing a growth of 94%. During FY2022, interest costs declined by 52% to Rs. 112.43 crore. With strong operational performance, PAT grew by 167% during the year to Rs. 1275.23 crore. EPS for the year was Rs. 54.05 against Rs. 20.25 for the previous year.

Description - Borrowings (Rs. crore)	As on March 2022	As on March 2021	As on March 2020
Long term debt	1205	1250	1,929
Short term borrowing (less than 12 months)	421	127	90
Total Debt	1626	1376	2,019
Cash & Bank Balances	21	8	19
Net Debt	1605	1368	2,000
Long Term Debt Breakup:
-INR Debt	1205	1250	1,929
-Foreign Currency Debt

Borrowings (Subsidiaries) (Rs. crore)	As on March 2022	As on March 2021	As on March 2020
Long term debt	31	41	33
Short term borrowing (less than 12 months)	171	64	129
Total	201	104	162

On a standalone basis, JSHLs net debt stood at Rs. 1,605 crore as of 31^st March 2022. As against FY2020 figure, this is lower by Rs. 395 crore. Long term debt reduced by Rs 145 crore On the back of healthy cash flows, the Company has been able to strengthen its balance sheet as its Net Debt/Equity ratio has improved from 1.4x in FY19 to 0.6x in FY21 and Net Debt/ EBITDA ratio improved from 2.4x in FY19 to 1.4x in FY21. Despite challenges, the company reduced its total debt by Rs 643 crore during the year to Rs 1376 crore.

KEY FINANCIAL RATIOS

Key Financial Ratios - Standalone	FY22	FY21	FY20
EBITDA margin (%)	11.9%	11.9%	10.3%
PAT Margin (%)	5.7%	5.7%	3.8%
Net Debt to Equity	0.4	0.6	1.1
Net Debt to EBITDA	0.8	1.4	2.3
Return on Equity (%)	43.2%	23.0%	19.1%
Return on Capital employed (%)	40.6%	19.8%	15.6%
Debtors Turnover	11.7	11.7	11.5
Inventory Turnover	6.2	5.4	5.7
Interest Coverage Ratio	18.3	4.7	3.2
Current Ratio	1.8	1.1	1.1

 

Return on Equity (ROE) has been improving over last couple of years primarily due to stronger operating performance of the company and despite substantial reduction in debt position. During FY2022, supportive macro- economic scenario, recovery in demand across segments following relaxation in COVID 19 restrictions, strong export markets, rising raw material prices along with wide product range and agile business strategy helped superior operating performance.

* Net Debt to Equity is calculated as Total Debt less Cash and Bank Balance / Equity

* Net Debt to EBITDA is calculated as Total Debt less Cash and Bank Balance /EBITDA

* ROE (%) is calculated as PAT/ Avg. Networth

* ROCE(%) is calculated as Earning before Depreciation, Interest & Tax/Avg. Capital employed

* Inventory Turnover is calculated as COGS including employee cost, manufacturing & Admin Expenses and depreciation /Avg. Inventories

* Debtors Turnover is calculated as Sales /Avg. Account Receivable

* Interest Coverage Ratio is calculated as Earning before Depreciation, Interest, Tax & Exceptional Items / Finance cost

* Current Ratio is calculated as Current Asset /Current Liabilities

With strong demand recovery JSHLs sales volume was recorded at 702,168 tonnes in FY22. JSHLs consolidated revenue from operations stood at Rs. 15,011.36 crore as compared to Rs. 9,400.29 crore. Consolidated EBITDA stood at Rs. 2,153.27 crore in FY2022 as compared to Rs. 1,127.04 crore in FY2021. PAT for the year stood at Rs. 1,947.24 crore as compared to Rs. 695.6 crore during previous year. EPS for the year was Rs. 82.33 against Rs. 29.4 for the previous year.

AWARDS AND ACCOLADES - FY22

In pursuit of bringing excellence in overall business, JSHL has undertaken various initiatives under operational excellence and has bagged various awards and recognition during FY22. Some of them are-

1. International Safety Award 2021 by the British Safety Council for the second consecutive year.

2. National Safety Award 2018 by the Ministry of Labour and Employment, Government of India.

3. Energy and Environment Foundation Global Sustainability Award 2021 (Platinum category) for the second consecutive year.

4. Excellent Energy Efficient Unit by Confederation of Indian Industry (CII).

5. Energy Conservation Award 2020 by HAREDA (Haryana Renewable Energy Development Agency).

INTEGRATED MANAGEMENT SYSTEMS

Quality & Quality Management Systems Quality Management System (ISO 9001:2015)

In order to deliver world-class quality and achieve global service standards, JSHL has adopted the internationally recognized quality management system (QMS) (ISO 9001) that not only ensures that the customers requirements are fulfilled across each stage of processing, but also aids the organization to compete globally- both in product and process quality. As part of its approach towards manufacturing excellence under the ISO 9001 regime, JSHL has also upgraded its QMS to comply with the requirements of ISO 9001:2015. The results range from improved consistency in operations to improved customer satisfaction to international recognition.

Energy Management System- ISO 50001:2018

JSHLs commitment towards a sustainable and green environment has been demonstrated by ISO 50001 certification. Through ISO 50001:2018 implementation, JSHL demonstrates its intent of being a better corporate citizen with reduced wastes, proper utilization of resources, and improved upon carbon footprint.

Pressure Equipment Certification (EU)- AD 2000-Merkblatt W0

The products of JSHL are also certified for Pressure Equipment Certification (EU)- AD 2000- Merkblatt W0. This certification demonstrates JSHLs capability to meet the stringent requirements of the European Union for pressurized vessel applications like boilers, pressure vessels, valves, etc. Recently, the product portfolio for the PED and AD certifications has been upgraded to include long products as well.

Chemical Lab accreditation in accordance with ISO/IEC by NABL- ISO/IEC 17025:2017

The NABL accreditation for the chemical and mechanical labs demonstrates JSHLs technical competence in the field of chemical testing. It raises customer confidence in the test results issued by the laboratory with universal acceptability in the open market which provides greater access for their products, in both domestic and international markets.

Occupational Health & Safety- BS OHSAS 18001:2007

JSHL, being a BS OHSAS 18001 certified organization demonstrates its commitment to instigate proper and effective management of health and safety in the workplace, thus minimizing the risks to its workforce and visitors or external contractors on their premises. Cost savings and a reduction in accidents are just two of the many benefits accrued.

AS 9100D Certification

JSHL became the first integrated stainless steel manufacturing company in India producing coils, sheets and plates, and among the select few in the world, to get certified with AS 9100D Certification, a Quality Management System for Aviation, Space, and Defence Organizations. The Certification validates JSHLs competence to constantly meet highly stringent standards of the aerospace industry. It also enables JSHL to get listed in OASIS, the Online Aerospace Supplier Information System database, which showcases the Company offerings to aerospace manufacturers.

Environment, Safety and Fire

JSHL is committed to promoting and protecting the health, safety and well-being of its people. The Companys vision is to create the healthiest and safest workplace with zero harm culture. Health, safety, and environment are key performance indicators and prime drivers of the Companys corporate vision. Relevant stakeholders participate in management of change process. Mental health and wellbeing of employees are monitored periodically.

In an endeavour to achieve vision "zero incident" in health, environment, and safety, several new initiatives were implemented for enhancement of skill and awareness at all levels among employees.

Monthly safety campaigns have been arranged on various topics based on risk assessment and category of incidents happened earlier. Companys training programs and safety initiatives are based on root cause analysis of incidents as well as anticipated risks associated in job. JSHL has strengthened selection criteria of contractors with their safety performance prioritized over other selection criteria. Method of statement is made mandatory for all contractors and critical jobs to meet Companys safety standards.

Due to an online safety portal, near-misses, nodal officer compliances, and other safety observations are more effectively captured. JSHL has assessed all critical risks and disaster conditions. In line with them, the Company has strengthened its emergency management system. JSHL is periodically conducting mock drills, taking consideration into all potential risks of disaster.

The Company has focused its safety programs on: inspection and audits, using internal and external benchmarking to drive health and safety improvements; behaviour safety, raising awareness of safety issues and reinforcing it consistently with employees via regular communication through EHS leader meetings, safety briefings, nodal officers, safety committees, etc.

JSHLs powerful approach encompassing leadership, organization, and operational components that guide it on a journey to zero injuries and incidents are: strong and visible management commitment, line management accountability and responsibility, supportive SHE personnel, high standards of procedures and performance, continuous training and development, effective twoway communication, progressive motivation and awareness, behaviour-based safety trainings, and audits, and thorough investigations and reports and implementations of CAPA.

At JSHL, safety is a core value. The Company today has a single safety philosophy: all incidents are preventable and the goal is Zero.

Environment

In the pursuit of excellence in sustainable environment, JSHL has taken various measures towards environment protection by way of efficient use of all key resources through its effective management, technological advancement, and environmentally sound workforce for up- gradation of Integrated Management System (IMS)- including ISO 9001: 2015 for Quality Management System (QMS), ISO 14001:2015 for Environment Management System (EMS) and ISO 45001:2018 Occupational Health and Safety Management system in line with the requirement.

Environment surveillance monitoring of air quality (ambient air and stack), water quality, and noise at various locations is being regularly carried out. 8 PTZ Camera have been installed at various locations inside the plant for round-the-clock supervision of process emission and 2 IP Based PTZ cameras have been installed at ETP plants. Various environmental measures have been taken for control of air pollution. The fume extraction system is updated for steel melting shops.

As a part of compliance towards pollution prevention and sound environmental performance, JSHL has made substantial efforts in the last few years. To be harmony with nature and green environment, JSHL has undertaken mass plantation programs in and around the plant. As on 31st March, 2022, JSHL has undertaken plantation of more than 2,15,560 Lakh trees, palms, and shrubs inside and outside plant.

JSHL is committed towards sustainable clean and green environment with compliance to all statutory obligations.

HUMAN RESOURCES

The bedrock of JSHLs success is the relentless effort put in by its workforce. In turn, the Company continues to nurture an environment where its employees can continuously work on innovation in processes and products, and skill enhancement for themselves. During FY22, we rolled into yet another year full of uncertainty and challenges caused by the pandemic and several macroeconomic developments. However, you the Company could sail through rough waters, saving our business along with the lives of people around us, due to the unwavering spirit of its employees.

The Companys core concentration last year was enhancing people care and employee wellbeing. As the second wave of COVID-19 strained the national health care infrastructure, your Company organized free vaccination drives for all its employees and their family members, along with 676 employee health check-up camps. Your Company also announced special financial assistance for all the families of late employees, who lost an earning member due to the pandemic. Along with this, JSHL organized regular sessions on mindfulness for its people in association with the Brahma Kumaris. As a matter of practice, 40-minute sessions are conducted across the Company on a weekly basis, with more than 200 employees attending them at any given time.

On the Learning & Development front, our keen focus on digitisation is creating an environment which enhances competency, capability and work efficiency. JSHL took up various programs in order to inculcate and propagate the Companys 17 key competencies among employees. Structured training programs across levels helped cater to the training needs of employees, with the Being Better - Emerging Leaders (BB) program designed for nearly 700 Managers and Senior Managers, and the Aspire & Achieve program tailored for over 750 Associate and Deputy Managers. Lastly, two batches of the year-long flagship leadership development program, Masterful Management, were launched for Associate General Managers and Deputy General Managers to groom them for leadership positions. On the skill upgradation front, 2332 programs were conducted through the year. The Company achieved 17,841 human-days of training with nearly 31,246 employees participating in these training programs during the financial year.

To strengthen the culture of high performance and meritocracy, JSHL follows a continuous performance management system with all managerial employees. Acknowledging and rewarding relentless efforts, even through unprecedented challenges, the Company revised the overall compensation structure for employees with effect from April 1, 2022, based on individuals contribution and annual performance. The hard work and dedication of our people brought the Company laurels in the form of Golden Peacock National Award 2021, Fortune Indias Employers of the Future-2022 Award, Transformance Business Medias Gamification in Learning and Young L&D Leader Awards for 2022, and Economic Times Future-Ready Organisation 2022 Award, among others.

On the hiring front, JSHL adopted virtual recruiting strategies to onboard the best talent to fulfill the vision and mission of the organisation. Living up to its deep sense of community, JSHL organized various employee engagement activities during the year, including World Environment Day activations, tree plantation drives, and awareness sessions. Although most of Companys sporting events were limited to online, our employees participated in huge numbers to make them a success. Along with the Founders Day, Pro Kabaddi League, Annual Cricket League, Townhall Meetings, and quarterly Rewards & Recognition ceremonies, JSHL also organized various cultural activities like ‘Roobaro and Durga Puja following COVID-related safety norms.

WAY FORWARD

A major emphasis is being laid in development of new applications through business development activities and an ecosystem is being developed to facilitate use of stainless steel. With the development of BIS Standards, product references will be available in the Industry to facilitate use of stainless steel in various food processing equipment. Secondly, implementation of Skill India program will help in improving skills of fabricators on mass scale basis thereby making skilled people available in the Industry for fabricating many more products in stainless steel. As the market leader, JSHL is committed towards increasing awareness of stainless steel.

JSHL continues to enhance focus on better product mix with higher proportion of Specialty Products in its portfolio. Merger with JSL will help in consolidation of complementing strengths with stronger financial positioning.

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.