JSW Holdings Ltd Management Discussions.

1. BACKGROUND

JSW Holdings Limited (JHL or the Company) is a Core Investment Company (CIC) in terms of the Core Investments Companies (Reserve Bank) Directions, 2011. As a pre-requisite condition the Company is required to have 90% of its investments, loans, advances, etc. in its Group Companies. Therefore, the Company grants loan(s)/ advance(S) and provides guarantee(s)/ security(ies) to only its Group Company(ies) in its ordinary course of business and at arms length.

The Company continues to hold significant investments in equity shares of JSW Steel Limited, besides holding certain other investments in other Companies of JSW Group. The Company will continue to focus on making long-term strategic investments in various new ventures promoted by JSW Group, besides consolidating the existing investments through further investments in the existing companies.

Your Company continues to hold 7.50% equity shares of JSW Steel Limited, the market value of which, as on March 31, 2021, stood above Rs.8,400 crores. The Company also holds other strategic investment in JSW Group, the details of which are provided elsewhere in this report

2. OVERVIEW OF FINANCIAL AND OPERATIONAL PERFORMANCE

Your Company follows Indian Accounting Standards (IndAS) for preparing its financial statements, in compliance with the requirement of the Companies Act, 2013, as amended and regulations issued by the Securities and Exchange Board of India (SEBI) from time to time.

Your Company has recorded a very good performance during the Financial Year 2020-21 on Standalone as well as Consolidated basis. Below is a brief quantitative overview of the financial and operational performance of your Company during the reporting period. This Report should be read in conjunction with the Companys financial statements and other information included elsewhere in this Annual Report.

A. Standalone Results:

Your Company has recorded a very good performance during the year under review. The Company during the year has received, an income by way of Dividend of Rs.3,628.05 Lakhs, Interest of Rs.4,893.92 Lakhs, Pledge Fees of Rs.759.22 Lakhs. The Total Revenue forthe year is Rs.9,281.19 Lakhs as against Rs.12,101.45 Lakhs in the previous financial year. The Profit before interest, depreciation and tax for the year is Rs.8,779.86 Lakhs and after providing for interest Rs.6.76 Lakhs, depreciation of Rs.2.59 Lakhs and Tax of Rs.2,199.99 Lakhs, the Net Profit for the year is Rs.6,570.52 Lakhs as against Rs.10,406.49 Lakhs in the previous financial year, a decrease of around 36.86%.

B. Consolidated Results

Your Company has recorded a very good performance during the year under review. The Company during the year has received an Income by way of Dividend of Rs.3,628.05 Lakhs, Interest of Rs.4,893.92 Lakhs, Pledge Fees of Rs.759.22 Lakhs. The Total Revenue for the year is Rs.9,281.19 Lakhs as against Rs.12,101.45 Lakhs in the previous financial year. The Profit before interest, depreciation and tax for the year is Rs.8,779.86 Lakhs and after providing for interest of Rs.6.76 Lakhs, depreciation of Rs.2.59 Lakhs and Tax of Rs.2,199.99 Lakhs, the profit after tax but before Share of Profit from Associates is Rs.6,570.52 Lakhs. The share of Profit from Associates is Rs.950.98 Lakhs and Consolidated Profit after tax for the year is Rs.7,521,50 Lakhs as against Rs.10,643.82 Lakhs in the previous financial year, a decrease of around 29.33%.

Significant changes in Key Financial Ratios As compared to the figures of previous year, your Companys Return on Net Worth for the year has reduced by 64% owing to significant decrease in the dividend income for the year corresponding resulting in decrease of net profit of the Company. Current Ratio of the Company has also decreased significantly, i.e. by 46% in view of decrease in current assets and increase in current liabilities. Except for this, there is no significant change (i.e. change of more than 25%) in any other key financial ratios during the current financial year as compared to immediately preceding financial year.

3. OUTLOOK

A. INDIAN ECONOMY OVERVIEW FY 2020-21

• Economic Growth

The Indian Economy and the World Economy faced the unrivalled turmoil with the outbreak of novel COVID-19 pandemic which emerged as the biggest threat to the economic growth not only of the country but to the world in general. COVID-19 pandemic followed by the lockdowns and social distancing norms brought the already slowing global economy to a standstill. With an annual contraction of 8% in GDP, FY 2020-21 has been the worst year in terms of economic performance in India since 1950-51. The FY 2021-22, unfortunately, isnt beginning well, with at least some restrictions imminent on account of the ongoing second wave of COVID-19 infection. However, the Country has adopted the policy of saving Lives and Livelihoods amidst a Once-in-a-Century Crisis. This strategy flattened the curve and post September 2020 peak, a V-shaped recovery, was seen.

• Equity Market

The year 2020-21 has been a roller coaster for the Indian equity markets. From the lows seen during the end of 2019-20 on account of the COVID-19 induced lockdown, the markets recovered to reach new highs in the last quarter of FY 2020-21 after vaccines against COVID-19 were approved and rolled out. BSE Sensex, the benchmark equity index of BSE, fell to 25,981.24 on March 23, 2020 its lowest value since December 26, 2016, but then rose to 52,516.76 on February 16, 2021 its highest ever value. It closed trading at 50,136.58 on March 30, 2021. Similarly, Nifty also gained 69-71% in F.Y. 2020-21, hitting record highs multiple times, with Nifty Midcap 100 and Nifty Smallcap 100 rising over 100.04% and 128.31%, respectively.

• Steel Industry

The Indian steel industry accounts for about 2% of the countrys GDP and is one of the core sectors, deriving its demands from sectors like automobiles, consumer durables and infrastructure. Steel demand remained subdued in FY2020-21, largely due to lower consumption from construction, auto, infrastructure, real estate, and manufacturing industries. Further, the slowdown in the governments infrastructure investments and credit tightness, due to COVID-19 containment measures, impacted demand and consequently weighed on pricing.

According to the Joint Plant Committee, crude steel production declined by 1.5% YoY to 109.2 MnT (Million Tonnes) in FY20, whereas finished steel production grew 0.8% YoY to 102.1 MnT; non-alloy steel accounted for 96% (up from 93%), or 97.7 MnT, while alloy steel contributed the balance 4.4 MnT. India remained a net exporter of finished steel during FY20, with exports of 8.4 MnT, up 31.4% YoY. Finished steel consumption grew by 1.4% YoY to 100 MnT during FY20.

FY-20 witnessed the successful auction of 20 iron ore blocks in India, with combined reserves of 583.1 MnT. Further, the Odisha government also auctioned 22 iron ore merchant mines, of which, 19 were auctioned at a premium of 91-154%. Government also imposed anti-dumping duty on imports from China, South Korea and Vietnam, ranging from US$ 28-200/ton, to ensure iron ore availability for domestic manufacturing;

B. Future Prospects

The Indian steel industry accounts for about 2% to the countrys GDP with an output multiplier of 1.4x and an employment multiplier of 6.8x. Being a core sector, it also tracks the overall economic growth and derive its demand from other sectors like automobiles, consumer durables and infrastructure. The steel industry has seen major investment in the recent years.

Steel demand which largely remained subdued in FY20, due to lower consumption from construction, auto, infrastructure, real estate, and manufacturing industries, have seen a V shape recovery and is expected to grow by 7.2% in 2020-21.

With the country looking to modernize, expand and accommodate the aspirations of a growing population through urbanization and industrialization, steel consumption growth is expected to rise on account of government expenditure on infrastructure and manufacturing in the long run. The Dedicated Rail Freight Corridor (DRFC) network expansion and the implementation of city gas distribution network, the demand for steel is expected to increase many folds.

With the Aatmanirbhar Bharat Abhiyan, the Government has urged all the stakeholders in the steel industry to come together and utilize only domestically produced steel. Additionally, the global tendering of government purchases up to Rs.2 billion were waived off, hence widening the protection shield for MSMEs from the competition. The Ministry of Steel has suggested three models for states to implement setting up a greenfield unit for steel with a capacity of over 4 MnT. The greenfield investments will enable the Ministry of Steel to achieve its 160 MnT domestic steel consumption target by 2024-25. National Mineral Development Corporation (NMDC) is expected to invest US$1 billion on infrastructure in next three years to boost iron production.

4. OPPORTUNITIES, THREATS AND DEVELOPMENTS

India has emerged as the fastest growing major economy in the world and is expected to be one of the top three economic powers in the world over the next 10-15 years, backed by its robust democracy and strong partnerships. Despite the persistence of slowdown in global manufacturing trade growth, COVID-19 Pandemic, followed by lockdown and social distancing norms, the Economic growth of India was ensured by the government through various financial stimulus packages, announced by the Government of India. In November 2020, the Government of India announced Rs.2.65 lakh crore (US$ 36 billion) stimulus package to generate job opportunities and provide liquidity support to various sectors such as tourism, aviation, construction and housing. Also, Indias cabinet approved the production-linked incentives (PLI) scheme to provide Rs.2 trillion (US$ 27 billion) over five years to create jobs and boost production in the country. The COVID-19 pandemic, which affected the countries across the world have impacted the industry heavily during the first quarter of FY 2020-21. As per the estimates of Indian Steel Association steel demand in India is expected to increase in calendar year 2021 by 7%.

The stimulus measures and reforms initiated by the Government and liquidity measures by the RBI are expected to support industrial activity and demand. The movement of various high frequency indicators in recent months, points towards broad based resurgence of economic activity. The launch of Covid-19 vaccination programme in the Country will further add momentum to the economic recovery

The Company, being a CIC, holds significant investments in equity shares of JSW Steel Limited, besides certain other investments in other JSW Group of Companies, as a result of which it remains less affected by the overall environment in the NBFC Sector.

The Company recognizes that there is a significant potential for increase in steel demand in India. Various government initiatives, including Make in India, Aatmanirbhar Bharat Vocal for Local projects, increased spending on infrastructure and increased focus on rural development are likely to support increase in domestic demand for steel, providing opportunities for domestic steel players. Government has taken various steps to boost the sector including the introduction of National Steel Policy 2017 and allowing 100% Foreign Direct Investment (FDI) in the steel sector under the automatic route. In September 2020, the Ministry of Steel prepared a draft framework policy for development of steel clusters in the Country and have also introduced Steel Scrap Recycling Policy to reduce import. With the Country looking to modernize, expand and accommodate the aspirations of a growing population through urbanization and industrialization, the steel consumption growth is expected to rise on account of government expenditure on infrastructure and manufacturing in the long run.

JSW Steel Limited, one of the major investment of your Company, is in the capacity expansion mode, which would be achieved in the next fiscal year. It has also made various domestic as well as cross-border acquisitions in order to reap benefits in the long term.

All these factors point towards a high growth potential for Indian steel industry within India and a bright prospect for Indian Steel Manufacturers. As a result of which, the Company is looking forward for a sustainable growth in its investee Companies in the coming years which would enhance the shareholders value. The Company expects to enhance its entrenched value for the benefit of the shareholders at large.

5. GOVERNMENT INITIATIVES

The recent initiatives and a rejuvenated impetus to MAKE IN INDIA which was launched in 2014 given by the Government of India aims to make the country self-reliant in all manufacturing sectors. The government has given an impetus to the MSME sector by doubling the allocation of funds to the MSME Ministry. The Government has also proposed to set up a Development Finance Institution to finance infrastructure projects and equity infusion of INR 200 billion for public sector banks. The government aims at capital recycling for investing in new infrastructure by monetising operating public infrastructure assets though a National Monetization Pipeline of potential brownfield infrastructure assets and monitoring progress - across roads, pipelines, warehouses, airports, transmission, railways and stadiums.

With the reduction in customs duties on steel products, the imports are expected to rise. Changes in customs duty raw materials and inputs used by domestic manufacturers for reducing cost of inputs will likely give a boost to the EAF steelmaking route and secondary steel sector. The infrastructure push will create demand for key input materials such as cement, steel and aluminium, which will in turn drive the demand for minerals - limestone, iron ore, bauxite, etc. The Governments vision for Aatmanirbhar India, aims to incentivise global and domestic manufacturers to engage in high-volume, high value production hereby increasing self-reliance and also, increasing exports. The disinvestment step is taken by the government towards attracting private participation in the steel sector, with the potential to bring in the latest world- class technologies.

Some of the other recent Government initiatives in this sector are as follows:

• In September 2020, the Ministry of Steel prepared a draft framework policy for development of steel clusters in the country.

• On October 1, 2020, Directorate General of Foreign Trade (DGFT) announced that steel manufacturers in the country can avail duty drawback benefits on steel supplied through their service centres, distributors, dealers and stock yards.

In December 2020, the Minister for Petroleum & Natural Gas and Steel, Mr. Dharmendra Pradhan, has appealed to the scientific community to Innovate for India (I4I) and create competitive advantages to make India Aatmanirbhar.

• Government introduced Steel Scrap Recycling Policy to reduce import.

• An export duty of 30% has been levied on iron ore (lumps and fines) to ensure supply to domestic steel industry.

• The Union Cabinet, Government of India approved the National Steel Policy (NSP) 2017, as it intends to create a globally competitive steel industry in India. NSP 2017 envisage 300 million tonnes (MT) steel-making capacity and 160 kgs per capita steel consumption by 2030-31.

• The Ministry of Steel is facilitating setting up of an industry driven Steel Research and Technology Mission of India (SRTMI) in association with the public and private sector steel companies to spearhead research and development activities in the iron and steel industry at an initial corpus of Rs.200 crores (US$ 30 million).

6. INDUSTRY STRUCTURE

With a size of around 15% of Scheduled Commercial Banks combined balance sheet, the NBFC sector has been growing robustly in recent years, providing an alternative source of funds to the commercial sectorin the face of slowing bank credit. NBFC-ND-SI (Systematically Important Non-Deposit accepting NBFCs) comprise 85.4% of the total balance sheet size of the NBFC sector. Whereas the balance 14.6% accounted by NBFC-D (Deposit accepting NBFCs). Although in the FY 2020-21, the concerns surrounding the sector due to debt defaults amidst temporary asset liability mismatches arose, the inherent strength of the sector, coupled with the Reserve Banks continuing vigil on the regulatory and supervisory front, will ensure that the growth of the sector is sustained and liquidity fears are allayed.

Speaking in particular about the Indian Steel Industry, the steel demand is derived from other sectors like automobiles, consumer durables and infrastructure, its fortune is dependent on the growth of these user industries. The Indian steel sector enjoys advantages of domestic availability of raw materials and cheap labour. Iron ore is also available in abundant quantities. This provides major cost advantage to the domestic steel industry.

The Competition in Indian Steel Sector is very high owing to a presence of a large number of players in the unorganized sector, imports from China, Russia and FTA (Free Trade Agreement) Countries such as Japan and South Korea.

7. RISKS & CONCERNS

The growth in global steel demand is expected to steadily increase in 2021 and witness a sharp rise. COVID-19 pandemic, a slowing global economy, and uncertainty surrounding trade policies and the political situation in many regions suggest a possible moderation in business confidence and investment. Uncertainty over the global trade environment and volatility in the financial markets have not yet subsided and could pose downside risks to this forecast.

The financial year 2020-21 has been one of the worst years that the unprecedented pandemic has had a devastating impact on the world economic growth and 2021-22, isnt beginning well, with at least some restrictions imminent on account of the ongoing second / third wave of infections. The evolution of the virus and progress of vaccinations, withdrawal of supportive fiscal and monetary policies, geopolitics and trade tensions could all affect the recovery envisaged in this forecast.

The operations of JSW Steel Limited (JSL) have a major impact on the profitability of the Group and that of your Company. The Company continuously evaluates its investments in such company to ensure that the same meets the objective of ensuring maximisation of value to all its stakeholders in a prudent manner. The Company expects to make full use of the growth opportunities available to it as a CIC, however, the challenge remains on being able to leverage these initiatives to carve out a space in the competitive industry, within the regulatory and compliance framework.

8. MATERIAL DEVELOPMENTS IN HUMAN RESOURCE/ INDUSTRIAL RELATIONS FRONT

There have been no material developments in Human Resource and Industrial Relations front during the F.Y. 2020-21. Given the nature of business your Company is engaged in; it does not require Human Resources at a large level. Your Company continues to employ two employees to look after the business and administration of the Company. The Company has engaged service of a Consultant on contractual basis and had also hired a trainee during the year 2020-21.

9. INTERNAL CONTROLS, AUDIT AND INTERNAL FINANCIAL CONTROLS

Overview

The Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. A robust system of internal controls, commensurate with the size and nature of its business, forms an integral part of the Companys corporate governance policies.

Risk Management

Managing risk is fundamental to financial services industry. It is a basic key to ensure sustained profitability and stability. While risks are assumed after appropriate considerations, some risks may arise due to unintended consequences of internal actions or external events. The Company views Risk Management as one of its core competencies and tries to ensure that risks are identified, assessed and managed in a timely manner. The Companys Risk Management framework aligns risk and capital management to business strategies, aimed to protect its financial strength, reputation and ensures support to business activities for adding value to customers while creating sustainable shareholder value.

Compliance

The Company is committed to adhere to the highest standards of compliance with respect to regulatory matters as well as its internal norms and guidelines. An independent Compliance function, headed by the Company Secretary, has been set up to assist the Management in designing the compliance framework and risk and manage these by framing appropriate policies, procedures, oversight, etc. It also provides advisory support by reviewing policies and products rolled out by the Company and has in place the required framework for transactions monitoring and testing the implementation of the regulations, ensuring right governance structures and handling the regulatory relationships, including proactively engaging with the Regulators for industry level initiatives. The Company continues to exhibit "zero tolerance" towards any non-compliant behavior and violations have attracted disciplinary consequences, in line with the companys stress on "Clean Business Everywhere, Every time".

Internal Control

The Company has a proper and adequate system of internal controls, commensurate with the size and nature of its business to overview the Companys policy and to maintain an adequate check a balance mechanism. Internal control systems are integral to corporate governance. Some significant features of the internal control systems are:

• Adequate documentation of policies, guidelines, authorities and approval procedures covering all the important functions of the Company.

• Ensuring complete compliance with laws, regulations, standards and internal procedures and systems.

• De-risking the Companys assets/ resources and protecting them from any loss.

• Ensuring the integrity of the accounting system and a proper and authorised recording and reporting of all transactions.

• Preparation and monitoring of annual budgets.

• Ensuring a reliability of all financial and operational information. Audit Committee, a sub-committee of the Board of Directors, comprising of Independent Directors. The Audit Committee regularly reviews audit plans, significant audit findings, adequacy of internal controls, compliance with Accounting Standards, etc.

• The internal control systems and procedures are designed to assist in the identification and management of risks, the procedure-led verification of all compliances as well as an enhanced control consciousness.

Internal Audit

JSW Holdings Limited has an internal audit function that inculcates global best standards and practices of international majors into the Indian operations. The Company has a strong internal audit department reporting to the Audit Committee comprising Independent Directors who are experts in their fields. The Company extensively practices delegation of authority across its team, which creates effective checks and balances within the system to arrest all possible gaps. The internal audit team has access to all information in the organization.

The Internal Audit Department prepares a risk-based audit plan. The frequency of the audit is decided by risk ratings of areas/functions. The audit plan is carried out by the internal team and reviewed periodically to include areas that have assumed significant importance in line with the emerging industry trend and the aggressive growth of the Company. In addition, the Audit Committee also places reliance on internal feedback and other external events for inclusion into the audit plan.

Internal Financial Controls

As per Section 134(5)(e) of the Companies Act, 2013, the Directors have an overall responsibility forensuring that the Company has implemented a robust system and framework of internal financial controls. This provides the Directors with reasonable assurance regarding the adequacy and operating effectiveness of controls with regards to reporting, operational and compliance risks. The Company has devised appropriate systems and framework, including proper delegation of authority, policies and procedures; effective IT systems aligned to business requirements; risk-based internal audits; risk management framework and a whistle blower mechanism.

The Company had already developed and implemented a framework for ensuring internal controls over financial reporting. This framework includes entity-level policies, processes and Standard Operating Procedures (SOP). The entity-level policies include antifraud policies (such as code of conduct, confidentiality and whistle blower policy) and other polices (such as organization structure, insider trading policy, HR policy, etc.). The Company has also prepared SOP for each of its processes. During the year, controls were tested and no reportable material weakness in design and effectiveness was observed.

10. CAUTIONARY STATEMENT

Statements in this Management Discussion and Analysis describing the Companys objectives, projections, estimates and expectations may be forward looking within the meaning of applicable laws and regulations. Actual results may differ from those expressed or implied. Important factors that could make a difference to the Companys operations include global economy, political stability, stock performance on stock markets, changes in government regulations, tax regimes, economic developments and other incidental factors. Except as required by law, the Company does not undertake to update any forwardlooking statements to reflect future events or circumstances. Investors are advised to exercise due care and caution while interpreting these statements.