jsw ispat special products ltd share price Management discussions

1. Economic Review

1 Global Economy

After having witnessed severe contraction in CY 2020, owing to the uncertainty induced by Covid-19 and disruptions to economic activity, the global economy stabilised in CY 2021 driven by pent-up demand. As per the International Monetary Funds (IMF) World Economic Outlook: April 2022, the global real GDP has grown by 6.1% in CY 2021 in comparison to the CY 2020, where there was a contraction of 3.1%.

I n the first-half of CY 2021, the economy witnessed disruptions owing to the rapid spread of the Delta variant. Subsequently, as the caseload gradually declined and with the improved scale of vaccination efforts, the economic activity witnessed steady revival. Increase in consumer spending and greater liquidity, helped improve business investment.

Backed by increased inventory investment and increased service spending, the United States is estimated to have grown by 5.7% in CY 2021. However, going forward with the Build Back Better fiscal policy coming to a halt and Federal Reserves decision to tighten monetary policy, the economy is expected to witness some headwinds in CY 2022.

In Europe, industrial production was impacted by supply bottlenecks and higher energy prices in CY 2021. Hence, even as the economy continued to recover, growth was moderating. Moreover, with the spread of the new Covid-19 variant, recovery in services sector was impacted and weighed on growth prospects. In CY 2021, Euro Area is estimated to have grown by 5.3%.

Chinas growth witnessed some headwinds owing to stronger-than-anticipated fiscal tightening, uncertainty in the property sector, surging coal prices and supply chain disruptions. In China, with pandemic related restrictions and slowing property sector; consumer spending and investment considerably shrunk. In CY 2021, China is estimated to have grown by 8.1%.

Region	Year over Year Projections			Difference from January 2022 WEO
	2020	2021	2022 (F)	2021	2022
World Output	-3.1	6.1	3.6	0.2	-0.8
Advanced Economies	-4.5	5.2	3.3	0.2	-0.6
United States	-3.4	5.7	3.7	0.1	-0.3
Euro Area	-6.4	5.3	2.8	0.1	-1.1
Japan	-4.5	1.6	2.4	0	-0.9
United Kingdom	-9.3	7.4	3.7	0.2	-1
Emerging Market and Developing Economies	-2	6.8	3.8	0.3	-1
Emerging and Developing Asia	-0.9	7.3	5.4	0.1	-0.5
China	2.2	8.1	4.4	0	-0.4
India 4/	-6.6	8.9	8.2	-0.1	-0.8
ASEAN-5 5/	-3.4	3.4	5.3	0.3	-0.3
Russia	-2.7	4.7	-8.5	0.2	-11.3

4/ For India, data and forecasts are presented on a fiscal year basis and GDP from 2011 onward is based on GDP at market prices with fiscal year 2011/12 as a base year.

5/ Indonesia, Malaysia, Philippines, Thailand, Vietnam.

Outlook

At the end of CY 2021, inflation in several regions has surged to multi-decadal highs. A key driver of inflation across the world in 2021 was the rapid surge in energy, food and commodity prices. In the US, inflation measured by the y-o-y change in personal consumption expenditure (PCE) price index soared to a near 40-year high of 6.6% in March 2022 and, CPI inflation in the UK surged to 7% in March, the highest in the data series.

In CY 2022, global economic growth is expected to moderate to 3.6%, the dip in IMFs projections for global growth are largely driven by the Funds assessment of economic prospects in the US and China. In China, pandemic-induced disruptions related to zero- tolerance COVID-19 policy and protracted financial stress among property developers have induced a 0.4% downgrade. IMF has also stated that the growth estimates could face downward risk pressures owing to the possibility of the emergence of new Covid-19 variants, renewed economic interruptions, supply chain disruptions, energy price volatility, and localised wage pressures. Moreover, if geo-political situation worsens, global economy may experience medium-term headwinds as developed nations pronounce political stance which are by developed nations define long-term trade relations.

[Source: Global Economic Outlook 2022 (World bank), Reserve Bank of India Bulletin May 2022 (RBI)]

2 Indian Economy

Despite global supply chain disruptions and looming uncertainty plaguing the global economy, the Indian economy continued to be on a steady footing for growth. During the year, the Indian economy was supported by the governments improved spending on direct benefit transfers and planned outlays. Moreover, governments swift decision-making to contain the spread of COVID-19 and also two subsequent variants of the infection, helped the economy bounce back strongly.

As per the National Statistics Offices (NSO), Indias real GDP grew by 8.7% in FY 2021-22 as compared to a contraction of 6.6% in FY 2020-21,which is rebound from effect of the pandemic and the consequent restrictions. Due to significant government investments, total consumption is estimated to have grown by 7.8% during the fiscal, and Gross Fixed Capital Formation has exceeded pre-pandemic levels on the back of ramped up public expenditure on infrastructure.

Table: National Statistical Offices Second Advanced Estimates (% change of Indian GDP over fiscal years)

	2019-20	2020-21	2021-22
GDP	4.2%	-6.6%	8.7%

Source: Ministry of Statistics and Programme Implementation (MOSPI)

The countrys trade remained robust with Indias merchandise exports registering a growth of ~20% on a y-o-y basis in March 2022. During FY 2021-22, Indias merchandise exports stood at US$ 419.6 billion, a y-o-y growth of 43.8% and exceeding the US$ 400 billion export target set for the fiscal.

The Governments tax collections also improved, with GST collection recording an all-time high of 1.42 lakh crores in March 2022 and a y-o-y growth of 15%. The quarterly GST collections increased steadily during the year on the back of economic recovery, anti-evasion activities as well as various rate rationalisation measures.

India is on a steady path of growth with the support of the fiscal policies introduced and is consistently taking measures to mitigate risk arising out of any subsequent COVID-19 breakout by extending the vaccination drive to cover more and more of the populace.

The Union Budget 2022-23 has proposed infrastructure spend of over Rs 10 lakh crores, a 35% increase Y-o-Y. The Government intends to focus on using infrastructure development as an impetus to sustained economic growth. Introducing structural reforms like the Gati Shakti - National Master Plan, the government intends to create a digital platform to bring 16 Ministries for integrated planning and coordinated implementation of infrastructure connectivity projects. Moreover, policies like Atmanirbhar Bharat and Production Incentive Linked (PLI) scheme are expected to further encourage business investments in key growth sectors and boost domestic manufacturing.

Outlook

The IMF predicts that India will grow by 8.2% in FY 2022-23, to become one of the fastest growing economies in the world. The major factors to drive this growth will be increased infrastructure investments, growth in exports and supply-side policy reforms and incentives. Moreover, the governments consistent efforts to ensure widespread vaccine rollout should adequately safeguard the economy against any future variants of COVID-19.

By March 2022, close to 80% of the adult population of the country had received both the doses of vaccine, and 94% of the adult population had been administered at least one dose. In January, the country began giving booster shots to healthcare and frontline workers, and those above 60 with comorbidities. Since then, more than 10 million healthcare and frontline workers and another 10 million people aged above 60 have received booster shots. A vaccine programme for 15- to 18-year- olds also began in January - more than 75% have received the first dose. The aforementioned has been possible owing to the governments efforts to weed out logistical problems, supply bottlenecks and implementation of mass awareness campaigns to educate the masses.

However, persistent disruptions in global supply chains, Russia-Ukraine conflict, rising commodity prices and inflationary pressures will pose downward risk to the growth estimates. In May 2022, the RBI announced a 40 bps hike in repo rate, which was the first increase since May 2020. As inflation rises across the world and forces central banks to tighten monetary policy, the RBI may have to follow suit in order to contain inflationary pressures at home too.

2. Industry Review

2.1. Global Steel Industry

I n CY 2021, the global steel industry witnessed volatile trends in terms of raw material prices, supply chain disruptions and overall demand shifts.

The global steel industry began CY 2021 on positive note with improved demand following accelerated pace of vaccination programmes in developed countries and gradual opening up of economies. The industry witnessed continued support from uptick in economic activity and improved business sentiment. Hence, in the first half of CY 2021, global steel production was at 1002 million tonnes (Source: Worldsteel Association), 14% higher as compared to the same period in CY 2020.

As the year progressed, China, the biggest steel market, started witnessing a gradual slowdown. The progress of the economy was marked down slightly by a stronger than anticipated fiscal tightening, uncertainties in the property sector, surging coal prices and supply chain disruptions. In December, Chinas crude steel production dropped by 6.8% YoY, dragging down global output by 3.9% (YoY). However, for CY 2021, global steel production increased by 3.6%, YoY, to reach 1911 MnT, backed by growth in steel production in India, EU and the US.

The US market witnessed a yearly growth of 18.3% in steel production. Steel demand rebounded in the Unites States with the resumption of operations, leading to an uptick in capacity utilisation and domestic steel production.

In the Europe Union (EU), production grew 15.4%, YoY as steel prices in the region gained some ground after coming under pressure since August 2021 as the semiconductor shortage hurt demand from car manufacturers.

Global Steel Production (in MnT)

Particulars	CY 2021	CY 2020	Growth
World (64 Countries)	1910.74	1844.82	3.6%
China	1032.79	1064.73	-3.0%
World (Excl.China)	877.95	780.09	12.5%
India	118.22	100.26	17.9%
European Union	152.58	132.18	15.4%
C.I.S.	105.18	100.02	5.2%
US	85.79	72.73	18.0%
Japan	96.33	83.84	14.9%
Korea	70.42	67.08	5.0%

Source: Worldsteel Monthly Report (March 2022)

According to Worldsteels Short Range Outlook for April 2022, global steel demand for CY 2021 stood at roughly 1833.7 MnT, a growth of 2.7% from CY 2020. Even as the year was marred by COVID infection and subsequent disruptions and extended period of supply chain concerns, steel demand grew substantially in CY 2021, especially in the EU and the US.

Particulars	2021	2022 (f)	on OR		Growth
			2023 (f)	2021	2022 (f)	2023 (f)
World	1,833.7	1,840.2	1,881.4	2.7%	0.4%	2.2%
China	952.0	952.0	961.6	-5.4%	0.0%	1.0%
World (Excl.China)	881.6	888.2	919.8	13.2%	0.7%	3.6%
India	106.1	114.1	120.9	18.8%	7.5%	6.0%
European Union	163.6	161.5	167.9	16.8%	-1.3%	4.0%
Russia & other CIS countries + Ukraine	58.5	44.6	45.1	1.5%	-23.6%	1.1%
US	97.1	99.8	102.1	21.3%	2.8%	2.4%
Japan	57.5	58.2	58.8	9.3	1.2%	1.0%
Korea	55.6	56.2	56.8	13.5%	1.2%	1.0%

f- forecast

Source: Worldsteel Association Short Range Outlook (April 2022)

Outlook

According to the World Steel Association, the global steel demand is expected to increase by around 0.4% YoY in CY 2022 from 1833.7 MnT to 1840.2 MnT. Chinas steel demand is expected to remain flat in CY 2022 with the depression in real estate sector owing to structural problems; and the Governments environment policies. World steel demand excluding China is expected to grow by 1% (~6.6 MnT) in CY 2022. The demand is going to be driven by Developed economies (4.3 MnT growth) and EMDEs excluding China (2.2 MnT growth).

In CY 2022, steel demand growth in US is expected to rise by 2.8% driven by pent-up demand and the $1 trillion Infrastructure Bill. In the EU recovery in CY 2022 is expected to be impacted heavily by the on-going Russia-Ukraine war and steel demand is estimated to contract by 1.3%. As European economies pass sanctions closing trade relations with Russia, the resultant supply side shortage, liquidity tightening and market volatility may act as downward risks and weigh on investment sentiments.

High backlog orders combined with a rebuilding of inventories and further progress in vaccinations in developing countries, will drive steel demand in CY 2022. However, rising inflation, and further growth deceleration in China owing to recent Coronavirus lockdowns can pose risks to forecasts.

Demand outlook for consumption sectors Construction and infrastructure

Construction activities recovered around the globe and saw a growth of 3.4%, despite a contraction in China. This growth was due to infrastructure being used as a driver to boost economies.

Several countries have taken up initiatives to promote their economy by investing in infrastructure projects. Easing restrictions has prompted more construction projects as people are returning to offices.

Some issues that may hinder the growth would be supply issues, rising interests due to inflations and increased energy costs.

Automotive

The automotive sector saw the sharpest decline among the steel using sectors during CY 20-21. The sector saw some recovery post the decline mainly driven by pent-up demand and increased household savings. The supply chain disruption has led to a downturn in the recent quarter.

The disruption in the supply chain is significantly undermining the global automotive industrys recovery. With pent-up demand dissipating, the growth in auto production in CY 2022 will decelerate, though high order backlogs will provide some support.

Capital machinery

The capital machinery sector accounts for around 11 % of the total steel consumption and is expected to increase by around 14-15% by CY 2025-26. It has the potential to increase in tonnage and market share. Incremental focus on increasing the domestic production of Capital goods is likely to push for higher demand of domestic steel. One of the major impacts of the pandemic was the supply chain distortion due to which several manufacturers are now looking to expand their supplier network to avoid dependence on any particular country. This will help increase the demand for steel in the domestic market.

Indian Steel Industry

The steel industry is one of Indias core industries and it has around 2% contribution to the GDP. From being a net importer of steel from 2008-2016, India today is the second-largest producer of crude steel in the world and a leading exporter to the global market. The growth in the Indian steel sector has been driven by growth in domestic consumption, domestic availability of raw materials such as iron ore, enhanced and focused incentivizing of the sector by the government and cost-effective labor. Consequently, the steel sector has been a major contributor to Indias manufacturing output.

I n FY 2021-22, the Indian steel industry produced 120.01 MnT, a rise of 15.9% vis-a-vis FY 2020-21. In FY 2021-22, Indias finished steel consumption improved to 105.8 MnT, and rose by 12%, YoY. The growth in demand was driven by pent up demand and governments consistent investment in public infrastructure.

Exports of finished steel stood at 13.49 MnT in FY 2021-22. As steel prices improved during the year, steel firms increased their share of exports with better realisations and weak domestic demand in H1 FY 2021-22. Finished steel imports stood at 4.67 MnT in FY 2021-22 versus 4.75 MnT over FY 2020-21. The fall in imports is due to greater import substitution and development of comparable indigenous production lines in response to the governments clarion call for an Atmanirbhar Bharat or self-reliant India. Imports are projected to decline even further as steel mills leverage the Production Linked Incentive (PLI) scheme for specialty steel.

Outlook

Indias steel production capacity has expanded rapidly over the past few years, By the end of FY 2021-22, Indias total steel capacity increased to ~149 MTPA (million tonnes per annum).

Worldsteel has estimated that Indias steel demand will rise in CY 2022 by 7.5%. The infrastructure sector will be a focus area for growth as government aims to spend a massive capex on building key public infrastructure projects. Automobile sector and capital good and consumer durable are also expected to back domestic steel demand growth.

According to estimates, the export demand is also likely to be robust both in the short-term and the long run as India benefits from the spillover impact of the Russia-Ukraine crisis and moves up the steel value chain and has increasing varieties of grades to offer. The initiatives announced in the Union Budget such as expansion of roads and railways and the construction of airports and ports will create significant demand for steel in the country. An international factor which can be capitalised on is the China +1 strategy. This is a trend which has recently taken root where several countries are looking for centers of manufacturing other than China. Easily available labour and rising availability of local raw material is making India an attractive option as an alternative trade partner.

Operational Review

The Company has stabilized special steel production and also commenced Slab production in FY22. On raw material front, the Company has secured supply of Iron ore from the mines of JSW Steel Limited and Coke conversion through Bhushan Power and Steel Limited (BPSL) and other party. On coal procurement for power plant, the Company entered into Coal linkage agreement.

On logistics front, the Company concentrated on maximizing rail movement for both inward and outward movement of material. During the year the Company has been able to reduce the average interest rates on borrowed funds thereby reducing its finance cost.

Though, the demand for steel products from infrastructure, construction, automobile and real estate sectors were fluctuating throughout the year, the last quarter of FY22 witnessed improvement in production, demand and prices for the products of the Company. This was also accompanied by increase in raw material prices.

The Company is in the process of increasing the production levels for special steel products both in Long Products and Slabs. The Company focuses on

IATF Certification, API Certifications and RDSO (Indian Railway) Certifications.

During the year under review the Raigarh unit of the Company was awarded with 2 Gold and 5 Silver awards in Confederation of Indian Industry (CII) National Competition in Q3 of FY-22. The year under review, the commercial production of Slab has been commenced at the Raigarh plant of the Company in September 2021. The crude steel production of the Company was at 0.58 Mtpa for FY 22.

Special Steels production

During the financial year under review the Company produced special steels of 0.43 Mtpa.

The Company exported 87,743 tones of special steel to Italy in FY 22.

Quality

At JSW Ispat, Quality is considered as a topmost priority. There is a dedicated quality assurance department which has been provided with a wide range of testing equipments and inspection facilities. All the Quality systems are set in place to meet customer expectations on quality for special grade steel products. The focus is on zero defect and after sales support to the end / OEM customers. The Companys Raigarh facility has ISO 9001:2015 (Quality Management System), ISO 14001:2015 (Environmental Management System), ISO 45000:2018 (Occupational Health and Safety (OH&S) management system) certification.

The Raigarh unit of the Company was awarded with 3 Gold and 3 Silver awards in Chapter Convention on Quality Concept (CCQC) in Q3 of FY-22 organized by Quality Circle Forum of India (QCFI) - Bhilai.

Key markets, industries and customers

The Company primarily caters to the mass markets of Northern and Eastern India. It caters to the following industries:

• Automotive

• Infrastructure and Construction

• Capital machinery

• Other transport (ships and railways)

• Electrical Equipment

Synergies with JSW Steel

The Company enjoys synergies with JSW Steel that provides it raw material and offtake security. JSW

Steel has iron ore mines in total which ensures that JSW Ispat has long term raw material security. The Company also entered into a coke conversion agreement with Bhushan Power and Steel Limited, a subsidiary of JSW Steel Ltd. During the year, the Company exported 87,743 tonnes of special steel to JSW Steel Italy, Piombino S.P.A.

JSW Ispat uses the technical know-how of JSW steel to help build the knowledge and skillsets of employees.

organizational opportunities and Threats opportunities

• The infrastructure sector accounts for 9% of steel consumption and is expected to increase to 11% by 2025-26. Due to rising investment in infrastructure, the demand for steel products would increase in the years ahead.

• The automotive industry is forecast to reach US$ 260- 300 billion by 2026. The industry accounts for around 10% of the demand for steel in India.

• The Company is geared to meet the requirements of the seamless pipe manufacturers in the domestic market and also export its special cast products.

Strengths:

• Proximity to iron ore mines

• Integration includes pellets, sponge iron, billets, Alloy Steel and Ferro Alloys. Integration ensures better synergies, economies of scale and more effective control of operations.

• Its manufacturing capacity also allows cross selling of intermediate products apart from captive consumption

Threats

• COVID-19 disruptions in national and international markets.

• Continuous environmental pressures leading to process/ equipment related changes.

• The Divergent global market environment

• Geo-political conflict leading to increase in raw material prices for steel manufacturing

Financial review (standalone)

			(Rs in crores)
Particulars	FY 2021-22	FY2020-21	Variation %
Total revenue from operations	6060.65	4,187.74	44.72
Profit / (Loss) before depreciation, interest, tax and exceptional items (EBITDA)	472.86	385.27	22.73
Finance costs	270.60	275.78	(1.88)
Depreciation and amortisation charges	223.21	227.47	(1.87)
Profit / (Loss) before tax	9.18	(104.99)	108.74
Other comprehensive (loss) / income (OCL)/OCI	(0.77)	2.51	(130.68)
Total comprehensive income / loss for the year	8.41	(102.48)	108.21

The Company recorded a profit before tax of Rs 9.18 crores during the year, as against a loss before tax of Rs 104.99 crores in FY 2020-21. The Company also delivered a significantly improved performance with EBITDA increasing to 472.86 crores vis-a-vis an EBITDA of Rs 385.27 crores in the previous financial year.

The Company ended the financial year with a net total comprehensive income of Rs 8.41 crores in FY 2021-22 as against a loss of Rs 102.48 crores in FY 2020-21.

The analysis of the major items of the financial statements is given here:

a) Net sales and operating income

				(Rs in crores)
Particulars	FY 2021-22	FY 2020-21	Change ()	Change %
Domestic Turnover	5,027.60	3,857.60	1,170.00	30.33
Export Turnover	983.94	292.54	691.40	236.34
Total Turnover	6,011.54	4,150.14	1,861,40	44.85
Other operating income	49.11	37.60	11.51	30.61
Revenue from operations	6,060.65	4,187.74	1,872.91	44.72
Other Income	30.13	12.99	17.14	131.95
Total income	6,090.78	4,200.73	1,890.05	44.99

During the year, revenue from operations increased by 44.72 % as compared to the previous year as the Company dispatched higher volumes of Billets and slabs and could garner better prices for its entire range products in FY 2022 as compared to FY 2021.

b) Cost of materials consumed

				(Rs in crores)
Particulars	FY 2021-22	FY 2020-21	Change ()	Change %
Cost of materials consumed (including changes in inventory)	4,305.51	2,969.98	1,335.53	44.97%

During FY 2022, the Cost of Materials consumed increased by 44.97% as compared to the previous year on account of increase in volumes and increase in the prices for major RM like Iron Ore Fines, Coal and Coke as compared to the previous year.

c) Employee benefits expense

				(Rs in crores)
Particulars	FY 2021-22	FY 2020-21	Change ()	Change %
Employees Remuneration and Benefits	129.72	115.58	14.14	12.23%

The increase in manpower cost is mainly due to normal increment along with a onetime incentive.

d) Depreciation and amortization expense

				(Rs in crores)
Particulars	FY 2021-22	FY 2020-21	Change ()	Change %
Depreciation and amortization expenses	223.21	227.47	(4.26)	(1.87)

There is no major change in depreciation and amortization expense

e) Power and fuel expenses

				(Rs in crores)
Particulars	FY 2021-22	FY 2020-21	Change ()	Change %
Power and Fuel expenses	476.00	267.07	208.93	78.23%

During the year the power and fuel expenses increased by 78.23% mainly due to the Companys increase in operation especially production of steel and increase in the cost of coal.

f) Other expenses

				(Rs in crores)
Particulars	FY 2021-22	FY 2020-21	Change (Rs)	Change %
Other Expenses	676.56	449.84	226.72	50.40%

Other expenses include, cost of stores and spares consumed, which have increased from Rs 172.27 crores to Rs 271.02 crores, primarily due to an increase in consumption of electrodes, refractories and other stores with an increase in production.

Distribution expenses have increased from Rs 104.79 crores to Rs 215 crores mainly due to increase in outbound freight on account of increase in in exports from Rs 292.54 crores to Rs 983.94 crores.

g) Finance costs

				(Rs in crores)
Particulars	FY 2021-22	FY 2020-21	Change (Rs)	Change %
Finance costs	270.60	275.78	(5.18)	(1.88)

During the year the Company has been able to reduce the average interest rates on borrowed funds thereby reducing its finance cost.

h) Property, Plant and Equipment

				(Rs in crores)
Particulars	FY 2021-22	FY 2020-21	Change (Rs)	Change %
Tangible assets	2,991.27	3,124.57	(133.30)	(4.27)
Capital work-in-progress	166.90	175.14	(8.24)	(4.70)
Intangible assets	34.37	-	34.37	100%
Right of use assets	43.05	43.84	(0.79)	(1.80)
Total	3,235.59	3,343.55	(107.96)	(3.23)

During the year the net block of the Company has reduced by Rs 107.96 crores. Though the Company has added Rs 119.28 crores (net of transfer from capital work in process) in the gross block of tangible and intangible assets, it was offset by depreciation for the year.

i) Investments

				(Rs in crores)
Particulars	FY 2021-22	FY 2020-21	Change (Rs)	Change %
Investments	1.67	1.17	0.50	42.74%
Total	1.67	1.17	0.50

The increase in investments is due to the change in the market value of the investments. j) Inventories

				(Rs in crores)
Particulars	FY 2021-22	FY 2020-21	Change (Rs)	Change %
Raw Materials	499.08	440.92	58.16	13.19
Work-in-Progress	7.02	5.98	1.04	17.39
Finished Goods	459.43	364.53	94.90	26.03
Stores and spares	144,85	113.60	31.25	27.51
Total	1,110.38	925.03	185.35	20.04

The Company carries optimum level of inventories to avoid any shortages and opportunity losses. The increase in raw material and work-in-progress inventory is in line with the increase in production and also increase in prices of major RM.

k) Trade receivables

				(Rs in crores)
Particulars	FY 2021-22	FY 2020-21	Change (Rs)	Change %
Total Debtors	256.59	190.88	65.71	34.42
Less: Provision for Doubtful debts	(2.14)	(2.20)	0.06	(2.73)
Trade Receivables	254.45	188.68	65.77	34.86%

The increase in debtors is mainly due to increase in sale values. The average debtor days have increased marginally from 10.48 days to 13.34 days.

l) Details of significant changes (i.e. change of 25% or more as compared to the immediately previous financial year) in key financial ratios, along with detailed explanations;

				(Rs in crores)
Key Ratios	reason for change in key ratios	FY 2021-22	FY2020-21	Change in %
(i) Debtors Turnover	Improved Market sentiments	27.35	34.83	(21.48)
(ii) Inventory Turnover	During the year due to increased operations and higher productions, the Company could rotate the inventory better	4.23	3.33	27.03
(iii) Debt Service Coverage Ratio	Increase in EBITDA	1.56	1.45	7.59
(iv) Current Ratio	No Change	1.23	1.23	0.00
(v) Debt Equity Ratio	Due to improved profitability and cash flow	1.92	1.84	4.35
(vi) Operating Profit Margin (%)	Due to increase in raw material prices	7.80	9.20	(22.73)
(vii) Net Profit Margin (%)	Due to improved performance	0.15	(2.51)	(106)

People

JSW Ispat believes that people are the backbone to of the company. The Company has meritocratic culture and provides a conducive workplace for all. Occupational health and safety of both the permanent and contractual workforce is ensured at all times. The company focuses on the learning and professional development of its employees. Multiple on-the-job, classroom and other forms of trainings, learning opportunities and structured programmes are offered to our people, in order to help build world- class competencies, regularly reskill and upskill and provide an environment of continuous improvement.

Future Fit Leaders

JSW Group has launched the Future Fit journey for 2021 - 2022. Owing to the pandemic, the entire process was hosted virtually on a cloud based technology platform. This years FFL identification is anchored on the 3A construct which comprises three distinct elements namely - Agility, Ability and Aspiration. This unique lens helped us to view the talent holistically.

• high performers across businesses underwent cognitive ability assessments as part of Phase-I.

• Thereafter shortlisted employees made through the threshold and moved to the Phase-II i.e Virtual Development Centre

• Out of which the Future Fit Leaders (FFL) are identified across bands and will now take the Talent through the development journeys

The objective of the FFL program is to make leaders in current and transitioning roles to be effective, successful and ready for future growth. Create Selfawareness and deeper understanding of leadership strengths, motivators and blind spots and to achieve Tangible outcomes based on Individual Development Plans. During the year, the Company was also part of the FFL program and certain employees of the Company were identified for the FFL program.

The Company has strong people policies on Gender Equality, Gender Protection, Prevention of Sexual Harassment and Redressal System as per the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and employees (permanent, contractual, temporary, apprenticeship) are covered under these policies.

2076

Team strength on payroll (as on 31 March 2022)

Risk Management

Emerging risks are always a challenge, as in any business. To deal with this, the management has proper risk management framework in place to identify, assess and manage all potential risks which can pose a threat. This allows us to achieve our goals, safeguard stakeholder interests and grow as planned by the management.

risks	Understanding the risk	Mitigation technique
Unfavourable demand-supply dynamics	Demand and supply dynamics have an impact on the Companys ability to reach different domestic and international markets and cater to a varied customer base	The Company is growing its presence in various Markets, domestically and internationally and also catering to a wide industrial segment to manage this risk. It has also begun production of value-added offerings that will enable it to create a niche for itself in the industry
Cyclical nature of the steel industry	The easiest way to navigate the cyclical nature of the steel industry is by developing footholds in various markets with different cyclical patterns and reducing cost.	The Company uses this concept to leverage market opportunities, catering to the needs of domestic markets of northern and eastern India simultaneously preparing to meet the demands of global markets, starting with exports of special grade steel to JSW Steel Italy Piombino S.P.A. The Company has already initiated cost reduction measures.
Disruption of business activities	Risks are an integral part of any business and businesses must learn to mitigate them for a sustainable journey	The Company employs a proactive risk management approach that enables it to manage its upcoming risks and find opportunities

Internal control systems and their adequacy

The internal control systems include documented policies, checks and balances, guidelines and procedures, that are supplemented by robust internal audit processes and monitored continuously by periodical reviews by management to provide reasonable assurance that all assets are safeguarded; transactions are authorized, recorded and reported properly. The internal controls framework has been strengthened with an objective to have a best-in-class internal control framework commensurate with the size, scale and nature of business.

Cautionary Statement

Statements in the Management Discussion and Analysis describing the Companys estimates and expectations may be forward-looking statements within the meaning of applicable securities laws and regulations. Actual results/performance could differ materially from those expressed or implied.