jtl infra ltd share price Management discussions

OVERVIEW

The objective of this report is to convey the Managements perspective on the external environment and iron, ERW and steel pipe industry, as well as strategy, operating and financial performance, material developments in human resources and industrial relations, risks and opportunities and internal control systems and their adequacy in the Company during FY 2022-23. This should be read in conjunction with the

Companys financial statements, the thereto, and other information included elsewhere in this Integrated Report and Annual Accounts FY 2022-23. The

Companys financial statements have been prepared in accordance with Indian Accounting Standards (‘Ind AS) complying with the requirements of the Companies Act, 2013, as amended and regulations issued by the Securities and Exchange Board of India (‘SEBI) from time to time.

GLOBAL ECONOMIC OVERVIEW

In the beginning of 2023, the global economy showed nascent signs of recovery following the negative impact of Russias invasion of Ukraine. These events had profound impacts on commodity and energy prices, as well as trade disruptions. Consequently, many economies underwent significant reorientation and adjustment.

The global economy remained volatile in FY 2022-23. In general, it was been a challenging year for the global economy. In addition to Covid-19s pendemic lingering impact, the world witnessed a multi-decade high level of inflation across countries due to supply chain disruptions and elevated energy prices following Russias invasion of Ukraine.

To combat this situation, Central Banks across the world continued to withdraw their accommodative stance in a calibrated manner, which led to a tightening of liquidity across global markets and an increase in interest rates. This posed a downside risk to global economic growth prospects due to contractions in consumption and output. More recently, the turmoil of a few banks in the US and Europe resulted in vulnerabilities and concerns about global financial and systemic risk.

The increase in interest rates by central banks in various economies, along with the existence of supervisory and regulatory gaps, and a reduction in bank-specific risks, have collectively created stress in certain segments of the financial system, raising concerns about financial

In the later part of the year, central banks implemented aggressive interest rate hikes amid growing concerns about a potential recession. These actions, along with decreased demand, resulted in a cooling of commodity prices, particularly in the food and energy sectors. Additionally, as China experienced a strong rebound and reopened its economy, the disruptions in global supply chains graduallyandnotes began to unwind. The recovery from these challenges has been gradual, with advanced economies facing significant challenges, while developing and emerging economies are expected to make notable contributions to global growth. In fact, it is projected that the Asia-Pacific region will contribute approximately 70% of global growth in 2023.

The International Monetary Fund (IMF) predicts the global economy will grow by 2.8% this year and 3% in 2024. Emerging and developing economies to grow 3.9% in 2023 from 4% in 2022, with major contributions from India and China. Although inflation has been a major concern, the IMF predicts a decrease from 8.7% in the previous year to 7% in the current year. Furthermore, a further decline to 4% is anticipated in 2024 as major economies implement more stringent monetary policies and prices achieve stability.

ECONOMIC OUTLOOK

The factors that drove inflation in 2022 are already reversing. These include increase in commodity prices, expansive fiscal and monetary policies, and

Global inflation is expected to fall from 8.7% in 2022 to 7% in 2023 on the back of lower commodity prices. Inflation has already peaked in the US and Europe in early 2023. It is also declining in other major economies including Japan, China and India. In the US, economic growth is expected to be slower in 2023 given the tightening of monetary and fiscalpolicies. Contrary to late 2022 estimates, US will avoid a recession due to declining energy prices, strong employment growth, and easing of supply chain stress. The threat of recession continues to loom over Europe as wages and consumer spending have fallen significantly. Elevated stability natural gas prices are fuelling inflation and driving down purchasing power. The tightening of monetary policy by ECB and the Bank of England, along with energy shock resulting from the Russia-Ukraine war will have a key impact on the potential growth trajectory.

INDIAN ECONOMIC OVERVIEW

Indias economy has showed strong resilience and has

. Itbecome a significant stands among the fastest-growing economies worldwide, surpassing the UK to secure the fifth-largest economy status. The private sectors efforts to improve infrastructure, logistics, and the business ecosystem have contributed to this success. However, inflation remains a concern in India, with input prices pushing the inflation rate to 6.6%, exceeding the RBIs target. To address this, the RBI has been raising interest rates on a quarterly basis to curb spending. Nevertheless, in April 2023, the RBI decided to maintain the status quo on interest rates, anticipating improved macroeconomic conditions and a more reduced outlook. As a result, the inflation rate experienced a decline, dropping to a 16-month low of 5.66%, indicating progress in managing inflation.

Indias economic growth has been revised to 7.2% in FY

2022-23, reaffirming its position as the fastest-growing nation. The Indian Government is prioritising taxation to support economic growth and plans to utilise increased tax collections to fund infrastructure development programmes like the Production-Linked Incentive (PLI) schemes and the capital investments in the energy

Saptarishi Budget. These initiatives aim to empower the vision.economy and fulfil

Despite the growth focus, the Government is committed to maintaining fiscal responsibility and has implemented a medium-term framework for public finances to ensure long-term sustainability and stability. The success of Indias economy can be attributed to a robust private sector and a Government that fosters a favourable business environment, while ensuring long-term stability. (Source: World Economic Outlook, April 2023: A Rocky Recovery (imf.org)) (Indias Economy to Grow by 6.4% in FY2023, Rise to 6.7% in FY2024 : Asian Development Bank (adb.org)

The Indian economy remained resilient amidst these uncertainties on account of strong economic fundamentals and robust balance sheets of the corporate sector and banks, which enabled a rebound in credit demand, which was also facilitated by a large increase in capex by the centre. Indias GDP growth accelerated to 6.1% in the January to March 2023 quarter from an upwardly revised 4.5% growth in previous quarter. For the full financial year, the economy‘s growth was reported at 7.2% higher than the earlier second advance estimate of 7%. The surge is primarily driven by improved performance in agriculture, manufacturing, mining, and construction sectors. There was a broad-based improvement in growth across sectors. The strength in domestic demand supported the growth amid the global slowdown.

The Reserve Bank of India has projected real GDP growth in India for FY 2023-24 at 6.5% with Q1: FY 2023-24 at 7.8%; Q2 at 6.2%; Q3 at 6.1%; and Q4 at 5.9%; with risks evenly, balanced India will remain the fastest-growing major economy. Brent oil prices are expected to remain rangebound in 2023, given the continuing war in Ukraine and sanctions imposed in response by the USA and European Union. India meets nearly 80% of its oil needs through imports. High oil prices will also have a trickle down effect on the prices paid by consumers for goods and services. Persistent inflation resulted in RBI to increase the repo rate by 250 basis points throughout FY 2022-23. Further rate hikes are expected in the coming year, despite no rate hike in the April Monetary Policy Committee meeting. Capital investment of close to 3.3% of GDP is expected to crowd-in private investment, strengthen job creation and demand, and raise Indias overall growth potential. Focus is expected in the energy sector, with significant and green hydrogen mission.

Overall, the key iron and steel consumption sectors are expected to perform well in FY 2023-24 supported by a rise in infrastructure spending by the Government and gradually improving semiconductor supply. High CAPEX allocation in key iron and steel consuming sectors such as railways, agriculture, buildings, infrastructure national highways, Gas and oil and housing is expected to drive Iron and Steel pipe consumption. The IMF has projected Indias GDP to grow to $3.75 trillion in FY 2023-24. Indias Gross Domestic Product (GDP) has now reached USD3.75 trillion in 2023, up from around USD2 trillion in 2014, moving from the 10th largest to the 5th largest economy in the world. Overall, the future of Indian Economy is quite promising.

INDUSTRY STRUCTURE AND DEVELOPMENT

Global Iron & Steel Pipe Industry

The recovery momentum of global economy after the Covid-19 pandemic has been affected by persisting inflation, US monetary tightening, Chinas economic deceleration and continuedsupplydisruptionsduetoRussia-Ukrainewar.High energy prices, rising interest rates, and falling confidence have limited the recovery of the products demand after a dip in 2022. However, positive factors like Chinas re-opening, Europes resilience during the energy crisis and a preliminary easing of supply chain bottlenecks will lead to a Y-o-Y rise in global iron and steel pipe demand.

The worldwide electric resistance welded (ERW) pipes and tubes market is expected to be worth USD 71.9 Million in 2023. According to the Future Market Insights report, the market is predicted to expand at a CAGR of 5.2% between 2023 and 2033, totalling around USD 119.4 Million by 2033. It is anticipated that the global steel pipe market is likely to record a valuation of USD 97.88 Billion in 2023. The steel pipe market is expected to expand at an average CAGR of 3.9% and reach USD 143.50 Billion by 2032.

Indian Iron & Steel Pipe Industry

The iron and steel pipe industry plays a vital role in the development of our nations infrastructure, facilitating various projects, such as river interlinking and providing clean drinking water to households. In alignment with this, the Indian stainless steel pipe industry is projected to exhibit a compound annual growth rate (CAGR) of 4.5% from 2022 to 2027. This growth can be attributed to increased demand from the infrastructure and construction sectors, reduced input costs, and a resurgence in agricultural activities. The construction sector, backed by the Governments focus on infrastructure development, serves as the primary consumer of stainless steel tubes and pipes in India. Additionally, the automotive sector contributes significantly to the demand owing to increased automobile production. Moreover, the oil & gas sector drives further demand through its exploration and production activities. Overall, the Indian stainless-steel tube and pipe industry demonstrates immense potential and is poised for robust growth in the future.

The steel industry in India Has garnered significant attention due to its profound impact on various sectors and Indias ambitious goal of becoming a dominant force in manufacturing, exemplified by initiatives like Make in India.

Representing approximately 2% of the countrys GDP, India currently stands as the worlds second-largest producer of crude steel, with an output of 4.2%, recording 125.3 Million tonnes and is on a trajectory to surpass China as the second-largest consumer of steel. This presents a favourable opportunity for the industry and the nations export manufacturing capacity to contribute to Indias positive steel trade balance. The steel production in India has witnessed notable growth, rising from 10,100 thousand tonnes in July 2022 to 11,200 thousand tonnes in May 2023, showcasing an optimistic growth trajectory for the future. (Source: World Steel Association)

Moreover, the Union budget has witnessed a significant increase in capital

This boost in investment is expected to stimulate steel consumption, particularly in infrastructure and construction projects. Additionally, an investment of Rs. 75,000 Crores (USD 9.15 Billion), with Rs. 15,000 Crores (USD 1.83 Billion) sourced from private entities, has been allocated for 100 critical transport infrastructure projects. These projects prioritise the connectivity of ports, coal, and steel sectors, with a focus on bridging gaps in the first and last miles. In FY 2021-22, crude steel production amounted to 133.596 Million Tonne, while finished steel production reached 120.01 MT. Moreover, the consumption of finished steel stood at 105.751 Million Tonne.

Outlook for Indian Iron and Steel Pipe Industry

Indian iron and steel pipe demand is expected to be robust and growing in FY 2023-24 supported by strong GDP growth forecast, private consumption, and Government expenditure. Indias capital goods sector is also expected to benefit from the momentum in infrastructure and investment in renewable energy. Automotive and consumer durables are expected to maintain healthy growth driven by sustained growth in private consumption. Integrated Steel Players will continue to add capacity in FY 2023-24, and utilisation levels are expected to remain healthy. The net export position is expected to strengthen with the removal of export duties.

Opportunities and Outlook

JTL remains consistently prepared to seize current and emerging opportunities. With a keen focus on the development of warehouses, e-commerce, high-quality residential construction, and housing, the Company aims to capitalise on the increase in population and increasing household incomes, recognising these factors as potential catalysts for industry growth.

Warehousing	According to JLL (a global real estate services firm), warehousing stock in India is expected to touch 380 Million sq. ft by 2024, due to increased logistics and storage requirements, particularly in urban settings
	The primary factors fuelling demand include logistics, engineering, automotive and related industries, e-commerce, fast-moving consumer goods (FMCG), retail, telecom, and the white goods sector
Infrastructure	In December 2022, AAI and other airport developers have targeted a capital outlay of approximately Rs. 98,000 Crores (USD 11.8 Billion) in the airport sector over the next five years. This capital outlay is intended for expansion and modificationof existing terminals, constructing new terminals, and strengthening of runways, among other activities
	The Government has proposed an investment of USD 750 Billion to enhance railway infrastructure and has introduced the MaritimeIndiaVision2030,whichenvisionssignificantinvestments in the development of high-quality infrastructure at Indian ports
Real Estate	The construction industry ranks third among the 14 major sectors in terms of direct, indirect, and induced effects in all sectors of the economy
	The urban areas are currently facing a shortage of approximately 10 Million housing units, highlighting the need for additional 25 Million units of affordable housing by 2030 to cater to the growing urban population
Water Sanitation	The Jal Jeevan Mission (JJM) aims to provide tap water to 180 Million rural households by 2024
	JJM is one of Indias biggest infrastructure outlays with, ~USD 50 Billion in spending
	Huge demand for pipes in water systems and sanitisation
Affordable Housing	The momentum for affordable housing with cost-effective solutions and quicker construction is gaining traction in India
	The future of construction is projected to embrace modular building techniques
	In-house construction of modular steel structures is carried out, with the final assembly taking place on-site through stacking and connecting the steel modules

 

Green Growth	The Ministry of New and Renewable Energy (MNRE) was allocated Rs. 10,222 Crores, a 48% hike from the previous years budget of Rs. 7,033 Crores
Oil Industry	The Government has allowed 100% FDI in upstream and private sector refining projects
	Diesel demand in India is expected to double to 163 MT by FY 2029-30
	Consumption of natural gas in India is anticipated to grow by 25 Billion cubic metres
Railways	The Government of India allocated a substantial boost of Rs. 2.40 Lac Crores to the railways in the budget, representing a significant increase of nearly nine times compared to the FY 2013-14 allocation.
	On June 02, 2023, the Ministry of Railways resolved to upgrade 1,275 railway stations under Amrit Bharat Station, which will drive demand for structural steel

COMPANY OVERVIEW

JTL Industries Limited , also referred to as ‘JTL or ‘The Company (previously JTL Infra Limited) is a key player in the business of structural steel tubes and pipes. The Company has a rich history of operating in the industry for the past 30 years. The Company boasts a highly experienced managementteam,withoverthreedecadesofexpertiseinthe steel and pipes sector. JTL specialises in the manufacturing of ERW black and hollow steel tubes and pipes. In addition to these core products, the Company has expanded its product portfolio to include value-added products, such as solar module mounting structures/panels and hot-dipped galvanised steel tubes and pipes. These value-added products offer higher premiums quality products compared to commercial ERW pipes. With a focus on continuous expansion and diversification, JTL has emergedasoneofthe strides in leading manufacturers in India, catering to various sectors, such as agriculture, water distribution, solar projects, energy and engineering, heavy vehicles, construction & building materials, and core infrastructure, among others.

JTL operates from four state-of-the-art manufacturing facilities, strategically located across India. These strategic locations not only offer competitive pricing for sourcing raw materials but also facilitate the Companys expansion in both domesticmilestone by getting listed on the Nationaland global markets. Moreover, these facilities possess the capability to produce value-added products. JTL has two plants in Punjab: one in Gholu Mazra (Chandigarh) with a capacity of 1,00,000 MTPA and another in Mandi Gobindgarh (Punjab) with a capacity of 1,50,000 MTPA. In Maharashtra, the Company has a plant in Mangaon with a capacity of 2,00,000 MTPA, granting access to ports for exports. Additionally, through an amalgamation with its promoter-held Chetan Industries, JTL recently added a plant in Raipur with a capacity of 1,00,000 MTPA. This Raipur plant not only grants the Company access to the East Indian market but also benefits from proximity to cost-effective raw materials. With the added advantage of a 1,50,000 tonnes per annum hot mill, the Raipur plant has undergone backward integrated, leading to cost synergies for the Company. JTLs export portfolio comprises a mix of value-added products and commercial-grade products. With a wide range of offerings, the Company currently has 1,000+ SKUs and 600+ workforce. Furthermore, it has established a strong presence through a network of over 800 dealers and distributors, ensuring a robust geographical footprint. JTL serves a diverse client base that encompasses various sectors, including B2B, B2G, OEMs, and international markets.

During the year, JTL has made significant its manufacturing capacity. In FY 2022-23, the capacity has increased to approximately 5,86,000 MTPA, compared to 4,00,000 MTPA in FY 2021-22. Looking ahead, the Company has ambitious plans to add another 1 Million MT capacity after FY 2024-25, which will bring the total capacity to 2 Million MT by FY 2027-28. Additionally, JTL is focussed on expanding its product portfolio by introducing additional SKUs. This year, the Company has achieved another significant

Exchange (NSE), underscoring its growth aspirations and positive outlook for the future.

SEGMENT REVIEW

A. Hot-Dipped Galvanised Steel Tubes and Pipes

Hot-Dipped Galvanised Steel Tubes and Pipes are carbon steel pipes that have undergone a protective zinc coating process. These pipes are manufactured using high-quality steel and feature a galvanised finish

Hot-dipped galvanised pipes are favoured over other options due to their superior resistance to corrosion. Additionally, they are easy to weld and well-suited for applications involving high temperatures.

JTL operates a large-scale facility dedicated to manufacturing and exporting galvanised steel tubes/ pipes, welded black pipes/tubes, and electro-galvanised steel tubes/pipes. The Company produces steel tubes for various applications, including mild steel tubes for structural and general engineering purposes, ERW pipes for water, gas, and sewerage systems, steel tubes for belt conveyor idlers, water wells, and lancing pipes for growth. It has emerged automotive and industrial uses. JTL caters to different industries, such as agriculture, water distribution, heavy vehicles, construction & building materials, ensuring its products meet the diverse requirement of these market segments.

B. ERW Black & Hollow Steel Tubes and Pipes

India holds the distinction of being the worlds largest centre for Electric Resistance Welded (ERW) pipe production, boasting an annual domestic market of

8-10 Million tonnes. Over the past five years, the ERW pipe market has witnessed a consistent a growth rate of 4% to 5%. Looking ahead, this growth rate is projected to further accelerate to 8% to 10% in the coming years. This anticipated surge in the ERW pipe market positions it as the fastest-growing segment within the steel pipe industry.

ERW steel pipes findapplications in various sectors, including irrigation and agriculture, construction and building materials, energy and engineering, core infrastructure, and heavy vehicles. By 2024, the global market for ERW pipes is expected to reach a staggering 95.4 Million tonnes. This growth is largely attributed to the increasing demand for infrastructure projects, such as water and sewage systems, as well as oil and gas pipeline networks.

JTL manufactures and exports a wide range of hollow sections, including structural hollow sections, hollow steel sections, square/rectangular hollow sections, round hollow sections, mild steel black ERW square tubes, rectangular tubes, and round hollow section tubes. These sections are custom-made to meet the specific requirements of customers. To ensure safe delivery to end-customers, these sections are coated with anti-rust oil on both the inside and outside surfaces. This protective coating serves as a shield, safeguarding the sections during transportation. The Company caters to various industries like agriculture, water distribution, solar projects, energy and engineering, heavy vehicles, construction & building materials, and core infrastructure.

C. Solar Module Mounting Structures

In recent years, the Indian solar power industry has as a experienced significant cost-effective solution for reducing electricity expenses in various industries, including textiles, cement, paper, steel, chemical, dairy, and ceramics. Within the realm of solar power systems, the pivotal component is the solar mounting structures, commonly referred to as racking. The selection of appropriate racking holds immense importance in determining the overall stability of the solar installation.

Rooftop solar installations have gained popularity in industrial sectors. These installations serve as a practical solution to meet the heavy electric load requirements. In line with this, JTL is expanding its business in solar module structures domain, with a focus on providing top-notch products in both local and international markets. The Company strives to enhance the utilisation of solar panels on rooftops, buildings, and facades, promoting the widespread adoption of solar energy.

FINANCIAL REVIEW Accounting treatment

The Financial Statements of the Company for the year under review have been prepared in accordance with Indian

Accounting standards (Ind AS) as notified by Ministry of

Corporate Affairs pursuant to Section 133 of Companies Act, 2013 read with Rule 3 of the Companies (Indian Accounting Standard) Rules, 2015, Companies (Indian Accounting Standards) Amendment Rules, 2016 and subsequent amendments.

Financial Results

The key highlights of audited standalone financial performance for the financial year ended on March 31, 2023 of the Company are as follows:

Description	Standalone		Consolidated
	FY 2022-23	FY 2021-22	FY 2022-23	FY 2021-22
Revenue from Operations	1,54,840.26	1,35,531.74	1,54,991.88	1,35,531.74
Other Income	493.75	379.02	493.75	379.02
Total Revenue	1,55,334.01	1,35,910.76	1,55,485.63	1,35,910.76
Total Expenses	1,42,964.69	1,27,676.74	1,43,115.81	1,27,676.74
EBITDA	13,429.73	9,320.93	13,430.25	9,320.93
Finance Cost	(634.91)	(771.85)	(634.93)	(771.85)
Depreciation and Amortisation	(425.50)	(315.06)	(425.50)	(315.06)
Exceptional Items	(108.21)	0	(108.21)	0
Profit Before Tax	12,261.11	8,234.02	12,261.61	8,234.02
Profit AfterTax	9,012.40	6,106.27	9,012.78	6,106.27
Other Comprehensive Income	300.30	44.31	300.30	44.31
Total Comprehensive Income for the year	9,312.70	6,150.58	9,313.08	6,150.58
Earnings Per Equity Share of Rs. 2/- each
Basic	10.69	8.45	10.69	8.45
Diluted	9.28	7.63	9.28	7.63

During the Financial Year ended on March 31, 2023, the Honble NCLT Bench, Chandigarh, had sanctioned the scheme of Amalgamation of Chetan Industries Limited (Transferor Company) with JTL Industries Limited (Transferee Company). The said Scheme became effective w.e.f. March 31, 2023. The Appointed Date in respect of the said Merger is April 01, 2021. The Financial Statements of the Company include the effect/impact of merger of Chetan Industries Limited with JTL Industries Limited in accordance with applicable IND-AS. The standalone & consolidated financial statements have been prepared in accordance with the Indian Accounting Standards (Ind AS).

Operational Performance Highlights

During FY 2022-23, your Company recorded highest-ever revenues and profits in its history of 32 years. The Standalone income of your Company increased to Rs. 1,55,334.01 Lacs as compared to Rs. 1,35,910.76 Lacs in the previous year registering growth of 14%. The Standalone profit after for the year 2022-23 increased to Rs. 9,012.40 Lacs as compared to Rs. 6,106.27 Lacs in the previous financial year registering an increase of around 47.60% . EBITDA for the year 2022-23 increased to Rs. 13,429.73 Lacs as compared to Rs. 9,320.93 Lacs in the previous financial year showing a growth of around 44.08%. During the year FY 2022-23, the performance of the Company remained immune from the impact or post impact of the Covid-19.The Company has seen a robust growth across all our financial parameters The Company delivered increased revenues and profitability on back of operational efficiencies, a better product mix and control measures.

The Company operates in single reportable business segment i.e. manufacturing of iron/steel tubes, pipes and structures. The figures relate to the stated single segment. The other financial information including highlights which have been given in the Corporate Information section of the Annual Report FY 2022-23 forms part of this report and should be read along-with.

Significant change of key financial ratios

As required under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, during the year, the significant changes in the financial ratios of the Company, which are more than 25% as compared to the previous year, are summarised below:

Key Ratios	FY 2022-23	FY 2021-22	% Change	Reasons, if change is more than 25%
Debtors Turnover Ratio (in days)	33	30	10.00	NA
Inventory Turnover Ratio (In days)	40	32	25.00	Increased primarily on account of increase in Turnover and decrease in average inventory
Interest Coverage Ratio	15.86	9.32	70.17	Increased due to Increase in Earnings before interest & Tax (EBIT) and decrease in interest
Current Ratio	3.29	2.02	62.87	Increased on account of increase in current assets and decrease in current liabilities
Debt Equity Ratio	0.13	0.48	(72.92)	Decreased on account of increase in equity and lowering dependence of Debt.
Operating Profit Margin	8.65	6.86	26.09	Increased on account of increase in turnover, reduction in cost and increase in Profits.
Net Profit Margin	5.8	4.49	29.18	Increased on account of increase in turnover, reduction in cost and increase in Profits.
EPS (Diluted) Rs.	10.69	8.4	27.26	Increased due to Increase in PAT
Return on Net Worth	22.14	30.89	(28.33)	Reduced on account of increase in Shareholders equity, funds and increase in net worth of the Company

RISK MANAGEMENT AND CONCERNS

The Company remains constantly vigilant regarding the influence of different factors on its business and the effectiveness of its risk assessment protocols. Regular reviews are conducted to evaluate all risks, and focussed strategy is implemented to minimise their impact on the Companys operations. Risk management plays a crucial role in the Companys activities, with the

Risk Management Policy facilitating the identification and analysis of internal and external risks.

The key risks and recommended mitigating actions followed by the Company:

Risk

Impact Mitigation

decline in its Slow Economic Growth Risk: the Company,

JTL experienced a significant The Company has established a firm footing in the revenue stream due to the economic downturn, market with its extensive product range, catering to which had a negative impact on various steel variousend-usersectors.Withanotableinternational end-user categories. Industries, such as oil & gas, market presence, it has successfully diversified its construction, capital goods, consumer durables, revenue streams, facilitating income generation autos, and others were all adversely affected. from multiple sources. Moreover, as a result of the Unfavourable circumstances, such as escalating effective implementation of Government stimulus inflation or a macroeconomic recession, measures, India is poised for substantial growth in intensified the coming years. placing strain on its revenue generation.

 

Risk	Impact	Mitigation
Competitors Risk:	With the recent liberalisation of the steel trade, the hindrances to entering the steel industry	JTL remains actively engaged in analysing market demand for its products, while simultaneously
. This development	have significantly has opened up the market, creating a new landscape where JTL may encounter heightened competition from its fellow industry players. The reduced obstacles to enter the steel sector have paved the way for a more competitive environment, necessitating companies to demonstrate their unique strengths and capabilities to secure their position in the market. Hence, the Company must be prepared to face intensified competition from its peers as it navigates through this evolving industry landscape.	working towards enhancing their excellence. This strategic approach not only protects the Company from potential challenges presented by global competition but also paves the way for sustainable growth and achievement in the industry. By closely studying customer needs and preferences, the Company is proactively developing innovative solutions that ensure superior product quality and maintain a competitive edge in the market. Through these concerted efforts, the Company aims to solidify its position as an industry frontrunner and meet the evolving demands of customers worldwide.
Currency Risk:	JTL stands to benefit from a favourable currency exchange environment. If the local currency of the Companys customers strengthens against its operating currency, it can result in increased revenues and profitability. This can occur as the cost of the Companys products or services for customers in those countries becomes relatively cheaper, potentially leading to higher demand and market share.	The Company has a robust and carefully devised framework to effectively manage its exposure to negotiable bill risks. This strategy enables the Company to mitigate potential risks by implementing a range of hedging techniques. To achieve this, JTL actively utilises derivative financial instruments, specifically futures contracts, to hedge its foreign currency exposures. By leveraging these tools, the Company aims to ensure a more stable
		and predictable financial environment, protecting its assets from fluctuations in foreign currency exchange rates. This proactive stance towards managing convertibility risk demonstrates the Companys commitment to safeguarding its financial stability and optimising its global operations.
Input Risk:	~90-95% of total expenses is RM cost for JTL and the major RM for is is steel HR coils. The Company procures HR coils and processes them to produce ERW pipes. As a result, the Companys working capital requirement is consistent and is dependent on steel HRC prices. Volatility in the HRC prices could lead to inventory restocking/destocking cycles leading to inventory loss for JTL.	To mitigate the risk, the Company is increasing its dealer network and striving to minimise the inventory days in future. Moreover, many orders JTL are now pre-booked and its sales volumes are based on order books, thereby decreasing inventory losses in the supply chain.

 

Risk	Impact	Mitigation
Delay in Execution of Expansion Projects: rating and target	Delay in completion of the expansion projects along with lower-than-expected utilisation of the expanded projects could lead to lower revenue and profitability price.	The Company is well funded and all the machinery for the expansion up to 1MT capacity by FY 2024- 25 is ordered. JTL has enough land bank available (100+ acres of land bank area at Mangaon) and the current will be all brownfield expansion where it does not see any other regulatory risk in the execution of the expansion project.
Impact of Industry Fragmentation on ERW Pipes Operating Margins:	Currently, ~55% of the ERW pipes manufacturer comprises unorganised secondary players, thereby exerting competitive pressure on organised players and leading to lower EBITDA margins for ERW manufacturers. However, with the formalisation of the economy, unorganised playersarelikelytofacecompliancerequirements related to GST and other regulations. Moreover, the ERW pipe market is experiencing a transition from unorganised to organised players as it is becoming quality-conscious. This shift is likely to reduce the share of unorganised players.	The Company has advanced its foothold in VAP products. Further, the capacity expansion plans spreads its position to partially mitigate the risk from local players.

OPPORTUNITIES AND THREATS

The Company will endeavour to retain and improve its position in the ERW black and hollow steel tubes and pipes markets, as well as diversify its product portfolio. It has to ensure that the people (its major competitive advantage) working for it contribute effectively to its business. Looking out for competition and staying ahead of it in terms of quality and value proportion also becomes essential.

Factors contributing to the favourable opportunities for the Company

Favourable business environment, surging demand for the products

Expansion in the production capacity

Increased demand for products on account of growth, government push for infrastructure in the country

Easy availability of raw materials in the domestic market

Stable Central Government in India

Complete Integration of the raw materials used to produce provides a better opportunity for the Company in the longer run.

The Company is exposed to the risk of price fluctuation on raw material and finished goods; business risk; commodity risk; etc. Fluctuation in the demand-supply dynamic due to geo-political stress has also induced a rise in prices. The risk identified are reviewed and evaluated consistently and necessary steps are taken to mitigate the same. The risk management process is reviewed periodically.

Factors Affecting Threats To The Company

The Company faces general risks inherent in any business including political, legal, geographical, economic and environmental and competition risks and takes appropriate steps to mitigate them and reduce their impact to the extent possible. The business of the Company is subject to set legal procedures and Government rules, approvals and regulations and any change in them may affect the business of the Company. Raw material prices also affect the financial performance of the Company.

In todays economic environment, Risk Management is a very important part of business. The main aim of risk management is to identify, monitor and take precautionary measures in respect of the events that may pose risks for the business. The Companys risk management is embedded in the business processes. The Company has identified the following threats and adopts management as below:

(a) Commodity Price

The Company is exposed to commodity price fluctuations in its business. All major raw materials as well as finished goods, are subject to market price variations. Prices of these commodities continue to be linked to both domestic and international prices, which in turn are dependent on various macro and micro factors. Also, commodities are increasingly becoming asset classes. Prices of the raw materials and finished products manufactured by The Company fluctuate widely due to a host of local and international factors. The Company continues to place a strong emphasis on risk management and has successfully introduced and adopted various measures for hedging the price fluctuations in order to minimise its impact on profitability. Also, The Company has initiated setting-up of a framework to upgrade itself to a robust risk management system. Further, the Company has price review mechanism to protect against material movement in price of raw materials.

(b) Interest Rate

Any increase in interest rate can affect finance costs.

However, the Companys dependency on debt is on very the lower side. The Management of the Company adopts suitable procedures and takes reasonable steps in anticipation.

(c) Foreign Exchange

Risks are associated with various forex exposures like translation, transaction, economic etc. The Company would have a risk on net import side. Import exposure includes Acceptance, Trade Payables, Trade Buyers Credit, Interest Payable, CAPEX Buyers Credit etc. and export exposure includes Trade Receivables etc.

There are various financial instruments for hedging available to mitigate these risks like Forward Cover, Options and Derivative etc. Based on the risks involved in the hedging instrument, the Company generally uses Forward Cover as a measure for mitigating the Forex Volatility.

(d) Human Resource

The Companys ability to deliver value is dependent on its ability to attract, retain and nurture talent. Attrition and the non-availability of the required talent resources can affect the overall performance of the Company. By continuously benchmarking of the best HR practices across the industry and carrying out necessary improvements to attract and retain the best talent. By putting in place production incentives on time bound basis and evaluating the performance at each stage of work. Also recruitment is across almost all states of India which helps to mitigate this risk and we do not anticipate any major issue for the coming years.

(e) Competition

The Company is always exposed to competition Risk. The increase in competition can create pressure on margins, market share, etc. However by continuous efforts to enhance the brand image of the Company by focusing on R&D, quality, cost, timely delivery, best customer service and by introducing new product range commensurate with demand The Company plans to mitigate the risks so involved.

(f) Government Policies

The policies announced by the Government have been progressive and are expected to remain likewise in future, and have generally taken an equitable view towards various stake holders, including domestic farmers, industry, and consumers.

(g) Freight and Port Infrastructure

The element of freight is not likely to cause any adverse effect on the operational performance.

The Company has a proactive information and management system to address the issues arising out of port congestions to the maximum extent possible and has also made sufficientarrangements for storage infrastructure.

(h) Compliance

Any default can attract penal provisions. The Company regularly monitors and reviews changes in regulatory framework by monitoring compliance through legal compliance Management tools.

(i) Industrial Safety Employee Health and Safety

The industry requires labour and are exposed to accidents health and injury risk due to machinery breakdown, etc. By development and implementation of critical safety standards across the various departments of the factory establishing training need identification at each level of employee.

(j) Domestic Economy

The Company is well geared with multi-processing capabilities to cater to variances and changing consumer preferences. Also, keeping in view the overall growth of the economy, infrastructure, agriculture, gas and pipe industry requirements, it is expected that consumption will continue to outgrow.

ENVIRONMENT, SOCIAL AND GOVERNANCE (ESG) RESPONSIBILITY

JTL recognises that its responsibilities extend beyond financial performance and profitability. The Company actively engages with the community, fosters social development, and strives to make meaningful contributions to societal progress. This involves supporting various initiatives in education, healthcare, and other social welfare programmes that cater to the diverse needs of different communities. By embracing diversity and inclusion, JTL aims to create an environment that values and respects every individual, promoting a culture of equality and empowerment.

In the Companys quest to safeguard the environment, it firmly believes in its profound impact on human existence.

With a resolute commitment to preserving its well-being, JTL actively fosters a cleaner, greener, and healthier environment. The Companys efforts revolve around advocating for the utilisation of renewable energy sources, and it recognises the installation of rooftop solar panels as a promising solution. Furthermore, JTL aims to establish a cutting-edge rainwater harvesting facility that will enable it to recycle water for human consumption. Through these initiatives, the Company aims to create a narrative of environmental and efficacy, are augmented by the stewardship and inspire others to join in this transformative journey.

To facilitate a positive and inclusive work environment, JTL prioritises the timely resolution of stakeholder grievances and concerns. The Companys primary focus is on its valued customers and the markets it serves, ensuring their satisfaction and fulfiling their evolving requirements.

It is committed to ensuring the safety and well-being of its employees, striving for a workplace that is free from harm and promotes their overall welfare. Moreover, JTL aims to enhance stakeholder well-being through increased engagement and nurturing meaningful interactions. By actively engaging stakeholders and encouraging transparent communication, it can build stronger relationships and create a positive impact for all involved parties. The Companys primary focus lies in empowering the local community by nurturing their skill sets and fostering the growth of rural youth in sales operations. Additionally, it has implemented robust industrial hygiene systems and are dedicated to enhancing standards of occupational health.

To ensure objectivity and transparency, the organisation has enlisted the services of three reputable firms to handle different audit functions. M/s Suresh K Aggarwal & Co. conducts the Companys statutory audit, guaranteeing compliance with applicable laws and regulations. For internal audit, it relies on M/s Arvind Singla & Associates, who assess its internal controls and provide valuable insights for improvement. Additionally, M/s S. V. Associates, Company Secretaries, performs secretarial audit, ensuring adherence to corporate governance norms. To further strengthen JTL governance, it has appointed three Independent Board Members who diligently oversee all aspects of its business operations. Collectively, these measures contribute to a robust and accountable framework within the Company.

INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY

To guarantee that assets are secured, and transactions are allowed, documented, and appropriately reported, the Company has developed an internal control system consistent with its size and scope of activities. Management reviews and independent periodic assessments by outside chartered accountancy firms, which examine the functioning and quality of internal controls and offer assurance of their sufficiency control system. Internal auditing covers a wide range of operational methods and, at a bare minimum, ensures compliance with specified standards in terms of policy and procedure availability and suitability, the extent of adherence, management information system reliability, and authorisation procedures, including steps for asset safeguarding. Internal audit reports are presented to the Board of Directors Audit Committee.

The Audit Committee examines audit results and the effectiveness of internal control measures. The Companys Statutory Auditors and Internal Auditors also meet with the

Audit Committee to discuss their findings and the status of remedial measures in progress.

JTL maintains a robust internal control system and code of conduct to safeguard all assets against unauthorised use or disposition. Additionally, the system guarantees that transactions are properly authorised, recorded, and reported. The internal control system is reinforced by an extensive internal audit, periodic management reviews, and documented policies, guidelines, and procedures. The primary objective of this internal control is to ensure the reliability of financial and other records for the preparation of financial statements, while also maintaining asset accountability.

DEVELOPMENTS ON HUMAN RESOURCES AND INDUSTRIAL RELATIONS

The year under review has seen changes in the policies and procedures to make the organisation high performing and successful. The Company has always valued its human resources and believes in the optimum potential of each employee. During the period under review, the industrial relations were cordial without any disruptions to manufacturing activities. Additional appointments were made and annual increments were granted to the salaries of employees during the period under review.

As of March 31, 2023, the Company had 505 employees on its payroll. The Company believe, ‘People are the most valued resource of an organisation. Their interests and welfare is its prime concern. The Company strives to explore their best by creating opportunities for growth and development, while maintaining discipline and demeanour in consonance to the culture and values of the organisation. In the process, a set of parameters addressing all dimensions have been created. Also, the Company has a full-fledged manual on HR policies, which underpins and brings together the various codes of practices relating to specific aspects of Human Resources.

Human Resource Management is a dynamic function, which needs to adapt to the changing business needs of the organisation. Thus, the manual provides the basic guidelines to channelise the HR initiatives in the organisation and may not provide exhaustive solutions to problems, that keep emerging at regular times in the organisation.

JTL understands that its greatest asset resides within its Human Resources. In line with any other valuable capital, the Company recognises the need for continuous investments in this area, understanding that the long-term returns will be fruitful. Consequently, the Company proactively invests in its employees through comprehensive education and training programmes, aiming to improve the overall quality and productivity levels. The development of individuals and teams is of utmost importance to JTL. The Company operates under a transparent and performance-based system, fostering an environment of trust, healthy competition, and constant challenges. JTLs primary focus is on providing ambitious opportunities for personal and professional growth, accomplished through various training initiatives and career enhancement tasks.

CAUTIONARY STATEMENT

Statements in this Report on Management Discussion and Analysis relating to the Companys objectives, projections, estimates, expectations, or predictions may be forward-looking statements within the meaning of applicable security laws or regulations. These statements are based upon certain assumptions and expectations of future events. Actual results could, however, differ materially from those expressed or implied. Important factors that could make a difference to the Companys operations include global and domestic demand supply conditions, selling prices, raw material costs and availability, changes in Government regulations and tax structure, general economic developments in India and abroad, factors such as litigation, industrial relations and other unforeseen events. The Company assumes no responsibility in respect of forward-looking statements made herein which may undergo changes in future on the basis of subsequent developments, information, or events.