Kataria Industries Ltd Management Discussions

The objective of this report is to convey the Managements perspective on the external environment and steel 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 the FY 2024-25. This Report should be read in conjunction with the Companys financial statements, the schedules and notes thereto and other information included elsewhere in the Report and Annual Accounts 2024-25. The Companys financial statements have been prepared 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.

In 2024, the global economy grew at a rate of 2.8%, with regional disparities. Despite positive trends like reducing inflation and monetary easing in several countries, geopolitical risks around trade policy uncertainty, and ongoing conflicts continued to weigh on global economic sentiment. The economy globally is projected to continue to grow in 2025. While there is a reducing intensity in tariffs globally, developments in this area including trade agreement between major blocks like United States of America, United Kingdom, European Union, China among others, and a ceasefire deal between Russia and Ukraine will be key factors impacting the economic activity.

The global economy is expected to grow by 2.3% in 2025. The tension around trade and high levels of policy uncertainty are expected to have a significant impact on the economic activity. Global inflation is expected to moderate to 4.3% in 2025 and 3.6% in 2026, approaching central bank targets. While advanced economies are likely to contain inflation more effectively than emerging markets, rise in protectionism and geopolitical tensions around trade will significantly impact prices of domestic products especially in United States. Inflation in the services section in major economies like the United States and the Europe is expected to remain above pre-pandemic levels. The monetary policy remains divergent, with some central banks maintaining caution in their easing cycles. Fiscal policy in advanced economies is expected to tighten in 2025, with developing economies implementing comparatively moderate adjustments. In United States, growth is expected to be 1.5% in 2025, supported by consumer demand, rising incomes, productivity gains, and accommodative financial conditions. However, policies under the new U.S. administration—particularly on trade, taxation, immigration, and regulatory changes—may have diverse implications on the economy. In 2024, Europe (‘EU) registered a growth rate of 0.8% supported by monetary easing by European Central Bank. Economic activity in EU is projected to remain flat in 2025, before showing modest recovery in 2026. As per IMF, recovery will be largely driven by improvement in domestic demand along with rising wages. The United Kingdom (‘UK) is expected to register a stable GDP growth of 1.0% in 2025, aided by gradual interest rate declines, steady real income growth, and improving consumer confidence. However, elevated geopolitical uncertainties and structural constraints, such as low productivity and an aging population, will continue to pose challenges for Europe and UK. The Chinese economy continued to grow in 2024, witnessing a growth rate of 5%. Growth is projected to remain stable at 4.5% in 2025 and 2026, though overcapacity, sluggish domestic demand, and structural challenges in the property market remain as concerns. Outcome of governments stimulus on domestic consumption, US - China trade discussions, and export performance will impact the industrial output of China and would be the key watchpoints in 2025. Fuel prices are expected to decline by 7.9% in 2025, driven by weak Chinese demand and strong non-OPEC+ oil supply, although gas prices may rise due to supply disruptions. Non-fuel commodity prices are expected to increase by 4.4% in 2025. Meanwhile, global trade volumes are projected to be slightly lower in 2025 and 2026, owing to heightened trade policy uncertainty.

India is one of the fastest-growing major economy. It demonstrated a growth rate of 6.5% in FY2024-25. Despite global headwinds, Indias growth is expected to remain rangebound, 6% - 6.5%, in the next couple of years. The economy is expected to be driven by strong domestic consumption, government capital expenditure, and robust expansion in the services and manufacturing sectors. Inflation is projected to moderate and be rangebound, 4.0-4.5% in the near term, supported by favourable food price trends. Core inflation across goods and services has remained stable, while fuel prices have declined. The moderation in inflation has enabled the Reserve Bank of India to adopt a more accommodative stance, with interest rate cuts anticipated to stimulate consumer spending and credit growth. Foreign Portfolio Investment volatility is expected to subside, while softening crude oil prices will likely support exchange rate stability. On the sectoral front, the services sector has demonstrated resilience, with financial services, real estate, professional services, public administration, and defence driving growth. Exports in the services sector have also recorded strong performance. Construction activities and utility services have supported industrial growth, while highvalue-added manufacturing exports—particularly in electronics, semiconductors, and pharmaceuticals— have shown robust momentum.

Agricultural production has remained strong, underpinning rural consumption, and contributing to steady economic activity in rural markets. The Government of India (‘GoI) remains focused on fiscal consolidation, employment generation, and boosting capital investment. The share of capital expenditure in central government spending has continued to rise, playing a critical role in industrial and infrastructure development. Increased capital outlays on infrastructure and asset creation are expected to generate growth multipliers. The PLI scheme has successfully attracted investments and stimulated production across various industries. The Government is exploring further sectoral expansion to enhance domestic manufacturing and develop labour-intensive industries. Despite Indias strong economic momentum, certain downside risks persist. Towards the end of 2024, economic activity moderated due to weaker private and foreign investment flows, impacting industrial output. The rupees depreciation, coupled with uncertainties surrounding cross border conflicts, global trade policies and supply chain disruptions, could pose a few challenges. Overall, Indias economic outlook remains strong, driven by robust domestic demand, policy support, and sectoral resilience. Improving trade relations with the developed economies will provide the requisite impetus to the economy. The India - UK trade agreement is a positive development in this direction. By leveraging its domestic strengths and implementing strategic reforms, India is well-positioned to navigate global challenges and maintain its trajectory as a leading global economic powerhouse.

The steel sector has historically been a cornerstone of industrial progress, forming the foundation of economic development. However, the past year presented significant challenges for the industry, as global manufacturing activity remained subdued due to low household and business confidence, leading to cautious spending and investment. High input costs, geopolitical uncertainty, and tighter financing conditions have delayed capital investments. The lingering effects of inflation have further eroded purchasing power and consumer sentiment. Additionally, weak housing construction in major markets such as China, the United States, Europe, and Japan has adversely impacted steel demand. The automotive sector, a major consumer of steel, also experienced slowdown in 2024. However, investment in manufacturing facilities and public infrastructure provided some support to global steel demand. Sustained capital expenditure in these areas by major economies played a key role in offsetting weaker demand from traditional sectors. While steel demand weakened in China and most developed economies, developing economies like India have demonstrated resilience. Steel demand in the developing world excluding China grew by around 3.5% in 2024, while the developed economies witnessed approximately 2% decline in steel demand in 2024. Exports from China to the rest of the World were at their highest level since 2016, at 111 MT as domestic demand for steel in China decreased significantly, whereas the decline in production was moderate. The high exports from China have resulted in protectionist measures by different countries. Imports into the EU increased from 25.6 MT in 2023 to 27.4 MT in 2024. In India, the imports from China stood at 2.83 million tonnes in FY2024-25, around 12% higher than the previous year.

Steel Demand Outlook Global steel demand is projected to grow by 1.2% in 2025, reaching ~1,770 million tonnes. After three consecutive years of decline, steel demand is expected to recover globally (excluding China) in 2025. A stable global economic outlook, coupled with improving financing conditions and real income growth in major economies, is expected to support recovery in private consumption and investments before the tariff impositions. Additionally, a significant recovery in residential construction is also anticipated from 2025 onward, supported by easing financing conditions. However, the tariffs imposed by US administration and reciprocal tariffs by countries has led to increased uncertainty in demand-supply balance and continues to be a major risk to the steel industry. At a regional level, the downturn in Chinas real estate sector is expected to persist, leading to a 3% decline in steel demand in 2024, followed by an additional 1% decline expected in 2025. However, government intervention and economic support measures could help stabilise demand. In Developing Economies (excluding China), steel demand grew by 3.5% in 2024 and is expected to further accelerate to 4.2% in 2025. Emerging economies in the MENA and ASEAN regions are expected to rebound after experiencing a significant slowdown in 2022 and 2023. In Developed Economies, steel demand declined by around 2% in 2024, with major steelconsuming nations—including the United States, Japan, South Korea, and Germany—experiencing contractions. However, demand is expected to recover by 1.9% in 2025, driven by improving economic conditions. In Europe, apparent steel consumption experienced another drop of 2.3% in 2024. Output growth in the steel-using sectors is expected to remain low in 2025 due to continued low investments following from the high interest rates. In 2025, apparent steel consumption is projected to recover at a gradual pace of 2.2%, based on a positive industrial outlook and easing global tensions, though they are unpredictable now.

India remains the worlds second-largest steel producer and one of the strongest demand drivers, with steel demand expected to grow by 8% in 2025. Demand is expected to reach 200-210 million tonnes by 2030, driven by strong expansion in steel-intensive sectors such as infrastructure, housing, transportation, power, and renewable energy. Growth is further supported by rising demand for consumer durables and capital goods. Additionally, government initiatives, including Production-Linked Incentives (‘PLI) schemes and increased investments in infrastructure and manufacturing, have played a crucial role in boosting steel production and consumption. In the Union Budget for FY 2025-26, the Government of India (‘GoI) has maintained capital expenditure (capex) as a share of GDP at the same level as 2024, reinforcing its commitment to industrial growth. While steel demand remains robust in India, steel prices are expected to remain range bound, capped by the threat of Chinese imports. Policy support provided by the Government in the form of a safeguard duty of 12% on April 21, 2025 for 200 days has given a partial relief to the Indian steel industry. Overall, while the global steel demand is poised for recovery in 2025, the industry remains exposed to geopolitical, economic, and financial risks. India, however, continues to stand out as a high-growth market, supported by strong domestic demand and investment. The long-term outlook for the Indian steel industry remains optimistic, with continued infrastructure development, industrial expansion, and supportive government policies driving its growth. Effective trade policies, price stabilisation measures, and sustained investment will be crucial to maintaining Indias competitive edge in the global steel market.

We are engaged in the manufacturing and supply of Low Relaxation Pre-stressed Concrete (LRPC) Strands and Steel Wires, Post-tensioning (PT) Anchorage System (Anchor Cone, Anchor Head and Wedges), HDPE Single Wall Corrugated (SWC) Sheathing Ducts, Couplers and Aluminium Conductors. Our wide variety of products are utilized in various sectors including Infrastructure, Roads - Bridges & Flyovers, Metros, Railways, High Rise Buildings, Atomic Reactors, LNG Tanks, Power Transmission & Distribution Lines etc. Our products are certified by ISO 9001:2015 for quality management systems.

We have two manufacturing plants, both are situated at Ratlam, Madhya Pradesh. Our plants are well equipped with essential machinery, infrastructure, and an in-house testing facility, which ensures that our product conforms to the requisite standards.

We are constantly improving and expanding our processes and technologies. Our top management always emphasises core strength and policies that focus on technology and excellent service delivery. With a passion for setting high standards of service, the management always takes measures to scale up as needed to deliver the best. We work diligently and have a wide range of equipment to meet every need and ensure client satisfaction.

The Company is engaged in Wire, Cable/ Conductor and Accessories. The details of Segment wise or product wise performance is provided in Note No. 41 of Financial Statement of the Company, forming part of this annual report.

We aspire to be the foremost producer of steel wires and strands, driven by a dedication to superior quality, exceptional customer service, and unwavering business ethics.

We seek to expand and enhance our presence in our existing business segments by identifying markets where we can penetrate and provide technically advanced products in a cost-effective manner. Currently, we are exporting 0.92% of our revenue from operations as FY 2024-25, our strategy for expansion of our business is also to focus on the increase in the exports.

Our dedication doesnt stop at crafting superior products. We hold ourselves accountable to business ethics, making societal and environmental concerns an integral part of our operations. Leveraging our technological prowess and financial strength, we are not only well-positioned to cater to the diverse needs of our valued customers but also to make a positive impact on the world around us.

Over the years, we have established long-term relationships with our customers, leading to recurrent business engagements with them. Some of our customers have been with us for the several years. We believe that our customer retention levels reflect our ability to provide high quality products. Going forward, we intend to continue strengthening and expanding our existing relationships with our current customers and acquiring more valued customers. We strive to clearly understand our customers business needs and provide products according to their specification.

Additionally, we have developed strong relationship with our clients, contributing to the recognition of "Kataria Tenasyo" as a reputable brand in steel wire. Looking ahead, we plan to invest further in developing and enhancing our brand image through dedicated brand-building efforts, communication strategies and promotional initiatives. This ongoing investment in brand development is expected to strengthen our brand image, ultimately driving increased sales and profitability.

We are committed to enhancing operational efficiency within the company to drive cost reductions and maintain a competitive edge in the market. Through continuous process improvements, rigorous quality checks and investment in technology, we aim to boost operational output while maintaining high standards of quality. Our efforts also include empowering our employees, leveraging

their technical expertise to enhance overall efficiency. Furthermore, we are continuously working towards achieving zero defects and zero rejection, demonstrating our unwavering dedication to excellence.

Our company focuses on rationalising our indebtedness. We have entered into various financing arrangements with banks and financial institutions for financial facilities. Our Company proposes to repay or prepay all or a portion of certain borrowings availed by our Company from the Issue Proceeds. The repayment or prepayment will help reduce our outstanding indebtedness, assist us in maintaining a more favourable debt equity ratio and enable utilisation of our internal accruals for further investment in business growth and expansion.

> Robust Demand: Indias domestic steel demand is estimated to grow by 9-10% in FY25 as per ICRA.

> Increasing Investments: The industry is witnessing consolidation of players, which has led to investment by entities from other sectors. The ongoing consolidation also presents an opportunity to global players to enter the Indian market.

> Policy Support: In February 2024, The government has implemented various measures to promote self-reliance in the steel industry. The Government of India raised import duty on most steel items twice, each time by 2.5% and imposed measures including anti-dumping and safeguard duties on iron and steel items.

Fluctuations in commodity markets due to tariff and trade uncertainties, exacerbated by geopolitical instability, present volatility in raw material prices, impacting metal costs and working capital needs. Currency exchange rate volatility also significantly influences the cost of capital and overall financial performance.

In FY2024-25, the global economy faced persistent challenges, including sluggish activity in key regions, elections in over 60 major countries, ongoing geopolitical tensions, and the rising threat of tariff conflicts.

The steel industry was particularly impacted, with Chinas weakened property sector driving increased steel exports globally. This surplus supply placed downward pressure on prices. In India, demand remained strong, achieving double-digit growth for the fourth consecutive year. However, new production facilities and competitively priced imports created significant pricing pressures. Meanwhile, the UK and Netherlands businesses faced pressure from sluggish steel demand, increased climate compliance expenses, and competition from imports and alternative materials.

The global metals and mining industry faces a dynamic regulatory environment, driven by changing laws, trade patterns, and environmental policies. These developments shape business strategies and market footprint, aiming to safeguard operations while generating value.

The steel industry faces various external risks including supply chain disruptions from extreme weather, regulatory changes, and logistics constraints that impact operational efficiency. Cybersecurity threats can harm digital infrastructure, while internal issues like equipment failures and maintenance delays, combined with aging assets, may lead to unplanned downtime and increased costs. Additionally, disruptions in utility services such as power, water, or gas can hinder manufacturing processes and reduce overall output.

The steel industry inherently involves hazards that can impact workforce health and safety. Risks arise from non-compliance with safety processes, regulations, or operational standards, threatening business continuity. Geographic expansion adds complexity with location-specific safety laws and requirements.

During the year under review, the Company has earned total income of INR 35,199.94 Lakhs as against the total income of INR 34,149.66 Lakhs of previous year which states 3.08% increase in the total income as compared to previous year.

The profit before tax in the financial year 2024-25 stood at INR 1,330.09 Lakhs as compared to profit of INR1,454.23 Lakhs for last year which state 8.54% decrease in Profit before tax and net profit after tax stood at INR 1,095.57 Lakhs as compared to profit of INR 1,042.46 Lakhs for the previous year which state 5.09% increase in profit of the Company.

During the year under review, there was a comparatively huge reduction in finance cost as compared to last year due to which the revenue of the Company was increased.

Internal Control system and adequacy Internal Control measures and systems are established to ensure the correctness of the transactions and safe guarding of the assets. Thus, internal control is an integral component of risk management. The Internal control checks and internal audit programmes adopted by the Company plays an important role in the risk management feedback loop, in which the information generated in the internal control process is reported back to the Board and Management.

The internal control systems are modified continuously to meet the dynamic change. Further the Audit Committee of the Board of Directors reviews the internal audit reports and the adequacy and effectiveness of internal controls.

The Company believes in establishing and building a strong performance and competency driven culture amongst its employees with greater sense of accountability and responsibility. The Company has taken various steps for strengthening organizational competency through the involvement and development of employees as well as installing effective systems for improving their productivity and accountability at functional levels. The Company acknowledges that its principal asset is its employees. Ongoing in-house and external training is provided to the employees at all levels to update their knowledge and upgrade their skills and abilities. As on March 31, 2025, the Company had total 168 full time employees. The industrial relations have remained harmonious throughout the year.

Statements in this Report, describing the Companys objectives, projections, estimates and expectations may constitute forward looking statements within the meaning of applicable laws and regulations. Forward looking statements are based on certain assumptions and expectations of future events. These statements are subject to certain risks and uncertainties. The Company cannot guarantee that these assumptions and expectations are accurate or will be realized. The actual results may be different from those expressed or implied since the Companys operations are affected by many external and internal factors, which are beyond the control of the management. Hence the Company assumes no responsibility in respect of forward-looking statements that may be amended or modified in future on the basis of subsequent developments, information or events.