Industry Structure and developments
Overview The objective of this report is to convey the Managements
perspective on the external environment and infrastructure industry, as well as strategy,
operating and financial performance, 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 schedules and notes thereto and other
information included elsewhere in this Annual Accounts 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.
The Company has been facing some hurdles over the last few years due to
liquidity mis-match. Despite of the uncertainties and challenges faced by the company, the
management is optimistic of a resolution with its financial creditors and regain its
position going forward due to strong fundamentals like product development, technology,
manpower, quality, relationship etc.,
Global Economic Overview:
Global GDP growth is estimated to fall from 3.4% in 2022 to 2.8% in
2023. The continuing Russia-Ukraine war along with central banks hiking rates to tame
inflation continues to weigh on economic activity. Growth in 2022 was dampened due to
rapid spread of COVID-19 variants in China and the ongoing war in Ukraine. The concerted
sanctions on Russia, which supplies around 10% of the worlds energy, lead to dampening
growth and further straining of supply chain. The war worsens the persistent inflation
across developed economies. However, the recent re-opening may lead to faster than
expected recovery in 2023. Growth rate in 2023 in USA is expected to be 1.6%, while the
eurozone is expected to remain strained at 0.8%. The energy shock, a result of the war in
Ukraine, continues to impact the economic activity in Europe. Chinas economy is set to
rebound to 5.2% as mobility and industrial activity pick up after lifting of pandemic
restrictions.
The factors that drove inflation in 2022 are already reversing. These
include increase in commodity prices, expansive fiscal and monetary policy, and supply
chain disruptions. 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.
Domestic Economic Overview:
The Indian Governments strong infrastructure push under the Prime
Ministers Gati Shakti (National Master Plan for Multimodal Connectivity) initiative is
likely to contribute significantly towards raising industrial competitiveness. Further,
the Production Linked Incentive (PLI) scheme announced by the Government is not only
bolstering the countrys manufacturing sector, but also creating enormous employment
opportunities. With global businesses looking at diversifying their supply chains from
Chinas dependence, India is in a sweet spot to become a global manufacturing hub. India
is also witnessing massive digital transformation. The mass-scale digital infrastructure
is second to none, which is further validated by the creation of the India stack.
Digitalisation is accelerating e-commece growth, changing the retail consumer market
landscape and attracting leading multinationals in technology and e-commerce to the Indian
market.
The long-term growth drivers of the economy remain intact coupled with
a large and fast-growing middle-class driving consumer spending. The rapidly growing
domestic consumer market as well as the large industrial sector have made India an
important investment destination for a wide range of multinationals across manufacturing,
infrastructure, and services. Further, India is fast becoming the startup capital of the
world, attracting sizeable foreign investments, driven by its young population including a
large GenX segment, and technology edge.
Indian Economy 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
capital investments towards energy transition and green hydrogen mission Overall, the key
steel consuming sectors are expected to perform well in FY2023-24 supported by a rise in
infrastructure spend by the Government and gradually improving semiconductor supply. High
Capex allocation in key steel consuming sectors such as railways, national highways and
housing is expected to drive steel consumption.
CAPEX-led Growth The Government has declared a significant rise in
capital expenditure for infrastructure development in the FY 2023-24, with a 33% increase
amounting to H10 lakh crore. Furthermore, this expenditure is expected to account for
approximately 3.3% of the GDP. K10 lakh crore Capital expenditure in FY24 for
infrastructure development
Housing and Infrastructure Push The cement industry is driven by
the rapid execution of infrastructure projects and strong traction in housing, commercial
and industrial segments. The industry also receives steady support from government
policies and spending. Moreover, the governments increased budget allocation for
highway/road and infrastructure projects has further boosted demand. Housing for All with
the PM Awas Yojana and the extended Creditlinked Subsidy Scheme (CLSS) is expected to
further boost the real estate sector. • Increased the outlay for PM Awas Yojana by
66% to H 79,000 crore • Extended the Credit-linked Subsidy Scheme until 2027
Demand from Growing Urbanisation The demand for cement and steel
has been fueled by the growth in urbanisation and the rise in construction activities for
houses and buildings in metropolitan, semi-urban, and urban areas, along with the
large-scale residential projects initiated through the PMAY program. This, will lead to
increased consumption and spending, generating higher demand for housing and subsequently
providing a boost to the residential real estate sector.
Outlook
Outlook for India remains positive led by strong urban consumption and
infrastructure spending. Demand is expected to show healthy growth of 7.3% in 2023 backed
by consumption led demand. Outlook for steel and cement sectors is favourable on the back
of higher growth opportunities in the housing and infrastructure segments. The Government
in the Union Budget 2023-24 has allocated $11.4 billion for the creation of safe housing
(rural and urban), sanitation and increase road connectivity.
Opportunities:
Having managed inflation well, the Indian economy is on a healthy
growth track, with a rising share of investment in GDP, appropriate budget allocations and
expenditure by the Government in the infrastructure segment. With a busy construction
season ahead with the pre-election spending kicking in, the Steel Industry is expected to
see a volume growth of 6-8% going forward and is likley to reach ~390-400 million tonnes.
Threats
However, a complex interplay of geopolitical events including the
neighbouring countries, high inflation and consequently elevated interest rates could pose
risks to future economic growth. In the US, economic growth is expected to be slower in
2023 given the tightening monetary and fiscal policy. Threat of recession continuous to
loom over Europe as wages and consumer spending has fallen significantly. Elevated natural
gas prices are fuelling inflation and driving down purchasing power. The tightening of
monetary policy by ECB and Bank of England along with energy shock resulting from the
Russia-Ukraine war will play a key impact on the growth potential.
OPERATIONS
A Summary of key financial indicators is given below. The detailed
financial performance may be viewed from the Balance Sheet and schedules thereto in the
Annual Report.
(Rs. In Lacs)
| Particulars |
Standalone Year ended |
Consolidated Year ended |
|
31.03.2023 |
31.03.2022 |
31.03.2023 |
31.03.2022 |
| Total Income |
420 |
1,806 |
649 |
1,857 |
| Depreciation |
54 |
254 |
57 |
269 |
| Profit/(loss) Before Tax after exceptional items |
(5,000) |
(40,523) |
(5,512) |
(39,955) |
| Provision for Taxation |
27 |
(105) |
38 |
(101) |
| Appropriation: |
|
|
|
|
| Profit/(loss)After Tax |
5,027 |
(40,418) |
(6,433) |
(41,330) |
| Particulars |
Standalone Year ended |
Consolidated Year ended |
|
31.03.2023 |
31.03.2022 |
31.03.2023 |
31.03.2022 |
| Attributable to: |
|
|
|
|
| Shareholders of the Company |
5,027 |
(40,418) |
(6,433) |
(41,330) |
| Non-controlling interests |
|
|
|
|
| Opening balance of retained earnings |
(56,245) |
(15,827) |
(59,621) |
(18,291) |
| Add: Profit / (loss) for the year |
(5,027) |
(40,418) |
(6,433) |
|
| Amount available for appropriation |
(61,272) |
(56,245) |
(66,054) |
(59,621) |
| Balance to profit/(loss) b / f |
|
|
|
|
| Transfer to: |
|
|
|
|
| Dividend and Dividend Distribution Tax |
- |
- |
|
|
| Minority Interest |
|
|
|
|
| Balance carried to Balance Sheet |
(61,273) |
(56,245) |
(66,054) |
(59,621) |
ENVIRONMENT & SAFETY
We are conscious of the need for an environmentally clean and safe
operations. Our policy requires all operations to be conducted in way so as to ensure
safety of all concerned, compliance of statutory and industrial requirement for
environment protection and conservation of natural resources.
Risk and concerns:
The Company had a well-defined risk management mechanism covering risk
analysis, exposure, potential impact, and risk mitigation processes. We assess the overall
risk exposure from both top-down and bottom-up perspectives, which are then consolidated
to provide a birds eye view of our risk profile.
The subsidiary Company at Singapore, viz Readymade Steel Singapore Pte
Ltd., is under liquidation process. The Company has already impaired its investments and
loan outstanding in the said subsidiary. The accumulated losses in the previous years have
resulted in erosion of Companys net worth. The Company has submitted its plan for
settlements to its lenders, for long term viable solution, which is under active
consideration.
Internal control systems and their adequacy
The Management monitors and evaluates the efficacy and adequacy of
internal control systems in the Company, its compliance with operating systems, accounting
procedures and policies at all locations of the Company. Based on the report of
management, process owners undertake corrective action(s) in their respective area(s) and
thereby strengthen the controls.
The Audit Committee reviews the reports submitted by the management.
Also, the Audit Committee has independent sessions with the external auditor and the
Management to discuss the adequacy and effectiveness of internal financial controls over
financial reporting and internal financial controls respectively.
CAUTIONARY STATEMENT
Statement in this Management Discussion and Analysis describing the
Companys objectives, projections, estimates, expectations or predictions may be
"forward-looking statements" within the meaning of applicable laws and
regulations. Actual results could differ materially from those expressed or implied.
Important factors that could make a difference to the Companys operations include raw
material availability and prices, cyclical demand and pricing in the Companys principal
markets, changes in Government regulations, tax regimes, economic developments within
India and the countries in which the Company conducts business and other incidental
factors.
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