Mah. Seamless Management Discussions

The objective of this report is to convey the Managements perspective on the external environment as well as strategy and financial performance 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 the Annual Report. The Companys financial statements have been prepared in accordance with Indian Accounting Standards (‘Ind AS) complying with 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 Economy

The global economy witnessed a recovery in 2022 following two years of a pandemic-in icted environment. The International Monetary Fund (IMF) in their report of April 2023 estimated growth in global Real Gross Domestic Product (GDP) for 2022 to increase by 3.4% on the back of a 6.3% increase in 2021. A higher-than-usual growth in 2021 was due to a low-base effect of 2020 as a result of the global pandemic during which GDP contracted by 2.8%.

IMF forecasts global growth for 2023 to decelerate to 2.8% from 3.4% in 2022 before rising to 3.0% in 2024. This forecast is lower than expected growth rates a year ago. The economic slowdown in 2023 is concentrated in advanced economies especially the Euro Area and UK where growth is expected to fall to 0.8% and -0.3% in 2023. A lower growth in 2023 is attributable to prevailing tight monetary and financial conditions, recent signs of stress in the banking system, rising debt levels in certain countries including lower and middle-income countries, stickier than expected in ation and no signs of truce in theRussia-Ukraine war. In contrast, emerging and developing economies are showing stronger economic prospects than advanced economies. In the medium-term, the IMF forecasts global in ation to fall to 7.0% in 2023 and to 4.9% in 2024 on the back of gradual softening of interest rates, unwinding supply chain disruptions and a fully reopened Chinese economy putting the global economy back on the growth track.

Indian Economy

India is now the fastest growing, major economy in the world. The First Advance Estimates of National Income released by the National Statistical Office (NSO) of the Government of India in January 2023 estimates Indias GDP to have grown by 7.0% in FY 2022-23 following a growth of 8.7% in FY 2021-22. Total Consumption grew by 7.0% in FY 2022-23 mainly due to private consumption. Growth in exports for FY 2022-23 seems to have plateaued at 12.5% while Imports grew by 20.9% in FY 2022-23. By sectors, agriculture grew by 3.5% during FY 2022-23 after a growth of 3.0% in FY 2021-22. Mining grew by 2.4%, manufacturing by 1.6% and construction by 9.1% while electricity, gas water supply and other utilities services grew by 9.0% in FY 2022-23. Indias foreign currency reserves stood at USD 578.45 billion as on 31 March 2023 covering approximately 9 months of imports due to timely interventions of the Reserve Bank of India (RBI). The outlook for FY 2023-24 is optimistic. Retail in ation reduced to 5.6% in March 2023 from a peak of 7.79% in April 2022 and is expected to moderate to 5.2%. Core in ation which remained above 6% for the year eased to 5.8% in March 2023. Among the high frequency indicators, direct and indirect tax collection has shown strong momentum, bank balance sheets are strong, adequately capitalised and credit o take during the year was highest since FY 2011-12. The Indian Rupee is stable, the Current Account De cit is expected to remain moderate and consumer sentiment is high.

E ective implementation of various policies such as Amtanirbhar Bharat, Gati Shakti for improved connectivity and the National Monetization Pipeline (NMP) to nance infrastructure creation, will determine the pace of Indias growth story. It will have a multiplier effect on private investments and help India to move closer to its target of reaching USD 5 trillion GDP goal by 2024.

Pipes Industry Outlook

North America has traditionally been a significant producer of oil and gas, and their oil reserves have risen to more than 76 billion barrels and natural gas reserves to 521 trillion cubic feet. Steel pipe demand in the United States has benefited from robust economic development, which has been fuelled by government-led scal stimulus, resulting in high corporate con dence. This led in an increase in oil and gas output as well as increased industry activity in the region.

United States is expected to have the largest share in the global steel pipe and tubes market during the identified period of 2022-2027. In United States, the oil and gas sector has ourished exponentially. Further, the same product is used in upstream and downstream of crude oil processing.

Asia-Paci c is expected to the fastest during 2022-2027. This is attributed to rising consumption volume. The majority of steel pipe providers want to expand in equipments market and hence manufacturers supply chain management, increased transportation and trade has boosted market share in Asia-Paci c. This region has become significant production centres due to strong development potential and their capacity to manufacture steel pipes and tubes. The replacement of ageing pipelines in Europe is likely to rise rapidly in the next years which will further boost demand of pipes from this region.

The global market for seamless pipes and tubes estimated at USD 175 billion in the year 2022 is projected to reach a revised size of USD 218 billion by 2026, growing at a CAGR of 5.50%. Hot finished pipes are projected to grow at a 6.40% CAGR to reach USD

132 billion.

Honourable Prime Minister Narendra Modi announced that Government of India (GOI) plans to invest around Rs. 7.5 trillion in oil and gas infrastructure over the next ve years. GOI would add 100 more districts to the City Gas Distribution Network in next few years. GOI is also working on Har Ghar Jal mission to provide tap water supply to every rural household by 2024. Acknowledging the importance of oil and gas segment as a vital sector directly contributing to energy security of the country, GOI remains committed towards strengthening the oil and gas industry. It has gradually moved towards investor friendly liberalized policies and reforms in the sector. GOIs initiative to boost demand in domestic E&P sectors includes increased FDI in E&P Projects, NELP & CBM Policies and Freight SubsidyScheme.

Indias existing pipeline infrastructure falls short of what is required to cater to the upcoming boom in demand from the oil and gas and water segments. These actions bode well for the seamless and ERW pipes industry in India, as the demand visibility is clear.

Financial Performance

(Rs in Crores except EPS)

Particulars FY 2022-23 FY 2021-22 Change
Revenue from Operations 5707 3975 44%
Other Income 83 90 8%
EBIDTA 1038 603 72%
Depreciation 136 121 >12%
Finance Cost 36 41 12%
Profit after tax 793 711 12%
Earnings per share (Rs.) 59 53 11%
Type of Ratio FY 2022-23 FY 2021-22 Change
Trade Receivable Turnover 9.46 7.77 + 22%
Trade Payable Turnover 9.89 5.13 + 93%1
Inventory Turnover 2.54 2.36 + 8%
Debt Service Coverage Ratio 10.39 4.67 + 122%2
Current Ratio 5.89 3.74 + 57%3
Debt Equity Ratio 0.05 0.16 - 68%4
Operating Profit Margin (%) 18% 15% + 20%
Net Profit Margin (%) 14% 18% - 22%
Return on Capital Employed (%) 19.03% 12.62% + 51%5
Return on Investment (%) 13.71% 13.50% + 2%

Explanation of percentage change in ratios greater than 25%

1. Trade Payable Turnover - Due to better negotiated terms and better utilisation of internal accruals.

2. Debt Service Coverage Ratio - Due to prepayment of debt leading to lower interest and higher earnings.

3. Current Ratio - Due to increase in inventory on account of higher order book.

4. Debt Equity Ratio - Due to prepayment of debt.

5. Return on capital employed - Due to better sales realisation & amalgamation of subsidiary leading to economies of scale.

Human Resources

The Company has a rm belief that human capital is core to development of Company and the Companys philosophy of wider inclusion and participation from employees has resulted in the transformative growth to enable the Company to reach where it is currently. The pandemic resulted in focus on employee safety which was achieved through an agile workforce and development of world class occupational health and safety protocols. As on 31st March 2023, the Company had a total count of 1677 employees.

Risk and Mitigation

As per the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 and Companies Act, 2013, the Company has a Risk Management Framework in place. Risk management in the Company covers the ve components of the Internal Control - Control Environment, Risk Assessment, Control Activities, Information & Communication (ICT) and Monitoring. Accordingly, the operations are structured and it functions with business and process owners acting as first line of defence and management acting as the second line of defence. In addition there is a third party internal audit rm which conducts periodic audit of the various functions as per the Internal Audit plan. Statutory audits are also conducted on periodic basis.

As the Companys products are primarily used in oil and gas sector, demand - supply factors, pricing, economics and sovereign policy on oil and gas affect demand and cost of our products. The Company continuously monitors foreign exchange rates movement and our foreign exchange policies safeguard price escalation risk. The Company hedges foreign currency exposure as and when required.

Internal Financial Control Systems

The Company has a framework in place for the Internal Controls over Financial Reporting which complements the size, scale and complexity of business operations and covers all major processes to ensure an effective operating environment. The framework has been designed to provide a robust recording and reporting environment, effectively implement the change management process and with the annual review of the operations and business processes and compliance with statutory, legal, corporate laws and policies it stays relevant. This system is supplemented by internal audit review by management and documented policies, guidelines and procedures.

The Company has a well-de ned organisation structure, authority levels, internal rules and guidelines for conducting business transactions. A third party audit rm carries out the internal audit of company operations and reports its nding to the Audit Committee. The Company strives to undertake sustainable measures as necessary in line with its intent to adhere to procedures, guidelines and regulations in a transparent manner. Internal Audit is carried out as per a risk based internal audit plan which is reviewed by the Audit Committee of the Company. The Committee periodically reviews the findings and suggestions for the improvement and is apprised on the implementation status in respect to the actionable items. The controls, based on the prevailing business conditions and processes have been tested during the year and no reportable material weakness in the design or effectiveness was observed. These have been reviewed by the internal and external auditors. The Company uses various IT platforms to keep the Internal Financial Control framework robust and our Information Management Policy governs these IT platforms. The systems, standard operating procedures, and controls are implemented by the executive leadership team and are reviewed by the internal audit team whose findings and recommendations are placed before the Audit committee.

Company Outlook

The strategy of the Company has been realigned to increase focus on pipes and renewable energy segments and reduce exposure to other segments. Internal accruals are currently being utilised for working capital, capital expenditure requirements and growth opportunities.

The Company is focussing on developing value addition pipe products and improving e ciencies both in production process and in production mix. The Companys in-house product development team has successfully developed various import substitution products such as subsea pipes, cylinder pipes, drill pipes, cold-drawn pipes and premium connections. These products are high margin opportunities both for domestic as well as export markets. High priority has also been given to the addition of new customers in export markets.

For and on behalf of the Board
Place : New Delhi Chairman
Dated : 1st August, 2023 DIN: 00405579