Mangalam Alloys Ltd Management Discussions

Your directors have pleasure in presenting the management discussion and analysis report for the year ended on March 31, 2024.

GLOBAL ECONOMIC OVERVIEW

The world economy continues to face multiple crises, jeopardizing progress towards the Sustainable Development Goals.Although global economic growth outperformed expectations in 2023 with several large economies showing remarkable resilience, simmering geo-political tensions and the growing intensity and frequency of extreme weather events have increased underlying risks and vulnerabilities. Furthermore, tight financial conditions also pose increasing risks to global trade and industrial production.

^The global environment around the world continues to gothrough significant shifts. Post the pandemic, which resulted insupply chain shocks, there was an economic slowdown especiallyin developed markets. While initial signs of stability began emerge, the military conflicts have further intensified this yearand continue to impact the global supply chains.However, Hamas attack on Israel in October 2023 and the resulting war in Gaza has further spurred global uncertainties, and attacks by the Houthi militia based in Yemen on ships travelling through the Red Sea has disrupted international trade routes.After two years of recessionary fears, persistently highinflation, and unprecedented monetary tightening, the globalmacro- outlook looks relatively better now with improvinggrowth, disinflation, and monetary easing in sight.Across industries globally, there are multiple mega trends thatare shaping priorities of businesses: AI, New Energy, SupplyChain and Talent.

GDP GROWTH

Global growth is projected to stabilize at 2.6 percent this year, By 2024-25, growth is expected to edge up to 2.7 percent alongside modest expansions in trade and investment.

The International Monetary Fund (IMF) raised its forecast for global growth, projecting 3.1% in 2024. However, Europes prospects are not as positive.

Global growth is stronger than expected and will be 3.1% in 2024, the same as in 2023, as the US and emerging economies have shown resilience to previous crises, with strong consumption driving the growth, according to the International Monetary Fund (IMF).The global economy is stabilizing but the outlook remains subdued by historical standards?both advanced economies and EMDEs (emerging market and developing economies) are projected to grow at a slower pace over 2024-26 compared to the pre-pandemic decade.

REAL GDP GROWTH PROJECTIONS FOR 2024 AND 2025

^INFLATION

UNDERLYING INFLATION PRESSURES REMAIN HIGH

In 2024, global inflation is projected to decline to 5.8%, down from a 6.8% estimated annual average in 2023.

The International Monetary Fund (IMF) has raised worldwide concerns about high inflation rates. It has urged central banks worldwide to maintain tight monetary policies until a sustained reduction in inflation is observed.The IMF has revised its global inflation forecast for 2024. It anticipates an inflation rate of 5.8%, more than the previously estimated 5.2% just three months ago. Moreover, the fund predicts that inflation will continue to surpass central bank targets in most countries until 2025.

INDIAN ECONOMY

“Indias economy is forecast to expand by 6.9 per cent in 2024 and 7 per cent in 2025, mainly driven by strong public investment and resilient private consumption. Although subdued external demand will continue to weigh on merchandise export growth, pharmaceuticals and chemicals exports are expected to expand strongly. Ifthe prognosis for FY25 turns out to be right, that will mark the fourth year postpandemic thatthe Indian economy will have grown at or over 7 per cent. That would be an impressive achievement, testifying to the resilience and potential of the Indian economy.

GDP GROWTH FOR FY 2023-24

Indias gross domestic product (GDP) for the January-March quarter of fiscal 2023-24 (Q4FY24) came in at 7.8 per cent, driven by strong growth in the manufacturing sector. The Indian economy beat D-Street estimates and grew by 8.2 per cent for the full year (FY24). Economists expect the momentum to remain strong this year.The growth propelled the Indian economy to $3.5 trillion and set the stage for achieving the $5-trillion target in the next few years.

ENABLING INVESTMENT-LED ECONOMIC GROWTH

The investment climate in the country has transformed in recent years, leading to theemergence of ‘investment as a crucial driver of economic growth.The governments efforts over the past decade have resulted in positive economicoutcomes. With numerous investment-boosting reforms and healthier balance sheets, privatecorporate investment has begun to crowd in, and banks are responding with greater creditdisbursement.

THE ECONOMIC PROJECTIONS?WHAT LIES AHEAD

We are positive that investments will likely see a turnaround soon. In fact, the next two years will be crucial for investment to gain momentum before the economy takes off on a sustained and rapid growth path. High- frequency data?for example, electricity generation, GST collections (through e-way bills), average fuel consumption per day, sale of two-wheelers and tractors, credit growth across sectors and industry, occupancy rates in hotels, and the purchasing managers indices (PMIs)?clearly indicate that growth drivers have maintained a positive momentum despite uncertainties.

Further, to achieve future roadmap we adopt below business strategies

• Focus on value added products instead of low value added products.

• Source Ingots from overseas.

• We have strategy to hedge all currencies in export and import to avoid exchange fluctuation.

• We are doing natural hedge of sales and purchase quantities.

• We believe in customer satisfactions in terms of Quality and Delivery Commitment.

• We believe in zero waste philosophy (as in Mother Nature there is no waste). Zero waste includes Zero solid waste(recycling 100%) and Zero liquid waste (recycle liquid discharge by STP).

• We are continuously doing R&D on our products, process improvement and develop new grades. We have achieved inManufacturing of rare grades in our melting unit which are substitute of imports. We are continuously working onImproving our process by minimizing cost i.e. indirectly generating revenue, which will increase our bottom line.

• We are developing new markets such as Canada and United States of America.

	Revised Estimates	Budget Estimates
	2023-24	2024-25
1. Fiscal Deficit	5.8	5.1
2. Revenue Deficit	2.8	2.0
3. Primary Deficit	2.3	1.5
4. Tax Revenue (Gross)	11.6	11.7
5. Non-tax Revenue	1.3	1.2
6. Central Government Debt	57.8	56.8

Fiscal Indicators - Rolling Targets as a Percentage of GDP:

Strong domestic demand for consumption and investment, along with Governments continued emphasis on capital expenditure are seen as among the key driver of the GDP in H1 of FY2023-24. On the supply side, industry and services sectors were the primary growth drivers in H1 of FY2023-24. India has registered the highest growth among major advanced and emerging market economies during this period. As per the IMF, India is likely to become the third-largest economy in 2027 in USD at market exchange rate. It also estimates that Indias contribution to global growth will rise by 200 basis points in 5 years.

INDUSTRY OVERVIEW

Our Company is having an unique integrated stainless steel, special steel & alloys steel melting and further processing unit i.e. up tobright bar fasteners. Our Company is a stainless steel unit manufacturing SS Ingots, Round Bar, RCS, Bright bar, different sections/profiles like square, hex, angle, patti, etc, forging and making fasteners. Our Company is having integrated stainless steelmanufacturing unit covering 40,000 sq. meters land with an installed capacity of 25,000 TPA with a revenue of Rs. 30,455.21Lakhsin the financial year ending on 31 March 2024. Having situated in Gandhinagar, Gujarat, the fastest growing city of India and the thirdin the world, the location of the Company is one of the primary factors of its growth.

The India special steel market size was valued at $7.00 billion in 2020, and is projected to reach $38.8 billion by 2035, growing ata CAGR of 10.9% from 2021 to 2035.

The global steel market size was valued at USD 928 billion in 2022. It is projected to reach USD 1,210 billion by 2031, growing with a CAGR of 3% during the forecast period (2023-2031).

GLOBAL IRON AND STEEL, CLOSURE MARKET SIZE, 2022-2032 (IN BILLION US$)

Global steel demand is expected to rise by 1.7% to 1.793 billion metric tons in 2024 and to increase further in 2025, The association expects India to be the main driver of demand growth as Chinese demand continues to decline.After two years of decline and severe post-pandemic market volatility, there are signs of global steel demand "settling in a growth trajectory in 2024 and 2025",

India, however, has emerged as the strongest driver of steel demand growth since 2021.The association expects Indian demand to grow by 8% over 2024 and 2025.Demand in Europe, which has been challenged by high inflation and tighter monetary policy, is expected to show very modest growth this year before a ^^5.3% projected gain in 2025.

Further, Steel is used in every important industry: energy, construction, automotive and transportation, infrastructure, packaging and machinery. By 2050, steel use is projected to increase by around 20% compared to present levels in order to meet the needs of our growing population. Skyscrapers are made possible by steel.The housing and construction sector is the largest consumer of steel today, using more than 50% of steel produced. Also, Steel is the main material used in delivering renewable energy: solar, tidal, geothermal and wind.

BREAKUP BY PRODUCT TYPE:

GLOBAL OTHER STEEL MARKET BY MARKET VALUE SHARE, BY PRODUCT TYPE (IN %)

BREAKUP BY SEGMENTATION:

STAINLESS STEEL MARKET BY SEGMENTATION

BREAKUP BY REGION:

GLOBAL STAINLESS STEEL MARKET SHARE, BY REGION (IN MILLION US$)

SWOT Analysis Strengths

> Unique integrated stainless steel and higher alloys long product manufacturing unit.

> Availability of quality raw material both in import and indigenous in bulk quantity.

> Well connected by road, rail and airport.

> Factory is very near to the metro city Ahmedabad.

> Various products available at one place for customers like: Bright Bars, Angles, Hexagonal Bars, Square Bars, Fastenersand forging from 3 MM to 400 MM in size.

> Company have ONGC gas connection which contributes in green energy and enviroment friendly.

> Low Manufacturing Cost as in Small Medium Sector.

> Rich experience of Promoters.

> Continuous power supply (24x7)

Weakness

> High cost of energy/power

> Higher Cost of Debt.

Opportunities

> Potentially huge domestic demand from stainless steel intensive investments like engineering sector, defense, and medicalequipment, consumer durables etc.

> Further backward integration by putting AOD.

> Good, consistent increasing domestic demand.

> Huge potential for productive foreign collaboration.

Threats

> Dumping by competitors.

> High manpower requirement

> Change in foriegn policy.

SEGMENT -WISE PERFORMANCE

The Companys main business activity is manufacturing of various types of Steel products in more than 15 international grades and in size range from 3mm to 400mm Black Round Bars, SS RCS, Forging,

Hexagonal & Square, Bars, Steel Ignots, Bright Round Bar, Fasteners, Flat Bars, and Angle Bars.

OUTLOOK

The Company continues to explore the possibilities of expansion and will make the necessary investments when attractive opportunities arise.

RISK & CONCERNS

The Company has in place a mechanism to identify, assess, monitor and mitigate various risks to key business objectives. Key business risks and mitigation strategy are highlighted below.

Business Risk

To mitigate the risk of high dependence on any one business for revenues, the Company has adopted a strategy of launching new products/services, globalizing its operations and diversifying into different business segments. The strategy has yielded good results and the Company therefore has a diversified stream of revenues. To address the risk of dependence on a few large clients, the Company has also actively sought to diversify its client base.

Legal & Statutory Risk

The Company has no material litigation in relation to contractual obligations pending against it in any court in India or abroad. The Company Secretary, compliance and legal functions advise the Company on issues relating to compliance with law and to pre-empt violations of the same. The Company Secretary submits a quarterly report to the Board on the Companys initiatives to comply with the laws of various jurisdictions. The Company also seeks independent legal advice wherever necessary.

Human Resource Attrition Risk

Mangalam Alloys Limited key assets are its employees. In a highly competitive market, it is a challenge to address the attrition. Mangalam Alloys Limitedcontinues to accord top priority to manage employee attrition by talent retention efforts and offering a competitive salary and growth path for talented individuals.

Macroeconomic Risks

Companys business may be affected by changes in Government policy, taxation, intensifying competition and uncertainty around economic developments in Indian and overseas market in which the Company operates.

Mitigation Strategy

The Company has well defined conservative internal norms for its Business. The Company ensures a favourable debt/equity ratio, moderate liquidity, strongclientele with timely payment track record, appropriate due diligence before bidding and focus on expanding presence in newer markets to minimize the impact in adverse conditions. The Company has geographically and operationally diversified into multiple countries and business segments thereby reducing its dependency on one country or market.

Operational Risks

Inadequate assessment of health of critical equipment leading to unplanned interruption of operational processes, non-disposal of plant waste due to limited demand and storage space, Logistics constraints due to inadequate rail, road and sea infrastructure may lead to disruption in operations.

Climate change risks

Non-compliance to stringent environmental conditions leading to penalties, stoppage of operations and loss of reputation.

The Company continues to invest in upgrading existing technologies to minimise its environmental footprint. We closely monitor air quality, effluent discharge and other environmental parameters to ensure that they comply with all existing regulations. The focus on minimising carbon footprint is integrated within the capital allocation process and projects are required to calculate a carbon-adjusted Internal Rate of Return (IRR).

Others

The Company is exposed to risks & fluctuations of foreign exchange rates, raw-material prices and overseas investments exposures.

AUDIT AND INTERNAL CONTROL SYSTEM

One of the key requirements of the Companies Act, 2013 is that companies should have adequate Internal Financial Controls (IFC) and that such controls should operate effectively. Internal Financial Controls means the policies and procedures adopted by the Company for ensuring orderly and efficient conduct of its business, including adherence to Companys policies, safeguarding of its assets, prevention and detection of frauds and errors, accuracy and completeness of the accounting records, and timely preparation of reliable financial information. Your Companys process of assessment ensures that not only does adequate controls exist, but it can also be evidenced by unambiguous documentation. The process involves scoping and planning to identify and map significant accounts and processes based on materiality. Thereafter, risk is identified and their associated controls are mapped, else remediation is implemented. These controls are tested to assess operating effectiveness. The auditor performs independent testing of controls. The Auditors Report is required to comment on whether the Company has adequate IFC system in place and such controls are operating effectively. Your Companys Internal Control System is robust and well established. It includes documented rules and guidelines for conducting business. The environment and controls are periodically monitored through procedures/ processes set by the management, covering critical and important areas. These controls are periodically reviewed and updated to reflect the changes in the business and environment.

RAW MATERIAL PRICES

The prices of basic major raw materials used in our manufacturing process viz. stainless steel scrap /flats of various grades doesnt affect much, as we are working in open market scenario.

FINANCIAL PERFORMANCE

During the year under review, the Company has generated total revenue of Rs3, 05,55,64,787/- (Previous Year Rs3,08,17,92,406/-). The net profit before exceptional items and taxes is Rs8, 02,85,420/- (Previous Year ^13,00,70,007/-). The net profit after taxes resulted into the profit for the year at Rs11, 47,01,0478(Previous Year ^10,12,62,335/-).

MATERIAL DEVELOPMENTS IN HR / INDUSTRIAL RELATION / NUMBER OF PERSON EMPLOYED

Our Company believes that the human capital is key to bring in progress. The Company believes in maintaining cordial relation with its employees, which is one of the key pillars of the Companys business. The Companys HR policies and practices are built on core values of Integrity, Passion, Speed, and Commitment. The Companys focus is on recruitment of good talent and retention of the talent pool. The Company is hopeful and confident of achieving the same to be able to deliver results and value for our shareholders. As on 31^stMarch, 2024, the total employees on the Companys rolls stood at 196and on contract basis 300.

ACCOUNTING POLICIES

The accounting policies have been consistently applied by the Company and are consistent with those used in the previous year. The financial statements have been prepared under the historical cost convention on an accrual basis. The management accepts responsibility for the integrity and objectivity of the financial statements, as well as for the various estimates and judgment used therein.

DISCLOSURE OF ACCOUNTING /TREATMENT IN PREPARATION OF FINANCIAL STATEMENT

The Company has followed all relevant Accounting Standards laid down by the Institute of Chartered Accountants of India (ICAI) while preparing Financial Statements.

DETAILS OF SIGNIFICANT CHANGES (I.E. CHANGE OF 25% OR MORE AS COMPARED TO THE IMMEDIATELY PREVIOUS FINANCIAL YEAR) IN KEY FINANCIAL RATIOS

The Company has identified the following ratios as key financial ratios:

Particulars 2023-24	2022-23	Changes	Reason
1. Debt Equity Ratio 1.12	1.94	(42.47)	Reason for decrease in Debt Equity ratio is because of increase in share holders equity during the year.
2. Return on Capital 12.75 Employed	18.62	(31.51)	The decrease in return on capital employed Is due to increase in Equity Mainly because of funds Raised from IPO.

DETAILS OF ANY CHANGE IN RETURN ON NET WORTH AS COMPARED TO THE IMMEDIATELY PREVIOUS FINANCIAL YEAR ALONG WITH A DETAILED EXPLANATION THEREOF

Particulars	2023-24	2022-23	Changes	Reason
Return on Net Worth (%)	8.56	12.92	4.36	Increase in total equity by fund raised via IPO (net off) proceeds

CAUTIONERY STATEMENT

Statements in this report on Management Discussion and Analysis describing the Companys objectives, projections, estimates, expectations or predictions may be “forward-looking statements” within the meaning

of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied.

PLACE: Gandhinagar	By Order of the Board
DATE: 30th July, 2024	For, MANGALAM ALLOYS LIMITED

 

Sd/-	Sd/-
Uttamchand Chandanmal Mehta	Tushar Uttamchand Mehta
Whole Time Director	Managing Director
DIN: 00153639	DIN: 00187046

 

Regd. Office: -Plot No. 3123-3126,

GIDC Phase III, Chhatral, Dist. Gandhinagar,

Gujarat, India, 382729.

Website: www.mangalamalloys.com

CIN: L27109GJ1988PLC011051