Metal Coatings (India) Ltd Management Discussions

Overview

In terms of the Regulation 34(2)(e) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Management of the Company presents its Analysis Report covering the performance and outlook of the Company.

This report presents the Management?s perspective on the external business environment and developments within the steel industry, along with the Company?s strategic direction, operational and financial performance for the financial year 2024 25. It also outlines key updates related to human resources and industrial relations, identifies principal risks and opportunities, and evaluates the adequacy of the Company?s internal control systems.

This report should be read in conjunction with the Company?s audited financial statements, including the accompanying schedules, notes, and other relevant disclosures provided in the Annual Report and Annual Accounts for FY 2024 25.

INDUSTRY STRUCTURE

The Company operates across the steel value chain, with a strategic emphasis on the manufacturing and sale of Cold Rolled Steel Strips and Hot Rolled Pickled and Oiled (HRPO) steel strips and coils. These value-added products serve as critical inputs for a diverse range of end-use industries, including Automotive Components, Consumer Durables, Electrical and Electronics, Telecom Equipment, and more.

EXTERNAL ENVIRONMENT

The global economy continues to face a moderate growth outlook amidst rising geopolitical tensions, persistent inflation, and evolving trade dynamics. According to the International Monetary Fund (IMF), global GDP growth is projected at 3.3% in 2025, lower than the long-term average of 3.7%, reflecting subdued recovery in advanced economies and policy-related uncertainties. Emerging Markets and Developing Economies (EMDEs) remain the primary drivers of global expansion, led by robust performance in Asia and sub-Saharan Africa. India is expected to grow at 6.2% in 2025, supported by resilient domestic demand, while China?s growth outlook remains moderate at 4.0% due to ongoing property sector challenges and global trade tensions. In contrast, advanced economies face slower recovery. The United States is forecast to grow at 2.7% in 2025 before slowing to 1.7% in 2026, while the Eurozone is expected to witness a gradual rebound with growth of 1.0% in 2025. Global trade growth is projected to remain sluggish due to increasing protectionism, including recent tariff actions impacting metals and industrial goods. Monetary policy remains cautious worldwide as central banks? balance disinflation efforts with growth stability. While global financial markets have shown resilience, policy unpredictability, supply chain adjustments, and regional conflicts continue to pose downside risks to economic stability over the near term.

INDIAN ECONOMY

India remains the world?s fastest-growing major economy, with the World Bank projecting GDP growth of 6.7 per cent in FY 2025-26 and FY 2026-27 and the IMF forecasting 6.5 per cent for 2025-26 well above the global average of roughly 3 per cent. This outperformance underscores India?s rising influence as the principal engine of Asian growth while China?s expansion moderates.

Growth is underpinned by firmer investment supported by high capacity-utilisation, strong corporate and banking balance sheets, and stepped-up public infrastructure spending alongside resilient consumption. The composite Purchasing Managers? Index (PMI) climbed to 59.5 in March 2025, signalling broad-based expansion, while headline inflation stayed below the Reserve Bank of India?s 4 per cent target, enabling a 50 basis point repo-rate cut to 6.0 per cent.

The Union Budget 2025-26 reinforces momentum through targeted support for agriculture, MSMEs, capital investment, and exports, coupled with key tax reforms such as exempting incomes up to 12 lakh and restructuring slabs aim to boost consumption and support the middle class. Backed by strong policies and the "Viksit Bharat" vision, India is well-positioned to sustain growth and reinforce its role as a pillar of global economic stability.

STEEL INDUSTRY

In 2024, the global steel industry faced considerable challenges, with crude steel production declining by 1.0% year-on-year to 1,884.6 million tonnes (World Steel Association). This decline marks a continued slowdown post-pandemic, driven by subdued demand in major markets such as China, Japan, and the United States. In 2024, global steel markets remained under pressure, with China accounting for over half of global output reporting a 2.3% decline in production to 1,005.1 million tonnes. The imposition of 25% tariffs by the U.S. on steel and aluminum imports further disrupted trade flows, strained supply chains, and exerted downward pressure on prices. Amid these challenges, the World Steel Association revised its October 2024 forecast, projecting only a modest 1.2% growth in global steel demand for 2025, reflecting persistent geopolitical tensions, ongoing U.S.-China trade disputes, and cautious investment sentiment across advanced economies. Despite global headwinds, emerging Asian markets led by India are expected to remain resilient, driven by strong infrastructure investment, urbanization, and industrial growth. As the world?s second-largest steel producer, India continues to scale up production and consumption, supported by initiatives like the National Infrastructure Pipeline and PLI schemes.

While the global steel sector faces macroeconomic uncertainties and regulatory shifts, India?s outlook remains positive, underpinned by structural demand and sustained policy support.

INDIA STEEL OUTLOOK

India?s steel industry is charting a strong growth trajectory, underpinned by sustained government spending, expansive infrastructure development, and progressive policy interventions. Despite global economic uncertainties, India continues to demonstrate resilience, driven by structural reforms, rapid urbanization, and a growing emphasis on green and sustainable steel production.

Production and Consumption Trends:

During April to November 2024 (FY 2024 25), India recorded a 3.3% year-on-year growth in crude steel production and a 4.6% increase in finished steel output. This upward momentum, albeit with some monthly fluctuations, reflects the broad-based strength in domestic demand across construction, automotive, and capital goods sectors.

India retained its position as the world?s second-largest crude steel producer in 2024, with output reaching 144.3 million tonnes (MT) a 13.4% increase from 127.2 MT in FY 2022 23. Simultaneously, the finished steel consumption during April December 2024 stood at 111.5 MT, marking an 11.4% year- on-year rise. However, strong domestic demand outpaced exports, resulting in India becoming a net importer of finished steel during this period. Imports rose by 22.7% to 7.4 MT, while exports declined by 24.6% to 3.6 MT. The finished steel trade deficit during April December stood at 31,350 crore. The dip in finished steel exports during this period was largely due to pricing disparities between the domestic and international markets.

Trade Dynamics and Challenges:

From FY21 to FY24, India?s crude steel production rose from 103.5 MT to 144.3 MT, while finished steel consumption increased from 94.9 MT to 136.3 MT. However, finished steel exports fell from 10.8 MT to 7.5 MT and imports surged from 4.8 MT to 8.3 MT, reversing the trade balance in FY24 and FY25.

This shift has been primarily driven by pricing disparities wherein lower international prices compressed export margins, making imports comparatively more viable. The competitiveness of Indian steel is also under threat from dumping, especially in northern India, where a surge in CR strip capacity is impacting pricing dynamics.

RISKS, THREATS & STRATEGIC CONCERNS

Regulatory Challenges: Tightening environmental regulations are raising compliance costs, requiring investments in cleaner technologies. Non-compliance risks fines and operational disruptions. Price Volatility: Steel prices remain unpredictable due to global economic shifts, demand-supply imbalances, and policy changes, impacting profit margins and pricing strategies. Rising Input Costs: Higher costs for energy, labour, and logistics are straining margins. The energy transition further challenges cost-competitiveness in this energy-intensive sector. Competition and Substitutes: The CR steel segment faces intense competition from integrated HRC producers moving downstream. Additionally, alternatives like Aluminium and composites are reducing steel demand due to better performance and lower environmental impact.

To manage these challenges, the Company regularly monitors cost trends, optimizes procurement, and adapts its pricing and production strategies. Its diversified business model helps mitigate sector-specific risks and maintain operational stability.

OPPORTUNITIES FOR GROWTH

Infrastructure and Industrial Growth: Infrastructure is expanding rapidly, backed by a 11.21 lakh crores allocation in the Union Budget 2025 26 under the Viksit Bharat 2047 vision. Rising urbanization and development are driving strong demand for steel and other raw materials, with large construction and industrial projects leading consumption.

Government Support: The government is promoting steel manufacturing through tax incentives, subsidies, and infrastructure spending. Initiatives like the Domestically Manufactured Iron & Steel Products Policy (DMI&SP) mandate support domestic steel use, while duty cuts on Ferro Nickel and ferrous scrap boost competitiveness. Proposed anti-dumping duties aim to protect local producers from unfair imports.

Technological Advancements: Advancement in technology particularly in Automation, Artificial Intelligence, and Energy-efficient systems are enhancing productivity and sustainability across the sector. These innovations are enabling cost reductions, operational efficiency and a lower environmental footprint.

Green Steel Transition: India is progressing toward sustainable steel production by adopting cleaner technologies to reduce carbon emissions, aligning with global environmental goals.

FINANCIAL PERFORMANCE

HUMAN RESOURCES

At Metal Coatings (India) Limited, we firmly believe that our people are our greatest strength. Human resources play a critical role in driving our operational success and achieving our strategic goals. Our workforce is central to maintaining excellence across all facets of our operations and we are committed to attracting, developing and retaining top-tier talent. We cultivate a workplace culture rooted in innovation, safety, efficiency and inclusivity. By fostering a diverse and collaborative environment, we leverage the collective capabilities of our team to overcome challenges, capitalize on opportunities, and support long-term, sustainable growth.

Our human resource strategies are closely aligned with our business objectives, ensuring that talent development remains a top priority. Through targeted initiatives, we aim to build a motivated, agile, and engaged workforce that can thrive in a dynamic global market. Furthermore, our Whistle Blower Policy serves as a critical safeguard, reinforcing our commitment to transparency, accountability, and ethical conduct. This framework empowers employees to voice concerns without fear of retaliation, further strengthening our organizational integrity.

As of March 31, 2025, the company?s permanent employee strength stood at 65. We continue to uphold open and cordial employee relations, fostering a positive work environment.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

Your Company has laid down the set of standards, processes and structures which enables us to implement internal financial control across the organization and ensure that the same are adequate & operating effectively. Internal financial control also provides reasonable assurance regarding the reliability of financial reporting and preparation of financial statement. The company has devised such systems, policies and procedures which ensure orderly and efficient conduct of its business, including adherence to the company?s 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 disclosures. To maintain the objectivity and independence of Internal Audit, the Internal Auditor report is directly submitted to the Chairman of the Audit Committee and the Board.

KEY FINANCIAL RATIOS

SEGMENT-WISE OR PRODUCT-WISE PERFORMANCE

The Company operates in only one segment, i.e. iron & steel. During the Financial Year 2024-25 the company?s turnover of its main products was Rs. 150.68 Crores as compared to last year of Rs. 163.61 Crores.

CAUTIONARY STATEMENT

The Management Discussion and Analysis section presents the Company?s strategic objectives, projections, estimates, and expectations for future performance. Certain statements contained herein may be classified as "forward-looking statements" under applicable securities laws and regulations.

These forward-looking statements are based on current assumptions, expectations, and projections about future events. However, actual results may differ materially due to a variety of factors beyond the Company?s control. Key external influences include changes in economic conditions affecting supply and demand, fluctuations in market prices, revisions in government policies or tax regulations, climate variability, and other unforeseen contingencies.

Given these potential risks and uncertainties, readers are advised to interpret forward-looking statements with appropriate caution. These statements are not guarantees of future performance and should not be relied upon as such.