National General Industries Ltd Management Discussions

FORWARD LOOKING STATEMENT

This report contains forward-looking statements, which may be identified by their use of words like ‘plans, ‘expects, ‘will, ‘anticipates, ‘believes, ‘intends, ‘projects, ‘estimates or other words of similar meaning. All statements that address expectation of projections about the future, including but not limited to statements about the Companys strategy for growth, product development, market position, expenditures and financial results are forward-looking statements. Forward-looking statements are based on certain assumptions and expectations of future events. The Company cannot guarantee that these assumptions and expectations are accurate or will be realized. The Companys actual results, performance or achievements could, thus differ materially from those projected in any such forward-looking statements. The Company assumes no responsibility to publicly amend, modify or revise any forward-looking statements on the basis of any subsequent developments, information or events.

OVERVIEW OF FY 2024-25

National General Industries Limited (‘The Company) is engaged in the production and selling of Steel. The Company has manufacturing facilities at Ghaziabad, Uttar Pradesh.

GLOBAL ECONOMY & ITS OUTLOOK

The global economy was resilient over the last year, stabilising from the shocks witnessed in the beginning of the decade, amid the continued overhang of geopolitical risks. As per IMF estimates, world GDP growth eased to 3.3% in 2024 from 3.5% in 2023. The US economy recorded strong momentum at 2.8% with robust demand conditions and labour market, while growth was subdued in the Euro area and Japan. China managed to meet its growth target of 5% on the back of policy stimulus, despite a weakening property sector. According to the IMF, average inflation in advanced economies fell from 4.6% in 2023 to 2.6% in 2024. This was helped by the normalisation of supply chain pressures, from elevated levels after the outbreak of the Russia-Ukraine war.

The outlook for 2025 has been impacted by the trade tensions, sparked by the tariff policies of the new US administration. The initially announced tariffs by the US in early April have been subsequently diluted through various announcements and bilateral trade discussions. Nevertheless, US tariffs are likely to stay elevated in comparison to the levels prevailing before the start of the year. Further, the policy uncertainty is adversely affecting business and consumer confidence. The eventual tariff scenario may still take time to settle down.

Apart from trade tensions, geopolitical risks remain significant with continuing conflicts between Russia and Ukraine, and in the Middle East. Amid the heightened uncertainty, the IMF projected world GDP growth to slow substantially to 2.8% in 2025 and 3% in 2026, lower-than-trend growth but still above the mark typically associated with recessionary conditions. Trade policy effects are deemed by the IMF to be adverse almost across the world, with more severe impacts on the US and China, which are the most affected by tariff escalations. Tariffs could push inflationary tendencies in the US, complicating the future trajectory of US Fed rates. The IMF projects Chinas growth to slow to 4% in 2025, even as the Chinese government is targeting 5% growth and is undertaking fiscal and monetary policy support to meet the target.

Broader global growth concerns are likely to weigh on commodity prices, in general. Financial markets remain vulnerable to potential risk-aversion episodes in this macro backdrop, besides continuing geopolitical risks. However, in case of a significant dilution in trade frictions through trade deals resulting out of the ongoing bilateral negotiations by the US administration, the global economic outlook could get re-rated upwards.

INDIAN ECONOMY & ITS OUTLOOK

India continues to be one of the fastest growing major economies. The Indian economy is estimated to have recorded a solid growth of 6.5% in FY 2024-25, on top of a strong 9.2% growth in the previous year. Private consumption expenditure accelerated during the year, whereas gross fixed capital formation decelerated.

Growth was slower in the first half of the year, with the election-related code of conduct slowing down public capex and heatwave incidences impacting consumption, along with the elevated food inflation. Growth recovered in the second half of the year. Retail inflation eased from 5.4% in FY 2023-24 to 4.6% in FY 2024-25.

Inflation fell below the 4%-mark in the last quarter of the fiscal, as food inflation declined substantially. This opened the space for policy rate cuts by the RBI; policy rate was cut by a combined 50 basis points in February and April 2025 meetings. Liquidity conditions that had tightened in early 2025 have eased with a slew of liquidity measures by the RBI. Indias macroeconomic situation continues to be resilient with fiscal consolidation on track, a healthy level of foreign exchange reserves and current account deficit well within prudent levels. The overall current account deficit is estimated to be contained. Thanks to buoyant tax collections and increased transfers from the RBI, the central governments fiscal deficit reduced by nearly 0.8 percentage points to 4.8% of GDP in FY 2024-25.

Indias growth outlook for FY 2025-26 is likely to be supported by resilient domestic drivers, even though the overhang of global headwinds remains. Consumption will be buoyed by personal income tax cuts, easing food inflation, positive monsoon outlook and the RBIs rate cuts. The Union Budget announced cuts in personal income tax amounting to 1 trillion. The Indian Meteorological Department (IMD) has forecast monsoon rainfall to be above normal in 2025, which bodes well for continued rural recovery. Consumer confidence has shown an uptrend, and the RBIs policy easing and liquidity support will aid consumption demand.

Central government capex is budgeted at 11.2 trillion for FY 2025-26, versus the revised estimate of 10.2 trillion for FY 2024-25. Rising trends in capacity utilisation in the manufacturing sector, along with strong balance sheets of banks and corporates, are expected to support private capex, though the impact of global trade frictions on confidence levels needs to be watched. While the US tariffs scenario could take some time to solidify, early indications suggest that the realignment of global supply chains could benefit India in the medium term. Lower international oil prices are expected to bolster Indias macroeconomic fundamentals, along with the continued fiscal consolidation and adequate forex reserves. The RBI has projected Indias consumer inflation to soften further to 4% in FY 2025-26.

With some likely softening of external demand, the IMF expects Indias economy to grow at 6.2%, whereas the RBI has projected growth to be steady at 6.5% during FY 2025-26. These projections reflect a potentially modest dent to Indias growth performance due to the global slowdown, even as the domestic growth impulses remain supportive.

INDIAN STEEL INDUSTRY

India, the second-largest steel producer globally, has been a key driver of growth for the global steel industry. Indias steel consumption recorded a robust growth of 11.5% in FY 2024-25, the fourth consecutive year of double-digit growth. In the four years ending FY 2024-25, Indias GDP at constant prices increased 37% while steel consumption grew 60%. Over this period, the elasticity of steel consumption to economic growth (computed as the ratio of growth in steel consumption to growth in real GDP) was recorded at 1.5, compared to an elasticity of 0.8 during the decade before the pandemic. Such a step-up in elasticity of steel consumption reflects the phase of nation-building in India, characterised by a strong pick-up in infrastructure building and robust structural underpinnings of consumption, viz. urbanisation and rising penetration of consumer durables. This phase is expected to continue into the medium term, heralding a strong backdrop for growing steel consumption.

Although the consumption scenario in India was robust, domestic steel pricing was under pressure in FY 2024-25 amidst elevated levels of imports and weak global prices. Domestic iron ore prices were, however, range-bound, reflecting strong demand conditions.

OPPORTUNITIES, THREATS AND RISKS

CRISIL (March 2025 forecast) has projected Indias steel consumption growth to remain robust at 9-10% in FY 2025-26 with flat steel products (projected growth of 12-14%) leading the demand growth, in comparison to long steel products (projected growth of 5.5-7.5%). The following factors will have a bearing on Indias near-term steel consumption outlook: a) rising public capex on infrastructure for modernisation of railways and development of high-speed highway corridor projects are thrust areas in the development of transport infrastructure, b) Residential real estate launches, c) public housing programme, d) governments production-linked incentive schemes, improving, e) demand outlook for consumer durables, f) Auto industry growth, g) defence preparedness, etc.

While Indias domestic steel demand growth scenario continues to be robust, trade-related developments need to be watched. Import of finished steel (including semis) was elevated at 10.5 MnT in FY 2024-25, whereas exports slowed amid rising protectionist measures in other countries. Accordingly, India was a net importer of steel for the second consecutive year in FY 2024-25, with the magnitude of net imports being the highest in several years, barring the exception of FY 2015-16.

The provisional safeguard duty, enforced with effect from 21 April 2025 for 200 days, is expected to act, to some extent, as a speed bump for the import of steel into India, though any possible trade diversions arising out of the removal of exemptions for steel import duty by the US, the production demand imbalance in China and the trade remedial measures by other jurisdictions (especially against China) need to be watched carefully.

The Indian steel industry is estimated to have added more than 50 MTPA capacity in the last five years. The momentum of investments is expected to continue into the coming years, for capacity building to meet additional demand, for value addition and for decarbonisation. Broadly, the outlook for the Indian steel industry for FY 2025-26 is one of cautious optimism, with resilient domestic demand drivers and monitorable global dynamics.

SEGMENT-WISE PERFORMANCE

A detailed note on the segment-wise performance is given under note no. 25 of the Financial Statement of the Company.

RISKS AND CONCERNS

Technology obsolescence is an inherent business risk in a fast changing world and speed of change and adaptability is crucial for survival of business. Though aggressive cost cutting and addition to the product mix to incorporate more value-added products are still the present strengths of the Company, the Company is taking utmost care to ensure very high quality of products.

INTERNAL CONTROL SYSTEM

A robust system of internal control, commensurate with the size and nature of its business, forms an integral part of the Companys policies. The Company has a proper and adequate system of internal control commensurate with the size and nature of its business. The accounting records are adequate for preparation of financial statements and other financial information. The adequacy and effectiveness of internal controls across the various business, as well as compliance with laid down systems and policies are regularly monitored by your Companys internal audit process. The Audit Committee of Board, which met four times during the year, reviewed the financial disclosures. The Company has appointed M/s B.R.Maheswari & Co., Chartered Accountants, (FRN 001035N), New Delhi to oversee and carry out internal audit of its activities. The internal audit reports are reviewed by the Audit Committee periodically. Based on its evaluation (as defined in section 177 of Companies Act 2013 and Clause 18 of SEBI Regulations 2015), the audit committee has concluded that as on March 31, 2025, your internal financial controls were adequate and operating effectively.

FINANCIAL AND OPERATIONAL PERFORMANCE

The financial performance of the Company for the financial year ended on 31^st March, 2025 and 31^st March, 2024 are summarized below:-

(Rupees in Lakhs)