Orissa Sponge Iron & Steel Ltd Management Discussions

i. Industry structure and developments:

In the financial year 2024–25, Indias sponge iron production (i.e. 55.65 million tons) rose by 8% approx. compared to 51.5 million tones in immediately preceding financial year. Although it was lower than last fiscal year on with a year-on- year increase basis, when it was surged by 18%, and still, it makes India world leader in sponge iron manufacturing and the second-largest steel producer globally.

Sponge iron produced with 82–83% of the output derived from coal-based processes. The remaining production utilized natural gas and syngas as alternative energy sources, reflecting a gradual diversification in fuel usage.

As you know our Company operates coal-based sponge iron plant with capacity of 2.5 Lacs TPY, waste energy recovery-based power plants (36 MW) and a billet making plant (1 Lacs TPY). Growth in this sector of the industry has but gradually undergoing a transformation for the better. ii. Opportunities and threats: Opportunities:

The Company was allotted Iron Ore Mines by the Central Government and the State Government of Odisha. However, the commencement of mining operations from the mines requires several approvals, clearances and fulfillment of conditions as specified in the respective documents. The company has received all approvals and clearances including Stage I Clearance from the Ministry of Environment and Forest vide Letter dated 21st September, 2016 and Compliance Certificate under the Scheduled Tribes and Other Traditional Dwellers (Recognition of Forest Rights Act) 2006 vide Letter dated 23rd June, 2016. The Company has also received approval under Section 2 (iii) of the Forest Conservation Act, 1980 for proceeding to execute the Mining Lease. Thereafter the Company has also deposited Rs. 28.96 Crores towards the NPV (Net Present Value) over the forest Land for which forest license has been accorded. However, the matter has gone to the Court. The Company is hopeful of getting favorable judgment for execution of mining lease in the near future.

Most recently in May, 2022, an application has been filed before Honble High Court of Odisha for an early disposal of the Companys Writ Petition. On May 18, 2022, Honble High Court of Odisha disposed off Companys application thereby stating that it was not inclined to fix any early date in this matter. Consequent to which the Company has filed a SLP before the Honble Supreme Court of India for early disposal of our application and vide order dated 09th Dec 2022 of The Honble Supreme court of India, directions have issued to High court of Orissa to dispose of this case on merits.

As you know that, in February 2024, Company has entered into Operation and Management agreement with Maa Tarini Steel LLP (operator) for a period of 3 years. Where operator is authorized to operate 2 DRI kilns of 500 TPT and 350 TPT of the Company, which helped company to be operational and also made some capital expenditure for the smooth operation. Further Company also successfully commissioned Steel Melting Shop (SMS) Plant.

As company entered in operation and management agreement with Maa Tarini Steel LLP at end of last financial year therefore failure of the operator to meet the agreed-upon performance standards or failure of equipment or systems, leading to downtime or accidents, disagreements over liability for damages or losses.

Apart from these unforeseen events like natural disasters or pandemics that impact operations. iii. Segment-wise or product-wise performance:

According to Accounting Standard 17, Companys business activities fall within a single primary business segment viz. "Iron & Steel" and our plant also been shut down for more than 10 years. thereafter company started revamping of its plant during financial year 2022-23, which completed last financial year, thereafter company also started production after facing lot of hurdles thereafter company entered into Operation and management agreement as company was incurring losses after the operation started.

Even after production started, company was incurring losses and thereafter in February 2024, Company has entered into operation and management agreement with Maa Tarini Steel LLP (operator) to run this business in smooth and efficient manner for minimum guarantee price.

During the year production of sponge iron was approx. 1.63 lakhs Metric ton whereas last year it was 91k metric ton. during the year the Company has purchased electricity from TPNODL amounting to Rs. 547.74 lakhs in comparison to last year it was of Rs. 490.94 lakhs. iv. Outlook:

Our very first goal is to do all that is necessary action to obtain mining clearances so that mining operations from captive mines could commence as soon as possible. On achieving this goal efforts would be made to set up the project for production of 1 million tons of steel which will be a significant achievement for the company and company may perform magnificently in fututre.

As first phase of expansion, Company has successfully commissioned steel melting shop (SMS) which is also operational now. Further company is looking for more expansion of operations from SMS to TMT segment in future. v. Risks and concerns:

As you know Sponge Iron industry is too much volatile due to their basic raw material prices i.e. iron ore, pellet and coal are dictated. This totally shatters the cost effectiveness and the industry operates under a razor thin margin or with no or negative margin. Price of sponge iron is sensitive to demand supply position of steel scrap and selling prices of products.

Contingent liabilities have been disclosed under Note No.40 of Notes on Financial Statements. vi. Internal control system and its adequacy:

The Company has an adequate system of Internal Control commensurate with its size and nature of operations. It provides reasonable controls that all assets are safeguarded; transactions are authorized, recorded and reported properly. Internal Auditors, a firm of Chartered Accountants, conduct audit on various activities of the Company and reports to the Audit Committee constituted by the Board which Committee meets regularly and reviews audit issues and follows up implementation of corrective actions. vii. Material developments in Human Resources / Industrial Relations front including number of people employed:

The Company firmly believes that, its manpower is the key to driving performance and developing competitive advantage. The emphasis has been on proper recruitment of talent and empowerment while devoting resources for their continuous development. The Company takes pride in the commitment, competence and dedication shown by its employees in all areas of business. Industrial relations in the organization continued to be cordial during the year under review. As on March 31, 2025, the Company had a strong team of 84 employees, who are aligned and dedicated towards the Companys goals. viii. Significant Changes in Key Financial Ratios and Change in Return on Networth

In compliance with the requirements of Schedule V of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, as amended, the details of significant changes (i.e. change of 25% or more as compared to the immediately previous financial year) in key financial ratios, along with other key financial ratios and changes in Return on Networth of the Company (on standalone basis) including detailed explanations therefor are as under:

* Net worth, Current year profit and equity related ratios are also not applicable as these figures are in negative due to continuous losses.

During the FY 2024-25 and FY 2023-24, the Company net worth is negative in both the years. ix. Cautionary Statement:

The Management Discussions and Analysis describing Industry Structure, Developments, Opportunities, Threats etc. aims at a forward-looking approach based on present applicable Laws & Regulations. Actual Results may differ from such expectations, projections etc. whether expressed or implied. Important factors that can influence and can make a difference in Companys operations include effect of demand and supply leading to price differentials in both domestic and international markets, changes in the regulations, tax laws and other statutes and other factors like infrastructure facilities, natural calamities etc. over which the Company do not have a direct control.