Prabhu Steel Industries Ltd Management Discussions

Your directors have pleasure in presenting the Management Discussion and Analysis report for the year ended on 31st March 2025.

INDUSTRY STRUCTURE AND DEVELOPMENT:

The global steel industry witnessed moderate growth during FY 2024 25, driven by infrastructure investments, automotive sector recovery, and demand from renewable energy sectors. However, the industry faced challenges from fluctuating raw material prices, rising energy costs, and geopolitical tensions impacting trade flows.

In India, the steel sector remained resilient, supported by government infrastructure push (e.g., Gati Shakti, Smart Cities Mission), increased construction activity, and domestic demand from automotive and capital goods sectors. India retained its position as the second-largest steel producer globally, with crude steel production growing by approximately 5.3% YoY

SEGMENT WISE PERFORMANCE:

The steel industrys performance can be segmented into various categories, each with its own growth drivers and rates. Flat products, which include steel used in automotive, construction, and consumer goods, are expected to grow at a rate of 8-10% YoY. Long products, used in construction, infrastructure, and industrial sectors, are anticipated to grow at a slightly higher rate of 10-12% YoY. Tubes and pipes, which serve the oil and gas, power, and water sectors, are projected to grow at a rate of 12-15% YoY. Specialty steel, used in high-end applications such as aerospace, defense, and automotive, is expected to lead the pack with a growth rate of 15-18% YoY. Lastly, alloy and stainless steel, used in high-end automotive, aerospace, and industrial sectors, are anticipated to grow at a rate of 10-12% YoY.

OPPORTUNITIES AND THREATS: Opportunities:

? Increased infrastructure spending by the Government of India.

? Strong growth in construction, automobile, and renewable energy sectors. ? Import substitution and Make-in-India initiatives. ? Scope for exports to emerging economies and ASEAN markets. ? Technological advancements in green steel and carbon-neutral production.

? Rising energy and logistics costs.

? Global trade tensions and anti-dumping measures.

? Competition from low-cost producers (e.g., China, Vietnam). ? Regulatory pressure to reduce carbon emissions.

FINANCIAL HIGHLIGHTS:

Paid up Share Capital of the Company as on 31 March 2025, stands at 71,70,000 divided into 7,17,000 number of equity Shares of Rs. 10/- each fully paid up. Income from operation stood at Rs. 12,59,32,011/- for fiscal 2025. Profit/Loss before Taxes of fiscal 2024 was Rs. 23,56,555/-. Basic Earnings per Share for fiscal 2023 was Rs (7.78). Net Worth of the company stood at Rs. 10,59,90,504/- as on March 2025.

? High dependency on imported coking coal.

? Exchange rate volatility impacting import/export pricing. ? Delay in regulatory clearances for expansion projects. ? ESG compliance pressure and need for decarbonization.

Indias steel exports grew from $4.6 billion in 2014-15 to $11.81 billion in 2022-23, increase of 156%.

In 2018, India signed a deal with Japan to export 2.5 million tons of steel, worth $1.5 billion.

In 2020, India signed a deal with the US to export $500 million worth of steel, as part of the bilateral trade agreement.

In 2022, India exported $1.2 billion worth of steel to China, a significant increase from previous years. In 2022, India signed a deal with the EU to export $1 billion worth of steel, as part of the bilateral trade agreement.

In 2022, the Rourkela Steel Plant, a unit of SAIL, exported 1.2 million tons of steel to countries like China, Japan, and the US.

In 2022, JSW Steel exported 2.5 million tons of steel to countries like the US, EU, and Australia

GOVERNMENT INITIATIVES:

Some of the other recent Government initiatives in this sector are as follows:

National Steel Policy (NSP) 2017: The new Steel Policy enshrines the long-term vision of the Government to give impetus to the steel sector. ? It seeks to enhance domestic steel consumption and ensure high-quality steel production and create a technologically advanced and globally competitive steel industry. ? The policy also envisages domestically meeting the entire demand for high-grade automotive steel, electrical steel, special steels, and alloys for strategic applications and increasing domestic availability of washed coking coal to reduce import dependence on coking coal from about 85% to around 65% by 2030-31 IMPRINT Scheme: Supports R&D projects in the steel sector with funding of up to 1 crore per project. Make in India: Aims to increase steel production to 300 million tonnes by 2025, with an investment of

10 lakh crores.

Quality Control Order (QCO): Mandates quality standards for steel products to ensure conformity to international standards. Steel Development Fund (SDF): Provides financial assistance of up to 50 crores for R&D projects in the steel sector. Production-Linked Incentive (PLI) Scheme: Offers incentives of 6322 crores to specialty steel producers, targeting production of 42 million tonnes by 2026-27. The Government has also announced a policy for providing preference to domestically manufactured Iron & Steel products in Government procurement.

The government has also approved a Production-linked Incentive (PLI) Scheme for Specialty Steel. It is expected that specialty steel production will become 42 million tonnes by the end of 2026-27.

The Ministry of Steel is facilitating the setting up of an industry-driven Steel Research and Technology Mission of India (SRTMI) in association with the public and private sector steel companies to spearhead research and development activities in the iron and steel industry.

The Government of India raised import duty on most steel items twice, each time by 2.5%, and imposed measures including anti-dumping and safeguard duties on iron and steel items.

The internal control system is looked after by Directors themselves, who also looked after the day to day affairs to ensure compliances of guide lines and policies adhere to the management instructions and policies to ensure improvements in the system. The Internal Audit reports are regularly reviewed by the management. The Company has proper and adequate internal control system commensurate with the size of the business operations geared towards achieving efficiency in its various business operations, safeguarding assets, optimum utilization of resources and compliance with statutory regulations. Efforts for continued improvement of internal control system are being consistently made in this regard.

Our Human Resources philosophy is centered on fostering a high-performance culture that emphasizes accountability, responsibility, and competency. To achieve this, we have implemented practical measures to enhance organizational capabilities through employee engagement, development, and effective systems that promote productivity, equality, and accountability at all functional levels.

In response to the dynamic and challenging business landscape, our primary focus is on upskilling and reskilling our existing talent to meet the required standards. We provide leadership guidance at all levels, motivating employees to confront business realities, embrace a culture of swift action, and take ownership of their responsibilities.

To ensure our employees skills, knowledge, and business acumen remain current, we offer ongoing in-house and external training programs at all levels. Our efforts to optimize and streamline our workforce are an ongoing process, driven by our commitment to excellence.

The Management Discussion and Analysis contains forward-looking statements that describe the Companys objectives, projections, estimates, and expectations. However, these statements are subject to risks and uncertainties, and actual results may differ materially from those expressed or implied.

Several key factors could impact the Companys operations and performance. These include economic conditions, such as changes in demand and supply, price fluctuations, and market volatility, in both domestic and international markets. Additionally, changes in government regulations, tax laws, and other statutes may affect the Companys operations and profitability. Incidental factors, including natural disasters, global events, and other unforeseen circumstances, may also influence the Companys performance.

Furthermore, the Companys ability to adapt to changing market conditions, technological advancements, and evolving customer needs will be crucial. The impact of competition and market dynamics on the Companys market share and pricing power may also affect its performance. Due to these factors, the Companys actual results may differ from its projections and estimates.

The Company cautions readers not to place undue reliance on forward-looking statements, which speak only as of the date they are made. The Company undertakes no obligation to update or revise these statements, except as required by law.