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 2026.

INDUSTRY STRUCTURE AND DEVELOPMENT:

The global steel industry witnessed moderate growth during FY 2025-26, 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

In the past 10-12 years, Indias steel sector has expanded significantly. Production has increased by 75% since 2008, while domestic steel demand has increased by almost 80%. The capacity for producing steel has grown concurrently, and the rise has been largely organic.

In FY26 (April-February 2026), the consumption of finished steel stood at 147.7 MT.

In FY26 (April-February 2026), crude steel production in India stood at 153.6 MT.

In FY26 (April-February 2026), finished steel production stood at 146.8 MT.

Share of Secondary steel plants including MSMEs in crude steel capacity in FY25 stood at 47%.

Indias steel production capacity increased to 200.33 MT in FY25, and the figure is anticipated to rise to 300 MT by FY30.

As of April 2025, India has huge iron ore reserves and can produce 700 MT per year and has the potential to be the second largest producer of iron ore globally.

In FY26 (April-February 2026), the exports and imports of steel stood at 6.02 MT and 5.62 MT, respectively.

The top five exported products during this period were HR Coil/Strip, Pipes, GP/GC Sheets/Coil, Bars & Rods, and CR Coil/Sheets.

As of July 30, 2025, Indias green steel demand is forecasted to climb from negligible levels today to 4.49 million tonnes (MT) by FY30, driven by the construction sector, infrastructure and automobiles with projections rising to 24 MT by FY35, 73 MT by FY40 and peaking at 179 MT by FY50.

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.

Threats:

Volatility in prices of raw materials such as iron ore and coking coal.

- 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 2026, 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. 16,88,26,762/- for fiscal 2026.

- Profit/Loss before Taxes of fiscal 2026 was Rs. 69,01,061/-.

- Basic Earnings per Share for fiscal 2026 was Rs 7.20

- Net Worth of the company stood at Rs. 11,10,69,824/- as on March 2026.

RISKS AND CONCERNS

- 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 de-carbonization.

Indias global deal in Steel sector:

Steel, the sector is witnessing capacity expansion and investment momentum, with crude steel capacity reaching 200 MT in 2024–25 and specialty steel output targeted to rise significantly by 2026–27.

The growth in the Indian steel sector has been driven by the domestic availability of raw materials such as iron ore and cost-effective labour. Consequently, the steel sector has been a major contributor to Indias manufacturing output.

The Indian steel industry is modern, with state-of-the-art steel mills. It has always strived for continuous modernization of older plants and up-gradation to higher energy efficiency levels.

GOVERNMENT INITIATIVES:

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

- On January 12, 2026, Indias steel exports grew by nearly one-third during April?December 2025, supported by government measures aimed at boosting domestic production and exports, reflecting improved competitiveness and policy backing for the sector.

- December 26, 2025 The government is sharpening its focus on increasing steel output and ensuring raw material security as India moves toward its 2030 capacity targets. Key initiatives include securing coking coal supplies, strengthening supply chains, and encouraging investments across the steel value chain.

- In November 2025, Indias Ministry of Steel launched the third round of the PLI Scheme for Specialty Steel (PLI 1.2) to attract new investment in advanced steel products with incentives of 4% to 15% on incremental sales and broaden high-end steel capacity to support domestic manufacturing and global competitiveness.

- Indian government plans to reduce imports by 50% in FY26 to become net exporter of steel in the near future. The Directorate General of Trade Remedies (DGTR) has recommended a 12% provisional safeguard to protect domestic players from surge in imports and potentially increasing their profitability. This development could potentially lead to a decrease in imports and increase market competitiveness.

- Up to December 2024, RINL dispatched about 1,400 MT of steel to Northeast projects, including National Highways Authority of India (NHAI) and National Highways and Infrastructure Development Corporation Limited (NHIDCL). Plans are in progress to set up a two-tier steel distribution network in Guwahati.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY:

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.

HUMAN RESOURCES VIS-?-VIS INDUSTRIAL RELATIONS:

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.

CAUTIONARY STATEMENT:

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.