prakash industries ltd Management discussions

Industry Structure & Developments

The steel sector in India is one of the fastest growing, in-demand and robust sectors in the country and today it stands tall at 2^nd largest global steel producer with production of ~120 million tonnes in FY2023. During the year the Indian steel industry witnessed robust growth of over 11% in steel consumption over last year. The domestic steel consumption grew to 119 million tonnes in FY 2023 from 105 million tonnes in FY2022. The rising demand for affordable housing, infrastructure and construction projects has led to a strong demand for steel across the country. Moreover, the governments thrust to make India self-sufficient has room for sustainable urban development, construction of proposed logistics parks and industrial corridors, which is also complementing to meteoric rise in demand for steel in the country. With ever expanding cities, technological advent of Industry 4.0, and rise in construction and engineering projects, the meteoric rise of the steel industry is expected to continue in the coming years. The government has introduced several initiatives to boost steel production in India and reach 300 MT in production by 2030.

Opportunities and Threats

The Indian Steel industry has a huge potential for growth as the per capita steel consumption stands at 75 kgs as against world average of 233 kgs. It is envisaged that by the year 2030, the domestic per capita consumption will be at 160 kgs fuelled by rapid urbanisation, substantial government investment in infrastructure and expansion of housing sector. The Increased indigenous defence procurement and a growing manufacturing sector in the country shall also contribute to domestic steel demand. The governments initiative to redevelop 50+ existing railway stations and the plan to provide a capital of Rs 2.4 lakh crore to Railways shall also add to the need for steel. The government has also recently introduced the "Production Linked Scheme" which shall generate an investment of about Rs 30,000 crores and create additional capacity of about 25 million tonnes of speciality steel in the next five years. Since the Companys performance is linked to the steel demand in the country, in the Company foresees significant coming times.

The key threat to the domestic steel industry continues to be the uninterrupted supplies and the high price extent byvolatility of the key inputs, namely iron ore and coal. However, your Company has insulated itself against these possible threats as the Company has an operational iron ore mine and has also secured long term coal linkage from Coal India Limited. Further, the Company has in place a commercial coal mine in Chhattisgarh, which shall go a long way in enhancing the revenue and the profitability of the Company. Also, steel ma king is a power-intensive business, and India is a power-deficit country. However, the Company has an operational captive power plant which is in steel making.

Outlook

The Indian steel industry outlook looks promising with the country gearing to become a US $5 trillion economy by 2030 and as per market reports, the domestic steel industry will play a pivotal role in steering India towards its goal. Recent changes in export taxes and import duties on steel, complemented by the rising demand for affordable housing, infrastructure development and construction projects, will lead to a pan-India need for steel. Also, an investment of Rs 75,000 crore is planned for 100+ critical transportation infrastructure projects to connect ports, coal, steel, fertiliser, and food grain sectors across the first- and last-mile delivery network, which shall in turn lead to a rise in demand for steel. In addition, Urban planning development projects are planned to be undertaken to transform cities into sustainable cities in Tier II and Tier III category of states with proposed Rs10,000 crore annual fund, which shall also lead to demand for steel.

Risks and Concerns

Risk is an integral factor in virtually all businesses. The

Company follows a well-defined risk management process, which is integrated with its operations. The Company has formed a Risk Management Committee which has the mandate of identifying the risks and suggesting the ways to mitigate them. All risks are adequately measured, estimated and controlled. Irrespective of the type of risk or the activity that creates it, the Companys fundamental approach to risk management remains the same: identify and measure risks, leverage an in-depth knowledge of the business and respond flexiblyin the understanding and management of risks.

The potential risks being faced by the steel making business continue to be the domestic steel demand scenario and uninterrupted supplies of key inputs like iron ore and coal.

The Company has significantly reduced the risks arising from erratic demand through integration of operations. Besides, the Companys plants are located in a large steel manufacturing belt, making it possible to provide products with speed and relatively high logistic efficiency. The Company has safeguarded itself against input risks to a significant an operational captive iron ore mine in Sirkaguttu, State Odisha. Further as regards Coal, the Company has in place Long Term Linkage of Coal from Coal India Limited for supply of Coal at a stable price. Also, the recently allotted coal mine shall further integrate the steel operations of the Company in the coming times and insulate the Company against any volatility in the coal prices.

Internal Control System and their Adequacy

The Company has an adequate internal control system to efficiently. The manage the business operations effectively

Company has availed the services of independent professional firm for Internal Audit, which closely monitors the compliance of all operations with prescribed business standards. The audit team supervises all internal processes and recommends necessary changes to ensure quick remediation of deviations, if any. Any variance from the budget is flagged off to the senior management which advises modification to ensure strict adherence to compliances. Periodic monitoring and effective implementation of recommendations ensure high business compliance with adequate adherence to rules and regulations that govern the Company. The internal controls also ascertain the reliability of financial controls and strict adherence to compliance as per applicable laws and regulations. The internal control system ascertains optimal utilisation of all resources and proper documentation of financial transactions.

Material Developments in Human Resource/Industrial Relations

The Company considers its human resources as a critical factor to its growth and success. The Company follows a well developed human resource approach, which aims to address the key aspects of human resource thereby maintaining healthy work environment and constructive relationship with its employees with a continuing focus on efficiency and productivity. Since the Company firmly believes that the success of any entity is directly linked to the success of its employees, the Company regularly conducts training and leadership skill development programs across all its locations. The Company had maintained healthy and cordial industrial relations during the year.

RATIO ANALYSIS

S. No.	Particular	Units	FY 2023	FY 2022
1.	Debt-Equity Ratio	Times	0.08	0.10
2.	Current Ratio	Times	0.98	1.35
3.	EBITDA Margin	%	12.33	10.16
4.	Net Profit Margin	%	5.53	4.29
5.	Interest Coverage Ratio	Times	5.16	5.50
6.	Debtors Turnover Ratio	Times	42.20	37.56
7.	Inventory Turnover Ratio	Times	7.60	9.04