Quality Foils (India) Ltd Management Discussions

Your Company is engaged in the manufacture of Cold Rolled Stainless Steel Strips and Stainless Steel Tubes & Pipes. From manufacturing process involved, it may be classified as a stainless steel strips, tubes and pipes manufacturer. The Indian steel industry has made a rapid progress on strong fundamentals over the recent few years. The industry is getting all essential ingredients required for dynamic growth. The government is backing the industry through favorable industrial reforms. Indian steel demand is expected to boost by Infrastructure & Construction development sustained by industrial, manufacturing and capital goods and be stimulated by the automotive, railways and consumer durable sectors.

Your Company has various machineries as per the list attached as Annexure F(a) to this report. Thus, your Company has immense capability to keep pace with the growing requirement of the industry. Besides, we always look forward to cope with technology advancement to grasp the all available opportunities.

Indias GDP grows 9% in FY2022-23

Robust Demand

India steel consumption anticipated to increase to 250MT by 2030-31.

Increasing Investment

The industry is witnessing consolidation of player which has led to investment by entities from other sectors. The ongoing consolidation also presents an opportunity to global players to enter the Indian Market

Policy Support

In October 2021, the government announced guidelines for the approved specialty steel production-linked incentive (PLI) scheme.

Under the Union Budget 2023-24, the government allocated Rs. 70.15 crores (USD 8.5 Million) to the Ministry ofSteel.

Competitive Advantages

Easy availability of low-cost manpower and presence of abundant iron ore reserves make India competitive in the global set up.

Other

The demand from the C&I sector is slated to go up substantially with more investment in Infra, stability in the real estate sector, FERA amendment etc, the demand from the Auto and Auto component sector may witness a consolidation stage in FY24 with the thrust towards EV, Petrol and diesel price hike and export opportunities.

The incoming public investment along with enhancement of FDI limits (from 49 percent to 74 percent in Defence, 100 percent in retail and real estate) has generated a good feeling in the commodity sector, steel being the significant beneficiary, and an enabling environment for infrastructure growth.

The traditional demand driving sector for steel continues to be construction, which with the help of real estate construction and infra stimulus that have been announced by almost all the countries to prop up their economies immediately after the pandemic, would play a stellar role in strengthening steel

demand. The demand for logistic-related facilities to support e-commerce, along with green recovery programmes and infra renewals, would play their part.

A number of mega government schemes in India like Jal Jiban Mission, PMAY-G & U, Bharatmala and Sagarmala provide good prospect for public investment, while projects like dedicated freight corridor, Metro railways, Ujala, port modernisation, new airports, renewable energy and irrigation projects would demand massive volume of steel that can be mostly supplied indigenously.

The Indian steel industry needs to enhance intensity in each of these segments by making available standard designs in steel that can be immediately implemented. The penchant for Atmanirbhar Bharat and renewable energy would lead to higher demand for indigenous manufacturing of steel contained engineering goods by replacing imports.

ICR A revises outlook on steel sector to stable from positive

After two back-to-back years of earnings surge, the steel companies are now staring at a significant decline in earnings over the next 12 months as the industry faces multiple headwinds emanating from trade barriers from export duty on finished steel, unprecedented coal/energy cost pressures, and muted domestic demand growth so far, ICRA said in a report.

The industry could therefore be on the way to an accelerated mean reversion as the operating environment becomes far less attractive in the coming months. Such challenges would be accentuated by high inflation and front-loading of policy rate hikes, it said.

"According to a report by CRISIL Ratings, the domestic demand for stainless steel is projected to log a healthy compound annual growth rate of 9 per cent in the three fiscals through 2025, double the 4.5 per cent pace of the past five fiscals."

Segment-wise or Product wise Performance:

Currently your Company is engaged only in one type of product and involves one type of process and it is called Engineering Product, so there is no segment wise or product wise performance available.

Risk and Concerns:

The Companies engaged in production of stainless steel strips, tubes and pipes had faced major challenges due to slowdown in the growth of steel industry. The falling demand, low prices, cost escalation in inputs, reduction in import duty are some of the major threats to the sustainability of the Indian Steel Industry. Further reduction in import duty stimulated the import of steel from China and other countries manufacturers at low prices leading to decrease in demand of domestic goods.

Internal Control System and their Adequacy:

Your Company has adequate internal control systems commensurate with its size and operations, although not documented. The Company regularly gets its accounts audited from internal auditor.

Financial Performance with respect to Operational Performance:

The companys production of Cold Rolled Stainless Steel Strips and Stainless Steel Flexible Hoses (excluding Job production) was 6782.938 MT in the current financial year, as compared to 7332.141 MT in the previous financial

year. However, the sales volume of these products increased marginally from 7333.995 MT in the previous year to 6786.818 MT in the current year. The company also achieved a higher turnover of Rs. 18694.45 Lacs in the current year, compared to Rs. 18030.64 Lacs in the previous year .During the year the company has achieved

Profit after tax of Rs. 318.87 Lacs (including net capital gain of Rs. 132.00 lacs) as compared to last year profit after tax of Rs. 158.00 Lacs . The reserve and surplus stood to Rs. 2454.23 Lacs. The earnings per share is Rs. 11.18 and book value of the share is Rs. 96/- per share.

Industrial Relations and Resource Management:

The Company during the previous year continued its record of good industrial relations with its employees. During the year various initiatives had been taken to improve the performance and productivity levels in various departments of the Company. The Company conducts training sessions on various topics ranging from safety, productivity, handling of hazardous products etc. that help to train employees to overcome operational constraints. The Company has its in house technical centre in the plant to train the new recruits before their placement that helps in optimum utilization of resources as well as maintaining quality standards. It also indulges into and implements various HR initiatives and activities including employee welfare, special rewards, performancereview system and various employee motivation activities.

Cautionary Statement:

Management Discussion and Analysis Report may be "forward looking statement" within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied depending upon global and Indian demand-supply conditions, changes in government regulations, tax regimes,and economic developments within India and overseas.