Global Economic Review
The global economy is witnessing signs of resilience in 2023. The major forces that
shaped the world economy in 2022 such as the geopolitical tensions caused by the
Russia-Ukraine war, supply chain disruptions, higher inflation and tighter monetary
conditions continue in 2023 but with changed intensities. Further, the banking crisis in
March 2023 and a debt-ceiling crisis in the United States have raised concerns over
macroeconomic stability across the markets and an impending global recession. However, the
economic slowdown is expected to be less pronounced in 2023 than previously anticipated.
Key factors such as the rebounding of Chinas economy, the gradual unwinding of supply
chains and the recent decline in energy and food prices indicate the improvement in
economic activity and sentiment in 2023. Further, global inflation is projected to decline
from 8.7% in 2022 to 7.0% in 2023 and 4.9% in 2024.
Despite the challenges, the real Gross Domestic Product (GDP) grew in the United
States, the European Union, and major emerging market and developing economies. The United
States (US) economy is showing improvement with its real GDP growth at 2.1% in 2022 on the
back of increasing private investment and consumer spending. The European economy recorded
2.7% growth in 2022 and the Emerging Market and Developing Economies (EMDEs) fared better
and grew at 4.0% in 2022.
Outlook
The outlook for the global economy seems less gloomy despite the economic uncertainties
and underlying inflationary pressures. The International Monetary Fund (IMF) has projected
global growth to decline from 3.4% in 2022 to 2.8% in 2023 and rise to 3.0% in 2024.
Growth across Advanced Economies (AEs) is expected to decline from 2.7% in 2022 to 1.3% in
2023 before rising to 1.4% in 2024. The real GDP of the United States is projected to grow
at 1.6% in 2023 and 1.1% in 2024. The European economy is projected to grow at 0.8% in
2023 before rising to 1.4% in 2024. Emerging and Developing Economies (EMDEs) are expected
to grow at 3.9% in 2023 and 4.2% in 2024. The developing economies like South-East Asia
and Latin America are poised to do well and benefit from strong job markets, commodity
price boom and ambitious investment plans by governments in many countries. Asia- Pacific
will be the most dynamic of the worlds major regions in 2023, predominantly driven by the
buoyant outlook for China and India, which will be the major contributors to global
economic growth in 2023.
Indian Economic Review
India continues to be among the fastest growing economies in the world and emerged as
the shining beacon in a grim global scenario. The Indian economy continues to show
resilience despite external exogenous shocks. Indias real GDP growth is pegged at 7.2% in
FY 2022-23 as against 9.1% in FY 2021-22. Domestic economic growth is gaining strength and
further traction in 2023. According to the IMF, Indias GDP per capita at current prices
is US$ 2,600 in 2023, leading to a surge in household consumption, and boosting the demand
for goods and services across industries. Higher inflation remains a challenge. The
Reserve Bank of India (RBI) has tried to cushion the economy from rising prices and
increased the repo rate by 250 basis points in FY 2022-23 to tame inflation, maintain
liquidity and preserve financial stability. As a result, the wholesale price index (WPI)
inflation fell to -3.48% (provisional) in May 2023 against -0.92% recorded in April 2023.
Further, the RBI approved international trade settlements in Indian Rupees (INR) to
promote the growth of global trade with an emphasis on exports from India and to support
the increasing interest of the global trading community.
Indias IIP growth of 5.1% in FY 2022-23 shows modest growth in the industrial sector.
The combined growth rate of ICI (Index of Eight Core Industries) during FY 2022-23 was
7.7% (provisional) compared to the corresponding period of last year. Further, the gross
Goods and Services Tax (GST) revenue collection in May 2023 was 1.57 trillion, with 12%
Y-o-Y growth.
Despite the weak external demand, International trade contributed significantly to
economic growth in FY 2022-23. The Annual merchandise exports were the highest-ever at US$
447.46 billion with 6.03% growth during FY 2022-23 surpassing the previous years record
exports of US$ 422.00 billion. As the world economy experienced slower growth, commodity
prices softened which had a positive impact on domestic inflation.
Outlook
As per the IMF, the Indian economy is expected to grow at 6.3% in FY 2024-25 after
registering around 5.9% growth in FY 2023-24. Growth will be supported by a conducive
domestic policy environment, driven by higher capital expenditure, the governments thrust
on domestic manufacturing and infrastructure development, strong domestic consumption,
technology-enabled development, revival in credit growth, and energy transition among
others. In the Union Budget 2023-24, the government has envisaged 10 lakh crore for the
development of the infrastructure sector, which will accelerate economic growth. In
addition, growth-enhancing policies such as the production-linked incentives (PLI) scheme,
Atmanirbhar Bharat and PM Gati Shakti will have a multiplier effect on economic growth.
Moreover, the benefits of reforms like the Goods and Services Tax (GST) and Insolvency and
Bankruptcy Code (IBC) are slowly trickling in and will be felt in the coming years. As
urbanisation gathers pace demand for housing, real estate and automobiles will see an
upswing in tune with the rising aspirations of the populace. Despite the challenging
global environment, the Indian economy with its strong fundamentals and massive
demographic strengths seems en route to outpace other large economies.
Industry Section
Silica Ramming Mass overview
Silica ramming mass is used in steel and other industrial sectors as a furnace
refractory lining material. The ramming mass is primarily segmented as per the base
material used in it which can be silica, alumina or magnesia, accordingly its lining is
also termed acidic, basic and neutral. Silica masses are acidic and used in induction
furnaces; alumina is a neutral mass mainly used in high-temperature induction furnaces
while magnetite is the basic mass used in electric arc furnaces. Raghav Productivity
Enhancers Limited (RPEL) is largely engaged in silica ramming mass production due to its
superior characteristics like chemically inert, higher structural strength, high erosion
resistance, highly economical, etc.
Indian induction furnace industry overview
The induction furnace market in India is poised to grow by $ 74.81 million during FY
2021- FY 2025, progressing at a CAGR of 6.63%. The main types of induction furnaces
include channel induction furnaces and coreless induction furnaces. The channel induction
surfaces segment led the highest share of the induction furnace market in India as they
are majorly deployed for alloys with a low melting point. Induction furnaces are
extensively used in the steel industry, copper industry, aluminium industry and zinc
industry because they provide a clean, energy-efficient, and controllable melting process.
By end-user, the steel industry is the largest revenue-generating segment. Growing demand
for high-quality alloys and metals under environmentally clean conditions has increased
the application of induction furnaces in foundries for steel, cast iron and nonferrous
metals. Various functions of industrial induction furnaces include smelting, steelmaking,
metal casting, and heat treatment.
Factors driving the markets growth include the growing demand for metal castings from
the automotive sector, the fast-growing railway sector and metro projects and the high
demand for smelting, mining, and metal alloy machinery. In addition, the growing renewable
energy market is also driving demand for copper, which is expected to drive growth in the
post-blockage induction furnace market. The macroeconomic factors such as increasing
industrial activities on the back of the ‘Make in India initiative to promote
manufacturing in India, upgradation in metal processing and production and increased
demand for refined metals are augmenting the adoption of induction furnaces. Furthermore,
manufacturers focus on improving productivity at a high pace due to rapid
industrialisation. The induction furnace industry is anticipated to be pushed by lower
electricity usage due to rising energy costs as well as steel manufacturers constant
emphasis on capacity development. Focus on technology upgrades will be another key driver
influencing the induction furnace market growth in India. Foundries are investing in new
technologies and equipment to cater to the growing demand for metal castings in India.
Indian ramming mass industry overview
The silica ramming mass industry is highly unorganised, and is spread across central
and north India, with large production plants located in these geographies with an average
plant capacity of 10 KTPA and 15 KTPA respectively.
The average silica ramming mass consumption per tonne of steel production is estimated
at 30 Kg. The demand for silica ramming mass co-relates with steel production capacity as
almost 70% of ramming mass is used for induction furnace lining in crude steel
manufacturing plants. The overall domestic demand for ramming mass is expected to grow at
a CAGR of 5-5.5% between 2020-21 and 2024-25, to reach ~2300 KT by 2024-25.
Source: MM analysis
The majority of steel and foundry manufacturers in India prefer domestic silica
(acidic) ramming mass over imported silica ramming mass due to easy and timely
availability and comparatively cheaper logistics cost for domestic procurement. Further,
the Governments initiatives such as Make in India, Atmanirbhar Bharat, etc. will boost
the domestic ramming mass production in India and will result in reduced imports of silica
ramming mass from China and other countries. India is the largest exporter of silica
ramming in the world and it exports most of its silica ramming to Saudi Arabia, Kenya and
Uganda. The export market of Ramming mass is estimated to be 100 KTPA in FY 2022-23.
Global steel industry overview
The global steel industry has faced several challenges in 2022, such as the Russia-
Ukraine war, which led to the disruption of raw material supply and energy crisis, higher
inflation and reduction in the output of European steel mills among others. Further, with
low demand and concerns about the global economic downturn, global steel prices fell
rapidly in the second half of the year 2022. The World Steel Association reported that
global crude steel production stood at 1,885.02 million tonnes (MT) in 2022. China, the
largest steel manufacturer in the world will continue to cut down its production of steel
in accordance with the total production control policy to curb its carbon footprint.
Further, the destruction of steel production facilities in Ukraine has led to a collapse
in steel production, while soaring energy prices have led to widespread plant idling and
production stoppages, especially in Europe, thus leading to wide scope for the Indian
steel industry.
India is currently the worlds second-largest producer of crude steel, with an output
of 125 MT in FY 2022- 23. The Indian steel industry has been at a bright spot. The
governments continued focus on infrastructure development ensures long-term growth in the
steel industry. Under the Union Budget 2023-24, the government allocated 70.15 crore to
the Ministry of Steel. Positive government policies and initiatives like Public Private
Partnership (PPP) model and National Steel Policy will help India to increase crude steel
production capacity to 300 MTPA by 2030.
The government aims to include refractories in PLI 2.0 to support 300 MT steel capacity
target by 2030. The steel industry is a major consumer of refractories to line the
internal furnaces for iron and steel making. Currently, the steel industry consumes 70% of
refractories and it is estimated that the consumption of refractories for steel will be
2.5-3 million tonnes by 2030. The Ministry of Steel is in talks with the refractory
industry to develop an incentive policy to boost domestic production and reduce the
countrys dependence on imports from China.
The steel industry has strong linkages with other sectors, especially infrastructure.
The large demand in India for steel is largely linked to numerous government projects
associated with roads, railways, water and sanitation as well as a revival in the Auto
sector. Further, as per the NITI Aayog report, India will become the worlds production
center for green steel at 15-20 million tonnes by 2030 and pave the way for the worldwide
adoption of green steel.
Outlook
The World Steel Association estimated steel demand to witness a 2.3% rebound to reach
1,822.3 MT in 2023 and grow by 1.7% in 2024 to reach 1,854.0 MT. Manufacturing is expected
to lead the recovery, but high interest rates will continue to weigh on steel demand.
Growth in steel demand is expected to accelerate in most regions in 2024; however, it is
expected to decelerate in China. Steel demand in India is expected to see a healthy growth
of 7.3% in 2023 and 6.2% in 2024. The infrastructure push, the bid for developing more
affordable housing and the Indian Railways capex are all demand drivers for production and
consumption of steel across India.
Silica ramming mass is used in the steel industry as a furnace refractory lining
substance. In India, steel manufacturing capacity through Induction Furnace Route is 44
TPA and the total estimated steel production through Induction Furnace Route is 55 TPA.
Steel ramming mass market is estimated to be 1.65 Mn TPA and Foundry ramming mass market
is estimated to be 250 K TPA, which will create lucrative opportunities for the Indian
ramming mass industry. Our internal study suggests that the global ramming mass market
(excluding China) is double the size of the domestic market which will provide a large
export opportunity for the Company.
Government initiatives Roads
• Under the Union Budget 2023-24, the allocation to the Ministry of Road Transport
and Highways (MoRTH) has been increased to 2.70 lakh from the budget estimate (BE) of
1.99 lakh crore allocated for FY 2022-23.
• The allocation to the National Highways Authority of India (NHAI) has been
increased to 1.62 lakh crore for FY 2023-24 from the last years revised allocation of
1.42 lakh crore.
• NHAI plans to construct 25,000 km of national highways by the end of FY 2023-24.
Housing
• The allocation of PM Awas Yojana for the development of affordable housing in
the country has been increased to 79,000 crores.
Infrastructure
• The government launched the National Infrastructure Pipeline (NIP) with a
forward-looking approach and with a projected infrastructure investment of around 111
lakh crore during FY 2020- 2025 to provide high-quality infrastructure across the country.
The NIP currently has 8,964 projects with a total investment of more than 108 lakh crore
under different stages of implementation.
• The Governments new scheme provides a one-year extension of the 50-year
interest free loan to state governments in FY 2023- 24 with an outlay of 1.3 lakh crore.
100 critical transport infrastructure projects are identified for last and first mile
connectivity for various sectors such as ports, coal, steel, etc. with an investment of
75,000 crore including 15,000 crore from private sources.
• The government has allowed FDI of up to 100% for townships and settlements
development projects.
Capital investment
• The capital expenditure outlay of 10 lakh crore in FY 2023-24 compared to
7.50 lakh crore in FY 2022-23, a y-o-y increase of 33%.
• The total capital outlay for infrastructure in FY 2023-24 is 3.3% of the
countrys GDP.
Key growth drivers
Increasing population: According to United Nations Population Funds (UNFPA)
Report, India has surpassed China to become the most populous nation with 1,428.6 million
people in 2023 with a median age of 28.2 years. The rapidly growing population is
responsible for the increased demand for infrastructure development in the country.
Rapid Industrialisation: The industry sector witnessed 5.1% growth in FY 2022-23.
The cumulative growth rate of the Index of Eight Core Industries (ICI) during FY 2022-23
was 7.7% (provisional). The growth-enhancing policies and schemes such as
production-linked incentives (PLI) scheme and the governments push for self-reliance will
lead to higher manufacturing capacity and accelerate industrial growth. The expansion,
renovation and construction activities for industries in the foreseeable future are
expected to drive the demand for steel across the country, thereby, increasing the demand
for ramming mass.
Urbanisation: Indias urban population is growing rapidly and by 2035, the
percentage of the population in India at mid-year residing in urban areas will be 43.2%.
The push for urban infrastructure in Tier II and Tier III cities through the Urban
Infrastructure Development Fund (UIDF) of 10,000 crores per annum in the Union Budget FY
2023-24 will lead to increased construction activities and uplift steel demand, resulting
in increasing demand for ramming mass.
Infrastructure Development: The Government has increased capital investment outlay
by 33.4% to 10 lakh crores in the Union Budget 2023-24 from 7.50 lakh crores in FY
2022-23 to catapult the infrastructure sector. Further, an increased outlay of 79,000
crores in PM Aawas Yojana for the development of affordable housing and the governments
initiative ‘Smart Cities Mission will accelerate the growth of the infrastructure
and real estate sectors and hence create additional demand for steel.
Automobile sector: According to the Society of Indian Automobile Manufacturers
(SIAM), the total automobile production increased to 25.93 million units in FY 2022-23
from 23.04 million units in FY 2021-22. The growth momentum of the Indian automotive
industry is expected to continue in 2023 despite the constraints such as high input costs,
soaring fuel prices, higher interest rates and inflation. The Passenger Vehicles (PV) and
Commercial Vehicles (CV) segments have recorded robust growth in volumes during FY
2022-23. Factors such as sales of automobiles on digital platforms, wide availability of
credit and financing options, population growth and popularity of electric vehicles (EVs)
will spur the growth of the automotive industry and will increase demand for steel.
Vehicle scrapping policy: The Union Budget for 2023-2024 has laid special emphasis
on vehicle scrapping policy by allocating adequate funds to replace vehicles that are over
15 years. Around 9 lakh vehicles owned by central and state governments, transport
corporations and public sector undertakings will be eligible for scrapping. The need for
new vehicles to replace these vehicles that are expected to go off the road will boost
steel consumption.
Oil and Gas sector: The oil and gas sector is the major consumer of steel tubes and
pipes. The expansion of the city gas distribution network covering 98% of the population,
refining capacity augmentation, the target to set up 8,000 CNG stations by 2024 and
exploration and production activities will drive the demand for steel in the coming years.
Company Section Company background
Incorporated in 2009, Raghav Productivity Enhancers Limited (‘RPEL formerly known
as Raghav Ramming Mass Ltd.) is the worlds largest manufacturer of silica ramming mass.
The Company manufactures, supplies and exports silica (acidic) ramming mass and refractory
products to its customers across the globe. It caters to around 100+ big-capacity steel
plants in India and other countries including the Middle East, Africa and South East Asia.
The Company relentlessly strives to maintain global quality standards and produce
high-quality products using best-in-class materials and advanced technology. The Company
is ISO 9001 certified and its quality management system is validated by the ISO 9001:2008
certification.
The Companys manufacturing units are located in Newai, Tonk (Rajasthan). The plants
are equipped with fully-automated processing and VSI based crushing technology and have
installed capacity of 180,000 MTPA of ramming mass, respectively. The Company is setting
up a new plant under its wholly owned subsidiary with 180,000 MTPA capacity adjoining its
existing plants. Further, the Companys in-house research and development laboratory,
which is the only government-approved facility in India, develops customised furnace
lining solutions to meet and exceed the needs and demands of its customers.
Financial overview
Analysis of the profit and loss statement
PARTICULARS |
FY 2022-23 |
FY 2021-22 |
| Revenues ( million) |
1377.5 |
1007 |
| Operating EBITDA |
363 |
248 |
| Exports ( million) |
683 |
410 |
| Net Profit ( million) |
258 |
178 |
| EBITDA margin (%) |
26.34% |
24.80 |
| ROCE (%) |
23.55 |
21.00 |
| Net Worth ( million) |
1345.8 |
1092 |
Revenues
Revenues from operations reported a 36.77% growth from 100 crore in FY 2021-22 to
137.75 crore in FY 2022-23. Other incomes of the company stood at 2.75 crore and
accounted for a 1.35% share of the Companys revenues reflecting the Companys dependence
on its core business operations.
Expenses
Total expenses of the Company increased by 33.19% from 77.8 crore in 2021-22 to
104.95 crore in FY 2022-23. Raw material costs, accounting for a 30.49% share of the
Companys revenues increased by 49.89% owing to an increase in the operational scale of
the Company. Employee expenses accounting for a 2.56% share of the Companys revenues
increased by 16.94% in FY 2022-23.
Analysis of the Balance Sheet
Sources of funds
The capital employed by the Company increased by 16.87% from 115.15 crore as on 31st
March 2022 to 134.58 crore as on 31st March 2023. The net worth of the Company increased
by 23.15% from 109.28 crore as on 31st March 2022 to 134.58 crore as on 31st March
2023. Finance costs of the Company increased by 45% from 0.64 crore in FY 2021-22 to
0.93 crore in 2022-23 following the repayment of liabilities.
Applications of funds
Fixed assets (gross) of the Company increased by 4.59% from 37.44 crore as on 31st
March 2022 to 39.16 crore as on 31st March 2023 owing to an increase in plant and
machinery. Depreciation on tangible assets increased by 8% from 2.34 crore in FY 2021-22
to 2.54 crore in FY 2022-23 owing to an increase in fixed assets during the year under
review.
Working capital management
Current assets of the Company increased by 3.59% from 65.45 crore as on 31st March
2022 to 63.1 crore as on 31st March 2023 owing to the growing scale of business of the
Company. The current and quick ratios of the Company stood at 4.5 and 3.2, respectively in
FY 2022-23 compared to 3.1 and 2.5, respectively in FY 2021-22. Debtors increased 2.87%
from 35.91 crore to 36.94 crore due to an increase in sales, in particular exports,
during the last quarter of the year.
Inventories including raw materials, work-in-progress and finished goods among others
increased by 42.83% from 12.49 crore as on 31st March 2022 to 17.84 crore as on 31st
March 2023.
Business highlights FY 2022-23
• The Company has completed its major expansion by setting a greenfield plant
under its subsidiary adjoining its existing plant increasing its combined manufacturing
capacity from 180,000 MTPA to 288,000 MTPA.
• The capacity of the new plant can further increase 2x with marginal capital
expenditure. As such, The Company is prepared for medium-term growth of its core product
i.e. Silica Ramming Mass
• Share of exports in the companys sales has increased to 49.6% in FY2023 from
41% in FY2022 signifying encouraging business development in the higher value-add business
segment. The Company is now exporting to steel plants situated in Nepal, Bangladesh,
Taiwan, Saudi Arabia & other middle east countries in addition to African countries.
• The Company has entered into high-margin Foundry market in addition to the steel
plants, wherein it has also done a tie-up with global leader, Capital Refractories for the
supply of silica ramming mass to the foundry and casting industries worldwide.
• It is focused on expanding its footprint in the high-margin segment of bigger
furnaces, higher than 25 MT.
Risk Management Market risk
The global economic turbulences and geopolitical tension may impact the Companys
export business. However, its exposure to over 26 countries besides India, helps in
de-risking the market risk by decreasing dependence on any specific market for business.
In 2022-23, the Company earned 49.6% revenue from export sales, thereby insulating
business revenue to some extent from fluctuations in the Indian economy.
Foreign exchange volatility risk
The Company is exposed to foreign exchange volatility, increased interest rates and
liquidity due to its international operations. These factors may impact the Companys
margins and profitability. The Company monitors exchange rate fluctuations and follows a
hedging policy to minimize the impact of adverse currency fluctuation.
Quality risk
To ensure business continuity and have strong brand equity, the Company strives to
deliver superior quality products and is validated by ISO 9001:2015 certification. It has
stringent quality control measures to meet international quality benchmarks.
Customer concentration risk
The Company has a diverse clientele including large and medium induction-furnace
players across the globe, ensuring a de-risked business. Further, the Company supplies
products to the foundry sector to reduce revenue dependency on the steel sector.
Technological risk
The Company gives utmost importance to technology and proactively invests in the latest
and advanced technologies to maintain best-in-class products, strengthen its product
portfolio and expand the business. Failure to use the latest and sustainable technologies
to cater to the changing requirements of the global market may lead to loss of business.
Raw material sourcing risk
The Company solely sources its primary raw material, quartz stone, from licensed quartz
mines. This ensures a seamless supply of superior quality raw materials. Licensed mines
are compliant with stringent environmental and other norms and have minimal risk of
shutting down due to non-compliance.
Environment risk
The Company is committed to maintaining environmental sustainability including water,
sanitation and green energy. Its manufacturing facility strictly adheres to all applicable
environmental norms and is equipped with best-in-class environmental control equipment.
The Company relies on in-house developed techniques and technologies with a strong
emphasis on waste management and emission controls. The National Green Tribunal has
certified the facility as a model quartz processing unit.
HR and industrial relations
The Company treasures its human resource as it is the most critical element responsible
for the growth of the Company. It ensures a safe, conducive and productive work
environment across its properties. The Company provides regular skill and personnel
development training to enhance employee productivity and keep pace with technological
advancements. The experienced and talented employee pool plays a key role in enhancing
business efficiency, devising strategies, setting-up systems and evolving business. The
Companys employee strength stood at 145 as on 31st March, 2023.
Internal Control Systems
The Company has a well-defined and structured internal control mechanism, keeping in
consideration the size and nature of the business. The Company follows stringent
procedures, systems, policies and processes to ensure accuracy in financial information
recording, asset safeguarding, optimum use of resources and compliance with statutes and
laws. The Company conducts its internal audit regularly to monitor the operations and its
observations and recommendations are reviewed by the Audit Committee, which takes
appropriate corrective measures as deemed fit. To ensure the effective operation of
internal control systems, the Audit Committee remains in constant touch with statutory and
internal auditors.
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