Rathi Bars Ltd Management Discussions.

OPERATIVE VIEW:

The operating and financial review is intended to convey the Managements perspective on the financial and operating performance of the Company at the end of Financial Year 2017-18. This report should be read in conjunction with the Companys financial statements, the schedules and notes thereto and the other information included elsewhere in the Integrated Report. The Companys financial statements have been prepared in compliance with the requirements of the Companies Act, 2013, the guidelines issued by the Securities and Exchange Board of India (SEBI).

This report is an integral part of the Directors Report. Aspects on industry structure and developments, opportunities and threats, outlook, risks and concerns, internal control systems and their adequacy, material developments in human resources and industrial relations have been covered in the Directors Report.

STEEL INDUSTRY

India is the third-largest crude steel producer in the world. In FY18, India produced 104.98 million tonnes (MT) of finished steel. Crude Steel production during 2017-18 stood at 102.34 MT. Exports and imports of finished steel stood at 1.35 MT and 1.89 MT, during Apr-Jun 2018.

Steel consumption is expected to grow 5.7 per cent year-on-year to 92.1 MT in 2018. Indias steel production is expected to increase from 102.34 MT in FY18 to 128.6 MT by 2021. The Government of India has allowed 100 per cent foreign direct investment (FDI) in the steel sector under the automatic route.

Indias per capita consumption of steel grew at a CAGR of 3.96 per cent from 46 kgs in FY08 to 65.25 kgs in FY17. The figure stood at 68 kgs during April-February 2017-18. National Steel Policy 2017 seeks to increase per capita steel consumption to the level of 160 kgs.

World Steel Association estimates suggest that global steel demand is likely to touch 1,616 million tonnes in 2018, a growth of 1.8% vis-a-vis 2017. Continued strengthening of investments in advanced economies, improving manufacturing climate and recovery in commodity prices are expected to act as key catalysts to drive global steel demand.

Indian Economy

After a brief period that was dedicated to introducing economic reforms that would further formalize the economy and boost ease of doing business. India has achieved a growth of 6.7% in FY18 with a 7.1% growth in Q-418. India has bounced back as the fastest growing economy in the world during the third quarter for FY18.

The investment cycle exhibits a growth of 7.6% in FY18 and 14.4% in the Q-418. The FY18 is likely to see improved growth of 7.5% due to transformative reforms undertaken by the Government.

Indias economic fundamentals continued to improve during the year. The index of Industrial Production (IIP) touched 4.3% during the FY18 after robust growth of 6.2% in the Q-418 which was 1.9% Q-118. Inflation figures are also largely in control, with consumer price inflation reducing to 3.6% in FY18 from a level of 4.5% in FY17, keeping the food prices under control. Through the year, Indias foreign exchange reserves have also increased to more than US$ 420 billion.

The Union Budget for 2018-19 has emphasized on Indias infrastructural requirements and allocation of roads, railways and rural infrastructure has been significant. The Budget also focused considerably on health and education sector, which are instrumental in developing a sustainable economy and society.

Outlook

During the FY 2018-19, India is likely to record a robust GDP growth of 7.4% (Source: IMF). This growth will be driven by structural and wide ranging reforms such as Goods and Services Tax (GST) to widen the indirect tax base, Insolvency and Bankruptcy Code to address the asset quality of banks and formalization and digitization of the economy improving business ecosystem, thrust on infrastructure development, and a liberal FDI regime. Banking reforms through recapitalization and the Insolvency and Bankruptcy Code are expected to resolve the stressed assets of overleveraged corporate and restore lending support to these sectors.

The strengthening global economy is also likely to stimulate exports. The countrys exports are expected to touch US$ 350 billion during 2018-19. Pick up in capital expenditure by private corporate sector will also provide the necessary impetus to Indias GDP growth.

Statutory Compliance

The Managing Director and the Group Executive Director (Finance & Corporate) make a declaration at each Board Meeting regarding compliance with provisions of various statutes after obtaining confirmation from respective departments of the Company. The Company Secretary ensures compliance with all corporate laws and listing rules applicable to the Company.