Rathi Steel & Power Ltd Management Discussions

ECONOMIC ENVIRONMENT

Global Economic Overview

In calendar year (CY) 2024, the global economy grew by 3.3% despite significant geo-economic turbulence. Emerging Markets and Developing Economies (EMDEs) showed steady growth, while inflation eased from 6.6% in CY 2023 to 5.7% in CY 2024. Central banks worldwide tightened their policies, but a recession was avoided.

• United States: The US economy demonstrated strong growth at 2.7%, fueled by a robust labor market and strong underlying demand.

• Europe: The European economy remained subdued. Germany and France faced political and economic uncertainties, while Italy and the UK barely avoided a recession. Heightened energy costs due to the Russia-Ukraine war, currency depreciation, and a lack of innovation contributed to the downturn.

• Investor Sentiment: Prevailing geo-economic uncertainties have negatively impacted global investor sentiment. This is reflected in rising term premiums on long-term government bond yields in most G7 countries.

World Trade Outlook

Global trade growth is expected to slow down in 2025 to 1.7 percentage point, a downward revision of 1.5 percentage point since the January 2025 WEO Update. This forecast reflects increased tariff restrictions affecting trade flows and, to a lesser extent, the waning effects of cyclical factors that have underpinned the recent rise in goods trade. Meanwhile, global current account balances are expected to narrow somewhat (Figure 1.19). The widening of current account balances in 2024 reflected widening domestic imbalances and a pickup in global goods trade. Over the medium term, global balances are expected to narrow gradually as the effects of these factors wane. Creditor and debtor stock positions are estimated to have increased in 2024, with the increases reflecting widening current account balances. They are expected to moderate slightly over the medium term as current account balances gradually narrow. In some economies, gross external liabilities remain large from a historical perspective and pose risks of external stress.

Outlook

Global GDP is projected to grow at 2.8% in CY 2025 and 3.0% in CY 2026. This measured growth reflects cautious optimism. Advanced economies are expected to expand by 1.4% while Emerging Markets and Developing Economies (EDMEs) are expected to maintain a robust growth of an estimated 3.7%. Inflation in advanced countries is projected to fall to 4.3%, helping them meet their policy objectives sooner. European nations, under pressure from global manufacturing competition are expected to draw on their industrial bases and recover domestic demand, with Germany preparing major public-spending reforms. Within the Eurozone, trade ties are likely to strengthen despite rising geo-economic fragmentation. In the US, recent reciprocal tariffs have prompted a more cautious global trade outlook and reinforced trends toward economic decoupling. Despite economic uncertainties, fiscal discipline, strategic investments and enhanced consumption are foreseen to create an atmosphere conducive to growth.

INDIAN ECONOMIC OVERVIEW

Despite global economic turbulences, the economy of India grew by estimated 6.5% in FY 2024-25. The growth was supported by strong performance of sectors, such as services, manufacturing and agriculture. During the year, urban consumption, moderate and rural consumption picked up on the back of a favourable monsoon. Core- Led inflation was estimated at 4.8%, well within the reserve Bank of Indias to-six% tolerance. To drive growth, the government increase the infrastructure budget to ?10.2 lakh crore and extended the production link incentive (PLI) scheme to trigger investment and economic activity. Despite global supply-chain pressures, electronics, semiconductor, and pharmaceutical exports remain strong. Further, PLI 2.0 is aimed at establishing India a global IT-manufacturing powerhouse.

Within the constituents of growth, Indias private final consumption expenditure has grown by 7.3% in FY 2024-25. Investment activity which gained momentum in Q1, supported by high-capacity, utilisation, robust, steel and cement, industries and high capital goods imports, moderate as the year progress. To safeguard the domestic steel producers from Chinese imports, the government of India impose tariff on the import of steel.

Outlook

Indias medium term prospects are optimistic with a positive Kavi. Strong domestic demand and benevolent policy regime should induce private investment, as relocation of capital from the US positions India as a lucrative location for foreign investors. And accommodative monetary stand and salary. Individual tax relief will promote liquidity and domestic consumption. Moderation in depreciation against the dollar can be anticipated, which can stimulate export competitiveness. Further, India is maintaining a Watch full star regarding the evolving tariff situation and is expected to respond appropriately. In addition, India has recently concluded a historic free-trade agreement (FTA) with the UK. This is force to augment the strategic and economic ties between the two nations. Increase government capital expenditure is expected to facilitate the recovery of fixed capital formation. Sustained demand from rural areas, and anticipated revival in urban consumption, higher capacity, utilisation and healthy balance, sheets of corporate and banks are additional factors contributing to support growth prospects.

With India resolute on achieving the developed-nation status by 2047, growing energy requirements will be met by Energy, selfsufficiency policies and the growth of high-technology manufacturing.

INDUSTRY OVERVIEW

Global steel industry overview

Word steel consumption declined in 2024. It witnessed a 0.9% year-over-year declined to 1750 Million metric tons. This marks its third Street annual contraction. The decline can be attributed to sustained softness in manufacturing and elevated financing rates. Jio-political pressure further resulted in a 2.0% fall in demand in developed economies, such as the US, Japan and Germany. China, the largest consumer of steel, observed a reduction of 3% in demand due to its real estate crisis, with another 1% decline force in 2025. Conversely, India emerged as the main growth driver, the steel demand grew by 8% in CY 2024. This hike was primarily propelled by heightened infrastructure expenditure and industrial production.

Developing countries excluding China post 3.5% demand growth, driven by the recovery of ASEAN and MENA regions. What crude steel output hit 1.88 billion tonnes last year. China accounted for 54% (1.01 billion tonnes) of this output

The industries subdued performance can be attributed to the turbulent global economic landscape. Headwinds, such as tight, monetary policies and high construction exacerbated the decline in demand. Nevertheless, a 1.2% recovery in global demand is for seen in 2025. This recovery is envisioning to be facilitated by sustained recovery in the EU and emerging economies.

Indian steel industry overview

Indias steel industries witnessed robust growth. Industry is expected to exhibit an estimated growth of 8-9% in FY 2024-25, this for both is much higher than worldwide trends. While economy such as China, Europe and the US witnessed declining steel demand, India remain the sole major economy to reflect strong growth in steel consumption.

Indias steel production capacity has hit a new high in FY 2024-25 reaching- 149 million tons. This is ~ 6% higher than FY 2023-24 s ~ 140 million tons. Aggressive capacity expansion initiatives implemented by both private and public sector players have enabled the country to almost double its production capacity

With sustained flow of investment across sectors, the demand for steel is expected to grow at a CAGR of 5% to 7.3% over the next decade. The demand is forcing to reach 221-275 million tonnes by FY 2033-34. The long term growth prospect will further augment the flow of investment. To cater to the rising demand, India will need to produce an estimated 300 million tonnes of steel by 2030.

KEY INDUSTRY DRIVERS Government initiatives.

The heightened integration of steel in residential and infrastructure construction is one of the key drivers of demand of steel. Government initiatives, such as “Pradhan Mantri Awas Yojana (PMAY)” and the “ Gati Shakti Master Plan” are playing a crucial role in augmenting the consumption of steel.

The national infrastructure pipeline (NIP) programme, aimed at enhancing project preparation and drawing investment, remains a major driver of steel demand in FY 2024-25.

The production linked incentive (PLI) programme for specialty Steel has seen investment made of INR 20,000 crore out of commitments worth INR 27,106 crore. Incentive of INR 48 crore has been released with expectations of INR 2000 crore to be disbursed till the end of the scheme. These high-profile infrastructure initiatives are generating long-term momentum across the development sectors.

The Steel Ministry has proposed the implementation of stringent quality control regulation across all grid of steel utilised in the nation. This initiative intends to incorporate an additional 1000 grades of Steel under the quality control order (QCO). The QCO currently regulates 1376 items. The major twofold purpose of enhancing the quality of infrastructure and cheap imports that adversely affect the domestic manufacturers across the Steel value chain.

Construction

Organisation remains a key properly of consumption of steel in India. Heightened migration from rural to urban areas is further augmenting, the demand of residences and commercial premises, nearby, heightening demand of steel.

Indias construction industries are one of the pillars of its economic growth. The industry addresses the demand of the country and generate large-scale employment. Public and Private investments have been primarily directed towards infrastructure and real estate properties like offices, retail, housing and data centers, Logistics and warehousing have become crucial elements, driven by fast-paced urbanisation in the need of efficient supply chain. The trend of modular and pre-fabricated buildings in the construction sector, present new growth opportunities for the industry.

Infrastructure investment in India has witnessed remarkable rise. The elevation was facilitated by joint public and private funding. The heightened capital outlay has helped the country to build the second largest road network in the world. The Pradhan Mantri Gramin Sadak Yojana has completed the construction of 7,83,335. KM of the roads, significantly improving connectivity to rural areas.

During the year under review the Indian Railways renewed 6450 KM of leading track and overhaul, 8515, turnouts to enhance network dependability and safety.

National real estate development Council (NAREDCO) and Knight Frank estimated that Indias warehousing market will need 159 million square feet by 2047, increasing at a rate of 4% per annum. This growth is driven by instrument by the E-commerce and manufacturing industries in logistic Park, industrial corridors, and Modern warehouse space across the country. Moreover, Indias real estate industry is projected to reach $5.8 trillion by 2047, accounting for 15.5% of the countrys GDP.

Engineering and manufacturing

Heightened demand of steel from industries, such as engineering, packaging and industrial manufacturing played a crucial role in propping steel consumption in FY 2024-25. The diversification of steel utilisation across industries allows for a balance demand pattern. This reduce the dependency on anyone industry. Indias engineering exports is estimated to have reached an unprecedented height of $116.67 billion in FY 2024-25.

Further, India is aiming to establish itself as a global IT hub through initiatives, such as national policy on electronics (NPE), make in India, digital India, skill, India, electronics development, fund policy, scheme for promotion of manufacturing of electronic components and semiconductors (SPECS) as well as the production linked initiative (PLI). These schemes are playing a key role in the attracting investment in the electronics manufacturing sector.

Automotive industry growth

India is the world third-largest passenger vehicle market, following China and the US. During FY 2024-25, the Indian automatic sector grew by 7.3% in domestic sales while exports were accelerated by 19.2%. This highlights the strong global demand and heightened competitiveness within the India.

The rapidly expanding electric vehicle (EV) segment of the industry is augmenting the demand of specialise steel product. With sustained growth of Indias automotive sector and its gradual transition towards electric mobility. The utilisation of electric and other specialised types is force to witness our study growth.

The low vehicle ownership rate in India (38 vehicles per 1000 inhabitants) depends a huge growth potential. The Indian automotive market presents a lucrative opportunity for global auto manufacturers. Indias light-vehicle manufacturing capacity is affected to reach 10 million units by 2031.

OPPORTUNITY AND THREATS

OPPORTUNITIES

Becoming global infrastructure needs

Developing economies around the world are augmenting the demand of a steel due to heightened organisation and transportation program. India is strategically position to capitalise on its demand, especially steaming from Asian Africa, where infrastructure gaps persist.

Duties on imports

During April 2025, India imposed at 12% provisional safeguard due to specific steel imports to shield the domestic steel industry from cheap import from China, South Korea, and Japan. The implementation of safeguard duty came as a response to the record high import of steel at 9.5 million metric tons during 2024-25. The volume of import was the highest in nearly a decade. The intervention will offer temporary relief to the market from the flow of cheap imports.

Policy-driven market axis,

The production linked incentive (PLI) scheme aims to augment high-value Steel production to 42 million times by 2026-27. Export promotion schemes, like remission of duties and taxes on exported products (Ro DTEP) Farhan enhance competitiveness.

Power and Energy sector advancements

India is the third largest global energy consumer after China and the US. Rapid economic development, heightened urbanisation and expedited industrialization have contributed to the overall increase in energy consumption. The outlook for Indias energy sector remains highly optimistic. Sustained investment, technological innovation and international collaborations are expected to further initiate capacity edition in the years ahead. This capacity expansion will considerably argument the demand for steel.

Telecommunications network expansion

Indias telecom sector experience, notable growth, propelled by ground-breaking technological achievements, regulatory reforms, declining unit prices, and heightened adoption. Overall tally-density increased with rural growth outpacing the urban growth. The country witnessed the first 5G rollout in the world, covering more than 99% districts.

Expansion in defense and aerospace

After the initiation of the make in India movement, Indias defense production reached and all-high of ?1.27. Lakh crore during FY 2023-24, which exports crossing ?23,622 crores during FY 2024-25. This transition from being import - dependent to being the word leader in manufacturing shows Indias commitment towards self-reliance and economic growth. Policies have strengthened this progress by facilitating private sector participation, promoting technological advancement and developing contemporary military platforms.

Environmental sustainability initiatives

Investments under TLI, focus on automotive-grade alloy and electric steel, which is in line with international trends towards sustainability. This scheme plans to establish India as a global supplier of value-added steel by 2030.

THREATS Trade Tensions

Recent protectionist measure implemented by the US government, specifically the 25% tariff imposed on the import of steel, pose major threat to Indian steel producers, despite their limited direct exposure to the American market. These barriers are forcing to redirect the axis Steel to other markets, aggravating, regional over supply and putting downward pressure on prices and margins throughout Asia.

International metals market is dominated by scale players such as China and Russia, where immense production capacities and strategic-rooting of exports have increased competitive pressure. As a result, Indian companies are embracing industry 4.0 technologies, creating sophisticated, high-strength, steel grades and utilising waste-heat recovery systems to enhance operating efficiency, reduce courts and achieve stringent quality standards.

Environment Challenges

Adherence to strict environmental standards in major export markets has become necessary. Indian exporters are modernising, furnishes, adopting water-recycling techniques and obtaining carbon-emission and energy-efficiency certifications to meet International regulate systems and attract eco-conscious consumers.

Finance

Indian steel industry requires substantial investments. This demand is further intensified by the cautious lending practices, driven by higher interest rates and cyclic demand pattern. To counter these physical challenges, stakeholders have a embrace, new funding, options, including the mobilising of foreign direct investment and access to overseas capital market. Increase government financing programs can decrease risk and help accommodate necessary capacity expansion.

Supply Chain Vulnerabilities

Strong logistics and port facilities are imperative to support the growing industry. Heightened their freight rates, poor last-mile connectivity, and under deport handling facilities, drive, causes and compromise delivery, reliability, beginning Indias stand in global supply-chains. Heightened investment in dedicated, freight corridors, multi model, transportation notes and faster customs. Clearances are the keys to securing timely exports and gardening the trust of foreign customers.

https://www.imf.org/en/Publications/WEO/Issues/2025/04/22/world-economic-outlook-april-2025

https://rbidocs.rbi.org.in/rdocs/Bulletin/PDFs/0BULL22042025F03F83AE118C4B3B84E662D980C8DE33.PDF

https://www.pubs.usgs.gov/periodicals/mcs2025/mcs2025-iron-ore.pdf

http://worldsteel.org/media/press-release/2024/worldsteel-short-range-outlook-october-2024/

DOMESTIC STEEL DEMAND TO BUCK GLOBAL SLUMP, GROW 8-9% IN 2025 Safeguard duty a key monitorable for prices and mill profitability

Steel demand in India will continue to outpace other major steel consuming economies in calendar year 2025 with a growth of 8-9%, driven by a shift towards steel-intensive construction in the housing and infrastructure sectors along with better demand from engineering, packaging and other segments.

In 2024, global steel demand is estimated to have declined ~1%. Demand in China, the largest steel producer and consumer, declined ~3.5%, led by declining steel demand from real estate sector, despite conducive policy changes and release of support packages. Steel demand from Europe, Japan and the US also logged an estimated demand degrowth of 2-3%. However, demand growth in developing economies such as India and Brazil kept global demand from declining steeply. Demand is estimated to have increased 11% in India, 5.6% in Brazil and 2.7% in other steel consuming economies.

In 2025, global steel demand is expected to inch up by 0.5-1.5% on the back of easing financing conditions and pent-up demand from some key steel consuming economies, which will support manufacturing activities. An anticipated recovery in residential construction in economies such as EU, US and Korea in line with easing of financing conditions will support growth, too. India will continue to lead the pack in terms of demand.

Domestic supply, however, remains a point of concern.

Says Sehul Bhatt, Director- Research, CRISIL Market Intelligence and Analytics, “In 2024, supply growth from Indias mills was benign at 5.2%, with extended periods of planned and maintenance shutdowns. Aggregate crude production growth by the top seven players* remained flat during the year. However, crude and finished steel production from medium and small players increased 14% and 11.3%, highlighting the consistent demand growth from long steel end-users. ”

Competitive imports and decline in exports also played a role in weaker production growth in 2024. While finished steel imports increased 24.5%, exports declined 6.4%, leading to additional availability of 3.2 million tonnes of finished steel apart from domestic production. This additional material availability accounted for ~2% of the total finished steel demand.

To be sure, finished steel imports from all key exporters to India have increased significantly in the past few years. For instance, China has traditionally been an exporter of value-added products and speciality steel such as galvanised and coated steel, alloy steel and stainless steel to India, with minimal share of hot-rolled coil and strips (HRC), cold-rolled coils and strips (CRC). However, between 2022 and 2024, while finished steel imports from China increased 2.4-fold, import of HRC jumped 28-fold. Notably, HRC is used as feed material to produce various value-added downstream products, and these imports are often at a discount to domestic HRC prices, creating price pressure on domestic steel.

Similarly, the overall finished steel import from Japan increased 2.8-fold in 2024 from the base of 2022, while HRC imports increased 16.6-fold. Finished steel imports from Vietnam increased 8-fold, while HRC imports jumped 27-fold. Import growth from South Korea was relatively modest, bringing down its share in Indias finished steel import basket.

Domestic steel prices, meanwhile, declined in 2024, impacted by additional material availability due to increase in net imports. HRC prices declined 9% and CRC prices declined 7%, thereby slowing topline growth of domestic mills. That said, falling coking coal prices, along with low volatility, have helped reduce margin pressure somewhat. Coking coal spot price for the Premium Low Volatility grade, Australia-origin, declined 12% in 2024, whereas iron ore prices are estimated to have increased by 9-10% during the period. Notably, China HRC export prices declined 12% in 2024 and are still trading at a discount to domestic mill prices.

Imposition of a safeguard duty proposed by the industry could be a positive here. If implemented, steel prices in 2025 would be much higher than 2024, with the impact more prominent in the first half.

Says Vishal Singh, Manager-Research, CRISIL Market Intelligence and Analytics, “Domestic prices are under pressure due to global steel price decline and are expected to remain soft in 2025. Prices have a 4-6% upside potential hinged on implementation of the safeguard duty. As mills ramp up production volume from the newly commissioned capacities, increase in supply will reduce flat steel prices but will still be higher than average price of 2024. That said, intense competition among mills to gain market share could limit the upward movement. ”

https://www.crisil.com/content/crisilcom/en/home/newsroom/press-releases/2025/01/domestic-steel-demand-to-buckslobal-slump-srow-8-9percent-in-2025.html

Key Government Reforms in the Steel Sector

To foster a supportive policy environment for the steel sector and advance the Make in India initiative, the Government of India has taken several key measures over the years.

• Domestically Manufactured Iron & Steel Products (DMI&SP) Policy: This policy promotes the use of domestically produced steel in government procurement, supporting the growth of local manufacturing.

• Production Linked Incentive (PLI) Scheme for Specialty Steel: The Government has launched this scheme to stimulate the production of specialty steel within India. The PLI Scheme aims to reduce imports by attracting significant capital investment.

Under the Production Linked Incentive (PLI) Scheme, five broad categories of specialty steel have been identified:

1. Coated/Plated Steel Products

2. High Strength/Wear Resistant Steel

3. Specialty Rails

4. Alloy Steel Products and Steel Wires

5. Electrical Steel

Further, companies selected under the PLI Scheme for Specialty Steel have committed to an additional investment of approximately Rs 29,530 crores. By the end of the schemes tenure, these investments are expected to generate around 18,000 new direct employment opportunities.

A Process-Based Safety Guidelines: On July 25, 2024, the Ministry of Steel introduced 16 new safety guidelines designed to enhance productivity by standardizing safe operational practices within the steel industry.

A Revamped Steel Import Monitoring System (SIMS): SIMS has been upgraded to SIMS 2.0 as of July 25, 2024. This enhanced system is intended to more effectively monitor steel imports and address concerns affecting the domestic steel industry.

A Notification of Steel Scrap Recycling Policy: The Government has announced the Steel Scrap Recycling Policy aimed at increasing the availability of domestically generated scrap. This policy is designed to boost the recycling of steel scrap within the country, thereby enhancing the sustainability of the steel sector and reducing reliance on imported scrap.

A PM Gati-Shakti National Master Plan: The "Make in India" initiative, supported by the PM Gati-Shakti National Master Plan, will intensify engagement with key sectors?including Railways, Defence, Petroleum and Natural Gas, Housing, Civil Aviation, Road Transport and Highways, Agriculture, and Rural Development. The goal is to boost steel usage, increase overall demand, and attract investment in the steel industry

A Strategic Coordination Between Ministries and States: Optimizing the availability of raw materials for steel production by coordinating efforts with ministries, state governments, and other countries to obtain more favorable conditions.

A Ensuring Steel Quality Standards: The introduction of 145 Steel Quality Control Orders will prevent the manufacturing and import of non-standardized steel. This initiative is designed to make high-quality steel products more accessible to the public and uphold industry standards

Technological Advancements in Steel Industry

The steel industry operates in a deregulated environment, where companies independently decide on modernization and technological upgrades based on commercial factors and market dynamics. These companies are adopting the Best Available Technologies (BAT) globally as part of their modernization and technological advancement efforts.

To support environmental sustainability and reduce carbon emissions in the steel manufacturing sector, the following policies and initiatives are in place:

A R&D: The "Promotion of Research & Development in Iron & Steel Sector" scheme provides financial support to stakeholders for initiatives aimed at promoting environmental sustainability and reducing carbon emissions.

S National Green Hydrogen Mission: Launched by the Ministry of New and Renewable Energy (MNRE), this mission focuses on green hydrogen production and its application across various sectors, including steel. Under this mission, MNRE has introduced the "Implementation of Pilot Projects for Use of Hydrogen in the Steel Sector," developed in consultation with the Ministry of Steel.

S Steel Scrap Recycling Policy, 2019: This policy promotes the recycling of domestically generated steel scrap. By enhancing scrap availability, the policy helps reduce coal consumption in steelmaking and lowers emissions.

S Motor Vehicles Scrapping Rules (September 2021): These rules aim to increase the availability of scrap for the steel sector by facilitating the establishment of vehicle scrapping facilities.

S Perform, Achieve and Trade (PAT) Scheme: Part of the National Mission for Enhanced Energy Efficiency, the PAT scheme incentivizes the steel industry to reduce energy consumption.

Way Forward

Over the years, the steel sector has experienced remarkable growth, marked by substantial increases in both production and consumption. Per capita consumption of steel has risen from 59 kg in 2013-14 to 119 kg in 2022-23. In 2023, India produced 140.2 million tonnes of steel, positioning itself as the worlds second-largest steel producer.

Looking ahead, the National Steel Policy (NSP) projects significant expansion in the sector. By the year 2030-31, India is expected to achieve a total crude steel capacity of 300 million tonnes, with crude steel production reaching 255 million tonnes and finished steel production at 230 million tonnes. This growth trajectory highlights the steel sectors crucial role in supporting the countrys infrastructure and economic development.

Source: https ://www. p ib. gov. in/PressNoteDetails. aspx?Note!d=152018&ModuleId=3

https://www .ibef. ore/industry/steel-presenta tion

SWOT ANALYSIS OF STEEL INDUSTRY

SWOT analysis of industry The chemistry of steel comprises a mixture of carbon and iron and it amplifiers the resistance and strength of the alloy. Experts at other types of material chromium to make the steel resistance to oxidation and corrosion.

Steel has a lower cost and high tensile strength, and thats why manufactured employ steel in the production of various industries. Some of the main uses of steel are as follows:

> Weapons

> Electrical appliances,

> Machinery,

> Bicycles,

> Cars,

> Train

> Ships

> Ships

> Tools,

> Infrastructures

> Buildings,

The facts and figures about the steel industry are explained above. Some of the top steel industries are as follows:

> Angang Steel - China

> HBIS Group - China

> Jef Steel Corp - Japan

> Hunan Valin Steel Co - China

> Tata Steel Ltd - India

> Nucor Corp - USA

> Baoshan Iron & Steel Co - China

> Nippon Steel Corp - Japan

> POSCO Holding Inc - South Korea

> Arcelor Mittal SA - Luxembourg

Key Strengths of Steel Industry

1. Easy Access to Raw Material

Iron and carbon are the key ingredients of steel, and you can easily find them on the earths ground. Easy access to and availability of raw materials plays a significant role in the growth and success of the steel industry. However, some other types of industries says the challenge of scarcity of resources; the raw metal is not available or costly access to it. But the steel industry has got easy access and availability to the raw material.

2. Cheap labour.

If you look at the top 10 worlds leading steel industries; roundabout eight steel companies are in Asia, and the other two are in Europe and America. The main reason for the growth of the steel industry in China, India, and other Asian countries is because of the ability of cheap labour. However, the labour cost is very high in Europe and America.

3. Quality operations,

Manpower and workforce play a significant role in the production and manufacturing of steel; because the steel industry demands intense labour work. The reason the steel industry successfully conducts operations is because of the easy availability of labour

4. Shipping and transport.

The steel industry has got a highly developed network of supply chain and distribution channels. It allows the Company to have the access to the raw material so that the Company could manufacture the steel and meet the customer demands.

5. Community focus.

According to an estimate, the street industry contributed roundabout, 98% (comprising $1.663 billion) of its revenue back into society in 2019. It was in form of building hospitals, schools, transport and roads. Involvement of the steel industry in healthcare factories is very high in up. Along with the committee focus, the Company is also creating job opportunities and employing people in its industries.

6. Green economy.

Steel is 100% recyclable material; decomposes into its various building and become part of nature again after sometime. Nowadays, the global economy is moving towards dream project for the safety of the environment and nature. But the steel industry was no threat to the environment due to its recycling nature.

Weaknesses of steel industry

1. High capital investment.

It is no doubt, Steel industry is highly profitable and falls under the category of words leading industries. But launching and establishing a steel industry requires a huge capital investment in the form of the place, equipment, machinery, and workforce. And ordinary businessmen investor cant start the industry without funding from banks and other investors.

2. Deficiencies and risk.

The steel industry demands intensive labour work. The workforce is dealing with extremely hot and pressurise material. Overall, the environment in the production and manufacturing facility of the steel industry is very high and it causes a lot of health and other risk factor.

3. Limited productivity

Natural resources and it takes a lot of time to iron from the ground. The demand for steel in the market has its limits and it cant go beyond. Thats the growth and productivity of the steel industry are very compared to its size and investment.

4. Expensive material

The raw material “ iron” from the production of steel is also expensive, because of the labour and carriage. Sometimes, steel manufacturers have to pay double in the form of carriage and transportation cost; it increase the production cost and decrease the companies profitability.

5. Limited budget for research and development.

The owner in the industries invest a very limited, almost none in research and development. In fact, there are following the decades-old methods and processes at their Productions and manufacturing units without employing technology or robots.

Opportunities available to Steel industry

1. Infrastructure

If they are still in industry could invest in development of infrastructure like supply chain, routes, and distribution channel; then it would speed up the process increases overall efficiency and effectiveness

2. Merger and acquisition.

Merger and acquisition is also a great option for steel manufacturers. Small businesses should join their strength and focus on increasing their growth and productivity. It is good for them in terms of profitability and growth; it would allow them to deal with the industry issues and challenges collectively.

3. High demand and export.

The steel industry and the construction industry are complimenting each other. High investment in the construction industry is increasing the demand for steel. The steel manufacturer should take advantage of the growing demand in the market, and increase their profitability and revenue by producing more.

Threats to steel industry

1. Price conscious

The price of steel is a high sensitive matter in the steel industry and it could badly impact the demand and sale of steel. When the production and carriage cost becomes higher due to interruption and various other factors, then it decreases the profitability for investors and owners.

2. Tech development

High tech technological development is focusing on finding new ways to build houses and infrastructure that dont involve a lot of steel. It is decreasing the demand for a steel in the customer market and it is not good news for manufacture and owners because they have invested a lot of resources in the steel industry.

3. Limited growth.

The demand, production, and says office Steel in the market have their limits and they cant go beyond that. The limited growth is kicking out the small investor because they cant survive the market recession.

Source: https://swotandpestleanalvsis.com/swot-analvsis-of-steel-industry/

RISKS AND CONCERNS

Like every business, the Company faces risks, both internal and external, in the undertaking of its day-to-day operations and in pursuit of its longer-term objectives. A detailed policy drawn up and dedicated risk workshops are conducted for each business vertical and key support functions wherein risks are identified, assessed, analyzed and accepted / mitigated to an acceptable level within the risk appetite of the organization. The risk registers are also reviewed from time to time.

Credit Risk

The Company does its own research of clients financial health and project prospects before entering into an agreement with them. Timely and rigorous process is followed up with clients for payments as per schedule. The Company has suitably streamlined the process to develop a focused and aggressive receivables management system to ensure timely collections.

Interest Rate Risk

The Company has judiciously managed the debt-equity ratio. It has been using a mix of loans and internal cash accruals. The Company has well managed the working capital to reduce the overall interest cost.

Competition Risk

Like in most other industries, strong scope of opportunities come with intense competition. We face different levels of competition in each of our operating categories, from domestic as well as multinational companies. We counter this risk with the quality of our infrastructure, our customer-centric approach, value-added services and our ability to innovate customer specific solutions, focusing on pricing and aggressive marketing strategy, disciplined project executions, along with prudent financial and human resources management and better control over costs. Thus, we expect to be significantly insulated from this risk.

Macroeconomic risks

Overcapacity and oversupply in the global steel industry and high levels of imports may negatively affect steel prices and demand thereby reducing the Companys profitability. Developments in the competitive environment in the steel industry, such as consolidation among the Companys competitors, could have a material adverse effect on the Companys competitive position.

This could potentially impact the Companys business, financial condition, results of operations and future prospects. Any downgrading of Indias sovereign rating by independent agencies may harm the Companys ability to raise finance.

Financial risks

The Company has manageable amount of debt, which may potentially adversely affect its cash flow and its ability to operate the business. Any changes in assumptions underlying the carrying value of certain assets, including as a result of adverse market conditions, could result in impairment of such assets.

Regulatory risks

The Company faces regulatory risk from predatory pricing and surge in steel imports. The Company may benefit from certain protective trade restrictions, including anti-dumping laws, countervailing duties and tariffs, which if not available, may adversely affect its operations and financial condition. The Companys business could be affected by potential regulatory and judicial actions.

Operational risks

The industry is highly cyclical and a decrease in steel prices may adversely impact its financial condition. The Companys operations and financial condition could be adversely affected if it is unable to successfully implement its growth strategies. The Companys business is prone to high proportion of fixed costs and volatility in the prices of raw materials and energy. Mismatches between trends in prices of raw materials and steel, as well as limitations on or disruptions in the supply of raw materials, could adversely affect its profitability.

Market related risks

Competition from other materials, or changes in the products or manufacturing processes of the Companys customers who use steel products, could reduce market prices and demand for the Companys products, thereby reducing its cash flow and profitability. Product liability claims may adversely affect the Companys operations and finance.

Labour risk

The Companys success depends on the continued services of its senior management team and business and prospects could suffer if it loses one or more key personnel or if it is unable to attract and retain its employees. Any labour unrest could adversely affect the Companys operations and financial condition.

INTERNAL CONTROL SYSTEMS AND ADEQUACY

The Company has adequate internal control system and well laid-down policies and procedures for all its operations and financial functions. The procedures are aligned to provide assurance for maintaining proper accounting controls, monitoring efficient and proper usage of all its assets and reliability of financial and operational reports. The internal control system is ably supported by the Internal Audit Department which carries out extensive audit of various functions throughout the Company. The Companys Board has an Audit Committee which comprises of three members, all of whom are Independent Directors. The Audit Committee reviews significant findings of the internal audit.

FINANCIAL PERFORMANCE -

During the year under review, the Company has achieved total revenue of Rs. 505.43 Crore as against Rs. 496.28 Crore in the previous year.

Financial Summery

PARTICULARS	FOR THE FINANCIAL YEAR ENDED MARCH 31, 2025	FOR THE FINANCIAL YEAR ENDED MARCH 31, 2024
	(Rs in Lakh)	(Rs in Lakh)
T otal Revenue	50,543.39	49,628.32
EBIDTA (Before Exceptional / Extraordinary Items)	2431.10	2424.91
Interest / Finance Charges	550.26	1,173.57
Depreciation	956.89	874.29
Exceptional / Extraordinary Items	(471.48)	(1983.65)
Profit before tax (PBT)	1395.43	2360.70
Tax (including adjustment of previous years)	0.00	7.30
Profit after tax	1395.43	2353.40
Other Comprehensive Income (Net)	10.59	11.03
Net Profit available for appropriation	1406.02	2364.43
Appropriations:
Dividend per share	0.00	0.00
Earnings per share [Equity Share of Rs. 10]
-Basic earnings per share (in Rs.)	1.62	2.77
-Diluted earnings per share (in Rs.)	1.62	2.73

The Company operated in the single segment i.e., steel and steel related products.

Key Financial Ratios / Indicators

> (i) Debtors Turnover Ratio:

Debtor Turnover Ratio for the FY 2023-24 was 40.50 and the same for the current financial year stood at 24.52.This is in line with industry standard.

> (ii) Inventory Turnover

Inventory Turnover Ratio for the FY 2023-24 was 14.58 and the same for the current financial year stood at 11.95. A relatively low inventory turnover ratio is due to planned shutdown of the unit for the modernization project as well as cost optimization project.

> (iii) Interest Coverage Ratio

Interest Coverage ratio(after considering exceptional/extraordinary items) stood at 3.75 for FY 2023-24 and 5.27 for FY 2024-25. Interest Coverage ratio(before considering exceptional/extraordinary items) stood at 2.06 for FY 202324 and 4.42 for FY 2024-25.Interest coverage ratio is quite comfortable for the Company

> (iv) Current Ratio

Current Ratio for the FY 2023-24 was 0.97 and the same for the current financial year stood at 0.80. A low Current Ratio in the current financial year is due to internal accruals are deployed in Capex resulting in increase in current liability(ies) including the obligation of payment of Term Loan with in 12 months.

> (v) Debt Equity Ratio

Debt Equity Ratio for the FY 2024-25 stood at 0.28. There was no outstanding debt on 31st March 2024 so the debt Equity Ratio for the FY 2023-24 was NIL.

> (vi) Operating Profit Margin (%)

Operating Profit Margin Ratio for the FY 2023-24 was 4.19% and the same for the current Financial Year (202425) stood 4.36% which mainly due to cost optimistaion project executed by the Company.

> (vii) Net Profit Margin (%)

Net Profit(including exceptional/extraordinary items) Margin Ratio for the FY 2023-24 was 4.74% and the same for the current Financial Year (2024-25) stood 2.76%.Net Profit Margin(excluding exceptional/extraordinary items) stood at 0.77% for FY 2023-24 and same for the current financial year(2024-25) stood at 1.83% showing improvement due to various measures adopted by the Company to reduce costs.

> (vii) Return on Net worth (%)

Return on Net worth for the FY 2023-24 was 0.19 and the same for the current Financial Year (2024-25) stood 0.10 mainly due to lesser profit and increase in the Equity Capital due to conversion of Optionally Converted Redeemable Preference Shares (‘OCRPS) into Equity Shares.

The Company has prepared the Financial Statements for the Financial Year 2024-25 as per IND-AS and a treatment different from that prescribed in an Accounting Standards has not been followed in during the reporting period.

Human Resources and Industrial Relations

The Company takes pride in the commitment, competence and dedication shown by its employees in all areas of business. Various Human Resource initiatives are taken to align the HR Policies to the growing requirements of the business. The Company has a structured induction process and management development programmes to upgrade skills of managers. Technical and safety training programmes are given periodically to workers. Industrial relations in the organization continued to be cordial during the year under review.

As on 31st March, 2025 the total employee strength was 258.

OUTLOOK:

During the year the Company initiated work on modernization and cost optimization projects other than normal capital expenditure, to maintain and enhance the plant.

The modernization project as well as Cost Optimization project has been completed and yielding positive result and gives us confidence to manufacture high margin earning grades and also expand our customer base.

Rathi steel and Power Limited is well-positioned to leverage the positive growth opportunities in the steel industry. With its established reputation for exceptional product quality and customer-centric approach, the Company is well-equipped for the near to medium-term future. Rathi steels expanding product line, which includes stainless steel reinforcement bars, FE550 Series Reinforcement bars, other downstream products (under planning stage) demonstrates the Companys commitment to addressing the diversified needs of its customers. By collaborating with recognized downstream stainless steel manufacturers and a large number of recognize dealers / distributors among others, the Company ensures access to well-established brands which are leaders in their segments.

Following the cost optimization project, Rathi became the first Indian Company, and among the few players globally, to adopt hot charging of SS billets to make wire rods. The Company benefits from its existing integrated facility in Ghaziabad which has melting unit and rolling mill. Hot charging reduces the need for manpower and machines, for handling and charging of billets in furnace. It also reduces fuel cost in reheating and loss of scale, leading to lower carbon emissions. This translates into cost savings, better control over pricing, and improvement in margins.

Rathi Steel has demonstrated tremendous resilience in terms of a financial turnaround over the last year. The Company has significantly improved its net worth, managed debt and resumed banking relationships with debt to fund future growth initiatives.

In terms of industry trends, the steel industry is predicted to have continued increase in demand from a variety of sources, including infrastructure, automotive, and affordable housing. Rathi Steel and Power Ltd is poised to gain from these developments, given its ability to meet rising steel demand. Furthermore, the governments focus on infrastructure development, Smart Cities initiatives, and the new Vehicle Scrappage policy will provide additional impetus to the steel industry, creating favourable conditions for growth.

The Companys optimistic outlook is enhanced by its focus on boosting operational efficiency through continuous process improvement, such as technological development and modernization of loading and unloading, quality control operations, customer service, and consistency in quality, which results in optimal production levels.

Overall, the Company is well-positioned to seize market opportunities, drive development, and deliver sustainable value to its stakeholders.