Ratnamani Metals & Tubes Ltd Management Discussions.

Economic Overview

Global Economy

Financial year 2019-20 witnessed a synchronised slowdown in both the advanced as well as developing economies across the globe. While the trade activities remained weak overall, some green shoots of recovery had started to emerge towards the end of the year. However, the unexpected outbreak of Coronavirus (COVID-19) pandemic disrupted the socio-economic balance across the world. The response to avoid the spread of this pandemic was a multi-phased lockdown resulting in restricted movement of people, goods and services.

The global output growth in 2019 was registered at 2.9%, slowest since the global financial crisis of 2008, owing to a decline in manufacturing activity, trade war between China and the US, tighter financial conditions and the COVID-19 pandemic. The growth in advanced economies declined from 2.2% in 2018 to 1.9% in 2019. While the Emerging Market and Developing Economies (EMDE) also saw a drop in growth from 4.5% in 2018 to 3.7% in 2019.

According to the IMF estimates, the world GDP is estimated to grow negatively at -4.9% in 2020 and rebound in 2021 with a modest uptick to 5.4%.Stringent containment measures and social distancing policies have led to a sharp contraction in economic activities and growth prospect of countries worldwide. However, it is expected that the strong policy support and fiscal reforms will enable strong and sustainable growth recovery once the pandemic fades.

Indian Economy

The Indian economy witnessed a cyclical slowdown owing to weak private consumption, sluggish manufacturing activities and muted investments. The Government of India announced various measures to revive the economy, with the Reserve Bank of India (RBI) complementing with an accommodative policy stance for most parts of the year. Indias external sector gained stability in the first half of 2019-20, with a narrowing of Current Account Deficit (CAD) and impressive Foreign Direct Investment (FDI). Crude oil prices also exhibited stability for most part of the year before seeing a sharp fall to historic lows in the last couple of months of 2019-20.

The Government also took significant steps such as corporate tax rate cut and easing of credit, particularly for the stressed real estate and financial sector. At the same time, measures taken to boost investment, particularly under the National Infrastructure Pipeline, presented green shoots for growth. However, the inopportune COVID-19 outbreak in March 2020, brought the entire nation to a standstill. The consequent nationwide lockdown impacted business activities in all the segments of the economy. As a result, the GDP of 2019-20 plunged to an11-year-low of 4.2% and the growth of eight core industries declined to 0.6%.

The Government announced several measures to boost the healthcare segment, strengthen wage support and cash transfers for the lower-income households, deferred tax payments as well as provided liquidity support across sectors. In addition, a financial package worth of Rs 20 lakh Crore has been announced by the Government to support the economy and create an Atmanirbhar Bharat. However, the likely duration, intensity and spread of the coronavirus has brought lot of uncertainty into the economic outlook.

In the near term, the negative impact of the health crisis on economic growth and sentiment may be modestly mitigated by higher Government spending, a brighter outlook for crop yields and emergency stockpiling of essential items. Furthermore, the fall in commodity prices would provide some cushion to earnings in the near term.

Results Overview

The country witnessed lockdown being implemented in the second fortnight of March 2020. This impacted the business operations of the Company to a certain extent. The Company started resuming operations in its manufacturing plants, taking all safety precautions as per guidelines from the Government. The revenue from operations decreased to Rs 2,583.14 Crore in 2019-20 from Rs 2,754.90 Crore in 2018-19. Profit after Tax for the year stood at Rs 307.50 Crore, growing by 21.57% over the previous financial year.

Key Financial Ratios for the FY 2019-20 compared to the FY 2018-19

Reference Particulars FY 2019-20 FY 2018-19 Change %
(a) Operating Profit Margin 18.37 16.01 14.69
(b) Net Profit Margin* 11.63 9.05 28.52
(c) Return on Net Worth 18.00 16.62 8.32
(d) Debtors Turnover (Days)# 45.86 67.59 32.15
(e) Inventory Turnover (Days)$ 102.39 77.11 (32.78)
(f) Interest Coverage" 20.38 (100.00)
(g) Debt / EquityA 0.12 (100.00)
(h) Current Ratio 2.65 2.91 (9.00)

*New Lower Tax Rates as introduced by Taxation Laws (Amendment) Ordinance, 2019 # Better Average Credit Terms $ Procurement of Raw Materials against orders in hand A ECB and Term Loan facility availed in the previous year

Steel Pipes and Tubes Industry

India is one of the key producer and consumer of steel pipes and tubes globally. Steel is the primary raw material of steel pipes and tubes. India produced 111.2 million tons (MT) steel in 2019. The market size of domestic steel pipes industry is Rs 330 billion as on March 2020. The industry has shown a steady CAGR of 8.2% over the last 10 years. Wide range of high-quality and customised products made from carbon steel, alloy steel and stainless steel, accreditations, location advantage and cost has driven the consistent growth of this industry.

The industry faced challenges towards the end of the year owing to falling global crude oil prices, temporary lockdowns due to COVID-19 and delayed projects. However, the demand outlook for steel pipes and tubes remains positive driven by rising impetus on infrastructure sector and application in various end- user industries such as Transportation, Construction, Oil & Gas, Power, Petrochemicals, Fertilizers, Irrigation, Sewage, and Water among others.

The global Steel Pipes and Tubes market is forecasted to display a CAGR of 7.9% and grow from USD 153.20 billion in 2019 to USD 278.84 billion by 2027. Global pipeline projects are expected to bring potential growth opportunities in the Steel Pipe industry with major demand coming from Gulf countries and Asia, while US is expected to drive replacement demand. The Asia-Pacific Region occupied the largest market share in 2019, and it is forecast to witness a CAGR of 8.4% during 2020-2024. A rise in the growth trajectory of industrial production and infrastructure, especially in developing economies, is expected to boost the market for steel tubes and pipes over the coming years.

The Company is well placed to leverage its manufacturing efficiency and price competitiveness. After establishing ourselves as one of the leading infrastructure product manufacturers in the country, we are all geared to make our presence felt in countries like Australia, Canada, Germany, Qatar, UAE, and Middle East, among others.

(Source: https://www.reportsanddata.com/report-detail/steel-pipes- and-tubes-market)

Stainless Steel, Nickel Alloy & Titanium Division

The Companys Stainless Steel division primarily manufactures Seamless and Welded Pipes, Heat Exchanger Tubes, Instrumentation Tubes, Welded Titanium Tubes and Seamless Tubes made of Exotic Alloys (Incoloy, Inconel and Monel).

Expanding Manufacturing Capabilities

Ratnamani will grow into a different league of manufacturing capabilities with the commissioning of new Hot Extrusion Press this year, which will enhance its capacity to manufacture upto 10" NPS Seamless products in both Stainless Steel as well as in Nickel Alloys and Inconel. We expect the Extrusion Press to be ready for commercial production by fourth quarter of the financial year 2020-21. Successful commissioning of this project is an important priority for the division. The Company is putting in efforts to stabilise the plant & machinery faster and establish superior product quality to cater to the requirements of Seamless Pipes and Boiler Tubes in various sectors.

Oil & Gas, Petrochemicals and Refineries Sector

The Oil & Gas sector in India is amongst the eight core industries. The countrys economic growth is closely related to its energy demand, therefore, the need for oil and gas is projected to grow more, thereby making the sector quite conducive for investment. The steel pipes market is driven through rising demand from the Oil & Gas industry. ~8%-10% of the total capital allocation in Oil Refineries, Petrochemicals, LNG terminals is allocated towards steel pipes (Stainless Steel & Carbon Steel Pipes and Tubes).

India retained its spot as the third largest consumer of oil in the world with consumption of 5.16 million barrels per day (mbpd) in 2019 as compared to 4.56 mbpd in 2016. Crude Oil import rose sharply to USD 101.4 billion in 2019-20 from USD 70.72 billion in 2016-17.

Gas consumption is projected to reach143.08 billion cubic metres (bcm) by 2040. The Government is planning to invest USD 2.86 billion in the upstream oil and gas production to double the natural gas production to 60 bcm and drill more than 120 exploration wells by 2022. Indias natural gas imports increased at a CAGR of 12% during FY 2015-16 to FY 2019-20.

The country has 23 refineries, out of which 18 are in the public sector, two in the joint sector and three in the private sector. Top three companies, IOC, RIL and BPCL contribute almost 70% of Indias total refining capacity.

As of May 01,2020, Indias oil refining capacity stood at 249.9 million metric tonnes (MMT), making it the second largest refiner in Asia. With expected increase in consumption of petroleum products, total demand is likely to rise to 335 MMT by 2030 and 472 MMT by 2040. India plans to almost double its oil refining capacity to 450-500 MMT in the next ten years to meet the rising domestic fuel demand as well as cater to export market.

India has witnessed a steady increase in production as well as consumption of petroleum products over the years. Indias consumption of petroleum products grew by 4.5% from 213.22 MMT in 2018-19 to 213.69 MMT during 2019-20.

The country has been the fourth-largest Liquefied Natural Gas (LNG) importer since 2011 after Japan, South Korea, and China. Indias natural gas imports increased at a CAGR of 12% during 2015-16 to 2019-20. LNG import in the country accounted for about one-fourth of total gas demand, which is estimated to double over the next five years. To meet this rising demand the country plans to increase its LNG import capacity to 50 MT in the coming years.

With the lockdown implemented during March 2020 on account of COVID-19 and recent fall in global crude oil prices to USD 20, a medium-term slowdown is expected in terms of investments for Oil & Gas sector. Industries across the globe are facing severe situations in terms of order booking, execution and availability of manpower. It is expected that there will be a cascading effect of this in the subsequent financial year as well.

However, the business outlook for stainless steel pipes manufactures continues to remain stable for the next two- three years on account of higher consumption of petroleum products, rapid urbanisation and also increased penetration of natural gas.

Moreover, stainless steel, nickel alloy and inconel are highly durable and resistant to corrosion. Stainless steel is a perfect material to contain the corrosive nature of crude oil in sub-sea conditions such as deep-sea drilling.

During the FY 2019-20, majority of the oil producing companies in India and globally (particularly in the Middle East like Abu Dhabi and Saudi Arabia) have finalised major orders on EPCs. These EPCs are in the process of concluding various orders on their sub-contractors and hence, the Company expects better demand for the stainless steel division.

Domestically, expansion and efficiency improvement programme in various refineries such as BPCL, HPCL among others is expected to generate higher revenues for majority of the products in the division. A new Grass Root Refinery at Barmer, HPCL Rajasthan Refinery Ltd. (HRRL) has finalised a major contract with Indian EPCs. Ratnamani is well-poised to capitalise on this opportunity in the future through strong order inflow. Internationally, mainly the demand from Gulf region, will be a major contributor for the growth of the division.

With rich experience of supplying welded pipes to domestic LNG Terminals, the division is very well placed to cater to global LNG EPCs. Overall, the Company stands strong to leverage opportunities with diverse products, strong order book and manufacturing efficiencies despite challenging environment.

Power - Thermal, Solar and Nuclear Sector

Energy is considered crucial to achieve Indias development ambitions and support an expanding economy. The various applications of steel pipes & tubes (Carbon Steel Pipes, Stainless Steel Pipes & Titanium Alloy Tubes) in thermal and solar power plants include piping applications in ducts, chimneys and condensers. Other application include Steam piping, General Piping, High Pressure Piping, Feed Water Heaters, Boilers and Heat Exchanger Tubes.

With a customer base of more than 200 Million and service outreach spanning nearly 3.28 Million sq. km, the Indian power system is one of the largest in the world.

All India peak demand for electricity is expected to grow from 173 GW to 370 GW by 2032 at a CAGR of ~5.6%, leading to higher investment in the transmission space.

The total domestic power plant (thermal, nuclear and other renewable sources) capacity stands around 330 GW as of March 2020 and expected to reach 480 GW by 2025-27E. Around 5% of total capex invested in power plant expansion goes towards steel pipes & tubes.

The COVID-19 lockdown measures have slowed completion of several projects in the power sector. They are likely to be pushed by a few months to 2021. However, with rapid urbanisation, improved farm mechanisation and higher emphasis on setting up industries on account of Make in India process, the sector is expected to expand considerably. Any capacity expansion in thermal, solar and nuclear plants will generate positive demand for steel pipes (both Stainless Steel and Carbon Steel). With newer opportunities and initiatives in the energy space, the Company is well positioned to surge ahead, backed by reliable critical Heat Exchanger Tubes for thermal, solar and nuclear power plants across the globe.

In India, nuclear power plants of 7,000 megawatt (MW) capacity are currently under various phases of construction. Government is planning to add around 20,000 MW nuclear power generation capacity over the next decade. The Nuclear Power Corporation of India Ltd. (NPCIL) is also in process of enhancing the capacity of its nuclear power capacity across the country. With reliable quality product and competitive prices, the Company is hopeful to generate a good amount of business in coming year in this sector.

During the year, the Company became an approved supplier of Condenser Tubes in stainless steel as well as in titanium to one of the major international Atomic Energy corporation. This approval may result into opportunities for SS tubes and pipes for global projects.

Fertilizer Plants

The country has witnessed increased production and consumption of fertilizers over the years owing to increasing demand for agricultural products. During the year, there were no substantial investments in the countrys Fertilizer sector. With the high quality Urea Grade tubes, the division will strive to get exposure from the requirements globally.

Atomic Energy & Aerospace

Total investment by the central Public Sector Undertakings (PSUs) under the aegis of the Department of Atomic Energy is likely to stand at Rs 14,851 crore in 2020-21.

Better investments in the Atomic Energy sector in India will benefit the Company in the form of rising demand for Seamless Stainless Steel and Welded Pipes. Moreover, the Government has announced an increase in the foreign direct investment (FDI) limit in the defence sector from current 49% to 74% which will benefit the Company owing to its versatile steel pipes and tubes.

Department of Atomic Energy, Space Research Organisation and Aerospace sector present huge potential, wherein the Company can explore business opportunities. Looking ahead, the Company is successfully able to get the necessary approval for the Aerospace industries, which will help us in supplying critical tubing for this sector.

Carbon Steel Division

Ratnamanis Carbon Steel (CS) division manufactures Electric Resistance Welded (ERW) pipes and Submerged Arc Welded (SAW) pipes (L-SAW, H-SAW & Circ. Seam- SAW). Domestic market sales and exports in 2019-20 remained steady for the Carbon Steel division. Major order book stood at Rs 1,560 Crore for the ERW Pipes and H-SAW Pipes with Rs 348 Crore contribution from exports. Despite challenges in the months of May to July 2019 and March 2020, all pipe mills and coating plants ran on full capacity.

The division performed well on national and international platforms with rising demand from refinery projects, Oil exploration & port development projects among others. Coated Pipes for Oil & Gas and Water sector witnessed tremendous growth with orders for overseas requirement. Further, both ERW and H-SAW Pipes gained traction with bidding and execution for various projects.

Oil & Gas Transmission Lines

The Oil & Gas Pipeline Infrastructure is the cornerstone of the countrys economic development. Current crude oil pipeline in the country stands at 10,419 km having a capacity of 147.9 million metric tonnes per annum (mmtpa). IOCL accounts for 50.88% (5,301 km) of Indias crude pipeline network in terms of length. In terms of actual capacities, ONGC is the leader with a share of 40.97%, followed by IOCL at 32.86%.

The Oil & Gas product pipeline network stands at 17,430 km as on 1st March, 2020. The top three Companies such as IOCL, HPCL and BPCL contribute 82.84% of the total length of product pipeline network in the country. Indian Oil Corporation (IOC) leads the segment with 8,748 km of refined products pipeline in i.e. 51.25% of the total length of product pipeline network.

During 2019-20, the sectors total installed provisional refinery capacity was 249.9 MMT. The top three companies, IOC, RIL and BPCL, contribute almost 70% of Indias total refining capacity. As per Union Budget 2019-20, under scheme Kayakave Kailasa, the Ministry of Petroleum & Natural Gas enabled SC/ST entrepreneurs in providing bulk LPG Transportation.

Indian Oil Corporation plans to make an investment of USD 22.91 billion, including USD 7.64 billion for expanding its existing brown field refineries, in the next 5 to 7 years. Moreover, the Company plans to lay the nations longest LPG pipeline of 1,987 km from Gujarats coast to Gorakhpur in Uttar Pradesh to cater to growing demand for cooking gas in the country. Reliance Industries Ltd is planning to expand its Jamnagar oil refining capacity by about 50% from current 35.2 million tonne per annum (MTPA) to 41 MTPA. The Cabinet Committee on Economic Affairs approved the capacity expansion of Numaligarh Refinery from 3 MMTPA to 9 MMTPA in January 2019,

to be completed within two years. With enduring product portfolio, Ratnamani is well-prepared to grab the upcoming opportunities in the sector.

In recent years, the demand for natural gas has increased significantly due to its higher availability, environment friendly characteristics as a fuel and the reasonable prices for the end consumers. India is the biggest emitter of greenhouse gases after the US and China. It aims to achieve the emission reduction targets pledged by promoting the use of natural gas and green fuel. For this, the Government is offering a special impetus towards building a solid gas infrastructure across the nation.

Government is planning to invest Rs 70,000 Crore (USD 9.97 billion) to expand the gas pipeline network across the country. As of 1st May, 2020, the Gas Authority of India Ltd. (GAIL) is leading with12,160 km of the countrys total natural gas pipeline network of 16,905 km. The Government has fixed an ambitious target of increasing the share of natural gas in the countrys energy basket from 6% in 2019 to 15% by 2030. In order to attain this, it envisaged National Gas Grid project which involves connecting locations/hubs with pipelines to carry natural gas till the retail outlets. Recently, Government laid down plans for the expansion of National Gas Grid to 27,000 km from the present 16,905 km.

Major Natural Gas Pipeline Network as on 1st May, 2020

Nature of pipeline GAIL Reliance GSPL ARNA DNPL IOCL Total
Natural Gas Length (Km) 12,160 1,480 2,695 215 192 163 16,905
Capacity (MMSCMD) 246 67 43 6 1 22 385

AExcludes CGD pipeline network

Note: MMSCMD - Million Metric Standard Cubic Meter per Day (Source: Ministry of Petroleum and Natural Gas)

In addition, the Government is focused to develop gas infrastructure in the north-eastern region by providing Rs 5,559 Crore for the construction of the North East Gas Grid project. Availability of natural gas would boost fertilizer production, transportation, power generation and industrial activity. Addition of these pipelines will generate good business for the Carbon Steel Division. Ratnamani expects positive demand traction for H-SAW pipes due to expansion of cross country pipelines.

Internationally, Ratnamani is targeting to supply CS L-SAW pipes for ADNOC Refinery Expansion Project in UAE, Thai Oil Refinery in Thailand, North Field Expansion project Qatar, Mozambique LNG, HAIL & GUSHA Project Abu Dhabi and Ethylene Cracker Project of Amur in Russia.

Projects like HPCL Refinery in Barmer, Rajasthan (HRRL Project) and Ratnagiri grass root refinery in Maharashtra are expected to create huge requirement of pipes, and the Company is in a strong position to generate business out of these projects. Apart from these, oil exploration project of ONGC under Cluster 7 & 8 Series, will continue to create business for piling pipes and pipes for jacket & platform packages.

City Gas Distribution (CGD) lines

City gas distribution market in India involves Compressed Natural Gas (CNG), predominantly used as auto fuel, and Piped Natural Gas (PNG) which is used in domestic, commercial and industrial segments. Backed by booming PNG and CNG segments, the countrys CGD network is anticipated to witness robust expansion in the future.

With favourable initiatives taken by the Government in the CGD sector, a rising number of Companies are being authorised and granted licenses in the 9th and 10th round to operate in different geographical areas (GA) across the country. For instance, Indian Oil Corporation and Adani Gas Ltd. have won the most number of licenses for distribution of gas in 17 and 15 geographical areas under the 9th and 10th rounds of city gas distribution, respectively.

As of January, 2020, 55 lakh domestic households were connected with the piped gas in the country. More participation from public & private sectors in the CGD market, will aid in expanding CGD network to 228 GAs covering overall 70.86% of the cumulative population and 52.80% of the area of the country.

CGD market in India is forecast to grow from an estimated 9,223 MMSCM (Million Metric Standard Cubic Meter) in 2020 to 25,570 MMSCM by 2030 at a CAGR of 10%. Growing adoption in domestic, commercial and industrial sectors, stringent government regulations towards pollution emitting vehicles and rising fuel prices are expected to positively influence the CGD market in India during the forecast period. However, recent lockdown, to contain COVID-19, has disrupted the pipe laying activities of CGD companies. With the extension of the lockdown, the 11th round of CGD bidding, covering 44 GAs, is expected to get delayed.

The Company anticipates positive demand traction to be witnessed for ERW Pipes segment for the next three to five years and also expects ~90-95% utilisation for all the ERW installed capacities.

Water Infrastructure

India is the 2nd largest water consumer in the world. Currently, the country is home to 17% of the worlds population but has only 4% of the worlds renewable water resources. The Composite Water Management Index (CWMI) report states that by 2030, the countrys water demand is projected to be twice the available supply, implying severe water scarcity for hundreds of millions of people. The demand and supply gap of water availability is expected to widen due to expected rise in population, rapid industrialisation and urbanisation. However, water availability and utilisation can be optimised by linking water of surplus areas with lower water availability areas via canals, pipelines etc. Robust planning and fast track implementation of Government initiated water segment projects is expected to create proper infrastructure for water utilisation.

The Government launched Jal Shakti Abhiyaan in 2019 to enhance rainwater harvesting and water conservation in 225 water-stressed districts. Nal Se Jal is another Government measure that focuses on providing piped water supply to every household by 2024. River linking is one of the large scale civil engineering projects that aims to link rivers through a network of reservoirs and canals

across India. The project will ensure greater equity in the distribution of water by enhancing its availability in drought prone and rain fed areas. In addition, Atal Mission for Rejuvenation and Urban Transformation (AMRUT) mission and Namami Gange mission are going to increase demand for H-Saw and DI pipes to a great extent.

During the year, growth was muted in water sector projects on account of payment issues. However, driven by various initiatives in the water sector, acceptability of Carbon Steel Pipes for transportation, the Company foresees huge opportunities in the coming year. Moreover, demand is expected to rise in Africa, Middle East Countries such as Saudi Arabia, Oman which have huge potential for water projects.

The ‘Make in India Impact

Government tenders now have the clause to use local content for all their upcoming projects. This has helped the industry to reduce the competition from foreign suppliers. The Government has also developed GEM Portal which presents a good platform for all Make in India products beneficial for all. The move is also aligned with Honble Prime Ministers vision of Vocal for Local.

Response to COVID-19

The health and safety of employees is always the highest priority of the organisation. Beyond business growth, we also believe that it is our duty to act responsibly and to do our part to protect the society. Ratnamani has been continuously monitoring all aspects of the COVID-19 situation, evaluating all new developments and taking measures to protect its employees. We are following the proven mantra of "Trace, Test and Treat" to control the spread in the Company. The Company have also contributed to the society through various CSR initiatives during these difficult times.

Implemented Measures

Hygiene: The Company has taken various steps to spread awareness among employees for the need of social distancing along with various precautions and hygiene measures.

Travel: The employees have been advised to refrain from trips that arent absolutely necessary. Personal meetings have been replaced by conference calls or similar options. Employees are also suggested to restrict their movements within the plants/offices of the Company

Office Operations: Operations of the Head office and Regional offices commenced as per guidelines from the Government of India. From starting the operations with 33% staff capacity to operating with full staff capacity, the Company took all the precautionary measures to prevent employees from the risk of infection.

Plant Operations: Ratnamani has established processes for ensuring the continuity of manufacturing operations to the greatest possible extent. To ensure that the employees are protected, the Company has implemented the recommendations made by the Government of India.

Precautions and Steps Taken for Employees: Permission from the Government has been received for the resumption of the production with proper safety measures.

o Sanitization Tunnels and Hands free Sanitizer Dispenser built in-house for the employees

o Daily health screening of all employees

o Serving immunity boosters to employees

o Inviting doctors as well as conducting in-house

programs to create awareness amongst the employees well in advance

o Ensuring that the Shop-floors, Offices, Colonies, Staff buses, and other vehicles are properly sanitized and also sanitizers are kept at approachable places in the premises

o Ensuring that all the employees are using face masks, PPEs and maintaining social distancing while working

o No gathering of employees

o Employees are encouraged to use virtual/remote modes to conduct meetings

o Restriction of inter locational movements for employees to minimise the risk

o Increased vigilance at plants to ensure that hygiene, catering, waste management and preventive measures including social distancing is being rigorously maintained

o All plants have a good Lock-in facility for our employees that is equipped with kitchen and dining facility, uninterrupted electricity, water supply, 24X7 medical assistance, ambulance and round the clock security

o We have tie ups with various testing laboratories for prompt need-based response for the COVID tests

Risk and Challenges

The objective of our risk management activities is to recognise, assess and manage risks early on and to implement appropriate measures to minimise them. Risk management at Ratnamani is a continuous process of analysing and managing all the opportunities and threats faced by the Company in its efforts to attain its goals and to ensure continuity of the business.

There are many constraints affecting the smooth functioning of the industry in which the Company operates. The table below provides a brief overview of the most significant risks and the Companys approach to managing them.

Risk Explanation Mitigation approach
Competitor risk Competition by bidding at lower cost in domestic as well as international markets could affect market presence. o Focus on cost effective manufacturing of

innovative SS pipes & tubes and welded CS pipes ensuring value addition for customers

o Manufactures the best quality product with latest technology and rich expertise
o Efficient and cost-effective operations
Foreign exchange risk The risk of Foreign exchange fluctuation can impact the Company as it is engaged in procuring various equipment from the overseas as well as the Company exports its products to foreign countries. o Hedges the net foreign exchange using well- defined strategies (e.g. forward contracts, futures contracts, options, and swaps) which reduces the exchange rate risk
Economic downturn A major economic downturn resulting in lower demand/delay for various projects. For instance, the COVID-19 crisis has impacted economic activities significantly by disrupting operations. o Well-diversified and balanced product with large customer base and presence
o Resilient business model and proactive strategies in the face of changing economic scenario
o Usage of IT and data intelligence to anticipate market developments
Liquidity risk The liquidity risk may hinder smooth operation of the Company due to blockage of funds resulting in delayed receivables. o Prudent strategies to maintain adequate cash flow, working capital cycle and financial stability
Input cost fluctuations Significant changes in raw material costs (steel) can impact the profitability. o Hedges the risk by covering the raw material on back to back basis immediately after receipt of an order
Labour disputes Industrial disputes lead to industrial action with impacts the Companys ability to meet client demands. o Maintains an open and positive relationship with all the employees, sub-contractors, workers, etc.; as exemplified by not a single instance of any such dispute so far

Corporate Governance

The Companys Corporate Governance philosophy is based on conscience, openness, fairness, professionalism and accountability. These qualities are ingrained in its value system and are reflected in its policies, procedures and systems. The Company is being governed in accordance with the policies, code of conducts, charters and various committees are formed in accordance with the law to ensure governance. The Companies Act,

2013 and SEBI Listing Regulations have strengthened the governance regime in the country. The Company has adopted the policies in line with new governance requirements including the Policy on Related Party Transactions, Policy on Material Subsidiaries, CSR Policy and Whistle Blower Policy. These policies are available on

the website of the Company at www.ratnamani.com. The Company has established a vigil mechanism for Directors and employees to report their genuine concerns, details of which have been given in the Corporate Governance Report annexed to this Report.

A separate report on Corporate Governance is provided together with a Certificate from the practising Company Secretary of the Company regarding compliance of conditions of Corporate Governance as stipulated under Listing Regulations. A Certificate of the CEO and CFO of the Company in terms of Listing Regulations, inter alia, confirming the correctness of the financial statements and cash flow statements, adequacy of the internal control measures and reporting of matters to the Audit Committee, is also annexed.

Human Resource

People power is one of the pillars of success at Ratnamani. The Company takes pride in acknowledging the performance of its human resource which has always responded with deep commitment to achieve business growth and market leadership. The top management acts as the governing force in ensuring a progressive work culture. The Company believes in reinforcing the key thrust areas i.e. being the employer of choice, building an inclusive culture, building a strong talent pipeline, building capabilities in the organisation.

The HR development framework ensure employees career progression and greater connect with the Company. This framework rides on multiple programs and opportunities for individual training, skill up-gradation, congenial atmosphere for employee-management relationship and equal opportunities. The Company continued to build on the Diversity and Inclusion agenda through building leadership capability and respectful work environment for the teams. The leadership development frameworks are focused on the core capabilities, which are essential for strong and effective leadership. These capabilities are defined for each level in the organisation and apply to all our employees. During the year under review, total 2,279 employees were on the pay rolls of the Company.

Internal Control System

The Company has put in place robust internal control systems and the best-in-class three-tiered governance structure, commensurate with its size and scale of operations. The Code of Conduct commits management to financial and accounting policies, systems and processes. The Corporate Governance Policy and the Code of Conduct stand widely communicated across the Company at all times, and, together with the Strategy of Organisation, Planning & Review Processes and the Risk Management Framework provide the foundation for Internal Financial Controls with reference to the Companys Financial Statements. Such Financial Statements are prepared on the basis of the Significant Accounting Policies that are carefully selected by management and approved by the Audit Committee and the Board. The Accounting Policies are reviewed and updated from time to time. These, in turn are supported by a set of divisional policies and SOPs that have been established for individual businesses.

The Company uses ERP System as a business enabler and also to maintain its Books of Account. The Information Management Policy reinforces the control environment. The systems, SOPs and controls are reviewed by divisional management and audited by Internal Audit whose findings and recommendations are reviewed by the Audit Committee and tracked through to implementation.

The Company has in place adequate internal financial controls with reference to the Financial Statements.

Such controls have been tested during the year and no reportable material weakness in the design or operation was observed.

The Company has also put in place comprehensive systems and procedural guidelines concerning other areas of business, too, like budgeting, execution, material management, quality, safety, procurement, asset management, human resources etc., which are adequate and necessary considering the size and level of operations of the Company. The Management has been making constant efforts to review and upgrade existing systems and processes to gear up and meet the changing needs of the business.


Looking into the current scenario, the Company foresees a tough time for all the sectors with delayed project execution. However,with various initiatives in the end- user segments, supportive Government policies, strong industry position and capacities, the Company anticipates continuous order inflow and sustainable growth in the future.