Global Economy
The global economy recovered in 2021 following the disruption caused by
COVID-19, on the back of efficient fiscal and monetary policies coupled with vaccinations
across the globe. The global economy is estimated to have grown by 6.1% in 2021, compared
to a contraction of 3.1% in 2020, as stated by International Monetary Fund (IMF). The
biggest contributors to the growth of developing economies were India and China estimated
to have grown at 8.9% and 8.1% respectively.
World Economic Output (%)
Post COVID-19, the global economy was on a recovery phase. However, the
ongoing Russia and Ukraine war coupled with the possibilities of another wave of COVID is
expected to impact the global economic growth in 2022 and 2023. Russia is a key provider
of oil, gas, and metals, as well as wheat and grain, which it shares with Ukraine. Due to
diminishing availability, prices have seen a sharp rise. Global growth is projected to
slow from an estimated 6.1 percent in 2021 to 3.6 percent in 2022 and 2023. This is 0.8
and 0.2 percentage points lower for 2022 and 2023 than projected in January. Both Russia
and Ukraine are expected to experience large GDP contractions in 2022.
The supply-chain disruptions across the globe have resulted in a
higher-than-expected broad-based inflation. Further, with the ongoing Ukraine and Russia
war, the inflation is expected to remain elevated for a longer timespan than previously
forecasted by IMF. The inflation is projected at 5.7% for advanced economies and 8.7% for
emerging and developing economies in 2022. Further, to reduce the impact of rising energy
prices, many governments will need to diversify their energy sources and boost efficiency
wherever possible in the near future.
Indian Economy
The Indian Economy contracted sharply by -7.3% in 2020 as it was hit
hard by the pandemic and then rebounded by 8.9% in 2021. Despite having witnessed one of
the steepest contractions in gross domestic product and being hit by three successive
waves, the Second Advance Estimates of National Income released on February 28, 2022
indicate that the economy has surpassed its pre- COVID level in 2021-22, on the back of
unprecedented policy support from monetary and fiscal authorities. India is expected to be
the fastest growing major economy in the world. IMF projects a real GDP growth for India
of 8.2% in 2022 and 6.9% in 2023
Source: IMF, RBI, MOSPI
Stainless Steel Sector:
Global Stainless Steel melt shop production grew by 10.6% to 56.3
million metric tonnes in 2021 compared to 50.9 million metric tonnes in 2020.
China is estimated to have the largest share of production of 54%. With
3.5 Mn tonnes Stainless Steel output, Indias share in world Stainless Steel output
is estimated to be at 6.2% in 2021.
India is one of the largest consumers of stainless steel in the world.
However, its per capita stainless steel consumption is much lower at around 2.5kg compared
to the world average of 6 kg per capita. The per capita consumption of stainless steel in
India will reach 8-9 kg by 2040 and 11-12 kg by 2047 as per the "Stainless Steel
Vision Document 2047" released by the Ministry of Steel.
It is estimated that manufacturing of durables and household utensils
in India is the largest end use of stainless steel with a 44% share. Apart from this, the
usage of stainless steel is 30% in capital goods, 13% in automobiles, railways and
transport (ART), 12% of in construction and infrastructure and 1 % in others.
Stainless steel pipes and tubes are important products in the stainless
steel industry. They are mainly used in oil and gas, petrochemical, refineries, thermal
power and nuclear power, aerospace and defence and in instrumentation across a wide range
of industries. Therefore, demand for steel pipes & tubes is linked to the prospects of
the end-user industries.
India is planning to double its refining capacity to 450-500 million
tonnes by 2030. Energy demand of India is anticipated to grow faster than energy demand of
all major economies on the back of continuous robust economic growth. Indias energy
demand is expected to double to 1,516 Mtoe by 2035 from 753.7 Mtoe in 2017. Moreover, the
countrys share in global primary energy consumption is projected to increase to two-fold
by 2035. Crude oil consumption is expected to grow at a CAGR of 4.66% to 500 MMTPA by 2040
from 201.26 million tonnes in 2021. Indias oil demand is projected to rise at the fastest
pace in the world to reach 10 million barrels per day by 2030, from 4.9 million barrels
per day in 2021. Natural Gas consumption is forecast to increase at a CAGR of 12.2% to 550
MCMPD by 2030 from 174 MCMPD in 2021. Diesel demand in India is expected to double to 163
MMTPA by 2029-30, with diesel and gasoline covering 58% of Indias oil demand by 2045.
India is the third-largest producer and second-largest consumer of
electricity worldwide, with an installed power capacity of 395.07 GW, as of January 2022.
Coal-based power installed capacity in India stood at 203.9 GW in January 2022 and is
expected to reach 330-441 GW by 2040.
Indias defence manufacturing sector has been witnessing a CAGR of
3.9% between 2016 and 2020. The Indian government has set the defence production target at
USD 25 billion by 2025 while production in 2020-21 was valued at USD 10.9 billion.
The Indian chemicals industry stood at USD 178 billion in 2019 and is
expected to reach USD 304 billion by 2025 registering a CAGR of 9.3%. With global
companies seeking to de-risk their supply chains, which are dependent on China, the
chemical sector in India has the opportunity for a significant growth.
Source: IBEF
Company Business Update:
The company restarted its Steel Melting (SMS plant) operations during
Q3FY22. This has helped mitigate challenges being faced in Raw Material procurement and
hurdles in logistics. This is evidenced by a faster delivery cycle which has resulted in
enhancing monthly output and improving market share.
COVID-19 Impact:
Financial results in FY21 and Q1 and Q2 FY22 were impacted due to the
Covid-19 pandemic. There was no significant impact on operations in Q3FY22. The impact of
the 3rd wave has been mild compared to the previous waves and operations in Q4FY22 were
also not affected.
The company has adopted several additional measures, encompassing
global best practices, across plant location and offices to keep the employees and service
providers safe.
Key Business Updates:
• As on 31st March 2022, the total order book of the company for
tubes and pipes stands at 1,692 MT amounting to Rs.96 crores and for Stainless Steel Bars
stands at 1,117 MT amounting to Rs.29 crores.
• The Company restarted its Steel Melting (SMS plant) operations
during Q3FY22. This has been ramped up quickly and also helped mitigate challenges being
faced in Raw Material procurement and hurdles in logistics.
• In addition, WSSL continues to reap benefits out of
countrys ‘Make in India indigenisation projects with several Private and
pSu companies. Increasingly, customers are preferring to source locally which is
favourable for the company.
• The Company has dispatched material for strategic sectors during
the year with the help of its unique integrated steel manufacturing facilities and expects
repeat orders in the near future.
• The Company has been continuously gaining new customer
approvals. During the year, WSSL received approvals from customers in Oil & Gas,
Fertilizers, Aerospace and Defence amongst others. It has also added new customers in the
domestic market for critical equipment like power plant boilers and oil refinery heat
exchangers. Notably, it also gained a prestigious approval from an international customer
for one of the largest LNG project ever to be undertaken.
• The Company has entered into several niche market segments
successfully this year. It executed its first lot of Heat Exchanger tubes in SS 317L
grade. The company developed and booked its first order of square tubing for nuclear
application, received an order for a critical application of high pressure feed water
heater for U-bend tubes and delivered tubes for the countrys flagship defence
project in aerospace. WSSL executed production of Super Duplex SS Mother Hollows for Heat
Exchanger tube supply to domestic client and 6" Duplex Pipes for an export order.
• The company expects its performance to further improve on the
back of a healthy order book and the several management initiatives undertaken to improve
performance.
A. SEGMENT WISE AND PRODUCT WISE PERFORMANCE
Product wise performance is given in Directors Report under the
heading ‘Operations.
B. FUTURISTIC STATEMENT
Companys performance as expressed or implied could differ
materially due to economic conditions affecting demand/supply and price condition in the
domestic & overseas markets, changes in the Government regulations, tax laws &
other incidental factors.
C. RISKS & CONCERNS
Risk is integral to any business. The Company has evolved a proper
governance to identify and access potential risks and also formulate appropriate
mitigation plans as under -
• Rising input cost - Identifying alternative sources for
procurement of key raw material in cost competitive manner dividing the exposure into
various kinds of raw materials which are also interchangeable.
• Labour availability - In order to retain the labour company has
taken initiative of providing training on skill development and also introduced
performance linked incentive schemes.
• Competition - To minimize the threat of competition the Company
is regularly identifying the niche/high value segment and working aggressively with the
customer centric approach. Various new approvals have been obtained and more are underway.
• Trade barriers - Wherever the Company finds surging of cheaper
imports in the country, the matter will be timely taken through business associations with
appropriate authorities in the Government for suitable protection / remedial measures. The
Company is a co-petitioner for anti-dumping duty investigation in relation to dumping of
SS seamless pipes and tubes from China.
D. INTERNAL CONTROL SYSTEM
The internal control system encompasses the policies, processes, tasks,
behaviors and other aspects of our company that taken together, facilitate effective and
efficient operations.
The Company employs adequate and effective system for internal control
that provide for:
i) Security of the asset
ii) Efficient management information system
iii) Compliance with all laws and regulations
iv) Compliance with all standard system and quality standards.
E. INDUSTRIAL RELATIONS & HUMAN RESOURCES
Our company is maintaining the good industrial relationship. Company
recognizes that human capital is its most important asset and due care is taken by various
HR initiatives at company level like employee development, talent pool program etc.
F. DISCUSSION & FINANCIAL PERFORMANCE
Operational performance vis a vis financial performance of the Company
is discussed in details in Directors Report.
G. DISCUSSION ON CHANGES IN KEY FINANCIAL RATIOS
| Ratio |
FY22 |
FY21 |
Remarks |
| Debtors Turnover |
12.22 |
7.02 |
The turnover of the company has doubled
from last year while the Debtors have grown only by 50%. The Debtors Turnover ratio has
improved due to better realisation, increase in Export sales and regular supply with
repeat orders. |
| Inventory Turnover |
2.22 |
1.96 |
There has been significant increase in Raw
Material and WIP due to increase in production capacity and for fulfilment of new sales
order. This is like to stabilise with continuous production and sales going forward. |
| Interest Coverage Ratio |
(0.81) |
(2.86) |
The Interest has been in similar levels,
except for an Ind As adjustment of Rs 553 lakhs, as compared to previous year though the
sales and working capital requirement has doubled. With reduction in Operating losses the
PBIT has improved resulting in improved ratio from previous year |
| Ratio |
FY22 |
FY21 |
Remarks |
| Current Ratio |
1.80 |
1.58 |
Current Ratio improved in FY22 due to
significant increase in current assets due to increase in Business operations compared to
last year. |
| Debt Equity Ratio |
38.85 |
4.62 |
Due to increase in loans availed for
augmentation of working capital requirement to meet the enhanced business activity. |
| Operating Profit Margin (%) |
0.45% |
(20.38%) |
Improvement in EBIT has led to a change in
the ratio |
| Net Profit Margin (%) |
(18.85)% |
99.76% |
In FY22 it is net loss as against net
profit in FY21. FY 21 had exceptional income due to write back of Rs. 12726 Lakhs
Preference Share Premium, else it would have been a loss. Excluding exceptional income
ratio would have been (47.44%) & (18.85%) in FY21 & FY22 respectively. |
| Return on Net Worth (ROE) |
(51.41)% |
111.72% |
In FY21, PAT was higher due to exceptional
income (mainly write back of Rs 12726 Lakhs Pref Share Premium). Excluding exceptional
income in both years, ratio would have been -53.24% & -51.41% in FY21 & FY22
respectively. |
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