s a i l Management discussions

EAF based steel production facilities to reduce CO2

China also plans to raise the proportion of EAF steel to 20% by 2030 from 11% in 2021. Further, many European steel producers have started to set up Green Hydrogen based DRI production facilities, to be used in EAF to produce steel and various European Governments are providing financial aid for setting up of such facilities. In USA, few companies have been successful in using innovative methods to produce iron from iron ore using electricity. EU plans to set up an EU Carbon Border Adjustment Mechanism (CBAM) from 1^st October, 2023, to _ght climate change and prevent carbon leakage. Under this framework, taxes would be imposed from the year 2026 on embedded carbon imports from six sectors, including steel.

Outlook for Steel Industry

The recovery momentum of world economy after the pandemic has been affected mainly by Chinas economic deceleration, persisting inflation, monetary tightening by US and continued supply disruptions due to on-going Russia-Ukraine war. The World Steel Association (WSA) has forecast 2.3% growth in steel demand reaching to 1,822.3 MT in 2023 and shall see a further demand growth of 1.7% in 2024 to reach a level of 1,854.0 MT. Manufacturing is expected to lead the recovery, but high interest rates will continue to weigh on steel demand. In 2024, growth is expected to accelerate in most regions, but deceleration is expected in China due to its anticipated 0% growth, overshadowing the improved demand in the rest of the world. However, persistent inflation and high-interest rates in most economies will limit the recovery of steel demand in 2023, despite positive factors like Chinas reopening, Europes resilience in the face of the energy crisis and the easing of supply chain bottlenecks. As Chinas population declines and moves to consumption-driven growth, its contribution to global steel demand growth will lessen. Future global steel demand growth will rely on reduced drivers, primarily concentrated in Asia. Investments in decarbonisation and dynamic emerging economies will increasingly drive positive momentum for global steel demand, even as Chinas contribution to global growth diminishes.

Indian Steel Scenario

As per World Steel Associations April, 2023 Short Range Outlook, after growth of 8.2% in 2022, Indias Finished Steel Consumption is expected to show healthy growth of 7.3% and 6.2% in 2023 and 2024 respectively. India remained a bright spot in the Global Steel Industry in 2022. Having managed inflation well, the Indian economy is on a healthy growth track, with a rising share of investment in GDP, supplemented thanks to strong Government spending on infrastructure. The Real Estate sector is also expected to grow, backed by affordable housing projects and urban demand. Private investment is improving on the back of the Production Linked Investment (PLI) Schemes. Following the initial spurt in domestic steel prices, due to onset of Ukraine war in February, 2022, prices started coming down from April, 2022 onwards, to mirror falling international steel prices and weakening raw material prices. Imposition of Export Duties on Finished Steel by the Government of India in May, 2022, further accelerated the price decline. Consequently, in November, 2022, Indias Finished Steel Exports were only 0.34 MT, down by 53.1% over the previous year. As a result, many Indian mills opted for maintenance shutdowns due to non-remunerative steel prices. Such curtailed exports and falling steel prices, lead to the domestic steel majors recording huge financial losses in Q3 of FY 2022-23. However, domestic steel prices started rising from December onwards, supported by rising international steel prices and better performance by domestic end-user industries. While Indian Finished Steel Exports during the Financial Year 2022-23 were 6.71 MT, down by 50.2% as compared to previous financial year, Imports were up by 29.0% to 6.02 MT. Indias Finished Steel Consumption during the year was 119.17 MT, up by 12.7% as compared to CPLY. Meanwhile domestic steel producers stayed on course to expand their production capacities. To promote production of Specialty Steel in India, the Ministry of Steel signed 57 MoUs with 27 companies under the Production Linked Incentive (PLI) scheme, which is expected to generate an investment of about Rs. 30,000 crore and create additional capacity of about 25 MT of specialty steel in next five years.

In view of the rising concerns worldwide over the technology in use, Government of India has also started promoting Green Steel. The Centre plans to support Green Hydrogen based DRI projects as well as push primary steel producers to increase use of scrap in steel production.

B. RISKS AND CONCERNS

• Impact of MMDR Amendment Act, 2021 on Non- operational Mining Leases

The Minerals (Development and Regulation) Amendment Act (The Act) which came into force on 28^th March, 2021, inter-alia, that provides in case the holder of a mining lease fails to undertake production and dispatch within a period of two years after the execution of mining lease or discontinues the production and dispatch for a period of two years, the lease shall lapse on the expiry of the period of two years from the date of execution of mining lease or discontinuance of the production and dispatch, as the case may be. On account of likely impact of the Act on non-operational mining leases of SAIL and its subsidiary company, the matter was taken up with the Ministry of Steel for expediting early executions of the mining leases of the Company on or before March, 2022. On intervention of the Ministry of Steel, required applications were submitted for each non-operational mining lease with the respective State Governments in March/April, 2022. During FY 2022-23, 6.9 Sq Mile of Bolani Mines was made operational on 16^th March, 2023 with the commencement of Manganese mining operations. The lease period of the two non-operational iron ore mining leases of Kalta Iron Ore Mines has been extended by the Odisha Government and their supplementary lease deed will be executed on grant of statutory clearances. In the matter of non–operational Kalwar–Nagur Iron Ore mining lease of BSP, the Ministry of Mines, vide order dated 7^th March, 2023 has directed the Government of Chhattisgarh to extend the mining lease of Kalwar Mines up to 31^st March, 2025 for starting the production and dispatch from the Mine, for which efforts are being made.

• Impact on Chiria Iron Ore Leases being in No-Mining Zone

Chiria Mine leases (except already broken up area in Dhobil lease) have been proposed to be "No Mining Zone" in Management Plan for Sustainable Mining (MPSM) in Saranda forest, approved by MoEFCC. Out of the available iron ore resource of about 3.7 billion tonnes (BT) with SAIL, about 42% i.e. 1.6 BT is available at a single location viz. the Chiria Mine in Saranda forest in Jharkhand, which is not only critical for raw material security for future expansion but will also be required to meet iron ore requirement of currently operating facilities, in view of depleting resources at SAILs other operating mines. On intervention of the Ministry of Steel in July, 2022 to allow mining in already broken up area of the Chiria leases which have been with SAIL for a long time, along with resumption of Reassessment Study on MPSM to be carried out concurrently, MoEFCC intimated that there is no need for any Reassessment Study, and the same was informed to the Department for Promotion of Industry and Trade (DPIIT). DPIIT, in February, 2023 has advised the Ministry of Steel to take up the matter at an appropriate inter-ministerial forum.

• Revocation of the Prospecting License (PL) Grant Order for Thakurani Block-A by the Government of Odisha

Government of Odisha vide order dated 19^th September, 2022 while invoking the MMDR Amendment Act, 2021, declared the Gazette Notification dated 4^th February, 2004 as lapsed and revoked the Prospecting License (PL) Grant Order dated 24^th February, 2021 for iron ore over an area of 268.221 ha in Thakurani Mine. The matter was taken up in November, 2022 with the Government of Odisha for grant of a composite license including the mining lease. However, due to delay in getting the response, a writ petition was filed before the Honble High Court of Orissa for directing the Government of Odisha to consider the application. Subsequently, the Honble High Court of Orissa vide Order dated 17^th March, 2023 directed the Government of Odisha to consider SAILs application and pass appropriate order within a period of three months from the date of production of a certified copy of this order. Consequently, in March, 2023, enclosing the certified copy of the Honble Court Order, Government of Odisha was requested to consider the SAILs application as per the direction of Honble High Court of Orissa order. Decision of the Government of Odisha is awaited.

• Delay in Grant of Stage-II Forest Clearance by MoEFCC

Stage-I Forest Clearance (FC) for development of new mining pits at South and Central blocks of Kiriburu and Meghahatuburu Mines was granted in October, 2010 and Compliance Report was forwarded by the Government of Jharkhand for approval of MoEFCC in April, 2016. However, approval could not be obtained due to initial link up of the grant of FC with the finalisation of Management Plan for Sustainable Mining (MPSM) for Saranda Forest and subsequently, on account of non-suitability of identified Compensatory A_orestation land. During the FY 2022-23, FC proposal was considered by the Forest Advisory Committee in July, 2022 and January, 2023 and consequently, MoEFCC in February, 2023, asked MoEFCC, Ranchi, inter-alia, to explore the possibility of handing over of equivalent reclaimed area by the user agency from other mines in the State in consultation with State Government. Compliance report forwarded to MoEFCC, New Delhi on 11^th May, 2023 by the Jharkhand Government with a copy to IRO, MoEFCC, Ranchi for further necessary action. The report from MoEFCC, Ranchi is awaited.

• Delay in Grant of Clearance for Selling Iron Ore from Jharkhand Mines

On account of the likely shortage of iron ore in the Country, Ministry of Mines, Government of India vide Order dated 16^th September, 2019 has entrusted SAIL with the responsibility to make available in the open market, 25 percent of its total mineral production of the previous year. Further, in another separate Order dated 16^th September, 2019, Ministry of Mines, has allowed SAIL to dispose of the old stock of 70 MT of low grade iron fines and ores (including slime) lying dumped across different captive mines of the Company. In this regard, efforts were being made in obtaining approval of respective State Governments and other concerned statutory authorities. However, SAIL has not received the necessary approvals from Jharkhand State Government. Accordingly, only 0.58 million tonnes of iron ore was made available in the open market from SAIL mines in Odisha during FY 2022-23. E_orts are being made for getting clearances from the Jharkhand State Government to commence selling of iron ore from iron ore mines of SAIL in Jharkhand.

• Delay in Allocation of Suitable Coking Coal Blocks in lieu of Surrendered Sitanala and Parbatpur Coking Coal Blocks

In order to reduce its dependability on imported coking coal, with the intervention of Ministry of Steel, two Coking Coal blocks namely Sitanala and Parbatpur were allotted to SAIL through allotment route in 2015 and 2016 respectively. However, due to decrease in the Coal Mining Lease areas for both the coal blocks, SAIL Board approved the return of the Parbatpur and Sitanala Coal Blocks to Ministry of Coal (MoC). Accordingly, Nominated Authority, MoC, was intimated about returning of Parbatpur and Sitanala Coal Blocks, with a request to refund the amount paid including Bank Guarantee submitted by SAIL at the time of allocation of blocks. SAIL had also requested MoC for allotment of potential coking Coal Blocks in lieu of Parbatpur and Sitanala Coal Blocks in line with NITI Aayogs recommendation. Meanwhile, Ministry of Coal terminated the allocations of both the Coal Blocks i.e. Sitanala and Parbatpur and advised concerned banks to invoke the Bank Guarantees (BGs). In both the matters, SAIL has preferred Writ Petitions before the Honble High Court of Delhi to challenge the respective Orders. In the matter of Sitanala Coal Block, Honble Delhi High Court declined to pass any interim order. However, Honble Court clarified that if the petitioner prevails in this petition, the consequential direction for refund of the amount collected by invoking the BG will be passed. However, in the matter of Parbatpur Coal Block, Honble Delhi High Court directed for maintaining status quo in respect of the BG till the next date of hearing. In both the cases, the matter is sub-judice.

• Inadequate Supply of Raw Material

At Bhilai Steel Plant, the iron ore production is being met from the Rajhara Group of Iron Ore Mines. Due to exhaustion of iron ore from top benches, mining operations are being done in lower benches. As an alternative, mining of iron ore is to be started from the Rowghat Mines. Since there is delay in the Rowghat project, contract has been awarded for interim mining in Anjrel Block. Approach road has been constructed but due to agitation by the local people, the dispatch of iron ore is through extended route. The district administration is resolving the issue of agitation by the locals. Periodic desilting of Hitkasa tailing dam is also in progress. Further, for mining leases of Kalwar-Nagur and Pandardalli Rajhara Pahar Lease, SAIL has filed review petition in Chhattisgarh High Court.

• Possible Shortage of Water Supply may lead to Disruption of Operations at IISCO Steel Plant.

Presently the water supply is being managed through newly constructed intake water channel at riverbed and the job is ongoing. Construction of anicut/barrage/weir, etc. by Central Water & Power Research Station (CWPRS) for a long-term solution to ensure sufficient water availability shall be taken up only after receipt of recommendation by CWPRS. A contract proposal has been initiated for hydrographic survey of Damodar river. Further, new water pumping stations at upstream of river Damodar along with feed line to the Plant Reservoir is being envisaged in the upcoming 4.2 MTPA expansion plan of IISCO Steel Plant.

• Challenges to Ramp up Production of Iron Ore

The matter is being taken up with the concerned authorities for obtaining forest clearances for starting mining activities at some of the mines. In addition to this, actions are being taken to expedite the mining process at Rowghat and matter is being taken up with Indian Railways for expansion of railway sidings, wherever required.

• Non-availability of Spare Parts/Critical Spares due to restriction on Import from China

The matter is being pursued with the Government of India for procurement through Global Tender Enquiry (GTE) for items having no indigenous availability and valued upto

Rs. 200 crore. Further, in order to encourage indigenization, a list of items for which GTEs were issued have been put up on the SAIL Tender website to enable interested indigenous vendors to express their interest in supplying these items.

• Volatility in Steel Prices

As there is lower than expected demand for steel during part of the year, continuous efforts are made to improve upon sales in freight advantageous zones. Further, committed sales under MoU and other order booking schemes through Tier-1 and Tier-2 distributorships mitigate the risk of low demand. To reduce the dependence of sales on lower end of the product value chain, focus is on increasing targeted sales of downstream and ready to use products to diversify the segment basket under Tier-1 distribution channel. Segment specific approach is being adopted for products being difficult to market and seminars and workshops are being conducted to bring awareness about the products. To mitigate the threat of increase in low value imports from China and other leading countries leading to imbalance in demand and supply, Government intervention is being sought through industry associations for continuing tari_ based redressal for discouraging low value imports.

• Sti_ Competition in International Market in respect of specific Product Mix may impact plans for Revenue generation and Growth from Exports.

As the prices in international market are subject to wide fluctuations, focus is on neighbouring markets in SAARC and Middle East viz. Nepal, Bangladesh, Sri Lanka and Saudi Arabia. E_orts are being made for diversification of export product basket with inclusion of more value added products and products manufactured from new facilities at ISP, RSP and DSP.

• Disruption in Supply of Imported Coking Coal.

There is a risk of interruption in supply of imported coking coal as there are limited number of vendors and bulk supply from one geographical area. Action is being taken to increase vendor base through EOI route and increase coal basket by exploring new coal producing countries from different geographies like Russia, Mongolia, etc.

• Brand Misuse

To mitigate the misuse of our brands, existing brand names and their registry status is reviewed. Action is being taken for extension of registration of all brands except SAIL TIN, which is not being produced any more. Last registered brand was SAIL SeQR. Updated list of conversion agents, wet leasing agents and SPUs is available on the website of the Company. Further, major brands are properly displayed on SAILs website and other media avenues. In addition to this, product brochures for major products have been developed and are displayed at appropriate places and Brand Manual for Tier-1 & Tier-2 retail models is also in use.

C. SWOT ANALYSIS

D. OUTLOOK

International Monetary Fund (IMF) in its April 23 Report has warned that its outlook for global economic growth over the next five years is the weakest in more than three decades. As higher interest rates continue, the world economy will expand by about 3% over the next half decade, which is lowest medium-term growth forecast since 1990. In its July, 2023 World Economic Outlook report, IMF predicts the global economy will grow by 3.0% in 2023 and 2024. As compared to April23 outlook, the growth rate has been upgraded by 0.2% for 2023, with no change for 2024. However, balance of risks to global growth remains tilted to downside. World Steel Association forecasts that in 2023, world steel demand will see a recovery of just 1.0% to reach 1,814.7 MT. High inflation, monetary tightening and Chinas slowdown contributed to a difficult 2022, but infrastructure demand is expected to lift 2023 steel demand slightly. With regard to Indian economy, IMF has raised its economic growth forecast for CY 2023 by 0.2% to 6.1%, as compared to April23 outlook with no change for 2024, reflecting momentum from stronger than expected growth in 4^th quarter of 2022 as a result of stronger domestic investment. Reserve Bank of India (RBI) stopped its rate-hike cycle by retaining the key lending rate at 6.5%. RBI in its Annual Report FY 23 has said that Indias growth momentum is likely to sustain in 2023-24 in an atmosphere of easing inflationary pressures, sound macroeconomic policies, softer commodity prices, a robust financial sector, a healthy corporate sector, continued fiscal policy thrust on quality of government expenditure, and new growth opportunities stemming from global realignment of supply chains. On account of global turmoil, Indias merchandise exports in FY22-23 were US$ 447.5 bn., up by just 6% as compared to previous year. Withdrawal of export duties on finished steel by Government of India (GoI) has given fresh impetus to Indias steel exports. GoIs strong emphasis on infrastructure development in FY23-24 budget is likely to boost domestic steel consumption. Current downward trend in international coking coal prices is likely to improve the margins of domestic steel companies. RBI has paused raising the interest rates, which will also support domestic steel demand. Indias strengthening industrial production is a good sign for domestic steel consumption. However, volatile international situation due to continued Ukraine-Russia conflict is a cause of concern.

1. FINANCIAL OVERVIEW OF SAIL

SAIL achieved its best ever sales turnover of Rs. 1,03,767.54 crore during the Financial Year (FY) 2022-23, which was higher by 1% as compared to corresponding period of last year (CPLY) turnover of Rs. 1,02,805.13 crore. During the FY 2022-23, the Profit before Tax and after Tax were Rs. 2,636.91 crore and Rs. 1,903.07 crore respectively as compared to CPLY Profit before Tax of Rs. 16,038.72 crore and Profit after Tax of

Rs. 12,015.04 crore. The comparative performance of major

financial parameters during the FYs 2022-23 and 2021-22 is given below: (Rs. crore)

During the FY 2022-23 the decline in the profitability as compared to CPLY is on account of higher input cost, mainly for imported coal prices, increase in stores and spares consumption, repairs & maintenance expenses, increased purchasedpowerrates,conversioncharges,securityexpenses, higher usage of raw materials like Iron ore, limestone and other ferro-alloys, higher interest charges & depreciation, loss arising due to foreign exchange fluctuation, etc. However, the decline in profit has been partially offset by increased production, improved NSR, decrease in salaries & wages, better techno-economic parameters like improvement in BF Productivity and Coke Rate, lower imported coal in blend, etc., decrease in Royalty expenses, higher stock valuation rate, higher dividend income, etc.

As compared to CPLY, while there has been an increase in turnover, there has also been an increase in debtors, leading to an increase in the number of days in Debtors Turnover Ratio. There has been a reduction in the inventory levels during the year. The increase in Current Ratio is mainly on account of increase in inventory levels and debtors. Increase in borrowings has led to higher debt equity ratio in FY 2022-23. Reduction in Interest Coverage Ratio is mainly due to lower EBIT and higher interest and finance charges.

1.1 Cost Control Measures

• Renewed focus on innovation and productivity, through continuous process improvement and R&D efforts, resulted in cost reduction, improvement in productivity & quality and value addition.

• Continuous monitoring of procurement of high value items, maximizing usage of available indigenous coal in the blend, maximising use of in-house engineering shops, sale of idle assets, optimising procurement through centrally purchased items, including negotiations with suppliers for price reduction, were pursued throughout the financial year 2022-23.

• Coal blend optimization, improvement in vendor base of purchased coal by adding low cost coals from Russia

& Indonesia, enhanced usage of indigenous coals and improvement in operational parameters such as Coke Rate, Coal Dust Injection and BF Productivity, Concast Production hand Usage of Pellets in prepared burden at Blast Furnaces have attributed to cost savings during the year.

1.2 Marketing

Your Company has taken a number of initiatives during the Financial Year 2022-23 aimed at sustaining and consolidating its position as the leading steel producer of the Country. Further, with strategic and focused approach in areas of product development, branding, niche marketing, customer servicing, digitalization, etc. SAIL is committed to aim for continual improvement for prosperity in business. In this regard, marketing of new products in FY 2022-23, include the following:

• New grade of steel "Duplex Stainless Steel" developed by Salem Steel Plant, an import substitution item, has superior corrosion resistance with higher strength and formability.

• Your Company has enhanced its efforts towards new grades of special quality at IISCO Steel Plant like AWS A5.17 EM12K, 5.5 mm and AWS A5.23 EA2 (Mo bearing) at Wire Rod Mill for welding applications.

• At Durgapur Steel Plant, Ultra Low Nb Structural (E-350 BR), IS 2062 E410 C and Channel 300 have been rolled out.

• Bhilai Steel Plant has developed Grades IS 7887 CAQ Gr1 and EWNR Wire Rods 5.5/6/7mm at its Wire Rod Mill.

• Grades like HSFQ 450 and MC-30/40/55 have been developed in Hot Strip Mill-II at Rourkela Steel Plant and Grade EN 10025-5/ IS 11587 HR Coils at Hot Strip Mill of Bokaro Steel Plant.

Besides the usual efforts to enhance sales, your Company has taken a number of initiatives to improve sales and market presence which, inter-alia, include the following:

• Your Company has the largest marketing network among all steel producers in the Country. As on 31^st March, 2023, SAILs functional network of marketing offices consists of 37 Branch Sales Offices, 5 Customer Contact Offices, 18 Departmental Warehouses, 17 functional Consignment Agency yards and 2 Consignment Handling Agency yards. Marketing efforts are further supplemented through SAILs Retail Channel that reaches the products of mass consumption to remote corners of India.

• SAIL has an extensive dealership network comprising of more than 4700 dealers spread across the Country. With 42 Distributors already in place in the 2-tier distribution network as on 31^st March, 2023, this channel of retail sales is being further strengthened. Around 6.57 lakh tonnes of TMT were supplied through the 2-Tier Distribution network during FY 2022-23. SAIL also has Tier-I distributor system to improve the system of servicing demand of small consumers, B2B industrial segments and to provide single window servicing of small customers including value added services and has 38 distributors as on 31^st March, 2023. This huge network spread across the Country helps in meeting the requirements of a wide range of customers spread through length and breadth of the Country. Out of total sales of 12.7 lakh tonnes to retail segment during April to March, 2023, sales through Tier-2 Distributors and Dealers was 8.3 lakh tonne consisting of TMT & GP. Sales through Tier-1 distributors during the Financial Year 2022-23 was 4.4 lakh tonne.

• In order to help build awareness and acceptance of steel usage in rural areas, SAIL has an ongoing rural outreach programme "Gaon Ki Ore". Under the campaign, 363 workshops have been conducted during the FY 2022-23 across the Country with focus on small consumers.

• Your Company has launched its reinforcement bar brand "SAIL-SeQR" in 2019-20. This brand is being promoted as better quality steel for safer homes. This brand is focused on enhancing retail presence with special emphasis on rural penetration. During the FY 2022-23, the Company has sold about 5.6 lakh tonnes of "SAIL SeQR" reinforcement bars. During the coming years, in addition to contribution to top line value, the brand "SAIL SeQR" is expected to not only meet the quality expectation of the Retail Sector but also to drive brand presence of the Company.

• Carrying forward the digitization, AI based Chatbot ‘SAIL SARATHI has been introduced for facilitating easier navigation & information accessibility for customers and visitors. The operations and supply chain has rolled out various Industry 4.0 initiatives. Unmanned weighbridge system and automated entry / exit system has been installed/ commissioned at several warehouses. Integrated Vehicle Tracking System (IVTS) has been implemented in some warehouses. With 680 numbers of e-transactions taking place through SAIL on-line portal ‘SAIL Suraksha, the small customers are showing their interest and confidence in the e-portal, having tag line ‘Ab Nishchint ho Jayein, for buying of SAIL SeQR TMT Bars.

• Your Company has continued the thrust on the "NEX" brand of structurals, assuring improved performance. E_orts have been made to popularise usage of steel in designing in general and increase usage of "NEX" brand of structural through virtual meetings with customers, webinars and participated in virtual workshop sessions in-house and also by Structural Designers, Architects, etc. In addition to this, Tier I Distributors of Structurals are promoting NEX brand through advertisements/ hoardings, etc.

• During the FY 2022-23, your Company has supplied steel to number of Iconic Structures and Projects of National Importance. The major projects include- Central Vistas Delhi, High Speed Rail Project (Bullet Train) from Ahmedabad to Mumbai, Regional Rapid Transport

System from Delhi to Meerut, Delhi Mumbai Expressway, HPCL Rajasthan Refinery Limited at Barmer, Indias longest river road bridge of 19 km at Dhubri to Foolbari over river Brahmaputra, Reconstruction / Rehabilitation of the longest steel bridge in India called "Mahatma Gandhi Setu" or "Ganga Setu" over river Ganges in Bihar connecting Patna in South to Hajipur in the north, Samriddhi Expressway, Kaleshwaram Lift Irrigation Project across Telangana and Stainless Steel for Vande Bharat coaches. SAIL was also one of the major suppliers of steel to Metro Rail Projects across the Country.

• Some other initiatives undertaken by your Company include launching of Incentivisation Scheme for MSMEs to promote Local Industries based in and around its Integrated Steel Plants, wherein 144 MSMEs have joined the SAIL scheme. Supplies to these MSMEs have been approx. 91,000 tonnes in Financial Year 2022-23, a growth of about 50% over the previous year.

1.3 Funds Management

In a challenging global environment, your Company despite its prudent and judicious fund management, had to resort to additional borrowings during the FY. The borrowings has increased from Rs. 17,284 crore as on 31^st March, 2022 to Rs. 30,773 crore as on 31^st March, 2023 in line with INDAS. Consequently, the debt equity ratio of the Company has also increased to 0.59:1 as on 31^st March, 2023 as compared to 0.33:1 in the previous year. Further, the interest and finance charges on operation account during the FY at

Rs. 2,037 crore are higher as compared to Rs. 1,698 crore in CPLY due to increase in borrowings as well as interest rates. The Net-worth of the Company has increased marginally from

Rs. 52,017 crore as on 31^st March, 2022 to Rs. 52,139 crore as on 31^st March, 2023. M/s. CARE Ratings, M/s. India Ratings and M/s. Brickwork Ratings, RBI approved credit rating agencies, assigned ‘CARE AA- Outlook: Stable, ‘India Ratings AA- Outlook: Stable and ‘BWR AA Outlook: Stable ratings respectively for SAILs long- term borrowing programme. The trend of borrowings and Net-worth is given as under:

1.4 Contribution to SAIL Gratuity Trust

As per the settlement made towards payment of Gratuity by the Company, an amount of Rs. 532 crore has been funded by SAIL Gratuity Trust to the Company. The fund size has been at Rs. 5,808.81 crore as on 31^st March, 2023, as per the contributions made by the Company to SAIL Gratuity Trust.

2.1 Revenue from Operations a) Sale of Products

b) Trend of Domestic Sales and Exports

Welded Pipes, Spiral Welded Pipes and Silicon Steel Sheets formed part of the Companys rich product-mix. The product category-wise sales turnover during the FY 2022-23 is given as under:

(Rs. crore)

Revenue from sale of services decreased by about Rs. 4.16 crore during the current year. d) Other Operating Revenues (Rs. crore)

Other operating revenues increased by about Rs. 15.79 crore over previous year mainly due to higher recoveries from social amenities and better realization from sale of sundries.

(Rs. crore)

Other income increased by about Rs. 312.81 crore over previous year primarily on account of higher interest income from customers and dividend from investments.

(Rs. crore)

During the FY 2022-23, there has been substantial increase in Raw Materials cost on account of increase in input prices, particularly of imported coal and higher usage of raw materials like Iron Ore, Limestone and other ferro-alloys. During the year, the Employees Remuneration & Benefits have decreased mainly on account of natural separation. The increase in borrowings, has led to higher finance cost.

Increase in depreciation has been mainly due to capitalization of new facilities. The increase in Other Expenses was on account of higher consumption of stores & spares, power & fuel, repairs & maintenance, freight outward, etc. due to higher production volume.

2.4 Contribution to Exchequer

During the Financial Year 2022-23, SAIL contributed Rs. 23,625 crore to the national exchequer by way of payment of taxes and duties to various government agencies and dividend to Government of India.

(Rs. crore)

(Rs. crore)

• The capital work-in-progress has increased by Rs. 181 crore on account of expenditure incurred on various capital schemes in Steel Plants. Further, Right to use Assets includes an addition of Rs. 1,480 crore under Finance Lease Agreement with M/s. NTPC SAIL Power Company Limited, a Joint Venture between NTPC Limited and SAIL.

• Other Non-Current Assets increased by Rs. 178 crore.

• The inventories increased by Rs. 8,186 crore mainly on account of increase in raw materials inventory by Rs. 2,608 crores, _ nished/ semi-_ finished products inventory by

Rs. 5,258 crore, and stores & spares inventory by Rs. 320 crore.

• Increase in trade receivables was by Rs. 626 crore.

• Other Current Assets increased by Rs. 643 crore.

(Rs. crore)

• Short term borrowings have increased on account of higher input cost mainly for imported coal, increase in purchase power rates and loss on account of foreign exchange _ fluctuation.

3. PLANT-WISE FINANCIAL PERFORMANCE (PROFIT BEFORE TAX) (Rs. crore)

F. MATERIALS MANAGEMENT

A number of initiatives were taken to reduce cost of inputs and improve the performance of materials management, some of which are summarized as under:

• Procurement on GeM Portal: In the Financial Year 2022- 23, SAIL continued its thrust on procurement of Goods and Services through Government e-Marketplace (GeM), with a special focus on procurement of Services, which enabled the Company to achieve 2^nd position amongst CPSEs on GeM with a total procurement value of

Rs. 9,230.89 crore, including Rs. 154.47 crore of Services. While the total Goods & Services registered a growth of about 100%, Services were higher by 170% over the previous _ financial year.

• SAILs procurement from MSEs in FY 2022-23 is placed in the table below.

(Rs. crore)

• SAIL is continuously making endeavors to develop new MSE vendors and provide support to local MSEs by mentoring, training, handholding and providing technical support to such MSEs in their chosen areas of functioning. In this regard, SAIL Plants and Units conducted 24 Vendor Development Programs during FY 2022-23. Vendor Development Programs were also conducted especially for SC/ST and Women MSME vendors, to inform them about the opportunities, item requirement and vendor registration procedures in the organization.

G. FOREIGN EXCHANGE CONSERVATION

SAIL majorly dependent on imported coal, its imports are large as compared to the exports, and therefore, the foreign exchange has a signifi cant impact on the Company in terms of the foreign exchange outgo, with consequential impact on the Countrys foreign exchange reserves.

It has been the Companys endeavour to minimize the imports through domestic substitution wherever possible, and also emphasise on exports. One of the major raw materials which SAIL has been importing is Coking Coal. E_ orts are being made to use a blended coal mix with increased indigenous coal, which would lead to reducing the dependence on

Imported Coking Coal and reduce the outflow of precious foreign currency. Further, measures are being taken to expand the basket/ pool of suppliers for imported inputs/raw materials. Your Company has adhered to the Government of India policy initiative restraining Global tender for projects up to Rs. 200 crore, which is expected to provide the domestic participants an opportunity on the one hand, and on the other hand, result in conserving of Foreign Currency. In addition to this, the Company has taken up various initiatives to indigenise the procurement of raw materials and other inputs to the extent they become available to the Company at the commercially acceptable prices/costs and commensurate with the requirements of the technologies adopted by the Company.

AMR SCHEMES

Besides Modernisation and Expansion Projects, the Addition, Modi_cation & Replacement (AMR) Schemes have also been taken up which are required for managing the existing operations and primarily focusing on improving the current level of efficiency and output through incremental measures. AMR Schemes are undertaken for improving or revamping of existing facilities for sustaining the existing operations, balancing/de-bottlenecking of production processes, improving energy & other resource consumption/ services/ safety and environment. Replacement includes mostly replacing the existing Plant & Equipment which have completed their useful life with better performance Plant & Equipment. Accordingly, a number of AMR schemes costing around Rs. 5,100 crore were under implementation during Financial Year 2022-23 in different Plants of the Company, of which major schemes are as under:

• Setting up of Static Facility for Environmentally Sound Management of Polychlorinated Biphenyls, Installation of Electrostatic Precipitators as replacement of Multi- cyclones for Sinter Plant–II and Rebuilding of Coke Oven Battery No.7 & 8 at Bhilai Steel Plant, Modi_cation in washing circuit of CSW Plant of Dalli Mines.

• Installation of 4^th Stove in Blast Furnace No.4, Installation of NDT Facilities at Wheel & Axle Plant, Power Augmentation Scheme for new 1250 TPD BOO Oxygen Plant and Installation of New Gas Fired Boiler at Durgapur Steel Plant.

• Power evacuation at 220 kV from NSPCL to MSDS-IV, Re-building of Coke Oven Battery No.2 along with augmentation of Coke Handling & Gas Handling Facility, Up-gradation of E_uent Treatment Plant of CO & CCD with ZLD concept, Installation of 4^th Slab Caster along with Ladle Furnace at SMS-II and Installation of Treatment System-1 for Implementation of ZLD at Rourkela Steel Plant.

• New Sinter Plant, Rebuilding of Coke Oven Battery No.8, Development of alternate system for drawl of raw water from Damodar River for BSL & Township, Replacement of existing RRI (Route Relay Interlocking) System by SSI (Solid State Interlocking) System at SWS (Steel Works Station), Power supply arrangement for proposed 2000

TPD Oxygen, Installation of 2000 TPD Oxygen Plant on BOO Basis, Up-gradation of Automation System of HSM, Installation of 22 kV, 3^rd line between CTPS of DVC to MRS and Replacement of Turbine & Auxiliaries for Turbo Blower No.5 at Bokaro Steel Plant. Further, out of the above, following projects worth about

Rs. 500 crore have been completed during the year 2022-23:

• Setting up of Static facility for Environmentally Sound Management of Polychlorinated Biphenyls at BSP.

• Installation of Electrostatic Precipitators as replacement of Multi-cyclones for Sinter Plant–II at BSP.

• Power evacuation at 220 kV from NSPCL to MSDS-IV at RSP.

• Up-gradation of E_uent Treatment Plant of CO & CCD with ZLD concept at RSP.

• Rebuilding of Coke Oven Battery-8 at BSL.

I. IN-HOUSE DESIGN & ENGINEERING

Centre for Engineering & Technology (CET), the ISO 9001:2015 certified in-house design, engineering and consultancy unit of SAIL caters to prepare investment proposal for the projects required for sustenance, up gradation, modernization of Plants & Units of the Company with measures to reduce carbon footprint and compliance to environmental norms. CET provides consultancy for CAPEX projects across the complete value chain of steel business processes from Mines to Finishing. The major area of competency is in Mine Planning, Development and Capacity Expansion of Mines, Mineral Beneficiation, Loading and Transportation, Iron Ore Pelletisation, Material Handling in the area of Mining; Preparation of Investment Proposals and Design & Engineering Consultancy for Sinter Plants, Pellet Plants, Blast Furnaces with associated facilities like CDI injection, Stoves, Gas Cleaning Plant, Top Recovery Turbine, Slag Granulation Plant, etc. Steel Melting Shops with associated facilities like Ladle Furnaces, Casters and Thin Slab Casting and Direct Rolling (TSCDR) in the area of Iron & Steel making, Rolling Mills & Reheating Furnaces, Utilities projects like Zero Liquid Discharge Projects, Oxygen Plant, Power Plant, Pollution Control Projects, Refractory Plants, Automation Projects, Electrical Power Supply & Distribution Projects, Infrastructure Projects, and Balance of Plant & Equipment. CET has competitive edge of working in brown field projects in SAIL Plants and has also successfully carried out green field projects. CET has prepared the Pre-feasibility Report for brownfield expansion of BSL from 4.66 Mtpa of Crude Steel to 7.16 Mtpa of Crude Steel. CET is also the owners engineer for expansion of ISP, BSL and DSP.

The current major projects being handled by CET covers many brownfield as well as greenfield projects and include

• Engagement of MDO at Tasra, Taldih & Gua;

• Mineral beneficiation at Bhilai mines;

• Rebuilding of Coke Oven batteries in BSP, RSP, DSP & BSL;

• Installation of New Stamp Charged Coke Oven Battery

(_ first such Coke Oven Battery in SAIL) at RSP and ISP along with CDCP units;

• Installation of new stoves for Blast Furnaces in DSP, ISP and BSL;

• Revamping of subsystems of BF-3 at BSL;

• Installation of TRTs on BFs of RSP and BSP;

• Upgradation of Blast Furnace-5 & 3 at DSP;

• Upgradation of Blast Furnace-9 at BSP;

• Augmentation of CDI in BF-7 at BSP;

• New SMS-III at RSP, installation of 4^th caster in RSP;

• Converter shell changing in BSP;

• Ladle Furnace in BSP & ISP;

• New Bar Mill in DSP;

• Re_ nishing Mill Complex for rails in Universal Rail Mill of BSP and Head hardening facility for Rails in BSP;

• Normalizing facility for plates in New Plate Mill of RSP; New Product Testing Laboratory for NPM & HSM in RSP;

• Non-Destructive Testing facilities for wheels in DSP and Long Rails in BSP;

• Oxygen Plant at DSP, RSP and BSL;

• Zero Liquid Discharge (ZLD) projects of ISP, DSP and RSP;

• Power Evacuation Projects at DSP, RSP;

• Upgradation of Automation of Finishing Mills and Reheating Furnaces of Hot Strip Mill at BSL.

J RESEARCH & DEVELOPMENT

Research and Development Centre for Iron & Steel (RDCIS) of the Company is Indias premier research organization in the _ eld of ferrous metallurgy. Recognizing that development and assimilation of new technologies & process innovations are basic tenets for sustainable growth, SAIL has given thrust for its R&D e_ orts through its well equipped R&D Centre located at Ranchi. It has more than three hundred diagnostic equipment and adequate pilot facilities under _ fteen major laboratories. The Centre undertakes research projects encompassing the entire spectrum of iron & steel starting from raw materials to _ finished products. In the year 2022-23, 64 R&D projects were completed with substantial bene_ ts to the Company.

RDCIS also pursues pioneering work in the area of development of niche products as per market requirements aiming at superior performance based on application. During the year 2022-23, twelve products have been developed and some of the noteworthy products include Ultra low Nb added steel structurals , Plates & Hot Rolled Coils, IS 2062 E410C grade high strength structurals, Fire resistant steel structurals, API X70 line pipe grade Hot Rolled Steel Coils, HSFQ 450 grade HR Coils, Customised IS 513:2016 (Part

1) CR2D grade CR Coils for electrical stampings and high strength high GSM GP350+600GSM Galvanised Steel Coils. In its pursuit for excellence in various research _ elds, RDCIS enters into collaboration mode of research in specific areas with renowned research institutions and academia.

The e_ orts of RDCIS engineers and scientists have culminated in _ ling of 12 patents and 13 copyrights (in association with SAIL Plants) during 2022-23. As many as 63 technical papers were presented in seminars/symposia/ conferences and 65 papers were published in prestigious journals.

K. INTERNAL CONTROL SYSTEMS & THEIR ADEQUACY

The Company has adequate and e_ cient Internal Control Systems for achieving the following business objectives of the Company:

• E_ ciency of operations.

• Judicious utilization and protection of resources.

• Accuracy and promptness of _ financial reporting.

• Compliance with the laid down policies and procedures.

• Compliance with various laws and regulations.

In SAIL, Internal Audit is a multi-disciplinary function which reviews, evaluates and appraises various systems, procedures/ policies of the Company and suggests meaningful and useful improvements. It helps Management to accomplish its objectives by bringing a systematic and disciplined approach to improve the e_ ectiveness of risk management towards good corporate governance.

The Company is constantly taking measures to make the Internal Audit function more e_ ective. The Internal Audit is subject to overall control environment supervised by Board Level Audit Committee, providing independence to the Internal Audit function, emphasizing transparency in the systems and internal controls with appropriate skill- mix of internal audit personnel, etc. Audit Plan based on identifi cation of key-risk areas with thrust on system/process audits and benchmarking of the best practices followed in the Plants/Units, is made and approved by Audit Committee of the Board so as to achieve Cost Saving and Revenue Generation, Review of Inventory and Idle Assets, Systems Improvement, Compliance with Policies and Procedures, etc. Training and development of Internal Audit Executives, bringing awareness amongst auditees, converging on the pro-active role of internal audit remained other focus areas during the year. The Audit Committee in its meetings with the Companys Statutory Auditors also ascertains their views on the adequacy of internal control systems in the Company and their observations on _ financial reports.

The Internal Audit system is supplemented by well- documented Policies, Guidelines and Procedures and regular reviews are being carried out by the Internal Audit Department. The reports containing Signifi cant Audit Findings along with settlement/updated status are periodically submitted to the Management and Audit Committee of the Board.

CAUTIONARY STATEMENT

Certain statements in the Management Discussion and Analysis, describing the Companys objective, projections and estimates are forward looking statements and progressive within the meaning of applicable Laws and Regulations. Actual results may vary from those expressed or implied, depending upon economic conditions, Government Policies and other incidental factors.