The objective of this report is to convey the Managements perspective on the external environment and steel industry, as well as strategy, operating and financial performance, material developments in human resources and industrial relations, risks and opportunities, and internal control systems and their adequacy in the Company during the Financial Year 2023-24. This should be read in conjunction with the Companys financial statements, the schedules and notes thereto and other information included elsewhere in the Integrated Report. The Companys financial statements have been prepared in accordance with Indian Accounting Standards (Ind AS) complying with the requirements of the Companies Act, 2013, as amended and regulations issued by the Securities and Exchange Board of India (SEBI) from time to time.
Source: World Economic Outlook as per International Monetary Fund & Indian Economy Forecast as per Indian Brand Equity Foundation.
INSIGHTS ON GLOBAL ECONOMY
The global economy in 2023 and 2024 displayed several noteworthy trends and key figures. Several shocks have hit a world economy already weakened by the pandemic: higher-than-expected inflation worldwideespecially in the United States and major European economiestriggering tighter financial conditions; a worse-than-anticipated slowdown in China, reflecting COVID- 19 outbreaks and lockdowns; and further negative spillovers from the war in Ukraine.
Economic Growth: In 2024, the global economy rebounded from the pandemic, with a growth rate estimated at around 3.2%, according to the International Monetary Fund (IMF). While this marked a significant improvement from the recession of 2020, growth rates varied widely among countries, with advanced economies recovering faster than emerging markets. In 2025, global growth was expected to moderate to around 3.3%, reflecting Global recovery is steady but slow and differ by region.
Inflation: Inflation became a major concern during this period. Many countries experienced higher inflation rates due to a combination of supply chain disruptions, rising commodity prices, and increased demand. In the United States, for example, inflation reached levels not seen in over a decade, with the Consumer Price Index (CPI) exceeding 5% at times in 2024. Central banks responded by adjusting monetary policy to combat inflation, which had implications for borrowing costs and financial markets.
Labor Market: Labor markets underwent significant changes. The pandemic accelerated trends in remote work and automation, altering the nature of work in various industries. Some countries faced labor shortages in sectors like healthcare, hospitality, and manufacturing, leading to wage increases and labor disputes. The global gig economy continued to expand, raising questions about worker protections and employment stability.
Green Economy: Sustainability and environmental concerns gained prominence. Investment in renewable energy, electric vehicles, and green technologies surged, with governments and businesses committing to carbon neutrality goals. The renewable energy sector saw substantial growth, and sustainability considerations began to influence investment decisions and consumer behavior.
Trade and Geopolitical Tensions: Geopolitical tensions, particularly between the United States and China, continued to shape global trade dynamics. Supply chain disruptions and trade disputes affected the flow of goods and added complexity to global supply networks. The World Trade Organization (WTO) aimed to address these challenges through trade negotiations.
Technology and Innovation: Technological advancements remained a driving force behind economic growth. Artificial intelligence, blockchain, and biotechnology continued to revolutionize industries. The technology sector attracted substantial investment, and digitalization efforts accelerated across sectors, from healthcare to finance.
Debt Levels: Public and private debt levels reached record highs in many countries due to pandemic-related stimulus measures and economic support. Managing this debt and its long-term implications for fiscal sustainability became a key concern for policymakers.
In summary, 2024 was characterized by a mixed economic picture, with recovery from the pandemic coexisting with inflationary pressures, supply chain disruptions, and ongoing geopolitical tensions. Sustainability and technological innovation emerged as critical drivers of economic growth and transformation, while the global economy faced the challenge of navigating uncertainty and adaptability in an increasingly interconnected world.
In 2024, disinflationary monetary policy is expected to bite, with global output growing by just 3.2 percent. (Source - Indian Monetary Fund Global Outlook)
In FY 2022-23, India was the worlds second-largest producer of crude steel, with an output of 125.32 million metric tons In FY23. This was an 11.8% increase from the 2021-22. Indias crude steel production has grown at a compound annual growth rate (CAGR) of 4.2% since 2017-18.
INDIAN ECONOMIC OVERVIEW
This year began with the anticipation that runaway inflation, aggressive policy rate hikes, and high commodity prices might topple a few major economies into recession in 2024. We are halfway past 2024 and, while the world is still in the woods, the probability of a recession this year has trimmed. Labor markets in several advanced countries remain tight, while the largest economy, the United States, is seeing a rebound in consumer confidence and spending. Risk spreads are declining on both sides of the Atlantic after the recent banking crisis in the United States.
India, meanwhile, enjoys a Goldilocks moment as it sees its economic activity gaining momentum amid continuing global uncertainties. The last quarters GDP data was pleasantly surprising but not completely unexpected. The GDP growth in the fourth quarter has pushed up the full-year GDP growth of FY2023-24 to 7.2%, 200 basis points (bps) higher than the earlier estimate. The recently released Annual Economic Review for the month of May 2023 highlighted that the postpandemic quarterly trajectories of consumption and investment have crossed pre-pandemic levels.1
Evidently, economists and analysts are bullish about the Indian economy. Our growth forecasts for FY2024-25 remain similar to our April forecast, although higher-than-expected growth in FY2023-24 has raised our base for comparison. That said, we have raised our lower limit of the range given the buoyancy of the economy. We expect India to grow between 6% and 6.3% in FY2024-25 and have a stronger outlook thereafter. In fact, if global uncertainties recede, we expect growth to surpass 7% over the next two years.
The first-quarter data points to further building on the positive momentum in the economic data. We continue to remain optimistic about the economy this year and expect India to grow between 6.5% and 7.00% during FY2024-25 in our baseline scenario, followed by 6.6% and 7.2% over the next two years as the global economy turns buoyant (figure 6). However, if downside risks weigh on the economic fundamentals and outlook, we may see a substantial economic slowdown (Source - Deloitte Insights)
Market Size
In FY24, the production of crude steel and finished steel stood at 143.6 (million tonnes) MT and 138.5 (Million tonnes) MT respectively.
In FY23, the production of crude steel and finished steel stood at 125.32 (million tonnes) MT and 121.29 (million tones) MT, respectively. The consumption of finished steel stood at 120 (million tonnes) MT in FY23. In FY24, the consumption of finished steel stood at 136 (million tonnes) MT. Indias domestic finished steel consumption increased by 13% in 2023-24, driven by increased demand from the automotive and infrastructure sectors.
In FY24, exports and imports of finished steel stood at 7.5 (million Tonnes) MT and 8.03(million tonnes) MT, respectively. In FY23, India exported 11.14 MT of finished steel.
The annual production of steel is anticipated to exceed 300 million tonnes by 2029-30. By 2029-30, crude steel production is projected to reach 255 million tonnes at 85% capacity utilisation achieving 230 million tonnes of finished steel production, assuming a 10% yield loss or a 90% conversion ratio for the conversion of raw steel to finished steel. With net exports of 24 million tonnes, consumption is expected to reach 206 million tonnes by the year 2030. As a result, it is anticipated that per-person steel consumption will grow to 160 kg.
(Source: https://www.ibef.org/industry/steel)
Government Initiatives
Some of the other recent Government initiatives in this sector are as follows:
Under the Union Budget 2024-25, the government allocated 325.66 crore (US $ 39.23 million) to the Ministry of Steel.
The Government has launched the Production Linked Incentive (PLI) Scheme for specialty steel to promote the manufacturing of Specialty Steel within the country and reduce import by attracting capital investments. The anticipated additional investment under PLI Scheme for specialty steel is 29,500 crores and an additional capacity creation of around 25 million tonnes (MT) for specialty steel.
In January 2021, the Ministry of Steel, Government of India, signed a Memorandum of Cooperation (MoC) with the Ministry of Economy, Trade and Industry, Government of Japan, to boost the steel sector through joint activities under the framework of India-Japan Steel Dialogue.
The Union Cabinet, Government of India approved the National Steel Policy (NSP) 2017, as it intends to create a globally competitive steel industry in India. NSP 2017 envisage 300 million tonnes (MT) steel-making capacity and 160 kgs per capita steel consumption by 2030-31.
The Ministry of Steel is facilitating the setting up of an industry driven Steel Research and Technology Mission of India (SRTMI) in association with the public and private sector steel companies to spearhead research and development activities in the iron and steel industry at an initial corpus of 200 crore (US$ 30 million).
The Government of India raised import duty on most steel items twice, each time by 2.5% and imposed measures including antidumping and safeguard duties on iron and steel items.
Road ahead
The National Steel Policy, 2017 envisage 300 million tonnes of production capacity by 2030-31. The per capita consumption of steel has increased from 57.6 kgs to 74.1 kgs during the last five years. The government has a fixed objective of increasing rural consumption of steel from the current 19.6 kg/per capita to 38 kg/per capita by 2030-31. As per Indian Steel Association (ISA), steel demand will grow by 7.2% in 2019-20 and 2020-21.
Huge scope for growth is offered by Indias comparatively low per capita steel consumption and the expected rise in consumption due to increased infrastructure construction and the thriving automobile and railways sectors.
Opportunities
There is a significant growth being witnessed in Construction sector as the government is spending on Infrastructure projects and the sector is considered to maintain the same level of momentum and demand with a gradual rise in Investment resulting in creating market for the Steel Industries in the Country.
Further the Capital goods market has also improved with rising manufacturing capacity utilization and infrastructure investment which has boosted demand for Construction and earthmoving equipment.
Also Consumer durable growth is driven by segments like Air-conditioner, Refrigerators and furniture supported by lowering of GST and hike in Import Duty and indirectly giving a good demand to steel industries
As per the National steel policy crafted during FY 2018-19, the crude steel production target for India is set at 300 MT by 2030. Share of sponge iron in steel making will be 80MT, which will create huge opportunity for sponge iron industry.
Threats
Presently there are no visible threats in the short and medium term in the sponge iron industry. However availability of key raw materials and environmental concerns might pose significant challenge in the future.
Outlook
The domestic consumption is considered to move at a same momentum as is evident in the demand pull visible in infrastructure, automobile and other sectors. Government is also driving the economy by investing in housing, roads, and ports and in other infrastructure projects.
Favourable domestic demand and remunerative prices in both domestic and international markets are likely to bolster steel production further in the years to come, resulting into more demand for sponge iron.
RISK AND CONCERNS
The process of Risk Management in the company identifies inherent risks in its operations and records residual risk after taking specific risk mitigation steps. The company has identified and categorized risks in the areas of Operations, Finance, Marketing, Regulatory Compliances and Corporate matter.
The volatility in price of sponge iron, excess supply of sponge iron in the market will have an effect of squeezing margins and poses risk to the profitability. New customers, new market and cost reduction have been identified as the mitigation measures.
Also, the enforcement of recent Tariff policy guidelines on power by Government of India that requires the State Electricity Regulatory Commission to ascertain sale price of power based on cost of generation will have an impact on the revenue from export of power.
Fluctuation of import coal price, increase in USD-INR exchange rate, may lead to increase in cost of production. This is mitigated by continuous evaluation of international coal price vis-a-vis Indian coal price and accordingly the action plan for procurement has been formulated.
INTERNAL CONTROL SYSTEM AND ITS ADEQUACY
The Companys internal control systems are adequate considering size and nature of operations of the Company, meets with the regulatory and statutory requirements, assuring recording of all transactions and also ensuring reporting the financial information in a timely and reliable manner. The Company has defined risk management framework and it is implemented as an integral part of business processes. The Company has installed Enterprise Resource Planning System for accounting purposes. To counter the adverse fluctuation in the sponge iron prices, the Company vigorously keeps watch on its price trends and accordingly plans the purchases to ensure efficient operations and better profitability. The Company applies effective mitigation techniques to manage potential risks. Risk management system includes recording, monitoring and controlling internal enterprise business risks and addressing them through informed and objective strategies. Further, the Board of Directors of the Company has adopted a Risk Management Policy and it has identified various risks and also has mitigation plans for each risk identified. Its comprehensive risk management system ensures that all risks are timely identified, assessed and mitigated in accordance with the Risk Management Policy. The Audit Committee of the Board of Directors of the Company periodically reviews the internal control system and also internal audit reports issued by the Internal Auditors of the Company.
The Company has formulated a robust whistleblower policy for receiving and redressing complaints of employees. No employee has been denied access to the Audit Committee or its Chairman during the year under review.
HUMAN RESOURCES AND INDUSTRIAL RELATIONS
The Company is working on enhancing its competencies to take care of current and future business. Its employee strength as on 31st March, 2024 was 320. Human Resource and Industrial Relations departments have developed systems and policies on recruitment, performance management, learning and development, and employee engagement. Further, the Company has adopted various safety measures to ensure safe working environment for the employees of the Company. During the Financial Year, the industrial relations between the employees and management were calm and composed.
Further, the Company has complied with the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. The Company has formed Internal Complaints Committee and also formulated a policy. No complaint was reported during the Financial Year 2023-24.
FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE
Production of sponge iron during the year was 129696 MT as compared to 112663 MT in the previous year. Production of Ferro Chrome was 14797 MT as compared to 8932 MT in the previous year.
Accordingly, sales for sponge iron during the year was 128115 MT as compared to 113365 MT in the previous year. Sales of Ferro Chrome during the year were 14759 MT as compared to 8916 MT in the previous year.
Company has a power generation plant of 40 MW. During the year 55875 KWH of power was sold by way of Captive Consumption as against 36600 KWH in the previous year.
During the year under review Total Revenue from operation has increased from Rs 510.13 Crores to Rs 578.23 Crores as compared to previous years turnover. Company has registered a net profit of Rs 0.64 Crores in comparison to net profit of Rs 5.52 Crores during previous year.
Particulars | Numerator | Denominator | 31st March 2024 | 31st March 2023 | Variation | Reasons |
Current Ratio | Current Assets | Current Liabilities | 1.42% | 1.50% | -5% | Due to Substential increase in the Current Liabilities |
Debt Equity Ratio | Borrowings | Share Holders Equity | 2.97% | 3.01% | -1% | Not Applicable |
Debt Service Coverage Ratio | Earnings available for debt Service | Debt Service | N.A. | N.A. | N.A. | Not Applicable |
Return on Equity (ROE): | Net Profit after Taxes | Average Shareholders Equity | 1.12% | 8.94% | -87% | Due to Substential decrease in the Net Profit |
Inventory Turnover Ratio | Cost of Material Consumed + Channges in WIP/ FG | Average Invnetory | 8.26% | 6.94% | 19% | Not Applicable |
Trade receivable Turnover Ratio | Revenue from Operations | Average Trade Receivables | 8.41% | 7.71% | 9% | Not Applicable |
Trade Payable Turnover Ratio | Purchases | Average Trade Payables | 12.83% | 10.26% | 25% | Due to decrease in average Trade Payable |
Net Capital Turnover Ratio | Revenue from Operations | Working Capital | 14.33% | 11.16% | 28% | Due to increase in revenue and decrease in Net Working Capital |
Net Profit Ratio | Net Profit | Revenue from Operations | 0.08% | 0.72% | -89% | Due to substential decrease in the Net Profit |
Return on Capital Employed | Earning Before Interest and Tax | Capital Employed | 8.01% | 8.01% | 0% | Not Applicable |
CAUTIONARY NOTE
Readers are cautioned that this discussion and analysis contains forward-looking statements that involve risks and uncertainties. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Actual results, performances or achievements could differ materially from those expressed or implied in such forward-looking statements. The details and information used in this report have been taken from publicly available sources. Any discrepancies in the details or information are incidental and unintentional. Readers are cautioned not to place undue reliance on these forward-looking statements that speak only as of date. The above discussion and analysis should be read in conjunction with the Companys financial statements included herein and the notes thereto.
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