sarda energy minerals ltd Management discussions

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 FY 2022-23. This should be read in conjunction with the Companys financial statements and notes thereto and other information included elsewhere in the Report. This report is an integral part of the Directors Report.

Industry Structure and Development Global Economy

Prospects for a robust global economic recovery remain dim amid stubborn inflation, rising interest rates and heightened uncertainties. The world economy faces the risk of a prolonged period of low growth due to the lingering effects of the COVID-19 pandemic, the ever-worsening impact of climate change and unaddressed macroeconomic structural challenges. The overlapping shocks of the pandemic, the Russian invasion of Ukraine, and the sharp slowdown amid tight global financial conditions have dealt an enduring setback to development.

Global real GDP is forecasted to grow by 2.6% in 2023, down from 3.3% in 2022. Most of the weakness is concentrated in Europe, Latin America, and the US. Asian economies are expected to drive most of global growth in 2023, as they benefit from ongoing reopening dynamics and less intense inflationary pressures compared to other regions. The banking sector turmoil in the United States and Europe has added new uncertainties and challenges for monetary policy. Although swift and decisive actions by regulators helped contain financial stability risks, vulnerabilities in the global financial architecture and the measures taken to contain them will likely dampen credit and investment growth going forward.

Weak spots in the global economy include housing, bank lending and the industrial sector. However, this is more than offset by strength in other sectors, most notably in service-sector activities and visible in labour markets.

Indian Economy

The Indian economy appears to have moved on leaving behind the challenges posed by the pandemic, staging a full recovery, ahead of many nations and positioning itself to ascend to the pre-pandemic growth path in F.Y. 2023-24. Indias economic growth in F.Y. 2022-23 has been principally led by private consumption and capital formation which led to employment generation. As a result, India, is now the third-largest economy in the world in Purchasing Power Parity (PPP) terms and the fifth-largest in market exchange rates. This has reinforced the countrys belief in its economic resilience as it has withstood the internal and external challenges. In the current year, India has also faced the challenge of reining in inflation that the European strife accentuated. Measures taken by the government and RBI, along with the easing of global commodity prices, managed the retail inflation. However, the challenge of the depreciating rupee, persists with the likelihood of further increases in policy rates by the US Fed. The widening of the Current Account Deficit may also continue as exports remain suppressed on account of slowing world growth and trade shrinks the global market size and the growth momentum of the Indian economy remains strong.

Ironand Steel

The steel industry has emerged as a major focus area given the dependence of a diverse range of sectors on its output as India works to become a manufacturing powerhouse through policy initiatives like Make in India. In the past 10–12 years, Indias steel sector has expanded significantly. Production has increased by 75% since 2008, while domestic steel demand has increased by almost 80%. The capacity for producing steel has grown concurrently, and the rise has been largely organic. In 2022-23, the production of crude steel and finished steel stood at 126.26 MT and 122.28 MT, respectively. The consumption of finished steel stood at 119.86 MT in 2022-23. Indias steel exports slumped to a five-year low in 22-23, as slowing global demand and an export tax hampered shipment. India shipped 6.7 million tonnes of finished steel in 2022-23, a decline of 50.2% year on year and the lowest since 2018-19. Meanwhile, Indias imports touched a four-year high at 6 million tonnes, a growth of 29% on the year and the highest since 2019-20.

The Indian steel industrys performance in 2022-23 is the bright spot in a gloomy world scenario spurred by inflation, looming recession, and the energy crisis in Europe. The country is currently the worlds second-largest producer of crude steel, with an output of 126.26 million tonnes. The World Steel Association (WSA) has also projected the sectors growth in India at 6.7% for 2023-24.

Apart from government initiatives, what bodes well for growth in FY23 are the strong linkages between the steel industries with other sectors, especially infrastructure. The large demand in India for steel is largely linked to revival of numerous government projects associated with roads, railways, water, and sanitation which got stalled due to the pandemic as well as revival in the auto sector. As per report of NITI Aayog, by 2030, India will become the worlds production centre for green steel and pave the way for the worldwide adoption of green steel. Technologies like DRI or sponge iron and gas turbine generators are replacing old methods like an integrated blast furnace/basic oxygen furnace or an electric arc furnace that used coal to make steel. With an emphasis on the fourth industrial revolution, the steel industry would be increasingly using artificial intelligence (AI), Industrial IoT, AR/VR, and machine learning, among others, into everyday practices of smart manufacturing.

These development and practices, along with government policies and initiatives like Public Private Partnership (PPP) model and National Steel Policy, will help the country increase crude steel production capacity from 154 million tonnes per annum (MTPA) to 300 MTPA by 2030 making India self-reliant in steel.

IronOre /Pellet

India has the fifth-highest reserves of iron ore in the world. Majority (over 85%) of iron ore reserves are of medium to high-grade and are directly used in blast furnace and direct reduced iron (DRI) plants in the form of sized lumps or sinters or pellets. India ranks fourth globally in terms of iron ore production. Indias production of iron ore in 2022-23 stood at 255 million tonnes. Almost all (98%) iron ore is used in steelmaking. To meet the growing demand for steel products, world iron ore production has increased dramatically over the last decade. Earlier, lump ores were the principal source of iron in the manufacturing process. However, due to extensive mining, high-grade lump ore reserves have been rapidly diminishing over time and many new iron ore deposits of lower grade and more complicated mineralogy are being mined.

Iron ore extraction in India yields lumps and fines in the ratio of 2:3 — 60% of the ore generation is in the form of iron ore fines. For efficient utilization of ore produced, it is imperative to consume the iron ore fines. In order to consume lower grade ore for steel making, beneficiation of ore is required. Beneficiation efficiently removes silica, alumina, clay, and other contaminants from feed material to increase the Fe value in the final ore allowing for a more efficient steel production process. Silica requires very high temperatures in the kiln, therefore, increases energy costs when it is present in the feed tothe kilns. The iron and steel industry is concerned about the restricted availability of high-grade lump ore, as it is becoming increasingly difficult to source adequate lump ore for direct use in blast furnaces. Furthermore, the sintering process, which is utilized when lump ore is used, produces more pollution than the pelletizing process, so major steel companies prefer to use iron ore pellets as blast furnace feed over lump ore. As a result of these reasons, the demand for iron ore pellets is expanding. Global Iron Ore Pellets Market was valued at USD 62.75 billion in 2021 and is expected to reach USD 85.22 billion by 2029, registering a CAGR of 3.90% during the forecast period of 2022-2029. The near-term outlook is subdued global iron ore demand. A weaker economic outlook and rising interest rates indicate declining steel consumption over the next few quarters. This will be partly offset by Chinese stimulus to fund stalled construction projects. The Company has ensured uninterrupted supply of iron ore through its fully operational captive iron ore mine which operated smoothly during the year under review. During the year, the Company received 3.85 lakh million tonnes of iron ore from its mine. The Company also procures iron ore from NMDC, OMC and other private miners to meet balance requirements of ore. The Company has pellet manufacturing capacity of 8 lakh tonnes per annum which operated smoothly during the year.

Coal/ Power

Indias overall coal Production has seen a quantum jump to 893.08 MT in FY 2022-23 as compared to 728.72 MT in FY 2018-2019 with a growth of about 22.6%. The priority of the Govt. is to enhance the domestic coal production to reduce the dependence on substitutable coal imports. Ministry of Coal has initiated several measures to ramp up the domestic coal production to achieve self-reliance to meet the demand of all sectors and ensure adequate coal stocks at thermal Power Plants. The exceptional growth in coal production has paved the way for energy security of the Nation. The annual Coal Production target set for the FY 2023- 2024 is 1,012 MT.

Apart from this, Ministry is proactively involved in promoting sustainable development in conjunction with coal production, by emphasizing on environmental protection, resource conservation, societal welfare and measures to preserve our forests and biodiversity. Ministry of Coal has also formulated a strategy to develop an integrated approach for eliminating road transportation of coal in mines and has taken steps to upgrade mechanized coal transportation and loading system under ‘First Mile Connectivity projects.

The Ministry has formulated an Action Plan for 2023-24 to achieve Aatmanirbhar Bharat by improving production, efficiency, sustainability, and new technologies in the coal sector. To enhance coking coal availability in the country and reduce imports, the Ministry has developed a coking coal strategy. The Ministry is closely monitoring critical railway line projects for coal evacuation in consultation with the Ministry of Railways. It is also undertaking mapping of the Coal sector on National Master Plan (NMP) and utilizing Dashboards on NMP. The Ministry has adopted a Coal Logistics Policy/Plan for effective and eco-friendly coal transport, recognizing the significance of logistics in the coal supply chain.

In the current decade (2020-2029), the Indian electricity sector is likely to witness a major transformation with respect to demand growth, energy mix and market operations. India wants to ensure that everyone has reliable access to sufficient electricity at all times, while also accelerating the clean energy transition by lowering its reliance on fossil fuels and moving toward more environmentally friendly, renewable sources of energy. The Government of India is preparing a ‘rent a roof policy for supporting its target of generating 40 GW of power through solar rooftop projects. It also plans to set up 21 new nuclear power reactors with a total installed capacity of 15,700 MW by 2031. The Central Electricity Authority (CEA) estimates Indias power requirement to grow to reach 817 GW by 2030. Also, by 2029-30, CEA estimates that the share of renewable energy generation would increase from 18% to 44%, while that of thermal energy is expected to reduce from 78% to 52%. The government plans to establish renewable energy capacity of 500 GW by 2030.

At SEML, we have captive thermal power plants to cater to the power requirement. Apart from market purchases, the Company also has an operational coal mine to meet its coal requirements. The Company, through its subsidiaries also operates Hydro Power plants with capacity of nearly 142 MW. The Company is increasing hydro power generation by installing new plants and thus contributing in controlling environment pollution by generating green energy. Another coal mine of the Company at Shahpur, Madhya Pradesh is under development.

Ferro Alloys

Ferro Alloys Market was valued at USD 139.5 billion in 2022. The ferro alloys industry is projected to grow from USD 147.3 Billion in 2023 to USD 204.2 billion by 2030, exhibiting a compound annual growth rate (CAGR) of 5.60% during the forecast period (2023 - 2030). Growing usage in automobile production and technological advancement are the key market drivers enhancing the market growth. The construction industry is the largest consumer of ferroalloys, accounting for over 35% of the total demand. The automotive industry is the second-largest consumer, accounting for over 25% of the total demand. Other major consumers include the energy and power sector, the machinery sector, and the electronics sector. The Asia-Pacific region is the largest market for ferroalloys, accounting for over 60% of the total demand. There are several drivers of the global ferroalloy market. One is the increasing use of stainless steel. Stainless steel contains a high proportion of chromium, which is an important ingredient in ferroalloys. As demand for stainless steel increases, so does demand for ferroalloys. Another driver of the global ferroalloy market is the increasing use of aluminium. Aluminium alloys contain a high proportion of manganese, another important ingredient in ferroalloys. As demand for aluminium increases, so does demand for ferroalloys. Yet another driver of the global ferroalloy market is the increasing use of nickel. Nickel alloys contain a high proportion of chromium and manganese, both of which are important ingredients in ferroalloys. As demand for nickel increases, so does demand for ferroalloys. There are a few key restraints that have been holding back the growth of the global ferroalloy market. Firstly, the high cost of production. Ferroalloy production is energy intensive and requires expensive raw materials. This makes it difficult for manufacturers to compete on price with other metals and alloys. Secondly, the global ferroalloy market is highly fragmented. This fragmentation makes it difficult to achieve economies of scale and achieve cost efficiencies. Finally, environmental regulations are becoming increasingly stringent. The production of ferroalloys generates a lot of pollution and waste. This is making it difficult for manufacturers to operate in some jurisdictions. The conflict between Russia and Ukraine has had a significant impact on the ferroalloy industry. The main producing regions of ferroalloys are located in Eastern Europe, which has been affected by the conflict. This has led to disruptions in production and supply, which has driven up prices. The conflict has also resulted in sanctions being placed on Russia by the EU and the US. These sanctions have limited Russian exports of ferroalloys, which has further tightened supply and driven up prices. Looking forward, it is expected that the conflict between Russia and Ukraine will continue to affect the ferroalloy industry. Prices are expected to remain high due to tight supply.

Opportunities and Threats Opportunities

As per short range outlook released by the World Steel Association, demand for steel worldwide will witness a 2.3 % growth in 2023 and 1.7% in 2024. The Report said that the demand will increase to 1,822 million tonnes (mt) in 2023 and 1,854 mt in 2024. In 2024, demand growth will be driven by regions outside China, but it will face global deceleration due to Chinas anticipated 0% growth, overshadowing the improved environment. Sustained inflation remains a downside risk, potentially keeping interest rates high.

The Indian steel industry outlook for 2023 looks promising with the country gearing to become a US $5 trillion economy by 2030. The steel industry will play a pivotal role in steering India towards its goal. Recent changes in export taxes and import duties on steel, complemented by the rising demand for affordable housing, infrastructure development and construction projects, has led to a pan-India need for steel metal. Moreover, the governments initiative to make India self-sufficient has made room for sustainable urban development, construction of proposed logistics parks and industrial corridors – all adding to the meteoric demand for finished steel and steel as a raw material. Indias steel consumption is expected to grow by 7.5% during the current fiscal year to March 2024, boosted by rising demand from the domestic construction, railways and capital goods sectors.

With 126 MT production, India is the worlds second largest producer of crude steel. As per research reports, the domestic steel consumption growth rate in India is expected to be around 10-12% in FY2023. With cities expanding, technological advent of Industry 4.0, and rise in construction and engineering projects, the meteoric rise of the steel industry is not unexpected. Budget announcements related to creation of one hundred critical transport infrastructure projects will also spur up the domestic steel demand. Further the announcement with regard to review of Rs.fty additional airports, heliports, water aerodromes and advance landing grounds for improving regional connectivity will also create opportunities for domestic steel demand. Projects like development of urban infrastructure for creating cities of tomorrow, PM Awas Yojana, and other such projects will also create demand for steel.

The global iron ore pellets market is predicted to increase in tandem with the growth of the steel sector. Furthermore, significant investments in research and development activities that further enhance product applications extend profitable opportunities to the market players. Additionally, move taken by various governments towards more sustainable steel production will further expand the future growth of the iron ore pellets market.

In just under a decade, India has risen to become the fifth largest economy in the world, up from its position as the tenth largest. The government has set a goal of 7% growth despite global headwinds. The recent Union Budget, the first one in what is being called the Amrit Kaal, has outlined strategies to strengthen Indias economy and build a technology-driven and knowledge-based economy. Green growth was one of the Saptarishi or the seven guiding principles of the Union Budget 2023–24 for steering India towards the Amrit Kaal.

A slew of programmes targeted at promoting clean energy and sustainable growth have been announced in the Budget, including priority capital investment towards energy transition; provision for inter- state grid integration; viability gap funding for battery energy storage systems; compressed biogas plants; and indirect tax revisions for encouraging green energy to achieve the ambitious target of 500 gigawatts of installed non-fossil fuel energy by 2030. To achieve this, the budgetary allocations for key non-fossil fuel energy projects in 2023-24 have increased significantly. The budget has put forward Sovereign Green Fund as one of the key sources for financing clean energy transition, particularly in the areas of grid-connected solar and wind energy segments, as well as green hydrogen. The Indian governments commitment to reaching net-zero emissions by 2070 and increasing its renewable energy target to 500 GW by 2030 at the COP26 summit has provided great support to the industry and spurred unprecedented growth. However, there is still much work to be done, with a need to install 25-30 GW of solar energy each year for the next eight years to meet its 280 GW solar target. What we need today is similar to what was once called the green revolution in agriculture and the white revolution in dairy. We are in need of a second green revolution, but this time in energy.

The market for ferroalloys is expected to grow steadily in the coming years. Several factors are driving this growth. One factor is the increasing demand for steel. As the demand for steel increases, so does the demand for ferroalloys. Another factor driving market growth is the increasing use of ferroalloys in a variety of industries, including automotive, construction, and electrical. The Asia-Pacific region is expected to be the largest market for ferroalloys, due to the growing economies in China and India. North America and Europe are also expected to see significant growth in the demand for ferroalloys.

Threats

The price of steel is a highly sensitive matter in the steel industry which could badly impact the demand and sale of steel. High production and carriage costs, coupled with various other factors, decrease the profitability. High technological development is focusing on finding new ways/alternative materials to build houses and infrastructures that dont involve a lot of steel. It may affect the demand for steel in the customer market. Slowdown in economy, tightening of interest rate may continue to be a deterrent factor. Geo-political tension in Eastern Europe might adversely affect exports. Re-emergence of Covid may dampen business and operations.

Global DR-grade iron ore demand is expected to be at a deficit of more than 100 MTPA by 2031, sustaining high premiums. Another emerging issue is the lack of existing high-quality-pellet capacity to meet this future demand worldwide. The market is heavily reliant on iron and steel and therefore, the fluctuations in the price of raw material (iron and steel) will prove to be a demerit for the iron ore pellets market. The supply of high-quality iron ore and metallics is expected to be tight over the next decade. The cornerstone of decarbonizing the steel industry and supporting the energy transition is capital projects at a massive scale. This will result in energy infrastructure investments growing globally at 5.9 % per annum in real terms by 2030. Therefore, the strength of capital expenditure functions will become critical for steel players undertaking large capital investments.

Volatile global commodity prices and geopolitical issues, factors like insufficient availability of domestic coal, coal mining efficiencies and transportation issues affect the companies in power sector. Mining industry has to deal with many variable factors, including rising ESG and societal expectations, decarbonization of value chains, geopolitical risks, digital transformation and cumbersome statutory compliances requirements. ESG remains the top risk and opportunity for mining and metals companies. Renewable energy sources such as wind and solar have high variability in their generation due to weather conditions. In the case of a thermal or hydropower plant, the production can be ramped up or down as per requirement, but this is not possible in the case of wind or solar power. There is growing recognition of the challenges for integration of renewables in the national grid, including seasonality in energy generation, expensive storage technologies for dealing with the mismatch between supply and demand, and lack of capacity of the existing infrastructure to cope with the variability in energy generation.

Though there has been significant increase in power generation capacities, various threats hover around. Location of renewable energy facilities in unmanageable geographical location increases the chances of attackers gaining access to generation facilities. Ine Rs.cient security in network protocols makes the entire set up vulnerable to cyber-attacks which may result in damage to the entire system. Even though ferroalloys are used in various end-use industries in enormous quantities, long time exposure to the alloying material can harm human health. For instance, manganese fumes are toxic and cause cognitive disorders when inhaled. Therefore, organizations such as National Institute for Occupational Safety and Health (NIOSH) and Occupational Safety and Health Administration (OSHA) have launched safety guidelines for recommendations and permissible exposure limits to preserve human health. Thus, such rules and regulations for producing alloys are expected to hinder the market growth.

Outlook

The 10-year economic outlook signals a prolonged period of disruptions and uncertainties for businesses, but there are also opportunities. Global growth will return to its slowing trajectory with mature markets making smaller contributions to global GDP over the next decade. Nonetheless, there are still opportunities for firms to invest in both mature markets—given their wealth and need for innovation to compensate for shrinking labour forces and emerging markets—given their need for both physical and digital infrastructure to support their sizable and young labour forces. Keys to ensuring growth over the longer term include developing new lines of business; strengthening corporate culture; embracing digital transformation and automation; recruiting for talent with new skills not currently represented in the company; and maximizing the hybrid work model where it makes sense. Research agencies continue to project India as the fastest-growing major economy at 6.5-7.0% in FY23. These optimistic growth forecasts stem in part from the resilience of the Indian economy seen in the rebound of private consumption seamlessly replacing the export stimuli as the leading driver of growth.

The uptick in private consumption has also given a boost to production activity resulting in an increase in capacity utilization across sectors. The rebound in consumption was engineered by the near-universal vaccination coverage overseen by the government that brought people back to the streets to spend on contact-based services, such as restaurants, hotels, shopping malls, and cinemas, among others. The worlds second-largest vaccination drive involving more than 2 billion doses also served to lift consumer sentiments that may prolong the rebound in consumption. The capital expenditure of the central government, which increased by 63.4% in the first eight months of FY23, was another growth driver of the Indian economy. A sustained increase in private capex is also imminent with the strengthening of the balance sheets of the corporates and the consequent increase in credit financing it has been able to generate. A much-improved financial health of well-capitalized public sector banks has positioned them better to increase the credit supply. If inflation declines in FY24 and if real cost of credit does not rise, then credit growth is likely to be brisk in FY24. Indias economic growth in FY23 has been principally led by private consumption and capital formation.

Risks and Concerns

Risk, which is the manifestation of business uncertainty affecting corporate performance and prospects, is an integral part of business. The Company follows a well-defined and exhaustive risk management process, which is integrated with its operations. This enables the Company to identify, categorize and prioritize operational, financial and strategic business risks. The Company has formed a Risk Management Committee which has the mandate of identifying the risks and suggesting the ways to mitigate them. The Company spends significant time, effort and human resources to manage and mitigate identified risks. The Company has identified its risk parameters and planned out mitigation measures to sustain its operations. Some of these include:

Risk	Risk-mitigating factors
Economic/Industrial risk	-Captive mineral resource
-Cyclical nature of business	-Captive power
-Unforeseen demand upsurge	-Fully integrated process
	-Proximity to market
	-Diversification in hydro power providing consistent cash flows
	-Low leveraging
	-Customer loyalty
Environmental risk	-Adequately equipped with pollution-control devices to observe norms
-Discharge of pollutants	-Regular upgradation and maintenance of the equipment to avoid
-Compliances	discharge of pollutants in the environment
	-Focus on full waste utilization through waste to wealth programme
Financial risk	-Low debt gearing ratio and efficient financial management. Creating
-Availability of funds for capex and business operations	cushion for contingencies
Foreign Exchange risk	-Substantial amount of import, export and financial assets in foreign
-Unfavourable rupee/foreign currency	currency providing natural hedge
movement	-Regular review of exposure at highest level
	-Forward contracts and bookings
	-Avoiding exotic derivative structures

 

Risk	Risk-mitigating factors
Human resources	-Ample opportunity of growth and development of individual
-Retaining talent at various levels is a challenge	-Safety and security, motivation, performance linked remuneration in line with market
Input risk	- Captive mineral resource – iron and coal
-Procurement of raw materials at the right cost and in the right time.	-Integrated business model making end product of one business to be positioned as the raw material of another
	- Long term coal linkage
	-Creation of a self-feeding ecosystem, costing and logistic issues
Regulatory risk -Compliance with the ever-changing	-Complies with all applicable statutory requirements and has systems in place to ensure compliance with the regulatory changes, if any
applicable statutes and guidelines, rules and regulations
Safety risk / Health related disruption	-Regular health check-ups
-Healthy and safe working of workmen	- Regular safety audit by independent team and compliance review
	- Safety trainings, promoting near miss reporting and corrective actions
	- Preventive maintenance of machines and equipment to avoid any unforeseen accidents
	-Adequate arrangements of fire Rs.ghting system and dispensaries to address emergency situations
System / Cyber Security risk	- Maintenance and upgrading of systems on a continuous basis
System capability, System reliability	- Data security through access control restrictions
and Data integrity risks	- Regular data backup
	- Use of antivirus softwares and firewall system

Internal Control System and their Adequacy

The Company has in place an adequate system of internal control commensurate with its size and nature of business. The system provides a reasonable assurance in respect of providing financial and operational information, complying with applicable statutes, safeguarding of assets of the Company and ensuring compliance with corporate policies. The Company has a business planning system to set targets and parameters for operations which are reviewed with actual performance to ensure timely initiation of corrective action, if required. The Company has availed the services of independent professional firm for Internal Audit, which checks the effectiveness of the internal controls with an objective to provide an independent, objective and reasonable assurance of the adequacy and effectiveness of the Companys risk management, control and governance processes. The scope and authority of the Internal Audit activity are approved by the Audit Committee. Internal Auditor reports directly to the Audit Committee of Board. Audit Committee periodically reviews the Internal Audit Reports and issues guidance and advice. The Audit Committee also seeks the views/opinions of statutory auditors on the adequacy of the internal control systems in the Company. Minutes of the Audit Committee are put up to the Board of Directors. The Companys Audit Committee reviews adherence to internal control systems, internal audit reports and legal compliances. This committee reviews all quarterly and yearly results of the Company and recommends the same to Board for its approval. The Committee also reviews the performance of the subsidiaries.

Product-wise Performance

During the year under review, the operations were better than the previous year. During the year, pellet production increased by 8%, Billet production increased by 18%, Wire rod production by 18%, HB wire production by 21%, Ferro Alloys production by 3%, power generation increased by 5%, iron ore production by 29% and coal production by 53%. Increase in coal production is not comparable because in 2021-22, coal production was for part of the year. During the year, the Company operated all its plants at optimum capacity. The consolidated product wise performance matrix for the year 2022-23 is summarized hereunder:

Product	Production (MTs)		Sales (MTs)		Captive consumption (MTs)
	2022-23	2021-22	2022-23	2021-22	2022-23	2021-22
Pellet	8,00,000	7,41,000	5,21,972	4,88,057	2,83,618	2,65,645
Sponge Iron	2,89,612	2,94,203	81,645	1,21,252	2,07,109	1,76,652
Steel Billet	2,27,673	1,92,283	33,349	25,688	1,94,713	1,66,085
Wire Rod	1,89,911	1,60,945	1,51,116	1,27,813	39,868	32,528
HB Wire	39,310	32,393	39,730	31,930	-	-
Ferro Alloys	1,63,967	1,59,483	1,57,432	1,53,301	3,334	3,555
Power (Mn Kwh)	1,577	1,496	565	493	971	917
Iron Ore	3,85,453	2,99,042	-	-	3,75,049	3,54,180
Coal(MT)	11,99,999	7,86,142	8,70,133	2,09,995	11,14,423	1,86,473

 

Financial Performance vis a vis Operational Performance as per standalone financials

( Rs. in crore)

 

Ratio	2022-23	2021-22	% Change	Reason
Debtors turnover (no. of days)	11	12	8.33%
Inventory turnover (no. of days)	59	60	1.67%
Interest coverage ratio	58.29	42.29	37.83%	Lower debt
Current ratio	7.06	4.47	57.94%	Improved liquidity due to profitability
Debt equity ratio	0.04	0.06	33.33%	Repayment of term loans
Operating profit margin (%)	27.86	33.22	(16.13%)	Fall in prices of finished
Net profit margin (%)	22.14	24.97	(11.33%)	goods
Return on net worth (%)	20.58	24.97	(17.58%)

Turnover

During 2022-23, the Company achieved a turnover of Rs. 3,020.45 crore on standalone basis as against Rs. 2,641.95 crore in the previous year, up by 14.33%. At the consolidated levels, the turnover in 2022-23 was Rs. 4,211.90 crore as against Rs. 3,914.02 crore in the previous year, increasing by 7.61%. Increase in volume contributed to higher turnover.

Breakup of revenue (% Product wise)

Product	Standalone		Consolidated
	2022-23	2021-22	2022-23	2021-22
Ferro Alloys	23.44	25.05	36.43	40.24
Steel – billets, wire rods and HB wire	38.02	33.40	27.27	22.55
Sponge Iron	8.38	13.69	6.01	9.24
Pellet	15.93	23.37	11.42	15.77
Power	-	0.08	8.45	7.57
Coal	11.86	2.24	8.50	1.51
Others (includes eco bricks and trading)	2.37	2.17	1.92	3.12
Total	100.00	100.00	100.00	100.00

 

Breakup of consolidated revenue (Entity wise)
Company	2022-23	2021-22	Product
Sarda Energy & Minerals Limited	2,955.23	2,596.75	Steel, Ferro alloys & Thermal Power
Sarda Metals & Alloys Limited	947.09	1,046.04	Ferro Alloys & Thermal Power
Madhya Bharat Power Corporation Limited	251.76	194.18	Hydro Power
Chhattisgarh Hydro Power LLP	42.13	55.89	Hydro Power
Sarda Energy Limited	8.11	10.90	Share of profit from LLP
Parvatiya Power Limited	7.58	8.67	Hydro Power
Sarda Global Trading DMCC	-	1.59	Trading activities
	4,211.90	3,914.02

Exports

Export markets for ferro alloys are catered mainly from Sarda Metals plant located near the port. Consolidated ferro alloys exports of the Company stood at 98,617 MTs as against 91,207 MTs in previous year.

	2022-23	2021-22	Reason(s) for change
Finance Cost
Standalone	15.95	22.42	Lower utilization of WC facilities
Consolidated	124.41	147.12	and increased use of Sight LC as against usance LC
Depreciation
Standalone	65.89	53.57	Provision of depreciation on coal
Consolidated	178.35	143.16	mines and Sikkim Hydro power project for full year. Last year it was for part of the year
Other Expenses
Standalone	295.59	215.72	Purchase of power from grid and
Consolidated	529.29	359.77	higher carriage outwards on higher FOR buyer place sale
Profitability
EBIDTA - Standalone	928.61	952.56	Fall in price of finished goods
Consolidated	1109.60	1398.30
PBT – Standalone	846.77	876.57
Consolidated	806.84	1108.02
PAT – Standalone	638.41	659.77
Consolidated	603.98	806.70

 

Non-Current Assets
	2022-23	2021-22	Reason(s) for change
Property Plant & Equipment
Standalone	Gross – 1,024.15	Gross – 994.17	Normal capex
	Net – 595.47	Net – 589.17
Consolidated	Gross – 3,749.19	Gross – 3,521.09	Capitalization of new furnace in
	Net – 2,907.89	Net – 2,853.77	Sarda Metals & Alloys Limited

 

	2022-23	2021-22	Reason(s) for change
Capital work-in-progress
Standalone	27.64	67.90	Capitalization of Coal gasi Rs.cation plant and Electro Column Assembly in Ferro Alloys Plant
Consolidated	130.18	131.96	Capex on Rehar hydro power project
Investments
Standalone	891.01	887.16	Investment in Chhattisgarh Hydro Power LLP
Consolidated	69.69	48.27	Investments mainly in Joint Venture and Associates
Loans & Advances
Standalone Consolidated	199.73 -	184.51 -	loans to related parties

 

	2022-23	2021-22		Reason(s) for change
Other financial assets
Standalone	0.24	1.00		Reduction in amount given as security deposits
Consolidated	39.45	36.65		Increase due to increase in contracted assets
Other non-current assets
Standalone	57.95	65.98		Reduction in capital advances
Consolidated	88.36	96.30
Current assets

 

	2022-23	2021-22	Reason(s) for change
Inventories
Standalone	548.88	429.13	Increase in stock of coal, iron ore
Consolidated	727.12	612.97	and ferro alloys
Investments
Standalone	210.57	274.03	Reduction due to sale of
Consolidated	352.59	451.90	investments
Trade receivables
Standalone	90.44	92.83	No material change
Consolidated	182.02	168.75	Increase in receivables from electricity board against sale of p o w e r
Bank and Cash Balances
Standalone	240.78	23.43	Surplus funds deposited with banks.
Consolidated	372.06	281.54	Increased FD in standalone and use of FD for payment of loan in MBPCL
Loans and advances
Standalone	461.75	384.78	Increase due to increase in loans to related parties and claims & recoverables
Consolidated	372.70	403.33	Reduction due to reduction in loan to related parties
Other current assets
Standalone	179.82	175.10	Increase in advance royalty and
Consolidated	235.80	207.96	advances to vendors

 

Non-current Liabilities
	2022-23	2021-22	Reason(s) for change
Borrowings
Standalone	82.73	142.84	Repayment of term loans
Consolidated	1,063.04	1,194.66

CRISIL has upgraded the rating of the Company at CRISIL AA- Stable for long term credit facilities and CRISIL A1+ for short term credit facilities.

		2022-23	2021-22	Reason(s) for change
Other long-term liabilities
Standalone		3.11	3.17	No material change
Consolidated		19.06	9.74	Deferred payment of free power obligation in Madhya Bharat Power Corporation Limited
Provisions
Standalone		30.94	30.42	No material change
Consolidated		36.38	34.27
Current liabilities

 

	2022-23	2021-22	Reason(s) for change
Short term borrowings
Standalone	56.22	27.69	Increased in current maturities of long-term loans
Consolidated	343.93	385.91	Reduction on account of reduction in amount of current maturities of long-term loans
Trade payables
Standalone	55.06	142.03	reduction in outstanding amount to
Consolidated	134.71	212.24	creditors
Other financial liabilities
Standalone	82.27	90.55	No material change
Consolidated	158.05	168.63

 

Other current liabilities
	2022-23	2021-22	Reason(s) for change
Standalone	46.97	38.60	Increase in advances from customers
Consolidated	107.59	46.71	Increase in advances from customers and provision for true up of Revenue in Madhya Bharat Power Corporation Limited
Provisions
Standalone	1.00	1.54	Reduction in provision for gratuity
Consolidated	2.32	2.61

Material Developments in Human Resource/Industrial Relations

The HR function provides the business with tools and frameworks that enable us to effectively manage our workforce. Effective workforce management plays a vital role in achieving transformational goals and includes supporting managers in performing their daily tasks, from recruitment to development and providing insights to senior management. The HR activities of the Company are focused on achieving company goals, increased employee engagement, employee productivity, enhanced customer loyalty and preparedness to bounce back from recessionary times. The company had displayed its resilience during the toughest times resulted by waves of COVID-19.

The Company believes in togetherness, the key for success. During the year under review, the Companys focus was on employee health and safety. The HR Activities were guided towards building a motivated human capital force by engaging the employees and workmen to upgrade themselves with new technologies across business functions.

To make sure Company has leaders for tomorrow, the Company has come up with new initiative "Talent Xibit" to develop & nurture top talents wherein a pool of 84 persons have been identified and made to undergo Development Assessment. Structured learning methods with clear objectives were used to imparted training / learning. This is a new initiative to create a talent pipeline and constant efforts would be put in to review the results and transform this initiative as a continuous process. Continuous learning is key to open new doors of thinking. During the year the Company achieved 2.93 mandays of training per employee which includes internal and external training sessions. These learning interventions are focussed on multiple dimensions of technical, behavioural, wellness & safety. Further, the Company has also taken up new initiative to upkeep the wellness of family members with virtual sessions on mindfulness, awareness in multiple learning areas.

During the year,

8 Quality Circle teams of the Company have participated in CCQC-2022 (Chapter Convention on Quality Concepts) organized in Bhilai and all the teams won "Gold Award". In NCQC-2022 (National Convention on Quality Concepts), 8 QC Teams have participated and 4 of them won "Par Excellence" award and 4 of them won

"Excellence" award with a 100% winning tally.

During the year, the Company :

continued to operate and maintain, mobile medical van in mines and surrounding villages to strengthen community health services benefitting 11,354 patients.

organized health check-up camps, eye check-up camps, and awareness programmes on health issue and boosting of immunity etc.

undertaken watershed development initiatives in villages and has created & maintained rainwater harvesting structures.

has organized Womens Empowerment Training to promote income generation activities at village level with Central Board of Workers Education, benefitting 187 women across 2 villages.

has provided scholarships to meritorious students in nearby villages.

has provided portable drinking water supply to nearby villages during summer period. Also providing continuous water supply to Siltara & Mandhar village community for drinking and other daily use. supported 50 Ekal vidhyalays for education to tribal children, donated 22-seater School Bus, supported schools for teachers, infrastructure and school building.

provided infrastructure support to villages including roads, drainage system, etc.

supported 11 physically challenged couple for marriage under "Nirdhan Kanya Vivah" initiative.

As of 31st March 2023, the total number of employees on permanent company rolls stood at 1,395 (excluding trainees) as compared to 1,369 in the previous year.

Cautionary Statement

The above Management Discussion and Analysis describing the Companys objectives, projections, estimates and expectations may be "forward looking statements" within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the Companys operations include external economic conditions affecting demand/supply influencing price conditions in the market in which the Company operates, changes in Government regulations, tax laws, and other incidental factors.