Sarthak Metals Ltd Management Discussions

ECONOMIC OVERVIEW Indian Economy

Indias economic performance in FY25 remained robust amidst global uncertainties, underscoring the nations resilience and adaptability. According to the Economic Survey 2024-25, Indias real Gross Domestic Product (GDP) is estimated to have grown by 6.4% in FY25, aligning closely with its decadal average. This growth trajectory is supported by a balanced expansion across key sectors: agriculture is projected to rebound with a growth of 3.8%, industry is expected to grow by 6.2%, and the services sector is anticipated to maintain a strong performance with a 7.2% increase.

On the demand side, private final consumption expenditure is estimated to grow by 7.3% at constant prices, driven by a resurgence in rural demand. This uptick reflects improved agricultural output and targeted government initiatives aimed at enhancing rural incomes.

Inflationary pressures have moderated, with retail headline inflation softening from 5.4% in FY24 to 4.9% during April-December 2024. This decline is attributed to effective monetary policy measures and easing supply- side constraints.

The governments focus on capital expenditure (CAPEX) has been constant, with a year-on-year growth of 8.2% during July-November 2024. This sustained investment in infrastructure is expected to crowd in private investment and bolster long-term economic growth.

Indias external sector has also shown resilience, with non-petroleum and non-gems & jewellery exports increasing by 9.1% during April-December 2024, despite global trade volatilities. This performance underscores the competitiveness of Indias manufacturing and services sectors.

The financial sector continues to strengthen, evidenced by steady bank credit growth, improved profitability of Scheduled Commercial Banks, a decline in gross nonperforming assets (GNPAs), and a rise in the capital to risk- weighted asset ratio (CRAR). These indicators reflect a robust banking system capable of supporting economic expansion.

Looking ahead, the Economic Survey projects Indias real GDP growth for FY26 to be in the range of 6.3% to 6.8%, contingent upon global economic conditions and domestic policy measures. The governments emphasis on grassroots-level structural reforms and deregulation is expected to enhance medium-term growth potential and global competitiveness.

Source: Economic Survey 2024-25, Ministry of Finance, Government of India

Indias steel industry in 2024 and 2025 stands out as a global growth engine, continuing to expand even as other major economies face stagnation or contraction in steel demand. As the worlds second-largest steel producer,

Indias domestic market dynamics, production trends, and investment flows are drawing significant global interest, despite the immediate challenges & competitive pressure from low-cost imports from countries like China & Vietnam.

In 2024, global crude steel production reached 1,884.6 million tonnes (Mt), reflecting a 0.9% contraction in demand to 1,750.9 Mt. A modest rebound of 1.2% is forecast for 2025, bringing global demand to 1,771.5 Mt. Against this backdrop, India has maintained its momentum as the fastest-growing major steel market, producing 149.4 Mt of crude steel in 2024, second only to Chinas 1,005.1 Mt.

Indias steel production has witnessed steady growth over recent years. In 2024-25, crude steel production rose by 4.7% to reach 151.14 Mt, while finished steel output increased by 5.0% to 145.31 Mt1. Domestic consumption surged by 11.3%, reaching 150.23 Mt, underscoring robust demand fundamentals. The countrys crude steel capacity stood at 198.5 Mt in 2024-25, keeping it on track to meet the National Steel Policy 2017s ambitious target of 300 Mt by 2030-31.

The primary engine of steel demand growth in India remains the governments sustained investment in infrastructure, housing, and urban development. Construction activity, particularly in housing and infrastructure, is expected to drive an 8-9% increase in steel demand in 2025. Manufacturing sectors such as engineering, packaging, and automotive are also contributing to rising steel consumption. Policy support has been significant, with the Production-Linked Incentive (PLI) Scheme for Specialty Steel targeting 42 Mt by 2026-27 and catalyzing new investments and technology upgrades across the sector.

Indias trade dynamics shifted notably in 2024-25, as the country transitioned from being a net exporter of finished steel to a net importer. Imports surged by 24.5% in 2024, while exports declined by 6.4%. China, Japan, and Vietnam were the leading sources of imports, with Chinas finished steel exports to India increasing 2.4 times between 2022 and 2024. In response to rising imports and to support domestic producers, the government imposed a 12% safeguard duty on flat steel imports for 200 days in April 2025.

Domestic hot-rolled coil (HRC) prices in India fell by 9% in 2024, pressured by increased imports and softer global prices. However, prices rebounded by 14% in early 2025, following the imposition of safeguard duties. On the input side, coking coal prices declined by 12% in 2024, providing some relief to producers, though iron ore prices rose by 9-10% during the same period. Despite strong demand, profit margins came under pressure due to stiff import competition and subdued global prices, and capacity utilization is projected to fall below 80% in 2024-25, the lowest in four years.

The Indian steel industry is predominantly driven by the private sector, which accounted for 84% of crude steel and 86% of finished steel production in 2024-25. The product mix is skewed towards non-flat products (long steel), which made up 55% of finished steel production, while flat products such as HRC accounted for 45%.

Policy frameworks have played a pivotal role in shaping the industrys trajectory. The National Steel Policy 2017 set out clear targets for capacity, production, and per capita consumption by 2030-31. The PLI Schemes second round, launched in January 2025, saw 42 memoranda of understanding signed and a committed investment of H 27,100 Crore. Quality control has been strengthened through the Steel Quality Control Order (QCO), which enforces BIS standards, with 151 standards notified and 21 more in process. The revamped Steel Import Monitoring System (SIMS 2.0) aims to enhance transparency and data- driven policymaking for imports.

Sustainability and innovation have become central to the industrys agenda. R&D funding is being channeled into green steel production, hydrogen-based processes, carbon capture, and waste utilization, with thirteen new R&D proposals funded in 2024-25. The sector is increasingly aligning with global decarbonization trends, with pilot projects and policy incentives supporting the adoption of cleaner technologies.

Looking ahead, Indias steel demand is projected to grow by 8-9% in 2025, outpacing all other major economies. Crude steel output is expected to continue its upward trajectory, buoyed by new capacity additions and robust domestic consumption. While import pressures are likely to persist, government intervention may help stabilize domestic prices and margins. The industry faces challenges such as global price volatility, import competition, and the imperative for ongoing investment in technology and decarbonization, but Indias low per capita consumption, rapid urbanization, and infrastructure push provide ample room for long-term growth.

Indias steel industry, building on its resilient performance in 2024 and with a positive outlook for 2025, is poised to remain a global leader in growth. While challenges from imports and global price trends persist, supportive policies, robust demand, and continued investment position the sector for sustained expansion in the coming years.

Source: World Steel Association, India Steel Association, IBEF, Ministry of Steel

The Indian welding consumables market has shown remarkable growth in recent years and is poised for continued expansion. This growth is underpinned by several factors, most notably the rapid expansion of renewable energy projects, robust infrastructure development, and the increasing adoption of advanced welding technologies across key industries.

One of the primary drivers of the market is the surge in renewable energy installations, such as wind and solar power projects. These projects require extensive metal fabrication and joining, thereby fueling the demand for high-quality welding consumables. The oil and gas sector also plays a significant role, as the construction and maintenance of pipelines, storage facilities, and offshore platforms rely heavily on welding processes. Additionally, Indias ongoing urbanization and ambitious infrastructure projects — including highways, bridges, and commercial buildings — have further cemented the importance of welding consumables in ensuring the structural integrity and safety of these developments.

Technological advancements are reshaping the market landscape. The adoption of innovative welding techniques, such as laser welding, friction stir welding, and robotic welding, is driving the need for specialized consumables capable of withstanding higher temperatures, pressures, and demanding operational conditions. In the automotive and shipbuilding industries, the shift towards electric vehicles and the use of advanced, lightweight, and high- strength metals have created new opportunities for manufacturers of welding consumables. These sectors demand products that offer superior performance, reliability, and compatibility with modern manufacturing processes.

In terms of product segmentation, stick electrodes remain the dominant category in the Indian market.

Their popularity stems from their ease of use, minimal equipment requirements, and versatility in field operations, making them particularly well-suited for the diverse and often challenging conditions prevalent in India. Other significant product segments include solid wires, flux-cored wires, and submerged arc welding (SAW) wires and fluxes, each catering to specific industrial needs and applications.

Arc welding continues to be the most widely used welding technique in India, valued for its flexibility, robustness, and ability to deliver strong welds across a variety of environments. Other techniques, such as resistance welding, oxyfuel welding, and ultrasonic welding, also hold notable market shares, especially in specialized manufacturing and repair applications.

The construction sector stands out as the largest end- user of welding consumables, given the extensive welding requirements in infrastructure projects. The automobile, energy, shipbuilding, aerospace, and industrial equipment sectors also contribute significantly to market demand, each with unique requirements for welding quality, efficiency, and safety.

Several trends are shaping the future of the Indian welding consumables market. The increasing adoption of automation and laser-based welding, particularly in automotive manufacturing, is improving productivity, safety, and fuel efficiency. Sustainability is another key focus, with manufacturers developing eco-friendly consumables to reduce emissions and waste, in line with global environmental standards. Continuous research and development efforts are yielding innovative products tailored for high-performance applications in sectors like aerospace and defense. Leading companies are also investing in comprehensive customer support and training programs to ensure optimal product usage and compliance with stringent quality standards.

Overall, the Indian welding consumables market is set for sustained growth, driven by infrastructure development, industrialization, and technological progress. With a strong focus on sustainability, automation, and specialized applications, the market is expected to witness significant innovation and diversification in the coming years, solidifying its role as a critical enabler of Indias industrial and economic advancement.

Source: IMCAR Group, Maximize Market Research

Sarthak Metals, the flagship company of the esteemed Desraj Bansal Group, is recognized as Indias leading manufacturer and exporter of metallurgical consumables such as Cored Wires, Aluminium Flipping Coils, and has recently launched welding consumables such as Flux Cored Wires. The Company is distinguished by its expertise in precision metallurgy, its role in advancing and fine-tuning steel manufacturing processes, and its latest cutting-edge industrial welding consumables product portfolio.

Headquartered in Bhilai, Chhattisgarh, Sarthak Metals leverages its proximity to a major steel production hub, enabling efficient connectivity and fostering robust industry partnerships. Its commitment to excellence is reflected in its ISO 9001-2000 certified, state-of-the-art manufacturing facilities, which incorporate the latest technological advancements to ensure rigorous testing and inspection for consistently superior quality products.

Renowned as the preferred supplier to some of Indias largest steel players, Sarthak Metals has built its reputation on quality and manufacturing expertise. The Company has now extended its presence beyond the steel sector into the fabrication and industrial welding sector.

Embracing diversification, Sarthak Metals has expanded its product portfolio to reinforce its core strengths & enable business diversification. Alongside its established Cored Wires and Aluminium Flipping Coils, the Company is now growing its Flux Cored Wires business. With recent capacity expansion in place in this product category, Sarthak Metals is now better equipped to drive growth in this business division. This strategic expansion not only diversifies its revenue streams but also strengthens its presence beyond the metallurgical sector.

Through these thoughtful diversification initiatives,

Sarthak Metals is well-positioned to capitalize on emerging market opportunities, secure a strong foothold in multiple industries, and drive sustained growth while reinforcing its market leadership.

Amid ongoing challenges in the steel & ancillary industries — particularly affecting our core metallurgical consumables segment, including Cored Wires and Aluminium Flipping Coils — Sarthak Metals has demonstrated notable resilience. Despite subdued demand, lower realizations, and increased price volatility, we have sustained our market presence through a focused and strategic approach.

Instead of engaging in aggressive price-based competition, we have prioritized higher value-added products, which has helped safeguard our margins in this difficult environment.

A notable highlight of the year has been the strong initial response to our new product category, Flux Cored Wires. Encouraged by this positive momentum, we have expanded our production capacity to meet rising demand and further consolidate our position in this promising segment.

Looking ahead, we remain cautiously optimistic.

While challenges persist in our traditional business vertical, the growth of our newer offerings provides a compelling avenue for expansion. Our robust balance sheet and healthy cash reserves give us the flexibility and strength to navigate market uncertainties and seize strategic opportunities. With a continued emphasis on innovation, operational excellence, and disciplined capital allocation, Sarthak Metals is well-positioned to adapt to evolving industry dynamics and capitalize on emerging opportunities in the year ahead.

We have instituted a strong and comprehensive internal control framework aimed at safeguarding our assets, preventing unauthorised usage or disposal, and ensuring the accurate authorisation, recording, and reporting of all transactions. These systems are meticulously designed to optimize resource allocation, drive operational efficiency, and ensure strict adherence to applicable laws, regulations, and internal policies. Our internal controls also play a critical role in monitoring business processes and reinforcing accountability across the organisation.

The reliability and effectiveness of these controls have been independently verified and affirmed by our statutory auditors, further reinforcing stakeholder confidence in the integrity of our systems. Together, these measures form an integral part of our governance architecture, enabling us to operate with transparency, maintain financial discipline, and uphold the trust placed in us by our stakeholders.

At Sarthak Metals, we regard our employees as the driving force behind our resilience, innovation, and long-term growth. We are deeply committed to nurturing their potential through structured training and development initiatives aimed at enhancing their technical and professional capabilities. Our focus extends beyond attracting top talent; we strive to be an employer of choice by fostering an inclusive, collaborative, and respectful work environment. We believe that a culture built on trust, transparency, and mutual support is essential to sustaining employee engagement and organisational stability. As of March 31, 2025, our team strength exceeded 145 dedicated individuals - a tribute to our growing human capital. Looking ahead, we remain focused on strengthening these relationships, promoting internal growth opportunities, and ensuring industrial harmony. By continuously investing in our people and prioritising strong employee relations, we are laying the groundwork for sustained success and a stronger tomorrow.

Statements made in the Management Discussion and Analysis and other sections of this Annual Report that outline our objectives, expectations, projections, or estimates may be forward-looking in nature. These statements are based on certain assumptions and are subject to various risks and uncertainties that could cause actual outcomes to differ materially from those anticipated. Factors that may influence our actual results include economic and political developments in India and in the countries where we operate, fluctuations in interest rates, changes in governmental policies, regulations, tax laws, and other unforeseen events. We do not undertake any obligation to revise or update these forward-looking statements, whether due to future developments, new information, or otherwise.