Scan Steels Ltd Management Discussions

OVERVIEW

Scan Steels Limited ("the Company") is engaged in the business of manufacturing and marketing steel products and operates in an industry that plays a vital role in Indias economic and industrial development. The Companys business is supported by demand from infrastructure, construction, manufacturing, housing and other allied sectors. During the financial year ended March 31, 2026, the Company continued to operate in a dynamic business environment influenced by domestic economic conditions, infrastructure spending, steel demand, availability and pricing of key raw materials, energy costs, logistics expenses and developments in the global steel market.

During the year under review, the management remained focused on strengthening operational efficiency, optimising utilisation of available resources, maintaining product quality, managing costs and improving overall business performance. The Company continued to pursue a disciplined approach towards production, procurement, inventory and working capital management while remaining responsive to changing market conditions and customer requirements. The management believes that the long-term growth prospects of the Indian steel industry remain encouraging, supported by continued infrastructure development, urbanisation, industrial expansion and the Governments focus on strengthening domestic manufacturing capabilities. At the same time, the Company remains conscious of the cyclical nature of the steel industry and the risks arising from fluctuations in raw material prices, energy costs, steel prices, demand conditions, global economic developments and trade-related measures.

Going forward, the Company will continue to focus on operational excellence, cost optimisation, prudent financial management, product quality, customer satisfaction and sustainable business growth. Management remains committed to strengthening the Companys competitive position and creating long-term value for shareholders and other stakeholders through responsible and disciplined business practices.

GLOBAL ECONOMIC OVERVIEW

The global economic environment during FY 2025–26 remained challenging, with moderate growth, geopolitical uncertainties, changing trade policies, inflationary pressures and fluctuations in commodity and energy prices. These factors continued to influence industrial activity, investment and demand for commodities, including steel. The global steel industry, in particular, remained under pressure from subdued demand and increasing production capacity. According to the OECD Steel Outlook 2026, global steel demand declined by an estimated 2.6% in 2025, while global steelmaking capacity reached a record 2,445 million tonnes, resulting in estimated excess capacity of approximately 640 million tonnes. Global capacity utilisation declined to around 76% in 2025, reflecting the gap between available capacity and actual demand.

For 2026, the global steel outlook remains cautious. The OECD projects global steel demand to increase by only about 0.4% to approximately 1.8 billion tonnes, following the 2.6% contraction in 2025. However, the performance is expected to vary significantly across regions. Chinas steel demand is projected to decline by 0.6%, while India is expected to record stronger growth of approximately 6.7%, taking its steel demand to about 174.7 million tonnes. ASEAN demand is projected to increase by around 3.5%, indicating that emerging economies are expected to remain important drivers of global steel consumption.

From the managements perspective, the global steel industry therefore presents a mixed environment. While weak global demand, excess capacity, international competition, trade measures and volatility in raw material and energy prices remain key challenges, the stronger growth outlook for India provides a favourable opportunity for domestic steel manufacturers. The Company will continue to closely monitor global and domestic market developments and focus on operational efficiency, cost optimisation, prudent working-capital management, product quality and customer relationships. Management remains committed to maintaining financial discipline and strengthening the Companys ability to respond effectively to changing market conditions and pursue sustainable long-term growth.

INDIAN ECONOMIC OVERVIEW

The Indian economy remained resilient during FY 2025–26, supported by strong domestic consumption, infrastructure development, public capital expenditure and continued growth in manufacturing and services. Indias real GDP growth for FY 2025–26 was estimated at 7.6%, reflecting the continued strength of domestic economic activity. The economic environment remained broadly supportive for industrial sectors, although global uncertainties, commodity-price movements, geopolitical developments and external trade conditions continued to present challenges.

For the steel industry, the domestic environment remained particularly encouraging. Indias crude steel production increased by approximately 10.7% year-on-year to around 168.4 million tonnes during FY 2025–26, while finished steel consumption reached approximately 164 million tonnes, registering growth of around 7–8%. The increase in demand was supported by infrastructure development, construction, railways, manufacturing and other capital-intensive sectors.

The Governments continued focus on infrastructure development, urbanisation, roads, railways, housing and manufacturing is expected to support steel consumption over the medium to long term. Indias total steel capacity stood at approximately 220 million tonnes per annum (MTPA) in FY 2025–26, with the industry progressing towards the National Steel Policy target of 300 MTPA by 2030.

From the managements perspective, the sustained growth in domestic steel consumption provides a favourable operating environment for steel manufacturers. However, volatility in iron ore, coal and energy prices, logistics costs, steel prices, interest rates and global trade policies remain important factors affecting industry margins and profitability. The Company therefore continues to focus on efficient utilisation of resources, cost optimisation, prudent working-capital management, product quality and operational discipline.

The management believes that Indias long-term economic growth, increasing infrastructure investment and rising industrial activity provide a strong foundation for the continued development of the steel sector. The Company remains focused on leveraging these opportunities while maintaining financial discipline and effectively managing the risks arising from changes in the domestic and global economic environment.

INDUSTRY STRUCTURE AND DEVELOPMENTS

The Indian steel industry is an important part of the countrys economic and industrial development and has a strong link with infrastructure, construction, housing, manufacturing, transportation and other core sectors. The industry consists of large integrated steel producers as well as secondary steel manufacturers producing products such as sponge iron, billets, TMT bars, structural steel and other finished steel products. The growing requirement for steel in infrastructure and industrial projects continues to support the long-term demand for steel in India.

During the financial year 2025–26, the domestic steel industry witnessed continued growth in demand, supported by infrastructure development, government spending, construction activity, urbanisation and growth in manufacturing. The development of roads, railways, power projects, renewable energy, housing and industrial infrastructure continued to provide opportunities for steel manufacturers. The Company believes that these developments are expected to support the demand for steel products in the coming years.

At the same time, the steel industry remained exposed to fluctuations in the prices of key raw materials such as iron ore, coal and scrap, as well as changes in power, fuel and transportation costs. Steel prices are also influenced by domestic and global demand, imports and exports, international commodity prices and global economic conditions. These factors may affect the operating margins and profitability of steel manufacturers.

The industry is also witnessing increasing focus on energy efficiency, environmental sustainability, technological improvement and responsible use of natural resources. Steel manufacturers are required to continuously improve production efficiency and adopt appropriate measures to reduce energy consumption, emissions and waste while maintaining product quality and competitiveness.

From the managements perspective, the long-term outlook for the Indian steel industry remains positive, supported by infrastructure development, industrialisation and increasing domestic steel consumption. Scan Steels Limited will continue to focus on operational efficiency, cost optimisation, product quality, customer satisfaction and prudent financial management. The Company remains committed to responding effectively to changing industry conditions and pursuing sustainable growth while managing the risks associated with the cyclical nature of the steel industry.

BUSINESS OVERVIEW

Scan Steels Limited ("the Company") is a BSE-listed company engaged in the manufacturing of iron and steel products. The Company has an integrated secondary steel manufacturing presence, with its manufacturing facilities located in Odisha and Karnataka. Its principal products include TMT rods and other steel products, with TMT rods marketed under the brand name "SHRISHTII TMT".

The Company has developed capabilities across various stages of steel manufacturing, including DRI, steel melting, rolling and captive power generation, enabling better integration of its manufacturing operations and resource utilisation. The Company has built its presence in the steel market over several years and has established a strong regional presence, particularly in Odisha.

During FY 2025–26, the Company continued to focus on efficient manufacturing operations, product quality, cost optimisation and meeting customer requirements. Management remains focused on strengthening operational efficiency and maintaining the quality and reliability of its products while responding to changing market conditions. The Companys business is closely linked with the growth of the construction, infrastructure, housing and industrial sectors. Management believes that the continued development of infrastructure and industrial activity in India provides a favourable long-term environment for steel demand. Going forward, the Company will continue to focus on operational efficiency, prudent resource management, quality improvement and sustainable growth while creating long-term value for its stakeholders.

SWOT ANALYSIS

As part of the Business Overview, the SWOT Analysis provides managements assessment of the Companys

Strengths, Weaknesses, Opportunities and Threats in relation to its steel manufacturing operations and the prevailing business environment. The analysis highlights the Companys key internal capabilities and areas requiring attention, while also identifying external opportunities arising from the growth of the Indian steel industry and potential risks that may affect business performance. This assessment assists management in formulating appropriate business strategies, managing risks and pursuing sustainable growth.

Strengths: The Company has experience in steel manufacturing, established operational capabilities, a focus on product quality and customer relationships.

Weaknesses: The business is capital-intensive and cyclical, with performance being sensitive to raw material prices, energy costs, steel prices and market demand.

Opportunities: Growing infrastructure, construction, housing and industrial activity in India provides opportunities for increased demand for steel products.

Threats: Raw material and steel price volatility, competition, changes in demand, imports, global economic conditions and regulatory requirements may affect the Companys performance.

Management Perspective: Management remains focused on leveraging its strengths and market opportunities while addressing weaknesses and mitigating risks through operational efficiency, cost optimisation, prudent financial management and sustainable business practices.

SEGMENT-WISE PERFORMANCE

Scan Steels Limited is primarily engaged in the steel manufacturing business and its operations are principally focused on the manufacture and sale of steel products. Accordingly, the Companys business is substantially managed and reviewed as a single operating segment. The Companys performance during FY 2025–26 was influenced by domestic steel demand, steel prices, raw material availability and costs, energy and transportation expenses and overall market conditions.

During the year, the management continued to focus on efficient utilisation of manufacturing facilities, cost optimisation, product quality and effective management of raw materials and working capital. The Company also remained focused on meeting customer requirements and maintaining operational efficiency in a competitive market. The management believes that the Companys steel business has opportunities for growth arising from infrastructure development, construction, housing and industrial activity in India. At the same time, the Company continues to monitor risks relating to volatility in steel and raw material prices, competition and changes in market demand.

The detailed financial and segment information, wherever applicable, is provided in the relevant Notes to the Financial Statements, forming part of this Annual Report.

RISKS AND MITIGATION

The steel manufacturing business is exposed to various risks, including fluctuations in the prices and availability of key raw materials, volatility in steel prices, changes in market demand, energy and transportation costs, competition and operational disruptions. These factors may affect production costs, sales realisations and operating margins.

The Company seeks to mitigate these risks through effective procurement and inventory planning, continuous monitoring of market conditions, cost optimisation and efficient utilisation of manufacturing facilities. Management also focuses on preventive maintenance, quality control, workplace safety and operational monitoring to minimise production-related risks.

Working-capital and liquidity risks are managed through regular monitoring of receivables, inventory and payables and prudent financial planning. The Company also monitors applicable statutory, environmental and regulatory requirements to ensure timely compliance.

Management remains focused on strengthening operational efficiency, maintaining product quality and responding proactively to changes in the steel market. Through these measures, the Company aims to manage identified risks effectively while pursuing sustainable growth and long-term value creation for its stakeholders.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

Scan Steels Limited has established adequate internal control systems and procedures commensurate with the size, nature and complexity of its steel manufacturing operations. The internal control framework is designed to safeguard the Companys assets, ensure efficient utilisation of resources, maintain accurate and reliable financial records, prevent errors and irregularities, and ensure compliance with applicable laws and regulations.

The Company regularly monitors and reviews its internal control systems through appropriate management processes and internal checks. The Audit Committee periodically reviews the effectiveness of the internal control framework and the observations arising from internal and statutory audits, wherever applicable. Corrective actions are taken on a timely basis to strengthen controls and address identified gaps.

Based on the assessment undertaken by the management, the Company believes that its internal control systems are adequate and operating effectively in relation to its business operations. The Company remains committed to continuously strengthening its internal controls in line with its business requirements and changes in the operating environment.

INDUSTRIAL RELATIONS AND HUMAN RESOURCE MANAGEMENT

Our employees, communities, customers and suppliers are important stakeholders of the Company and contribute significantly to the continuity and growth of our business. The Company believes in building long-term, transparent and trust-based relationships with its stakeholders through regular engagement, open communication and responsible business practices.

The Company recognises the important role played by its suppliers and business partners in maintaining a reliable and efficient supply chain. Key areas of focus include timely payments, continuity of business, capacity building and local procurement. The Company aims to develop mutually beneficial relationships with business partners who share its values, business ethics and commitment to responsible and sustainable practices.

The Company believes that its people are the foundation of its growth and operational excellence. As of March 31, 2026, the Company had 1299 employees. The Human Resources Department continues to focus on maintaining healthy and cordial relations with employees and workers and on creating a safe, supportive and productive workplace. The Company promotes diversity, inclusion and equal opportunities and believes in providing a fair and respectful work environment to all employees. The recruitment and development processes focus on bringing together people with diverse skills, experience and backgrounds. The Company also encourages the participation and development of women and employees from different backgrounds. Employee engagement, skill development and continuous learning remain important areas of focus. Employees are encouraged to share ideas, participate in improvement initiatives and contribute to cross-functional projects. The Company also recognises and appreciates employee performance through appropriate recognition and reward initiatives.

Management believes that a motivated, skilled and engaged workforce is essential for achieving operational excellence and sustainable growth. The Company will continue to invest in employee development, workplace safety, engagement and welfare and strive to build a culture of excellence and continuous improvement.

DISCUSSION ON FINANCIAL PERFORMANCE WITH OPERATIONAL PERFORMANCE FINANCIAL PERFORMANCE

Highlights FY 2025-26

Financial Data	2025-26	2024-25	Growth (%)
Total Income	839.88	793.81	5.80%
Operating EBIDTA	49.09	45.3583	8.23%
EBIDTA margin (%)	5.86%	5.75%	1.91%
Depreciation and amortization expenses	15.73	15.69	0.25%
Interest Cost	8.47	8.19	3.42%
Profit before Exceptional Items	26.53	26.09	1.69%
Exceptional Items	-	-	-
PAT	19.81	19.61	1.02%
Earnings per shares (basic)	3.38	3.35	0.90%
Earnings per shares (diluted)	3.34	3.35	-0.30%

Note: The figures are in bracket shows negative

Other key Financial Indicators:

Sr. No.	RATIOS	2025-26	2024-25	CHANGE	%CHANGE
1	Debtors Turnover (No. Of days)	7	8.00	-1	-12.50%
2	Inventory Turnover (No. Of Days) *	73	80.00	-7	-8.75%
3	Interest Coverage Ratio **	5.80	5.54	0.26	4.66%
4	Current Ratio	1.79	1.82	-0.03	-1.65%
5	Debt –Equity Ratio	0.16	0.15	0.01	6.67%
6	Operating EBITDA (Margin %)	5.86%	5.75%	0.11%	1.91%
7	Net Profit Margin (%) #	2.36	2.47	-0.11	-4.45%
8	Return on Net worth (%)	4.49	4.69	-0.21	-4.37%

Note:

*Inventory turnover is high due to higher amount of inventory holding.

** Interest coverage ratio has gone up substantially due to higher EBDITA margin and lower interest on debt. #Net Profit margin has gone up substantially due to higher operational efficiency in production of finished products. OPERATIONAL PERFORMANCE

PRODUCT WISE GROSS SALES:

Breakup ( in crores)

Product	2025-26	2024-25	% change
TMT REBARS	710.78	697.74	1.87
SPONGE IRON	-	-	-
MS INGOT/MS BILLET	9.79	41.35	-76.32

PRODUCT WISE SALES QUANTITY:

Breakup (Qty in MT)

Product	2025-26	2024-25	% change
TMT REBARS	162469	153869	5.59
SPONGE IRON	-	-	-
MS INGOT/MS BILLET	2593	10750	-75.88

FINANCIAL MANAGEMENT

The Company follows a prudent approach to financial management and regularly reviews its funding requirements for ongoing projects and business operations. Senior management assesses the financial requirements and prevailing market conditions before taking decisions regarding the appropriate sources of finance. The Company meets its funding requirements through a balanced mix of borrowings from banks and financial institutions on competitive terms and internal accruals, as appropriate. The Finance Department, operating from the corporate office and manufacturing locations, is supported by qualified and experienced personnel. The department maintains proper records of financial transactions and prepares regular financial reports for review by the senior management.

The Company has appropriate financial controls and processes in place to ensure proper monitoring and utilisation of funds. Regular internal and statutory audits are undertaken to review financial systems and controls. Management continues to focus on prudent financial planning, effective working-capital management and responsible utilisation of financial resources.

OUTLOOK

The outlook for the Indian steel industry remains favourable over the medium to long term, supported by sustained economic growth, continued infrastructure development, urbanisation, housing demand and expansion in manufacturing and industrial activities. Increased investment in roads, railways, power, renewable energy and other infrastructure sectors is expected to provide continued support to domestic steel consumption.

In this evolving business environment, Scan Steels Limited remains focused on strengthening its manufacturing capabilities, improving operational efficiency, optimising costs and maintaining consistent product quality. The Company will continue to closely monitor developments in steel demand, selling prices, raw material availability, energy costs, logistics and competitive conditions and will take appropriate business measures in response to market dynamics.

Management remains cautiously optimistic about the Companys business prospects and is committed to disciplined financial management, optimum utilisation of resources, operational excellence and sustainable business practices. The Company will continue to strengthen customer relationships and enhance its ability to respond effectively to changing market requirements.

At the same time, management remains cognisant of the risks associated with volatility in steel and raw material prices, fluctuations in demand, global economic uncertainties, competitive pressures and changes in regulatory and environmental requirements. Appropriate measures will continue to be undertaken to manage these risks and protect the Companys operational and financial interests.

The Company believes that its continued focus on operational efficiency, product quality, cost competitiveness, responsible resource management and sustainable practices will enable it to capitalise on emerging opportunities in the steel sector and strengthen its position in the domestic market. The Company remains committed to creating sustainable long-term value for its shareholders and other stakeholders.

CORE VALUES AND CULTURE

The Company believes that sustainable business success is built on strong values, ethical practices and a positive corporate culture. Integrity, transparency, accountability and responsible conduct form the foundation of the Companys business operations. The Company expects its employees and business associates to follow high standards of ethical behaviour and comply with its Code of Conduct.

The Company promotes a culture of teamwork, mutual respect, fairness and open communication. Employees are encouraged to actively participate in discussions, share ideas and contribute to decision-making and continuous improvement. The Company believes that employee involvement and motivation are important for achieving operational excellence and sustainable growth.

Quality, productivity, efficient utilisation of human and material resources and responsible business practices remain key elements of the Companys management philosophy. The Company also recognises its responsibility towards the community and strives to conduct its operations in a manner that creates value for shareholders, employees, customers, business partners and society at large.

CAUTIONARY STATEMENT

This Management Discussion and Analysis Report may contain certain forward-looking statements relating to the Companys future plans, expectations, projections and business prospects. Such statements are based on the information, assumptions and expectations available to the management as on the date of this Report and are subject to various risks and uncertainties.

Actual results may differ materially from those expressed or implied in such statements due to factors such as changes in economic conditions, steel demand and prices, raw material availability and costs, competition, government policies and regulations, taxation, interest rates and other factors affecting the Companys business and operations.

The Company does not undertake any obligation to publicly update or revise these forward-looking statements to reflect subsequent events or developments, except as required under applicable laws and regulations. Accordingly, readers are advised to exercise due caution while considering such statements, as actual performance may differ from the expectations expressed herein.

CONCLUSION

Scan Steels Limited remains focused on strengthening its core steel manufacturing operations and improving operational efficiency, product quality and cost competitiveness. The Company will continue to monitor industry developments, market conditions and emerging opportunities while maintaining a prudent approach towards business risks.

Management remains committed to responsible financial management, employee development, customer satisfaction, regulatory compliance and sustainable business practices. With continued focus on operational excellence and efficient utilisation of resources, the Company aims to achieve sustainable growth and create long-term value for its shareholders and other stakeholders.

	For and on Behalf of the Board of Directors
	Scan Steels Limited
	Sd/-	Sd/
	Ankur Madaan	Praveen Patro
Date: September 1, 2026	Whole- Time Director	Director
Place: Bhubaneswar	(DIN: 07002199)	(DIN: 02469361)