Shri Hare-Krishna Sponge Iron Ltd Management Discussions

You should read the following discussion in conjunction with our restated financial statements attached in the chapter titled “Financial Information of the Company” beginning on page 167. You should also read the section titled “Risk Factors" on page 27 and the section titled “Forward looking Statement" on page 19 of this Red Herring Prospectus, which discusses a number of factors and contingencies that could affect our financial condition and results of operations. The following discussion relates to us, and, unless otherwise stated or the context requires otherwise, is based on our Restated financial Statements.

Our financial statements have been prepared in accordance with Indian GAAP, the Companies Act and the SEBI (ICDR) Regulations and restated as described in the report of our auditor date June 07, 2025 which is included in this Red Herring Prospectus under “Financial Statements". The Restated Financial Information has been prepared on a basis that differs in certain material respects from generally accepted accounting principles in other jurisdictions, including US GAAP and IFRS. Our financial year ends on March 31 of each year, and all references to a particular financial year are to the twelve-month period ended March 31 of that year.

OVERVIEW

Established in 2003, we are primarily engaged in the business of manufacturing and selling of Sponge Iron. Sponge iron is mainly used as a raw material for steel production in electric arc furnaces and induction furnaces. Through our sponge iron business, we cater to the metallic requirements of steel producers in selected geographies.

Our manufacturing facility is located in Siltara - Raipur, Chhattisgarh and is spread across an area of around 13.45 acres of land with an annual production capacity of 30,000 metric tonnes. The strategic location of our sponge iron manufacturing facility provides us with access to high-quality iron ore, iron ore pellets, coal and dolomite which are essential raw materials for producing sponge iron. During production of sponge iron, a solid waste is produced as a by-product called dolochar. For the Fiscal 2025, our revenue from operations stood at Rs. 8,047 lakhs of which revenue from sponge iron, Iron Ore fines, dolochar and other items (dust and waste scrap) contributed 95.67%, 2.86%, 1.02% and 0.45% respectively.

Due to increasing power costs, our manufacturing operations for mild steel ingots, steel shots, grits, and other steel products have been temporarily shut down since 2020. Despite having a well-defined production process and all necessary machinery installed at our manufacturing unit, the economic environment has not supported sustained operations. Therefore, we are planning to install a captive power plant on our premises using proceeds from the issue. The installation of the captive power plant will enable us to resume and sustain our operations effectively.

We have been granted ISO 9001:2015 for quality management systems, ISO 14001:2015 for environmental management systems and ISO 45001:2018 for occupational health and safety management systems. Our manufacturing facility is equipped with requisite technology and infrastructure including machineries, testing laboratory other handling equipments to facilitate smooth manufacturing process. The key raw materials to produce sponge iron are iron ore/iron ore pellets, coal and dolomite. Sponge iron manufacturing is highly sensitive to raw material characteristics that would help obtain the rated capacity and the desired product quality. To ascertain the suitability of our raw materials in a rotary kiln, we have in-house testing laboratory that is responsible for conducting tests on raw materials i.e .coal, iron ore and dolomite to check their chemical and physical properties, so as to ensure that the product conform with the pre-determined standards. Currently, we sell our products primarily in the state of Maharashtra, Madhya Pradesh and Chhattisgarh.

Our Company is managed by Mr. Manoj Parasrampuria, Chairman and Managing Director who looks after the affairs of the Company and has considerable experience in steel Industry. We believe our success is the result of sustained efforts over the years in key aspects of our business, such as products, process improvements and increased scale of operations. The details of our financial performance as per the restated financial statements for the Fiscal years ended March 31, 2025, 2024 and 2023, are set forth below:

Key Performance Indicators of our company

(€In Lakhs except percentages and ratios)

Key Financial Performance	FY 2024-25	FY 2023-24	FY 2022-23
Revenue from operations(1)	8,047.00	8,226.63	9,425.17
EBITDA(2)	1,078.23	1,210.61	1,396.52
EBITDA Margin(3)	13.40%	14.72%	14.82%
pat(4)	919.80	1,017.44	1,052.53
PAT Margin(5)	11.43%	12.37%	11.17%
RoE(6)	13.33%	17.16%	21.50%
RoCE(7)	14.70%	19.24%	26.11%

Notes:

Revenue from operation means revenue from sales, service and other operating revenues <2 EBITDA is calculated as Profit before tax + Depreciation + Interest Expenses - Other Income <3 EBITDA Margin is calculated as EBITDA divided by Revenue from Operations <4) pa t is calculated as Profit before tax - Tax Expenses

5 PA TMargin is calculated as PA T for the year divided by Revenue from operations.

<6 Return on Equity is ratio of Profit after Tax and Average Shareholder Equity

<7 Return on Capital Employed is calculated as EBIT divided by capital employed, which is defined as shareholders equity plus Long term borrowings and Short term borrowings+ Deferred Tax liability (net).

Explanation for KPI metrics

KPI	Explanations
Revenue from Operations	Revenue from Operations is used by our management to track the revenue profile of the business and in turn helps to assess the overall financial performance of our Company and volume of our business
EBITDA	EBITDA provides information regarding the operational efficiency of the business
EBITDA Margin (%)	EBITDA Margin (%) is an indicator of the operational profitability and financial performance of our business
PAT	Profit after tax provides information regarding the overall profitability of the business
PAT Margin (%)	PAT Margin (%) is an indicator of the overall profitability and financial performance of our business
RoE (%)	RoE provides how efficiently our Company generates profits from shareholders funds
RoCE (%)	RoCE provides how efficiently our Company generates earnings from the capital employed in the business.

STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES

For details in respect of Statement of Significant Accounting Policies, please refer to “Annexure IV of Restated Financial Statements “beginning on page 175 of this Red Herring Prospectus.

Factors Affecting our Results of Operations

Our business is subjected to various risks and uncertainties, including those discussed in the section titled “Risk Factors” beginning on page 27 of this Red Herring Prospectus. Our results of operations and financial conditions are affected by numerous factors including the following:

3. Performance of the Steel industries in India;

4. General economic and business conditions in the markets in which we operate and in the local, regional, national and international economies;

5. Changes in consumer demand;

6. Failure to successfully upgrade our product portfolio, from time to time;

7. Any change in government policies resulting in increases in taxes payable by us;

8. Our ability to retain our key managements persons and other employees;

9. Changes in laws and regulations that apply to the industries in which we operate.

10. Our failure to keep pace with rapid changes in technology;

11. Our ability to grow our business;

12. Our ability to make interest and principal payments on our existing debt obligations and satisfy the other covenants contained in our existing debt agreements:

13. General economic, political and other risks that are out of our control;

14. Inflation, deflation, unanticipated turbulence in interest rates, equity prices or other rates or prices;

15. Companys ability to successfully implement its growth strategy and expansion plans ;

13. Failure to comply with regulations prescribed by authorities of the jurisdictions in which we operate;

14. Inability to successfully obtain registrations in a timely manner or at all;

15. Occurrence of Environmental Problems & Uninsured Losses;

16. Conflicts of interest with affiliated companies, the promoter group and other related parties;

17. Any adverse outcome in the legal proceedings in which we are involved;

18. Concentration of ownership among our Promoter;

19. The performance of the financial markets in India and globally;

20. Impact of covid-19 on our business and operations; and

21. Global distress due to pandemic, war or by any other reason.

Discussion on Result of Operations

The following discussion on results of operations should be read in conjunction with the Restated Financial Statements for the financial years ended on March 31, 2025, March 31, 2024 and March 31, 2023.

(Rs. in lakhs)

Particulars	For the year ended 31st March, 2025	For the year ended 31st March, 2024	For the year ended 31st March, 2023
Revenue from operations	8,047.00	8,226.63	9,425.17
Other Income	313.02	266.50	99.78
Total Income (1+2)	8,360.02	8,493.13	9,524.95
Expenses:
Cost of materials consumed	6,227.89	6,115.92	7,246.95
Changes in inventories of finished goods	(100.73)	0.84	42.71
Employee benefits expenses	369.65	356.67	279.80
Finance costs	20.17	23.09	21.58
Depreciation and amortization expense	142.28	99.15	60.78
Other Expense	463.73	528.67	447.53
Total Expenses	7,122.99	7,124.34	8,099.35
Profit before tax (3-4)	1237.03	1,368.79	1,425.60
Prior Period Items	-	-
Profit Before Tax (5+6)	1237.03	1,368.79	1,425.60
Tax Expense:
Current Tax	326.04	355.00	375.00
Deferred Tax	(7.88)	(3.06)	(2.60)
Deferred Tax for earlier years	-	-	-
Income Tax for Earlier Years	(0.93)	(0.59)	0.67
Profit / (Loss) for the year (7-8)	919.80	1,017.44	1,052.53
Profit/(Loss) for the period	919.80	1,017.44	1,052.53

Revenue from operations:

Revenue from operations mainly consists of sale of manufactured goods, by products and scrap.

Other Income:

Our other income primarily comprises of Interest Income on security deposit, loan and fixed deposits etc.

Expenses:

Companys expenses consist of Raw material consumption, Change in inventories of finished goods, Employee benefits expense, Finance costs, Depreciation and amortization and other expenses.

Cost of Raw material consumed:

Our Raw Material Consumption comprises of purchase of material, changes in the inventory of raw material for manufacturing the end products, and consumption of stores, spares and consumables etc.

Change in inventories of finished goods and work in progress:

Our changes in the inventory comprises of changes in the finished goods and changes in rejected raw materials.

Employee benefits expense:

Our employee benefits expense primarily comprises of Salaries, Wages & Bonus, Staff Welfare Expenses, and Contribution to provident and other funds and Gratuity Expense.

Finance Costs:

Our finance cost includes Interest expense and Other Borrowing cost.

Depreciation and Amortization Expenses:

Depreciation includes depreciation on Property, Plant &Equipments, furniture and intangible assets etc.

Other Expenses:

Our other expenses include power and fuel costs, electricity charges, insurance premiums, testing expenses, Advertisement expenses, payments to statutory auditors for audit, Bad debts written off, brokerage and commission fees, professional charges, corporate social responsibility expenses, rent, GST payments, handling charges, linkage auction charges, property, plant, and equipment write-offs, miscellaneous expenses, printing and stationery costs, rates and taxes, Repairs and maintenance expenses, buildings, plant and machinery, and other items, Business promotion expenses, security expenses, share of loss from LLP, and travelling and conveyance.

Details of Financial Year 2025 Compared to Financial Year 2024 (Based on Restated Financial Statements)

Total Income:

Total income for the financial year 2024-25 stood at Rs.8360.02 Lakhs as compared to Rs. Rs.8493.13 Lakhs in financial year 2023-24 representing a decrease of 1.57%.

Revenue from Operations:

During the financial year 2024-25, the revenue from operations of our company decreased to Rs. 8047.00 Lakhs as against Rs. 8226.63 Lakhs in financial year 2023-24, representing a decrease of 2.18%. Such decrease was due to decrease in sale of Sponge iron during the FY 2024-25.

Other Income:

Other income significantly increased to ?313.02 lakhs in 2024-25 from ?266.50 lakhs in 2023-24, representing a rise of 17.44%. This substantial increase was attributed to higher interest income in FY 2024-25.

Total Expenses:

Total expenses for the financial year 2024-25 increased to Rs. 7122.99 Lakhs as compared to Rs. 7124.34 Lakhs in financial year 2023-24 representing a marginal decrease.

Cost of Raw material consumed:

The cost of materials consumed increased to Rs. 6,227.89 lakhs in 2024-25 from ?6115.92 lakhs in 2023-24, an increase of 1.83%. Such increase was due to increase in raw material consumption during the year.

Change in inventories of finished goods, work in progress:

Changes in inventories dropped significantly to ? (100.73) lakhs in 2024-25 from ?0.84 lakhs in 2023-24, This negative change indicates a significant increase in closing stock of finished goods.

Employee benefits expense:

Employee benefits expenses increased to Rs. 369.65 lakhs in 2024-25 from ?356.67 lakhs in 2023-24, an increase of 3.64%, Such increase was due to increase in Salaries & Wages from 312.60 lakhs in FY. 2023-24 as compared to Rs. 351.31 Lakhs in FY. 2024-25 which amount to increase of 12.38%.

Finance costs:

Finance costs decreased to ?20.17 lakhs in 2024-25 from ?23.09 lakhs in 2023-24, a decline of 12.65%. This decrease was due to decrease in other borrowings cost in FY 2024-25 by 40.88% in compared to FY 2023-24.

Depreciation and Amortization Expenses:

Depreciation and amortisation expenses increased to ?142.28 Lakhs in 2024-25 from ?99.15 Lakhs in 2023 -24, representing a rise of 43.37%, primarily due to capital investments in assets.

Other expense:

Other expenses decreased to ?463.73 lakhs in 2024-25 from ?528.67 lakhs in 2023-24, a decrease of 12.29%. This decrease is due to decrease in (i) Travelling & Conveyance from Rs. 57.15 lakhs in FY 2023-24 as compared to Rs. 11.93 lakhs in FY.2024- 25 which amount to decrease of 79.13%; (ii) Repairs to Plant & Machinery from Rs. 28.45 lakhs in FY. 2023-24 as compared to Rs. 8.73 Lakhs in FY. 2024-25 which amount to decrease of 69.32%; (iii) Printing and Stationery from Rs. 4.91 lakhs in FY. 2023- 24 as compared to Rs. 1.02 Lakhs in FY. 2024-25 which amount to decrease of 79.22%; (iv) Handling Charges from Rs. 13.39 lakhs in FY. 2023-24 as compared to Rs. 6.15 Lakhs in FY. 2024-25 which amount to decrease of 54.07%; (v) Linkage Auction Charges from Rs. 6.27 lakhs as compared to Rs. 0.00 Lakhs in FY. 2024-25 which amount to decrease of 100%. (vi) Advertisement Expenses from Rs. 10.27 lakhs in FY. 2023-24 as compared to Rs. 0.00 Lakhs in FY. 2024-25 which amount to decrease of 100% and (vii) Power and Fuel from Rs. 46.53 lakhs in FY. 2023-24 as compared to Rs. 38.31 Lakhs in FY. 2024- 25 which amount to decrease of 17.66%.

Restated Profit/ (Loss) before tax:

Restated Profit before Tax for the financial year 2024-25 was Rs. 1,237.03 Lakhs as compared to Rs. 1,368.79 Lakhs during the financial year 2023-24, showing a decline of 10.55%which amounts to decrease was majorly due to factors as mentioned above.

Restated Profit/ (Loss) after tax:

Restated Profit after Tax for the financial year 2024-25 was Rs. 919.80 Lakhs as compared to Restated profit after tax of Rs. 1017.44 Lakhs during the financial year 2023-24. This decline in profit reflects the overall reduction in total income and profit before tax.

Details of Financial Year 2024 Compared to Financial Year 2023 (Based on Restated Financial Statements)

Total Income:

Total income for the financial year 2023-24 stood at Rs.8493.13 Lakhs as compared to Rs. 9524.95 Lakhs in financial year 2022-23 representing a decrease of 10.79%.

Revenue from Operations:

During the financial year 2023-24, the revenue from operations of our company decreased to Rs. 8226.63 Lakhs as against Rs.9425.17 Lakhs in financial year 2022-23, representing a decrease of 12.73%. Such decrease was due to decrease in sale of Sponge iron during the FY 2023-24.

Other Income:

Other income significantly increased to ?266.50 lakhs in 2023-24 from ?99.78 lakhs in 2022-23, representing a rise of 167.77%. This substantial increase was attributed to higher interest income in FY 2023-24.

Total Expenses:

Total expenses for the financial year 2023-24 increased to Rs. 7124.34 Lakhs as compared to Rs. 8099.35 Lakhs in financial year 2022-23 representing a decrease of 12.04%. Such decrease was due to decrease in the volume of business operations of the company.

Cost of Raw material consumed:

The cost of materials consumed fell to Rs. 6,115.92 lakhs in 2023-24 from ?7,246.95 lakhs in 2022-23, a decrease of 15.64%. Such decrease was due to decrease in (i) opening stock of Raw material from Rs. 971.91 Lakhs in FY. 2022-23 as compared to Rs.630.58 Lakhs in FY 2023-24 representing an decrease of 35.12% and (ii) Increase in Closing Stock of Raw material from Rs. 630.58 lakhs in FY 2022-23 as compared to Rs. 853.46 lakhs in FY 2023-24 representing an increase of 35.35%.

Change in inventories of finished goods, work in progress:

Changes in inventories dropped significantly to ?0.84 lakhs in 2023-24 from ?42.71 lakhs in 2022-23, a decrease of 98.03%, which was due to increase in closing stock finished goods.

Employee benefits expense:

Employee benefits expenses increased to Rs.356.67 lakhs in 2023-24 from ?279.80 lakhs in 2022-23, up by 27.46%. Such increase was due to increase in Salaries & Wages from 263.28 lakhs in FY. 2022-23 as compared to Rs. 312.60 Lakhs in FY. 2023-24 which amount to increase of 18.73%.

Finance costs:

Finance costs increased to ?23.09 lakhs in 2023-24 from ?21.58 lakhs in 2022-23, an increase of 6.99%. This increase was due to increase in other borrowings cost in FY 2023-24 by 19.38% in compared to FY 2022-23.

Depreciation and Amortization Expenses:

Depreciation and amortisation expenses increased to ?99.15 lakhs in 2023-24 from ?60.78 lakhs in 2022-23, representing a rise of 63.39%. This increase is due to higher asset investments.

Other expense:

Other expenses increased to ?528.67 lakhs in 2023-24 from ?447.53 lakhs in 2022-23, an increase of 18.14%. This increase is due to increase in (i) Travelling & Conveyance from Rs. 2.79 lakhs in FY 2022-23 as compared to Rs. 57.15 lakhs in FY.2023- 24 which amount to increase of 1946.88%; (ii) Misc. Expenses from Rs. 17.65 lakhs in FY. 2022-23 as compared to Rs. 40.06 Lakhs in FY. 2023-24 which amount to increase of 126.97%; (iii) Insurance Charges from Rs. 5.33 lakhs in FY. 2022-23 as compared to Rs. 6.89 Lakhs in FY. 2023-24 which amount to increase of 29.32%; (iv) Testing expenses from Rs. 15.03 lakhs in FY. 2022-23 as compared to Rs. 21.50 Lakhs in FY. 2023-24 which amount to increase of 43.07%; (v) CSR expenses from Rs. 13.86 lakhs as compared to Rs. 23.99 Lakhs in FY. 2023-24 which amount to increase of 72.98%. and (vi) Payment to Statutory auditors from Rs. 1.00 lakhs as compared to Rs. 7.75 Lakhs in FY. 2023-24 which amount to increase of 675%.

Restated Profit/ (Loss) before tax:

Restated Profit before Tax for the financial year 2023-24 was Rs.1368.79 Lakhs as compared to Restated profit before tax of Rs. 1425.60 Lakhs during the financial year 2022-23 which amounts to decrease was majorly due to factors as mentioned above.

Restated Profit/ (Loss) after tax:

Restated Profit after Tax for the financial year 2023-24 was Rs. 1017.44 Lakhs as compared to Restated profit after tax of Rs. 1052.53 Lakhs during the financial year 2022-23. This decline in profit reflects the overall reduction in total income and profit before tax.

Information required as per Item (II) (C) (iv) of Part A of Schedule VI to the SEBI Regulations:

An analysis of reasons for the changes in significant items of income and expenditure is given hereunder:

1. Unusual or infrequent events or transactions

There has not been any unusual trend on account of our business activity. Except as disclosed in this Red Herring Prospectus, there are no unusual or infrequent events or transactions in our Company.

2. Significant economic changes that materially affected or are likely to affect income from continuing operations.

There are no significant economic changes that may materially affect or likely to affect income from continuing operations.

3. Known trends or uncertainties that have had or are expected to have a material adverse impact on sales, revenue or income from continuing operations.

Apart from the risks as disclosed under Section “Risk Factors” beginning on page 27 of the Red Herring Prospectus, in our opinion there are no other known trends or uncertainties that have had or are expected to have a material adverse impact on revenue or income from continuing operations.

4. Future changes in relationship between costs and revenues

Other than as described in the sections “Risk Factors”, “Our Business” and “Managements Discussion and Analysis of

Financial Condition and Results of Operations” on pages 27, 121 and 219 respectively, to our knowledge, no future relationship between expenditure and income is expected to have a material adverse impact on our operations and finances.

5. Total turnover of each major industry segment in which our Company operates

Our business activity primarily falls within a single business and geographical segment, i.e. is engaged in the business of manufacturing of machineries, as disclosed in “Restated Financial Statements” on page 167, we do not follow any other segment reporting.

6. Status of any publicly announced New Products or Business Segment

Except as disclosed in the Chapter “Our Business” on page 121, our Company has not announced any new product or service.

7. Seasonality of business

Our business is not subject to seasonality. For further information, see “Industry Overview” and “Our Business” on pages 104 and 121, respectively.

8. Dependence on single or few customers

Substantial portion of revenues has been dependent upon few customers, with which we do not have any firm commitments. For instance, our top five customers for the fiscal year ended March 31, 2025, March 31, 2024 and March 31st, 2023 accounted for 70.22%, 76.25% and 61.51% of our revenue of operations for the respective year. For further details, refer risk factor, “Substantial portion of our revenues has been dependent upon few customers, with which we do not have any firm commitments. The loss of any one or more of our major customer would have a material adverse effect on our business, cash flows, result of operations andfinancial condition. on page 27 of this Red Herring Prospectus.

9. Competitive conditions

Competitive conditions are as described under the Chapters “Industry Overview” and “Our Business” beginning on pages 104 and 121 respectively of this Red Herring Prospectus.

10. Details of material developments after the date of last balance sheet i.e. March 31, 2025.

After the date of last Balance sheet i.e. March 31, 2025, the following material events have occurred after the last audited period:

1. Kamlesh Kumar Dewangan appointed as Additional Director with effective from March 17, 2025 and regularized and redesignated as whole time director with effect from April 09, 2025

2. Our Company has approved the Red Herring Prospectus vide resolution in the Board Meeting dated June 17, 2025