A. INDUSTRY STRUCTURE AND DEVELOPMENTS a) GLOBAL ECONOMY
The global economy grew 3.4% in 2022 with nascent signs of recovery seen in the
second half of the year. A gradual recovery post the pandemic was beginning to take shape
with unwinding of supply chain disruptions, however, the Russia-Ukraine conflict resulted
in inflationary pressure and slowed the pace of recovery.
In view of pent-up demand spike, lingering supply disruptions, and commodity price
spikes, monetary action was taken by various central banks. Central banks across the globe
have resorted to raising policy rates to tackle inflationary pressure. With strong policy
action from various central banks, food and energy prices have come down, but underlying
price pressures are proving sticky, with labour markets tight in a number of economies.
In 2023, global growth is estimated to slow down to 2.8% and improve slightly to 3.0%
in 2024. The global economic recovery is showing signs of uncertainty with persistent high
debt levels, ongoing geopolitical conflict and financial sector turmoil -unexpected
failures of two specialised regional banks in the
United States in mid-March 2023 and the collapse of confidence in a major European
bank. Growth in advanced economies is expected to slow down from 2.7% in 2022 to 1.3% and
1.4% in
2023 and 2024 respectively. However, the performance of emerging markets is expected to
be slightly better with growth being maintained from 4.0% in 2022 to 3.9% in 2023 and
slight improvement to 4.2% in 2024. In the medium term, it is imperative to focus on
structural factors impeding supply and take appropriate steps to strengthen multilateral
cooperation. This will help in creating a more resilient world economy.
1. IMF World Economic Outlook April 2023 b) INDIAN ECONOMY OVERVIEW
Despite sluggish global economy, India is poised to become the worlds
fastest-growing economy. India has set an ambitious target of becoming a USD 5 trillion
economy by 2025 and more than double its annual exports to USD 2 trillion by 2030 aided by
rise in valueadded manufactured products and services exports. The Indian government is
undertaking a slew of measures towards achieving these targets, including promotion of
Make in India,
Production Linked Incentives (PLI) scheme, Housing for All, rural electrification,
refurbishing foreign trade policy, extended
Emergency Credit Linked Guarantee Scheme, etc. China plus one strategy coupled with
more liberal trade policy like new export hubs, ease of doing business and online
approvals is poised to aid manufacturing sector growth in India
According to the estimates by National Statistics Office (NSO), Indias GDP growth is
estimated at 7.2% for FY 2023. Despite GDP growth came in slightly lower than the last
year, India remains one of the fastestgrowing economies among the major economies. Growth
in FY 2023 is primarily attributable to rise in private consumption and capital formation
which have helped in generating employment, reflected in the declining urban unemployment
rate.
FY 2023 has witnessed a strong rebound of private consumption and higher capital
expenditure, which in turn resulted in providing boost to production activity. Worlds
largest vaccination drive involving over 2 billion doses served to lift consumer
sentiments and enabled people to spend on contact-based services, such as restaurants,
hotels, shopping malls, and cinemas gave boost to consumption. Well-capitalised public
sector banks led to increase in the credit supply and the credit growth to MSMEs. Robust
government capital expenditure coupled with sustained increase in private capital
expenditure is expected to continue with strengthening of corporate balance sheets.
Measures taken by the Government and RBI, along with the easing of global commodity
prices, aided in controlling retail inflation level below the RBIs upper tolerance target
of 6%, in March 2023. The Union Budget 2023-24 aimed at strengthening Indias economic
status in the 75th year of Indias independence. The
Vision for ‘Amrit Kaal was articulated in the Budget which centred around
opportunities for citizens with focus on youth, growth & job creation and strong &
stable macro-economic environment. Seven priorities, termed Saptarishi, were adopted to
guide the country towards ‘Amrit Kaal, thus providing a blueprint for an empowered
and inclusive economy. The priorities being, inclusive development, reaching the last
mile, infrastructure & investment, unleashing the potential, green growth, youth power
and financial sector Indian GDP growth is expected to be brisk in FY2024 at 6.5%, led by
strong credit disbursal, higher Rabi crop output and intensive capital investment cycle.
The expansion of public digital platforms and several measures like PM GatiShakti, the
National Logistics Policy, and PLI schemes are expected to provide the needed boost to
manufacturing output. However, the depreciating rupee coupled with tight monetary policy
by the US Fed pose risk to pace of economic growth.
2. Source: NSO, Press Information Bureau (pib.gov.in).
B. OVERVIEW
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
FY2022-23. This should be read in conjunction with the Companys financial statements, the
schedules and notes thereto and other information included elsewhere in this Integrated
Report and Annual
Accounts 2022-23. The Companys financial statements have been prepared in accordance
with Indian Accounting Standards (IndAS) complying with the requirements of the Companies
Act, 2013, as amended and regulations issued by the Securities and Exchange
Board of India (SEBI) from time to time.
This Management Discussion & Analysis report presents the key performance
highlights of the year 2022-23, pertaining to the Companys business. To avoid duplication
between the Directors Report and the Management Discussion and Analysis, we present below
a composite summary of performance of the business and functions of the Company.
C. EXTERNAL ENVIRONMENT a) OUTLOOK
Going forward, inflation trends, central bank actions, expected recovery in China and
the Russia-Ukraine conflictwill determine the course of the worlds economic growth in CY
2023. Headline inflation has eased, though core inflation is yet to peak. The IMF expects
global inflation to drop to 6.6% (from 8.8% in 2022) in CY 2023 and further to 4.3% in CY
2024, but still stay above the pre-pandemic levels of about 3.5%. In response, the pace
and intensity of interest rate hikes by major central banks is likely to be benign, but
interest rates are likely to remain higher for longer.
Global GDP growth is projected at 2.8% in CY 2023 and at 3.0% in CY
2024, led primarily by Asian economies such as India and China and other developing
economies. The outlook for advanced economies such as the US and the Eurozone remains
weak, with fears of a recession still looming on the horizon. down significantly but
Goodsandcommodityinflation services inflation in developed markets remains elevated due to
tight labour markets. Aggressive policy tightening by the central banks in the US and
Europe to control inflation has impacted growth and also led to a banking sector turmoil
recently, which has potential for further downside risks.
The US economy is decelerating, and combined with the high wage inflation and banking
sector issues, could lead to a slowdown in H2 CY
2023. The tight labour markets driven by strong services demand is expected to weaken
in Q3 CY 2023. This will help cool inflation but may affect growth. Ongoing
financialsector stress could force a pause in further rate hikes. There is a risk that the
US will be pushed into a recession in CY 2023, with a significant investment, despite the
strong jobs market and healthy balance sheets of households.
The Euro area averted a severe recession due to good energy management helped by a mild
winter, and manufacturing and services are picking up. Wage-driven inflation and any
banking crisis growth. Moreover, according to the International Energy Agency (IEA),
possibilities of a further decline in delivery of Russian natural gas to the Euro area
could further dampen growth, especially in the case of a lower availability of liquified
natural gas (LNG), which accounted for majority of gas demand, and weather factors such as
a dry summer and a cold winter in Q4.
In Japan, manufacturing remains subdued but services have picked up. Wage inflation and
global slowdown are risks to GDP growth. Chinas recovery, post the Zero COVID policy, is
being driven more by services than manufacturing. Slowing exports and a lacklustre
property market are headwinds. Fiscal and monetary policy is expected to be supportive as
inflation remains low in China.
World Economic Outlook Projections (GDP growth %)
| REGION |
Year to Year (%) |
|
2022 |
2023 |
2024 |
| World |
3.4 |
2.8 |
3.0 |
| Advanced Economies |
2.7 |
1.3 |
1.4 |
| Emerging Markets & |
4.0 |
3.9 |
4.2 |
| Developed economies |
|
|
|
| United States |
2.1 |
1.6 |
1.1 |
| Euro Area |
3.5 |
0.8 |
1.4 |
| Japan |
1.1 |
1.3 |
1.0 |
| China |
3.0 |
5.2 |
4.5 |
| India |
6.8 |
5.9 |
6.3 |
D. CAUTIONARY STATEMENT
Statements in the Management Discussion and Analysis describing the Companys
objectives, projections, estimates and expectations are
“forward-looking statements” within the meaning of applicable securities laws
and regulations. Actual results may differ materially from those expressed or implied.
Important factors that could make a difference to the Companys operations include
economic conditions affecting demand/supply and price conditions in the domestic and
overseas markets in which the Company operates; changes in the Government regulations; tax
laws and other statutes and incidental factors.
E. INDIAN STEEL INDUSTRY
The Indian economy stayed on a steady growth path, demonstrating strong resilience to
multiple headwinds stemming from elevated inflation and a volatile global macro
environment. The Indian economy is estimated to have grown by 7.2% in FY 2022-23, driven
by strong private consumption, steady manufacturing and normalisation of contact-intensive
services sectors. Although inflation remained the upper band of the RBIs comfort range of
4-6% for most part of FY
2022-23, it started easing during the third and fourth quarters, as the central bank
hiked its policy rates by 250 basis points cumulatively to decline in residential contain
inflation.In April 2023, the RBI hit a pause to its rate hike cycle, and is widely
expected to maintain it, if a benign inflationary environment persists.
The Indian economy growth stems from the resilience seen in the rebound of private
consumption, seamlessly replacing the export risks to 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 utilisation across sectors. The rebound in
consumption was engineered by the near-universal vaccination coverage overseen by the
government, which brought people back to the streets to spend on contact-based services,
such as restaurants, hotels, shopping malls, and cinemas, among others. In FY 2022-23,
growth has been principally led by private consumption and capital formation. The capex of
the central government, which increased by 26% in FY 2022-23, was another growth driver in
the current year. It has helped generate employment, seen in the declining urban
unemployment rate and in the faster net registration in
Employee Provident Fund. 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 able to generate. The much-improved financial health of well-capitalised
public sector banks has positioned them well to increase the credit supply.
As of April 2022, India was the worlds second-largest producer of crude steel, with an
output of 10.14 MT. In FY22, the production of crude steel and finished steel stood at
133.596 MT and 120.01 MT, respectively. In April-July 2022, the production of crude steel
and finished steel stood at 40.95 MT and 38.55 MT respectively.
In FY22, the production of crude steel and finished steel stood at
133.596 MT and 120.01 MT, respectively. In April-Oct 2022, the production of crude
steel and finished steel stood at 71.56 MT and
68.17 MT respectively. In FY22, crude steel production in India is estimated to
increase by 18%, to reach 120 million tonnes, driven by rising demand from customers. The
consumption of finishedsteel stood at 105.751 MT in FY22. In July 2022, the consumption of
finished steel stood at 9.17 MT.
Steel companies are looking to restart expansion projects on the back of burgeoning
steel processes with a capacity addition of 29 MT.
Between April 2021-January 2022, consumption of finished steel stood at 86.3 MT.
In FY22, demand for steel is expected to increase by 17% to 110 million tonnes, driven
by rising construction activities. Tata Steel is planning to set up more scrap-based
facilities that will have a capacity of at least a billion tonnes by 2025. Tata Steel in
India is also planning to expand its annual capacity from 34 MTPA to 55 MTPA by 2030. In
FY22, exports and imports of finished steel stood at 13.49 MT and 4.67 MT, respectively.
In FY22, Indias export rose by 25.1% YoY, compared with 2021. Indias per capita
consumption of steel grew at a
CAGR of 4.43% from 46 kgs in FY08 to 74.10 kgs in FY19. In July 2022 exports of
finished steel stood at 3.80 lakh MT.
In FY23 (until January 2023), the exports of finished steel stood at 5.33
MT, while the imports stood at 5 MT. In FY22, exports and imports of finished steel
stood at 13.49 MT and 4.67 MT, respectively. In FY22, Indias export rose by 25.1% YoY,
compared with 2021. In FY21, India exported 9.49 MT of finished steel. In December
finished steel stood at 4.42 lakh tonnes.
The annual production of steel is anticipated to exceed 300 million tonnes by
2030–2031. By 2030–31, crude steel production is projected to reach 255 million
tonnes at 85% capacity utilisation achieving 230 million tonnes of finished steel
production, assuming a 10% yield loss or a 90% conversion ratio for the conversion of raw
steel to finished steel. With net exports of 24 million tonnes, consumption is expected to
reach 206 million tonnes by the years 2030–1931. As a result, it is anticipated that
per-person steel consumption will grow to 160 kg.
F. INVESTMENTS
The steel industry and its associated mining and metallurgy sectors have seen major
investments and developments in the recent past.
According to the data released by the Department for Promotion of Industry and Internal
Trade (DPIIT), between April
2000-December 2022, Indian metallurgical industries attracted
FDI inflows of US$ 17.22 billion.
In FY22, demand for steel was expected to increase by 17% to 110 million tonnes, driven
by rising construction activities.
Some of the major investments in the Indian steel industry are as follows:
• 67 applications from 30 companies have been selected under the
Production Linked Incentive (PLI) Scheme for Specialty Steel. This will attract
committed investment of Rs. 42,500 crore (US$ 5.19 billion) with a downstream capacity
addition of 26 million tonnes and employment generation potential of 70,000.
In September 2022, Steel Authority of India Limited (SAIL), a Maharatna PSU, supplied
30,000 tonnes of the entire DMR grade specialty steel for the nations first indigenously
built Aircraft
Carrier INS Vikrant.
In August 2022, Tata Steel signed an MoU with Punjab Government to set up a steel scrap
based electric arc furnace steel plant.
In May 2022, Tata Steel announced a CAPEX of Rs. 12,000 crore (US$ 1.50 billion).
• In October 2021, Tata Steel was planning to set up more scrap-based facilities
that will have a capacity of at least a billion tonnes by 2025.
In October 2021, JSW Steel invested Rs. 150 billion (US$ 19.9 million) to build a steel
plant in Jammu and Kashmir and boost manufacturing in the region. exports of
• In October 2021, ArcelorMittal and Nippon Steel Corp.s joint venture steel firm
in India, announced a plan to expand its operations in the country by investing ~Rs. 1
trillion (US$ 13.34 billion) over 10 years.
• In August 2021, Tata Steel announced to invest Rs. 8,000 crore
(US$ 1.08 billion) in capital expenditure to develop operations in
India in FY22.
• In August 2021, ArcelorMittal announced to invest Rs. 1 lakh crore
(US$ 13.48 billion) in Gujarat for capacity expansion.
• In August 2021, Tata Steel announced to invest Rs. 3,000 crore
(US$ 404.46 million) in Jharkhand to expand capacities over the next three years.
In August 2021, Jindal Steel & Power Ltd. announced plans to invest US$ 2.4 billion
to increase capacity over the next six years to meet the rising demand from customers.
In the next three years from June 2021, JSW Steel is planning to invest Rs. 47,457
crore (US$ 6.36 billion) to increase Vijayanagars steel plant capacity by 5 MTPA and
establish a mining infrastructure in Odisha.
G. Government Initiavte
ISome of the other recent Government initiatives in this sector are as follows:
• In October 2021, the government announced guidelines for the approved specialty
steel production-linked incentive (PLI) scheme.
In October 2021, India and Russia signed an MoU to carry out R&D in the steel
sector and produce coking coal (used in steel making).
In July 2021, the Union Cabinet approved the production-linked incentive (PLI) scheme
for specialty steel. The scheme is expected to attract investment worth ~Rs. 400 billion
(US$ 5.37 billion) and expand specialty steel capacity by 25 million tonnes (MT), to 42
MT in FY27, from 18 MT in FY21.
In June 2021, Minister of Steel & Petroleum & Natural Gas, Mr. Dharmendra
Pradhan addressed the webinar on ‘Making Eastern
India a manufacturing hub with respect to metallurgical industries, organised by the
Indian Institute of Metals. In 2020, ‘Mission Purvodaya was launched to accelerate
the development of the eastern states of India (Odisha, Jharkhand, Chhattisgarh, West
Bengal and the northern part of Andhra Pradesh) through the establishment of an integrated
steel hub in Kolkata, West Bengal.
Eastern India has the potential to add >75% of the countrys incremental steel
capacity. It is expected that of the 300 MT capacity by 2030-31, >200 MT can come from
this region alone.
In June 2021, JSW Steel, CSIR-National Chemical Lab (NCL), Scottish Development
International (SDI) and India H2 Alliance (IH2A) joined forces to commercialise hydrogen
in the steel and cement sectors.
Under the Union Budget 2023-24, the government allocated Rs. 70.15 crore (US$ 8.6
million) to the Ministry of Steel.
In addition, an investment of Rs. 75,000 crore (US$ 9.15 billion)
(including Rs. 15,000 crore (US$ 1.83 billion) from private sources) has been allocated
for 100 critical transport infrastructure projects for last and first mile connectivity
coal, and steel.
In January 2021, the Ministry of Steel, Government of India, signed a Memorandum of
Cooperation (MoC) with the Ministry of Economy, Trade and Industry, Government of Japan,
to boost the steel sector through joint activities under the framework of India–
Japan Steel Dialogue.
The Union Cabinet, Government of India approved the National Steel Policy (NSP) 2017,
as it intends to create a globally competitive steel industry in India. NSP 2017 envisage
300 million tonnes (MT) steel-making capacity and 160 kgs per capita steel consumption by
2030-31.
• The Ministry of Steel is facilitating the setting up of an industry driven Steel
Research and Technology Mission of India (SRTMI) in association with the public and
private sector steel companies to spearhead research and development activities in the
iron and steel industry at an initial corpus of Rs. 200 crore (US$ 30 million).
• The Government of India raised import duty on most steel items twice, each time
by 2.5% and imposed measures including anti-dumping and safeguard duties on iron and steel
items.
Source: https://www.ibef.org/industry/steel
H. OPPORTUNITIES
Over the past few years, increasing awareness on the various benefits of stainless
steel has been leading to a substantial increase of its usage in various applications in
railways, automobile, process industries, building and construction. Additionally, various
initiatives undertaken by the Indian Government have been giving significant impetus to
the domestic stainless steel industry. Demand for steel from different sectors will drive
steel industry. 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. With the industry accounting for about 2% of the nations GDP, India
ranks as the worlds second-largest producer of steel and is poised to overtake China as
the worlds second-largest consumer of steel. Both the industry and the nations export
manufacturing capacity have the potential to help India regain its favourable steel trade
balance.
The National Steel Policy, 2017 envisage 300 million tonnes of production capacity by
2030-31. The per capita consumption of steel has increased from 57.6 kgs to 74.1 kgs
during the last five years. The government has a fixed objective of increasing rural
consumption of steel from the current 19.6 kg/per capita to 38 kg/per capita by 2030-
31. As per Indian Steel Association (ISA), steel demand will grow by 7.2% in 2019-20
and 2020-21.
Huge scope for growth is offered by Indias comparatively low per capita steel
consumption and the expected rise in consumption due to increased infrastructure
construction and the thriving automobile
THREATS
the Russia-Ukraine conflict resulted in inflationary pressure
• COVID-19 disruptions in national and international markets.
• Continuous environmental pressures leading to process/ equipment related
changes.
• The Divergent global market environment
Geo-political conflict leading to increase in raw material prices for steel
manufacturing.
SEGMENT WISE PERFORMANCE
The Company being engaged in the sale of steel coils, Sheets, and other type of steels,
there is only one business segment and single segment of activity. Further, the Company is
mainly operative in the cities of Delhi and does not operate at any other place and
therefore all the revenue and income has been generated from these geographic areas only
RISK AND CONCERNS:
The year under the review has been a roller-coaster ride, starting with oxygen crisis
during the second wave of COVID-19, drop in Russia-
Ukraine conflict, auto production due to semi-conductor shortage, volatility in coal
& energy prices in the subsequent quarters and finally ending on tensed geo-political
scenario resulting in shift in trade dynamics. High raw material prices have pushed steel
prices and aided in maintaining margins at last years level.
Key Risks in F.Y. 2022-2023 which have had a large bearing on the business are as
follows: Rising inflation due to Russia-Ukraine conflict, geopolitical issues disrupting
supply chains, heightened volatility in the commodity prices, increasing regulatory
compliances, ongoing semi conductor chip shortages, ageing equipment and safety related
hazards.
In any business, risks and prospects are inseparable. As a responsible management, the
Companys principal endeavour is to maximize returns. The Company continues to take all
steps necessary to minimise its expenses through detailed studies and interaction with
experts.
INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY:
The Company believes in systematic working and placing appropriate internal control
systems and checks. Proper checks and systems are in place and regular reviews are held by
the Head of Department and Senior Management to check that the systems and controls are
adhered. The reviews also prescribe changes wherever required.
SRU STEELS OPERATIONS
The Company operates in the single business segment of trading in various types of
Stainless Steel. At present, the Company is trading in various types of steel products as
well as sale of products on Commission basis. This sector of steel is witnessing intense
competition from numerous players in the country.
During the financial year 2022-23, the SRU Steels Ltd reported Rs 9,449 lakhs profit
before tax as against a profit financial year 2021-22.
FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL
PERFORMANCE
| Particulars |
2022-23 |
2021-22 |
Growth % |
| Revenue from Operations |
1578.65 |
1409.94 |
11.96 |
| Other Income |
92.99 |
95.19 |
-2.3 |
| Total Revenue |
1671.64 |
1505.13 |
11.06 |
| Expenses |
|
|
|
| Purchase |
1503.55 |
1315.89 |
14.26 |
| Change in inventory |
(107.71) |
(24.61) |
-337.66 |
| Employees benefits expenses |
51.97 |
48.92 |
6.23 |
| Finance Cost |
31.49 |
14.52 |
116.87 |
| Depreciation and |
9.87 |
10.60 |
-6.88 |
| Amortisation |
|
|
|
| Other Expenses |
87.98 |
108.73 |
-19.084 |
| Total Expenses |
1577.15 |
1474.05 |
6.99 |
| PBT |
94.49 |
31.08 |
204.021 |
| Tax Expenses |
25.12 |
8.84 |
184.16 |
| Profit after tax |
69.86 |
23.00 |
20373 |
| Earning per Equity Share |
0.87 |
0.29 |
|
MATERIAL DEVELOPMENT IN HUMAN RESOURCES /INDUSTRIAL
RELATIONS FRONT, INCLUDING THE NUMBER OF PEOPLE
EMPLOYED.
Human resource has always been one of the most valued stakeholders and a key
differentiator for SRU Steels Limited. The underlying principle is that workers and staff
at all levels are equally instrumental for attaining the Companys goals. The Company
strongly believes in the policy of hiring the right talent for the right position at the
right time, with a focus to improve employee productivity.
SRU believes that people are the backbone of the company. The
Company has meritocratic culture and provides a conducive workplace for all.
Occupational health and safety of employee is ensured at all times. The company focuses on
the learning and professional development of its employees. Training programmes are
regularly conducted to update their skills and apprise them of latest techniques. To
enable the organisation to attain its full potential, it is imperative for us to create
and maintain an ideal work culture thus creating an engaged and skilled workforce capable
of delivering on the commitments to our stakeholders and in the process, making us
‘Future Ready- structurally, financially and culturally. Senior
Management is easily accessible for counseling and redressal of Rs.3,108lakhs
grievances if any. The HR Department strives to maintain and promotein harmony and
co-ordination amongst Workers, Staff, and Members of the Senior Management.
DETAILS OF SIGNIFICANT CHANGES IN KEY FINANCIAL RATIOS, ALONG WITH DETAILED EXPLANTION
THEREOF
Abridged StatementofProfit Loss and
| Particulars |
Year 2022-23(in %) |
Year 2021-22(in %) |
| Debtor Turnover Ratio |
5.44 |
3.93 |
| Inventory Turnover Ratio |
8.88 |
15.48 |
| Debt Equity Ratio |
0.49 |
0.29 |
| Interest Coverage Ratio |
4.31 |
3.36 |
| Current Ratio |
2.97 |
3.55 |
| Operating Profit Margin |
5.99 |
2.20 |
| Net Profit Margin Ratio |
4.18 |
1.63 |
| Return on Net Worth |
5.38 |
1.81 |
+91-9892691696
