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SRU Steels Ltd Management Discussions

Jul 12, 2024|03:46:00 PM

SRU Steels Ltd Share Price Management Discussions


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).


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.


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 %)

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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.


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.


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


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


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.


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


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.


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.


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.






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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.


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