GLOBAL ECONOMY
By early 2023, the prospects of the global economys gentle landing
have dimmed due to elevated inflation and banking sector turbulence. While inflation has
moderated, pricing pressures remain high, and labour markets are constrained. In response
to shifts in sentiment and evolving financial conditions, policymakers have taken measures
to stabilize the banking system. The global economic trajectory in 2022 is expected to
continue this year, marked by high debt levels, decreasing commodity prices, and
escalating geopolitical tensions. Although Chinas recovery from COVID-19 outbreaks has
reduced supply-chain interruptions, risks remain due to mounting uncertainties stemming
from the financial sector upheaval.
The baseline forecast indicates that growth will dip from 3.4% in 2022
to 2.8% in 2023 before gradually returning to 3.0% five years later. Advanced economies
are poised to face significant slowdown, from 2.7 percent in 2022 to 1.3 percent in 2023.
In an alternate scenario, global growth could plummet to 2.5% in 2023, the lowest level
since 2001, with advanced economies growing at less than 1 %. The outlook remains grim due
to tight policy stances, financial conditions, the Russia- Ukraine war, and geoeconomic
fragmentation. The global headline inflation rate is predicted to reduce from 8.7% in 2022
to 7.0% in 2023, but core inflation will fall more slowly. The odds are overwhelmingly
stacked against a hard landing, with financial sector stress increasing. This might harm
the real economy and force central banks to reassess their policy options. Sovereign debt
distress might expand, the war in Ukraine could worsen, resulting in further food and
energy price spikes and higher inflation, and geopolitical bloc fragmentation could result
in huge output losses, including foreign direct investment.
Source: World Economic Outlook - A Rocky Recovery - IMF 2023
INDIAN ECONOMY
Indias economic performance was impacted by global economic slowdown,
high inflation, and the ongoing war between Russia and Ukraine. The countrys real GDP
growth was estimated at 7.0% in 2022-23 in comparison to 9.1% in the prior year, but
demand indicators like passenger vehicle sales, tractor sales, and domestic air travel
support growth. In 2023, India is predicted to be a major growth destination, owing to
high domestic demand and government spending.
Indias high unemployment rate of 7.5% in February 2023 remains a
source of concern, while inflation rose to 6.5% in January 2023 as a result of high food
prices.The Reserve Bank of India (RBI) raised policy repo rates six times since May 2022
in order to contain inflation. Commodity prices will be affected by global geopolitical
tensions and increased demand from countries that have lifted mobility restrictions. Lower
input costs are predicted to have an impact on core inflation, with inflation forecast to
gradually decline at 6.5% in 2022-23 and 5.3% in 2023-24. A healthy domestic demand and
favourable government efforts are projected to help India maintain its position as one of
the worlds fastest growing major economies. External challenges, such as a global
economic downturn and monetary tightening in advanced economies, could, nonetheless, have
an impact on the countrys progress.
The Union Budget 2023-24 is expected to enhance disposable income,
increase discretionary spending, and raise capital expenditure, resulting in increased
growth, investments, and job creation. The governments efforts to reduce compliance and
decriminalise will also benefit business. Investments will be aided by strong credit
growth and financial market stability.
Source: KPMG Global Economic Outlook 2023
GLOBAL STEEL INDUSTRY AND DEVELOPMENTS
Steel is an iron-based alloy, which might contain carbon, silicon,
manganese, and other minerals.The process of steelmaking involves the production of steel
from iron ore and/or scrap. Due to its high durability and malleability, steel is a
preferred choice of raw material in several industries like the manufacturing, automotive,
and consumer products.
Steel demand is predicted to rise 1.7% to 1,854.0 Mt in 2024.
Manufacturing is expected to lead the recovery, however high loan rates may hinder steel
demand. Most regions are expected to see faster growth next year, but China is expected to
decelerate.
High inflation and rising interest rates, the Russian invasion of
Ukraine, and Chinese lockdowns halted the rebound momentum following the pandemic shock in
2022. As a result, activity in steel-consuming industries fell in the fourth quarter of
2022. Steel demand fell less than projected due to this, as well as the impact of stock
changes. Despite hopeful variables such
as Chinas reopening, Europes resilience in the face of the energy
crisis, and the removal of supply chain bottlenecks, continuing inflation and high
interest rates in most countries will limit steel demand recovery in 2023. Other areas
will boost demand growth in 2024, but there will be a global slowdown due to Chinas
predicted 0% growth, which will overshadow the improved environment.
Chinas contribution to global steel demand growth will decline as its
population declines and the country transitions to consumption-driven growth. Fewer
factors will fuel future global steel demand growth, notably in Asia. Even if Chinas
contribution to global GDP diminishes, investments in decarbonization and dynamic
developing economies will keep global steel demand growing.
Steel demand in developed economies fell significantly in 2022 as a
result of monetary tightening and high energy prices. After falling by 6.2% in 2022, steel
demand is expected to rise by 1.3% in 2023. In 2024, a 3.2% recovery is projected. Steel
demand patterns varied between emerging and developing countries, with developing Asia
excluding China demonstrating higher resilience than elsewhere. Steel demand in emerging
and developing nations excluding China will expand by 3.6% in 2023 and 3.9% in 2024,
following a 0.3% fall in 2022.
In FY2022-23, the steel raw materials market remained volatile,
particularly in coal markets, due to irregular weather events in Eastern Australia, while
trade flows altered dramatically due to the Russian-Ukraine war. One of the most important
elements influencing steel pricing was the cost of production, particularly energy
expenses. Sanctions imposed on Russia, which exports oil, coal, and gas, resulted in the
hydrocarbon market undergoing a considerable shift in commodity flows and has yet to
achieve equilibrium. The 43% year-on-year (y-o-y) increase in oil prices in 2022 reflects
rising inflation in general and global energy costs in particular. The coking coal (top
energy material for steel for flat goods) index increased 68% year on year in 2022,
reaching the highest value of all pricing indices analysed in December. Natural gas and
coal shortages in Europe have resulted in yearly energy price rises of roughly 125%
through 2022.This has a significant impact on steel companies who use electric furnaces,
given power is a major cost issue.
Source: Worldsteel Short Range Outlook April 2023, Raw Material Outlook
2023
INDIAN STEEL INDUSTRY
In 2022, India remained a shining star in the global steel industry.
Indias economic prospects and steel industry outlook are encouraging. Recent adjustments
in steel export and import charges, together with increased demand for affordable housing,
infrastructure development, and building projects, have resulted in a pan-India demand for
steel metal. Furthermore, the governments goal to make India self-sufficient has created
space for sustainable urban development, the construction of envisaged logistics parks,
and the development of industrial corridors, all of which have contributed to the rising
demand for finished steel and steel as a raw material.
After successfully managing inflation, the Indian economy is on a solid
development path, with a rising percentage of GDP investment due to increased government
spending on infrastructure. The residential sector is likely to expand as well, fuelled by
inexpensive housing initiatives and urban demand. Private investment is increasing as a
result of Production Linked Investment (PLI) Schemes.
The momentum in infrastructure and investment in renewable energy is
also predicted to assist Indias capital goods sector. Automotive and consumer durables
are likely to rise at a robust rate, owing to continued growth in private spending. After
growing by 8.2% in 2022, demand is predicted to expand by 7.3% in 2023 and 6.2% in 2024.
Steel prices in India have been volatile in recent months, particularly
following the worldwide economic crisis triggered by the epidemic. Steel prices in India
increased by 5% in February 2023.The daily steel price has been influenced by a number of
factors, including an increase in raw material prices (particularly iron ore and coking
coal) and an increase in infrastructure and engineering projects. Steel prices, however,
are expected to rise above pre-pandemic levels by March 2023, reaching 60,000 per tonne.
The Asia Pacific region comprises of a number of emerging economies
that are some of the major producers of steel globally. Within the Asia Pacific, India is
one of the major regional markets for steel. In India, the iron and steel industry is
experiencing a robust demand from sectors like infrastructure, oil and gas, and
automotive, which has been driving the growth of the steel industry in the region.The
Indian steel industry is further being driven by the easy availability of low-cost
manpower and the presence of abundant iron ore reserves in the country. The implementation
of schemes by the Government of India like the Jal Jiban Mission, Pradhan Mantri Awaas
Yojana -Gramin and Urban (PMAY-G & U), Bharatmala and Sagarmala, and the National
Steel Policy have provided favourable prospects for public and foreign investments,
further leading to the growth of the steel industry. The launch of various projects like
the construction of metro railways and new airports and irrigation projects are
anticipated to catalyse the market growth in India, thus, aiding the overall growth of the
steel industry.
Under the PLI scheme (Production Linked Incentive), the Ministry of
Steel signed 57 MoUs with 27 businesses for speciality steel. The government has approved
a total of 6322 crore for steel sector growth under the plan. Aside from producing new
jobs and helping India become the worlds third largest economy (by 2030-31), the project
seeks to add 25 MT of speciality steel capacity over the next five years.
Source: Worldsteel Short Range Outlook April 2023, Indian Steel
Industry Outlook 2023
ABOUT SEIL
Steel Exchange India Limited (SEIL) is the flagship company of the
Vizag Profiles Group. Established in 1999, SEIL is a leading manufacturer of TMT Rebars
underthe brand SIMHADRI TMT.The firm is primarily engaged in the manufacturing of steel
products and allied activities at its Integrated Steel Plant located close to
Visakhapatnam, Andhra Pradesh. It has the largest private integrated steel plant in Andhra
Pradesh. It manufactures sponge iron, billets, and TMT bars.
TRADING DIVISION
Apart from its manufacturing operations, the corporation also trades a
few products to improve its top and bottom line. Currently, the trading division deals in
a wide range of products ranging from finished steel products to supplementary products
such as semis, coal, scrap, and sponge iron.The division has been largely responsible for
expanding the companys marketing and sales base throughout Andhra Pradeshs coastal
region.The trading section handles items manufactured by the Company, RINL (Vizag Steel),
and other producers.
The steel trading division reported a turnover of Rs.291.68 crores for
the year ended 31st March 2023 compared to Rs 134.08 crores in the previous year ended 31
st March 2022.
STEEL INGOT DIVISION
This division produces ingots from sponge iron and scrap/pig iron. For
captive consumption, the unit also includes a power producing unit that runs on natural
gas.
The division reported a turnover of Rs.4.73 Crs (previous year Rs. 5.80
Cr) of which Rs.1.89 Cr came from resale of gas and Rs. 2.84 Cr from power sale
respectively.
INTEGRATED STEEL PLANT
The main Integrated Steel Plant (ISP) of the Company located at
Sreerampuram Village, L. Kota Mandal, Vizianagaram District consists of the following
units:
1. Sponge Iron Unit - 2,20,000 TPA
2. SMS Billet Unit - 2,50,000 TPA
3. Rolling Unit-2,25,000TPA
4. Captive Thermal Power Plant- 60 MW
The total revenue for the period 2022-23 under review from ISP stood at
Rs.1056.59 crores as against Rs.896.36 crores in the previous year 2021 -22. The division
reported increase in turnover on year to year compared to previous year and TMT bars
produced are sold under the well-established brand name Simhadri TMT Bars. The total
revenue from the sale of surplus Power for the period under review from Power Division
stood at Rs.35.32 crores compared to Rs.36.11 crores in the previous year. The division
reported increase in turnover on year-to-year basis and the power plant was operated at
54% PLF compared to 52% in the previous year.
FINANCIAL PERFORMANCE OF THE COMPANY FOR THE YEAR ENDED 31.03.2023
(Amount in Crores, unless otherwise stated)
|
FY23 |
FY22 |
Total Income |
1,393.36 |
1,120.87 |
EBITDA |
99.50 |
124.43 |
EBITDA Margin |
7.14% |
11.11% |
Profit before tax (PBT) |
(28.32) |
14.48 |
Deferred Tax Liability (Asset) |
30.53 |
(102.00) |
Profit after tax (PAT) |
(58.85) |
116.48 |
PAT Margin |
NA |
10.40% |
1) Share Capital
The Authorized share capital of the Company is Rs. 332 Cr and the
paid-up share capital stood at Rs 103.96 Cr. The increase in Paid Up Capital is on account
of allotment of 15,88,00,000 equity shares with Face Value of Rs 1 each at a premium of Rs
6.25 per share on preferential basis to Promoters and Non-Promoters of the Company.
2) Reserves and Surplus
For the year ended 31 st March 2023, the Reserves and Surplus have
increased from Rs. 402.99 crores to Rs.413.20 crores, Equity component of compounded
financial instruments i.e., CCDs [Rs.14.42 Cr], Share Warrants [Rs.10.55 Cr], Share
Premium [Rs.224.11 Cr] and reduction of Revaluation Reserves [Rs.208.14 Cr] & Others
[Rs.(44.02) Cr],
3) Secured Loans
Secured loans was Rs.289.13 crores as on March 31,2023 as compared to
Rs.304.35 crores as on March 31,2022.
4) Unsecured Loans
Unsecured loans was Rs.41.26 crores as on March 31,2023 as compared to
Rs. 125.46 crores as on March 31,2022.
5) Fixed Assets
During the year under review, the Fixed Assets, and the total Fixed
Assets (net Block) stands at Rs. 592.16 crores as against Rs. 602.80 crores in the
previous year.
OPERATIONAL PERFORMANCE OF THE COMPANY FOR THE YEAR ENDED 31.03.2023
1) Income
The total income of the company stood at Rs. 1,393.36 Crfor FY 2022-23
against Rs. 1,120.88 Crfor FY 2021-22. During the year, the total operational revenue of
the company increased by 24.3% compared to the previous financial year.
2) Di rect Cost & Other expenses
The Direct Costs comprising of cost material consumed, changes in
inventories of finished goods, stock in trade & work-in-progress and purchases of
traded goods was to Rs. 1167.27 Cr for FY 2022-23 against Rs. 882.61 Cr for FY 2021-22 due
to the increase in the prices.
Other expenses comprise of other manufacturing expenses, staff costs,
administration and selling & distribution expenses etc. The same was increased to Rs.
94.21 crores for FY 2022-23 against Rs. 83.83 Cr for FY 2021-22 due to discounts given to
customers.
3) Interest Cost
For the year under review, the interest and financial charges were Rs.
105.63 Crores representing 7.58 % of the turnover as against Rs. 88.12 crores representing
7.87% of the turnover in the previous year. The increase in finance cost / interest cost
is on account of payment of interest on CCDs and NCDs.The company is taking various
initiatives to reduce the financial costs in the coming year to make the company more
sustainable in the long run.
4) Depreciation
The company has provided a sum of Rs. 24.37 crores towards depreciation
for the year under review as against Rs. 23.75 crores in the previous year.
5) Provision for Tax
There was no current tax due to loss incurred in FY2022-23.
6) T otal Comprehensive income/Loss (Net Prof it/Loss)
The operations for FY 2022-23 resulted in a net loss of Rs. 58.85 Cr as
against Rs. 116.36 Cr profit in FY 2021-22.
7) Dividend
No Dividend is recommended on the Equity Shares for the year ended 31st
March 2023.
Details of significant changes in Key Financial Ratios
|
FY23 |
FY22 |
Debt Equity Ratio |
0.58 |
0.68 |
Debt Service Coverage Ratio |
0.77 |
0.65 |
Interest Service Coverage
Ratio # |
0.92 |
1.41 |
Current Ratio |
1.34 |
1.43 |
Long Term debt to working
capital ## |
1.52 |
2.08 |
Total debts to Total Assets |
0.26 |
0.27 |
Debtors Turnover (no. of days) |
27 |
24 |
Inventory Turnover (no. of
days)### |
43 |
30 |
Detailed explanation on significant changes (i.e., change of 25% or
more as compared to FY22) in the above key ratios:
# Repayment of principle on borrowings (Reduction of Debt)
## Repayment of partial long term borrowings to NCD holders of the
company ### due to increase of finished stock as on 31st March 2023
Environmental, Social and Governance (ESG) & Corporate Social
Responsibility (CSR) - Safety, Health, Sustainability
The 60 MW captive power plant includes 16 MW of power generated by
Waste Heat Recovery Boilers (WHRB) that use flue gases from DRI Kilns, boosting energy
efficiency, lowering costs, and addressing pollution concerns. Air Cooled Condensers have
been built at the power plant to reduce water usage for cooling purposes, resulting in
water consumption reductions of 1000 KL per day. Slag (waste material) produced by the
Steel Melt Shop is utilised as a foundational element for road construction, and crushed
slag is used as a substitute to concrete aggregate and sand. The power plants fly ash
(waste material) is delivered to local brick production plants.
The Company provided electric buggies to inhabitants in ISP
neighbouring villages for smooth mobility. In partnership with hospitals in Visakhapatnam,
the company holds medical camps for the surrounding communities on a regular basis.
Dedicated 24x7 primary care centre at ISP staffed by a full-time doctor and nurses give
free supplies of essential medicines to conduct testing for neighbouring villages. In
addition, ISP offers a completely sanitised medical bed ward for isolation and minimal
intervention therapies. The Company has provided a dedicated ambulance at the ISP primary
care centre for patients to be transferred to a full-service medical centre if necessary.
The Company has arranged for water to be delivered to ISPs
neighbouring villages by underground pipeline and water tankers. The Company collaborated
in the installation of solar streetlights in adjacent villages. The Company has supported
The Gurudeva Charitable Trust funded the purchase and distribution of artificial limbs and
supported tricycles in the Vizianagaram District. Improved government school
infrastructure in collaboration with local Roundtable chapters. During the COVID-19
pandemic, worked with the district administration to buy and distribute medical supplies
to the local population. During the COVID-19 epidemic, migrant staff and other ISP nearby
impacted migrants were given access to food and shelter.
Risks, Concerns and Mitigation Strategies
Geopolitical uncertainty, the macroeconomic outlook, trade barriers,
and protectionist trade policies all have an impact on
steel demand. Prolonged inflationary pressures, particularly from
disruptions in the energy and commodity supply chains, may have a negative influence on
global demand. Adoption of innovative steel grades and sustainable steel products causes a
shift in client preferences. During this decade, the Indian steel industry is predicted to
increase at a rate of 6% to 7%. However, the steel industrys rising trajectory would
present its own set of obstacles. Due to geopolitical developments, changing trade
patterns, and increased emphasis on Environment, Social, and Governance (ESG) elements,
the regulatory framework in the metals and mining business is getting more demanding.
Noncompliance with such demanding regulatory regimes may have an impact on corporate
operations and reputation. Steel, an energy-intensive and difficult-to-abate sector, must
transition to low-emission steel, and the government of India may implement taxes and
fines to accelerate the ESG trip.
Risk is an important component in almost all sorts of businesses and
must be mitigated. Steel Exchange India Limited manages risks by properly identifying,
estimating, and mitigating them. The Company has implemented adequate risk- mitigation
measures in all business verticals and activities in operations, finance, and human
resources by leveraging its indepth knowledge of the business acquired over the last 20
years by understanding market trends, competitors, and steel sector policies and
responding accordingly to risk management. However, despite the risk precautions taken by
the company, unanticipated problems such as inflation, liquidity crisis, slower industrial
growth, weakening rupee, political instability, and variable commodity prices are likely
to impair industry performance in the future.
With a focused approach, the Company took initiatives in value chain
excellence, overall operational excellence, pandemic & crisis management, throughput
maximisation, enriching product mix, customer centricity with diversification of customer
base, sustainable initiatives, employee engagement, synergy & integration, and
leveraging IT & digital to sustain the most critical situation in pandemic times. The
Company is prioritising a long-term initiative for sound robust liquidity management and
working capital optimisation with superior planning that takes into account all risk
indicators.
Human Resource Management, Industrial Relations
The Company regards the quality and commitment of its human resources
as its most valuable asset and places a high priority on training and development of human
resources at all levels, as well as providing a pleasant working environment. The
management team is adamant that the company cannot grow until its human resources are
fully utilised.
As of March 31,2023, the total number of employees is 995 including
Trainees. The Company maintains a cordial relationship with its employees and cherishes
their safety by guaranteeing safe work practises, and the Board of Directors and
Management express their gratitude to all of its employees for their vital contribution to
the Companys growth.
Internal Financial Control Systems and Internal Audit
The Company has suitable internal control measures in place that are
proportionate to its size and kind of operation.
These internal controls are intended to provide reasonable assurance
that all corporate operational and financial processes are adequate to safeguard and
defend against any loss from unauthorised use or disposition, and that all transactions
are properly authorised, documented, and reported.
The Audit Committee reviews the internal control systems on a regular
basis and initiates remedial actions where necessary. The Audit Committee also meets with
the Companys Internal Auditors and Statutory Auditors to obtain their perspectives on the
adequacy of the Companys internal control systems, and it keeps management informed of
its significant findings.
Cautionary Statement
Statements in the Management Discussion and Analysis describing the
Companys estimates and expectations may be "forward-looking statements" within
the meaning of applicable securities laws and regulations. Actual results could differ
materially from those expressed or implied.
+91-9892691696
