Steelco Gujarat Ltd Management Discussions

(Annexure-1)

The purpose of this report is to present Managements viewpoint on the external environment and the steel industry, alongside discussing strategy, operational and financial performance, significant developments in human resources and industrial relations, risks and opportunities, and the adequacy of internal control systems within the Company for the financial year 2025-26. The Companys financial statements have been prepared in compliance with Indian Accounting Standards (Ind AS), as per the requirements of the Companies Act, 2013 and regulations set forth by the Securities and Exchange Board of India (SEBI).

The global economy continues to demonstrate resilience despite prolonged geopolitical uncertainties, persistent fiscal concerns, and structural realignments. According to the World Steel Association April 2026 Short Range Outlook, global steel demand is bottoming out after a challenging phase of structural adjustments since 2022.

• Global Demand Growth: Global steel demand is transitioning to a path of modest recovery, projected to grow by 0.3% in 2026 to reach 1,724 MT, followed by an accelerated growth of 2.2% in 2027.

• Chinas Real Estate Correction: Following a sharp 7.1% contraction in Chinese steel demand in 2025, the rate of decline is decelerating to 1.0%-1.5% in 2026 as the property market begins to stabilize.

• Developed Economies: Steel demand in the developed world grew by 0.2% in 2025, marking the end of a three- year consecutive decline. A gradual recovery of 1.0% growth is forecast for 2026, supported by robust infrastructure, defence spending in the EU+UK (1.3% growth), and sustained private-sector investments in the United States (1.7% growth).

Steel remains a vital cornerstone of Indias industrialization and economic progress. India has firmly solidified its position as the worlds fastest-growing major steel market and the second-largest producer of crude steel globally. As per Ministry of Steel / PIB Government of India the increase in production and annual growth % of steel for FY 202526 was as follows:

The Government of Indias National Steel Policy targets an ambitious production capacity of 300 MT by 2030-31. To accelerate this, the Ministry of Steel has pushed forward key strategic interventions:

• Production Linked Incentive (PLI) Schemes: Spearheading local manufacturing of specialty steel grades to reduce import dependency.

• Raw Material Security: Measures to improve iron ore availability, reforms in mineral allocation, and diversification of coking coal imports

• Infrastructure Boost: Major capital outlays supported by continued public capital expenditure on railways, highways, urban infrastructure and the Pradhan Mantri Awas Yojana (PMAY).

Following the successful completion of the Corporate Insolvency Resolution Process and implementation of the Resolution Plan, the Company recommenced manufacturing operations during the year under review. The restart involved recommissioning of plant and machinery, restoration of utility connections, re-engagement of technical and operating personnel, and phased ramp-up of production.

The Board and management have adopted an approach to ramp-up the capacity, balancing the need to rebuild customer volumes with prudent working capital management, particularly given the Companys recent emergence from insolvency proceedings.

• Phased restart of manufacturing operations with priority on high-demand, high-margin product categories.

• Re-establishment of long-term relationships with key raw material suppliers and anchor customers.

• Deployment of NCD proceeds towards working capital and capacity augmentation.

• Strengthening of the capital structure through the Rights Issue completed in June 2026, improving the debt- equity position and supporting future growth capital expenditure.

• Rebuilding of institutional processes, including finance, internal controls, compliance and governance systems, commensurate with the Companys status as a listed entity with listed debt securities.

Working capital management remains a key area of management focus, given the operational restart following an extended period of suspended operations. The Secured Listed Non-Convertible Debentures issued in January 2026 have provided a critical source of funding for working capital requirements, enabling the Company to procure raw materials, meet operating expenses, and support the ramp-up of production.

• Strong growth in exports, backed by a stable central government with structural development policies.

• Sustained domestic demand outpacing global averages, ensuring a reliable local market.

• Global Oversupply: Projected global capacity additions threaten to drive utilization rates down and put downward pressure on global prices.

• Market Volatility: Severe fluctuations in key raw material markets (iron ore, metallurgical coal) and energy prices.

• Competitive Squeeze: Ongoing capacity expansions by primary integrated steel giants are squeezing the margins of secondary manufacturers.

To mitigate these market risks and maintain healthy margins, your Company is focusing toward increasing its capacity utilization to its maximum, and developing value-added products, thereby optimizing its sales.

The overall sales in revenue including other income during FY. 2025-26 was 5,919.93 and net loss was Rs. 3,727.20 Lakhs. This is against the revenue of FY 2024-25 of 493.91 Lakhs and net loss of 2,053.77 Lakhs in the previous year.

The Net loss was as a result of interest expenses, employees benefit expenses, finance cost and other expenses during the year under review. It should be viewed keeping in view following perspectives:

1. The Company was admitted to Corporate Insolvency Resolution Process (CIRP) vide order CP(IB) No. 342/NCLT/AHM/2020 dated 31.12.2020 by Honble National Company Law Tribunal, Ahmedabad Bench, Court No. II (Honble NCLT.) Subsequently Honble NCLT passed an order vide No. IA No. 763/AHM/2022 in CP(IB)/342/AHM/2020 dated 31st July, 2023 approving Resolution Plan submitted by M/s. Next Orbit Growth Fund III, the Resolution Applicant for the Company. The New Management (the Resolution Applicant) is in the process of implementation of the same.

2. The Company had been un-operational since November, 2019 and has recently commenced its Commercial Production on 14th July, 2025.

The Company has in all material respects sound Internal Financial Control system in place, commensurate with the size, scale and complexity of its business operations. These have been designed to provide reasonable assurance with regard to recording and providing reliable financial and operational information, complying with applicable statutes, safeguarding assets from unauthorized use or losses executing transaction with proper authorization and ensure compliance of corporate policies.

For the Financial Year ended 31st March 2026, the Board notes that the framework designed under Section 134(5)(e) of the Companies Act is effectively in place. Following the commencement of commercial production, management is actively strengthening operational controls, improving process efficiencies, and monitoring compliance to seamlessly mitigate material risks.

The Company has also infused funds of Rs. 160 crores through issuance of Secured, Listed Non-convertible Debentures on a private placement basis to M/s India Resurgence Asset Management Business Pvt. Ltd. The Company received the listing and trading approval for the aforesaid non-convertible debentures on 9th January, 2026.

Additionally, in order to achieve compliance with the minimum public shareholding requirements prescribed under Rule 19A of the Securities Contracts (Regulation) Rules, 1957 (SCRR) and Regulation 38 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR), the Board of Directors, at its meeting held on 9th May, 2026, approved the issuance of 13,30,060 equity shares of Rs.10 each at an issue price of Rs.112 per share (including a premium of Rs.102 per share) on Rights basis.

The said shares were allotted on 6th June, 2026, resulting in an increase in the paid-up equity share capital of the Company to Rs.6,29,60,720 comprising of 62,96,072 equity shares of Rs.10 each. The Company received listing approval from BSE on 8th June, 2026, followed by trading approval on 9th June, 2026. Accordingly, the Company achieved Minimum Public Shareholding in compliance with SCRR read with LODR.

Your Company believes in branding its products for sustainable and long-term growth, through customer satisfaction that goes beyond contractual obligations, improvement in quality, and resolution of customer complaints with a target of improvement in reduction of complaints from time to time. In todays global competition and open economy, quality plays a vital role in marketing the products and in staying ahead of others. Therefore, more emphasis is being given to manufacturing of products that meets high standards of quality in the global market and customers satisfaction. Proactive efforts are directed towards determining customers requirements and achieving all-round customer satisfaction. This is primarily aimed to be achieved through automated systems, high attention to complaint resolution, online communication, and information exchange, at various levels.

With the successful commencement of commercial production in July 2025, the Company has actively rebuilt its workforce. Human Resource initiatives during FY 2025-26 focused on onboarding technical personnel, implementing robust safety training protocols, and fostering harmonious industrial relations to ensure undisrupted plant operations.

*Since the Company was in CIRP and not in operation since November, 2019 during the previous year, most of the financial ratios are not applicable and hence not mentioned.

Statements in this Management Discussion and Analysis Report describing the Companys objectives, projections, estimates and expectations may constitute "forward-looking statements" within the meaning of applicable laws and regulations. Actual results may differ materially from those expressed or implied. Important factors that could influence the Companys operations include raw material availability and prices, changes in government regulations, tax laws, economic conditions affecting demand and supply, and other factors beyond the Companys control.