Tata Steel Long Products Ltd Management Discussions.

Management Discussion & Analysis Report

I. Overview

This Management Discussion & Analysis Report (MDA / Report) is an integral part of the Boards Report and 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 the FY 2021-22. This Report should be read in conjunction with the Companys financial statements, the schedules and notes thereto and other information included elsewhere in the Integrated Report. The Companys financial statements have been prepared in accordance with the Indian Accounting Standards (Ind AS) 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.

II. External environment

1. Macroeconomic condition

Global economy has rebounded from contraction in 2020 to register a growth of around 6.1% in 2021. This was driven by pick up in investment, trade, consumer spending and improvement in services. As the year progressed, pace of recovery began to moderate on account of slowdown in China due to regulatory pressures on its real estate sector and Zero COVID Policy. COVID continues to be an overhang on global economies and has led to persistent stress on supply chains, energy and so on. The global economy entered 2022 in a weaker position than previously expected. As the new Omicron COVID-19 variant spreads, some countries have reimposed mobility restrictions.

2. Economic Outlook

In 2022, Global growth is expected to moderate to around 3.6%, a 0.8 percentage point lower growth than what was envisioned in the last World Economic Outlook (WEO) of January 2022, largely reflecting forecast markdowns in USA and China. In USA, a revised assumption of removing the Build Back Better fiscal policy package from the baseline, earlier withdrawal of monetary accommodation, and continued supply shortages have induced a downgrade in the outlook by 1.2 percentage- points. In China, pandemic-induced disruptions related to the zero-tolerance COVID-19 policy and protracted financial stress among property developers have induced a 0.8 percentage-point downgrade.

Elevated inflation and shift in policy stance of global central banks, and continued supply shortages as pent up demand fades poses further downside risk to growth. More recently, Russia Ukraine conflict has added to the uncertain environment around inflation and central bank policy by weighing on energy prices, commodity supplies including steel and food supply chains. These downside risks are likely to be partially offset by global economies focus on digital transformation and productivity improvements, as well as long-term investments for physical and social infrastructure.

3. Indian Economy

India GDP grew by 8.7 %in FY22 compared to a contraction of 6.6% in FY21. Despite the impact of second wave during early part of the financial year, economic activity has continued to recover primarily driven by government induced capex growth. The manufacturing sector has been in expansionary mode compared to contraction a year ago. Moving to services sector, growth was subdued but it has gained momentum since Q4FY22 post decrease in the number of COVID infections and increase in-vaccination rate. Inflation though continues to remain elevated at 5.3%. Indias GDP is estimated to grow between 8 - 8.5% in FY23 on the back of strong post-pandemic economic recovery, and a growth-oriented budget, which focuses on infrastructure and other capital spending. However, high inflation, increasing oil prices and supply distortions are a "drag on growth".

III. Steel Industry

1. Global Steel Industry

Global steel industry witnessed recovery in 2021 after being impacted by COVID-19 pandemic in 2020, due to revival in end-market demand. The resumption of operations across major steel-consuming sectors such as construction and engineering following the easing of lockdowns and restrictions led to an uptick in steel demand and thereby, drove an upswing in steel prices and fuelled them to historic highs.

According to the World Steel Association (WSA), total global crude steel production was 1,951 MnT in 2021, a 3.7% increase compared to 2020. This is primarily due to economies opening after wide scale vaccinations, gradual commencement of economic activity, and significant change in retail consumer behavior mainly in automotive and construction sectors. Further, increase in raw material prices mainly concerning coking coal, iron ore and oil & fuel have pushed the market prices of steel. China witnessed a contraction of 3% YoY in its crude steel output standing at 1,033 Mt in 2021 mainly dragged down by a slump in output on account of the Chinese Governments measures to curb production to reduce pollution during the Winter Olympics. Chinas share of global crude steel production has also decreased from 56.6% in 2020 to 52.9% in 2021. The Short-Range Outlook (SRO) by worldsteel had forecasted that steel demand will grow by 4.5% in 2021 and reach 1,855.4 MnT. It is expected that in 2022, the steel demand will see a further increase of 2.2% to 1,896.4 MnT. The forecast assumes that spread of variants of Covid-19 will be less on account of good vaccination progress.

2. Indian Steel Industry

Indias crude steel production in FY22 increased by 16%, to reach 120 MnT. The domestic steel sector witnessed a strong revival in FY22 surpassing the pre COVID - 19 level because of a combination of factors like strong retail demand, green shoots of recovery in white goods and the automobile sector, especially passenger vehicles, tractors, and commercial vehicles. The central governments call for Aatmanirbar Bharat has given a whole new dimension to the nation. Some of the recent Government initiatives in the Steel Industry include the PLI scheme for specialty steel, Memorandum of Cooperation (MoC) with the Ministry of Economy, Trade and Industry, Government of Japan, to boost the steel sector through joint activities.

This high demand is likely to continue in FY23 backed by an uptick in the overall consumption. Construction and infrastructure remain the biggest sector driving the demand for steel. The Governments focus on developing the infrastructure sector is visible in the union budget for 2022-23 with several announcements on new roads and highways, railways, cargo terminals, National Ropeways Development Program for hilly areas and housing projects. This is also helping Commercial Vehicle segment to register a robust growth. The Automobile industry has seen a recovery from Oct21 onwards the back of an increased affinity for personal mobility amid the pandemic, and the demand outlook for the next fiscal year remains upbeat with an expected growth rate of 7-8% but geopolitical tension, fuel inflation and price hikes pose significant downward risk too.

The Russia-Ukraine conflict has caused panic in the market about supply shortage with the result that prices have moved north radically, be it iron ore or coking coal. Prices of steel have also responded to the crisis but its northward movement so far has been limited. Increasing risk of procurement, constraints of financial approval, nonaccessibility due to port blockage, growing uncertainty about availability, rising safety and security concerns are among the major factors that have driven sentiments in the commodity markets around the world. To what extent, steel prices would be impacted hinges significantly on the extent of aggravation of the Russia-Ukraine crisis and its longevity.

IV. Operational Performance

FY22 has been a year of a landmark achievements for the Company witnessing 43% Y-o-Y increase in turnover, net debt reducing to zero and ongoing strategic acquisition of Neelanchal Ispat Nigam Limited (NINL). During the year, TSLPLs performance has been consistently improving in all facets of business and our key enablers have been:

a. Scenario based planning to tackle weak domestic demand: The second wave of COVID-19 pandemic with record number of infections resulted in Oxygen shortage coupled with emotional crisis throughout the country. During these difficult times, the company remained committed to all its stakeholders and rolled out various people centric policies policies to support its employees, their families and the proximate communities. The Company remained resilient and was able to achieve higher steel sales than the years plan enabled by scenario-based approach, advance planning and exploring export options. The Company made very good use of Scenario planning as part of its business planning process which helped chose the optimal scenario to operate while quickly considering the current realities of the external factors. From 2QFY22 onwards, when demand picked up and oxygen availability improved, TSLPL was able to ramp up its production and achieve its highest ever rolled product sales post the acquisition of the steel business of Usha Martin Limited.

b. Exceeding customers expectation: The Company imbibes the culture of customer-centricity across its value chain and strives towards enhanced customer experience. In FY22 the Company demonstrated its endeavor to exceed customer expectation through number of initiatives viz.

i) Strengthening product quality and customer service-The Company took impactful actions to make its quality control process robust and reduce customer claims.

ii) Improved engagement with Customers-The Company has 10 active Customer Service Team (CST) for key customers to enhance engagement and provide quick resolution to their issues.

iii) ACE Portal (Customer Complaint and Feedback Management system) launched in FY 2020-21, continues to reap benefits of increased customer satisfaction. Based on the customer and engagement survey outcome, significant improvement has been observed in CSI scores, from 79.4 in FY 2020-21 to 85.4 in FY 2021-22.

iv) The Company developed 40 new products out of which 3 were first time products in India viz. lead-free steel, PC300k-Alloy LRPC and Grade 3 cable wire for horseshoe nails and DTH cables. Customers have appreciated TSLPLs contribution in consistency and quality at various forums.

c. Focus on safety and creating an engaging work culture:

TSLPL has put effective strategies in-place to create a constructive work culture that values and cares for employees. In FY22, the Company rolled out modern age flexible salary structure into practice in terms of Flexi Pay for all officers which simplified the compensation structure and allowed employees to choose compensation components that suited them. The Company is also fully aware of the fact that a diverse & inclusive environment establish a sense of belonging amongst employees. Further, to leverage the power of diversity & inclusion, initiatives like Jyotishmati program (A step for creating more avenues for women to grow in technical /manufacturing domain by upskilling), WIN (Women Interactive engagement aimed at building a strong pipeline for women in leadership roles by mentor- mentee pairing) and RISE policy (Empowering diverse workforce by providing opportunities for Women, Person with Disabilities, Transgender candidates for a fulfilling career with TSLP) were launched in FY22. The Company also launched a comprehensive wellness app for employees and their families to establish a culture that encourages physical and mental wellbeing. As far as safety is concerned there was an overall reduction by 40% in Loss Time Injury (LTI) ensuring a more secure workplace for employees.

d. Empowering the community:

For over a century, Tata Steel has been serving the marginalised and voiceless sections of the community. Tata Steels overarching vision to be the global steel industry benchmark for value creation and corporate citizenship is underpinned by a resolve to work with excluded communities and cocreate transformative, efficient, and lasting solutions to their development challenges and thereby create "an enlightened, equitable society in which every individual realises ones own potential with dignity". TSLPL also assimilates the same values and considers the community not just another stakeholder in business, but in fact the very purpose of its existence. Volunteerism was actively demonstrated across the Company during FY22 with enthused participation by employees and their family members in the group-level volunteering platform, Tata Engage. Over the past one year, the Company has touched over 51,000 lives through volunteerism and dedicated CSR strategies. The Company has also tried to create a significant impact through its signature projects viz. Super 30 girls Empowering women to accomplish their dreams and Mushroom cultivation.

e. Setting path for strategic growth:

FY22 has been a defining year for the Companys long term strategic development and growth project deployment. The ongoing acquisition of Neelanchal Ispat Nigam Limited (NINL) is in progress and is key to achieve product and market expansion. The NINL acquisition is a strategic fit for the Company. With the existing crude steel capacity of ~1 MnT and ~2500 acres of land, it has potential to scale up TSLP to sizeable level of steel production. This will also help in iron ore securitisation with high reserves and a longer lease period. In addition, the Company is embarking on phase 1 expansion of commissioning a state of the Art Rolling facility which would bridge the technology gaps in existing facilities to enhance its presence in Passenger Vehicle and 2-wheeler segments along with enabling the Gamharia facility to achieve 1.2 MTPA crude steel production in the coming years.

f. Business Performance

TSLPLs current product portfolio is unique in nature with Special Steel as well as Sponge Iron / Direct Reduced Iron (DRI). Special steel is used for high-end and critical applications such as forging, bearings, fasteners, springs etc. which are used primarily by the Automotive sector but also in other areas such as construction, capital goods, etc. On the other hand, DRI is highly commoditised in nature and is used as a raw material (substitute to the steel scrap) in the electric arc furnaces or induction furnaces.

Steel Business: During FY22, TSLPL produced 684 KT of crude steel (6% growth YoY) and 672 KT of rolled products witnessing an increase of 26% on YoY basis. Constant efforts of de-bottlenecking and increasing yield of its steel making unit have reaped benefits and TSLPL is now entering FY23 with a healthy rate of operating capacity for steelmaking which will further enable it to maximise rolling capacities.

TSLPL was able to ramp up its production and achieve its highest ever rolled product sales post the acquisition of the steel business of Usha Martin Limited. Rolled product deliveries stood at 646 KT, a 22% Y-o-Y growth, enabled by market demand and robust customer approval pipelines built over the last two years. Special Steel sales mix increased to 75% in FY22 as compared to 60% in FY21 reaffirming the Companys focus on value maximisation through product portfolio enrichment.

Product wise Sales performance (All figures in kT)

Particulars FY22
Straight Length (Bar & Blooms) 322
Wire Rod 324
Billet 6
Total Steel Sales 652

Sponge Iron/DRI: FY22 has been a challenging year due to the second wave of the COVID - 19 pandemic in the initial quarter.

Rising commodity prices and limited pricing power squeezed the margins of sponge iron producers across the country. Despite all the challenges, the Company proved its credibility by increasing its production by 5% on YoY levels through various operational improvements. The Company eventually achieved an overall production of 839 KT with an increase of 5% as compared to FY21 despite the setback in Q1FY22. DRI sales were limited to 594 KT because of higher internal consumption by the Companys Gamharia unit.

g. Operational Excellence:

TSLPL continues its journey of operational excellence through Shikhar program (an in-house improvement management programme). Demonstrating operational resilience, 20+ new trials were conducted across the Gamharia plant to establish a new operating paradigm (including consistent optimisation of coal blend and usage of alternate fluxes in Blast Furnaces for improved productivity and cost reduction). The program has also contributed towards harnessing the opportunities within the group companies through synergy initiatives especially through supply chain optimisation. TSLPL is embarking upon a digitally enabled business transformation journey and to achieve this goal, Digital Twin for DRI, a pioneering initiative, was rolled out to maximise throughput through multivariate optimisation and predictive modelling. With improvement savings of 503 crore, Shikhar program continues to contribute towards EBITDA improvement and has been pivotal in staging a healthy performance by TSLPL.

V. Financial Performance

During FY222, the Company recorded a top line growth of ~1.5X with revenue reaching to 6,802 crores level. In addition, the Companys continued focus on operational improvement through Shikhar initiatives and curbing all non-essential spend has resulted in a better EBITDA. The Company posted an EBITDA margin of 19% at 1,289 crore in FY 222 as against 1,154 crore in FY21. The healthy EBITDA level helped the Company to deleverage its balance sheet significantly with pre-payment of the longterm loan installments due upto March 2029. Credit Rating for the company was upgraded from AA to AA+ by India Ratings for FY22 thereby resulting in further reduction in interest cost. The Company has registered a positive PBT of 858 crore in FY222 as against PBT of 615 crore in FY21, marking a 40% Y-o-Y growth. The Companys net debt is zero if the funds arranged through Non Convertible Redeemable Preference Shares (NCRPS) (for NINL acquisition) are excluded. This was enabled through overall focus on cash management. The Company has also reduced its debtors by 20% Y-o-Y.

a. Revenue from operations

(Rs. in crores)
FY 22 FY 21 Change %
Sale of products 6,316 4,359 45
Sale of power 63 51 22
Income from services 186 195 (4)
Other operating revenue 237 145 63
Total revenue from operations 6,802 4,750 43

During the year under review, sale of products was higher as compared to the previous year primarily due to increase in volumes and higher realisations. The Company recorded steel sales of 652 KT which is 2% higher than the previous years level. Continued focus towards mix enrichment has resulted in 22% growth in rolled product sales during FY22.

b. Cost of materials consumed

(Rs. in crores)
FY 22 FY 21 Change %
Cost of Materials consumed 3,930 2,182 80

During the year under review, cost of materials consumed increased primarily on account of higher input raw material prices, especially coking coal, and pursuant to amendment in the Mines and Minerals (Development and Regulation) Act (MMDR Act), levy of additional royalty on purchase of iron ore from Tata Steel Limited.

c. Employee benefits expense

(Rs. in crores)
FY 22 FY 21 Change %
Employee benefit expenses 216 215 1

d. Depreciation and amortisation expense

(Rs. in crores)
FY 22 FY 21 Change %
Depreciation and amortisation expenses 320 327 (2)

e. Other expenses

(Rs. in crores)
FY 22 FY 21 Change %
Other Expenses 1,577 1,198 32

f. Other Expenses represents the following expenditure:

(Rs. in crores)
FY 22 FY 21 Change %
Consumption of stores and spare parts 437 275 59
Fuel oil consumed 188 94 101
Purchase of power 112 55 101

 

(Rs. in crores)
FY 22 FY 21 Change %
Rent 5 5 7
Repairs to buildings 25 11 125
Repairs to machinery 153 122 25
Insurance 11 11 -
Rates and taxes 30 29 5
Freight and handling charges 353 332 7
Commission, discounts and rebates 1 2 (27)
Packing and forwarding 10 8 26
Royalty 135 152 (11)
Conversion charges 1 - NA
Legal and professional costs 10 11 (4)
Advertisement, promotion and selling expenses 0 0 65
Travelling expenses 7 4 83
Net Loss on foreign currency transactions 11 3 310
Corporate social responsibility expenses 3 1 434
Loss on disposal of property plant and equipment 12 10 25
Loss on disposal of noncurrent investments 0 - NA
Net loss on fair value changes of financial assets carried at FVTPL 13 NA
Other general expenses 72 62 16
Total Other expenses 1,577 1198 32

Other expenses were higher as compared to the previous financial year primarily on account of higher production volume and higher stores & spares prices.

g. Finance costs and net finance costs

(Rs. in crores)
FY 22 FY 21 Change %
Finance cost 110 235 (53)
Net finance cost 83 212 (61)

During the year under review, finance cost decreased mainly on account of prepayment of term loan by 636 crores and lower interest rate.

h. Exceptional items

(Rs. in crores)
FY 22 FY 21 Change %
(i) Acquisition related expenditures 27 - n/a

i. Property, plant & equipment (PPE) including intangibles

(Rs. in crores)
FY 22 FY 21 Change %
Property, Plant and Equipment 3,599 3,823 (6)
Capital work-in-progress 58 24 141
Goodwill 6 6 -
Right-of-use assets 211 224 (6)
Other Intangible assets 264 289 (9)
Total property, plant & equipment (PPE) including intangibles 4,138 4,366 (5)

The movement in total PPE including intangible assets is lower primarily on account of depreciation charge for the year, partly offset by additions made during the year.

j. Investments

(Rs. in crores)
FY 22 FY 21 Change %
Investment in Subsidiary, JVs and Associates 16 21 (24)
Investments - Current 8,078 - NA
Total Investments 8,093 21 39074%

The decrease in investment represents fair valuation loss and derecognition of TSIL Energy Limited. Current Investment has increased on account of investment of NCRPS proceeds in Mutual Funds.

k. Inventories

(Rs. in crores)
FY 22 FY 21 Change %
Raw materials 979 551 78
Finished and semi-finished goods 302 203 49
Stores and spares 69 60 16
Total Inventories 1,350 813 66

Raw materials inventory value has increased over the previous year mainly due to increase in prices of bought out coal and iron ore. Finished and semi-finished inventory value has increased as compared to previous year mainly due to increase in prices and partly offset by lower quantities.

l. Trade receivables

(Rs. in crores)
FY 22 FY 21 Change %
Gross trade receivables 61 98 (38)
Less: allowance for credit losses (1) (23) 97
Net trade receivables 60 75 (20)

Decrease in trade receivables as compared to that of previous year is primarily due to focused collection measures.

m. Gross debt and net debt

(Rs. in crores)
FY 22 FY 21 Change %
Gross debt 13,482 1,424 847
Less: Cash and Bank balances 4,562 283 1,514
(incl. non-current balances)
Less: Current investments 8,078 - n/a
Net debt 842 1,142 (26)

Gross Debt during FY 22 has increased due to issue of NCRPS amounting to 12,700 Crores to Tata Steel.

n. Cash Flows

(Rs. in crores)
FY 22 FY 21 Change %
Net cash (used)/generated from operating activities 1,761 1,690 4
Net cash (used)/generated from investing activities (9,405) 91 (10,432)
Net cash (used)/generated from financing activities 11,923 (1,559) 865
Net (decrease)/increase in cash and cash equivalents 4,280 221 1833

a) Net cash used in investing activities: During the current year, the net cash outflow from investing activities was 9,405 crores as against 91 crores inflow during the previous year. The outflow in FY22 broadly represents investments of proceeds in Mutual Funds from the issue of Non-Convertible Redeemable Preference Shares (NCRPS) amounting to 8,065 crores and deposit of 1,210 crores representing 10% of the bid amount to acquire a 93.71% in Neelachal Ispat Nigam Limited.

b) Net cash generated from financing activities: During the current year, the net cash inflow from financing activities was 11,923 crores against cash outflow of 1,559 crores during the previous year. Cash inflow for FY 22 includes proceeds of 12,700 crores of NCRPS.

o. Changes in key financial ratio

(Rs. in crores)
FY 22 FY 21 Change %
Debtors turnover ratio1 100.36 41.12 144
Inventory turnover ratio (No. of days) 58 62 (6)
Interest coverage ratio 11.61 3.90 198
Current ratio2 4.90 0.79 520
Net debt to equity ratio (times) 0.29 0.50 (42)
Operating profit margin (%)3 17.31 23.13 (5.82)
EBITDA margin %3 18.94 24.30 (5.36)
Net Profit margin (%) 9.08 11.85 (2.77)
Return on average net worth (%)3 21.74 24.81 (3.07)

1. Debtors turnover ratio has improved primarily on account of reduction in debtors and higher turnover during the year.

2. Current ratio has primarily increased due to increase in Investment balances at year end.

3. Operating profit margin, EBITDA margin, Net profit margin and return on average net worth has decreased primarily on account of higher raw material prices.

VI. Human Resource and Industrial Relations

As on March 31,2022, the Company had 2,357 employees on Roll. 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. Central Maintenance philosophy has been implemented for improving the productivity and development of multi-skilled workforce. During the year, 138 officers underwent the modular Managerial Effectiveness program focused on developing managerial capabilities. There has been an increased focus on career growth and 124 officers were promoted to the next level. As a part of the focused diversity initiatives, 73% hired candidates during campus recruitments in FY22 were females & persons with disabilities. As the organisation is poised for growth, Flexi Compensation structure was introduced during the year with an aim of simplification of salary structure and to provide empowerment to officers to decide their own salary structure. TSLPL introduced several initiatives such as targeted Wellness programs, Wellness App, Flexi Salary implementation, Digital initiatives, Diversity & Inclusion initiatives, Lead assessments for Talent development and Culture Study with an objective to sustain the high engagement scores. For some pathbreaking initiatives in formative years, TSLPL was conferred the prestigious 12th CII HR Excellence award in the category "Leadership in HR Excellence", surpassing the 600+ Score band in the very 1st year of assessment itself. The Company was also awarded the Economic Times Human Capital Award in the category "HR Leader of the Year, Gold Category" conferred to the Chief People Officer for his contribution in driving HR Excellence.

The Company has ensured harmonious and productive relations with its unions and community through effective Industrial Relations management. This is largely attributed to the Managements concern for its employees and the proactive and cooperative attitude of the employee trade unions. TSLPL in a short time has embodied the core values of Tata Group for its employees and community through implementation of Policies/Programmes/ Schemes/Projects aimed at providing Social Security and Welfare, workplace amenities, Occupational Health and Safety of Workers and promoting Harmonious Industrial Relations. The company was also conferred the Programmed Economic Times Human Capital Award in the category "Social Excellence, Silver Category" for its efforts in driving volunteerism in the company.

VII. Digital Transformation

IT and digital leadership is an important enabler identified to achieve the Companys objectives. In FY22, the primary focus of TSLPL was to create a cyber secured base for its digital transformation journey. In view of the same, initiatives in the following areas were implemented:

1. Protection and management of company data on phone, tablet, and desktop.

2. Authentication and authorisation of all user access.

3. Prevention unauthorised network access by firewall upgrade.

4. Scanning and prevention of malicious links, attachments from entering organisation via email and other tools (like SharePoint, OneDrive, and Teams)

More than 25 digital initiatives were implemented during FY22. Key initiatives include:

1. Digitally signed test certificate for tamper proofing, security enhancement of the document. Its an environment friendly initiative.

2. Rewards & Recognition(R&R) Portal to promote the culture of recognition and appreciation at workplace

3. Flexi Salary Management System to enable employees to increase take home salary by choosing allowances that suits their requirements.

4. Online Digital Logbook for Steel Melting Shop to improve accessibility data from anywhere to authorised persons.

5. Online Vehicle Access Permit to identify and prohibit unauthorised vehicle entry

6. Agility Project in Procurement- Budget based Buy System for better visibility and control of budget through system.

Engagement with Start-up (Newer) for latest digital concepts & technologies - Digital Twin for DRI plants for both Joda and Gamharia. A Central Virtual Command Centre has been established to enable Remote Manufacturing & Operations control. This will help to improve Productivity, Quality and Cost Reduction through process optimisation by adopting Industry 4.0 approach.

VMI.COVID-19 Pandemic and Companys response

Communities across the country had to face several challenges during COVID-19; and it was no different for people in the vicinity of our operational perimeters. This proved out to be a very challenging period for many sections across the community, especially for the people with deeply entrenched poverty, village children who were neither prepared nor could afford virtual tutoring, migrant workers who had to return with a bleak future, local labourers falling prey to the economic impact of the ongoing crisis and petty shopkeepers whose only source of daily income came to a standstill. Even seemingly simple measures to keep the spread of COVID-19 at bay, such as maintaining social distance, use of proper mask & sanitisers, washing hands with water and soap, were luxuries to many. As a responsible corporate citizen, the Company genuinely felt concerned about the wellbeing of these helpless people. The Company came to the rescue to every section of the community, through its customised approach. There were instant arrangements for supply of dry ration and cooked food for a sustained period, to prevent any casualty of hunger. This also included constant coordination and collaboration with the local administration to normalise supply of basic amenities. Free masks & sanitisers were distributed to those who could not afford the same. Special arrangements were made to build virtual set up for village children through tailored programs so that they did not miss out on regular classes. Soft loans and arrangements were made for the petty shopkeepers to reinstate their businesses. The Company also organised administration of free vaccines for all those personnel working in the plants. Besides, the Company also extended able support to the local administration and public health centers in equipping them to effectively continue their treatments.

IX. Risks & Opportunities

FY22 has been a roller-coaster ride, starting with oxygen crisis during the second wave of COVID-19, drop in 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. The current financial year has proven TSLPLs ability in proactively embracing Enterprise Risk Management as a business process. The Companys efforts are bearing fruit with step wise journey towards a risk intelligent culture in the organisation to support its decision-making process and thereby improving performance. Proactive assessment of events as part of Enterprise Risk Management has placed the organisation in a better position in several situations. TSLPL ensures compliance with risk management related regulatory frameworks such as the ones prescribed by the SEBI Listing Regulations and Companies Act, 2013. In its journey towards risk intelligence, a robust risk governance structure has been developed and implemented across the organisation and is steered by the Risk Management Committee of the Board. The Company also has an Apex Committee which is responsible for the successful implementation of the ERM process across the Company. The Company follows a 5 step ERM process (establish context, risk identification, risk assessment & evaluation, mitigation & monitoring, and review & report) for holistic risk identification across the organisation. The Company through the ERM framework has identified several strategic, macroeconomic, financial, operational, regulatory, and other risks. Post the identification of these risks, the Company has also assessed these risks and developed short term and long-term plans to mitigate or reduce these risks. Additionally, the Company is focusing on building the capability of its employees to enable each manager to act as a risk manager.

Key Risks in FY22 which have had a large bearing on the business are as follows:

Rising inflation, 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.

During the year, the company has also assessed and added the risk towards climate change and sustainability to take a more focused & proactive approach on the implementation of mitigation strategies in this area.

Comprehensive risk assessment and mitigation strategies are detailed out in IR under "Risk Management".

In addition to risk assessment, TSLP also carries out opportunity assessment to take a deeper look at the business environment to find out whether there is room to introduce new products, penetrate new customers and markets to achieve the aspired growth for the company. Some of the opportunities which TSLP is trying to ride upon are listed below:

a) Capitalise on growth potential posed by rising Indian economy and self- reliant initiatives of Government viz. strengthening the domestic manufacturing through production linked incentive etc.

b) Fast paced technological and digital changes providing an opportunity to grow in new segment and transform the business models.

c) I ncreasing thrust of the government on climate change providing an opportunity to take leadership role in sustainability by generating value through circular economy.

d) Ongoing acquistion of NINL offers an opportunity to grow at a faster pace with diverse products through in-organic route while the phase 1 expansion plan of investment in rolling mill would aid in augmenting our Gamharia plant capacity through organic route.

A detailed overview on the risk landscape and mitigation strategies is provided in the "Enterprise Risk Management" section forming part of the integrated report.

X. Internal control systems and their adequacy

The Board of Directors of the Company is responsible for ensuring that Internal Financial Controls have been laid down in the Company and that such controls are adequate and operating effectively. The foundation of Internal Financial Controls (IFC) lies in the Tata Code of Conduct (TCoC), policies and procedures adopted by the Management, corporate strategies, annual business planning process, management reviews, management system certifications and the risk management framework. The Company has an adequate internal control system to manage the business operations effectively and efficiently. The internal audit department closely monitors the compliance of all operations with prescribed business standards. The audit team supervises all internal processes and recommends necessary changes to ensure quick remediation of deviations, if any. Any variance from the budget is flagged off to the senior management which advises modification to ensure strict adherence to compliances. Periodic monitoring and effective implementation of recommendations ensure high business compliance with adequate adherence to rules and regulations that govern the Company. The controls also ascertain the reliability of financial controls and strict adherence to compliance as per applicable laws and regulations. The internal control system ascertains optimal utilisation of all resources and proper documentation of financial transactions.

XI. Statutory Compliances

The Managing Director, after obtaining confirmation from each of the departments, reports to the Board on a quarterly basis regarding the compliance with the provisions of various statutes, applicable to the Company. An enterprise-wide digital compliance management tool has been implemented across all locations of the Company to help monitor compliance real-time across the organisation. Due systems and processes are in place to ensure effectiveness of this tool. The Company Secretary, being the Compliance Officer, ensures compliance with the relevant provisions of the Companies Act, 2013 and SEBI Listing Regulations.