undefined share price Management discussions


Prior to recent financial sector ructions, activity in the world economy had shown nascent signs of stabilizing in early 2023 after the adverse shocks of last year Russias invasion of Ukraine and the ongoing war caused severe commodity and energy price shocks and trade disruptions, provoking the beginning of a significant reorientation and adjustment across many economies.

INDIAN ECONOMY – An expectation to add impetus to Economic Growth

The Indian economy appears to have moved on after its encounter with the pandemic, staging a full recovery in FY22 ahead of many nations and positioning itself to ascend to the pre-pandemic growth path in FY23. Indias steel consumption was at 106 million tonnes in FY22, up from 95 million tonnes in FY21, an increase of 11% y-o-y on account of increased consumption by the government on varied infrastructure projects, as well as the resumption of real estate and construction work on a lower-base of FY21. Yet in the current year, India has also faced the challenge of reining in inflation that the European strife accentuated. Measures taken by the government and RBI, along with the easing of global commodity prices, have finally managed to bring retail inflation below the RBI upper tolerance target in November 2022.

IN FY 2022-23, India reported an estimated economic growth of 7% and becoming the fifth largest global economy by overtaking UK. India surpassed China to become the worlds most populous nation.

Growth of Indian Economy

Particular FY 21 FY 22 FY 23
Real GDP Growth % -6.6 8.7 7

Indias economic growth in FY23 has been principally led by private consumption and capital formation, this has helped generate employment as seen in the declining urban unemployment rate and in the faster net registration in Employee Provident Fund. The Capital Expenditure (Capex) of the central government, which increased by 63.4 percent in the first eight months of FY23, was another growth driver of the Indian economy in the current year, crowding in the private Capex since the January-March quarter of 2022. The credit growth to the Micro, Small, and Medium Enterprises (MSME) sector has been remarkably high, over 30.6 per cent, on average during Jan-Nov 2022, supported by the extended Emergency Credit Linked Guarantee Scheme (ECLGS) of the Union government. Moreover, Worlds second-largest vaccination drive involving more than 2 billion doses also served to lift consumer sentiments that may prolong the rebound in consumption.

Strong domestic demand and supportive government policies are likely to sustain Indias status as one of the worlds fastest-growing major economies. It has also been noted that the Union Budget for FY 2023-24 includes various measures to boost demand, mainly through increased public spending on capex, which is expected to stimulate private investment and improve overall demand.

INDIAN OUTLOOK

Indias recovery from the pandemic was relatively quick, and growth in the upcoming year will be supported by solid domestic demand and a pickup in capital investment.

The average domestic finished steel prices reached their peak on April 2022, the same sharp rise was pinned down by sharp decline in December 2022, this decline was due to imposition of heavy export duties on a range of finished good and increasing in domestic inventories. Moreover Rising inflation, fiscal deficit, and environmental concerns are also the main difficulties confronting the Indian economy. Yet, the Indian economy has emerged stronger and fared better than other global economies, which can be attributed to the countrys well-considered policy reforms and effective regulatory measures.

GLOBAL STEEL INDUSTRY SCENARIO

As the worlds most important engineering and construction material, steel is essential to the global economy. The global steel industry is an essential sector that holds a significant role in the worldwide economy. It serves as a fundamental material for construction, infrastructure, manufacturing, and various other industries. The post-pandemic recovery of the global economy has encountered several obstacles that have affected its momentum. Persistent inflation, US monetary tightening, Chinas economic slowdown, and the ongoing supply disruptions resulting from the Russia-Ukraine war have all contributed to the challenges. Notably, high energy prices, increasing interest rates, and declining confidence have hindered the recovery of steel demand after a decline in 2022. These factors have created a difficult environment for the steel industry.

While uncertainties remain due to the complex interplay of various factors, these positive developments offer hope for the steel industrys recovery and growth in the coming year.

Total Global crude steel production in 2022 dropped by 4.2% to 1,878.5 million tonnes due to rising geopolitical tensions and supply-chain constraints. China has dominated steel production as the largest global producer and recorded production of 1013 million tonnes, closely followed by other major players such as India, Japan, the United States, and Russia, but Chinese steel demand experienced a contraction in both 2021 and 2022 as the economy decelerated sharply due to unexpected lockdowns.

Top 10 crude steel Production countries are

Rank

2022 2021 %2022/2021
1 China 1 013.0 1 034.7 -2.1
2 India 124.7 118.2 5.5
3 Japan 89.2 96.3 -7.4
4 United States 80.7 85.8 -5.9
5 Russia 71.5 77.0 -7.2
6 South Korea 65.9 70.4 -6.5
7 Germany 36.8 40.2 -8.4
8 Turkey 35.1 40.4 -12.9
9 Brazil 34.0 36.1 -5.8
10 Iran 30.6 28.3 8.0

Source: World Steel Association

Demand Supply Outlook

Persistent inflation and high-interest rates in most economies will limit the recovery of steel demand in 2023, despite positive factors like Chinas reopening, Europes resilience in the face of the energy crisis, and the easing of supply chain bottlenecks.

Indian Steel Industry Scenario

Indias Steel sector is one of the fastest growing, in-demand and robust sectors. While the pandemic and global export/import circumstances did cause the sector to slow down for a while, recent development is bringing the sector back to its glory. Today, the Indian steel industry ranks second in global production.The Indian steel industry outlook for 2023 looks promising with the country gearing to become a US $5 trillion economy by 2030 (or sooner). India is the second-largest producer of crude steel in the world, with an output of 126.2 MnT in FY 2022-23. Crude steel production rose 5.0% year-over-year while finished steel consumption rose 13.3% to 119.9 MnT4. The imposition of export duty on steel led to the built-up of domestic inventories, as exports became unviable in the weak global price environment. Indias steel exports dipped by 54.1% to 47.41 lakh tonnes from April to December 2022, largely due to the weak global demand. The distribution of iron and steel industry is spread across the states of Odisha, Jharkhand, Chhattisgarh, Karnataka, Maharashtra, West Bengal, and Gujarat, while the use of steel in construction, automotive, railways, capital goods and consumer durables, has been growing.

Opportunities:

? Infrastructure Development: Indias ambitious infrastructure projects, such as smart cities, highways, railways, and ports, present significant opportunities for increased steel consumption? Make in India Initiative: The governments Make in India campaign encourages domestic manufacturing, leading to higher steel demand in various sectors.

? Global Export Potential: With its competitive production costs and improving quality, the Indian steel industry has opportunities to expand its presence in the international market.

? Government Intiatives: Government Policies like Production Linked Incentive (PLI), Jal Jeevan Mission, PM Ji-van Yojana targeting development in various sectors like infrastructure, housing and development pose a unique opportunity for Steel Industry

Threats:

Steel has been one of the most important materials in the industrialisation of economies worldwide. Steel has been the backbone of modern infrastructure, from skyscrapers to cars, bridges to pipelines. However, the steel industry is not without its challenges, and it faces significant obstacles in todays global economy. Major setbacks are? Capital and labour intensive industry-One of the main challenges of the steel industry is it is highly capital and labour intensive.

? Steel industry stimulated growth of a nation and acts as the economy booster for the nations industrial growth, Producing low cost high quality steel with optimal usage of all type of resources is the biggest challenge today.? Establishing steel plants requires substantial investment, and managing labor remains a challenge.

? Fluctuating Demand: Predicting demand accurately is difficult, leading to delayed returns on investment.??LogisticsIssues:Handlingbulkmaterialslikeironoreandsteelposeslogisticalchallenges,impactingtransportation costs.

? Disruptions in Raw Material Supply: Imports of coking coal can face supply chain disruptions and price fluctuations.? Unexpected circumstances, such as the COVID-19 pandemic, can affect the Companys operations, supply chain, and product demand. The pandemic of COVID-19 has underlined the significance of having a resilient business model that can react to unforeseen occurrences and market changes.

OUTLOOK OF INDIAN STEEL INDUSTRY

India, one of the fastest growing major economies, is likely to become the third-largest economy in the world by 2030. The steel industry will have a major role to support this growth. Increased investments in infrastructure will be a major contributor to the growth of Indias domestic steel demand. In 2022, Indias economy stood out as a beacon of strength within the global steel industry. This was largely due to the countrys effective management of inflation, propelling the economy onto a healthy growth trajectory. Notably, there was a notable increase in the share of investment in the GDP, mainly attributed to the governments substantial spending on infrastructure projects. Furthermore, the residential sector showed promise and was expected to grow, buoyed by the development of affordable housing projects and increasing urban demand. The implementation of the Production-Linked Investment (PLI) Schemes played a pivotal role in fostering private investment, further boosting economic prospects.

Several other sectors also witnessed positive trends. The capital goods sector was poised to benefit from the infrastructure momentum and investments in renewable energy. Moreover, the automotive and consumer durables industries were anticipated to maintain robust growth, supported by sustained private consumption.

Looking ahead, demand was projected to exhibit healthy growth rates of 7.3 per cent in 2023 and 6.2 per cent in 2024, following an impressive 8.2 per cent growth in 2022. These projections painted a promising picture of Indias economic future.

1. The Rising Demand for Steel

With cities expanding, technological advent of Industry 4.0, and rise in construction and engineering projects, the meteoric rise of the steel industry is not unexpected. Today, there are different types of steel manufactured and used in India to cater to its rising demand. From the industry-wide use of steel coils to steel channels and steel structurals, there is a market ready for steel products everywhere. The India government has set a target to increase crude steel production capacity from 160 MTPA in FY 2022-23 to 300 MTPA by FY 2030-31 under the National Steel Policy. Further, the NITI Aayog has stated that India will become the worlds production centre for green steel and pave the way for its worldwide adoption. The domestic steel industry, which grew between 5% to 7% on a year-on-year basis, is expected to play a bigger role in enabling India to achieve the 5 trillion economy target by 2025. We anticipate that the recent government policy announcements would support a relatively solid demand recovery and drive the need for iron & steel products.

An Indian steel industry overview analysis has identify the following as some of reasons for the growth of the steel sector in India

1. Resource availability: Though the cost of iron-ore has been on the rise in recent years, it is still one of the most widely available resources domestically. In addition to that, considering that the production of steel is a capital- and labor-intensive process, labour is also available economically. This naturally has helped to balance steel production costs.

2. Industry-wide application: Steel and steel products have its uses across multiple industries – shipbuilding, automotive, pharmaceutical, aviation, real estate, energy, home appliances, electronics etc. Whether its using corrugated sheets in roo_ng or using TMT bars in buildings for safety against natural disasters, the use of steel as a raw material is visible across all industries.

3. Longevity of steel metal: Steel as a metal has longevity. For instance, stainless steel used in making cutlery lasts longer than glass. Steel is also low on maintenance. TMT bars used in housing construction projects can stand for years unlike wood or other raw material used. Moreover, based on its composition and type, steel is strong, ductile, can bear heavy load, is corrosion and heat resistant – in short, its more cost-e_ective and value-for-money than other raw materials. Recycling of steel is also possible which makes it a preferred raw material in industries, adding to its growing demand.

4. Government initiatives: As stated previously, the government has introduced several initiatives to boost steel production in India and reach 300 MT in production by 2030. It has removed the 15% export taxes, and working towards removing technology, logistics and infrastructure bottlenecks.

5. Ease of purchase: Technology has made buying and selling of steel and steel products easier today. Buyers can buy steel online through reliable steel marketplaces and online websites, in a secure, transparent, and quick manner.

2. Policy Support: -

The Ministry of Steel signed 57 MoUs with 27 companies for specialty steel under the PLI scheme (Production Linked Incentive). Under the scheme the government has approved a sum of 6322 crore for steel sector growth. Apart from creating new jobs and contributing to making India the 3rd largest economy globally (by 2030-31), the scheme aims to create an additional capacity of 25 MT of specialty steel in the next five years.

The government has introduced several initiatives to boost steel production in India and reach 300 MT in production by 2030. It has removed the 15% export taxes, and working towards removing technology, logistics and infrastructure bottlenecks.

1. COMPANYS (FINANCIAL AND OPERATIONAL) PERFORMANCE a. The Financial performance of the Company for 2022-2023 is given below:

(Rs. in Lakhs)

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Standalone

Consolidated

Particulars

F.Y. 22-23

F.Y. 21-22

F.Y. 22-23

F.Y. 21-22

Revenue from Operations 2,55,039.96 2,33,957.86 2,55,039.96 2,33,957.86
Other Income 1,157.47 339.42 1,161.28 339.59
Total Income (A) 2,56,197.43 2,34,297.28 2,56,201.24 2,34,297.45
Profit/(Loss) Before Tax (6,028.27) 3,816.29 (5,717.95) 2,990.01
Provision For Taxation - - - -
Deferred Tax (658.65) 421.09 (658.22) 421.59
Net Profit/(Loss) (5,369.62) 3,395.20 (5,059.73) 2,568.42
Other Comprehensive Income/(Loss)(net of tax) 226.24 62.43 216.73 62.43
Total Comprehensive Income (5,143.38) 3,457.63 (4,842.99) 2,630.85

? Highlights of Standalone Results

Revenue from Operations for the year ended 31st March, 2023 stood at Rs. 2,55,039.96 lakhs as compared to Rs. 2,33,957.86 lakhs in the previous financial year 2021-2022.

? ?Highlights of Consolidated Results

Revenue from Operations for the year ended 31st March, 2023 stood at Rs. 2,55,039.96 lakhs as compared to Rs. 2,33,957.86 lakhs in the previous financial year 2021-2022.

b. Details of significant changes in key financial ratios are as given below:-

Sr. No.

Particulars

UOM

Year Ended 31.03.2023

Year Ended 31.03.2022

Growth YOY

1 Debtor Turnover Ratio Times 33.99 29.56 4.43
2 Inventory Turnover Ratio Times 5.27 5.37 0.1
3 Revenue Growth Rs. In Lakhs 21,082.10 61,644.42 (40,562.03)
4 EBITDA Rs. In Lakhs 7,072.64 15,862.23 (8,789.59)
5 EBITDA MARGIN % 2.77 6.78 (4.01)
6 ROE % % (13.35) 8.81 (22.16)
7 ROCE% % (4.81) 9.10 (13.91)
8 PBT Rs. In Lakhs (6,028.27) 3,816.29 (9,844.56)
9 PAT Rs. In Lakhs (5,369.62) 3,395.20 (8,764.82)
10 Net Worth Rs. In Lakhs 56,729.53 61,872.91 (5,143.38)
11 Capital Employed Rs. In Lakhs 1,06,994.82 1,14,516.39 (7,521.57)
12 Current Ratio Times 1.27 1.39 (0.12)
13 Debt to Equity Ratio Times 1.41 1.33 0.08
14 Fixed Assets Turnover Ratio Times 3.09 2.83 0.26

c. Return on Networth :-

The details of return on net worth are given below:-

Particulars 2022-2023 2021-2022 Growth YOY
Return on Networth (%) 1.47 1.61 (0.14)

The Networth of the Company has decreased in the current Financial Year 2022-2023 due to decrease in the profits of the Company. It decreased to Rs. 56,729.53 Lakhs in comparison to the previous Financial Year 2021-2022 of Rs. 61,872.91 Lakhs.

d. Companys Subsidiary, Associates and Joint ventures:

The financial Statements of the following Companies were accounted for in making the Consolidated Financial Statements of MSP Steel & Power Limited:

MSP CEMENT LIMITED _WHOLLY OWNED SUBSIDIARY_ 100% MSP STEEL & POWER LIMITED PRATEEK MINES & MINERALS PRIVATE LIMITED _SUBSIDIARY_ 63.69% MADANPUR SOUTH COAL COMPANY LIMITED _JOINT VENTURE_ 14.54%

The performance and financial position of the Companys Subsidiary, Associates and Jointly Controlled Entity are summarized herein below: (Rs. In lakhs)

Name of the Company*

% of Share

Networth as on 31.03.2023

Profit/ (Loss) for the Year 31.03.2023

MSP Cement Limited CIN: U26940CT2008PLC002120

100%

28.73

0.26

Prateek Mines & Minerals Private Limited CIN:U14219WB2006PTC112186

63.69%

83.90

(4.69)

Madanpur South Coal Company Limited CIN: U10300CT2006PLC020006

14.54 %

2,792.60

2,096.49

*During the year under review an associate company of the your Company namely "AA ESS Tradelinks Pvt Ltd" have ceased to be an associate post its merger with M.A. Hire Purchase Private Limited w.e.f.18th July, 2022.

e. Earnings Per Share (EPS):-

The Earnings per Share (EPS-Basic and Diluted) of the Company for the current financial year 2022-2023 is Rs (1.39) and (1.29) respectively as compared to the (EPS-Basic and Diluted) for the previous financial year 2021-2022 was Rs. 0.88 and 0.82 respectively.

2. COMPANYS PRODUCT PERFORMANCE

During Financial year 2022-2023 the Production figures indicate a mixed trend. Pellet production experienced a slight decrease, moving from 10,76,370 metric tons in 2021-22 to 10,67,416 metric tons in 2022-23. In contrast, Sponge Iron production exhibited a modest increase, rising from 3,59,041 metric tons to 3,65383 metric tons during the year. MS Billets showed a notable product growth, reaching 3,60,229 metric tons from the previous year 2,99,949 metric tons.

Turning to sales, 2022-23 demonstrated varied patterns. Pellet sales saw a substantial rise, surging from 4,28,343 metric tons to 6,47,195 metric tons. Conversely, Sponge Iron sales experienced a significant decline, decreasing from 80,330 metric tons to 37,653 metric tons. MS Billet; sales, however, showcased an upward trajectory, climbing from 19,030 metric tons to 24,442 metric tons.

Moreover, the TMT/ Structural category recorded growth in both production and sales. Production increased from 2,98,383 metric tons to 3,27,155 metric tons, and sales rose from 2,96,271 metric tons to 3,26,126 metric tons. On other hand, Power production witnessed a reduction, moving from 52,12,51,600 Kwh to 50,71,86,200 Kwh. Power sales also experienced a significant decline, dropping from 7,10,20,603 Kwh to 3,84,38,400 Kwh during the year.

3. FINANCIAL MANAGEMENT

Financial management is strategic planning, organising, directing, and controlling of financial undertakings in the Company. It also includes applying management principles to the financial assets of an organisation, while also playing an important part in fiscal management.

The objectives involved in financial management include:

? ?Maintaining enough supply of funds for the organisation; ? ?Ensuring shareholders get good returns on their investment; ? ?Optimum and efficient utilisation of funds; ? ?Creating real and safe investment opportunities.

The scope of Financial Management is as follows:-

Financial Planning Financial Management Financial Control Financial Decision-Making

The Board of Directors and the Senior Management personnel of the Company takes part in financial decision of the Company such as adequate forecasting of the total financial cash requirements, proper utilisation of finance cash, proper resourcing, maintaining proper cash flow, survival of the Company,creating reserves, creating goodwill, increase efficiency which leads to financial planning, control and decision-making. This ensures regular and adequate supply of funds, optimum funds utilization, safety on investment, i.e, funds should be invested in safe ventures so that adequate rate of return can be achieved.

The Companys highly efficient teams of professionals and technicians are responsible for overseeing factory operations. The team ensures that the established organisational procedures laid down by the senior management at a strategic level are followed and translated even in financial results and periodic management reports.

4. HUMAN RESOURCES MANAGEMENT & INDUSTRIAL RELATIONS

People are the essential part of the organization. As they say, its people who make the organization successful.

People are foundation and pillar that hold the organization strong and tall as they provide skills and competencies necessary to make organizational strategies work. We at MSP truly believe the same and work towards attracting, retaining and developing best talent in the organization.

Your Companys Workforce consists of 1,137 employees as on 31st March, 2023 as compared to the previous year as on 31st March, 2022, which was 1,087 employess. Your Company maintains a cordial relationship with its employees and values the safety of its employees ensuring safe work practices. In order to maintain lively and enthusiastic environment, your Company organises various employee engagement activities and in terms of celebration, various occasions like Diwali, Holi, Christmas, Womens Day are celebrated. Various sports activities including Cricket tournament were organized at our plant Location as well as at corporate office. Various other engagement activities like plant sapling on "World Environment Day", yoga training on "Yoga Day" etc. In terms of development, various in-house and external trainings were organised by the Company.

Your Company has a culture of working together through joint consultation between Senior Management and employees and a very strong commitment towards mutual development. Your Company believes in developing long term relationships with all our employees on an ongoing basis. Industrial relations at all the manufacturing units of your Company have been harmonious and peaceful with active involvement of the employees in the collective bargaining process.

5. STATUTORY COMPLIANCE

Statutory compliance adherence provides a great deal of security, starting from employees minimum wages to the companys business existence. The Company has adequate systems and processes to ensure that it is in compliance with all applicable laws and it is complying with all the Statutory rules and regulations applicable to it. The HR department complies with Statutory Acts like Factories Act, PF & Misc Provision Act, ESI Act, Minimum Wages Act, Bonus Act, Professional Tax Act, Shop and Establishment Act, Maternity Benefit Act, Payment of Wages Act and Other Labour Regulations as applicable for the organization. The Accounts Department complies with Income Tax Act and Service Act, etc. The Company Secretary complies with Companies Act, SEBI Regulations and other allied corporate laws applicable to the Company.

All the Statutory Compliances are met for the smooth functioning of the Company.

6. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

To ensure effective internal controls across business process and systems, the Company has established a robust framework that is designed to provide reliable and quality assurance related to the Companys financial and operational information so that it can comply with applicable laws and safeguard the Company assets. The framework comprises both entity level controls and business process controls. The adequacy and efficacy of these controls are evaluated on a regular basis.

Apart from strong internal control, your Company has also appointed external and independent Audit Firms as its Internal auditors for periodical checking and monitoring of the Internal Control Measures.

The Companys internal financial control framework commensurate with the size and the operation of the business and is in line with requirements of the Companies Act, 2013. The Company has laid down Standard Operating Procedures and policies to guide the operations of each of its functions. The Audit Committee also meets the

Companys Internal Auditors as well as Statutory Auditors to ascertain for their views on the adequacy of internal control systems of the Company and keeps the management informed of its major observations Robust and continuous internal monitoring mechanisms ensure timely identification of risks and issues. The Management, Statutory and Internal Auditors undertake rigorous testing of the control environment of the Company.

7. RISK AND CONCERN

Our company understands that all businesses inherently carry certain risks, but we place great importance on actively identifying and minimizing these risks. To achieve this, we have implemented a robust organizational risk management system that consistently evaluates both our internal and external environment to detect potential risks. By doing so, we can develop effective strategies to mitigate these risks effectively. We ensure that these measures are integrated into our strategic plans, thereby ensuring their implementation throughout the organization.

The risks we address are diverse and encompass various types, such as geopolitical developments (e.g. war or natural calamities), travel restrictions, industry-specific risks, foreign currency volatility, client concentration, technology hazards, and financial risks, among others. To manage these significant threats, we have already put in place measures at different levels of management.

Moreover, we continuously review and monitor our risk mitigation plans to guarantee their ongoing effectiveness in safeguarding our business from potential threats. Our commitment to proactive risk management underscores our dedication to the long-term stability and success of our company.

8. CAUTIONARY STATEMENT

The Management Discussions and Analysis describe Companys projections, expectations or predictions and are "forward looking statements" within the meaning of applicable laws and regulations. These statements are based on current information and may differ from actual results due to risks and uncertainties. Important factors that could make a difference to the Companys operations include demand-supply conditions, finished goods prices, raw materials costs and availability, fluctuations in exchange rates, changes in Government regulations, tax laws, natural calamities including critically of pandemic (Covid- 19), litigation and industrial relations, economic developments within the country and other factors.