MSP Steel & Power Ltd Management Discussions

ECONOMIC OVERVIEW

GLOBAL ECONOMY¹

The global economy remained resilient despite a series of formidable challenges in recent years. Geopolitical tensions and extreme weather conditions continued to disrupt supply chains, leading to energy shortages and food security concerns across multiple regions. However, even in this uncertain environment, the global economy managed to hold steady, registering a growth rate of 3.3% in CY 2024. That said, the recovery remained uneven, with growth patterns varying significantly across regions.

Inflationary pressures eased considerably over the course of the year. Global inflation declined from 6.8% in CY 2023 to 5.7% in CY 2024. This easing was primarily due to effective and timely monetary interventions, along with greater stability in global energy markets. These factors helped stabilise prices and supported a more broad-based economic rebound. Emerging Markets and Developing Economies (EMDEs) outpaced advanced economies during the year, growing at 4.3%, compared to 1.8% for the latter. This stronger performance was catalysed by robust domestic demand, a healthy influx of Foreign Direct Investment (FDI) and a deliberate shift in strategy aimed at reducing over-reliance on external trade.

OUTLOOK

The outlook for the global economy remains cautiously optimistic. Growth is projected to continue at a measured pace, with global GDP expected to expand by 2.8% in CY 2025 and 3.0% in CY 2026. This forecast reflects a combination of gradually easing inflation and ongoing policy support from central banks and a stabilisation of key macroeconomic indicators.

Emerging markets are expected to maintain stable momentum with a growth rate of 3.7%, while advanced economies are likely to experience a slow but steady recovery, reaching 1.4% growth in CY 2025. This divergence in growth trajectories will continue to shape global investment flows and trade dynamics. As inflation is forecast to decline further to 4.3% in CY 2025 and further to 3.6% in CY 2026, consumer confidence and spending are likely to strengthen, especially in economies where wage growth keeps pace with inflation. However, recent hikes in tariffs and the resurgence of protectionist policies in several regions present notable risks to trade and investment. In response to these uncertainties, governments and businesses across the globe are recalibrating their strategies. Many are diversifying trade relationships, investing in supply chain efficiencies and exploring opportunities in emerging markets. Simultaneously, there is a growing emphasis on enhancing productivity through technological innovation, workforce upskilling, and investment in smart infrastructure. These shifts are expected to provide a solid foundation for long-term, sustainable growth and contribute to a more balanced and inclusive global economic recovery.

INDIAN ECONOMY²

India has emerged as one of the worlds fastest-growing major economies, despite persistent global headwinds. The economy expanded at a rate of 6.5% in FY 2025, driven by strong domestic demand, rising private consumption, increased public and private investments. As the fifth-largest economy globally, India continues on an upward growth path, increasingly positioning itself as a hub for entrepreneurship, business and innovation on the world stage. Consumer confidence remained positive, as reflected in the Future Expectations Index (FEI). A significant contributor to this momentum was the substantial increase in infrastructure spending, with capital expenditure rising by approximately 39% between FY 2019-20 and FY2024-25.³

India is expected to sustain its economic growth, supported by robust demand, higher capital investments, an expanding middle-class population and adaptive fiscal and monetary strategies. The manufacturing sector is also poised for substantial expansion in the coming years, supported by government efforts to establish the country as a global manufacturing hub.

OUTLOOK

Indias economy is projected to maintain its momentum, underpinned by macroeconomic stability and strong financial fundamentals. Key growth drivers include ongoing digital transformation, a supportive regulatory environment, and a vibrant culture of entrepreneurship. With a forecasted GDP growth rate of 6.5% in FY 2026, India is set to remain one of the fastest-growing major economies in the world.

To support this momentum, the RBI has adopted accommodative monetary policies, including a reduction in the repo rate to 5.50% in April 2025. This move aims to lower borrowing costs and improve market liquidity. These measures are expected to stimulate credit growth, enhance bank profitability, and reinforce financial system stability. Additionally, steps such as cuts in the Cash Reserve Ratio (CRR) and open market operations are helping to address liquidity constraints within the banking system.

INDUSTRY OVERVIEW

GLOBAL STEEL INDUSTRY⁴

The global steel industry experienced mixed trends during the year. Overall crude steel production for the 70 countries reporting to the World Steel Association reached 158.8 million tonnes in May 2025, marking a 3.8% decline compared to May 2024. This contraction was primarily driven by reduced output in major producing regions such as Asia and Oceania, which saw a 4.7% year-on-year decrease and significant declines in Europe and the CIS region.

In contrast to the general decline in global steel production, some regions showed notable strength and expansion. Africa, the Middle East, North America and South America all recorded increases in crude steel output compared to the previous year. This trend highlights a changing landscape in the industry, with emerging and developing markets playing a larger role in driving global steel production.

Among the top steel-producing countries, India stood out with a 9.7% year-on-year increase in production in May 2025, while China, the worlds largest producer, experienced a notable 6.9% decrease. Other leading producers such as Japan, Russia, and Germany also reported declines, reflecting broader economic and industrial challenges in those regions. The divergence in performance among key players highlights the evolving landscape of the global steel industry.

OUTLOOK⁵

The global steel industry is expected to face persistent challenges in the near term, as excess capacity continues to expand amid only modest demand growth. Significant new capacity additions, particularly in Asia, are projected to exacerbate oversupply pressures, potentially driving utilisation rates down towards 70% and placing further strain on margins and profitability. Heightened competition, rising trade actions and the prevalence of subsidies in major producing regions are likely to distort market dynamics and dampen price recovery. At the same time, decarbonisation efforts could be constrained by weak financial performance and the continued dominance of carbon-intensive production routes, underscoring the need for international cooperation to address structural imbalances and support a more sustainable industry trajectory.

INDIAN STEEL INDUSTRY⁶

India continues to play a significant role in driving global steel demand growth, retaining its position as the worlds second-largest steel producer after China in 2024. The countrys steel demand is expected to outpace that of other major economies in FY 2024-25, supported by a shift towards steel-intensive sectors such as construction and housing, as well as strong government-led infrastructure and manufacturing initiatives.

The crude steel production reached 112.01 million tonnes during April–December 2024, reflecting a steady growth trend, with private sector players contributing 84% of this output. Finished steel production also saw a 4.4% increase over the previous year, totalling 107.19 million tonnes in the same period.

Despite strong domestic production and consumption finished steel consumption grew by 11.4% to 111.49 million tonnes the industry faced challenges in the global market. Exports of finished steel declined by 24.6% to 3.6 million tonnes, while imports surged by 22.7% to 7.42 million tonnes, making India a net importer of finished steel during this period.

To strengthen the sector, the government advanced several policy initiatives. The Production Linked Incentive

(PLI) Scheme for specialty steel, with a budget outlay of

6,322 crore, aimed to boost domestic manufacturing and attract investments. The schemes second round (PLI 1.1) was launched in January 2025 to further incentivise innovation and capacity expansion. Additionally, infrastructure initiatives under the PM GatiShakti Masterplan and stringent quality control measures were implemented to enhance competitiveness and ensure the availability of high-quality steel for end users.

OUTLOOK⁷

The steel industry is poised for continued expansion, supported by strong domestic demand, robust infrastructure development and policy initiatives. Consumption trends have similarly been on an upward trajectory, driven by government spending on housing, roads and railways, alongside recovery in the manufacturing sector. However, India transitioned to a net importer of finished steel during the year, reflecting rising demand and some pressure on supply chains. The Production Linked Incentive Scheme for specialty steel, along with research and development incentives and the implementation of the Steel Quality Control Order, are expected to improve quality, stimulate investment and enhance technological capabilities. Overall, the sector is supported by favourable policies and sustained infrastructure momentum.

OPPORTUNITIES and CHALLENGES

Opportunities

Infrastructure & Construction Boom – Government-funded infrastructure projects such as smart cities, highways and housing are fuelling 8–11% annual growth in domestic steel demand. Urbanisation & Industrialisation - Rapid urban expansion and manufacturing modernisation are boosting demand across the construction, packaging and engineering sectors.

Input Integration & Local Raw Material Push - Expanded exploration and block auctions for iron ore, coal, and manganese, often internationally, are strengthening material supply chains.

Technology Adoption & Operational Efficiency- Embracing Industry 4.0 tools, AI for predictive maintenance, and automation in rolling mills is lifting productivity.

Supportive measures— Government reliefs in tariffs, levy exemptions, and infrastructure subsidies — are buffering domestic prices and underpinning capacity.

Challenges

Global overcapacity & oversupply – Global steel capacity remains excessive, depressing prices and margins. OECD warns of falling utilisation and intensified price pressure.

Volatile raw material & energy costs – Iron ore, coking coal price instability, mining royalties, and high energy costs undermine cost competitiveness and profit margins.

Geopolitical & trade uncertainty – Tariffs and shifting trade flows, such as U.S./China, create unpredictable export/ import landscapes.

COMPANY OVERVIEW

MSP Steel & Power Limited ("MSP Steel"), the flagship company of the MSP Group, operates a highly diversified and integrated manufacturing setup. Its end-to-end operations span the entire value chain, from raw material processing to the production of high-quality steel and a range of downstream value-added products.

From its beginnings as a single-product manufacturing unit, the Company has evolved into one of the countrys leading steel producers. Its state-of-the-art facilities, qualified workforce, comprehensive product portfolio and sound management practices have positioned the Company as a reliable partner in Indias journey towards becoming a progressive and self-reliant industrial economy.

FINANCIAL PERFORMANCE OF THE COMPANY

(Rs. in lakhs)

	Standalone		Consolidated
Particulars	FY 2024-25	FY 2023-24	FY 2024-25	FY 2023-24
Total Income	2,90,882.80	2,91,221.25	2,90,883.48	2,91,226.31
EBITDA	137,06.79	16,377.03	137,49.24	16,378.58
PAT	(2870.98)	1,438.90	(2835.94)	1,434.64
EPS Basic	(0.62)	0.37	(0.62)	0.37
EPS Diluted	(0.62)	0.35	(0.62)	0.34

KEY FINANCIAL RATIO

Particulars	As at 31st March 2025	As at 31st March 2024	% variance	Reasons
Current ratio	1.26	1.29	(2.52)	-
Debt -equity ratio	0.25	0.49	(49.46)	Due to conversion of OCD and Long term Loan from Promoters into Equity.
Debt services coverage ratio	0.89	1.13	(21.61)	Due to conversion of OCD and Long term Loan from Promoters into Equity.
Inventory turnover ratio	6.02	5.90	2.07	Due to Better Working Capital Management.
Trade receivables turnover ratio	40.36	39.61	1.89	Due to Better Working Capital Management.
Trade payables turnover ratio	10.89	11.50	(5.33)	Due to Better Working Capital Management.
Net capital turnover ratio	19.12	14.68	30.27	-
Net profit ratio	(0.99)	0.50	(297.64)	Due to increase in Equity Share Capital.
Return on capital employed	0.07	0.08	(16.09)	Due to increase in Equity Share Capital.
Return on investment	5.64	(1.66)	(439.97)	-
Return on Equity Ratio	(3.69)	2.51	(247.04)	Due to increase in Equity Share Capital

HUMAN RESOURCES MANAGEMENT

The Company continues to uphold its core belief that people are the foundation of organisational success, a belief that is reflected in its steady growth. Employee well-being and safety remain key priorities, with robust safety practices maintained across all operations. The Company also nurtured a positive and inclusive workplace culture by celebrating festivals such as Diwali, Holi and Christmas, and organising sports tournaments and environmental initiatives like sapling plantations on World Environment Day.

In line with its commitment to continuous development, the Company offers a wide range of in-house and external training programmes designed to enhance employee skills and support career progression. It has also cultivated a collaborative environment through open dialogue between management and employees, encouraging harmonious industrial relations and active participation in collective bargaining.

By focusing on engagement, development and a culture of mutual respect, the Company continues to strengthen its position as an employer of choice while supporting long-term business growth.

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 organisation. The Accounts Department complies with Direct and Indirect Tax Compliances. 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.

RISK & CONCERNS

The Company recognises that all business activities carry inherent risks and places high importance on proactively identifying and mitigating them. The Company has implemented a structured risk management framework that regularly monitors both internal and external environments to detect and address potential threats.

This approach enables timely strategy formulation to address emerging risks before they can significantly impact operations. Risks identified include geopolitical developments such as war or natural calamities, travel restrictions, industry-specific challenges, foreign currency volatility, client concentration, technology hazards and financial exposures.

To mitigate these risks, the Company has implemented targeted measures across various levels of management. It also regularly reviews its risk mitigation plans to ensure their ongoing effectiveness. This proactive and integrated approach underlines MSP Steels commitment to long-term stability and sustainable growth.

The Board of Directors ensures that risk management is embedded within the Companys governance structure, in compliance with the provisions of the Companies Act and SEBI Listing Regulations. In this regard, the Board has approved and adopted a revised Risk Management Policy of the Company: https://www.mspsteel.com/ about-us/corporate-policies

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

To ensure effective internal controls across business processes and systems, the Company has established a comprehensive internal control framework. This framework is designed to provide accurate, reliable, and quality assurance related to the Companys financial and operational information, ensuring compliance with applicable laws and safeguarding Company assets.

The framework comprises both entity-level and business process controls. The adequacy and efficacy of these controls are regularly evaluated.

In addition to internal control, the Company has also appointed external and independent Audit Firms as its Internal auditors for periodic checking and monitoring of Internal Control Measures.

The Companys internal financial control framework is commensurate with the size and operation of the business and is in line with the requirements of the Companies Act, 2013. The Company has established standard operating procedures and policies to guide the operations of each of its functions. The Audit Committee also meets with the Companys Internal Auditors and Statutory Auditors to ascertain their views on the adequacy of the Companys internal control systems and keeps management informed of its major observations. Robust and continuous internal monitoring mechanisms ensure the timely identification of risks and issues. The Management, Statutory, and Internal Auditors undertake rigorous testing of the Companys control environment.

CAUTIONARY STATEMENT

The Management Discussions and Analysis describe the 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.