vesuvius india ltd share price Management discussions

Industry Structure and Developments, Opportunities and Threats, Outlook, Risks & Concerns

Macroeconomic Environment

Amidst an uncertain and challenging global macroeconomic environment, the Indian economy presents a picture of confidence, positivity, and optimism. Recent growth outturns have surprised most forecasts on the upside. After clocking real gross domestic product (GDP) growth of 7.2 per cent in 2022-23, real GDP is expected to grow by 7.3 per cent during 2023-24 according to the latest release by the National Statistical Office (NSO). As per RBI, FY 2025 growth to remain robust at 7% driven by private capex and consumption demand.

With strong domestic demand, India remains the fastest growing major economy and is now the fifth largest economy in the world. In fact, in purchasing power parity (PPP) terms,

India is already the third largest economy. The International Monetary Fund (IMF) has projected that Indias contribution to world growth will rise from the current 16 per cent to 18 per cent by 2028. Strong domestic demand remains the main driver of growth, although there has been a significant increase in Indian economys global integration through trade and financial channels. Higher reliance on domestic demand cushioned India from multiple external headwinds. As per RBI Monetary policy, CPI inflation expected to moderate to 4.5% in FY 2025 from 5.4% in FY 2024.

Outlook on Indian Steel Industry

In 2023, while crude steel production saw marginal decline globally but Indias crude steel production grew by 11.8% to 140.2 million metric tons. India has already emerged as the second largest steel producer in the world and the per capita consumption of steel in India is around 77.2 kg, gone up by 50% in last 8 years, which is still 1/3rd of the average world per capita steel consumption.

India Crude Steel Production, 2023 production 140.2 MT increased by 11.8%

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2022 11.0 10.1 11.1 10.4 10.7 9.9 10.0 10.1 9.8 10.5 10.5 11.1
2023 11.7 10.6 11.8 11.6 11.8 11.6 11.5 12.0 11.7 12.2 11.7 12.1
Growth % 6% 4% 6% 12% 10% 17% 15% 18% 19% 16% 11% 10%

Indias steel capacity has crossed 161 million tons comprising 67 MT by blast furnace-basic oxygen furnace (BF-BoF) route, 36 MT by electric arc furnace (EAF) and 58 MT by induction furnace (IF) route. As per the National Steel

Policy, India has set the targets of achieving the total crude steel capacity of 300 MTPA and total crude steel demand/ production of 255 MTPA by 2030-31.

Domestic consumption growth can be attributed mainly to high infrastructure spending by the government led by the final budget allocation of Rs 9.5 lakh crores for infrastructure projects for the year 2023-24. Allocation for the infrastructure sector in the interim budget for 2024-25 is Rs. 11.11 Lakhs Crores thereby ensuring the continuation of infrastructure building activities.

The government has started the PLI scheme for special steels, and the total incentive amount envisaged for a five-year period (FY 2024 to FY 2028) is Rs. 6,322 Crores. In FY 2024, Rs. 12,900 Crores has been invested up to December 2023, and the full-year investment is expected to be Rs. 16,000 Crores (commitment-Rs. 21,000 Crores). Five units have begun production, and nine more are expected to start in Q4 FY 2024. For FY 2025, the investment expected is Rs. 10,000 Crores. PLI 1.0 covered only around Rs. 2,300 Crores of incentives. The government is, therefore, planning PLI 2.0 to utilise the balance amount of Rs. 4,000 Crores. The PLI 2.0 scheme will also be for a five-year period from FY 2026 to FY 2030. As per the objectives of the PLI scheme, while imports will reduce substantially, exports will be 13% of total production (capacity planned is 25 MT).

Outlook on Indian Cement Sector

The Indian cement industry plays a vital role in the countrys infrastructure development due to its significant contribution to the construction sector. The outlook for the Indian cement industry remains positive, supported by favorable demographics, urbanisation trends, and government-led infrastructure projects. With the governments focus on initiatives like "Housing for All", Smart Cities Mission, and infrastructure investments, cement consumption is expected to remain robust in the coming years. The implementation of the National Infrastructure Pipeline (NIP) and Bharatmala Pariyojana, among other initiatives, will further boost cement consumption across the country.

India is the second largest producer of cement in the world but the per capita consumption of cement in India is still low at 250-270 kg compared to the world average of 500 kg. India accounts for more than 7% of the global installed capacity. Indian cement consumption reached 375 million tons in FY 2023 and is expected to reach 400 million tons in FY 2024 thereby expected to experience a volume growth of 7-8% in FY 2024 due to increased demand from the housing and infrastructure sectors. Additionally, capacity additions are estimated at 63-69 million metric tons between FY 2024 and FY 2025, with a 6% increase expected in FY 2024, the largest in the past five years.

Outlook on Indian Aluminum Sector

At 4.5 million tons per annum (MTPA), India has the second largest primary aluminum smelting production capacity in the world. As per industry sources, aluminum demand in India is expected to jump to 9 million tons by 2033 from 4.5 million tons.

In India, aluminum is mainly consumed in the Electrical sector (48%), followed by Automobile & Transport sector (15%), Construction (13%), Consumer Durables (7%), Machinery & Equipment (7%), Packaging (4%) and others (6%). ICRA has estimated the domestic aluminum demand growth to remain healthy at 9% in the next two fiscal years, given the Governments thrust on infrastructure development. Domestic demand growth would sharply outpace the rate of global growth in aluminum demand.

The automotive sector also plays a pivotal role in the overall consumption of aluminum in India. After a stellar performance in FY 2023, automotive demand is expected to remain steady in FY 2024 and FY 2025. In addition, the average quantity of aluminum used per vehicle in India remains significantly lower(40-45kg) compared to the global average of 160-200 kg.

Indias per capita aluminum consumption is only 3.1 kg compared to the world average of 12 kg and Chinas at 31.7 kg. Demand for the metal is expected to pick up as the scenario improves for user industries, like power, infrastructure, and transportation.

Refractory Industry structure and developments

The Indian refractory industry plays a critical role in supporting various sectors such as steel, cement industries, by providing essential materials for high-temperature applications. Collaboration and innovation within the refractory sector continue to drive improvements in performance, sustainability, and cost-effectiveness for steel and cement manufacturers. About 70% of the refractories that are manufactured find application in the steel industry, 7% in the cement industry, 6% in non-ferrous industries and the balance in other industries.


Strong Demand from Steel Industry: The steel industry is a major consumer of refractory products, accounting for a significant portion of total demand. With the governments focus on infrastructure development, urbanisation, and industrial growth, the demand for steel is expected to remain robust, driving demand for refractories.

Expansion of Steel Capacities: The Indian steel industry has been witnessing significant capacity expansion to meet growing domestic demand and capitalise on export opportunities. This expansion translates into increased demand for refractories, as new steel plants and existing facilities require high-quality refractory materials for their operations. ciency.

Technological Advancements: Advancements in steelmaking technologies, such as electric arc furnaces

(EAFs) and continuous casting processes, require specialised refractory materials that can withstand higher temperatures and provide better performance. The adoption of advanced refractory solutions presents opportunities for the refractory industry to innovate and develop new products.

Focus on Quality and Efficiency: With intensifying competition and increasing emphasis on cost-effectiveness and environmental sustainability, steel manufacturers are prioritising the use of high-quality refractories that offer longer service life, reduced downtime, and improved energy efficiency. This trend bodes well for the refractory industry, driving demand for advanced and customised refractory solutions.


Raw Material Availability and Pricing:

Refractory manufacturing relies heavily on raw materials such as magnesite, bauxite, and graphite. Fluctuations in the availability and pricing of these raw materials can impact production costs and profitability for refractory manufacturers.

Competition from Imports:

The Indian refractory industry faces competition from imported refractory products, which may offer competitive pricing or technological advantages. To remain competitive,

Indian refractory manufacturers need to focus on product quality,innovation,andcost

Volatility in End-User Industries:

End-user industries such as steel and cement are cyclical in nature and susceptible to economic downturns, fluctuations in commodity prices, and geopolitical factors. Volatility in these industries can impact demand for refractories, affecting the revenue and profitability of refractory manufacturers.


The outlook for the Indian refractory industry remains positive, driven by robust demand from the steel, cement and other industries, technological advancements, and infrastructure development initiatives. As the Indian steel industry continues to expand and modernise, the refractory industry is poised to grow in tandem, offering innovative solutions to meet evolving market requirements.

Disclosures under Regulation 34(3) read with Schedule V Clause B of SEBI (LODR)

FY 2023 FY 2022
(i) Debtors Turnover Ratio 60.62 51.36
(ii) Inventory Turnover Ratio 52.38 56.71
(iii) Interest Coverage Ratio 665 NA
(iv) Current Ratio 3.1 3.34
(v) Debt Equity Ratio 0.01 NA
(vi) Operating Profit Margin (%) 17.83% 11.68%
(vii) Net Profit Margin (%) 13.28% 8.70%
(viii) Return on Net Worth (%) 23.95% 15.72%

Details of significant change(s) in the Key Financial Ratios

The Operating Profit Margin, Net Profit Margin and Return on Net Worth have registered upside variations of 51.10%, 52.70%, and 52.35% in 2023 as compared to 2022, on account of significant growth in the earnings of the Company.