Vesuvius India Ltd Management Discussions

Macroeconomic Environment

The global economy continues to be challenging with supply chain disruption, inflationary pressures and geopolitical tensions.

Despite these challenges, in 2024, the global economy expanded at a steady yet uneven pace across regions, recording a growth rate of 3.2%. A notable trend was the slowdown in global manufacturing, particularly in Europe and parts of Asia, due to supply chain constraints and weak external demand. Conversely, the services sector remained a key growth driver in many economies. Inflationary pressures eased in most regions, although services inflation remained persistent. While commodity prices stabilised, the risk of synchronised price increases continues to loom. With economic growth varying across regions and last-mile disinflation proving sticky, central banks are likely to adopt divergent monetary easing strategies, adding uncertainty to future policy rates and inflation trajectories.

The Indian economy remained strong and resilient despite global headwinds. According to the Reserve Bank of India (RBI), Indias GDP is projected to grow at 6.4% in FY25, a moderate expansion following the robust 8.2% growth recorded in the previous year. The World Bank forecasts 6.7% growth for FY26 and FY27, fastest-growing major economy.

Indias growth trajectory reflects its resilience amid global economic uncertainties, underpinned by strong domestic fundamentals and proactive policy measures. Structural reforms, digital transformation, and large-scale infrastructure development continue to provide momentum, while targeted government interventions aim to sustain economic expansion. Additionally, stable consumption patterns and improving labour market dynamics further reinforce Indias economic strength. Growth has been driven by strong performances in agriculture and services, coupled with stable private consumption and macroeconomic stability.

The FY26 Union Budget reflects the governments commitment to infrastructure development, with a 10.1% increase in capital expenditure, amounting to Rs 11.2 trillion. Additionally, an Rs 1.5 trillion allocation for 50-year interest-free loans to states underscores the emphasis on decentralised infrastructure development.

With strong growth projections and continued -economic resilience, India is well-positioned to sustain its upward trajectory. Strategic policy initiatives, robust domestic demand, and structural reforms are expected to drive long-term economic expansion, further solidifying Indias role as a key player in the global economic landscape.

Indias steel industry

Indias steel industry has undergone a remarkable transformation, mirroring the nations broader economic journey. Once a modest player in global production, India emerged as the worlds second-largest steel producer after surpassing Japan in 2018. This evolution reflects the countrys strides toward modernisation, self-reliance, and sustainable industrialisation. As India moves toward its vision of becoming a developed nation, the steel sector is set to play a pivotal role in strengthening infrastructure and driving economic progress. Large-scale initiatives such as ‘Make in India and the PM Gati-Shakti National Master Plan continue to fuel demand, ensuring sustained growth in the industry.

Steel production and consumption trends

In 2024, global crude steel production declined marginally by 0.8%, settling at 1,882.6 million tons (MT). In contrast, Indias crude steel production grew by 6.3% to 149.6 MT, highlighting the sectors expansion and resilience.

From April to December 2024-25, Indias per capita steel consumption rose to approximately 106.6 kg, up from 97.7 kg in 2023-24. This steady increase is driven by rising infrastructure development and industrial growth.

Indias crude steel capacity surpassed 170 million tons in 2024, reinforcing its position as a key player in the global steel industry.

Steel imports and exports

Despite robust domestic production, India remained a net importer of steel, with imports rising by 20.3%, reaching 8.29 million tons between April 2024 and January 2025. Meanwhile, steel exports declined by 28.9% to 3.99 million tons, reflecting changing trade dynamics and a shift in domestic consumption patterns.

Policy and growth initiatives

As per the National Steel Policy (NSP) 2017, India aims to achieve a crude steel capacity of 300 million tons by 2030-31, with an expected production of 255 million tons of crude steel and 230 million tons of finished steel. The policy focuses on making India self-sufficient in steel production while catering to both domestic and international markets. It emphasises capacity expansion, quality enhancement, and the adoption of sustainable and energy-

A key initiative to boost steel production is the Production Linked Incentive (PLI) Scheme, designed to attract capital investments and reduce import dependency. The scheme anticipates an investment of 29,500 crores, aimingtocreate an additional 25 million tons of capacity for specialty steel.

With strong policy support, increasing domestic demand, and strategic investments, Indias steel industry is poised for long-term growth, reinforcing its position as a global steel powerhouse.

Indian cement sector

Indias cement industry, the second-largest globally, has an installed capacity of approximately 690 million tons per annum (MTPA). With abundant high-quality limestone reserves, the sector holds immense growth potential, driven by rising demand from housing and infrastructure projects.

In 2025, the Indian cement industry is projected to grow at a steady pace, fueled by increased government spending on infrastructure and housing. Despite facing challenges in 2024 including lower sales realisation and moderate capacity utilisation major players continued to expand and consolidate through acquisitions. The top producers now control an estimated 60-65% of industry capacity, reflecting a shift toward consolidation.

Anticipating higher demand, the industry is set to add 35 MTPA of new capacity, positioning itself for increased government-led infrastructure spending. All-India cement volumes are expected to grow 4-5% YoY, reaching 445-450 million tons in FY25. However, capacity utilisation is projected to remain moderate at around 70% in FY25-FY26.

Government investments driving cement demand

The Indian government has allocated 11.11 lakh crore towards capital expenditure, accounting for approximately 3.4% of GDP. This marks a significant reinforcing the governments commitment to infrastructure-led economic growth.

Key infrastructure initiatives supporting cement demand include:

• National Infrastructure Pipeline (NIP): A planned investment of 111 lakh crore across roads, railways, urban infrastructure, and energy sectors.

• Bharatmala and Sagarmala: Strengthening road and port connectivity to improve logistics and trade efficiency.

• PM GatiShakti National Master Plan: An integrated approach for coordinated infrastructure development across sectors.

• Smart Cities Mission: Continued focus on urban transformation and improved quality of life.

• Jal Jeevan Mission: Expansion of piped water supply to rural households, boosting demand for construction materials.

Infrastructure expansion

• State Governments: Increased capital outlays to 8.7 lakh crore in 2024, marking a substantial rise since 2015.

• National Highways: Expansion and modernisation to enhance road connectivity.

• Railways: Electrification, high-speed train projects.

• Airports: Development of new airports and expansion of ic. traff existingonestosupportrisingair

• Power Generation: Increased renewable energy capacity and expansion of conventional power generation.

With strong government backing, large-scale infrastructure investments, and rising urbanisation, Indias cement industry is well-positioned for sustained growth. As infrastructure projects gain momentum, the demand for cement is expected to remain robust, further strengthening the industrys role in Indias economic progress.

Indian aluminum sector

With a primary aluminum smelting capacity of 4.5 million tons per annum (MTPA), India ranks as the second-largest producer globally. Aluminum demand in India is projected to double to 9 million tons by 2033, driven by rapid infrastructure development, industrial expansion, and increasing applications across key sectors.

In FY 2024-25 (April December), Indias primary aluminum production grew by 1.6% year-on-year, reaching 3.156 million tons, compared to 3.107 million tons during the same period in FY 2023-24.

Aluminum consumption in India is sector-driven, with the Electrical sector leading at 48%, followed by:

Automobile & Transport 15%

Construction 13%

Consumer Durables 7%

Machinery & Equipment 7%

Packaging 4%

Other applications 6%

Indias per capita aluminum consumption stands at 3.1 kg, significantly lower than the global average of 12 kg and Chinas 31.7 kg. As power, infrastructure, and transportation sectors expand, aluminum demand is expected to accelerate, bridging this gap and supporting long-term industry growth.

The automotive industry plays a crucial role in Indias aluminum consumption. Demand from this sector is expected to remain steady in FY 2025, with increasing use of lightweight materials for fuel efficiency and sustainability. However, the average aluminum usage per vehicle in India remains significantly lower at 40-45 kg compared to the global average of 160-200 kg, highlighting untapped potential for further growth.

According to ICRA, Indias domestic aluminum demand is expected to grow at a healthy 9% annually over the next two fiscal years, significantly outpacing the global average growth rate. This expansion is largely driven by the Governments focus on infrastructure development, which continues to fuel demand for aluminum in construction, transportation, and power sectors.

Refractory industry structure and developments

The Indian refractory industry plays a pivotal role in supporting critical sectors, particularly steel, cement, and non-ferrous industries, by providing essential materials for high-temperature applications. Continuous collaboration and innovation within the sector are driving improvements in performance, sustainability, and cost-effectiveness, reinforcing its importance in industrial growth.

The refractory industry in India has witnessed significant growth, fueled by rising demand from high-temperature industrial processes, including steelmaking, cement production, and glass manufacturing. To meet this growing demand, refractory manufacturers are actively investing in greenfield and brownfield projects, expanding production capacities, and enhancing technological capabilities.

Sector-wise refractory consumption

The application of refractories across industries is heavily skewed towards steel production, with:

70% of refractories used in the steel industry

7% in the cement industry

6% in non-ferrous industries

17% spread across other high-temperature applications

With Indias steel and cement industries expanding rapidly, demand for high-quality refractories is expected to rise steadily. The sector is focusing on sustainable solutions, efficiency, ensuring long-term enhanceddurability,andcost growth and resilience in Indias industrial ecosystem.

Opportunities and threats

Strong demand from the steel industry: The steel sector remains the largest consumer of refractory products, accounting for a significant portion of total demand. With the governments continued focus on infrastructure development, urbanisation, and industrial growth, steel demand is expected to stay strong, driving the need for high-quality refractories.

Expansion of steel capacities: The Indian steel industry is undergoing significant capacity expansion to cater to growing domestic demand and export opportunities. As new steel plants come online and existing facilities upgrade operations, the demand for refractories is set to rise, making it a key growth driver for the industry.

Technological advancements: Innovations in steelmaking technologies, such as electric arc furnaces (EAFs) and continuous casting processes, require specialised refractory materials capable of withstanding extreme temperatures while enhancing efficiency. This shift towards advanced refractory solutions presents opportunities for manufacturers to innovate and develop high-performance products.

Focus on quality and efficiency: Amid growing competition and increasing emphasis on cost-effectiveness and environmental sustainability, steel producers are prioritising high-quality refractories that offer longer service life, reduced downtime, and improved energy efficiency. This trend is fueling demand for customised and technologically advanced refractory solutions, presenting a lucrative opportunity for industry players.

Risks and concerns

By leveraging emerging opportunities while proactively addressing risks, the Indian refractory industry can strengthen its position as a critical enabler for high-temperature industrial processes, ensuring sustainable growth and long-term competitiveness.

Raw material availability and pricing: Refractory manufacturing relies on critical raw materials such as magnesite, bauxite, and graphite. Fluctuations in their availability and pricing can directly impact production costs and profitability, posing a challenge for manufacturers in maintaining cost stability.

Competition from imports: The Indian refractory industry faces intensifying competition from imported refractory products, which may have advantages in pricing or technological sophistication. To remain competitive, domestic manufacturers need to focus on product quality, innovation, andcost to differentiate themselves

Volatility in end-user industries: Key end-user industries, particularly steel and cement, are cyclical in nature and susceptible to economic downturns, fluctuations in commodity prices, and geopolitical uncertainties. Any downturn in these industries could impact refractory demand, affecting revenue and profitability for manufacturers.

Financial & Operational performance

The financial and operational performance of the Company are covered under the Corporate Overview section at pages 2-3 of this Annual Report of the Company.

Outlook

The Indian refractory industry is set for sustained growth, driven by strong demand from the steel sector, technological advancements, and large-scale infrastructure development initiatives. As the Indian steel industry expands and modernises, the refractory sector is poised to evolve in tandem, offering innovative and high-performance solutions to meet the increasingly sophisticated requirements of end-user industries.

However, securing a stable supply of raw materials and navigating global competition will be key challenges in maintaining long-term growth and competitiveness. Addressing these challenges through strategic investments, supply chain optimisation, and innovation will be critical for industry players.

By proactively mitigating risks and leveraging emerging opportunities, Indian refractory manufacturers can strengthen their market position, enhance global competitiveness, and drive sustainable growth in both domestic and international markets.

Human resources

At Vesuvius India Limited, our People and Culture strategy is designed to build an outstanding business by ensuring that we have the right talent, skills, and capabilities essential for executing our long-term vision. Our approach focuses on fostering a dynamic and inclusive work environment, where diversity, innovation, and continuous learning drive business excellence.

We prioritise delivering value to our employees, enhancing their overall experience, and maintaining functional excellence across all levels of the organisation. Our commitment to talent development is reflected in structured training programs, leadership development initiatives, and career growth opportunities, ensuring that employees are well-equipped to meet evolving industry challenges.

In 2024, our head count went up from 559 in 2023 to 612, with 11% of new recruits being women with individuals, spanning various operational, technical, and managerial roles. Our workforce remains our greatest asset, and we continuously invest in employee engagement, well-being, and professional development to build a resilient and future-ready organisation.

On the industrial relations front, we have maintained harmonious labour relations, with a strong emphasis on collaboration, transparency, and employee welfare. Our structured HR policies and proactive engagement initiatives ensure a positive work environment, fostering productivity and alignment with business objectives.

As we move forward, our focus remains on enhancing workforce capabilities, strengthening leadership pipelines, and fostering a culture of high performance and continuous improvement. These efforts will enable us to sustain business growth, operational excellence, and long-term organisational success.

Internal control systems and their adequacy

The Company has established a robust internal control system designed to align with the complexities of its business operations, ensuring financial integrity, operational efficiency, and regulatory compliance. Comprehensive internal financial controls have been implemented to enhance the accuracy and reliability of financial reporting and to strengthen the integrity of financial statement preparation. These internal control mechanisms are enforced through a structured combination of policies, procedures, and certifications, ensuring strong governance and effective risk management. The Board, in consultation with the Internal Auditors, reviews the effectiveness of internal controls and compliance systems, financial and operational risks, risk assessment and management frameworks, and related party transactions, along with their compliance with applicable laws, rules, and regulations. The Internal Auditors of the Vesuvius Group conduct internal audits on a pan-India basis. The Companys Policies, Code of Conduct, and CORE Values and Behaviours are applicable to the Directors and all employees of the Company and have been duly complied with during the year. These Policies are available on the Companys website at www.vesuviusindia.in, with direct weblinks also provided later in this Report. Additionally, the Company ensures strict compliance with all applicable laws, regulations, and corporate governance standards governing its operations. Internal Financial Controls: The Company has in place adequate internal financial controls with reference to its financial statements, aimed at safeguarding assets, preventing and detecting fraud or errors, maintaining accurate and complete accounting records, and ensuring the timely preparation of reliable financial information. These controls were reviewed during the year, and no reportable material weaknesses were observed.

Furthermore, statutory auditors have conducted comprehensive verifications of systems and processes, confirming the adequacy and operational effectiveness of internal financial controls over financial reporting. This ensures that the Company upholds strong corporate governance, financial transparency, and operational excellence..

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

Ratios	2024	2023
Debtors Turnover Ratio	69.20	60.62
Inventory Turnover Ratio	49.09	52.38
Interest Coverage Ratio	297	665
Current Ratio	3.12	3.1
Debt Equity Ratio	0.01	0.01
Operating Profit Margin	18.73%	17.83%
Net Profit Margin(%)	14.16%	13.28%
Return on Net Worth (%)	24.46%	23.95%