Welcast Steels Ltd Management Discussions

REPORT ON MANAGEMENT DISCUSSION AND ANALYSIS

A. INDUSTRY OVERVIEW:

Welcast Steels Limited (“WSL”), manufactures 40mm-125mm dia size of high chrome grinding media balls with alloy composition of 12-28 % chrome content. Its product are of superior wear, corrosion resistant with sufficient strength to withstand elevated temperatures without significant loss of its mechanical chemical properties which are essential in processing Grinding in Cement, Mining and Thermal Power industries. The process involves in reduction of ore to fine size and liberate the valuable minerals for further processing. The Company employs casting process for the manufacture of these products. The requirement of high chrome grinding media balls is propelled by the increasing mining and metallurgy activates globally. Hence there is a considerable growth opportunity in the mining sector and demand for the product is expected from mining Industry also.

With the considerable headroom available for migrating from the usage of conventional method of grinding (using forged castings) to High Chrome by mining industries, your company should not have any material adverse impact on its stability at least at present level. However, while the Company remains cautiously optimistic, it is carefully and diligently monitoring the situation.

B. SEGMENT WISE PERFORMANCE:

The Company primarily operates in only one segment i.e. manufacturing of High Chrome Grinding Media Balls.

C. OUTLOOK AND PROSPECTS:

WSLs prospects are linked to the thriving cement, power and mining industries. These industries rely heavily on grinding media for the comminution of raw materials in cement production and pulverisation in power plants and in mining industries. High chrome steel grinding media balls, with their high wear resistance and durability become an essential tools in the milling process of these industries, supporting their continues growth and contributing to the overall demand for grinding media.

Hence in terms of sales quantities the total sales volume in F.Y. 2024-25 at 9,650 MT looks more or less the same as the sales volume achieved in previous F.Y. 2023-24.

Going forward, WSL continues to maintain its stability, reduction in operating costs in terms of wear costs, power costs and reagent consumption. This value addition is offered by continuous and direct engagement with operations personnel at plants.

D. CAPEX PLAN:

There are no immediate capex plan except for maintain / modernization of the pollution control machineries of the plant to meet the statutory requirements.

E. RISKS AND CONCERNS:

The Company is exposed to normal operating business risks, like constant upgradation in manufacturing techniques for achieving and maintain proper distribution of chemical composition during casting process and improper heat treatment can affect the material micro structure which has a direct impact on its performance. Therefore careful attention to casting techniques, alloy design and heat treatment process is necessary to avoid the risk of any loss in expected level of performance.

Furthermore cost considerations similar to most manufacturing companies like fluctuations in raw material prices, labour unrest, reduced demand etc. which are mitigated by regular monitoring and corrective actions.

Key risks that the Company faces are around stability in the mining market, foreign exchange rate fluctuation, fluctuation in raw material prices, debtor defaults.

F. INTERNAL CONTROL SYSTEMS AND ADEQUACY:

The Companys Internal Control Systems are commensurate with the size and nature of its operations, aimed at achieving efficiency in operations, optimum utilisation of resources, reliable financial reporting and compliances with all applicable laws and regulations. The system also provide reasonable assurance that all assets are safeguarded, transactions are authorized, recorded & reported properly to ascertain operating Business risks, which are mitigated by regular monitoring and corrective actions. The internal control system has been designed so as to ensure that the financial and other records are reliable and reflects a true and fair

view of the state of the Companys business. A qualified and independent Audit Committee of the Board of Directors actively reviews the adequacy and effectiveness of internal control systems and suggests improvements for strengthening them. Similarly, the Internal Auditors Talati and Talati LLP, Chartered Accountants are also monitoring the Internal Control Systems. It carries out extensive internal audit throughout the year across all functional areas and submits reports to Management and Audit Committee. The recommendations from such internal audit and follow up actions for improvements of the business processes and controls are also periodically reviewed and monitored by the Audit Committee.

G. FINANCIAL PERFORMANCE REVIEW:

An analysis of financial performance of the Company is given below:

• Production

The production achieved is as under. (Qty. in M. T.)

Product	F.Y. 2024-2025	F.Y. 2023-2024
High Chrome Grinding Media Balls	9,539	9,502

• Sales Turnover

The comparative position of sales turnover achieved by the Company is as under: (Rs in Lakhs)

Particulars	F.Y. 2024-2025	F.Y. 2023-2024
Sales (Net of GST)	8,450.30	9,107.30
Other Income	168.77	362.43
Total	8,619.07	9,469.73

Key Performance Indicators

An analysis of the key indicators as percentage to Revenue is given below: (Rs in Lakhs)

Particulars	FY 2024-25	% of Revenue	FY 2023-2024	% of Revenue
Revenue from Operations (Net)	8,450.30	100	9107.30	100.00
Cost of Materials Consumed (including Trading Purchase)	5,233.76	61.94	5346.16	58.70
Employee Benefits Expense	903.00	10.68	752.45	8.26
Other Expenses	2,431.71	28.78	2585.16	28.40
EBIDTA	50.61	0.59	785.96	8.63
Finance Costs	7.01	0.08	10.52	0.11
Depreciation & Amortization Expenses	78.95	0.93	74.60	0.82
Profit/(Loss) before Tax	(35.35)	(0.42)	700.84	7.69
Tax Expenses	(1.61)	(0.02)	175.99	1.93
Profit/(Loss) for the period after tax	(33.74)	(0.39)	524.85	5.76

H. INDUSTRIAL RELATIONS AND HUMAN RESOURCE MANAGEMENT:

The Company believes that human resource is the most important asset of the organization. During the year under review, your Company continued its efforts to improve HR related processes, practices and systems to align these to the organizational objectives. Training and development of its employees is ensured through on the job and outside training programs and workshops. The relationships with the employees, in general, remain cordial.

I. DETAILS OF SIGNIFICANT CHANGES IN THE KEY FINANCIAL RATIOS & RETURN ON NET WORTH

Pursuant to amendment made in Schedule V to the SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 details of significant changes (i.e change of 25% or more as compared to the immediately previous Financial Year) in Key Financial Ratios and any changes in Return on Net Worth of the Company including explanations therefore are given below:

Sl.No. Particulars	2024-25	2023-24	Change	Change in %	Explanations
1 Debtors Turnover (Days)	33	25	8.00	32.00	Credit payment terms increased
2 Inventory Turnover (Days)	20	22	(2.00)	(9.09)	-
3 Interest coverage Ratio	(4.05)	67.62	(71.67)	(105.99)	Loss for the year
4 Current Ratio	5.33	4.71	0.62	13.16	-
5 Debt Equity Ratio	-	-	-	0.00	No debt
6 Operating Profit Margin (%)	(2.25)	4.05	(6.42)	(153.92)	Lower sales margin and in the previous year there was a material amount of reversal of provision, which is not in current year.
7 Net Profit Margin (%)	(0.40%)	5.45	(6.17%)	(106.93)
8 Return on Net Worth (%)	(1.08%)	12.80	(13.88%)	(108.43)

J. CAUTIONARY STATEMENT:

Statements made in the Management Discussion & Analysis describing the Companys objectives, projections, estimates, expectations may be “Forward-looking statements” within the meaning of applicable Securities, laws & regulations. Actual results could differ from those expressed or implied. Important factors that could make a difference to the Companys operations include economic conditions affecting demand supply and price conditions in the domestic & overseas markets in which the Company operates, changes in the government regulations, tax laws & other statutes & other incidental factors. None of the Senior Management personnel have Financial and Commercial transactions with the Company, where they have personal interest that would / could emerge as potential conflict with the interest of the Company at large.