Welspun Specialty Solutions Ltd Management Discussions

Economic Overview Global Economy¹ Overview

The Global economy grew at 3.3% in CY 2024. This growth was driven by moderating inflation, technological advancements and structural economic shifts across regions. The growth was achieved in a turbulent macroeconomic environment with geopolitical unrest and supply chain disruptions and heightened economic fragmentation. Despite the resilient performance, growth remains below the historical average of 3.7%. Emerging Market and Developing Economies (EMDEs) delivered a better performance by growing at 4.3%. Conversely, the advanced economies exhibited a growth of 1.8%. Proactive monetary policies by Central Banks across the world further stabilised the economy. Monetary policy interventions played an important role in checking inflation, which declined from 6.7% in CY 2023 to 5.7% in CY 2024.² The easing inflation led to moderation in price levels which helped stabilise consumer confidence and accelerated economic activity.

Outlook

The Global economy is expected to maintain a modest growth, with a growth forecast of 2.8% for CY 2025 and 3.0% for CY 2026. This growth will be supported by more accommodative monetary policies aimed at ensuring price stability, stimulating economic activity and boosting employment. However, the recent uncertainty around the reciprocal tariffs imposed by the US on its import is disrupting global trade which can lead to increased costs, supply chain uncertainties and heightened recession risks. In response businesses all around the world are delaying investments and restructuring operations. To mitigate the impact of the tariffs, leaders around the world are undertaking diplomatic and economic steps through dialogue, trade alliances and strategic negotiations to ease rising tariff tensions and stabilise global trade.

If the current uncertainty around the US tariffs settles down, then the inflationary pressures are expected to settle down gradually, with global headline inflation projected to decline to 4.3% in CY 2025 and further to 3.6% in CY 2026. The outlook of the Emerging Market and Developing Economies (EMDEs) is positive where it is projected that they will sustain their momentum with a 3.7% growth in CY 2025 and 3.9% in CY 2026 and advanced economies will clock in a growth of 1.4% in CY 2025 and 1.5% in CY 2026.

World GDP Growth Trends

Indian Economy³

Overview

The Indian economy was successful in maintaining its status as one of the worlds fastest growing major economy by achieving a GDP growth rate of 6.5% in FY 2025. The growth was achieved amidst a disrupted global economic landscape and geopolitical tensions in Europe and the Middle East. One of the major factors that facilitated this growth was the targeted government initiatives aimed at stimulating economic activity through infrastructure development. The government has allocated 11.21 lakh crore⁴ in the Union Budget and has heightened its focus on rural connectivity. With such large capital infusion, India still managed to keep its fiscal deficit at 4.4% of GDP⁵, providing the government more room to increase spending and stimulate demand.

Additionally, the growth was further propelled by declining inflation from 5.4% in FY 2024⁶ to 4.7% in FY 2025 that bolstered consumer confidence and stimulated both urban and rural consumption. The easing inflation has further pushed RBI to infuse T1.5 trillion into the banking system to support the demand for liquidity and propel economic activity.⁷

Outlook

The Indian economy is expected to maintain its positive growth momentum where the growth rate is projected to sustain at 6.5% in FY 2026. This strong growth will be backed by the governments income tax reform, which has exempted salaried individuals earning up to INR 12.75 lakh from income tax.⁸ In accordance with the government, the Reserve Bank of India (RBI) is also aiming to augment economic activity by implementing expansionary monetary strategies. The RBI has reduced the repo rate by 50 basis points through consecutive cuts⁹ to further boost consumption and inject liquidity.

The US tariff imposed on India may create a negative sentiment in the export market for the nation as US is a major importer of several Indian products. In FY 2024, the US traded a total of USD 129.2 billion worth of goods with India. The US sold USD 41.8 billion worth of goods to India, which was 3.4% more than that of FY 2023. At the same time, the US bought USD 87.4 billion worth of goods from India, a 4.5% increase from the year before. This means the US bought a lot more from India than it sold, leading to a trade deficit of USD 45.7 billion. Bilateral talks between the officials of both the economies is going on and expected to bring an end to current volatility w.r.t. India- US trade.

India is closely monitoring the evolving tariff scenario and is calibrating its response. Inflation is expected to fall further if the current situation regarding tariffs is clarified. This will strengthen the economic growth momentum by enhancing purchasing power. With strong foreign reserves, smart government spending and stable policies, Indias economy is perfectly positioned for a continued growth, making it a significant player on the global stage.

GDP growth trend in India

Industry Overview Stainless Steel Industry¹² Global

The global stainless steel market is growing steadily owing to expanding industrial applications and regional development. The global stainless steel market has shown consistent growth, with projections indicating a continued growth till 2032. Valued at USD 200.02 billion in 2024, the market is expected to reach USD 211.89 billion by 2032, growing at a CAGR of 7.4%.

Global stainless steel consumption is likely to grow by 3% in CY2025 after growing at 4% in the previous year. Long products growth is likely to be 3% as well in CY2025 from a growth of just 1% in CY2024.

Asia-Pacific, especially China and India, are the biggest markets for stainless steel, commanding over 68% of the total market in CY 2023. This expedited growth can be attributed to accelerated urban development, new infrastructure projects and elevated demand from automotive and construction industries.

Emerging technology and its eco-friendly nature will further augment its prominence across industries. Asia-Pacific is expected to lead the market. India is expected to exhibit the fastest growth due to heightened manufacturing in the automotive sector and large-scale construction projects.

Meanwhile, the global Stainless Steel meltshop production rose to 62.6 million tonne in 2024 as per the Worldstainless.

Indian¹³

Over the past five years, Indias stainless-steel consumption has grown at an average rate of 4.36% annually. In FY 2023-24 the consumption reached 3.75 million tonnes which is up from 3.03 million tonnes in FY 2019. Despite declines in FY 2020 and FY 2021, the industry rebounded with significant growth in subsequent years. The Indian Government has implemented several policies to support the steel sector. These include the Domestically Manufactured Iron and Steel Products (DMI&SP) Policy to promote Made in India steel and the Production Linked Incentive (PLI) Scheme for specialty steel. Additional initiatives include the Make in India campaign, the PM Gati Shakti National Master Plan and the Steel Scrap Recycling Policy. Overall, the government initiatives are designed to enhance domestic production and reduce reliance on imports.

Looking ahead, Indias stainless-steel industry is poised for sustained growth, driven by government initiatives and increasing demand from sectors like thermal, energy, defence, space, Oil&Gas, nuclear power etc. The “Make in India” Scheme is expected to augment domestic manufacturing and reduce imports. Additionally, policies like the Steel Scrap Recycling Policy aim to improve the domestic availability of raw materials. With these measures, the industry anticipates a steady increase in production and consumption, contributing to Indias economic development and self-reliance in the steel sector.

Seamless Pipes and Tubes Industry¹⁴

The Global Stainless Steel Seamless pipes & tubes market has grown at a CAGR of 0.6% between 2019 and 2023 to reach 0.8 million tonne. It is forecasted to reach 0.9 mn tonne during 2027, growing at a CAGR of 4.0%. Globally, the Stainless Steel pipes & tubes industry was estimated to be valued at nearly USD 32.6 billion in 2023 contributing ~25% share in global pipe & tube industry. In coming years too, the Stainless Steel pipes & tubes industry is expected to observe stable growth of ~5% through 2032 with market size estimated to cross USD 49.5 billion. Attributed to its metal properties, Stainless Steel tubes are expected to witness growing applications in global petrochemical, energy & power, chemical, chemical industry and automobile.

Production of Stainless Steel seamless pipes & tubes in India grew at a CAGR of 10.7% between 2019 and 2023 to 0.12 million tonne. Going forward too it is likely to grow at a CAGR of 7.2% between 2023 and 2027 to reach to 0.16 million tonne.

End User Industries Power and Energy¹⁵

Indias power sector is growing strongly where the total installed capacity has reached 456.7 GW by November 2024 which is 7.2% higher than the last year. The country is moving fast towards renewable energy, mainly through big solar and wind projects with renewable capacity growing by 15.8% to 209.4 GW by December 2024. This growth is made possible because of the new schemes like the Revamped Distribution Sector Scheme, people now.

Petrochemicals¹⁶

Indias petrochemical industry is in a steady growth path and is expected to reach a market size of USD 300 billion by 2025, with projections of hitting USD 1 trillion by 2040. This growth is driven by increasing demand across various sectors like agriculture, automotive, packaging, and construction. The government is supporting this expansion through initiatives like the Petroleum, Chemicals and Petrochemicals Investment Regions (PCPIRs) and plastic parks, aiming to attract significant investments and reduce import dependency. With rising domestic consumption and strategic investments, Indias petrochemical sector is poised for substantial growth in the coming years.

Specialty Chemicals

Indias specialty chemicals sector is growing fast because of rising demand in areas like personal care, construction, and medicines, along with more urbanization and better living standards. Government support for research and new infrastructure is also boosting the industry. Specialty chemicals like agrochemicals, dyes, pigments, and ingredients for medicines are very important, and the future looks bright with lots of growth ahead. To succeed, companies need to focus on making products at lower costs and investing in new ideas, while reducing dependence on imported raw materials. Supportive government policies and the "China plus one" strategy are encouraging more domestic production. With global demand rising in fields like electric vehicles, green energy, and digital infrastructure, India is in a strong position to grow its share in the world market. Its low manufacturing costs and strong technical skills make India an attractive place for both local and international companies, setting it up to become a major global player in specialty chemicals.

Defence¹⁷

Indias Defence Budget Growth (in ^ lakh Crore)

Source: Ministry of Defence

Indias defence has shown a robust growth, thanks to the Make in India program, which boosted local manufacturing and reduced reliance on imports. In FY 2023-24, defence production hit a record T1.27 lakh crore, a 174% jump since FY 2014-15, and defence exports soared to T23,622 crore in FY 2024-25, growing 34 times over the last decade. The government is signing more contracts with Indian companies, supporting innovation through start-ups, and building new military equipment like fighter jets, warships, and missiles within the country. With strong government policies, increasing private sector participation, and a goal to reach T3 lakh crore in production and T50,000 crore in exports by 2029, Indias defence sector is set to become a major global player in the coming years.

Nuclear Energy

Indias nuclear energy sector is poised for significant growth, with the government setting an ambitious target to increase nuclear power capacity from the current 8,180 MW to 100 GW by 2047. This expansion is part of the "Nuclear Energy Mission for Viksit Bharat," aiming to enhance energy security and reduce reliance on fossil fuels. Key initiatives include the development of Bharat Small Reactors (BSRs) and Small Modular Reactors (SMRs), which are designed for efficient and flexible deployment, particularly near industrial hubs. To facilitate private sector participation, legislative amendments to the Atomic Energy Act and Civil Liability for Nuclear Damage Act are being considered. With a focus on indigenous technology and public-private partnerships, India is strategically positioning nuclear energy as a cornerstone of its clean energy future.

Indias Installed Nuclear Capacity Growth (in MW)

Growth of Installed Nuclear Capacity (in MW)

Company Overview

Welspun Specialty Solutions Limited (WSSL) is the only fully integrated stainless steel and seamless pipes and tubes manufacturer in India. The Company has garnered the trust of eminent customers both in domestic and overseas markets with world class manufacturing facility in Bharuch, Gujarat and globally benchmarked quality standards, WSSL supplies critical materials for sectors like Oil and Gas, Automotive, Defence and Energy.

Currently, the Company is undergoing a phase of transformation. Over the next few years, WSSL expects to benefit from operating leverage as it ramps up production and improves capacity utilisation. The Company has already started securing esteemed orders from large organisations which reflects the rising trust of its clients in its abilities.

Earlier, exports made up to 70% of WSSLs sales. The Company is gradually shifting its focus towards the domestic market, with 60% sales generated within India and 40% through exports. Going forward, WSSL plans to increase domestic sales further to around 70%, driven by strong local demand. WSSL is committed to continuous innovation, operational excellence and customer satisfaction as it strengthens its position both in India and outside.

: BHEL Order

Welspun Specialty Solutions Limited (WSSL) recently secured its biggest order ever from Bharat Heavy Electricals Limited (BHEL) to supply 4,000 tons of seamless tubes. These tubes of Super-304 H grade, are used in super-critical power plants that operate at high temperatures and pressures. The entire order will be delivered within the financial year 2026.

This is a major achievement for WSSL, highlighting its ability to produce high-quality, critical components for the power sector and helps strengthen its market position. The tubes will be manufactured using WSSLs vertical extrusion technology, which ensures better quality compared to other methods. The deal also aligns with WSSLs focus on the domestic market, where demand for infrastructure and energy projects is growing.

Innovations and Progress

Welspun Specialty Solutions Limited (WSSL) has introduced several innovations to improve its products and operations. These efforts focus on product development, technology upgrades, market expansion, and better efficiency.

One major area of innovation is product development. WSSL has introduced high-value steel grades like Welsonic-60 and Super-13 Chrome, designed for specialized applications such as oil wells. The company also developed Grade T91 for power plants. Additionally, WSSL achieved AS9100D certification for aerospace applications and is working on NORSOK M-650 certification for the North Sea market.

WSSL has also improved its manufacturing processes. It developed Super-304 H and T91 tubes for power plants, produced entirely under one roof. The company uses vertical

extrusion technology for better control during production. On the sustainability front, WSSL reduced emission intensity per MT of bloom production by 12% and increased renewable energy use from 26% to 31% in FY25. This is expected to reach upto 70% with new renewable energy initiatives in near future.

The company is focusing more on the domestic market, leveraging initiatives like Make in India to increase its presence in sectors like energy, space, defence and oil & gas. Internationally, WSSL has also entered new markets like South Africa for steel bars.

Operational improvements include better equipment, streamlined processes, and efficient maintenance to minimize downtime. The company has also earned the Great Place to Work certification, reflecting its commitment to employee wellbeing. In summary, WSSL is committed to innovation in products, technology and operations, aiming to be a leader in high-value stainless steel solutions.

Segment wise and product wise performance

Product wise performance is given in Boards Report under the heading Operations.

Financials

Operational performance vis-a-vis financial performance of the Company is discussed in detail in Boards Report. Discussion on Changes in Key Financial Ratios

Ratio	FY 2025	^FY 2024	Remarks
Debtors Turnover	8.41	15.51	Due to higher debtors with letter of credit at the end of the year
Inventory Turnover	1.83	1.88	Marginal change
Interest Coverage Ratio	0.91	1.86	Higher interest cost and lower operating profit (EBIT) during the year
Current Ratio	1.81	0.95	Repayment of loans with proceeds of rights issue has improved the ratio
Debt Equity Ratio	0.05	2.92	Repayment of loans with proceeds of rights issue has improved the ratio
Operating Profit Margin (%)	5.52%	8.88%	Lower operating profit (EBIT) during the year
Net Profit Margin (%)	-0.56%	8.97	Due to loss at net profit for the year
Return on Net Worth (ROE)	-1.55%	102.03%	Due to loss at net profit level for the year. Net worth has increased with Rights Issue

Risk Management

Key Points	Key Points
The Company faces the risk of increasing prices for raw materials like metals and other inputs. Higher input costs can directly affect production expenses and reduce profit margins if not managed properly.	The Company is sources key raw materials from multiple cost-competitive suppliers. It is also diversifying into interchangeable raw materials to reduce dependency and manage costs better.
Availability of skilled and experienced workers is crucial for smooth operations. Challenges in hiring or retaining talent can impact production quality, timelines, and overall operational efficiency.	To retain skilled workers, the Company provides regular skill development training and has introduced performance-linked incentive programmes to keep employees motivated and productive.
The Company operates in a highly competitive industry where rivals may offer better products at lower prices. Without strong differentiation, the Company could lose market share and profitability.	The Company addresses competitive threats by focusing on niche and high-value segments. It is also strengthening customer relationships through the adoption of a customer-centric approach and securing new product approvals to expand its market share.
Changes in trade policies, such as new tariffs, duties or import/export restrictions can disrupt the Companys ability to sell products internationally or source materials competitively.	In response to the increasing cheaper imports the Company actively engages with business associations to work with government authorities and seek protective or corrective measures when necessary.
Since the Company deals with international markets, changes in currency exchange rates can affect costs for imported materials and revenues from exports, leading to financial volatility.	The Company use hedging instruments like forward contracts to minimize risks arising from currency volatility, especially given exposure to imports and exports.
Any disruption in the supply chain, whether due to supplier issues, transportation problems or geopolitical events, can delay production schedules and increase costs.	To cushion the effect of any disruption in supply chain the Company has developed multiple sourcing strategies across geographies, maintain safety stock of critical materials.
Political instability, economic sanctions, or regulatory changes in countries where the Company operates can affect its market access, supply chains, and overall business continuity.	The Company has diversified its global market presence and also focuses on maintaining a presence in politically stable regions to reduce overdependence on any one market.
Advancements in manufacturing technology and changing customer requirements can make existing processes and products outdated. The Company must continuously innovate to stay competitive.	The Company has a strong focus on R&D and continuously upgrade production technology to maintain efficiency and meet evolving customer specifications.

Human Resource

Welspun Specialty Solutions Ltd. is focused on building a friendly, fair and productive workplace where both the Company and its employees can grow together. The HR team is dedicated to recruiting the right talent for key roles and ensures that new employees have a smooth on-boarding experience. Continuous learning and development opportunities are also provided to help employees enhance their skills.

The Company supports its workforce by acknowledging and appreciating quality performance. Competitive salaries and benefits are offered to establish a culture of employeewellbeing. A positive and inclusive work culture is encouraged through regular activities, open communication and a strong emphasis on diversity.

Welspuns performance management system emphasises regular feedback and clear goal-setting, helping employees reach their full potential. Overall, the HR initiatives aim to make every employee feel valued, supported and empowered to grow within the organisation.

Internal Control System and Their Adequacy

The Companys internal control system includes the rules, processes, activities and behaviours that help it operate smoothly and effectively.

It has a strong and reliable system in place to ensure:

i) The security of its assets

ii) An efficient management information system

iii) Compliance with all laws and regulations

iv) Adherence to all system and quality standards Cautionary Statement

In accordance with relevant securities laws and regulations, comments in the Management Discussion and Analysis that describe the Companys goals, plans, estimates, or expectations may be deemed to be "forward-looking statements." Actual outcomes could significantly vary from those that were stated or indicated.

Economic conditions affecting supply and demand, price conditions in domestic and international markets where the Company operates, competitive pressures in these markets, changes in governmental regulations, tax laws and other statutes, as well as incidental factors, are significant variables that could have an impact on results.