MANAGEMENT AND DISCUSSION ANALYSIS A) INDUSTRY STRUCTURE, SCENARIO & DEVELOPMENT The prolonged slowdown that set off in 2011-12 and has continued unabated into the current year has severely dented the revenue growth and profitability of Indian component manufacturers. Tier 2 and tier 3 suppliers and those dependent on the commercial vehicles segment have been key casualties. But, renewed optimism and expectations of a turnaround in our economy following the election of a stable government at the Centre have restored hopes of a recovery in auto sector demand. The Indian steel industry is headed for a period of overcapacity with additional supply coming on stream in the next fiscal likely to exceed any improvement in demand. The result may be continuing price and margin brssures for Indian steelmakers who are already under brssure due to slowing domestic demand and cheaper imports. Fiscal 2016 will see nearly 9 million tonnes (mt) in fresh capacity added to the existing capacity of about 95 mt. Steel imports from China nearly trebled during April 14-Jan 15 to over 29 lakh tonnes (LT), the country had imported 10.88 LT steel comprising 6.46 LT carbon steel and 441.70 LT alloy/stainless variety during the entire 2013-14 fiscal. The construction, automobile and white goods industries will attract a high demand for steel over the next decade. Vast opportunities exist where the unique properties of steel are critical. This could result in a much larger market penetration. Global steel demand over the next decade will largely depend on the emerging economies With increased government's focus on infrastructure and housing sectors, India's steel demand is likely to grow faster than production. While steel production continued to face intense brssure due to the lack of raw materials - iron ore and coal - linkage, its consumption will grow sustainably. Almost all domestic steel makers are raising capacities, expecting a rise in consumption in the near future even as the ongoing difficulties due to subdued demand and rising imports are likely to persist for some more time. From the brsent installed capacity of around 100 million tonnes per annum, India aims to treble capacity to 300 mtpa by 202526 using greenfield as well as brownfield routes, entailing a whopping investment of USD 200 billion. With the steel and mines minister announcing the setting up of four new steel plants in different states, experts say the steel sector will get a significant boost with an addition of 24 million tonnes capacity. If our GDP growth outstrips China, as is expected next year onwards, and as "Make in India" takes off, there is certainly room for additional capacity. Acknowledging that India's "infrastructure does not match our growth ambitions , the finance minister announced heavy investment in building roads, railways, and other infrastructure projects. Road infrastructure will receive an outlay of 14,031 crores Rupees (US$2.26 billion), while railways will get 10,050 crores Rupees (US$1.62 billion). A new National Investment and Infrastructure Fund will also be set up and receive 20,000 crore Rupees (US$3.23 billion) annually. These investments are expected to drive economic growth and attract investment in the country and could also prove to be a game-changer for the industry. B) OPPORTUNITY & THREATS Demand of steel in global market mostly depends upon growth of infrastructure in China, India and other developing countries. Increase in price of steel and cocking coal affects competitiveness of Indian end users of steel. Further, increase in competition affect margin of profits. Increase in imports of steel at cheap price from China affects local supplier of steel manufacturers. The Company concentrates in Niche market. The Company shall concentrates Aerospace, Defense, Railway, Drilling, Yellow Good, Oil & Gas (Export), Turbine, Wind Energy, Machine/Ship Building, Gear Development, Engines, Open Die Forgers etc. The Company is taking various steps to utilize its existing capacity to the maximum extent. C) SEGMENTWISE AND PRODUCTWISE PERFORMANCE Product wise performance is given in Directors Report under heading operations. D) RISK & CONCERNS Additional capacity being generated for production of Alloy Steel in India and import of steel from China caused brssure on sales & margin. However the Company expects to mitigate the impact of risks and concerns since the Company concentrates on niche products. E) INTERNAL CONTROL SYSTEM The Company employs adequate and effective system of internal control systems that provide for:- i) security of the asset ii) efficient management information system iii) compliance with all laws and regulations iv) Compliance with all standard system and quality standards. F) INDUSTRIAL RELATIONS & HUMAN RESOURCES Human resource is the key factor for the success of any organization. Your Company places considerable emphasis on continuous enhancement of skills and performance of human resources across the organization. G) DISCUSSION & FINACIAL PERFORMANCE REVENUE Revenue details are discussed in Directors Report. H) FUTURISTIC STATEMENT Company's performance as exbrssed or implied could differ materially due to economic conditions affecting demand/ supply and price condition in the domestic & overseas markets, changes in the Government regulations, tax laws & other incidental factors. For and on behalf of the Board of Directors Abhishek Mandawewala Director Ashok Jain Director Mumbai, Date: 8th July, 2015 |