Goodluck India Ltd Management Discussions

ECONOMIC OVERVIEW Global Economy

Global economic activity is experiencing a broad-based and sharper-than-expected slowdown, with inflation higher than seen in several decades. The cost-of-living crisis, tightening financial conditions in most regions, Russias invasion of Ukraine, and the lingering COVID-19 pandemic weighed heavily on outlook. Global growth slowed in 2022 to 3.2%, more than 1% weaker than expected at the end of 2021, mainly weighed down by Russia-Ukraine war and rising inflation, which continued to shadow the world economy. Economic growth proved resilient in the third quarter of 2022, with strong labour markets, robust household consumption and business investment, and better-than- expected adaptation to the energy crisis in Europe. Even as headline inflation appears to have peaked in 2022 and the energy crisis has been less severe than initially feared, the global economy still faces major headwinds.

The International Monetary Fund (IMF) trimmed its 2023 global growth outlook as higher interest rates cool activity. Global growth is projected to fall from an estimated 3.5% in 2022 to 3.0% in 2023 and 2024, marking a slowdown. The rise in central bank policy rates to fight inflation continues to weigh on economic activity. Global headline inflation is expected to cool from 8.7% in 2022 to 6.8% in 2023 and 5.2% in 2024.

Structural reforms can further support the fight against inflation by improving productivity and easing supply constraints, while multilateral cooperation is necessary for fast-tracking the green energy transition and preventing fragmentation.

India Economy

The Indian economy grew by 7.2% in the financial year ended March 2023, lower than 9.1% growth registered in FY 2021-22, underscoring the countrys economic resilience amid geopolitical conflicts and global headwinds. IMF projects Indias GDP to grow by 6.1% in FY 2023-24, reflecting momentum from stronger-than-expected growth in FY 2022-23, as a result of stronger domestic investment.

India will maintain its position as the worlds fifth-largest economy in 2023, becoming a US$ 3.7 trillion economy, maintaining its lead over United Kingdom, as softening of commodity prices appear to have boosted corporate earnings. Economic growth in FY 2022-23 was underpinned by strong investment activity bolstered by the governments capex push and buoyant private consumption. Fall in year-on- year growth rate is partly due to a fading of pandemic-induced base effects, which contributed towards higher growth in FY 2021-22. Inflation remained high in FY 2022-23, averaging around 6.7%, but current account deficit narrowed in Q3 of FY 2022-23 on the back of strong growth in service exports and easing global commodity prices.

The economy demonstrated resilience despite a challenging external environment, the World Bank stated in the India Development Update. Indias economy has been remarkably resilient to the deteriorating external environment and strong macroeconomic fundamentals have placed it in good stead, compared to other emerging market economies. According to World Banks report titled "Navigating the Storm", while deteriorating external environment will weigh on Indias growth prospects, the economy is relatively well positioned to weather global spill-overs compared to other emerging markets.

INDUSTRY STRUCTURE AND DEVELOPMENTS Global Steel Industry

The global steel industry has faced several challenges in 2022, such as the Russia-Ukraine war, which led to the disruption of raw material supply and energy crisis, higher inflation and reduction in the output of European steel mills, among others. Further, with low demand and concerns about the global economic downturn, global steel prices fell over 40% to US$ 570-590 per tonne in December 2022, from its April 2022 peak of US$ 1,000 per tonne on tepid steel demand. As per World Steel Association, global crude steel production in CY2022 stood at 1,878.5 MT, a 4.2% decrease compared to 2021, its first decline in seven years, on the back of Chinas strict zero-COVID policy. China, the worlds largest steel producing country, which accounts for 54% of total world steel production, witnessed its crude steel output fall by 2.1% or 21.73 million MT, from 2021 to 1.013 billion MT, marking its second-successive annual decline, as per data from the National Bureau of Statistics. Production was sluggish in other primary markets too. The World Steel Association estimated steel demand to witness a 2.3% rebound to reach 1,822.3 MT in 2023 and grow by 1.7% in 2024 to reach 1,854.0 MT. High inflation and interest rates in most countries will limit recovery of steel demand in 2023, despite positive factors, particularly the lifting of restrictions in China, resilience of Europe in the face of energy crisis and resolution of logistics issues.

Indian Steel Industry

India is currently the worlds second-largest producer of crude steel, with an output of 125.32 MT in FY 2022-23, with the governments continued focus on infrastructure development ensuring long-term growth in the steel industry. In Union Budget 2023-24, the government allocated Rs. 70.15 Crore to the Ministry of Steel. Positive government policies and initiatives like Public Private Partnership (PPP) model and National Steel Policy are expected to help India increase its crude steel production capacity to 300 MTPA by 2030.

Moving forward, steel consumption is expected to grow by 7.5% in FY 2023-24, boosted by rising demand from domestic construction, railways and capital goods sector. Steel demand is expected to be 128.9 MT in FY 2023-24, up from 119.9 MT in the previous year, according to Indian Steel Association. The infrastructure push, the bid for developing more affordable housing and the Indian Railways capex are all demand drivers for production and consumption of steel across India.

Indias growing demand for steel is largely linked to numerous government projects associated with roads, railways and automobiles, among others. The Ministry of Steel is in talks with the refractory industry to develop an incentive policy to boost domestic production and reduce the countrys dependence on imports from China. As per NITI Aayogs report, India is set to become the worlds production centre for green steel at 15-20 million tonnes by 2030, paving the way for worldwide adoption of green steel.

Global Metal Forging Market

The global metal forging market, valued at US$ 83.4 billion in 2022, is projected to double at US$ 168 billion by 2032, growing by a CAGR of 7.2%, with Asia-Pacific dominating the market. The industry has grown significantly owing to a surge in demand for forged metal components from automotive, aerospace and defence, industrial machinery and other sectors. The automotive segment accounted for a market share of more than 58.5% of the global market in 2021.

India Metal Forging Industry

The India metal forging market is seen growing by 10.69% CAGR during 2022-29 to reach US$ 8.80 billion by 2029, up from US$ 3.86 billion in 2021. Indias market share of automotive forging is nearly 58% of total forging production due to rapid growth in the automotive sector, while the market is also segmented into defence, railway, industrial, machinery and other sectors such as agriculture, power, mining and construction. Demand for lightweight stainless steel forged parts in aerospace and defence is also driving growth.

Global Automotive Industry

The global automotive manufacturing market, which contributes 3% to worlds total GDP output, is valued at US$ 2,900 billion in 2022, growing by a CAGR of 3.7%. Moving ahead, the industry is projected to grow by 6.9% CAGR at US$ 6,070.4 billion by 2030, backed by consistent production volumes, delayed order backlogs and low cancellation rates. The industry will also benefit from gradual economic recovery, moderation in inflation, easing of semiconductor crisis and supply chain pressures, improved consumer demand and development of new technologies.

Major industry constraints in 2020 and 2021 were supply chain disruptions, energy crisis, inflationary pressures, higher interest rates, fears of recession and shortage of semiconductors. Despite these challenges, worldwide car sales grew to 67.2 million units in 2022, compared to 66.7 million units in 2021.

Irrespective of a volatile macro-economic backdrop, the global car industry is seen growing further with sales forecasted at 70+ million in 2023, and at 74 million in 2024. This upward trajectory is expected to be fuelled by greater penetration in the emerging markets and re-opening of China following relaxation of COVID-19 restrictions. The Electric Vehicle segment will remain a bright spot fuelling growth in the global automotive industry. The industry is witnessing increased adoption of EVs, resulting in higher investments for development of EV infrastructure to support growing demand.

Indian Automotive Industry

The Indian automotive industry, the worlds third largest by production, witnessed a healthy revival with FY 2022-23 being a year of consolidation. The industry, valued at US$ 222 billion, is projected to reach US$ 300 billion by 2026. It is a key contributor to economic growth, adding 7.5% to the overall GDP and 49% to Indias manufacturing GDP Major technological advancements in electric vehicles, autonomous driving, connectivity, digital sales, used car market and intense focus on safety measures are redefining industrys growth momentum and transforming rural and urban transportation. Factors such as sales of automobiles on digital platforms, wide availability of credit and financing options, population growth, integration of wireless technology in cars, and popularity of electric vehicles (EVs) will spur future growth of Indias automotive industry.

Automobiles production increased to 25.93 million units in FY2023 from 23.04 million units in FY2022. Domestic passenger vehicle sales increased 26.7% to 3.89 million units due to increase in demand for utility vehicles. Commercial Vehicles sales increased from 0.72 million units in FY2022 to 0.96 million units in FY2023. Two-wheeler sales were up 17% at 15.86 million units.

Growth was driven by pent-up consumer demand, improved semiconductor chip supply, new launches and product upgrades from OEMs. India registered EV sales of 11.71 lakh units in FY2023, marking 154% growth over FY2022, driven by increased adoption of electric vehicles across segments, advancements in technology, supportive government policies and the expanding charging infrastructure.

The government has been taking proactive measures, including the Make in India, Production Linked Incentive (PLI) scheme, Foreign Trade Policy (FTP), and schemes such as Advance Authorisation, Export Promotion Capital Goods Scheme to boost the local manufacturing ecosystem and exports of automobiles. Measures taken in Union Budget 2023-24 such as the elimination of customs duties on capital goods and machinery used to produce lithium-ion batteries for electric vehicles (EVs) will result in lower prices and increase demand for EVs. Increased customs duty on imported vehicles, including electric models, in semi-knocked down (SKD) and completely built unit (CBU) forms will further augment domestic manufacturing of automobiles.

Indian Infrastructure Industry

Infrastructure has been one of the key drivers for economic development. Initiatives such as the National Infrastructure Pipeline (NIP), BharatMala Pariyojana and PM Gati Shakti - National Master Plan are likely to boost overall growth of the infrastructure sector and improve connectivity in India. NIPs total capital expenditure is estimated at Rs. 111 lakh crore for development of high-quality infrastructure across the country. Currently, NIP has 8,964 projects with a total investment of over Rs. 108 lakh crore under different stages of implementation. The PM Gati Shakti Plan plans to integrate roads, railways, aviation, urban and logistics infrastructure for providing multi-modal connectivity to improve transportation and logistics.

Under PM Gati Shakti, 38 high impact steel projects are earmarked to develop multimodal connectivity and bridge infrastructure gaps. In Union Budget 2022-23, the government gave a boost to infrastructure development, earmarking Rs. 10 lakh crore as capital expenditure for FY2024, significantly higher than Rs. 7.5 lakh crore earmarked in FY2023. The increased capex is for areas such as railways, roads and highways, bridges, airports, ports, waterways and cargo terminals. Further, the push for creating urban infrastructure in Tier 2& 3 cities through Urban Infrastructure Development Fund (UIDF) of Rs. 10,000 crore per annum in Budget FY 2023-24 and the governments initiative Smart Cities Mission augur well for growth of infrastructure and real estate.

Roads & Railways

The total length of National Highways in the country is 1,44,955 km. The national highways network is proposed to be expanded by 13,800 km in FY 2023-24 . The Ministry of Road Transport and Highways (MoRTH) targets to construct at least 45 km of roadways each day to meet this target. In Budget 2023-24, MoRTH received a push with 36% increased allocation of Rs. 2.70 lakh crore for FY 2023-24. The allocation to the National Highways Authority of India (NHAI) has been increased to Rs. 1.62 lakh crore for FY 2023-24 from the revised allocation of Rs. 1.42 lakh crore in FY 2022-23.

In FY2023, Indian Railways achieved a new milestone of electrification of 6,542 RKMs and 5,243 kms of new lines. With an intention to augment railway infrastructure and improve safety standards, it is developing and creating technology in signalling and telecommunication with 15,000 kms being converted into automatic signalling and 37,000 kms to be fitted with Kavach, the domestically developed Train Collision Avoidance System for safety. Indian Railways has been provided the highest-ever capital outlay of Rs. 2.40 lakh crore, with investment for rail infrastructure such as railway electrification and metro trains likely to increase to Rs. 50 lakh crore by 2030.

Energy

Indias demand for electricity has been growing rapidly, driven by growing population, rapid urbanisation, accelerating industrial and economic activities, infrastructure development, rising electrification and per-capita consumption. Further, increased investments in railway electrification and metro trains fuelled the demand for additional power. The governments initiative Power for All has accelerated capacity addition in the country. Power consumption in India grew 9.5% to 1,503.65 BU Y-o-Y in FY 2022-23. The Central Electricity Authority (CEA) estimates Indias power requirement to grow to reach 817 GW by 2030. Globally, India has the fourth-largest installed capacity of renewable energy, as per the statistics of International Renewable Energy Agency. Indias total installed renewable energy capacity increased from 115.94 GW in March 2018 to 172 GW in FY2023, as per the Ministry of New & Renewable Energy, underscoring Indias steadfast commitment to sustainable energy solutions. The CEA estimates that the share of renewable energy generation is set to increase from 18% to 44% by 2030 with the government aiming to achieve 450 GW of installed renewable energy capacity by 2030.

Solar Energy

The installed solar energy capacity in India has increased 24.4 times in the last 9 years and stands at 67.07 GW. The government has set a target of achieving 100 GW of solar power installed capacity by the year 2022, of which 70+ GW has been achieved by June 2023, while another 50+ GW is under installation. In Union Budget 2022-23, the government provided a major push to the solar energy sector under renewable energy with an additional allocation of Rs. 19,500 crore for a production-linked incentives for manufacturing of high-efficiency solar photovoltaic modules, while another Rs. 35,000 crore was allocated for priority capital investments towards energy transition and net zero objectives and energy security. Further, to facilitate large-scale grid-connected solar power projects, a scheme for "Development of Solar Parks and Ultra Mega Solar Power Projects" is under implementation with a target capacity of 40 GW capacity by March 2024.

Transmission & Distribution (T&D)

The transmission network has been growing at a significant pace with the addition of transmission capacity both at interstate and intra-state levels, given the governments focus on increasing renewable energy (RE) capacity and transition to renewable energy. The growth of electrification and consumption has led to a need for the expansion and upgradation of the T&D systems which are core enablers for the energy transition.

India has become one of the worlds largest synchronous interconnected electricity grids with 4,71,817 ckm of transmission lines and 11,85,058 MVA of transformation capacity (as on April 2023). The country added 1,77,641 ckm of transmission lines and 6,28,329 MVA of transformer capacity in FY2023, which led to 1,12,250 MW inter-regional power transfer capacity with a staggering 212% increase since 2014. The Revamped Distribution Sector Scheme (RDSS) with an outlay of Rs. 3.03 trillion has been launched for the five years till FY 2025-26, aimed at providing financial assistance to Power Distribution Companies (DISCOMs) for modernisation and strengthening of distribution infrastructure.

Telecom

Indias Telecom industry is the worlds second-largest, with a subscriber base of 1,172.34 million and an 84.5% increase in overall tele density (wireless & wireline) at the end of March 2023. The industrys exponential growth in the last few years was driven by affordable tariffs, wider availability, roll-out of Mobile Number Portability (MNP), expanding 4G coverage, roll-out of 5G, evolving consumption patterns of subscribers, governments initiatives towards bolstering Indias domestic telecom manufacturing capacity and a conducive regulatory environment. Further, 100% FDI is allowed in telecommunications through the automatic route, making it the 3rd largest sector in terms of FDI inflows, contributing 6.4% to Indias total FDI inflows.

To make India 5G ready and meet the growing demand of large bandwidth and ultra-low latency, 65% of telecom towers need to be fiberised and 12 lakh towers needed to be deployed by FY 2023-24. Union Budget 2023-24 allocated Rs. 97,579 crore to the Department of Telecommunications (DOT) under the Ministry of Communications, a 19% increase over FY2023s revised estimates.

Global Oil & Gas Industry

The oil & gas industry was impacted by supply chain disruptions, Russia-Ukraine war and price volatility in 2022. A confluence of economic, geopolitical, trade, policy, and financial factors exacerbated the issue of underinvestment and triggered a readjustment in the broader energy market. As a result, all three components of a balanced energy equation - energy security, supply diversification, and low-carbon transition - are now facing a "trilemma" of concerns. The immediate impact of this imbalance was high energy prices and record cash flows for Oil & Gas companies, helping them enter 2023 with the healthiest balance sheet and continued capital discipline. This momentum could help companies overcome the energy underinvestment of recent years and enable an accelerated energy transition.

Indian Oil & Gas Industry

The oil & gas sector is amongst Indias eight core industries. India is the second largest refiner in Asia with 23 refineries and a refining capacity of 248.9 MMTPA. Indias state refineries have upgraded their facilities to comply with new government requirements to produce oil products with the equivalent of Euro VI emission standards. Indias cumulative crude oil production in FY 2022-23 stood at 29.2 MMT, which is 1.73% lower than production during the previous year, as per data from the Ministry of Petroleum & Natural Gas. According to the International Energy Agency (IEA), primary energy demand is expected to double to 1,123 million tonnes of oil equivalent by 2040, and the country is projected to be one of the largest contributors to non-OECD petroleum consumption growth globally.

Global Steel Pipes & Tubes Sector

The global steel pipes & tubes market size was valued at US$ 142.4 billion in 2019 and is expected to grow at CAGR of 6.2% between 2020 and 2027. Increasing oil & gas production owing to growing demand from transportation industry is one of the prominent growth drivers. The oil & gas industry is the major consumer segment for steel pipes & tubes. Steel pipes are used for the transportation of gas & liquid and are generally manufactured using low alloy or carbon steel. The U.S. oil & gas industry is among the primary end-users for steel pipes and tubes, which is used in upstream, midstream and downstream processing of crude oil.

Significant investments made in infrastructure projects and increased demand for residential and commercial buildings due to an expanding population and urbanisation propelled the demand for steel pipes and tubes globally. ERW pipes & tubes are gaining prominence in the market owing to their low prices and modest performance. Modern welding technologies, such as high-frequency welding, that are increasingly integrated into the process of manufacturing ERW pipes & tubes, act as a crucial factor supporting growth.

Indian Steel Pipes & Tubes Sector

The steel pipes and tubes industry is one of the most important verticals in the Indian steel industry, with an 8% contribution to Indias steel consumption. The domestic steel pipe market is estimated to have reached a market size of Rs. 50,000-55,000 crore. with its major growth drivers being demand from domestic water infrastructure, oil exploration and transportation, construction, irrigation, infrastructure, and expansion of gas pipelines.

The governments push to provide drinking water to every household is expected to drive water pipeline demand for the next 3-4 years. Currently, 49% of Indian households have tap water connections. By 2030, the demand for water in India is going to be twice the available supply indicating severe water scarcity. The initiative Nal se Jal scheme aims to provide piped drinking water to every rural home by 2024. This scheme has the potential to boost the demand for pipe in three broad pipe categories: HSAW pipes, ductile iron (DI) pipes and HDPR/PVC pipes. India will see double-engine growth from the gas grid as well as from water-pipeline demand for the next 3-4 years (19,000 km of oil/gas pipeline and potential demand of 5-6 Mn TPA for water pipeline).

OPPORTUNITIES AND THREATS

Opportunities

The governments thrust for large infrastructure projects in PPP mode and allocation of Rs. 10 lakh crore in Union Budget 2023-24 will catapult the infrastructure sector. Additionally, an increased outlay of Rs. 79,000 crore in PM Awas Yojana for development of affordable housing and the governments initiative Smart Cities Mission will accelerate growth in Indias real estate and infrastructure sector.

The government plans to augment railway infrastructure and improve safety standards includes setting up of high-speed corridors, expansion of optical fibre cable network, new lines and dedicated freight corridors.

Factors such as global transition towards green energy, increasing investment in solar energy and the US new policy of increasing investment in renewable energy may boost demand for steel tubes .

The governments initiatives for clean energy adoption and expansion of renewable energy capacity, including solar, will augur well for structural solutions and tube business.

^ Installation of telecom towers to facilitate 5G services in India will provide a huge opportunity for the engineering structure segment.

^ The expansion of Indias oil & gas sector with an estimated Rs. 1.11 lakh crore capex in FY 2022-23 will lead to expansion and upgradation of facilities and will open new markets for Boilers, Steel Tubes and Pipes.

^ The target to set up 8,000 CNG stations by 2024 and exploration and production activities will drive demand for steel products, including tubes and pipes in the coming years.

Union Budget 2023-24 laid special emphasis on Vehicle Scrapping policy by allocating adequate funds to replace 15+ year-old vehicles. Around 9 lakh vehicles owned by central and state governments, transport corporations and public sector undertakings will be eligible for scrapping. The need for new vehicles to replace these will boost steel consumption.

^ The government approved the Production Linked Incentive (PLI) Scheme for the automobile and auto component industry, with a budgetary outlay of Rs. 25,938 crore to boost domestic manufacturing of Advanced Automotive Products (AAT).

^ Due to the China Plus One strategy and with global companies looking to diversify their supply base to reduce reliance on China, India is well positioned to emerge as an alternative manufacturing hub and expand its global market share by leveraging its strength of low-cost manufacturing, technological advancement, and favourable government policies. This will boost domestic manufacturing and increase export opportunities for India.

Threats

^ Steep increase in commodity and crude oil prices on account of global turmoil, the ongoing Russia-Ukraine war and high inflation will increase input costs, impact profitability and dampen the export market.

^ Rising cost of logistics will increase freight costs and impact industry profitability.

^ Adverse geo-political conditions can affect the business.

COMPANY OVERVIEW

Established in 1986 by IITians, Goodluck India Limited (GLIN) is Indias pioneer and leading Specialised Engineering Products company, engaged in converting basic steel into quality engineering products. Headquartered in Ghaziabad, with three generations of hands-on experience of promoters, it has three decades of experience in manufacturing steel products to providing engineering solutions.

The Company is engaged in manufacturing and export of a wide range of high-value engineered steel products. This includes Engineering Structures, Forging for Defence and Aerospace, Precision/Auto Tubes, CR Products and GI Pipes.

The Company manufactures and exports engineering products globally and domestically with a wide range of galvanised and cold-rolled coils/sheets, galvanised and black steel tubes and hollow sections, forgings & flanges, cold drawn welded & precision tubes, engineering fabricated structures for towers, bridges, walkways, girders, boiler support structures, pipe rack structures, chimney structures and secondary support structures, and other cold rolled value-added products.

Industries Served

The Company caters to several diverse sectors including Automotives, Infrastructure, High-speed Railways, Specialised Infrastructure, Solar, Aerospace and Defence components. The Company is treating Auto, Railways and Solar industries as its sunrise sectors.

Esteemed Clientele

The Companys key clientele comprises members from the public sector, private sector OEMs and central and state government departments, with over three decades of experience of having successfully served the domestic and international clients. It has established a strong presence in the worlds key export markets of United Kingdom, United States, Singapore, South Africa, UAE, Germany and France, providing them with best-in-class specialised engineered products. The Company serves some of the worlds top automotive companies, including Ashok Leyland, Bajaj Auto, TVS, SML, Isuzu, ISGEC, ISRO, NTPC, BMW and Audi, among others.

MANUFACTURING PROFICIENCIES

The Company has 6 state-of-the-art manufacturing facilities, of which 5 are located at Sikandrabad and Dadri in Uttar Pradesh, and 1 in Kutch, Gujarat. The structures for special steel bridges for Bullet Train project are being supplied from Kutch plant. The Companys total manufacturing capacity stands at 3,64,000 tonnes. During the year, it added 18,000 metric tonnes in the Forging division. With demand for products continuously rising, the Company is working on a capex plan to increase its capacity to 50,000 tonnes per annum, which is expected to be operational by Q1-FY2025.

TUBES:

GLIL is the second-largest auto grade precision steel tube manufacturer in India with a capacity of 80 ktpa, which is already running at over 90% capacity utilisation. Another unit is being set up near the existing plant at Sikandrabad with 50 ktpa capacity, which is scheduled to be commissioned by Q1-FY2025. It supplies tubes to major automotive segments such as 4-wheeler passenger cars, commercial vehicles and 2-wheelers. The Company is seeing traction from automotive OEMs and is a preferred Category-2 supplier to overseas clients.

FORGING:

The forging unit caters to critical components of oil & gas, automotive, general industrial equipment, marine, aerospace and defence. We specialise in steel, duplex, carbon, alloy steel forgings and flanges supplied in more than 100 grade products. The Company also supplies material to various prestigious programmes of DRDO, such as BrahMos. The product mix from high value-added businesses will gradually increase, which will also improve EBITDA per tonne. The recently-imported a new fully automatic metal press unit from South Korea was commissioned during the year. With this, the total forging capacity stands increased from 12 ktpa to 30 ktpa.

STRUCTURES:

GLIL is the Category-1 supplier of critical components required for various marquee projects of L&T in the domestic infrastructure space. In FY2022, the Company received Letter of Intent for Indias first bullet train, for supply and fabrication of special bridges on National High Speed Rail Track between Mumbai and Vapi. It has set up structures for supply of material to companies. With proven expertise and track record, it has received orders for supply and fabrication of heavy-duty structures to the steel industry.

CR SHEETS, PIPES AND TUBES:

The Company manufactures and exports engineering products domestically and globally with a wide range of galvanised and cold-rolled sheets and coils, galvanised and black steel tubes & hollow sections. The clientele comprises public sector and private sector OEMs, and central and state governments.

FUTURE ENABLERS FOR GROWTH

A. Value addition in high volume GI Pipe business:

The intensely-competitive GI Pipes business has relatively less value-added products. The Company is focussing to add value-added products by partially converting GI lines to produce Tracker Tubes, which are needed for the Solar Energy business. The Company has started gaining strong traction for Tracker Tubes from leading domestic and overseas customers.

B. Capacity addition in high value-added product (VAP) segments:

Precision Tubes: GLIL is the second-largest auto grade Precision Steel Tube manufacturer with currently capacity of 80 ktpa. With strong traction from domestic and global auto OEMs, the Company is setting up 50 ktpa capacity in Precision Tubes segment. Capex for this is projected to be completed by Q1-FY2025, taking the total capacity to 130 ktpa. Being a Category-2 supplier to marquee global automotive OEMs, nearly 60% of this volume is currently exported to overseas clients.

Forging: The Company added a fully automatic metal press unit in the previous fiscal year. This enabled it to improve its single piece press capacity to 14 tonnes. With the addition of this unit with capex, the Companys total forging capacity will nearly treble at 30 ktpa, up from 12 ktpa earlier, thus enabling volume growth. This is also helping the Company gain good traction on high-value export orders. Given the managements technical expertise and legacy of delivering critical components, the Company is also working on entering new areas of sub-sea forged components.

C. Driving Structures business:

Being a Category-1 supplier of critical components to domestic infrastructure companies, the Company receives orders for supply and fabrication of these critical components for several marquee projects in the domestic infrastructure space. The new unit at Kutch, Gujarat helps in supply and fabrication of special bridges on National High Speed Rail Track for Indias first bullet train between Mumbai and Vapi, Gujarat, being constructed by engineering major, Larsen & Tourbo.

The Company also received orders from other user industries and metros for supply and fabrication of heavy-duty structures. With proven expertise and track record, the Company is expecting to receive more such orders in the future for upcoming bullet trains and metro projects in India.

FINANCIAL OVERVIEW

The Company achieved remarkable growth during the year under review, registering a robust Revenue of Rs. 3,047.98 crore in FY 2022-23, as against Rs. 2,51112 crore in FY 2021-22, recording a growth of 18.24%. EBITDA increased by 11.26% to Rs. 219.15 crore in FY 2022-23, compared to Rs. 186.88 crore in FY 2021-22. PAT stood at Rs. 81.80 crore in FY 2022-23, as against Rs. 15 crore in FY 2021-22. Our sales volume stood at 3,16,118 MT in FY 2022-23, as against 2,64,419 MT during FY 2021-22.

Revenue Break-up

In Financial Year 2022-23, Sheets & ERW Pipe segments contributed 41% of total revenue of the Company, however, its contribution towards EBIDTA was only 20%. Other value-added segments added lesser to the top line, but their contribution to bottom line was higher. For example, Precision Tubes segment shares 42% of the Companys EBIDTA, while revenue-wise, its share stood at only 24%. The Forgings division also performed well this year and contributed 22% of total EBIDTA, while its contribution to top line was only 14%. The Engineering Structures segment contributed 15% to the total revenue, while its contribution to EBIDTA was only 16%. The Company is targeting to increase its revenue contribution from Forging, Precision Tubes and Precision Fabrication segments, which have a higher EBITDA impact.

Consolidated Financial Highlights (FY 2022-23)

Particulars	2022-23	2021-22
Income from Operations	3,041.98	2,511.12
Other Operating Income	24.02	35.49
Other Income	14.19	3.89
Total Income	3,086.80	2,617.10
Raw Materials	2,242.12	1,883.10
Excise Duty	0	0
Employee Cost	125.89	96.59
Other Expenses	499.03	450.52
Total Expenditure	2,867.64	2,430.22
EBITDA	219.15	186.88
EBITDA Margin (%)	7.09%	7.14%
Depreciation	32.59	28.91
Interest	65.51	51.34
Exceptional Item (Gain) / Loss	0	0
Profit Before Tax (PBT)	121.05	100.57
Tax	33.25	25.56
Profit After Tax (PAT)	87.80	75.01
PAT Margin (%)	2.84%	2.87%
EPS (Rs)	33.31	29.48

Changes in Key Financial Ratios

The details of changes in the key financial ratios as compared to previous year are stated below:

Sr. No.	Balance Sheet Ratios	2022-23	2021-22	Change (%)	Explanation (If change is more than 25%)
1.	Debtors Turnover Ratio	9.62	9.95	3.32	-
2.	Inventory Turnover Ratio	5.61	5.12	0.81	-
3.	Interest Coverage Ratio	3.33	3.26	2.15	-
4.	Current Ratio	1.42	1.35	5.19	-
5.	Debt Equity Ratio	0.91	1.21	(23.62)	Improvement is primarily on account of increase in Equity during FY 2022-23
6.	Operating Profit Ratio	6.11	1.10	(5.49)	-
1.	Net Profit Margin	2.85	2.91	(2.06)	-

The Companys Net Worth for the Financial Year 2022-23 stood at Rs. 619 crore, in comparison with Rs. 466 crore in the previous Financial Year 2021-22. The increase of Rs. 153 crore in Net Worth is due to profit earned by the Company during FY 2022-23 and the Company issued 12,90,000 warrants convertible into equal number of equity shares within 18 months at Rs. 305 (including a premium of Rs. 303 per share) each on 20 July 2022.

During the year, on 19 December 2022, the Company again issued 9,64,600 warrants convertible into equal number of equity shares within 18 months and also issued 12,50,000 equity shares at Rs. 450/- each (Including a premium of Rs. 448 per share). The Company is sharing profit with its shareholders also, and during FY 2022-23, the Company paid Rs. 10.65 crore as dividend to its shareholders.

FUTURE OUTLOOK

The Companys increasing market share in renewable energy, road safety and infrastructure for railways and highways is propelling business growth across the globe. With moderation in inflation, and gradual improvement in order inflow, it remains optimistic about expanding our client base, new orders from established industrial and government companies and improvement in profitability.

With newly added capacities and measures taken to turn around GI business, it is well-positioned to benefit from the Governments planned infrastructure spending over the next few years. The Company is likely to be a key beneficiary of the governments thrust on infrastructure development and renewable energy, with its diverse product offerings and marquee customer base. In addition, as the Company is approved by the Research Design & Standards Organisation, Ministry of Railway, India, it also intends to leverage our strength in fabrication and supply of steel bridge girders for railway projects.

Further, the Company aims to capitalise on its key strengths in supplying high-quality products to defence & aerospace, automotive, oil & gas and renewable energy sectors to cater to robust domestic demand and the international markets.

Over the next two years, the Companys aim is to increase its revenue from Tubes to 25-30% to further improve margin profile. The Auto Tube segment will remain its key priority, and it will remain focussed on supplying auto tubes of higher diameter and thickness, such as hydraulic tubes, with tremendous potential in domestic and global markets.

The Company will also focus on capacity addition in high value-added product segments, which will be helpful in generating high margins. This is aimed at expanding the EBITDA margins, which will also be achieved by optimising capital structure through cost reduction and realisation improvement. Further, the Company plans to continue to reshuffle its products and markets, as per the new marketing dynamics to enhance its profitability.

RISKS AND CONCERNS

The Company has a robust risk management system for the timely and effective identification, assessment, and mitigation of key business and operational risks. The key risks and their corresponding mitigation measures are depicted below:

Raw Material Risk	The price of key raw materials, especially steel has been rising on account of high inflation, geopolitical tensions, and supply chain disruption. Failure to procure key raw materials at competitive rates may impact the Companys operations and profitability.
	Mitigation Plan - We try to maximise the use of one type of raw material, i.e., HR Coil. Further, our formula driven contracts enable us to pass through steel price fluctuations and protect us from price volatility.
Policy Risk	The Indian governments focus and investments in infrastructure projects have a positive impact on the Companys business. However, in the long term, if the government reduces its target and budget for the infrastructure sector, it will adversely impact the market and the profitability of the Company.
	Mitigation Plan - It is gearing up to strengthen our presence in the market with new products and to minimise the impact of market depression if it occurs.
Supply Chain Disruption Risk	The Russia-Ukraine conflict has caused severe disruptions to the global supply chain network and a sharp increase in freight cost, which would negatively impact the profitability of the Company.
	Mitigation Plan - The Company evaluates various strategic sourcing and supply options. We also try to enhance supply chain transparency by strengthening international coordination and collaboration.
Economic Risk	The global economic slowdown and geopolitical tension may lead to demand compression and dampen the Companys export business. The slowdown in Europe and Russia may have a direct impact on our export business.
	Mitigation Plan - It has a global presence in over 100 countries and it is focussed to expand into new market destinations. It regularly assesses the geographical risks and feasibility of operating in a particular country or region through extensive market research to ensure low impairment risk. In addition, the domestic market will continue to provide us sizeable business opportunities.
Technology Risk	There is a constant requirement for equipment and technology upgradation to enhance efficiency. Failure to use the latest and sustainable technologies to cater to the changing requirements of the global market may lead to loss of business. Further, consistent investment in advanced technologies and equipment poses constraints to the growth of the Company.
	Mitigation Plan - We give utmost importance to technology and continuously invest in balancing equipment to increase our productivity and the latest technologies to enhance our competitiveness.
Human Resource Risk	Skilled manpower and its retention are paramount for the Companys sustainable growth in a labour-intensive sector. Shortage of skilled workforce, high attrition rates, or lack of the right skills may disrupt our operations, productivity and growth prospects.
	Mitigation Plan - The Company undertakes numerous initiatives to attract and retain talented workforce and improve employee engagement. It has conducive people-centric policies which promote meritocracy across all hierarchies. It also ensures the availability of the right skills in the right quantity through capability development and capacity augmentation activities.

HUMAN RESOURCES

GLIL considers its employees as the most important asset and integral to growth and continued success. It remains committed to enhancing the knowledge, skills and capabilities of its employees. Further, it encourages new talent acquisition and reward excellent employee performance. It has also established an empowered, synergetic, harmonious, and transparent work environment that values meritocracy and innovation.

The Companys progressive policies and continual investment helps it upgrade employee skills. We regularly conduct training programmes in different areas such as technical skills, safety, behavioural skills, leadership skills, values and code of conduct. During the year, it has undertaken various initiatives to improve employee capabilities, productivity and enhance collaborative working. It also organises staff safety workshops by external specialists to spread awareness of safety hazards among employees.

Further, it prioritises health, safety, and security of its employees. It also undertakes various engagement initiatives to enhance employee satisfaction and motivation levels. It also provides platforms for employees to share their ideas and give feedback, which enables it to improve productivity.

The Company has launched and revamped several employee-friendly policies/initiatives to effectively address the growing needs and challenges of its employees. It ensures felicitating and rewarding its employees for their contributions and long-standing commitment. It has also embarked on developing a Performance Linked Incentive Scheme for employees directly involved in production.

The Companys total workforce strength stood at 4,000, as on 31 March, 2023.

CORPORATE SOCIAL RESPONSIBILITY

At Goodluck India, corporate social responsibility is not merely a compliance mandate. The Company is committed towards the community and environment at large. The Company has always been conscious of its social responsibilities and has actively contributed to social and economic development of the society. It is fully engaged in ensuring equitable and sustainable growth of the society in and around the area of its operations. Through its CSR initiatives based on social, environmental, and economic considerations, its conscious endeavour is to serve the socio-economically backward, under-privileged and marginalised communities.

INTERNAL CONTROL SYSTEMS

The Company has robust internal control systems in place to ensure orderly and efficient conduct of business and protect the Company from losses. The internal control systems ensure compliance with applicable laws and regulations, safeguarding and proper use of assets and resources, and preserving the accuracy of financial transactions and reporting.

The Company always adheres to prescribed guidelines and follows all Accounting Standards prescribed for maintenance of books of accounts and reporting of financial statements. We place prime importance on an effective internal audit system. The appointed internal auditors are responsible for regular monitoring and reviewing the entire operations, services, and the effectiveness of the internal control systems. Key observations and recommendations are communicated to the Audit Committee of the Board of Directors, which takes appropriate corrective measures as deemed fit.

CAUTIONARY STATEMENT

Statements in the Management Discussion & Analysis describing the Companys objectives, projections, estimates, and expectations may be forward-looking statements within the meaning of applicable laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the Companys operations include among others, climatic conditions, economic conditions affecting demand-supply and price conditions in the domestic and overseas markets in which the Company operates, changes in the Government regulations, tax laws, and other statutes and other incidental factors.