Hi-Tech Pipes Ltd Management Discussions

Global economic growth

The global economy walked on a tightrope in the last couple of years as the impacts of the COVID-19 pandemic continue to reverberate worldwide, the war in Ukraine unleashed a new crisis, disrupting food and energy markets and exacerbating food insecurity and malnutrition in many developing countries. Further, high inflation continued to erode real incomes, triggering a global cost-of-living crisis that has pushed millions into poverty and economic hardship. At the same time, the climate crisis continued to take a heavy toll on many countries, with heat waves, wildfires, floods, and hurricanes inflicting massive humanitarian and economic damage.

These shocks continue to weigh heavy on the global economy in 2023. According to the International Monetary Fund (IMF), the global economy is expected to grow at 2.9% in 2023 – up from the previous forecast of 2.7%, compared to 3.4% growth achieved in 2022. This growth is expected to be driven by the "surprisingly resilient" demand in the United States and Europe in the last quarter of 2022, easing energy costs and the reopening of Chinas economy after Beijing abandoned its strict COVID-19 restrictions. According to IMF, Global inflation is expected to fall from 8.8% in 2022 to 6.6% in 2023 and 4.3% in 2024, still above pre-pandemic (2017–19) levels of about 3.5%.

Global economic growth

According to IMF, US GDP is expected to grow by 1.4% in 2023 compared to 2.0% in 2022. Stronger-than-expected consumption and investment in the third quarter of 2022, a robust labour market and strong consumer balance sheets is expected to drive growth in the US markets. The Eurozone is expected to grow at 0.7% compared to 3.5% in 2022, largely owing to the higher energy cost and lower investment sentiment. The rapid spread of COVID-19 in China dampened growth in 2022, but the recent reopening has paved the way for a faster-than-expected recovery. As a result, IMF revised Chinas growth outlook sharply higher, to 5.2% in 2023 compared to the previous estimate of 4.4%. The earlier-than-expected reopening in China has resulted in a positive impact on global activity, reducing supply chain pressures and giving a boost to international tourism. Indias outlook remains robust, with unchanged forecasts for a dip in 2023 growth to 6.1% but a rebound to 6.8% in 2024, matching its 2022 performance. Amongst the developing nations and major economies, IMF expects Britains economy to shrink in 2023 and forecasts a 0.6% fall in GDP as households struggle with rising living costs, including for energy and mortgages.

Key trends to guide the global economy in 2023 and beyond

Declining energy prices may help in the global recovery

A key factor in the improvement in activity and sentiment in early 2023 was the recent decline in energy and food prices witnessed across economies. Brent oil prices reduced from $130 in June 2022 to $80 in March 2023.

Although the current price levels are still relatively high compared to pre-war levels, but the drop in price of nearly $50 has helped boost the purchasing power for most firms and households and is helping to lower headline inflation.

Easing inflation to boost growth

After reaching multi-decade highs in 2022, the global inflation is expected to moderate in response to tightening financial conditions, softening demand, and easing supply chain conditions. Further, downward price pressure is indicated by the decline in the industrial commodity prices, which has fallen nearly 30% from its record high in early March. Agricultural commodity prices are in the early stages of a correction and is expected to sustain the downward train throughout 2023, led by grain prices. Commodity price declines will filter downstream to intermediate and finished products, bringing some relief to businesses and consumers in 2023.

However, labour shortages and wage acceleration are expected to contribute towards the persistence of inflation, especially in the services sector. Although the trends show that the inflation to soften up in 2023, but experts opine it would take a few years to bring inflation rates down sustainably to central bank targets. Global consumer price inflation will probably ease to an average of 5% in 2023, finishing the year at a 3.5% year-on-year pace.

Easing of headline inflation Global monetary policy tightening and balanced macroeconomic policies would continue to support growth

According to World Bank, 2023 is expected to be a tough year for the central banks and policy makers as monetary policies are expected to play a key role in steering the economies through the current crises and supporting an inclusive and sustainable recovery. Many developed country central banks, including the Federal Reserve and the European Central Bank, were initially reluctant to raise policy rates, perceiving the rising inflation as transitory. But, as inflationary pressures were more persistent and risked de-anchoring inflation expectations, the central banks embarked on an aggressive monetary tightening path in 2022 and 2023, raising rates at a very fast clip. In 2023, the central banks

find themselves at a critical juncture as economic prospects have weakened, while inflation is not yet fully under control and fiscal challenges remain. Rapid and synchronized monetary tightening by the worlds major central banks has pulled out substantial liquidity out of markets too quickly.

However, over-tightening of monetary policy would drive the world economy into an unnecessarily harsh slowdown – an outcome that could be avoided if rate increases by individual central banks accurately considered the reciprocal impacts of similar rate hikes by others. This will require more effective coordination among major central banks, supported with clear policy messages to manage and moderate inflationary expectations.

EMDEs will remain resilient during 2023

Higher interest rates in advanced economies, in combination with the expiration of most COVID-19 support measures in 2022, is expected to have spillover effects for Emerging and developing economies (EMDEs).

The risks of higher default rates among domestic borrowers and sovereign debt restructuring have increased, but a wave of crises remains unlikely. Real GDP growth will be more vulnerable in EMDEs with slow policy responses, higher debt loads, and smaller external buffers.

The possibility of debt restructuring under the G-20 common framework, instead of disorderly defaults, is more likely for low-income, debt-distressed countries, especially in sub-Saharan Africa.

As a region, Asia Pacific has adopted more prudent policies in the post covid era and has more manageable debt levels and healthier external buffers. Some of the key Asia Pacific economies will also benefit from lingering pent-up demand with the withdrawal of COVID-19 lockdown measures, the resumption of pandemic-delayed infrastructure programs, relatively low inflation, and the modest recovery in mainland Chinas growth.

In contrast, emerging Europe will be severely affected by the slowdown in the Eurozone and the continued impact of Russias war in Ukraine.

Outlook

Still recovering from the unprecedented upheavals thrown by the global pandemic over the last three years, the global economy expects rocky recovery over the next couple years as events, such as the recent banking turmoil, have increased uncertainties. According to IMF, the global output growth is expected to fall from 3.4% in 2022 to 2.8% in 2023, before rising to 3% in 2024. Advanced economies are expected to see an especially pronounced growth slowdown from 2.7% in 2022 to 1.3% in 2023. However, the global headline inflation is set to fall from 8.7% in 2022 to 7% in 2023 on the back of lower commodity prices, but underlying core inflation is proving to be stickier.

Indian economy overview

Over the course of the last two years, up to FY23, the Indian economy has shown impressive fortitude in the face of a worsening external economic situation, growing at a rate that outstrips all the other emerging economies.

According to the second advance estimates released by the Ministry of Statistics and Programme Implementation, the Indian GDP is expected to have grown by 7% in FY23, supported by increased public investment in infrastructure and a pickup in private investment. Economic activity in India strengthened in the first half of FY23 despite challenging global growth conditions caused by slowing growth in major trade partners (such as the US, UK and China), the Russia-Ukraine war and persistent global supply disruptions (caused by the global shortage of shipping containers and supply bottlenecks). This resilience can be attributed to large domestic markets, coupled with consistent efforts on the part of the government to strengthen the supply side through reforms like PLI schemes, national logistic reforms, and fostering ease of doing business through digitization, among others.

Snapshot of the Indian economy Sector-wise growth

Strong economic growth in the first half of FY23 helped India overcome the UK to become the fifth-largest economy after it recovered from repeated waves of COVID-19 pandemic shock. Given the release of pent-up demand and the widespread vaccination coverage, the contact-intensive services sector emerged as one of the key drivers of growth in FY23. Rising employment and substantially increasing private consumption, supported by rising consumer sentiment, will support GDP growth in the coming months.

In FY23, the Indian government has introduced several measures to support economic growth, including increased spending on infrastructure, tax incentives for businesses, and reforms to attract foreign investment. These initiatives may contribute to boosting economic growth in the years ahead. However, structural issues such as high levels of non-performing loans in the banking sector, a complex tax system, and limited access to credit for small and medium-sized enterprises have emerged as the new set of challenges to sustained economic growth in India. India has emerged as the fastest-growing major economy in the world and is expected to be one of the top three economic powers in the world over the next 10-15 years, backed by its robust democracy and strong partnerships.

In the first nine months of FY23, the FDI inflow, which includes equity inflows, reinvested earnings and other capital, declined to USD 55.27 billion during this period as against USD 60.4 billion in the year-ago period. As per the data published by GOI, the total Foreign direct investment (FDI) into India declined by 15% to USD 36.75 billion for the first nine months of FY23. The FDI inflows stood at USD 43.17 billion during the corresponding period of the previous year.

Indian MSME sector

Today, the Indian MSME sector contributes ~33% to the Indian GDP and accounts for around 120 million jobs across industries and regions. The MSMEs sector is a major contributor to the socioeconomic development of the country and has emerged as a highly vibrant and dynamic sector of the Indian economy over the last five decades. In India, the sector has gained significant importance because of its contribution to the Gross Domestic Product (GDP) of the country and exports. The sector has also contributed immensely regarding entrepreneurship development, especially in semi-urban and rural areas of India.

The introduction of micro, small, and medium enterprise (MSME) financing in India has recently been a catalyst for the expansion of the MSME sector, supported by the growth of neobanks and digital payment channels. MSMEs have benefited greatly from digitalization, including a larger client base, less need for staff, production efficiency during an economic downturn, ease of facilitating transactions between buyers and sellers, and many other things since the government has been consciously advancing initiatives to support the growth of MSMEs in India. Indias MSMEs sector is rapidly moving from offine mode to online as far as conducting business is concerned. They are adopting technology to improve their operations and increase efficiency while providing timely services to their customers and clients. Stating that the MSME sector is a "growth engine", and amongst the biggest employers in India, the government in its recently concluded budget has announced to allocate a record _22,138 crore on the MSME sector.

Here are a few key budget allocations:

A The government plans to infuse _9,000 crore into the Credit Guarantee Fund Trust for Micro and Small Enterprises Credit Guarantee Scheme. Further, the government is expected to provide additional collateral-free credit of _2 lakh crore to MSMEs, while reducing the credit cost by 1%.

A The Government has also announced the expansion of the turnover limit for micro units for presumptive taxation from _2 crores in the last fiscal year to _3 crore. Additionally, the government stated that under presumptive taxation, individuals and businesses are no longer required to maintain account books or get their account audited.

A To help the micro, small and medium enterprises (MSME) sector become more resilient, competitive, and efficient, the government announced the Raising and Accelerating MSME Performance (RAMP) program will be rolled out with an initial outlay of _6,000 crores spread over five years.

A The government has earmarked _10,000 crore for the creation of the Urban Infrastructure Development Fund (UIDF), which is expected to empower small cities to set up the infrastructure necessary for maintaining adequate sanitation and hygiene. The government aims to make these cities more sustainable and cleaner through this move. A To enable traditional artisans to improve the scale, quality and reach of products and integrate them with the value chain of MSME, the government has announced an assistance packaged named ‘PM Vishwakarma Kaushal Samman. Stating that the products created by the art and handicraft industry represents the "true spirit of Atmanirbhar Bharat", the government, through this scheme is expected to provide financial support along with advanced skill training, efficient green technologies, and knowledge of modern digital techniques designed to benefit artisans from economically weaker sections.

A MSMEs are often burdened with compliance regulations that are too complicated relative to their scale. The government plans to simplify these regulations and make it easier and cost-e_cient for MSMEs to comply. As part of this change, the government in the recent budget introduced one specific recommendation wherein a single registration process for MSMEs across the country, which can be done online, similar to the Udyam Registration launched by the government of India in 2020.

A With an aim to have last mile connectivity, the government, in its recently concluded budget announced the initiation of about 100 transport infrastructure projects to boost Indias MSME sector. A The Budget 2023 provided relief to startups by giving the benefit of carry forward of losses on a change of shareholding of startups from seven years to ten years. The condition of continuity of a minimum of 51% shareholding to set off of carried-forward losses is relaxed for eligible startups if all company shareholders continue to hold those shares.

Export scenario

Indias overall exports (including merchandise and services) is expected to have increased by 13.84% to a record $770.18 billion in 2022-23, while overall imports are expected to have surged 17.38% to $892.18 billion over the previous year. A strong trade performance on the services front helped boost the overall export numbers in 2022-23, even as the impact of a global economic slowdown was visibly felt in the case of merchandise trade. Services exports are estimated to have grown by 26.79%, as compared to merchandise exports at just over 6% during the fiscal. During FY23, oil imports rose 29.5% to $209.57 billion, reflecting the impact of high crude oil prices in the aftermath of the Russia-Ukraine war. Among countries, while Chinas share in Indias import basket declined to 13.79% from 15.43% in the previous year, it continued to be at first place in the top 10 import sources, with imports at $98.51 billion in 2022-23.

Outlook

Despite the global slowdown, Indias economic growth rate is stronger than in many peer economies and reflects relatively robust domestic consumption and lesser dependence on global demand. The Government of Indias strong infrastructure push under the Prime Ministers Gati Shakti (National Master Plan for Multimodal Connectivity) initiative, logistics development, and industrial corridor development is expected to contribute significantly to raising industrial competitiveness and boosting future growth.

Improving labour market conditions and growing consumer confidence is expected to drive growth in private consumption. The central governments commitment to significantly increase capital expenditure in the years ahead is also expected to spur demand. Helped by recovery in tourism and other contact services, the services sector will grow strongly in the years ahead as the impact of COVID-19 wanes. However, manufacturing growth is expected to be tamped down by a weak global demand, but it will probably improve in FY24. Recent announcements to boost agricultural productivity, such as setting up digital services for crop planning and support for agriculture startups, will be important in sustaining agriculture growth in the medium term.

Indian steel industry

India has made significant progress in its steel industry since the establishment of TISCO in 1907. It has now become the worlds second-largest producer of crude steel, manufacturing approximately 120 million tonnes, which accounts for 5.9% of global production. Additionally, steel exports from India contribute 3.1% to the countrys total exports. With the deregulation of the industry and a thriving economy, the Indian steel sector has entered a new phase of development and growth backed by the rising demand for steel has surged across various sectors such as construction, automotive, railways, capital goods, real estate, and consumer durables. As a result, the Indian steel industry now contributes around 2% to the countrys GDP.

In terms of production, Indias crude steel production in 2022 stood at 124.45 million tonnes (MT) after rising by 5.80% compared to the total steel production of 117.63 million tonnes (MT) in 2021. The production of finished steel in 2022 stood at 110.03 MT, up from over 104.54 MT in 2021. In terms of consumption, finished steel consumption in 2022 stood at 106.48 MT, as against 98.39 MT in 2021, a year-on-year rise of 8%. In terms of per capita consumption, the per capita consumption of steel in India stood around 77.2 kg. Although the per capita steel consumption in India has grown by ~50% over the last 8 years, but still pretty low compared to the global average of 233 kg.

(Source: https://economictimes.indiatimes. com/industry/indl-goods/svs/steel/indias-crude-steel-output-grows-to-over-124-mt-in-2022-consumption-rises-to-106-mt-steelmint/articleshow/97621763.cms)

Over the last few years, the government has played a major role in boosting the demand for steel in India and has acted as a facilitator. In that direction, the government deregulated the sector and has also put in place the National Steel Policy (NSP), in 2017, which envisages per capita steel consumption to increase up to 160 kg by 2030-31. Governments push for infrastructure development through Gati-Shakti Master Plan, ‘Make-in-India initiative for manufacturing sector, Pradhan Mantri Awas Yojna (PMAY) etc. is likely to provide impetus to the demand and consumption of steel in the country.

Budget 2023-24 initiatives for the Indian steel sector

Although there was no specific announcement pertaining to the steel sector, but the government undertook different infrastructure boosting initiatives which is likely to boost the demand for steel in the days ahead.

Some of the key initiatives are as follows: Railways: The governments initiative to redevelop 50+ existing railway stations and the plan to provide a capital of _2.4 lakh crore to railways is likely to scale the need for steel.

Logistics: An investment of _75,000 crore is planned for 100+ critical transportation infrastructure projects that will connect ports, coal, steel, fertiliser, and food grain sectors across the first-and last-mile delivery network. This is expected to improve connectivity and transportation services across major points, in turn leading to a rise in demand for steel.

City development: Urban planning development projects will be undertaken to transform cities into sustainable cities. With the proposed _10,000 crore annual fund, the goal is to ramp up infrastructure development, especially in Tier II and Tier III cities. This is likely to witness a growth in steel demand, especially for TMT steel bars in construction, among others.

Recent developments in the Indian steel sector

The Ministry of Steel (MoS) has entered into agreements with 27 companies, signing 57 Memorandums of Understanding (MoUs) under the Production Linked Incentive (PLI) scheme. The government has allocated a budget of _6,322 crore for the growth of the specialty steel sector. This scheme aims to create 25 million metric tons (MT) of additional capacity for specialty steel production over the next five years. The collaboration between these companies and the government is expected to boost the production of value-added steel and contribute to Indias goal of becoming the third-largest global economy by 2030-31.

To address environmental concerns, initiatives like the Green Steel and Hydrogen Mission have been introduced to reduce carbon emissions from the steel industry. These efforts are expected to improve the industrys sustainability. Furthermore, increased emphasis on research and development, as well as the development of new and innovative value-added products, is anticipated to drive the industrys growth in the future.

The government has unveiled a capital expenditure plan worth _10 lakh crore with the objective of promoting domestically produced steel and achieving self-reliance in the sector. This plan aims to establish India as a prominent manufacturing hub and increase the steel industrys contribution to the countrys GDP from the current 2% to 5% over time.

Factors to drive growth for the Indian steel industry

With cities expanding, the technological advent of Industry 4.0, and the rise in construction and engineering projects, the meteoric rise of the steel industry is not unexpected. Today, there are different types of steel manufactured and used in India to cater to its rising demand. From the industry-wide use of steel coils to steel channels and steel alloys, there is a market ready for steel products everywhere.

Resource availability: Despite the increasing cost of iron ore in recent years, it remains abundantly available within the country. Furthermore, due to the capital and labour-intensive nature of steel production, labour is also economically accessible. As a result, these factors have contributed to maintaining a reasonable balance in the production costs of steel.

Industry-wide application: Steel and its products are utilized in a wide range of industries, such as shipbuilding, automotive, pharmaceutical, aviation, real estate, energy,homeappliances,electronics,andmore.Whetheritsemployingcorrugated sheets for roofing or using TMT bars in construction to enhance resilience against natural calamities, steel is prominently present as a fundamental material in all these sectors.

Longevity of steel metal: Steel as a metal has longevity. For instance, stainless steel used in making cutlery lasts longer than glass. Steel is also low on maintenance. TMT bars used in housing construction projects can stand for years, unlike wood or other raw material used. Moreover, based on its composition and type, steel is strong, ductile, can bear heavy load, is corrosion and heat resistant – in short, its more cost-effective and value-for-money than other raw materials. Recycling of steel is also possible, which makes it a preferred raw material in industries, adding to its growing demand.

Government initiatives: As stated previously, the government has introduced several initiatives to boost steel production in India and reach 300 MT in production by 2030. It has removed the 15% export taxes, and working towards removing technology, logistics and infrastructure bottlenecks.

Ease of purchase: Technology has made buying and selling of steel and steel products easier today. Buyers can buy steel online through reliable steel marketplaces and online websites, in a secure, transparent, and quick manner.

Indian steel pipes industry

The Indian steel pipe industry holds a significant position within the broader Indian steel industry, accounting for nearly 8% of Indias steel consumption. Steel pipes and tubes are manufactured in various sizes to cater to different applications and can be categorized into two main segments: Electric Resistant Welded (ERW) and Submerged Arc Welded and Seamless (SAW). In terms of volume, approximately 70% consist of ERW pipes, while the remaining 30% comprise stainless steel and SAW pipes. Currently the industry is valued at around _60,000 crores, with both segments contributing equally in terms of value. Although the industry faced disruptions due to the COVID-19 pandemic, it demonstrated a remarkable V-shaped recovery after the removal of restrictions and managed to surpass pre-pandemic levels. Given the increasing demand for steel pipes, the Indian steel pipes industry is expected to experience substantial growth in the year ahead. According to the industry experts, The Indian steel pipes industry is expected to grow at a CAGR of 7.5% during 2023-2027, driven by the increasing demand from the construction, oil and gas, agriculture, defence and automotive industries, among others.

The Indian infrastructure industry is one of the largest consumers of steel pipes in India, accounting for over 50% of the total demand. The growth of the construction industry is being driven by the governments infrastructure development initiatives, such as the Pradhan Mantri Gram Sadak Yojana (PMGSY) and the Smart Cities Mission.

The oil and gas industry is another major consumer of steel pipes in India. The demand from the oil and gas industry is expected to grow in the coming years, as India increases its exploration and production activities. he automotive industry is also expected to drive the growth of the Indian steel pipes industry. The demand for steel pipes from the automotive industry is increasing, as automakers are using steel pipes in a variety of applications, such as exhaust systems, fuel tanks, and chassis components. Further demand for steel pipes is being driven by the steady growth in some of the other key sectors such as agriculture, defence and renewable energy, among others.

In addition to the domestic demand, the Indian steel pipes industry is also expected to benefit from the growing exports of steel pipes to countries in the Middle East, Africa, and Southeast Asia, among others.

Industry-wise growth drivers of the Indian steel piping industry

Infrastructure and construction industry

The Indian infrastructure and construction industry is the largest consumer of steel pipes in India, accounting for over 50% of the total demand. The growth of the infrastructure and construction industry, in the recent years, is being driven by the governments various infrastructure development initiatives, such as the Pradhan Mantri Gram Sadak Yojana (PMGSY), Sagarmala, Bharatmala, and the Smart Cities Mission. The governments focus on building roads, bridges, dams, metro network and other infrastructure projects is expected to boost the demand for steel pipes in the coming years.

Since the construction industry is a major consumer of steel pipes, expansion across the industry will translate into the growth of the steel sector. According to the World Bank report, the India government is expected to invest more than $840 billion over the next 15 years, with an annual average of $55 billion, to meet the demands of its increasingly urban population. This is expected to drive demand for pipes in a variety of applications.

Agriculture industry

The Indian agriculture industry is a vital part of the countrys economy, supporting over half the population and using more than half of the fertile land. In 2020, the industrys market value was around _63,506 billion, and it is expected to reach _1,25,350 billion by 2026 with a growth rate of 12% per year. The increasing demand for food requires improved irrigation systems, leading to a greater need for steel pipes. Further, the government has implemented or plants to implement several projects to enhance irrigation systems, further driving the demand for pipes. Additionally, existing systems often need repairs or replacements, contributing to the sustained demand for steel pipes. As Indias agriculture sector is gradually diversifying beyond traditional crops to include high-value horticultural crops, floriculture, and greenhouse farming. These agricultural practices frequently employ controlled irrigation methods that require the use of pipes for water supply. As this diversification continues, it further drives the demand for pipes in the agricultural sector.

Oil & gas industry

The oil and gas industry is another major consumer of steel pipes in India. The demand from the oil and gas industry is expected to grow in the coming years, as India increases its exploration and production activities. The governments aim to achieve energy independence by increasing domestic oil and gas production is expected to drive the demand for steel pipes in the oil and gas industry.

The Indian government is encouraging exploration and production activities in the country in order to reduce its dependence on imported oil and gas. This is expected to lead to an increased demand for steel pipes, which are used in a variety of oil and gas applications, such as pipelines, storage tanks, and drilling rigs. Natural gas is a cleaner-burning fuel than coal and oil, and its demand is expected to grow in India in the coming years. This is expected to lead to an increased demand for steel pipes, which are used in the transportation and distribution of natural gas. Further impetus is expected to be provided by the governments "One Nation, One Gas Grid" initiative and is expected to create a demand for 4 million metric tonne of steel pipes.

Aviation industry

The Indian aviation industry has grown consistently over the last decade and is expected to see strong growth in passenger tra_c in the coming years. This growth is being driven by a number of factors, such as the growing middle class, increased tourism, and government policies supporting the industry. Under the different schemes introduced by the government, in the last couple of years, it plans to operationalize 100 airports by 2025 with an investment outlay of ~_1 trillion. This is expected to drive demand for still pipes as steel pipes are also used in the construction of airport infrastructure, such as runways, taxiways, and terminal buildings, among others. Besides these direct applications, steel pipes are also used in a number of indirect applications in the aviation industry, such as in the production of hydraulic fluid lines, fuel lines, and oxygen lines. As the Indian aviation industry grows, the demand for steel pipes for these indirect applications is also expected to grow.

Defence industry

The governments strong emphasis on the defence sector has resulted in consistent growth over the years. Recently, the government implemented a substantial modernization program for its armed forces, which is expected to boost the production of defence equipment. Consequently, there will be a substantial demand for steel pipes, which will be utilized in various applications such as constructing ships, submarines, aircraft, and armoured vehicles. Moreover, the Indian defence industry is actively investing in the development of advanced defence technologies like unmanned aerial vehicles (UAVs) and hypersonic missiles. These cutting-edge technologies will necessitate the utilization of specialized steel pipes, thus generating new demand for the Indian steel pipe industry.

Furthermore, the government has initiated plans to construct new military bases across the country. This undertaking will require a significant quantity of steel pipes for building construction, roads, and other infrastructure. Additionally, the Indian armed forces are in the process of upgrading their existing military equipment, which will involve the replacement of old and outdated pipes with new steel pipes.

Telecom industry

Steel pipes and tubes have a crucial significance within the Indian telecom industry as they serve as essential infrastructure for the effective installation, protection, and operation of telecommunication networks. Moreover, the governments recent announcement to introduce nationwide 5G networks by 2023 adds to the importance of these pipes. With the rapid expansion of 5G networks, a substantial quantity of steel pipes will be required for constructing cell towers and supporting infrastructure.

Furthermore, the increasing prevalence of the Internet of Things (IoT), the development of submarine cable networks, and the remarkable growth of data centers are anticipated to contribute significantly to the demand for steel pipes in the coming years.

Renewable energy industry

Steel pipes and tubes play a crucial role in Indias renewable energy industry. They are used in the construction, operation, and transmission of renewable energy projects like solar and wind power plants. These pipes are essential for transporting the power generated by these plants to the grid. India has ambitious targets for installing solar and wind power, which will create a significant demand for steel pipes. The governments target of installing 100 GW of solar power and 60 GW of wind power by 2022 has already helped create a significant demand for steel pipes. Steel pipes are also used in other applications within these projects, such as supporting structures for solar panels and wind turbines, as well as conduits for cables and wires. The offshore wind power industry is also expected to grow rapidly in India, leading to a higher demand for steel pipes. Additionally, steel pipes are used in various energy storage systems like pumped-storage hydroelectricity and compressed air energy storage. With the increasing use of such systems, the demand for steel pipes in India is expected to rise. Overall, the Indian renewable energy industry is set to drive the demand for steel pipes in multiple ways.

Railway and metro infrastructure of India

Indias railway and metro network has been on a rapid growth path, and this has created a steady demand for steel pipes. Steel pipes are used in a variety of applications in the railway and metro industry, such as track construction, signalling and communication systems, water supply and drainage systems, HVAC systems and fire protection systems, among others. Government plans to investment ~ _50 lakh crores by 2030 for redevelopment of ~400 railway stations, double the railway network, and build 4 new dedicated freight corridors. Further, the government plans to build 30 new metro networks by 2025. All these initiatives are expected to boost demand for steel pipes in the coming years. In addition to the governments investments, the growing urbanization in India is also expected to drive demand for steel pipes in the railway and metro sector. As more people move to cities, there will be a need for more railway and metro infrastructure. This will create new opportunities for the steel pipes industry.

Outlook

Indias steel pipe industry is expected to witness a growth trajectory as steel consumption and demand for steel tubes and pipes are expected to grow substantially in the years ahead as the government continues to build on the different infrastructure development initiatives, such as the construction of highways, railways, ports, and urban development projects. There is a diverse requirement for steel pipes and tubes across several industries including, but not limited to, oil and gas, petrochemicals, power and energy, construction, water supply, and sanitation, etc. Additionally, the governments thrust on initiatives like "Make in India", vocal for local, performance-linked incentives schemes, and "Smart Cities Mission" is expected to provide impetus to the domestic steel pipes industry. Indias focus on water management and irrigation projects, including river interlinking and canal systems, drives the domestic demand for steel pipes for efficient water transportation and distribution.

In terms of exports, the global players China plus one strategy is expected to make India a preferred location for global steel pipes manufacturing in the medium and long term. The industrys competitiveness, coupled with favorable government policies and cost advantages, contributes to its export potential.

Company Overview

Hi-Tech Pipes Limited (hereafter referred as the ‘Company) is a prominent player in the Indian piping industry and has established itself as one of the largest steel pipes manufacturers in India. The company has a significant manufacturing capacity, producing 5.8 lakh metric tons per annum.

Over the years, Hi-Tech Pipes Limited has built a strong reputation for reliability and trustworthiness within the domestic steel pipes industry. It has achieved a commanding market share by offering a diverse portfolio of products that cater to the varied needs of its customers. In addition to manufacturing pipes, the company has expanded its product range to include structural tubes, CR sheets, galvanized coils, solar torque tube, and metal crash barriers, among others.

The companys primary focus is on manufacturing high-quality and specialized products that meet the specific requirements of its customers. By prioritizing quality, Hi-Tech Pipes Limited aims to position itself as the leading player in the Indian market. To achieve this goal, the company has embraced advanced and state-of-the-art technologies across its manufacturing units. These technological advancements enable the company to enhance product quality, improve production efficiency, and maintain its competitive edge in the industry. By combining its manufacturing expertise, diversified product portfolio, and commitment to customer satisfaction, Hi-Tech Pipes Limited strives to emerge as the leader in the Indian piping industry.

Our operational excellence

At HTPL, our operations revolve around the production of a diverse range of steel pipes and tubes, serving the needs of various industries, including infrastructure, telecommunications, defense, railroads, airports, real estate, and automobiles, among others. This broad market coverage allows us to focus on creating products that receive positive feedback and remain competitively priced. To meet the growing demand, we have maximized the utilization of our manufacturing units. To drive operational excellence, we continuously undertake initiatives to enhance process efficiencies and engage in dedicated research and development efforts. Our commitment to improvement is ongoing. In addition, our manufacturing processes benefit from a robust inbound and outbound logistics and distribution network, ensuring a reliable supply to our customers. Furthermore, we place great emphasis on leveraging data and analytics to make informed decisions in real-time. This strategic focus allows us to enhance our overall performance and maintain a competitive edge in the industry.

Financial review

FY23 was marked by another year of commendable performance across different product categories, with market share gains and improvement in operating margins, as compared to FY22. For FY23, we witnessed a revenue growth of 27%, while net profit stood at _37.79 Cr. During the year, we continued to focus on our customers through focused production innovation and brand building initiatives. Further, new customer addition across different product segments was another focus area for the Company. delivered a remarkable overall performance. This progress was aided by growth across the Companys strategic business units (SBUs). Revenue from operations, including other income, stood at _2388.11 crores, higher by 27% compared to the previous year. EBITDA registered 2.69% gains over the previous year and stood at _103.22 crores. EBITDA margins came in at 4.33%.

The Company undertook several enhancements in the product mix, improved realisations, and cost-reduction efforts that helped deliver better margins. Profit before Tax (PBT) came in at _56.40 crores, up by 2% from last year. Profit after Tax (PAT) stood at _38 crores. Cost of sales increased by 28.35% to _2282.64 crore as compared with the previous financial year, in line with the increase in revenue.

healthy volume growth aided the financial performance. During the year, the Companys efforts to add innovative products to its portfolio complemented its growth trajectory. End-user demand remained strong, and HTPL capitalized on this opportunity by demonstrating agility throughout its operations. Total borrowings of HTPL as of March 31, 2023 stood at _235.10 crore vis-?-vis _364.49 crore as on March 31, 2022. The reduction in borrowings was largely because of the regular repayment of long-term secured loans. This strategy of the Company helped HTPL to reduce its interest cost by 3.2% during the year from _36.47 crore in FY22 to _35.30 crore in FY23. As on March 31, 2023, the Companys share capital stood at _12.7 crores compared to _12.27 crores as of March 31, 2022. This is because of preferential issue made by the Company and 64.53% increase in reserves and surplus during the year.

The Companys trade payable was of _174.16 crores as on March 31, 2023, as against _79.66 crores as at March 31, 2022. The Companys net fixed assets stood at _286.54 crores as at March 31, 2023, as against _238.95 crore as at March 31, 2022. The Companys trade receivable was of _185.52 crores as on March 31, 2023, as against _167.41 crores as at March 31, 2022.

Risk management

A thorough risk-management framework allows us to preemptively monitor risks emanating from the internal and external environment. As a result, we have been able to consistently create value for all our stakeholders, despite industry cycles and economic headwinds.

Our risk mitigation plan

The Board takes the following steps as a part of its risk management and mitigation plan: A Defines the roles and responsibilities of the Risk Management Committee A Participates in major decisions affecting the organisations risk profile A Integrates risk-management reporting with the Boards overall reporting framework The Company functions under a well-defined organization structure. Flow of information is well defined to avoid any conflict or communication gap between two or more departments. Second-level positions are created in each department to continue the work without any interruption in case of nonavailability of functional heads. Proper policies are followed in relation to maintenance of inventories of raw materials, consumables, key spares and tools to ensure their availability for planned production programmes. Effective steps are being taken to reduce the cost of production on a continuing basis, taking various changing

Internal control system and adequacy

The Company has in place strong internal control procedures commensurate with its size and operations. The Company believes that safeguarding of assets and business efficiency can be prolonged by exercising adequate internal controls and standardizing operational processes. The internal control and risk management system is structured and applied in accordance with the principles and criteria established in the corporate governance code of the organisation. It is an integral part of the general organizational structure of the Company and Group and involves a range of personnel who act in a coordinated manner while executing their respective responsibilities. The Board of Directors offers its guidance and strategic supervision to the Executive Directors and management, monitoring and support committees.

Our intellectual capital is the foremost asset of our business and the satisfaction of workers within the organisation is a major factor in its prosperity. At HTPL, we believe that the Company is governed by its people resources and our success is directly dependent on the success and growth of our people. Our commitment is to create an environment where personal growth is encouraged and supported in an inviting and secure atmosphere. In addition, the Company has often emphasized the importance of having a diverse team on board and cherishes each individuals input. Our aptitude for recognising, enrolling, and preserving skill has propelled our expansion significantly. Our human capital is our greatest tool for shaping the future of the Company and is also critical for our smooth functioning.

The groups strength resides in working and growing as a team. Training and skill development are critical for contributing to the overall growth of personnel and the organisation. The Company organises training and development sessions for its workforce, motivating and empowering them to unleash their full potential. Further, we focus on following a flat communication structure to make it a lucid one when it comes to the employees sharing their view with the management. Such initiatives aid in the recruitment and retention of top talent across the sector and hiss helped the Company enjoy the support of committed and well satisfied human capital. The Company has implemented important HR initiatives and people management practices effectively. As of 31st March 2023, the total workforce of HTPL is well over 659 employees.

Health and safety measures

Ensuring the safety of our personnel is of the highest importance. The factory heads take the lead on our safety focus, carrying out regular reviews across the factory regarding health, safety, and the environment (HSE).

Through their invaluable help, we have taken multiple steps to increase the health and safety of our personnel. In addition, we have organized small teams at every one of our manufacturing sites to rapidly detect and effectively manage safety matters. Our Company maintains an extensive range of health and safety protocols that must be strictly adhered to at all sites and by all personnel.

The focus on health and safety protocols was further stepped up during the year in response to the pandemic. Apart from following the government guidelines, we carried out regular sanitization and ensured adequate physical distancing. We also swiftly introduced measures to periodically test employees and regulated entry through the oximeter and thermal screening. We also launched wellness programmes for employees and their families to help build resilience, manage change, and enhance their wellbeing during this challenging period.

Cautionary statement

The statements made in the Management Discussion and 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.