Usha Martin Ltd Management Discussions

GLOBAL ECONOMY

During FY 2023 -24 the global economy witnessed a multifaceted landscape characterised by a blend of resilience, recovery, and persistent challenges. Challenging conditions like surging inflation, monetary tightening, concerns over slowdown of Chinas economic growth, heightened geopolitical tensions, disruption of supply chain, high energy prices resulted in slowdown of global economy. Technological innovation remained a driving force, propelled sectors such as digital services, renewable energy and e-commerce to new heights. However, inflationary pressures, exacerbated by supply chain bottlenecks and fiscal stimulus measures, posed significant concerns for central banks and policymakers worldwide. Efforts to address climate change gained momentum, with increased investments in sustainable infrastructure and green technologies. The global economy found itself at a critical juncture, navigating uncertainties while striving for inclusive growth and sustainability in the years ahead. On this backdrop, the global economy in 2024 is expected to be marked by uncertainty, geoeconomic shifts, and varying growth trajectories. As we navigate these complexities, resilience and adaptability will be crucial for nations and businesses alike.

INDUSTRY OVERVIEW AND BUSINESS OVERVIEW

India is anticipated to maintain the fastest growth rate among the worlds largest economies. The Indian economy in 2023-24 experienced a phase of recovery and transformation amidst ongoing challenges. In the face of unprecedented challenges such as the covid pandemic and geopolitical conflicts, the Indian economy has demonstrated a remarkable ability to bounce back and convert challenges into opportunities while striving to achieve strong, sustainable, balanced and inclusive growth. Efforts to rebound from the pandemic-induced slowdown gained traction, supported by robust domestic demand and government stimulus measures. However, structural reforms aimed at enhancing competitiveness and resilience remained critical to sustaining long-term growth. India continued its push towards digitalisation and innovation, fostering a conducive environment for startups and technology-driven industries. Despite progress, India faced persistent challenges such as inflationary pressures, unemployment, and fiscal deficits, necessitating careful policy calibration. Additionally, geopolitical tensions and global economic uncertainties posed external risks that required adept management. Overall, while the Indian economy showed signs of resilience and adaptation, navigating the complex dynamics of recovery and transformation demanded continued reforms and strategic interventions to unlock its full potential. The iron and steel industry underwent a period of adaptation and evolution in response to shifting market dynamics and global trends. The industry demonstrated resilience and rebounded with renewed vigor with robust infrastructure spending and construction activity, particularly in emerging markets which drove demand for steel products, supporting production and capacity utilisation. However, the industry faced challenges such as rising input costs, supply chain disruptions and anticipated slowdown in growth sectors. The initiatives by the Indian Government such as the National Steel Policy and the Production-Linked Incentive (PLI) scheme aimed at boosting domestic manufacturing contributed to a favorable operating environment. The industry witnessed increased demand from sectors like construction, infrastructure development, and automotive manufacturing, driven by economic recovery and ongoing urbanisation projects. Indian steel producers continued to invest in technology upgrades and capacity expansions to meet growing demand. Moreover, efforts to decarbonise and transition towards sustainable practices gained momentum, prompting investments in cleaner technologies and eco-friendly production processes The government-led initiatives with particular focus on Governments initiatives of rapid urbanisation and aggressive development plan of Tier-2 and Smart Cities, thrust on high-speed railway projects and metro projects, construction of ports and other key infrastructural spending have been instrumental in supporting the growth and resilience of the Indian steel industry, positioning it for long-term success and contributing to the countrys economic development. In view of the above backdrop and in anticipation of value-led volume growth in the upcoming fiscal year, the Company is strategically planning to expand its capacities specifically for high-end value-added products. This expansion will focus on enhancing production capabilities for premium offerings such as crane ropes, compacted ropes, plasticated ropes, mining ropes and oil and offshore ropes. Rapid urbanisation and aggressive development plan of Tier-2 and Smart Cities will remain the key growth driver in the elevator rope market segment in India, where the Company has integrated its supply chain to provide faster deliveries to its customers. Further the strength of in-house manufacturing and R&D capabilities, which, combined with our diverse product range and dedicated after-sales service, position the Company to effectively meet and adapt to global market challenges. As we venture forward, our resolve of "Reshaping our Industry with Responsibility" is a reflection of our commitment towards transforming into a sustainability leader. The Company is poised for sustainable growth with value accretive capital expenditure plans, enhancement of specialty offerings across industry segments, increase of geographical spread in strategic markets through overseas subsidiaries and focus on digitisation initiatives.

PERFORMANCE REVIEW

On a standalone basis, during FY 2023-24, the Company achieved gross production of Wire Ropes and Conveyor Cord of 74,020 MT against 67,557 MT in FY 2022-23. The gross production of Strand, Wire & LRPC was 82,412 MT in FY 2023-24 against 91,853 MT in FY 2022-23. Production of the total value added products which was lower by about 1.9% in FY 2023-24 compared to that in the previous financial year.

PRODUCTION VOLUME VA PRODUCTS?STANDALONE

Qty in MT	FY 2023-24	FY 2022-23
Wire Ropes	70,499	64,428
Wire / Strands / LRPC	82,412	91,853
Conveyor Cord	3,521	3,129

During the year, consolidated turnover of the Company stood at Rs. 3,225.20 Crore which is 1.30% lower than Rs. 3,267.76 Crore in the previous year. On standalone basis, the Companys turnover increased by 0.21% to Rs. 2,046.09 Crore in the current Financial Year from Rs. 2,041.71 Crore in the previous year. The EBIDTA achieved by the Company on consolidated basis was Rs. 638.84 Crore being 19.81% of the reported turnover, and on standalone basis at Rs. 460.38 Crore, being 22.50% of the reported turnover against Rs. 541.39 Crore and Rs. 328.70 Crore respectively in previous year.

INTERNATIONAL BUSINESS

Usha Martin International Limited [UMIL]: UMIL is a wholly owned subsidiary of the Company located in United Kingdom which enjoys presence in Europe through its following wholly owned step-down subsidiaries and a production facility situated at Nottinghamshire, United Kingdom: a) Usha Martin UK Limited i. European Management & Marine Corporation Limited ii. Brunton Shaw U K Limited b) De Ruiter Staalkabel B.V. Netherlands c) Usha Martin Italia S. R. L d) Usha Martin Europe B.V. e) Usha Martin Espa?a, S.L. During the year under review, Usha Martin Espa?a, S.L. has been incorporated in Spain as a wholly owned subsidiary of UMIL. Our global growth centre is located at Spain to strengthen presence in emerging markets, develop specialisation in metallurgical products like high-performance wire ropes, LRPC strands, wires, pre-stressing accessories, machinery, and cables.

The consolidated performance of UMIL during the year under review has been provided herein under:

GBP in Mn

UMIL	FY 2021-22	FY 2022-23	FY 2023-24
Turnover	48.3	71.9	77.0
PAT (including OCI)	1.5	6.3	4.9

Brunton Wire Ropes FZCo [BWRF]: BWRF, located in United Arab Emirates is a wholly owned subsidiary of the Company wherein the Company holds 75% of the paid-up capital of BWRF and balance 25% of paid-up capital is held by Usha Martin Americas Inc. (a wholly owned subsidiary of the Company). The production facility is located at Jebel Ali Free Zone in Dubai. During the year BWRF has incorporated a subsidiary named "Brunton Wire Ropes Industrial Company Limited" in Saudi Arabia to cater the to middle-east market specialising in wire ropes, slings and allied products. The consolidated performance of BWRF during the year under review has been provided herein under:

			USD in Mn
BWRF	FY 2021-22	FY 2022-23	FY 2023-24
Turnover	29.3	36.6	35.3
PAT (including OCI)	2.2	2.6	3.8

Usha Martin Singapore Pte Limited [UMSPL]: UMSPL located at Singapore is a wholly owned subsidiary of the Company which is in business of warehousing and distribution of wire ropes in Asia Pacific region by itself and through its following step-down wholly owned subsidiaries – a) Usha Martin Australia Pty Limited; b) Usha Martin Vietnam Company Ltd.; c) PT Usha Martin Indonesia; d) Usha Martin China Company Limited (Being an inoperative entity, de-registration process has been initiated in accordance with prevalent laws of China)

The consolidated performance of UMSPL during the year under review has been provided herein under:

USD in Mn

UMSPL	FY 2021-22	FY 2022-23	FY 2023-24
Turnover	35.4	38.6	34.6
PAT (including OCI)	3.2	1.2	1.6

Usha Siam Steel Industries Public Company Limited [USSIL]:

USSIL is a subsidiary of the Company situated in Thailand in which the Company along with Usha Martin Singapore Pte Ltd. holds 97.98% of the equity of USSIL. During the year under review, USSIL acquired 50% stake in Usha Siam Specialty Wire Company Limited [formerly known as Tesac Usha Wirerope Company Limited, joint venture company] (USSWCL). Consequent to such acquisition, as at 31^st March 2024, USSIL now holds 99.9996% in USSWCL. The production facilities of USSIL & USSWCL are situated at Bangkok, Thailand.

The consolidated performance of USSIL during the year under review has been provided herein under:

THB in Mn

USSIL	FY 2021-22	FY 2022-23	FY 2023-24
Turnover	1,631.9	1,821.2	1,523.7
PAT (including OCI)	34.7	99.9	34.8

Usha Martin Americas Inc [UMAI]: UMAI is a wholly owned subsidiary of the Company situated at Houston, United States of America. The consolidated performance of UMAI during the year under review has been provided herein under:

USD in Mn

UMAI	FY 2021-22	FY 2022-23	FY 2023-24
Turnover	14.8	26.2	21.2
PAT (including OCI)	1.7	3.2	2.1

DOMESTIC BUSINESS

U M Cables Limited [UMCL]: UMCL is a wholly owned Indian subsidiary of the Company, engaged in business of telecommunication cables. Its manufacturing facility is located at Silvassa, India. The performance of UMCL during the year under review has been provided herein under:

Rs. in Crore

UMCL	FY 2021-22	FY 2022-23	FY 2023-24
Turnover	103.9	111.7	135.3
PAT (including OCI)	7.9	0.6	7.4

KEY FINANCIAL RATIOS

The key financial ratios of the Company for the financial year under review as compared to the previous financial year are provided herein under:

Particulars	FY 2023-24	FY 2022-23	Change %
Debtors Turnover (days)	44	40	10.0
Inventory Turnover (days)	110	99	11.1
Interest Coverage Ratio1	63.1	20.2	212.4
Current Ratio	2.7	2.3	17.4
Debt Equity Ratio2	0.1	0.2	(50)
Operating Profit Margin-	20.9	14.8	41.2
EBIT (%)3
Net Profit Margin (%)4	15.7	10.5	49.5
Return on Net Worth (%)5	26.8	21.3	25.8

1 Interest coverage ratio has increased due to substantial reduction in finance cost and considerable increase in EBIT during FY 2023-24.

2 Debt-equity ratio has improved due to substantial reduction in borrowings during the financial year and increase in equity driven by higher profitability.

3 Operating Profit Margin -EBIT has increased due to improved product mix resulting in higher profitability.

OPPORTUNITIES, THREATS, RISKS & CONCERNS Opportunities:

• Indias ambitious infrastructure projects including ‘smart cities, highways, railways and ports will boost demand for the Companys specialty products.

• The growth in both the oil & gas and renewable energy sectors, particularly in offshore wind projects, presents compelling opportunities for our Company products. It is an opportunity to diversify our product portfolio and cater to the specific requirements of both traditional oil & gas projects and emerging renewable energy initiatives.

• Increase of activity and volume in shipping and container terminals is expected to boost demand of products of the Company.

• The mining sector in Latin America presents a promising opportunity for export growth.

• The ‘Make in India campaign encourages domestic manufacturing across various sectors, including machinery, appliances, and consumer goods, thereby stimulating demand for our products.

Threats, Risks & Concerns

• Slowdown of major economies might impact growth plans of the Company.

• Growth in number of small rope manufacturers, especially in the low end of the value chain, may impact sales of general application rope segment.

• Tightening of interest rate regimes by central banks of major economies may continue to be a deterrent factor.

• Inability to pass-off the effect of adverse movement of prices of key input materials and rising freight costs for commodity products.

• Increase in local competition in certain product segments due to mandatory implementation of BIS specifications.

• Geopolitical tensions may disrupt supply-chain and adversely affect Companys operations.

OUTLOOK

As we step into the next fiscal, global economic activity shows signs of recovery due to easing out of inflation and tight monetary policies although pace of recovery may remain slow. After a sharp slowdown in 2022 and another decline last year, global output growth is set to hold up in 2024.

Downside risks to the outlook include an escalation of the recent conflict in the Middle East and associated commodity market disruptions financial stress amid elevated debt and high borrowing costs, persistent inflation, weaker-than-expected activity in China, trade fragmentation, and climate-related disasters. As we step into 2024, the outlook for business in India is both promising and dynamic. With a robust economy poised for growth, fueled by technological advancements and government initiatives, the business landscape is ripe with opportunities. Further the expectation of acceleration of government, private and PPP spending on infrastructure development projects like highways, modern railways, airports, ports, building construction, transportation, material handling and "housing for all" & "smart city" projects may be growth drivers for both the economy and connected industries. The acceleration of digitalisation continues to revolutionise industries, fostering innovation and efficiency across sectors. Furthermore, Indias commitment to sustainability and renewable energy presents avenues for environmentally conscious ventures to thrive. However, challenges such as regulatory complexities and global economic uncertainties remain pertinent. With renewed focus on specialty wire-rope business and strategic initiatives to consolidate leadership, the Company is undergoing a strategic transformation. The Company is poised for sustainable growth with value accretive capital expenditure plans, enhancement of specialty offerings across industry segments, increase of geographical spread in strategic markets through overseas subsidiaries and focus on digitisation initiatives. The Company is confident in confronting the challenges of an ever-changing macroeconomic environment.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has adequate internal control procedures which is commensurate with its size and nature of business in order to fairly ensure efficient usage and protection of the Companys resources, accuracy in financial reporting and due compliance of statutes and procedures. Further, authorisation and approval levels for various functions exist and are mapped within SAP environment to ensure controls at source. The Company had engaged a firm of international repute to act as internal auditors of the Company. The Audit Committee of the board periodically reviews Internal Audit reports, progress in implementation of Committees recommendations and the adequacy of internal control systems.

MATERIAL DEVELOPMENTS IN HUMAN RESOURCES AND INDUSTRIAL RELATIONS

The policies and practices of the Company are designed to empower the Companys workforce, fostering accountability, autonomy, and a conducive workspace built on equity and equality. The Company actively promotes and enable employees engagement both individually and collaboratively, cultivating confidence, self-determination, and unwavering dedication to their roles. As we undergo a transformational journey, we encourage employees to be a part of that learning and experiential journey by allowing innovation and bringing positive changes. At Usha Martin, we recognise the importance of continuous training and development for our employees. Our commitment lies in enhancing their abilities, and knowledge, and ensuring alignment with the required competencies. To achieve this, the Company provides a comprehensive range of training programmes that combine on-the-job learning and platform-based training. Our training need identification (TNI) process includes training needs from different mechanisms like performance review, employee training self-nomination and individual development plan. The Company also organised trainings around Usha Martin competencies, Prevention of Sexual Harassment (POSH), Business Ethics and various other technical trainings. Our curated self-paced e-learning modules around our product categories help employees to understand the art and science of wire rope manufacturing and execute their work in a systematic method. The Company setup the Usha Martin Learning Academy at Ranchi in the State of Jharkhand which paves the way towards enhancing skill and knowledge of our employees around our cutting-edge technology from a more practical and focused approach. We motivate our people to develop and grow through structured performance feedback and comprehensive Learning and Development (L&D). Employee engagement was scaled up during the reporting year through leader led townhalls for real time issue redressal, launch of interactive Learning Management System, feedback surveys, core value surveys. Aspiring to be recognised as one of the preferred employers of choice, we focus on attracting, developing and retaining employees from a diverse pool of resources and nurturing their skills to create a prosperous career. We are dedicated to cultivating a harmonious workplace where every individual is taken care of. Throughout the year we organise several employee engagement initiatives to keep the employees motivated to excel and achieve individual and organisational goals. In pursuit of increasing women representation in our workforce, we have adopted a target of ensuring that 25% of our new hires in the officer grade and 10% of new hires in the worker grade annually will comprise female employees. The Company has in place direct interaction channels between HR and employees to understand their aspirations, grievances and suggestions for improvement. The Industrial Relations during the year continued to be cordial and the Company has an executed long-term settlement with recognised unions covering wages and service conditions. The focus on development, upliftment and capacity building of stakeholders in surrounding villages where the production facilities are located continues with fervour. The number of employees is provided elsewhere and forms part of this Annual Report.

APPRECIATION

The Company has been getting necessary support and cooperation from all stakeholders including customers, suppliers, value chain partners, investors, authorities, lenders and employees of the Company to whom the Company expresses its sense of appreciation.

CAUTIONARY STATEMENT

Statements in the management discussion and analysis report describing the Companys objectives, projections, estimates may be "forward looking statements" within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to Companys operations include, among others, economic conditions affecting demand / supply and price conditions in the domestic and overseas market in which the Company operates, changes in the government regulations, tax law and other statutes and incidental factors.