Venus Pipes & Tubes Ltd Management Discussions

Economic Overview

Global Economy

The global economy continues to display signs of a steady recovery despite the challenges of Russia-Ukraine conflict and tightening monetary policy stance adopted across various nations. As economies gradually reopen, the disruptions in supply chains are diminishing, leading to stabilisation in energy and food markets, which were previously affected by the conflict. Moreover, many central banks are implementing coordinated efforts to tighten monetary policy, which is expected to yield positive results as inflation approaches target levels.

According to the International Monetary Fund (IMF), there is a slight downturn projected for global growth, with a decrease from 3.4% in 2022 to 2.8% in 2023.

World Economic Outlook Growth Projections (in %)

The global economic growth for advanced economies is expected to decline from 2.7% in 2022 to 1.3% in 2023. This deceleration can be attributed to various factors, including policy measures aimed at curbing inflation, the lingering impact of recent financial conditions, the ongoing conflict between Russia and Ukraine, and escalating geopolitical tensions. On the other hand, emerging markets and developing economies are projected to have stronger economic prospects compared to advanced economies, with growth expected to reach 3.9% in 2023 and further increase to 4.2% in 2024.

Global inflation is also predicted to decrease from 8.7% in 2022 to 7.0% in 2023 and further decline to 4.9% in 2024. This decline can be attributed to factors such as interest rate hikes, lower energy and food prices, and the easing of supply chain pressures. However, it is worth noting that core inflation, which excludes volatile items, has shown more resilience to these factors. Strong labour markets in several advanced economies indicate higher aggregate demand than initially anticipated, potentially necessitating further tightening of monetary policy or maintaining a tighter policy stance for a longer period.

The recent banking instability is a reminder that the world economic outlook is fragile, with downside risks still dominating and uncertainty increasing. The potential consequences of a sudden and substantial tightening of global financial conditions should not be underestimated. Such a scenario could have profound effects on credit conditions and public finances, particularly in emerging markets and developing economies. It could trigger significant capital outflows, a sudden increase in risk premiums, a flight to safety leading to the appreciation of the US dollar, and substantial declines in global economic activity. Consequently, this could result in reduced confidence, decreased household spending, and lower levels of investment.

Outlook

Despite the progress made, the global economy is bracing itself for another wave of obstacles and a decline in activity. This is due to the sluggish pace of structural reforms, increasing trade tensions, dwindling direct investment, and slower adoption of innovation and technology in fragmented regions. However, the outlook for 2024 is more optimistic, with a projected growth rate of 3.0%.

It is widely predicted that the downturn will be moderate, giving everyone an opportunity to effectively tackle global issues. The export demand for Indian-manufactured stainless steel pipes and tubes is also witnessing a positive trend. Indian manufacturers have been able to establish a strong reputation for producing high-quality stainless steel pipes and tubes that meet international standards.

The versatility of these products allows for their application in a wide range of sectors, contributing to their growing popularity in the global market.

(Source: https://www.imf.org/en/Publications/WEO/ Issues/2023/04/11/world-economic-outlook-april-2023)

Indian Economy

The Indian economy has demonstrated remarkable ^ resilience, outperformed many other nations, positioning itself on a growth trajectory of 72% for 2022-23. This can be attributed to an optimistic business environment, robust industrial output, increased consumer spending, rapid vaccination coverage, increasing GST collections and the vision of Aatmanirbhar Bharat. Retail inflation, as measured by the Consumer Price Index (CPI), reached 6.8% in 2022-23. This was mainly due to a steep decline in food inflation. The Consumer Food Price Index (CFPI) reached 3.84% in April 2023 as compared to 8.31% in April 2022. Despite facing global macroeconomic challenges and tightening monetary policies to tackle inflation, the growth momentum was consistent, revealing robustness in Indias economy revival.

Over the past decade, India has made remarkable progress in its economic growth and has risen from being the tenth-largest economy in the world to becoming a prominent player as the fifth- largest. This growth has been accompanied by a strong emphasis on the development of physical infrastructure in the country. The Indian Government has implemented various programmes and initiatives to enhance physical infrastructure across different sectors. For instance, the National Infrastructure Pipeline (NIP) launched in 2021 has witnessed substantial expansion, with over 9,000 projects spanning 35 sub-sectors. The NIP plays a crucial role in driving infrastructure growth and creating opportunities for economic development in various regions of the country. The Indian Government has also launched the Production Linked Incentive (PLI) Scheme with 1.97 tn to be spent in the next five years in 13 Sectors. The Governments Make-in-India initiative and the National Manufacturing Policy has played a significant role in encouraging investment, promoting innovation, and strengthening the countrys manufacturing capabilities.

Initiatives such as Amritkaal and Saptarishis aim to address economic disparities among the population of India, empower individuals in rural areas, enhance technological capabilities within the country, and reduce dependence on Government assistance.

The Governments focus on inclusive development, expanding its reach and improving infrastructure and investments, tapping into untapped potential, promoting sustainable and environmentally friendly growth, harnessing the potential of the youth, and strengthening the financial sector will act as drivers in propelling India towards a promising and prosperous future.

Outlook

The Economic Survey released by the Central Government, projects a baseline GDP growth of 6.5% in real terms for India in 2023-24. Indias growth prospects have an upside due to several factors. Firstly, the World Health Organisation has ended the global health emergency of the COVID-19 pandemic. Secondly, the re-opening of Chinas economy has not led to significant or prolonged inflationary pressures. Thirdly, the recessionary trends in major Advanced Economies (AEs) may lead to the cessation of monetary tightening and the return of capital flows to India. Finally, a stable domestic inflation rate below 6%, coupled with improved investor sentiment could further stimulate private sector investments.

(Source: https://www.indiabudget.gov.in/economicsurvey/doc/echapter.pdf)

Industry Overview

Global Stainless Steel Industry

The stainless-steel (SS) industry is among the major contributing industries in economic growth in many economies, making a substantial contribution to global GDP. The global stainless-steel market reached at a near to the value of US$ 143.5 bn in 2022. The global stainless-steel markets is anticipated to grow from US$ 144 bn in 2022 to US$ 156 bn in 2023, registering a compound annual growth rate (CAGR) of 8.8%. Further, it is estimated to grow to US$ 210 bn in 2027 with an uptick of 79% CAGR. These estimates are majorly driven by continued growth in emerging economies particularly in China and India, increased focus on sustainability, development of new alloys with improved properties and expansion of production capacity in key markets, such as China and India.

(Source: https://issuu.com/saitbrc/docs/stainless_steel_ pdf)

These estimates are primarily influenced by the rapid expansion of public and private investments in infrastructure, residential housing, and technological advancements in the steel industry. Moreover, the market is being driven by significant trends such as increased mobility, urbanisation, population, and economic development, as well as the growing impact of climate change, reduction of greenhouse gas and water consumption. The COVID-19 pandemic has been unprecedented and staggering with the stainless-steel industry however, these growth factors will improve the condition of the industry, making it more resilient and sustainable.

(Source: https://www.fortunebusinessinsights.com/ stainless-steel-market-106481)

Steady Growth in the Global Stainless Steel Production

Global stainless-steel production (in tandem with demand) has registered a steady growth at a CAGR of 5.3%, from 38.5 MT (mn tonnes) in 2013 to approximately 58.3 MT (mn tonnes) in 2021. Stainless steel has been the fastest growing metal with ~5.4% CAGR over 1980-2021, as compared to aluminium (3.7%), copper (2.5%) or carbon steel (2.4%). The global stainless-steel tubes and pipes industry is expected to register a CAGR of 4% from US$ 32 bn in 2019 to ~US$ 41 bn by 2025.

Global Stainless-Steel Production (in mn tonnes)

Growth in Different Metals between 1980-2021

The outlook for the stainless- steel industry is positive and it is anticipated to grow in the coming years, fuelled by the growing demand for stainless- steel market from different industries and increasing market competition with several major players operating in the market.

As per a report by Nuvama, the global stainless-steel pipes and tubes industry was anticipated to be nearly accounting for 20-25% of the global pipes & tubes industry. In coming years, the SS pipe and tubes are estimated to grow at a stable rate of 4.7% through 2028 with the total market size estimated to top US$ 45 bn. At global space 10% of the steel produced is estimated to be converted to tubes.

Global Stainless-Steel Pipes and Tubes Market

Global Stainless-Steel Pipes and Tubes Market Share

The growth of the market is mainly fuelled by the increasing demand from the construction, automotive, and oil & gas industries. Stainless steel pipes and tubes are used in different industries such as chemical, engineering, oil & gas, sewage treatment, and transportation of fluids. The global consumption of stainless steel pipes and tubes is dominated by the oil & gas sector, chemical, with the automotive and other industries.

Technological advancements are one of the key trends in the steel pipes and tubes market. Major players operating in the space are focussed on developing innovative products to strengthen their position in the market.

Global Welded Pipes Market

The global welded pipes (includes carbon, alloy steel and stainless steel) market is valued at US$ 241.22 bn in 2022 and it is anticipated to register a CAGR of 5.8% from 2023 to 2029, reaching nearly US$ 357.94 bn. The market is fuelled by the structural and functional requirements of industries such as infrastructure spending on projects like airports, metros, and greenhouse structures, as well as improved infrastructure. Moreover, the extensive agricultural applications would boost the adoption of the market and aid in growth of the economies globally.

(Source: https://www.maximizemarketresearch.com/ market-report/welded-pipes-market/148354/)

Global Seamless Pipes Market

The global seamless pipes (includes carbon, alloy steel and stainless steel) market is valued at US$ 185.1 bn in 2023 and it is anticipated to grow to US$ 331.4 bn by 2033 with an uptick of 6% during the forecast period. The utilisation of these pipes are constantly increasing owing to the robust demand from several industries including steam boilers, heat exchangers, chemicals, oil & gas and pharmaceuticals because of resistance and corrosion and metallurgical toughness.

(Source: https://www.factmr.com/report/seamless-pipes- and-tubes-market)

Global Market Size of Seamless Pipes (in US$ bn)

Market Size in US$ Billion

Indian Stainless Steel Industry

Stainless steel is a highly versatile metal, and it has multiple applications in a wide range of industries, including consumer appliances, medical devices, transportation, and infrastructure. India has been producing and using stainless steel products for decades, but in recent years, the industry has experienced significant growth and expansion. As of March 2022, India had an installed capacity of approximately 6.8 mn tonnes(MT) for stainless steel.

(Source: https://www.jindalstainless.com/wp-content/ uploads/2023/03/Present-perfectfuture-continuous.pdf)

Stainless steel has emerged as the metal of choice owing to its superior qualities such as robust strength to weight ratio, aesthetic hygiene, resistance at high temperature and complete recyclability. These properties make it suitable for various industries such as architecture, building and construction (ABC), automobiles, railways, transport (ART), consumer durables, and process industries.

(Source: https://www.stainlessindia.org/UploadPdf/ c39d81d1-1786-4ecc-ab87-9ee389645810.pdf)

The demand in Indian stainless-steel industry was witnessed at ~4 mn tonnes in 2022-23, and it is anticipated to register a healthy compound annual growth of ~9% by 2025 which is near to the double of ~4.5% in the past five years. The growth is majorly fuelled by the increasing adoption of stainless steel in railways and infrastructure development and these are the prime focus of the Government of India. Furthermore, demand from other major sectors such as consumer goods (45% of demand) and process industry (25%), is also anticipated to grow at a healthy clip of 7%-9% over the next three to five financial years, owing to the higher consumer spends and recovery in consumption. The large Indian players mainly serve these segments, and thus their demand pockets remain healthy Moreover, the domestic manufacturers are also undertaking action for capex addition of ~1 mn tonnes of steel melting capacity by 2024-25.

(Source: https://www.crisilratings.com/en/home/ newsroom/press-releases/2023/03/stainless-steel- demand-seen-surging-through-fiscal-2025.html).

Indian Stainless Steel Pipes and Tubes Industry

The Indian stainless steel tubes and pipes industry plays a significant role in the countrys economy and is projected to register a 4.5% CAGR from 2022 to 2027 This growth is fuelled by rising demand from the construction, automotive, chemical, engineering and oil & gas sectors.

The construction sector is the primary consumer of stainless steel tubes and pipes in India, benefitting from the Governments infrastructure development focus. The automotive sector is also a major consumer due to increased automobile production. Additionally, the oil & gas sector drives demand through expanding exploration and production activities. Overall, the Indian stainless steel tubes and pipes industry shows great potential and is expected to experience robust growth in the future. Indias per capita stainless-steel consumption has steadily increased from 1.2 kg in 2010 to 2.5 kg in 2019 but is well below the world average of 5.5 kg-6 kg per capita.

(Source Antique report page 3)

Indias Production and Consumption of Steel Tubes & Pipes

Annual production of steel tubes & pipes in India reached 6.22 mn tonnes in 2022-23, while apparent consumption was 5.55 mn tonnes. However, both production and consumption levels have remained below the pre-pandemic levels of 2019-20.

Excluding 2020-21, the production and consumption of steel pipes and tubes in India have consistently shown a CAGR of 5.8% and 7.4%, respectively.

(Source: Nuvama, October 2022 report)

Export and Import of Stainless Steel Pipes and Tubes

India has been a net importer of stainless steel pipes and tubes during 2016-2021 where import value observed uneven growth in response to domestic demand scenario. The cost advantage enjoyed by Chinese manufacturers, which operate at a lower cost than Indian manufacturers, has helped in this high percentage of Chinese imports in the Indian stainless-steel pipes and tubes imports.

Indias Trade in Stainless Steel Pipes and Tubes by Value

Indias Trade in Stainless Steel Pipes and Tubes by Volume

Anti-Dumping Duty on Stainless Steel Tube Imports from China

The Directorate General of Trade Remedies (DGTR) has recommended anti-dumping duties on stainless steel seamless pipes and tubes imported from China for a period of five years. These duties range from US$ 114 per tonne to US$ 3801 per tonne depending upon the Chinese exporter of products.

Demand for domestic manufactured stainless steel seamless pipes and tubes will increase after implementing this duty. Close to 40% of Indias domestic demand is currently served by imports from China and a substantially high margin in various products. These duties will be implemented on products produced by both hot piercing and hot extrusion methods and most of them are imported by traders and stockists in India and used across end-user industries. Venus Pipes & Tubes Limiteds 40% products face competition from imports and therefore, it has large scope of replacing imports post-imposition of duties.

(Source: Monarch Networth Capital, October 2022 report)

Sectoral Growth Drivers

Rising significant demand for pipes & tubes from the different industry such as, oil & gas, chemical, pharma, engineering ,creates the opportunity for the industry way forward.

Oil & Gas Sector

India is projected to be a refining hub in future. The Government plans to expand oil refining capacity from 249 MMTPA (mn metric tonnes per annum) to ~304 MMTPA by 2025 and thereafter to ~450 MMTPA by 2030. The sector is expected to receive ~US$ 2856 bn in investment over 2023-25E. Typically, 10% is attributed for stainless steel pipes and tubes, which translates to ~ 285 bn opportunity from this sector.

Refining Capacity Expansion

(in mmtpa)

Oil & Gas Sector - Capex Trend of Major Companies

Schemes by Government

i Hydrocarbons Exploration Licensing Policy (HELP)

Chemical Sector

The chemical industry was valued at US$ 178 bn in 2018-19, and is expected to register a CAGR of 9% and reach US$ 300 bn by 2025. The sector is expected to receive ~US$ 215 bn in investment from major companies over 2023-25. Typically, 10% of capex is estimated in form of stainless steel pipes and tubes.

Chemical Sector-Capex Trend of Major Companies

Schemes by Government

• Chemicals Promotion and Development Scheme (CPDS)

• Petroleum, Chemicals, and Petrochemical Investment Regions (PCPIR)

Engineering Sector

Venus Pipes & Tubes Limited caters to both domestic and international market and it is focussed on producing specialised stainless steel pipes and tubes for customers. Venus supplies to the customers from engineering sector as per new project requirements. After the COVID-19 pandemic, the sector has geared up in parallel to rebound in the economy and is anticipated to perform well in future.

Pharmaceutical Sector

The COVID-19 pandemic had significant impact on domestic pharmaceutical industry. Understanding the importance of having strong manufacturing capabilities, investments in the sector increased sharply during 2021-22. The sector is expected to receive ~US$ 215 bn in investment over 202225. Typically, 10% of capex is estimated in form of stainless steel pipes and tubes.

Pharmaceutical Sector - Capex Trend of Major Companies

(Source: Centrum Broking)

Schemes by Government

• Scheme for development of pharmaceutical industry

• Schemes to improve bulk drug production in India

Policies Driving Growth

Major Policies in Pipes & Steel Pipes& Tubes Sector

• Strengthening the raw material supply chain

• Stainless steel pipes notified under Steel Quality Control Order

• Anti-dumping duty

• Domestically manufactured iron and steel products policy (DMISP)

• Duty reduction structure

Demand Generation from Government Initiatives

• Production Linked Incentive (PLI) Scheme:

The Government has announced 1.97 tn to be spent in the next five years for PLI schemes in 13 Sectors

• Aatmanirbhar Bharat Packages

• National Manufacturing Policy

• National Infrastructure Pipeline

Company Overview

Established in 2015, Venus Pipes & Tubes Limited (Venus or the Company), operates as a manufacturer and exporter of stainless steel (SS) welded and seamless pipes. The Companys headquarters are located in Gandhidham, Gujarat.

It possesses a stainless-steel pipe manufacturing plant with an annual production capacity of approximately 12,000 metric tonnes located in Daheti, Gujarat, specifically in the Kutch region. The plants strategic location places it in close proximity, approximately 50-70 kms, to the Mundra and Kandla Ports, providing logistical advantages.

The Company operates in two product verticals, namely seamless stainless-steel tubes and pipes, as well as welded stainless-steel tubes and pipes. These products find applications across various sectors, including chemicals, engineering, fertilisers, pharmaceuticals, power generation, food processing, paper, and oil & gas etc. The Company distributes its products through direct supply, traders, stockists, authorised distributors, and selected marketing representatives. By leveraging these channels, the Company ensures a widespread availability of its stainless-steel tubes and pipes to meet the diverse needs of its customers in different industries.

Operational Review i

On 27 May, 2020, the Indian Government mandated the use of input materials with the BIS standard mark for the production of stainless-steel pipelines, making imports more expensive and limiting availability. Moreover, on 01 May, 2021, the Chinese government revoked 13% export rebates on seamless pipes and tubing. In addition, most recently, the Government imposed anti-dumping duties on import of Seamless Stainless Steel Pipes & Tubes from China for five years up to US$ 3,801 /mn tonnes. All these regulations are likely to result in import substitutions in India and provide opportunity for Venus to strengthen its roots.

With the Companys new expansion plan, the capacity for seamless pipes will become ~2.7x and welded pipes will reach ~2.9x. With this capacity expansion and backward integration of seamless pipes, the Company will have opportunities to expand into new segments and new geographies, boosting its exports.

Particulars	Current		Post Expansion
	Size (mm)	Capacity	Size (mm)	Capacity
Seamless	6 - 114.3	3,600 MTPA	6-168.3	9,600 MTPA
Welded	6 - 219.3	8,400 MTPA	6-1,422.4	24,000 MTPA
Mother Hollow	NA	0	NA	9,600 MTPA

Financial Performance

Profit and Loss Statement

(in Rs cr.)

Particulars	2022-23	2021-22
Revenue from Operations	552.4	386.9
Cost of Goods Sold	444.6	315.0
Gross Profit	107.8	71.9
Gross Profit Margins (%)	19.5%	18.6%
Employee Cost	10.2	6.2
Other Expenses	28.5	16.4
EBITDA	69.1	49.3
EBITDA (%)	12.5%	12.7%
Depreciation	1.97	1.4
Other Income	2.4	2.1
EBIT	69.5	49.9
Finance Cost	9.8	7.1
Share in Profit/(Loss) in JV and Associates	0.0	0.0
Profit Before Tax	59.7	42.9
Tax	15.5	11.2
Profit After Tax	44.2	31.7
PAT Margins (%)	8.0%	8.2%

Ratio Analysis

Particulars	2022 - 23	2021 - 22	% Change	Reason for Change
Current Ratio	2.0	2.1	(5%)	There is no material change
Return on Equity*	21%	25%	(16%)	The Company raised capital by the way of Initial Public offering of 165.4 cr. in the current fiscal year which resulted in minor dip for return ratios. The capital employed will reap benefits in the coming years, resulting in improvement in the ratios.
Return on Capital Employed*	31%	35%	(11%)
Debt/ Equity Ratio	0.3	0.5	(40%)	The Company saw a dip in D/E ratio as a result of increasing equity share capital
Interest Coverage Ratio	9.68	13.09	(26%)	Interest coverage ratio saw a dip due to marginal rise in debt mainly due to an increase in operations.

“Excluding 107.9 cr. raised via IPO for capacity expansion

*Excluding CWIP of 121.6 cr. from total capital employed

Geographical Revenue

Segment	2022-23
Direct Domestic	356.9
Export	29.8
Stockist/Traders	165.7

Digitalisation

The Company recognises the significance of digital strategy in effectively engaging customers. To achieve this, the Company prioritises the enhancement of its information technology (IT) infrastructure and automation capabilities throughout its value chain. By doing so, it aims to establish a comprehensive digital ecosystem that caters to the needs of all its stakeholders. This digital transformation enables the Company to streamline processes, improve operational efficiency, and deliver enhanced experiences to its customers. Through the adoption of advanced digital technologies, the Company aims to stay ahead in the digital landscape and provide innovative solutions that meet the evolving demands of its stakeholders.

Human Resource

The Company places significant importance on enhancing the skills and capabilities of its human resources to drive improved performance and ensure high-quality outcomes. It recognises that its employees are the most valuable assets of the organisation. As a result, the Company consistently invests in their development through contemporary training programmes seminars, and various performance appraisal initiatives. By prioritising the growth and skill enhancement of its workforce, the Company aims to foster a culture of continuous improvement and maximise the potential of its human capital.

Corporate Social Responsibility (CSR)

Venus acknowledges that business enterprises are integral components of society, utilising its resources to operate. It firmly believes that as a business entity, it possesses the transformative potential to establish groundbreaking models of development by leveraging its entrepreneurial drive, innovation, and creativity. Aligned with this perspective, the Company remains committed to actively generating livelihood opportunities and fostering environmental well-being. By harnessing its capabilities, it aims to make a positive impact and contribute to the betterment of society as a whole. The Company focusses on various objectives such as enhancing environmental and natural capital, supporting rural development, promoting education, providing preventive healthcare, sanitation, and drinking water, creating livelihood opportunities for disadvantaged individuals in rural and urban areas of India, as well as preserving and promoting sports. It also lays emphasis on fostering the development of necessary skills and self-reliance among beneficiaries at the grassroots level, particularly women, for social and economic progress. Venus makes sure to engage in skillbuilding and vocational training initiatives to enhance employability and generate livelihood opportunities for individuals from marginalised sections of society.

Risk Management

The Company acknowledges the inherent presence of risk within its operations and is dedicated to managing it actively and effectively. This involves a systematic process that entails evaluating the risks associated with the Companys business, identifying their underlying causes, and assessing the effectiveness of measures taken to mitigate them. Risk management is deeply ingrained in the Companys business model, with a primary focus on fortifying the business model itself and fostering sustainable and profitable business growth.

Risk	Impact	Mitigation Strategy
Macroeconomic and Sectoral Risk	The Company faces potential challenges arising from developments in the highly competitive global business landscape, as well as the possibility of consolidation among its competitors. This may negatively affect the Companys financial condition and prospects. Furthermore, the steel and raw material markets exhibit excessive volatility, which can also have an adverse impact on the Companys financial condition.	Venus has devoted significant efforts to cultivate a diverse range of products within its portfolio. In order to mitigate the potential impact of price volatility and ensure availability, the Company adopts a strategy of issuing back-to-back bookings. This helps to manage fluctuations in prices and address any concerns related to product availability.
Foreign Exchange Risk	The Company faces consequences from fluctuations in exchange rates resulting from volatility in financial markets. Such fluctuations can impact the Companys import/export payments and introduce uncertainty in accessing financial markets.	The Company engages in foreign currency transactions on regular basis. The import of raw materials and other goods, as well as the export of finished goods and other products, all involves foreign currency transactions. As a result, any changes in foreign exchange rates may have an immediate impact on the Companys operations. To limit the impact of currency volatility, the Company has implemented a hedging policy that is resilient and fulfils evolving regulatory criteria. This is in addition to the natural hedge afforded to the Company by the nature of the business.

 

Risk	Impact	Mitigation Strategy
Human Resources Risk	The potential loss of one or more members of senior management and challenges in attracting and retaining employees can significantly impact the Companys operations and future prospects. Furthermore, any labour disputes or social unrest in the regions where the Company operates can have adverse effects on its operations and financial condition.	The Company has implemented employee-friendly programmes and policies designed to attract and retain talent. These initiatives are aimed at creating a positive work environment and fostering employee satisfaction. Additionally, the Company frequently organises various programmes and events to engage employees, which contributes to the retention of its valuable human resources.
Regulatory Risk	The Companys operations are subject to a range of statutes, including those related to environmental protection, climate change, trade measures, competition, and taxes, among others. In an environment of increasingly stringent regulatory norms, failing to comply with these requirements can pose a threat to the Companys long-term viability.	The Company maintains strict compliance with all relevant statutes and regulations governing its operations. In addition to internal resources, the Company also engages in the services of legal and regulatory consultants to ensure comprehensive compliance. These measures help the Company uphold its commitment to adhering to legal and regulatory requirements in all aspects of its business.
Strategic Risk	The Company may not be able to realise the benefits of its growth plans, which could harm its business financial condition and reputation.	The Companys SS pipes and tubes products find application in diverse manufacturing processes across various industries and sectors, leading to a significant diversification of concentration risk. Through enhancements in execution and production ramp-up going forward, the Company may successfully optimise the utilisation of new capital expenditures during 2023-24.
Operational Risk	Fluctuations in proportion of fixed costs and the volatility of raw material and energy prices can significantly impact the Companys profitability. Furthermore, any constraints or disruptions in the supply of raw materials could have a negative effect on the Companys ability to maintain its profitability. Moreover, the failure or shutdown of critical information systems, servers, or machinery that control the Companys manufacturing plants can have adverse consequences on its business operations.	The Company is undertaking backward integration to eliminate operational risk. This involves establishing a piercing line with a capacity of 9.6 KTPA (kilo tonnes per annum) to manufacture hollow pipes directly from stainless steel round bars. By implementing this backward integration process, the Company aims to insulate itself from raw material price fluctuations and disruptions in the supply chain.
Technology Risk	The dynamic nature of technology, marked by ongoing updates and advancements, poses the risk of product obsolescence if not addressed proactively.	The Company is committed to fostering innovation and staying at the forefront of technological advancements and product development. It prioritises continuous improvement and invests in state-of-the-art research and development (R&D) facilities. It maintains a proactive approach to regularly update its business practices in order to achieve the best quality standards at competitive costs.

Internal Control System and their Adequacy

The Company had a proper adequate internal control system and code of conduct to ensure that all the assets are safeguarded and protected against the loss from unauthorised use or disposition and that transactions are authorised, recorded and reported correctly. The internal control is supplemented by an extensive internal audit, periodical review by the management and documented policies, guidelines, and procedures. Internal control is designed to ensure that the financial and other records are reliable for preparing financial statements and other data and for maintaining accountability of assets.

Cautionary Statement

Certain statements in the MDA section concerning future prospects may be forward-looking statements which involve a number of underlying identified/non identified risks and uncertainties that could cause actual results to differ materially.

In addition to the foregoing changes in the macroenvironment, global pandemic like Covid-19 may pose an unforeseen, unprecedented, unascertainable, and constantly evolving risk(s), inter-alia, to the Company and the environment in which it operates. The results of these assumptions made, relying on available internal and external information, are the basis for determining certain facts and figures stated in the report. Since the factors underlying these assumptions are subject to change over time, the estimates on which they are based are also subject to change accordingly. These forward-looking statements represent only the Companys current intentions, beliefs or expectations, and any forward-looking statement speaks only as of the date on which it was made. The Company assumes no obligation to revise or update any forwardlooking statements, whether as a result of new information, future events, or otherwise.