Welcast Steels Ltd Management Discussions

A. INDUSTRY OVERVIEW:

Welcast Steels Limited ("WSL"), manufactures a wide range of consumable wear parts (mill internals) High Chrome Grinding Media of various sizes which are used in the process of Crushing and Grinding in Cement, Mining and Thermal Power industries. The Company employs casting process for the manufacture of these products.

The Cement Industry has practically use the High Chrome consumable wear parts, whereas in the mining industry migration from the use of conventional method using forged grinding balls to the use of High Chrome Grinding Media is still in progress. Hence there is a considerable growth opportunity in the mining sector. Estimated annual consumption of Grinding Media for the mining segment is 2.50 million tons with around 20% of the same migrating from the conventional usage of forged castings to High Chrome. Thus a sizeable growth opportunity of is available. Hence considerable demand for our product is expected from mining Industry in Copper, Gold and Iron ore mines. So far as the Cement industry is concerned there has been a strong growth trend in the cement demand already at the pre Covid-19 level. We believe that going forward cement industry should continue to grow at a near double digit growth rate in India matching with this our supplies to the cement industry will also therefore grow in tandem. With the considerable headroom available for migrating from the usage of conventional method of grinding (using forged castings) to High Chrome by mining industries, our company should not have any material adverse impact on our stability at least at present level. However, while we remain cautiously optimistic we are carefully and diligently monitoring the situation.

During the second half of the financial year 2022-23 prices of the basic raw materials are stabilized and the differential prices are passed on to the customers.

B. SEGMENT WISE PERFORMANCE:

The Company primarily operates in only one segment i.e. manufacturing of High Chrome Grinding Media Balls.

C. OUTLOOK AND PROSPECTS:

WSLs prospects are linked to activity in basic industries of Mining, Cement and Thermal Power generation. These industries are just recovered from the COVID interruption resulting in rapid recovery in consumption and in turn manufacturing and services activity saw a sharp increase which allowed WSL to ensure continued operations. Hence in terms of sales quantities the total sales volume in F.Y. 2022-23 at around 9073 MT looks more or less the same as the sales volume achieved in F.Y. 2022-23. Going forward, WSL continues to maintain its stability reduction in operating costs in terms of wear costs, power costs and reagent consumption. This value addition is offered by continuous and direct engagement with operations personnel at plants.

D. CAPEX PLAN:

There are no immediate capex plan except for maintain / modernization of the pollution control machineries of the plant to meet the statutory requirements.

E. RISKS AND CONCERNS:

The Company is exposed to normal operating business risks, similar to most manufacturing companies like fluctuations in raw material prices, labour unrest, reduced demand etc. which are mitigated by regular monitoring and corrective actions.

Key risks that the Company faces are around stability in the mining market, foreign exchange rate fluctuation, fluctuation in raw material prices, debtor defaults.

F. INTERNAL CONTROL SYSTEMS AND ADEQUACY:

The Companys Internal Control Systems are commensurate with the size and nature of its operations, aimed at achieving efficiency in operations, optimum utilisation of resources, reliable financial reporting and compliances with all applicable laws and regulations. The system also provide reasonable assurance that all assets are safeguarded, transactions are authorized, recorded & reported properly to ascertain operating