Steel Authority of India Ltd

Letter to Shareholders.

Dear Shareholders,

The year 2022 marks the completion of 75 glorious years of independence for our country. It is an extraordinary milestone in the journey of modern india which assumes further significance in the light of india's preparedness to gravitate forward into india 2.0. the 'Azadi Ka Amrit Mahotsav' celebrations commemorating the milestone of India@75 have set the tone for everyone to mobilize and focus on Atmanirbhar Bharat. A self-reliant India will not only provide greater opportunities of progress to the citizens but it will also offer a platform for sustainable development and inclusive growth for the society at large.

At this point, it is my honor to once again apprise you of the achievements of your Company for the Financial Year 2021-22. The year gone by has been a year of extreme volatilities. Countries around the world including India had to weather fresh waves of new variants of COVID19. As the markets started to claw back their ways, the economy was faced with fresh challenges towards the end of the fiscal in the form, geo-political conflict between Russia and Ukraine. While having catastrophic effect on global economy, these events impacted the domestic steel industry in terms of raw material security, demand and supply imbalance, logistics & supply-chain disruptions, inflationary pressures, etc.

While all these developments were taking place, India was going ahead steadily with its massive vaccination drive against COVID19.

As we breach the incredible 200 crore mark within a short span of one and half years, the efforts put in by the frontline corona warriors need special applause.

Also, the Government must be commended for envisioning, planning and executing this when it all seemed a distant dream to others.

However, despite all the hurdles and challenges, your company delivered a resilient performance by capitalizing on the opportunities as and when the same arose. Your company performed in sync with the overall performance of the domestic steel industry by leveraging the general buoyancy in the economy to the fullest.

on the production front, your company posted its best ever production performance by producing 18.733 million tonne(MT), 17.366 MT and 16.897 MT of Hot Metal, Crude Steel and Saleable Steel respectively during FY'22 registering a growth of 7%, 7% and 12% respectively over previous best. In addition to this, your Company also achieved its yearly best performance in respect of Techno-economic parameters like Coke Rate, CDI Rate and Specific Energy Consumption owing to better capacity utilisation of bigger Blast Furnaces (BFs), optimisation of BF operations and enhanced usage of CDI.

To meet the ever-evolving requirement of the market, your Company has been continuously taking several initiatives for the development of newer products.

During FY'22, 11 new Steel Products were developed which are expected to strengthen the Country in strategic areas such as railway, infrastructure & construction, defense, etc. Some of these products have been developed from the newly commissioned production facilities, the most prominent among them being R-260 grade and 60E1 profile Rails, DMR 301 Plates, LHB Axles, Cable Armour Quality (CAQ) Wire Rods, High Carbon Wire Rod in HC82B, High Silicon Cold Rolled Coils for electrical applications, Wide Parallel Flange Beam WPB200 for Railway Sleepers, TMT Fe550D HCR and Fe600 for infra and construction sectors, high strength coated galvanized products for agriculture & solar industry, etc. Further, a large number of new initiatives were undertaken across all the Plants for process improvements, with special emphasis on productivity & quality improvement, product development & commercialization, energy conservation and automation.

The efforts made by your Company bore the fruits in the form of the highest ever sales of 16.152 MT during FY'22 which is a growth of 8% over the previous best.

Your Company has commanded a leadership role for decades in the domestic sector. With the addition of new capacities, SAIL continues its efforts to not only expand its sales volumes in the domestic sector but also increase its presence in the global markets. New markets are regularly explored to provide new channels for exports. Export sales of 1.353 MT during FY'22, marked the third consecutive year when your company crossed the 1 MT mark in exports.

During FY'22, about 5.89 lakh tonnes of TMT bars were supplied in Retail. To meet the expectations and demands of the retail sector, SAIL is expanding its 2-Tier and 1-Tier distribution network across india which will further strengthen our position in the B2c space. With a view to facilitate procurement of TMT bars to retail customers, Sail has introduced an e-sales platform by the name of "SAiL SuRAKSHA". The popularity of your Company's branded products like "SAIL SeQR" for TMT bars and "NEX" for structural have been continuously growing in the market. To popularize these brands, your Company has been organizing physical as well as virtual meetings with user groups like architects, builders, civil engineers, structural designers, end consumers, etc.

Your Company is actively involved in promotion of the steel usage in the Country. While undertaking sales through its Distributor/Dealer Network, various outdoor/indoor media campaigns are being regularly done for brand promotion as well as to promote steel usage. Apart from servicing the regular customers, your Company is also making efforts to tap the potential of rural India for which regular workshops are conducted under its rural outreach program "Gaon Ki Ore". Despite the challenges from COVID, during FY'22, 130 such workshops were conducted across the Country. In the MSME segment, SAIL, under the aegis of "Mission Poorvodaya" programme of the Government of India, has introduced an incentivisation scheme "Ispati Ilakon ka Vikas - SAIL ke Saath" for the development of MSMEs based in the districts in which its Integrated Steel Plants are located. Around 142 MSMEs have joined under the Scheme till FY'22.

SAIL has been the preferred choice of steel for the nation since its inception. SAIL steel has strengthened the Infrastructure Projects including projects of Strategic Importance to India.

Carrying on the legacy, SAIL has supplied a significant quantity of steel to projects like Power, Road, Rail, Airport & Port Infrastructure, Metro Rail, Irrigation & Drinking Water, Fertiliser Industry, Oil & Gas Sector, etc., the major projects being Regional Rapid Transport System, Delhi Meerut Expressway, Eastern Dedicated Freight Corridor Corporation, Western Dedicated Freight Corridor Corporation, HPCL Rajasthan Refinery Limited Barmer, Bullet Train Project from Ahmedabad to Mumbai for National High-Speed Railway Corporation Limited, India's longest river road bridge of 19 km at Dhubri to Foolbari over river Brahmaputra, etc.

On the raw materials front, your Company delivered its best ever performance by mining iron ore of about 34.15 MT during FY'22.

The requirement of other inputs like coal and fluxes was met partially through production from captive sources at 0.88 MT and 1.89 MT respectively. However, as the Country has very low production of Coking Coal as compared to the demand, it is being imported by the domestic steel producers including your Company in order to bridge the gap between the requirement and indigenous availability and to improve the quality.

The year gone by saw your Company enter for the first time into the elite club of Indian Companies having a turnover above ' 1 lakh crore.

The turnover of ' 1.03 lakh crore during FY'22 saw an astronomical growth of more than 50% over the previous best of ' 68452 crore achieved during FY'21. The increase in turnover coupled with improved operational performance helped the Company achieve its highest ever numbers in terms of profitability. Earnings Before Interest, Taxes, Depreciation & Amortization (EBITDA) at ' 22364 crore, Profit Before Tax (PBT) at ' 16039 crore and Profit After Tax (PAT) at ' 12015 crore grew by 63%, 40% and 59% respectively over the previous best.

The improvement in profitability provided added momentum to the thrust already being put on improving the leverage position. During FY'22, your Company reduced its debts by 22000 crore from ' 35350 crore (non-Ind AS) as on 31^st March 2021 to ' 13386 crore (non-Ind AS) as on 31^st March 2022.

The Company decided to share the benefits of outstanding financial performance with its investors and paid Interim Dividend twice during the year at 40% and 25% of the face value.

Further, the Board of Directors of your Company has recommended another 22.50% towards the Final Dividend for the year. The cumulative dividend at 87.50% is the highest ever for any financial year. With improvement in profitability and liquidity, the Company seized the opportunity to meet some of the long pending aspirations of other key stakeholders viz., the employees. The Company settled the wage revision as well as long pending pension liability for the employees.

Your Company has been undertaking several projects of strategic importance for its growth and sustenance.

During the FY'22 three major facilities were commissioned in SAIL Plants which includes a 3.2 MTPA Hot Strip Mill at Rourkela which will ensure competitive product quality & enriched product range. Secondly, a new Slab Caster with associated facilities in SMS-I at Bokaro which phased out obsolete Ingot casting route with continuous casting of steel and thirdly, installation of "1X250 MW Thermal plant" at Rourkela was commissioned by NSPCL, a 50:50 JV of SAIL and NTPC. Apart from this, your Company has also been taking steps for installation of the 4^th Caster at SMS-III of Bhilai.

Your Company's Corporate Social Responsibility (CSR) objectives have been defined in compliance with the concerned statutes which includes the Companies Act, 2013 and rules framed thereunder as well as the DPE Guidelines. Your Company focuses its CSR activities in various areas of national priority viz., education, Health, Skills development, Women empowerment, Assistance to Divyangs and Sr. citizens, etc. during FY'22, SalL has incurred an expenditure of more than '94 crore on cSR.

Your Company continued to play a proactive part in the collective fight against COVID19.

Sail activated a scaled response towards management of coVID19 at its plants, units, Mines and Townships to ensure the health and safety of its employees and all other persons working at the sites. Arrangements have been made for touch-free hand sanitizers, spraying disinfectants, using digital thermal recorders, etc. SAIL plants and units, distributed food, medicines, face masks, aprons, gloves, etc. to the vulnerable and needy sections of society.

SAIL hospitals manned by highly qualified doctors and other para-medical staff worked round the clock. SAIL hospitals earmarked ~1000 dedicated coVID19 beds with oxygen support and 129 icu beds with ventilator support given the surge in cases, created 600 beds Quarantine Facilities and developed coVID19 testing facilities like Rat, RTpcR, TRu- NAT in coordination with the respective State governments. further, SAIL plants have setup separate Jumbo coVID19 care facilities equipped with gaseous oxygen through dedicated pipelines from the plants.

During Q1, when healthcare Infrastructure was faced with a severe shortage of Liquid Medical oxygen(LMo), your company rose to the occasion and supplied over 1.3 lakh Metric Tonnes of LMo to different States of the country through Railway oxygen express from the facilities in SAIL plants. In line with the country's vaccination drive, your company also undertook the initiatives of vaccination of its employees, their families and other people working at plants/units as well as in the vicinity.

SAIL's efforts as a responsible corporate citizen and partner in Nation Building have been recognized in several forums in the form of awards and accolades won by your company. To name a few, during the year your company has the prestigious golden peacock environment Management Award for the year 2021 in the Steel Sector by the Institute of Directors while the employees of SAIL also won accolades like prime Minister's Shram Awards (31 employees won 6 awards for the year 2018) and Vishwakarma Rashtriya puraskar (52 employees won 11 awards for the year 2018).

As a responsible corporate citizen, your Company has drawn its environmental vision in consonance with the Corporate Environmental Policy, which not only addresses the need for compliance with stipulated norms but also emphasises striving to go beyond.

While the SAIL plants and Mines operate their processes without disturbing the ecological balance, they have also been taking all appropriate measures to restore and rehabilitate the degraded ecosystem and maintain and enhance biodiversity. These include ecological restoration of mined-out areas, fresh plantation, bio-sequestration of cO₂, enhancing utilization of wastes, utilization of renewable energy sources, etc. Structured plantation programmes are being carried out every year in the SAIL plants and Mines. More than 3.6 lakh saplings were planted during the FY'22, taking the cumulative plantation by SAIL to 21.5 million.

SAIL plants and Mines are efficiently operating the pollution control devices/facilities and maintaining them regularly through revamping/ refurbishing/ revitalization and also upgrading them. As a result of these efforts, all the sustainability parameters like Solid Waste utilisation, Specific Water consumption, Specific pm emission Load, Specific effluent Discharge, Specific effluent Load, etc. have showed improvement with respect to previous year.

With an ambition for promotion of circular economy & improvement of environmental footprint, SAIL has signed an Mou with IcAR-IARI for participating as an industrial partner & part finance Ministry of Steel facilitated project of "Development of steel slag based cost-effective eco-friendly fertilizers for sustainable agriculture and inclusive growth".

In line with the Government of India's enhanced ambitions at cop26, your company has re-affirmed its commitment to substantially reduce cO₂ emission and increase the share of renewable/ non-conventional energy by 2030 as well as to achieve net zero emission by 2070. Further, actions are taken to achieve the long-term goal of "Zero Liquid Discharge" across all SAIL plants through adequate treatment and recycling of effluent being discharged through the outfalls at the plant boundary.

As a part of the All India co-ordinated Research project for "combating Desertification by enhancing vegetation cover and people livelihood in degraded dry lands and deserts of India", SAIL engaged "Institute of Forest productivity, Ranchi" for eco-restoration of mined out area and waste dumps separately for Kiriburu Iron Ore Mines and Meghahatuburu Iron Ore Mines. Further, to add to the natural wealth of the country, SAIL developed "Bio Diversity park-Vasundhara" and "Ispat Nandan Vihar" spreading over a landscape of 409 acres at DSp and an area of 1.5 acres at RSp respectively.

A responsible corporate always maintains and conducts business in a transparent manner. The company has adopted the Vigil Mechanism for conducting affairs in a fair and transparent manner by adopting the highest standards of professionalism, honesty, integrity and ethical behaviour. All employees of the company and Directors on the Board of the company are covered under this Mechanism.

Your Company is committed to the highest standards of Corporate Governance in line with its vision and credos.

In this connection, your company follows the philosophy of ensuring transparency, disclosures and reporting that not only conform to laws, regulations and guidelines including the Companies Act, 2013, SEBI (LODR) Regulations, 2015, DPE guidelines, etc. but also go beyond. Your company promotes ethical conduct throughout the organization with the primary objective of enhancing shareholders' value. The same reflects in the policies of the company which ensure transparency, accountability, disclosures and reporting.

In line with the National Steel policy 2017, your company has formulated its VISIoN 2030 whereby it is envisaged to enhance the crude steel capacity significantly. As our leverage position has improved, your company has started working on the land bank study for the next phase of expansion.

Your Company is also proactively working for adopting digital transformation which is a prerequisite in today's world of the dynamic business environment.

Sail has embarked on the digital transformation journey by adopting industry 4.0, which is transforming companies through data-led intelligent operations. Your company has also formulated It roadmap outlining the It vision for the organisation.

As mentioned earlier, the economic scenario post-coVID19 pandemic has been quite volatile. The advent of coVID19 saw the projections being revised downwards quite sharply by agencies across the globe. contrary to the same, the economies showed a much faster recovery. However, the fresh waves of coVID have been hindering economic progress intermittently. As normalcy was slowly setting in, factors like inflationary pressures, the russia-ukraine war, slowdown in countries like china, and tightening monetary policies have again made the projections go haywire. IMF in its World Economic outlook published in July 2022 has projected the World growth outlook for the cY 2022 and 2023 at 3.2% and 2.9% respectively, which is a sharp decline from 6% achieved in cY2021 majorly on account of lower growth in the advanced economies. The Advanced economies are projected to grow at 2.5% and 1.4% during cY 2022 and 2023 respectively, again a far cry from 5.2% achieved during cY2021. The emerging market and developing economies will also be bearing the brunt but are expected to outperform their advanced counterparts by growing at 3.6% and 3.9% during cY2022 and 2023 respectively. India is expected to grow at 7.4% and 6.1% during cY2022 and 2023 respectively which is again a reduction from 8.7% achieved for cY2021 but enough to retain the tag of being amongst the faster growing major economies.

As far as the steel demand is concerned, the general problems affecting the world economy have had a major negative impact on the global steel demand as financial market volatility and heightened uncertainty is undermining investment. The russia-ukraine war in particular has caused great distress for the steel industry as it has led to major disruptions in the supply chain, both upstream and downstream. The first half of cY 2022 has seen a decline of about 5.5% in the crude steel production over the previous year with all major Steel producing countries barring India registering a negative growth. India on the other hand has recorded a growth of 8.8% in the crude steel production. The Short range outlook published by the World Steel Association in April'22 has projected growth at 2.2% during cY2023. however, the outlook for 2023 is based on the assumption that the russia-ukraine war will come to an end during the course of 2022.

The Indian steel industry has performed quite well post coVID19 mainly from the demand created by investments in infrastructure projects as part of the economy revival measures by the Govt. The infra sector spendings are expected to drive the growth in coming year. The auto segment which has been relatively disappointing, due to the global semi-conductor shortages has now started showing signs of revival. Accordingly, as per WSA, the Indian Steel Industry is projected to fare better than its counterparts with growth rate of 6% in cY2023.

Your company believes that building trust will enhance its reputation and boost the confidence of its investors & stakeholders. In line with this, SAIL has been proactively and regularly sharing key information with all stakeholders through the use of different communication channels. I take this opportunity to inform you that pursuant to the circulars from the Ministry of corporate Affairs, the 50th Annual general Meeting (AGM) of the company is being held through Video conferencing (Vc)/other Audio Visual Means (oAVM) providing our far spread shareholders an opportunity to attend the AGM, which otherwise was difficult as per the earlier practice requiring physical presence.

In the end, I take this opportunity to thank all the shareholders for their continued trust and support. I must also thank our valued customers, trusted suppliers, the central and State governments and our talented employees, who have always stood by the company and contributed to the progress of SAIL. I specially convey my thanks to the Ministry of Steel, whose continuous guidance and support especially during challenging times made it possible for the company to deliver this commendable performance. I also thank all other stakeholders who have contributed internally and externally to the improved performance of the company. I look forward to the continued support and unflinching trust they have placed in us.