Dear Stakeholders,
The Indian economy was on a weak footing even before the COVID-19 pandemic hit the
world in February March 2020. The GDP was falling, the largest manufacturing sector - auto
was under a serious slow down and real estate and construction was also not growing. All
this resulted into lower consumption of steel in the country thereby pushing the country's
overall steel production down. The country produced 109.6 MT of crude steel in FY 2019-20
as against 110.92 MT of crude steel in 2018-19, almost a no growth scenario.
In spite of the various challenges in economy, the government continues to remain
focused on the development of the infrastructure sector. Union Budget 2019 once again
highlighted the investment which the government will make over the next 5 years towards
development of the infrastructure in the country and the amount is now a whopping 102 lakh
crores. If this were to happen, India would be on its way to replicating the kind of
infrastructure development China saw in the last 20 years more ports, roads, airports,
bridges, railways infrastructure and rural infrastructure. This focus of the government on
the infrastructure sector will drive the demand for steel over the next 10 years. This
opens up a completely new and large market for the engineering division of the company.
It is well known that the critical infrastructure projects typically use higher
specifications steel with stricter chemistry norms, e.g. a typical infrastructure project
will use Fe500D, Fe550D as against Fe500. The steel produced through induction route using
sponge iron as the raw material typically has high phosphorus and sulphur primarily on
account of high phosphorous in the incoming iron ore and high sulphur in the incoming
coal. The LRF- ELdFOSR technology developed by the company for refining of the steel
(specially to bring the sulphur and phosphorus down) has the potential to play a huge role
here. Almost 60% of the steel produced in the country through induction route is produced
using sponge iron. The availability of the refining technology opens up a huge opportunity
for the induction based steel producers as they will now be able to supply low sulphur low
phos grades steel to the fast growing infrastructure sector using this LRF ELdFOSR
technology. Additionally, 30 to 40 million tons per annum of infrastructure grade steel
(specially long products) will be required in the country over the next 10-15 years. Most
of the engineering division furnace customers are recognizing this opportunity and opting
for installation of LRF as the process route.
The high - end DiFOC technology based DTi model of Induction furnace technology
equipment launched by the company 3 years back has met with huge success and the new
product has been very much appreciated by the various induction furnace customers and the
steel industry in general. Not only have we seen new steel making capacity getting added
using these furnaces but we also saw a replacement of old furnaces with this new
technology based induction furnaces over the last 3 years.
The direct rolling process introduced by Electrotherm many years ago has now become the
industry norm now. Most induction based steel plants are now rolling billets directly from
the caster thereby eliminating the need for billet reheating furnace and hence save
reheating fuel worth 1.2 GJ/ton. In addition, it also protects environment from 0.8GJ/ ton
energy that would have while reheating. This has not only made been emitted while cooling
of the billets, and pollution from CO 2 emission making more cost effective thru the
induction furnace route but has actually also contributed significantly to the government
exchequer through saving of furnace oil imports and saving precious foreign exchange. We
are seeing an increased concern for the environment protection by steel makers and more
and more of our customers are asking for higher end high efficiency pollution control
equipments both within and outside the country. This should drive the sales of our
pollution control equipment over the next 3-5 years.
We remain optimistic on the steel demand and believe that the demand specially for long
products will increase substantially post some solution to the COVID-19 pandemic. As India
consumes more and more steel over the next 5-10 years and moves towards its goal of 300 MT
by 2030 (as per NSP 2017), we believe that more and more long steel will be produced
through the induction route. Considering the current balance between three ways of
steelmaking in India (BF-BoF, Arc, Induction), IF LRF route to meet all BIS quality norms
for construction and infrastructure grade steel, lower CAPEX and OPEX of the induction
route vis a vis that through BF-BOF and EAF routes, difficulties in getting/importing
coking coal for BF, and considerably long gestation period needed for BF-BOF and EAF based
steelmaking plants, Indian steel industry can confidently rely upon integrated IF LRF
route to meet about 35-40% of its capacity expansion from 124 MTPA in 2017 to 300 MTPA by
2031. When India attains 300 MTPA crude steel production capacity by 2030-31, integrated
IF LRF route should be contributing around 90 100 MT. This will also save about INR 3,800
Crore for every million ton plant capacity added through integrated IF LRF route in lieu
of BF-BOF route. All this augers well for robust growth of sales for the engineering
division of the company. The steel division producing TMT bars under the ET TMT brand has
definitely emerged as the number #1 and the most preferred TMT brand in Gujarat. With the
addition of new rolling capacity last year, the company is now expanding its sales in
Rajasthan and Maharashtra. In fact, Maharashtra has emerged a large market for the value
added epoxy coated TMT bars that the company produces. The company is also doubling its
epoxy coated bar capacity in view of increased demand in the infrastructure sector for
this product.
The company received many new approvals from various national and state level
institutions last year including approvals from RDSO, RSRDC, PWD, MMRDA. This is allowing
the company to migrate from being a real estate focused steel producer to real estate plus
infrastructure projects focused steel producer. A large portion of the sales is now coming
from road projects (NHAI), RDSO etc. and such orders are only expected to increase as the
economy kick starts post the COVID-19 pandemic control.
The pipe division continues to do well and contributes significantly to the
profitability of the company. The company has started to focus on increasing its pipe
exports and expect this to go up to 20% of the total pipe sales in the next few years.
While the operations of the company have got and may further get impacted due to the
COVID-19 crisis in the short term, we remain extremely optimistic and constructive on the
overall growth prospects of the company for all the three major verticals steel, pipe and
engineering, in the medium to long term.
The company over the last 5 years has settled with majority of its financial lenders
and is working seriously towards resolving the only remaining bank and an ARC.
On behalf of the board, I thank all the shareholders of the Company for their support
during the year. I would also like to thank the lenders, suppliers, customers, Various
National and Provincial Governments with whom we have been working, the Employees and the
Associates who have stood by the company and I look forward to their continued support in
the future.