Electrosteel Steels Limited Unlisted Shares

Annual Report Summary

ESL Steel Limited Annual Report 2022-2023 Summary:

ESL Steel Limited (ESL), formerly Electrosteel Steels Limited, presents its 16th Annual Report, outlining its financial performance and business activities for the year ended March 31, 2023. The report highlights achievements, challenges, and future strategies.

Financial Performance & Highlights:

ESL achieved its highest ever hot metal production of 1.367 MT, a 1% year-over-year (Y-O-Y) increase, and a record saleable production of 1.284 MT, up by 2% Y-O-Y. However, EBITDA margins contracted by 56% Y-O-Y due to volatile price changes in commodities and finished goods, coupled with an early-year surge in international coking coal prices. The government's imposition of export duties on pig iron, TMT, wire rods, and iron ore grades on May 22, 2022, also negatively impacted performance until their withdrawal on November 19, 2022, which improved Q4 results. The company reported revenue from operations of INR 7,97,757.92 Lakhs as compared to INR 6,59,586.91 Lakhs in the previous year, other income of INR 7,470.22 Lakhs (INR 20,396.88 Lakhs in FY22), and finance costs of INR 37,605.47 Lakhs (INR 33,822.02 Lakhs in FY22). Exceptional items for the previous year amounted to (INR 5,847.67) Lakhs. The company's loss before tax was (INR 4,7077.25) Lakhs, as compared to profit of INR 8,267.99 Lakhs in the previous year. The company's loss after tax was (INR 55,790.59) Lakhs, as compared to loss of INR (9,459.19) Lakhs in the previous year. EPS (Basic & Diluted) was (INR 3.02) as compared to (INR 0.51).

Operational Strategy & Future Outlook:

ESL aims to optimize costs across all operations and improve production and operational efficiency to protect margins. The company acquired two mines in FY23 to ensure a continuous iron ore supply through backward integration, producing 5.67 million tons and achieving self-sufficiency. ESL primarily serves the Indian market, targeting an 8% GDP growth. The Indian steel industry is projected to grow by 8-10% in the next 3-5 years, fueled by infrastructure demand. An expected investment influx of $1.5 billion is anticipated in the next 5 years, impacting ESL's products through projects like Pradhan Mantri Awas Yojana and Har Ghar Jal Yojana. Raw material price stability, especially for iron ore and metallurgical coal, contributes to an optimistic outlook.

Corporate Governance & Compliance:

The Board of Directors consists of Thomas Mathew Thumpeparambil, Mahendra Singh Mehta, Prasun Kumar Mukherjee, Ashish Kumar Gupta, and Poovannan Sumathi. The Board met five times during the fiscal year. Several committees exist within the board, including the Audit Committee, Nomination and Remuneration Committee, Stakeholders' Relationship Committee, and Corporate Social Responsibility Committee, each with specific roles and responsibilities. The company has a Vigil Mechanism/Whistle Blower Policy and zero tolerance for sexual harassment, with an Internal Complaints Committee (ICC) set up. The company emphasizes compliance with Secretarial Standards issued by The Institute of Company Secretaries of India.

Key Personnel:

Key managerial personnel include Ashish Kumar Gupta (CEO & Whole Time Director), Anand Prakash Dubey (CFO), and Manish Kumar Chaudhary (Company Secretary).

Legal and Regulatory Matters:

The Company's Consent to Operate (CTO) for its Bokaro plant was not renewed by the Jharkhand State Pollution Control Board (JSPCB). ESL filed a writ petition with the High Court of Jharkhand. The Environment Clearance (EC) was revoked by the Ministry of Environment, Forest and Climate Change (MoEF), leading ESL to file another writ petition. ESL has applied for Forest Diversion and received Stage I Forest Clearance. MoEF has revoked the FC Stage-I. During the financial year, the State government of Odisha issued a Notice of Demand for penalty for alleged shortfall on minimum dispatch and production requirements of Company's mines, which ESL is contesting.

Corporate Social Responsibility:

The company has a Corporate Social Responsibility Policy and undertook CSR initiatives during the year, although these are not mandatory.

Audits and Standards:

M/s. Lodha & Co. have audited the books of accounts. The Auditors' Report contains no qualifications or reservations or adverse remarks. The shareholders have reappointed M/s. Lodha & Co. as Statutory Auditors for a second term of five years. M/s. Sanjiban & Co. have been appointed as Cost Auditors for FY24. M/s. Vinod Kothari & Company have submitted their Secretarial Audit Report. KPMG were appointed as Internal Auditors. The company reported no fraud under Section 143(12) of the Companies Act.

Equity Share Capital:

The authorized share capital is INR 1,00,20,00,00,000 divided into 10,02,00,00,000 Equity Shares of INR 10 each. The issued, subscribed and paid-up share capital is INR 18,49,03,02,240 divided into 1,84,90,30,224 Equity Shares of INR 10 each fully paid up. Vedanta Limited (VEDL) is the Holding Company, holding 95.49% of the share capital.

Investor Information:

The company website is https://www.eslsteel.com/.

Conservation of Energy, Technology Absorption, and Foreign Exchange:

The company has taken various measures for saving energy across the plant and has proposed several energy-saving projects. They also focus on technology absorption. During the Financial Year there were no instances of imported technology. Expenditure has been incurred on Research and Development. Details of foreign exchange earnings and outgo are also provided.

Auditor's Report:

The Independent Auditors' Report notes a material uncertainty related to going concern stemming from pending regulatory approvals (CTO and Environmental Clearance). Key audit matters addressed include impairment of assets, recognition of deferred tax assets, and accounting of iron ore mines. The report includes annexures pertaining to various legal and regulatory requirements and internal financial controls.

Annexures:

Annexure A provides details on energy conservation, technology absorption, and foreign exchange earnings and outgo. Annexure B is the Secretarial Audit Report.