OVERVIEW

The following operating and financial review is intended to convey the management's perspective on the financial condition and on the operating performance of the Company as at the end of the Financial Year 2012-13.The Company's financial statements have been brpared in compliance with the requirements of the Companies Act, 1956, guidelines issued by the Securities and Exchange Board of India (SEBI) and the Generally Accepted Accounting Principles (GAAP) in India.

GLOBAL STEEL INDUSTRY

The global steel production reached a record high of 1.55 billion tonnes, up by 1.2% as compared to 2011. The growth came mainly from Asia and North America while production in the European Union and South America decreased in 2012 compared to 2011. Global steelmakers continued to witness supply growth outpacing demand, with capacity utilization rates remaining consistently below 80%. Subdued steel prices and a slowdown in demand growth from China continued to weigh on the global steel sector in the past year.

Annual production for Asia was 1.01 billion tonnes of crude steel in 2012, an increase of 2.6% as compared to 2011. China's crude steel production in 2012 reached 716.5 million tonnes, an increase of 3.1 % on 2011, resulting in a hike in the country's share of world crude steel production from 45.4% in 2011 to 46.3% in 2012. The EU meanwhile recorded a decrease of 4.7% compared to 2011, producing 169.4 million tones of crude steel in 2012. Among specific countries, South America was 46.9 million tonnes, a decrease of 3.0% on 2011. The US produced 88.6 million tonnes of crude steel, 2.5% higher than 2011.

STEEL INDUSTRY IN INDIA

During 2012, India maintained its ranking as the 4th largest steel producing country in the world behind China, Japan and the US with a crude steel production of 76.7 million tonnes rebrsenting a 4.3% growth over 2011. Steel demand is expected to grow by 5.9% to 75.8 million tonnes in 2013 following 2.5% growth in 2012 as monetary easing is expected to support investment activities.

OUTLOOK

Steel demand growth globally is expected to continue due to growth in the emery'.r-.^ and developing economies. As per the forecasts from World Steel Association (W3A), worldwide apparent steel demand is expected to grow by 2.9% to 1,454 mt in 2013 and by 3.2% in 2014 to 1,500 mt (following the 1.2% growth in 2012). Steel demand in China is expected to grow by 3.5% and by 2.5% in 2013 and 2014 respectively as the country tries to rebalance the growth model and gradually focuses on the service sectors. India's steel demand growth is projected at 5.9% and 7.0% in 2013 and 2014 respectively with expected support from the reform measures and narrowing of fiscal deficits

RISKS, OPPORTUNITIES AND THREATS:

The steel industry is susceptible to cyclical swings arising from demand & supply imbalances. These result in volatility in input costs as well as that of end products. The high prices result in inflationary trend which again affects the growth patterns. The recent hikes in interest rates are a major concern for the company as the cost of capital is eroding the margins. Further hikes are expected if the inflation shows an upward trend. The availability of quality Scarp, raw materials linkage, volatility in prices of key inputs and decrease in the steel prices in the international market will be the major concerns, as these would impact the domestic steel prices. The availability of TMT Bars, Wire Rods and other steel products in which the Company deals has increased as numerous small players have entered the sector. This could affect the realisation from these products. High cost of industrial raw materials will increase the marginal cost of production of steel and, therefore, the price of the metal in the market. At these prices steel may come under threat of substitution as end users look for cheaper options.

INTERNAL CONTROL SYSTEMS:

The Company has in place adequate internal control systems and procedures commensurate with the size and nature of business. These procedures are designed to ensure.

• That all assets and resources are used efficiently and are adequately protected.

• That all the internal policies and statutory guidelines are complied with.

• The accuracy and timing of financial reports and management information.

HUMAN RESOURCES AND INDUSTRIAL RELATIONS:

Your Company considers its employees as one the key stakeholders. It has created a Human Resources environment which tasters speed and agility in responding to the changing environment, learning and innovation to survive and prosper and integrity in all operation.

STATUTORY COMPLIANCE:

The Managing Director makes a declaration at each Board Meeting regarding the compliance with provisions of various statutes after obtaining confirmation from all the units of the company. The Company ensures compliance with the SEBI regulations and provisions of the Listing Agreement. The Compliance Officer ensures compliance with the guidelines on the insider trading for brvention of insider trading.

CAUTIONARY STATEMENT:

Statements made in this report describing the Company's objectives, projections, estimates, expectations may be "forward looking statements" within the meaning of applicable securities laws and regulations. Actual results could differ materially from those exbrssed or implied. Important factors that could make a difference to the Company's operations include economic conditions affecting demand/supply and price conditions in the domestic and overseas markets in which the Company operates, changes in the Government regulations, tax laws and other statutes and incidental factors.