Section 1

2. Risk Factors

2.1 Risk due to Market Downturn

In the recent economic downturn, demand shrinkage is witnessed in the
domestic market. Efforts have been initiated to boost exports to offset
any demand/price drop in domestic market. Further, the Company has a
focused approach towards development of new and high quality value added
products for niche markets, which are generally independent of the
domestic construction industry. Production of such high quality special
steel products like CO2, Spring Steel, etc would be facilitated by steel
making through the MBF route, or by sourcing high end billets generally
available from Tata Steel, India.

2.2 Risk due to High Ramp Up Time of the Mini Blast Furnace Project

The MBF Project, being the inaugural plant of its kind in entire South
East Asia, possible project delays leading to increased ramp up time, is
being averted through a network of measures including close monitoring
with dedicated management teams, regular structured review mechanism,
continuous resource, expertise, knowledge- sharing and supervision by
TSL, along with comprehensive integration strategy for smooth ramp-up
post commissioning. This interalia includes technician and operator
training & familiarization at both the technology provider in China and
experienced on-going Blast Furnace units of TSL in India. As individual
plant components get erected, ‘Dry Runs’ are conducted as part of
integration testing, to ensure ‘fail-proof’ commissioning at start–up.

3.  Risk of failure in continuous and consistent Raw Material Supply
    Logistics.

The inadequacy of domestic scrap sources resulting in sporadic reliance
on importation, along with its consequential impact on price volatility,
which often times is in contrary direction to the price trends of
finished rebars. This leads to high inventory holding to act as a
‘buffer’. This risk is being addressed through ‘Lean Inventory
Management’ techniques of shadowing the (Sales) Order Book position and
mapping it to required inventory holding levels. With Blast Furnace in
operation, its consistent supply of Hot Metal would substantially
obviate the need for sporadic importation of scrap. Further, since the
major raw material feedstock for Blast Furnace operation, of iron ore
and coke, is being aligned to TSL Group Global Sourcing Strategy, the
short to medium term price volatility and its resultant unpredictable
financial impact, would be insulated.

2.4 Risk from Market Competition

In the Wire Rod segment, the Company faces competition through frequent
yet unpredictable stock piling (similar in nature to ‘dumping
techniques’) resorted by suppliers of Chinese origin LC Wire Rods,
leading to sudden demand shrinkages, and adversely affecting production
patterns and volumes. Through various Customer Intimacy Programs
including elements of both ‘Cost Competiveness to attain Leadership
position’ and Customer Friendly Supply Chain initiatives, the Company
addresses the threat from import and local competition.

The Re-bar segment, is conventionally unorganized and fragmented. It
includes standalone re-rollers without EAF facilities. This hinders both
price stability and supply regularity. This risk is addressed by
strengthening the Distribution Channel Network, Retail Value Management
brand building and extending the market share.

2.5 Risk arising due to launch of new brand

The company is exploring the option of launching a new rebar brand in
the Market. To reduce the associated risks, in addition to internal
resources, the company has engaged external specialists to carry out
detailed market survey about the branding strategy, communication
channel and positioning and other requirements to build a comprehensive
plan.

2.6 Risks in areas of Safety, Health and Environment

Based on its core value of Corporate Social Responsibility, the company
has identified Safety and Environment as one of important focus area.
Risk mitigation is done by adopting Quality Systems like ISO-14000,
OHSAS 18000, introduction of Total Productive Maintenance methodology
and a continuous pursuit to upgrade pollution control measures. Targets
have been taken with detail action plans to control CO2 emissions.

2.7 Risk of Business Continuity in the event of Disaster &/or Natural
Calamity

Business Continuity risks in various functional areas are identified and
suitable mitigation plans are devised, such as in the area of
Information Technology, through a Disaster Recovery Plan, interalia
including secondary Data Center, Human Resource through a Succession
Planning mechanism for Key Management Positions, Logistical Risks
through diversifying the supply chain routes and exploring alternate sea
and riverine channels.

2.8 Financial Risk due to Foreign Exchange fluctuations

Foreign Exchange risk arising out of large raw material import
requirements and far exceeding export earnings, is addressed through a
structured Treasury Policy, of monitoring and hedging foreign exchange
exposure on a continuous basis.