crompton greaves ltd Management discussions

1. COMPANY OVERVIEW

Cosmo First started as Cosmo Films in 1981, has been credited as the first company to introduce BOPP films in India. Today, the Company is the worlds largest producer of thermal lamination films, the worlds second-largest producer of speciality label films and a leading player of BOPP films in India. The Companys commitment to research and development is evident through its advanced R&D centre in Aurangabad, where it has registered eight patents, with three more in the pipeline and eight currently being applied for. Cosmo First believes in practising excellent corporate governance and maintaining a culture of professional management, which provides the Company with a competitive advantage in the marketplace in the long run.

The Company has a well-diversified business model in terms of markets and products to meet the evolving needs of customers. It has positioned itself with a unique combination of speciality and commodity films, speciality chemicals, and its pet care brand ‘Zigly. With a wide product portfolio under one roof, ²

customised innovation, agility in job line allocation, scale, global reach, and a global warehousing facility, the Company is well-positioned for sustainable growth. This approach enables the Company to mitigate potential uncertainties in the business environment. By remaining focused on its strategy and unique value proposition for customers, with a capable and experienced team, and a people-first approach, Cosmo First will continue to drive long-term value creation for shareholders and other stakeholders.

While Cosmo First had challenging moments in FY23, the Companys long-term value-generating potential remains strong with its diversification in products, with new launches such as shrink films, polyester films, window films, adhesives and masterbatches. Furthermore, the potential for growing revenue in speciality chemicals and pet care is significant which will buttress the strong domestic demand for packaging solutions. With a plan to invest capital in increasing capabilities, Cosmo First looks to a bright future of growth , greater value, innovative products and sustainable profitability.

2. MACROECONOMIC OVERVIEW AND OUTLOOK 2.1 Global economy

At first glance, there are indications that the worldwide economy is on track for a steady revival after being hit hard by the pandemic and Russia Ukraine war. China has made a strong comeback following the reopening of its economy, and the supply chain disruptions are gradually resolving. Additionally, the disruptions caused by the war on energy and food markets are diminishing. At the same time, the coordinated and significant tightening of monetary policies by most central banks is expected to yield results, with inflation moving back towards its targets. Potential downside risks would include sticky inflation (especially in advanced economies), the fallout of bank collapses in the US spreading to the wider global economy and an escalation of the war in Ukraine which has now entered its second year.

According to the latest projections from the IMF¹, the global growth rate is expected to reach its lowest point at 2.8% in 2023 and then increase slightly to 3.0% in 2024. Meanwhile, global inflation is expected to decrease, albeit at a slower rate than previously anticipated, from 8.7% in 2022 to 7.0% this year and further down to 4.9% in 2024.

In many cases, emerging markets and developing economies are experiencing strong growth, with growth rates (Q4 over Q4) increasing from 2.8% in 2022 to 4.5% this year. However, advanced economies, particularly the Euro area and the United Kingdom, are facing a slowdown with expected growth rates (also Q4 over Q4) of 0.7% and -0.4%, respectively, this year before rebounding to 1.8% and 2.0% in 2024.

2.2 Indian economy

The Indian economy is now widely seen as the bright spot² in an otherwise gloomy global economic outlook, as per IMF Chief Kristalina Georgieva. Staying with the IMFs data points in its April 2023 world economic outlook, the Indian economy saw a growth rate of 6.8% in 2022, and 5.9% in 2023, and is estimated to grow at a rate of 6.3% in 2024.

Despite, global headwinds, the Russia-Ukraine war and associated price volatility in crude oil, fertiliser and food prices - India finds itself in a unique position to enter a phase of sustained rapid growth going forward. This is further reinforced by Deloittes India economic outlook, April 2023³, which suggests that to ensure India attains sustained non-inflationary growth, an increase in private investments on manufacturing capacity building is necessary in addition to the country capitalising on its comparative services advantage.

There is data to back Indias potential meteoric rise. For instance, India breached record exports in FY23 with $ 770 Billion with a surge in services exports, thanks to greater acceptance among multinationals (MNCs) to run operations remotely. More importantly, service exports were not limited to traditional sectors such as IT, but also so an increase in the share of business and professional services such as accounting, audit, research and development, quality assurance and aftersales services.

In the manufacturing sector (and associated exports of goods and products), India is seen to be on the cusp of becoming the next big manufacturer in the world. From an increase in electronics exports such as mobile phones to visible signs of the country improving its capacity building in pharmaceuticals and FMCG - Indias future looks bright. This has been supported by multiple government initiatives such as the National Infrastructure Pipeline, PM Gati Shakti and National Logistics Policy, among others, that will help reduce the cost of logistics while improving the ease of doing business. Similarly, the agriculture sector of the Indian economy grew at 3.5%⁴ in FY23 with agriculture exports touching $ 50.2 Billion in the fiscal year, as per the Press Information Bureau.

3. INDUSTRY OVERVIEW

Cosmo First, a leading player in the flexible packaging industry, has built a strong presence in the industry. With its extensive product portfolio of BOPP films, BOPET Films, thermal films, Coated and other Speciality films, the Company caters to the diverse packaging needs of various industries. Further, Cosmo Speciality Chemicals, is a venture established in 2020 with the aim of revolutionising the masterbatch, coating chemcials and adhesive segments through sustainable technology. Additionally, the Companys offerings cater to the needs of the pet care industry via its fast-growing brand Zigly. With a focus on innovation, a customer-centric approach, and sustainability, Cosmo First continues to drive growth and create value for its stakeholders across these industries.

3.1. Flexible packaging industry overview

The global packaging industry has experienced robust growth over the past few decades, driven by demographic factors like population growth and rapid urbanisation, increased trade, and greater demand for packaging. Sustainability and digitalisation are increasingly popular trends that present challenges and opportunities for the industry. Other factors such as changing consumer preferences, margin compression, and food safety have also impacted the industry and driven demand for new packaging products and innovations.

The global packaging industry in FY21 was approximately $ 1,002.4 Billion⁵ and is expected to reach $ 1,275 Billion by 2027. The global flexible packaging market is expected to grow at a CAGR of 4.8%⁶ from $ 248.9 Billion in 2022 to $ 315.5 Billion in 2027. Western Europe, North America, Central & East Asia, and South East Asia & Oceania account for 85% of the global market. The flexible packaging market in India is estimated to grow at a CAGR of 12.6% between 2022 and 2027. The size of the market is forecast to increase by USD 18.65 Billion. This growth is mainly due to rising disposable incomes and an improved standard of living in the region. Several factors are driving the growth of the packaging industry, including the rapid growth of the eCommerce segment, changing consumer preferences for customisation, convenience, health, and affordability, and the increasing demand for processed food globally. Sustainability requirements and heightened scrutiny along the value chain, along with digitalisation and automation in the packaging industry, will drive efficiency and innovation, including the development of smart packaging.

3.2. Speciality chemicals industry overview

The speciality chemicals market plays a critical role in many sectors of the global economy, including construction, automotive, electronics, textiles, and healthcare. Speciality chemicals are designed to perform specific functions and add value to end- use products. They are used in a wide range of applications, from adhesives, coatings, and polymers to agrochemicals, food additives, and personal care products. In recent years, the speciality chemicals market has experienced steady growth, driven by the increasing demand for high-performance and sustainable products.

As per a report from Grand View Research, the global speciality chemicals market size was estimated to be $ 616.2 Billion in 2022 and expected to grow to $ 641.5 Billion in 2023. Additionally, the industry is expected to grow at a CAGR of 5.1% to reach $ 914.4 Billion by 2030⁷.

The speciality chemicals market was predominantly led by the Asia Pacific region, holding a significant share. This can be attributed to the escalating demand for speciality chemicals in prominent end-use industries such as pharmaceuticals, nutraceuticals, personal care, cosmetics, automotive, and electrical and electronics in China and India.

As per KPMG, the Indian speciality chemicals market represents 22% of the countrys chemicals and petrochemicals market with a valuation of $ 32 Billion. With the industry expected to grow at a CAGR of 12% from 2020 - 2025, India has the scope for further exponential growth.

Masterbatches refer to a combination of polymer materials, additives, and pigments that are utilised as a chemical component to improve the characteristics of plastics and provide various shades of colour. The Masterbatch market was estimated to be valued at $ 11.1 Billion in 2020 and projected to grow at a CAGR of 5.1% leading up to 2025 with an estimated valuation of $ 14.3 Billion⁸.

Adhesives are another important segment of the speciality chemical industry, used in various applications such as packaging, construction, and automotive. Widely referred to as the adhesives and sealants market, this segment of the speciality chemicals industry is expected to grow at a CAGR of 3.7% globally to be valued at $ 85.8 Billion⁹ by 2026. India Adhesive market is expected to grow at a CAGR of 10.26% to be valued at US $1842.936 Million by 2028¹⁰

3.3. Pet care industry

Cosmo First is a strong proponent of diversifying by entering sunrise sectors and recently entered the pet care industry with end-to-end solutions under the brand Zigly. This particular industry has lacked any large-scale players which provide end-to-end products and services, therefore offering a unique opportunity for the Company to gain market share over time.

The global trend towards urbanisation, nuclear families, double-income households, and changing lifestyles, as well as the growing trend of pet humanisation, have all contributed to the increasing number of pet owners worldwide. India, in particular, has experienced a significant rise in pet ownership, with a thriving pet population of 32 Million that is growing at a rate of over 12% annually. This surge in pet ownership has led to the development of a robust pet-care ecosystem, including retail chains, pet nutrition and services, and pet care services. Furthermore, the emergence of e-commerce has facilitated the distribution of pet products.

The Indian pet care market may be smaller compared to the global market, valued at Rs 5,100 Crore and it is growing rapidly with a projected annual growth of 25% from 2023 to 2027. The markets growth is due to the increasing recognition that pets require specialised nutrition for their health and growth, leading to the entry of top international brands into the region. The pet care market in India is mostly unorganised, and consumers are progressively accepting the idea of providing their pets with food that is specially formulated for their needs, rather than traditional food meant for human consumption. As the pet care markets in the U.S., Canada, and Europe become more congested, Asia, particularly India, is becoming a more attractive market for leading brands.

4. BUSINESS SEGMENTS AND PERFORMANCE

Cosmo First provides an extensive range of products all in one place. It operates four modern manufacturing facilities (three in India and one in South Korea) with an annual installed capacity of:

- BOPP Films: 1,96,000 MT

- BOPET Films: 30,000 MT

- Thermal Lamination Films: 40,000 MT

- Coated Specialty Films: 20,000 MT

- Metalised Films: 22,000 MT

- CPP Films: 10,000 MT

- CSP Line: 7000 MT

- Master batches: 10,000 MT

- Adhesives: 2,500 MT and

- Coating Chemicals: 5000 MT

Cosmo First offers a diverse range of products across various segments such as Speciality Films, BOPP Films, and Speciality Chemicals. The Company has a comprehensive portfolio of BOPP Films for different applications including flexible packaging, lamination, labelling, and industrial usage. The BOPP Films range includes speciality films such as high barrier films, velvet thermal lamination films, and direct thermal printable films. Not only is Cosmo First a market leader in the BOPP sector, but it also offers additional value- added services. Cosmo First is one of the top 4 players in BOPP speciality films and the second-largest player in the world for speciality label films. Furthermore, Cosmo is the largest supplier of thermal lamination films globally.

4.1. Flexible packaging

The flexible packaging segment which includes speciality films and BOPP films has seen challenging situations but Cosmo First clearly outperformed the industry with revenue of Rs 3065 Crore in FY23 and EBITDA of Rs 434 Cr. primarily on the back of value add speciality films. The flexible packaging industry has witnessed scenario of excess supply during FY23 due to addition of new supply during the year. This adversely impacted the margins of the whole industry. Cosmo could withhold the margin pressure compared to peers due to high share of specility films (62% in FY23).

Growth:

The Company has planned close to 75% capacity addition in flexible packaging business in phases starting from FY23. While specialized BOPET line got commissioned during FY23, the CPP line and BOPP line are expected to get commissioned within next two years in phases. Both the lines will be the worlds largest production capacity lines with lower cost of production.

The Companys focus shall continue to be on improving speciality films, R&D efforts particularly on sustainability which would yield results in coming years. These actions would continue to de-commoditize business model and would contribute in long term sustainable growth. The Companys speciality films sales stand at 62% during FY23. On BOPET line as well, the company is looking to kick off few specialty products which includes window films, security films, PET-G films, and many others.

4.2. Speciality chemicals

In Speciality Chemicals the Company has three verticals

i.e. masterbatch, coating chemicals and adhesive. While masterbatch and coating checmicals have been operational during the year, adhesive is expected to commence commercial production from FY24. In each of these segment the Company plans to cater to niche speciality focused either to address current problem area for the Industry or significantly better product compared to currently available. The annual capacity of the Company for masterbatch is 10KMT, adhesives is 2.5KMT and Coating Chemicals is 5KMT. The target is to achieve 7%-8% of Companys consolidated revenue from speciality chemicals in 3-5 years with 25% ROCE

In FY23, the speciality chemicals subsidiary recorded total sales of Rs 159 Crore, representing a significant 75% growth compared to the previous year. Furthermore, the Company achieved nearly 75% capacity utilisation on its master batch line. Additionally, the complementary adhesives business for the packaging segment is poised for growth in the current financial year. To fuel the growth in speciality chemicals, the Company is going to launch adhesive during FY24 for already known customer base.

4.3. Pet care

The companys direct-to-consumer vertical, launched under the brand Zigly in September 2021, is progressing according to plan. With 15 experience centers operational as on March 2023, the Company targets to have 100 experience centres in next couple of years.

Ziglys current monthly Gross Merchandise Value (GMV) is around Rs 2 Crore. Company targets to achieve 10 times growth in the next few years. In FY23, Zigly divisions GMV reached Rs 13 Crore, which is nine times higher than the previous years sales. Zigly has already served over 23,000 customers, with a significant number being repeat customers. The Companys focus is to further multiply Ziglys growth in the coming years, both organically and through potential acquisitions.

5. FINANCIAL PERFORMANCE

During the FY23, on consolidated basis the Company registered sales of Rs 3,065 crores. Consolidated EBITDA for the year was Rs 434 crores as against Rs 620 crores in FY22 primarily due to margin pressure in BOPP & BOPET industry due to commissioning of several new production lines during FY23. Despite challenges, the Company has significantly outperformed the industry with two-third of the revenue coming from the specialty films, which could withstand the margin pressure.

On Standalone basis, the Company registered sales of Rs 2,742 crores . Standalone EBITDA for the year changed to Rs 396 crores against Rs 526 crores in FY22 primarily for the reasons explained above.

As on 31 March, 2023, Return on Capital employed stands at 16% and Return on Equity is 20%. The financials remain strong with Net Debt/EBITDA at one time.

During this year, your Company incurred capital expenditure of Rs 380.4 Cr as compared to Rs 282.9 Cr for FY22. The capital expenditure incurred during FY23 shall facilitate enhanced sale of speciality films, sustainability initiatives and solar power as a source of energy. The continuous investment in R&D, Sales & Marketing, Employee practices, Quality, and Customer satisfaction has reaffirmed the Companys growth strategy, as evidenced by the year-on-year growth in specialty films sales.

The Company has made concerted efforts to enhance brand visibility. The Exports for the financial year are Rs 1,268 Crores which is 46% of total sales. The Company exports to 80+ countries across the globe.

The performance of the overseas subsidiaries was under pressure compared to last year primarily for two reasons. One is reduced gap between the India raw material price index and US raw material price index and second is weakening of foreign currencies against the US dollar, particularly in Japan and Korea. The margin pressure in the US is due to the lower gap between the two-price index. However, this is expected to improve in FY24.

6. KEY FINANCIAL INDICATORS

In accordance with SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (‘Listing Regulations) the Company is required to give details of significant changes (i.e. changes of 25% or more as compared to the immediately previous financial year) in key financial ratios.

There is no significant changes (i.e. 25% or more) in financial ratios viz. Current Ratio, Debt Turnover Ratio and Inventory Turnover Ratio.

Ratio	FY23	FY22	% Change	Explanation
Interest Coverage Ratio (in times)	7.8	15.5	-49.7%	Primarily lower due to decrease in operating income due to margin pressure caused by significant capacity addition in the domestic industry and change in interest rate significantly
Net Debt to Equity Ratio (%)	33.5	25.6	30.8%	Primarily increase due to higher net debt and due to growth capex
Net Profit Margin (%)	7.9	13.0	39.0%	Primarily lower due to decrease in operating income due to margin pressure caused by significant capacity addition in the domestic industry

7. CHANGE IN RETURN ON NET WORTH

The FY23 witnessed a reduction in PAT, leading to a return on net worth of 18.80% .

8. LIQUIDITY

During the year ended 31 March 2023, the consolidated net debt is of Rs 433 Crore. The Company has been carrying close to Rs 456.09 Crores of cash and cash equivalents including liquid investments as at 31 March 2023 at consolidated level. The financials remain strong with Net Debt/EBITDA at one time.

9. R&D AND NEW PRODUCT DEVELOPMENT

Cosmo First takes pride in its continuous investment in research and development, which is focused on providing innovative solutions. Through these consistent efforts in research and development activities, Cosmo First is well-positioned to drive accelerated growth and spearhead new product development globally. In the year under review, the company incurred an expenditure of Rs 13 Crore on research and development (R&D). Cosmo Firsts R&D labs, located in India and the USA, are equipped with state-of-the-art equipment and instruments. The R&D team is also actively driving several sustainability projects to ensure that the company remains at the forefront of sustainable film solutions.

The Company has an impressive track record in product development, with eight registered patents and three more in the pipeline. In addition, the Company has filed applications for eight more patents. Cosmo Firsts dedicated R&D team plays a crucial role in keeping it ahead of the curve when it comes to product innovation. Comprising more than 30 scientists and technologists from esteemed universities in the USA and Europe, the team has a wealth of global experience in areas such as packaging, polymer engineering, and biopolymers. The Company is committed to further strengthening its R&D team to maintain its competitive edge.

Achievements

Security Film

1. Developed inhouse lamination and pressure sensitive adhesive for durable application.

2. Developed own nano pigment dispersions which are suitable for most of the coating chemistries.

3. Our coatings give best IR resistance up to 98% and perfect scratch resistance and durability more than 5 years.

Other Key Films

1. New generation heat resistance film has been developed which can replace PET in certain applications.

2. Extreme ultra high barrier film is developed with barrier properties < 0.06 enabling easy replacement of Aluminum foil.

3. New coated substrates are launched for digital printing.

4. Developed PVC free films for advertising and promotions.

5. Anti fingerprint and one of the best scratch resistant coated substrates are suitable for primary and secondary packaging.

Speciality Chemicals

1. New cost-effective compounds are developed for films giving better aesthetics and unique surface properties for easy runnability and faster printing.

2. New coating portfolio has been introduced for better inkjet printing.

3. Barrier coatings are environmentally friendly and offer one of the best water and oil resistance.

4. Developed specialty acrylic emulsions and PU dispersions which are suitable not only for film but offer unique functionalities to leather, wood and paper.

5. Cosmo is one of the few coatings companies who offer direct FDA and antistatic coatings for packaging applications.

6. Pressure sensitive adhesives are based on specialty acrylic emulsions that gives adhesion to various substrates.

7. PU based flexible adhesives are made to sustain high temperatures and still offer excellent flexibility.

Analytical facility

Cosmo analytical lab has state of the art facilities including GC, particle size analyzer, UV-Vis spectrophotometer. It suitable for all kind of films, coatings, resins, adhesives and Master Batch. Company has invested in new instruments and infrastructural development. This lab is capable of doing all surface, structural and elemental analysis from nano to Macro level. R&D team has invented new methods to analyse critical additive surface migrations very selectively on the surfaces. It can also analyse source and nature of additives by specific extraction methods .

Cosmo application labs can analyse all critical customer requirements in film, packaging adhesives and coating segment. New instruments to perform weatherability testing has recently been added. Cosmo also have pilot synthesis, coating and extrusion facilities that helps to launch our products faster in the market.

New Product Development

The Company launched several new products during the financial year including PVC Free Media, HP Indigo Printable Media for Photo Album Application , Glossy CSP For Tag Application, Ozge synthetic paper for home & office laser printers, Scratch-free coated metallized film for low-migratory inks, PET G Shrink Label Grade Film, Low SIT High Heat Seal Strength Extrusion Grade Barrier Metallized CPP Film etc.

10. SUSTAINABILITY AND ESG INITIATIVES

Cosmo has been working on several sustanability projects. The Company has continuously worked towards enhancing the sustainability of its products, operations, and supply chain. By focusing on product efficiency and taking measures to eliminate high- impact gases, the Company has successfully reduced its carbon footprint. Cosmo First Limited recognises that its commitment to sustainability not only benefits the environment but also helps to boost the bottom line. Cosmo First understands that customers are increasingly seeking sustainable products and operations, and it aims to stay ahead of the curve by adopting sustainable practices throughout its operations. By prioritising sustainability, Cosmo First Limited is not only doing its part to protect the planet but is also positioning itself as a leader in the industry.

10.1 Environment

Cosmo First demonstrates a steadfast commitment to promoting sustainable practices and actively contributing to the circular economy. The Company prioritises the offering of mono layered structures in its films to facilitate ease of recycling. By forging partnerships with renowned global brands, Cosmo First strives to provide structure rationalisation and recyclability solutions, ensuring that its products can be efficiently processed for reuse. The Companys dedication to research and development drives the growth of its specialty film portfolio, enabling the provision of sustainable solutions that contribute to a better future. Cosmo First has also successfully developed Oxo-Biodegradable Films, Water Based Coatings, and heat-resistant BOPP films, which facilitate the creation of mono material structures, further enhancing recyclability. The Companys commitment to reducing plastic consumption is evident through the improved yield of both BOPP and CPP films, allowing for reduced plastic usage while maintaining product integrity.

Cosmo Firsts unwavering dedication to environmental responsibility extends beyond film production. The Company actively explores alternatives to environmentally harmful materials, exemplified by its substitution of PVC with UV stabilised Synthetic Paper for outdoor promotional applications. Additionally, Cosmo Firsts Ultra-High Barrier Films provide a suitable replacement for aluminum foil, effectively reducing reliance on non-recyclable materials. The Company places a high priority on reducing greenhouse gas emissions, implementing green energy practices at its plants, and actively pursuing waste reduction and water treatment initiatives. Cosmo Firsts commitment to sustainable manufacturing encompasses various measures, including rainwater harvesting, the reuse of treated effluent water, and the reutilisation of reprocessed granules derived from waste materials in film production. Through continuous efforts to reduce water usage, minimise waste generation, and lower GHG emissions, the Company upholds the principles of the 3R approach—reducing waste, reusing and recycling resources and products. Ultimately, Cosmo First aims to manufacture environmentally friendly, sustainable polymers that can be easily recycled and reused in various applications, thereby contributing to a more sustainable and resource-efficient future.

Cosmo Tree Plantation Drive

Agroforestry and Miyawaki are viable solutions to address the environmental sustainability. Fruitbearing tree plantations have multiple benefits such as enhancing farmers incomes, optimal utilization of land, and coexistence of fruit forests along with conventional crops. It is also a way to promote a healthy, local chemical free fruit supply and increase the green cover. Whereas, Miyawaki forestry is a unique potential natural vegetation concept.

55,000 saplings were planted across locations with 92% survivability being ensured. Urban Miyawaki Forest was created at Army Equestrian Centre and Aahwan at New Delhi. It will enhance the livelihood of farmers and their upcoming generations.

Water Conservation

To preserve water resources in rural areas, Cosmo aimed to make a significant impact on sustainability and environmental stewardship and initiated Rain Water Harvesting Project. It involves promoting watersaving practices, implementing water filtration and reuse systems, and raising awareness about water conservation. Cosmo Foundation implemented this project in 11 rural govt. schools of Karjan & Aurangabad. 6872000 litres of water will be conserved in every monsoon. Underground water tanks were constructed in 2 rural govt. school. Cosmo Foundation created a drinking water facility in two rural schools in Himachal Pradesh for 350 students.

10.2 Social

Cosmo First is not only a leading manufacturer of packaging films and materials, but also a socially responsible corporate citizen. The Company strongly believes in providing a conducive environment to all its stakeholders and advocating for positive change in the world. To achieve this, Cosmo First takes action and engages beyond the boundaries of its facilities.

The Company is committed to giving back to the communities it operates in. It provides food to those who are less privileged, preserves the environment, and invests in the education of tomorrows leaders. In addition to these initiatives, Cosmo First also supports various social causes that are aimed at improving the quality of life of people in the communities it operates in.

The Companys commitment to being a socially responsible corporate citizen is not only driven by its values but also by the belief that such actions are good for business. By promoting positive change in the world, Cosmo First can build trust and loyalty among its stakeholders, which in turn contributes to the growth and success of the company.

Few initiatives of Cosmo Foundation in the social sector are as follows—

Massive Health Awareness & Check-up Camps -

Cosmo Foundation partnership with various private hospitals, organised Massive Health Awareness Camps across villages on the importance of nutrition and oral hygiene, prevention of common illnesses, menstrual and reproductive health, breastfeeding practices, critical illnesses like - pneumonia and epilepsy along with Eye, Gynae & Dental Check-ups. 15000 community members benefitted. Spectacles, eye surgeries and dental treatments were arranged.

Indian National Trust for Art and Cultural Heritage (INTACH) is reviving 700-year-old handmade papermaking art in the village, Kagzipura and developing this village as a model heritage village in Aurangabad. Cosmo Foundation has partnered with INTACH and a Chemical-free water filtration plant with Dhobi Ghats is being constructed which enables clean water for villagers and also to the handmade paper-making factory. All the villagers took an oath to keep the village and pond clean.

Fondly known as CGVK - Cosmo Gyan Vihar Kendra which was started in the year 2009 as a response to the low literacy skill among rural children. The program focuses on imparting basic reading, writing, arithmetic and life skills to children in their native language. It promotes creativity, logical thinking, analytical skills, communication skills, personal hygiene and exposure to the outer world. The program is functional in 30 villages with 17015 students and 45 community-based teachers (Balmitras). With this program children are able to cope up with their academics study better, thus enhancing their motivation to attend school.

Cosmo Foundation launched Cosmo Digi Pathshala - A WhatsApp learning platform. Prepared e-content encompassing diverse contents on Foundational Literacy and Numeracy, Native and English language development, operation of digital tools General Knowledge, current affairs, health and hygiene awareness and career awareness. 3941 rural students across Gujarat and Maharashtra are engaged creatively and constructively during the time schools remained closed.

Cosmo Foundation initiated E-Service centre in two villages of Karjan block in year 2021. With the aim of making digital services available free of cost to the villagers. 3000 + villagers benefitted with the services like - Change in address in Aadhar and PAN cards, payment of electricity bills, E-shram card registration online applications for admission and scholarship, RTO license test, online exams, etc. The platform received an overwhelming response from the villagers. Resource books/ study material are also available for reference. Village youth take maximum advantage of these resources. The centre is run by rural youth trained under Digital Literacy program of CF.

10.3 Governance

Cosmo First upholds ethical and responsible business practices not only to ensure fairness but because it is the right thing to do. The Company takes into account the economic, social, and environmental impact of its actions as part of its strategic planning, risk management, and governance approach.

The Board of Directors holds overall responsibility for upholding best practices in corporate governance, and the senior management supports the Board in fulfilling this duty. To achieve this, the Board and senior management take a consultative approach and seek inputs from all stakeholders, including shareholders, employees, vendors, suppliers, customers, community representatives, government authorities, and industry representatives.

For Cosmo First, maintaining the highest standards of corporate governance is not a mere formality, but an integral part of its core values and a way of life. The Companys philosophy of corporate governance aims to achieve business excellence by enhancing shareholder value, and transparency and ethical business practices are key in discharging corporate responsibilities.

11. QUALITY PERFORMANCE

Cosmo First takes pride in the quality systems implemented by the Company. Here are some of the initiatives undertaken during the year:

? Implementation of Six Sigma System at the organisational level to foster a culture of quality improvement.

? Ongoing second batch of Six Sigma training with new projects underway.

? Implementation of 5S methodology at the shop floors to establish world-class standards.

? Introduction of measures such as double door systems and automated door closures to enhance shop floor operations.

? Recognition of green practices with a green rating awarded by EcoVadis Sustainability Ratings.

? Introduction of lean manufacturing practices at the Karjan unit, which will be gradually implemented across all three locations.

? Collaboration with cross-functional teams to initiate small-scale quality improvement projects, aiming to reduce customer quality complaints.

? Provision of shop floor technical training for the sales and marketing team to enhance their understanding of product applications and manufacturing processes.

? Achievement of A-grade ratings from two major customers during plant quality audits.

? Establishment of a weekly Quality Assurance meeting for customer complaints, contributing to the continuous improvement of the quality management system.

? Sharing success stories of the Companys products through social media platforms.

? Development of an online Certificate of Analysis (COA) generation application in SAP for all three units, providing customers with system-generated COAs.

These initiatives reflect Cosmo Firsts commitment to maintaining and improving the quality standards of its products and operations.

12. INTERNAL CONTROL SYSTEMS, RISKS AND MITIGATION STRATEGY

At Cosmo First , the Risk Management, Internal Control Systems, and Internal Audit functions work in harmony to create a comprehensive risk management system. This system assesses the effectiveness of the framework concerning risk identification and mitigation.

Internal control systems

The Company has established comprehensive systems and controls throughout its operations, encompassing various financial and operational functions. These measures ensure the efficient execution of operations, safeguarding of assets, prevention and detection of frauds/errors, accuracy and completeness of accounting records, and the timely preparation of reliable financial reports. The Companys Internal Audit Department plays a vital role in providing assurance on compliance with operating procedures, internal policies, and legal requirements, as well as offering suggestions for system and process improvements. Furthermore, the Company has identified and documented key internal financial controls for critical processes across all plants, warehouses, and offices involved in financial transactions. The effectiveness of these financial controls is regularly evaluated through ongoing monitoring and review processes by management, as well as through independent assessments conducted by the internal audit team.

Risks & mitigation strategy

The Company has in place a robust risk management framework that identifies and evaluates business risks and opportunities. Cosmo recognises that the risks need to be handled effectively and mitigated to protect the interests of the shareholders and stakeholders, to achieve business objectives and create sustainable value and growth.

Few factors have been identified that could potentially have an adverse impact on the Companys consolidated financial position, results of operations, or cash flows.

1. Gap between Market Demand and Supply:

The capacity addition in the industry if comes within short time gap may impact the margins temporarily.

However, the Company has taken several steps to increase resistance to industry demand and supply gap if any including shifting of product mix to speciality products.

2. Economic slowdown:

Slowdown in the global economy due to current global developments could adversely impact growth in the short-term although impact in not expected to be significant on flexible packaging industry being part of essential commodity.

3. Strategic risks

Strategic risks encompass various factors such as shifts in consumer demand, competition, intellectual property issues, and potential loss of key customers. To mitigate these risks, the Company proactively engage in activities such as staying ahead in new product development, leveraging the protection provided by patent, trademark, copyright, and trade secret laws in its operating countries, and implementing nondisclosure agreements. A dedicated Key Account Team is focused on fostering strong customer relationships and effectively managing customer attrition to ensure a manageable level of risk.

4. Operational risks

Operations risks encompass various factors such as attracting and retaining key personnel, global health outbreaks, and information technology vulnerabilities. The Company prioritises creating a supportive work environment that promotes personal and professional growth to attract and retain key talent. Recognising the potential impact of information technology disruptions, Cosmo First has implemented measures to mitigate risks, although its systems and networks remain susceptible to advanced and persistent threats that could disrupt operations and compromise sensitive data of customers, employees, and vendors.

5. Financial risks

Financial risks encompass exchange rate risks, interest rate risks, and internal control risks. To mitigate exchange rate risks, the company utilises various derivative contracts, such as foreign exchange forward contracts, currency options, cross-currency swaps, and interest rate swaps. These instruments are employed to effectively manage and hedge against foreign currency exchange risks and interest rate fluctuations. In terms of interest rate cash flow risk, the Company follows a policy to minimise exposure on long-term financing. While the Company is exposed to market interest rate changes through variable interest rate bank borrowings, it maintains adequate internal financial controls that comply with the criteria established by the Company, considering the essential components of internal control outlined in the guidance note issued by the ICAI (Institute of Chartered Accountants of India).

6. Legal and compliance risks

In response to concerns surrounding safety, Greenhouse Gas Emissions, climate change, and plastic recycling, various countries have enacted and are expected to enact regulations and legislations. Cosmo First is proactive in taking necessary measures to ensure its operations and products fully comply with safety, health, and environmental regulations. The Companys legal and R&D functions work diligently to protect its patents and proprietary technology across different geographical regions. The Company has implemented robust systems and processes within and in line with the size and scope of its operations, to monitor and ensure compliance with relevant laws, rules, regulations, and guidelines. By doing so, Cosmo First strives to uphold legal and regulatory compliance at all levels of the organisation.

13. OPPORTUNITIES

1. Innovative packages

Marketers are acutely aware of the significant value and perception associated with brands. In the FMCG industry, many companies are embracing the idea of refreshing their packaging designs to align with the core values their brands represent. It is crucial to recognise that packaging not only safeguards the product but also safeguards the brand itself. Cosmo First is fully committed to creating inventive packaging solutions that entice customers and boost sales. The Companys focus is on developing packages that captivate consumers and effectively communicate the essence of its brands.

2. E-commerce

The growth of e-commerce, which was already on an upward trajectory, received a significant boost during the pandemic as consumers prioritise hygienic packaging when making their purchases. This surge in e-commerce activity has heightened the demand for packaging, especially for new products, and has also led to innovations in last-mile delivery solutions to meet these evolving requirements.

3. Digitisation and Internet of Things (IoT)

Companies are harnessing digital initiatives not only to reduce expenses but also to gain a competitive advantage among consumers. One such example is the integration of technology in packaging, which enhances customer value and service. With the rise of loT (Internet of Things), packaging is becoming more intuitive and capable of providing instant information to consumers about the products they purchase. This evolution positions packaging as an enabler, facilitating seamless communication and interaction between products and consumers.

4. Sustainable packaging solutions

Cosmo First recognises that sustainable packaging solutions present the most significant opportunity for the Company, and it is committed to achieving that goal. As the awareness of sustainable packaging requirements continues to grow, the Company views it as an opportunity to meet these demands through its products and manufacturing processes. The Company understands that consumers increasingly seek more sustainable packaging options, and it collaborates closely with its customers to ensure its products meet their sustainability needs.

Through partnerships with leading global brands, Cosmo First offers structure rationalisation and recyclability solutions in various categories such as biscuits, noodles, tea and coffee sachets, and soap wrappers, among others. In its pursuit of a better tomorrow, Cosmo First invests in research and development to expand its specialty film portfolio, providing sustainable solutions.

The Companys initiatives include the development of Oxo-Biodegradable Films, increased utilisation of water-based coatings, and the innovation of heat-resistant BOPP films to enable mono material structures. These monolayered structures not only enhance recyclability but also simplify the recycling process, minimising environmental impact. Cosmo Firsts dedicated R&D team continues to work tirelessly, conducting ongoing research and development to deliver innovative solutions for sustainable packaging.

14. HUMAN RESOURCES AND INDUSTRIAL RELATIONS

Cosmo First recognises that its people are its greatest assets, and the belief in people is central to its human resource strategy. The Company places a strong emphasis on talent management, succession planning, performance management, and learning and development initiatives to foster inspiring, strong, and trustworthy leadership. By promoting knowledge, entrepreneurship, and creativity, Cosmo First utilises its human capital to drive competitiveness. The Company also embraces workforce diversity and strives to build its employees careers through targeted interventions. Learning opportunities enhance employee engagement, boost productivity, reduce turnover, and cultivate a positive culture.

Labour relations in all India operations remained favourable. The Companys plants in India provided various opportunities to encourage an open and supportive work environment, promoting participative decision-making. The Company continued to provide its workers with team-building and collaboration training to strengthen team cohesiveness.

The total employee strength as of 31 March 2023 was 1148.

15. CAUTIONARY STATEMENT

This report will include ‘Forward-Looking Statements, such as statements about the implementation of strategic plans and other statements about Cosmo Firsts potential business developments and financial results. Although these Forward-Looking Statements reflect the Companys current evaluation and potential expectations for the development of the Companys business, a variety of risks, uncertainties, and other unknown factors could cause actual developments and outcomes to vary materially from those expected. General market, macroeconomic, governmental, and regulatory patterns, changes in currency exchange and interest rates, competitive pressures, technical advances, changes in the financial conditions of third parties doing business with the Company, regulatory developments, and other main factors that may have an effect on the Companys business and financial results. Cosmo First disclaims any duty to update or amend any forward-looking statements to represent events or circumstances that might occur in the future.