Comfort Commotrade Ltd Management Discussions

GLOBAL ECONOMIC REVIEW

The global economy witnessed a broad-based slowdown in 2022, weighed down by the Russias invasion of Ukraine, persistently high inflation, slowdown in China and tightening of financial conditions. The Russia-Ukraine war that commenced in February 2022 with no signs of de-escalation, derailed the fragile global economic recovery from the Covid-19 pandemic. This not only led to a devastating humanitarian crisis in Europe soon after the one caused by the pandemic, but also led to a sharp rise in food, oil and other commodity prices across the globe, worsening high inflationary pressures. This, in turn, forced central banks across the globe to resort to rapid monetary tightening, which was equally unprecedented as was the post-Covid easing. The US Federal Reserve, the European Central Bank and the Bank of England raised policy rates by 500 bps, 325 bps and 400 bps in the current cycle. Further, frequent lockdowns in China under its zero Covid policy and property sector crisis, led to a sharp slowdown in the Chinese economy, weighing heavily on global trade and activity.

Indias GDP experienced double-digit growth of 13.1% in Q1 FY2023 partially due to the base effect. However, growth slowed down in Q2 FY2023 and Q3 FY2023, reaching 6.2% and 4.5% respectively, due to high inflation and weakening demand. In Q4 FY2023, growth bounced back to 6.1%, pushing the overall growth rate to 7.2% for FY2023. India continues to be one of the fastest growing major economies globally in FY2023.

Even as global inflation has shown signs of easing, thanks to a decline in commodity prices towards the latter part of 2022, it remains way ahead of the target levels set by the global central banks. The International Monetary Fund ("IMF") projects global inflation at 7% in 2023, down from 8.7% in 2022, even as core inflation is expected to decline more softly. Importantly, the IMF doesnt see inflation rates falling back to targets before 2025 for most economies, which, in turn, may keep global interest rates higher for longer.

INDIAN ECONOMIC OVERVIEW

The Indian economy emerged as a bright spot in an otherwise ailing global environment and made a full recovery in FY 2022-23, growing at the fastest pace among its major developed and emerging market peers. The Central Statistics Offices (CSO) second advance estimate pegs Indias GDP growth at a robust 7.0% in FY 2022-23, on top of an upwardly revised 9.1% growth in the previous year. Investment (gross fixed capital formation) and private consumption were the growth drivers last year, partly dragged down by lower exports and subdued government consumption. Indias external vulnerability increased during the year, with the current account deficit expected to widen in FY 2022-23.

The logistic costs and commodity costs, which had risen substantially due to the Ukraine-Russia war, have started tapering and have also resulted in better margins for various companies. To control inflation, the Reserve Bank of India (RBI) had to adopt a tightening policy and raise interest rates by 250 basis points during the year. However, we expect the interest rates hikes to come to a pause during the next fiscal year.

On the positive side, India has one of the youngest population in the world. The government is committed to infrastructure growth, and adequate capex is happening on defense and infrastructure. Moreover, Indian banking sector has shown resilience during a global banking crisis demonstrating inherent strength of the economy and the banking system. We are likely to see consolidation with a strong positive bias and continue to attract the attention of global investors amidst a forecasted global slowdown.

OVERVIEW OF CAPITAL MARKETS

Aggressive rate hikes by the US Federal Reserve, Russia-Ukraine war, supply-side pressures, slowdown in China induced by a zero-Covid policy and global growth slowdown weighed collectively on global markets in FY 2022-23, particularly in the first half. The MSCI world index (developed market index) fell 22% in the first half of FY 2022-23 the steepest fall during this period in two decades. The MSCI emerging market (EM) index underperformed with a higher drop of 23% during this period the highest in 11 years.

Global equities, however, witnessed a modest rebound in the second half as expectations of a policy pivot gained strength amid easing inflation. Additionally, lifting of restrictions in China imposed under its zero-covid policy towards the latter part of the year and consequent rebound in the economic activity fuelled the rally, notwithstanding a modest reversal towards the end thanks to the stress in the global banking sector. During this period, the MSCI World and MSCI EM Index generated strong gains of 17.4% and 13.1%, partly reversing some of the losses seen in the first half. Consequently, the MSCI World and MSCI EM index ended FY 2022-23 with losses of 8.6% and 13.3% respectively.

On the capital raising front, 13.5 lakh crores were mobilised through debt (including public and private placement) as well as equity from the primary market during FY 2022-23. In the equity market, the amount raised was 1.5 lakh crores whereas the amount raised in debt market was Rs 12 lakh crores.

INDIAN CAPITAL MARKET

Indian stock market has seen a roller-coaster ride in FY 2022-2023 amid aggressive monetary policy stance by global central banks, the Russia-Ukraine war, high inflation, and outflows from overseas funds. Nifty and Nifty Midcap 100 were flat in FY 22-23 while the small-cap was down by 4%. Despite all these challenges, India was still the second best performer among the emerging markets in FY 22-23 after South Africa. The outperformance was mainly because of Rs 2.6 trillion net inflows from domestic institutional investors compared to around H2 trillion outflows by Foreign institutional investors.

Indias equity market is well-developed and is on par with international standards. This particular segment of the capital market has grown tremendously over the years supported by consistent technological advancement and regulatory support. Indias equity market now ranks 5^th globally in terms of market capitalisation, while the BSE exchange, one of the prominent Indian exchanges having the largest number of listed companies globally. Retail participation in the Indian stock market has seen a marked improvement over the last few years. SEBI has accelerated its attempt to educate investors and has also taken many measures aimed at strengthening investor protection. The recent shift to T+1 settlement cycle for equities is a laudable achievement and puts India ahead of other developed and emerging economies.

As far as the debt market is concerned, the G-Sec market is relatively well developed in terms of liquidity, investor base, and turnover, while the corporate bond remains undersized. With bank loans being the predominant source of financing, the full potential of the corporate bond market has not yet been tapped into. Preference of private placements, low retail participation, lack of risk-taking due to regulatory restrictions, and operational complexities are some of the challenges that the corporate bond market currently faces. These hurdles have been identified, with SEBI and RBI taking active steps to develop and deepen the corporate bond market. Introduction of market makers, improving liquidity, setting up of a uniform valuation framework and steps to enhance the complementary repo and derivatives market, are some of the recommendations for further developing the corporate bond market.

Over the years, the Indian commodity derivatives market has expanded with many new products and segments. With permission given to institutional investors like Category-3 (Alternative Investment Fund), PMS (Portfolio Management Service), EFEs (Eligible Foreign Entities) and mutual funds to trade in commodity derivatives, there has been an expansion in the eligible categories of participants. Despite these developments, the market is concentrated among a few market exchanges, product- segments and participants. In recent years, SEBI undertook various measures to deepen the commodity derivatives market, but there is a need to speed up the pace of reforms further to ensure large participation from primary producers, processors, industrial consumers, exporters, and importers of commodities.

With the increasing demand for infrastructure spending and an over-reliance on the banking sector to meet funding requirements, role of the capital market in mobilising capital for productive investment and bridging the funding gap assumes significance. A well-developed and deeper capital market enhances economic growth through financing the long-term investment requirements and also encourages discipline among businesses to perform. It also helps in diversifying credit risk and in reducing the cost of capital through promoting innovative and cost-effective financial instruments.

Notwithstanding the pandemic woes spanning over the last two years and geopolitical tensions arising towards the end of the last fiscal, the equity market has held strong and has shown resilience. FY 22 witnessed a boom in IPOs listing on the exchanges with corporate raising highest ever funds through IPOs. Indias share in global market capitalisation (m-cap) has been rising over the years. India now ranks 5^th in the world market capitalisation only behind developed nations like US, China, Japan, and Hong Kong. As of March 2023, Indian stock exchanges feature among top 10 in the world in terms of market capitalisation. The Bombay Stock Exchange is Asias oldest stock exchange and has the highest number of listed companies globally. As on March 2023, a total of 5,220 companies are listed on BSE while NSE has 2,138 companies listed on it. In the last 12 years, the number of listed companies has grown by 5.5% on BSE Limited whereas, National Stock Exchange of India has witnessed a whopping 31% increase.

COMMODITY MARKET

The Indian financial market offers numerous ways, apart from equity, to invest, diversify and ensure a positively healthy portfolio. One such method is commodity trading. The commodity market in India is over 100 years old but was officially established through a legal trading mechanism in the year 2003. As every country relies on raw materials to grow, the commodities markets have a special place in driving a countrys economy and allowing investors to profit along the way. Trading in commodities is slightly different as compared to trading in equities. The ticket size and the value of trades are comparatively higher in the commodities market. Because of this, such trades involve maintaining margin money, mark-to-market settlements and effective delivery. Commodities are goods that are used in everyday life. These can be exchanged for cash or other goods. Commodities include an array of items ranging from grains, oil, natural gas to crude oil, diamonds, etc. The price of commodities depends on the principles of demand and supply. In India, commodities are traded on various exchanges - primarily MCX (Multi Commodity Exchange of India Ltd.) and NCDEX (National Commodity & Derivative Exchange Limited). It is under the ownership of the Ministry of Finance and regulated by SEBI.

The financial year 2022-23 has ended on a positive note with MCX gaining further strength in its key domain areas. The volumes on the Exchange have been surging in the recent months, wherein turnover in the Options segment has been most noteworthy. The Exchange clocked its highest ever turnover on 15t h March 2023 of 1.68 lakh crore, which also included a record Options turnover of Rs 1.37 lakh crore. In line with initiatives at market inclusion of small stakeholders and new participants, MCX launched a mini futures contract in Natural Gas (250 MMBTU) on 14^th March, after having re-launched mini contracts in other commodities in Energy and Base Metals segments. The newly-launched Natural Gas Mini futures has started with a promising note, having achieved an average daily turnover of 37 crore and average daily Open Interest of 4131 lots during March 2023.

STOCK BROKING SECTOR

The Indian broking industry is very diverse with many intermediaries forming a part of the market infrastructure. Over the years, more efficient players have grown considerably in size, thus gaining healthy market share across parameters. The Indian broking industry exhibits a remarkable diversity, encompassing numerous intermediaries that contribute to the market infrastructure. In the past few years, many new digital and discount broking companies have entered the market resulting in severe competition and low brokerage rotes.

Retail broking businesses continue to improve their market share through digital initiatives. The rise of discount brokers has made it easy to invest in financial markets via zero brokerage, e-KYC and user-friendly mobile-based platforms which has made stock buying as seamless and intuitive as shopping online. Quick and paperless on boarding, UPI-based fund transfers, and a stable and scalable product have enabled equity participation for every Indian. The number of demat accounts in India rose to 11.4cr in March 2023 from 9cr in March 2022, registering a growth of 27%.

KEY GOVERNMENT INITIATIVES

Capital market and financial sector reforms:

The 2023 Union Budget saw a continued focus on developing and deepening capital and financial markets. Some of these included:

• Setting up of National Financial Information Registry as a central repository of financial and ancillary information,

• Capacity building in securities market, empowering SEBI to develop and enforce norms for education in the National Institute of Securities Market (NISM) and

• Launch of Central Bank Digital Currency (CBDC) for both wholesale and retail segment to facilitate a more efficient and cheaper currency management. Further, the RBI also took the first step towards internationalizing rupee, facilitating international trade settlement in Indian rupee. In March 2023, it approved 60 domestic and authorised foreign dealer banks from 18 countries to open Vostro Accounts.

ABOUT COMFORT COMMOTRADE LIMITED

The Company was originally incorporated in Mumbai as "Comfort Commotrade Private Limited" on November 05, 2007 under the Companies Act, 1956 vide Certificate of Incorporation issued by the Registrar of Companies, Maharashtra, Mumbai. Our Company was subsequently converted into Public Limited Company and consequently the name was changed to "Comfort Commotrade Limited" vide Fresh Certificate of Incorporation dated May 21, 2012 issued by the Registrar of Companies, Maharashtra, Mumbai. Further the Equity Shares of the Company were initially listed on SME Platform of BSE Limited. However, post migration, the Equity Shares are now listed on BSE Main Board vide BSE notice dated April 26, 2016. The Company has altered its Main Object at the Extra-Ordinary General Meeting held on March 24, 2021. The Company is currently engaged in the business of Commodity Broking and is a Member of MCX. It offers trading in many commodities such as bullion (gold, silver), energy (crude oil, natural gas) metals, food grains (rice, maize), spices, oil and oil seeds and others.

Our Company has been undertaking various types of initiatives for increasing the awareness and improving the participation in the commodities markets under the guidance of MCX. These programmes are aimed at ensuring financial inclusion, and raising the financial literacy levels among the various market participants, like, farmers, producers, traders, processors, importers, exporters and other stakeholders in the value chain, and also informing them about the benefits of trading in the commodity markets.

Towards the same, our Company has organized 3 Programmes in association with MCX at Mumbai, Hyderabad and Jhunjhunu (Rajasthan).

Subsidiary Company

The Company has one Wholly Owned Subsidiary Company viz. Anjali Trade Link FZE which has been duly incorporated as a Free Zone Establishment with limited liability pursuant to Emiri Decree No. (6) of 1995 of H.H. Sheikh Dr. Sultan Bin Mohammed AI- Qasimi Ruler of Sharjah and Implementing Rules and Regulations issued thereunder by the Hamriyah Free Zone Authority and registered in the FZE Register in U.A.E. incorporated on January 28, 2014. The Company is engaged in General Trading and as more particularly described in, and subject to, the License issued by the Hamriyah Free Zone Authority.

DEVELOPMENT OF HUMAN RESOURCES

The Company values its human resources and believes that the success of an organisation is directly linked to the competencies, capabilities, contributions, and experience of its employees. The HR policies and practices are built on the Groups core values of Integrity, Passion, Speed, Commitment and Seamlessness. The HR department promotes a culture of integrity, honesty and a constant learning attitude, while also maintaining cordial relationships, equal opportunities and policies to prevent harassment. The Company has embarked on various human resource activities to enhance the productivity of the workforce. The Company endeavors to provide a safe, conducive and productive work environment.

Through a performance-driven culture, the Company motivates its employees to deliver excellence, which adds value to its brand while responding successfully to business challenges. As we scale up our business and strive to build a future-ready organisation, talent attraction and retention, employee development and well-being, equal opportunities and harmonious relationships are key areas of focus.

As on March 31, 2023, the Company had a total head count of 11 employees. The Directors wish to place on record their appreciation and acknowledgment of the efforts and dedication and contributions made by employees at all levels during the year under review. The Company continues to focus on attracting new talent & help them to acquire new skills, explore new roles and realize their potential.

FINANCIAL HIGHLIGHTS

( in Lakh, except EPS)

PARTICULARS	STANDALONE		CONSOLIDATED
	2022-2023	2021-2022	2022-2023	2021-2022
Revenue from Operations	6,768.53	15,134.15	6,768.53	15,143.14
Other operating Income	33.08	45.31	33.13	45.35
Total Revenue	6,801.61	15,179.47	6,801.66	15,188.50
Total Expenditure	6,948.38	14,733.88	7,011.49	14,787.01
Profit / (Loss) before Tax	(146.76)	445.59	(209.83)	401.48
Current Tax Expenses	0.00	238.36	0.00	238.36
Deferred Tax	0.00	0.00	0.00	0.00
Tax of earlier years	19.05	4.72	19.05	4.72
Profit / (Loss) for the Year	(165.81)	202.51	(228.88)	158.41
Earnings Per Share (EPS) (Basic & Diluted)	(1.65)	2.02	(2.28)	1.58

During the year under review, your Companys total revenue from operations on standalone basis has changed to 6,768.53 lakh as compared to 15,134.15 lakh in the previous financial year. The loss for the year under review is (165.81) lakh as compared to the profit of Rs 202.51 lakh in the previous financial year.

During the year under review, your Companys total revenue from operations on consolidated basis has changed to Rs 6,768.53 lakh as compared to Rs 15,134.14 lakh in the previous financial year. The loss for the year under review is Rs (228.78) lakh as compared to the profit of 158.41 lakh in the previous financial year.

Your Company has been earning profits for the past financial years except for the year under review. Due to market fluctuations, the loss incurred during the year in the Company is a valuation loss. The same is a temporary decline in profit. The market has recovered since then, thereby increasing the revenue from operations of the Company in the present scenario as compared to March 31, 2023.

Details of significant changes, if any, in the Key Financial Ratios, along with the detailed explanation are provided in the accompanying financial statements which form part of this Annual Report. Return on Net worth of the Company is changed to (6.19) % in the financial year 2022-23 as compared to 7% in the previous financial year due to decrease in Profit after Tax of the Company.

INTERNAL CONTROL SYSTEM AND ADEQUACY

The Company has a well-defined organisational structure, documented policy guidelines, and a defined authority matrix that ensures efficiency of operations, compliance with internal policies and applicable laws and regulations, as well as protection of resources. The Company believes that a strong internal control system and processes play a critical role in the day-to-day operations of the Company. The Company has put in place an effective internal control system to synchronise its business processes, operations, financial reporting, fraud control, and compliance with extant regulatory guidelines and compliance parameters. Strict internal control and systems are devised as a depiction of the principles of the highest standards of governance. The Company ensures that a standard and effective internal control framework operates throughout the organisation, providing assurance about safekeeping of the assets and execution of transactions as per the authorisation in compliance with the internal control policies of the Company.

Besides protecting the Companys assets, it also constantly checks on the coexistent of its control, policy, and technology design. Based on that it suggests improvements and/or enhancements to its operational processes and reporting systems.

The Audit Committee of the Company reviews and recommends the unaudited quarterly financial results and the annual audited financial statements of your Company to the Board for approval. Your Company has appointed M/s. ASHP & Co. LLP, a firm of Chartered Accountants to conduct independent financial and operational internal audit in accordance with the scope as defined by the Audit Committee. The Internal auditors of the Company make continuous assessment of the adequacy and effectiveness of the internal controls and systems across the Company. The reports from the Internal Auditors are reviewed by the Audit Committee on periodic basis.

RISK MANAGEMENT

Risk is an integral part of the business and almost every business decision requires the management to balance risk and reward. The very nature of the Companys business makes it susceptible to various kinds of risk. Some key risks that affect the Companys overall governance include technology risk, operational risk, market risk, compliance risk, governance risk, competition risk and credit risk.

• Technology Risk: The management periodically reviews various technology risks such as protecting sensitive customer data, identify theft, cyber-crimes, data leakage, business continuity, access controls, etc. While the Company has put in place processes, systems and tools and is actively monitoring suspicious activities.

• Operational Risk: Operational risk is the risk that improper operation of trade processing or management systems will result in financial loss potentially resulting in significant liability and reputational damage. The breach of the Companys system, as well as those of its clients or third parties, can lead to unauthorized access, theft of sensitive information, such as client personal data or financial details, and financial fraud.

• Market Risk: Market risk inherent in any investment is the risk that the investment will not be as profitable as the investor expected because of fluctuations in the market. Market risk involves the risk that prices or rates will adversely change due to economic forces. Such risks include adverse effects of movements in equity and interest rate markets, currency exchange rates, and commodity prices. As sustained downturn is highly sensitive to economic and political conditions or Indian equity markets and severe market fluctuations would likely result in reduced client trading volumes and net revenues, and hence, will have a material adverse effect on our profitability.

• Compliance Risk: Compliance risk involves the potential exposure to legal and financial penalties and material loss, caused by its failure to act in accordance with industry laws and regulations, internal policies, or prescribed practices. In the context of stockbroking business, incompliance with laws may lead to lower efficiency of work, high operation cost, loss in operations, loss in revenue, punishments, or fines.

• Competition Risk: Competitive risk involves the chance that competitive forces can prevent the business from achieving its goal. For Stockbrokers, the potential risk from inside the industry can be intensified competition within the securities industry. The risk from outside industry mainly comes from other financial institutions such as Banks and Insurance Companies. It can be seen that the financial industry has shown a trend of mixed operations, which can lead to fierce competition from the banking industry to such stockbroking organizations.

• Credit Risk: In essence, credit risk means a risk of default on a debt that may arise from a borrower failing to make payments. The brokerage business of securities trading organizations includes the risk of losses from overdraft by clients and the risk of losses from the absence of client confirmation relating to agency transactions. The introduction of securities margin trading has increased credit risk for the business. Margin trading is like using borrowed funds from brokers to trade financial securities, which act as collateral for the loan.

Pursuant to Section 134 (3) (n) of the Companies Act, 2013, the Company has adequate risk management mechanism and is periodically reviewed by the Board. The major risks identified by the business are systematically addressed through mitigating actions on a continuing basis and cost-effectively risk are controlled to ensure that any residual risks are at an acceptable level. Whilst it is not possible to eliminate the risk absolutely effort is underway to actively promote and apply best practices at all levels and to all its activities including its dealing with external partners. The risk management approach is based on a clear understanding of the variety of risks that the organization faces, disciplined risk monitoring and measurement and continuous risk assessment and mitigation measures. The risk management approach is based on a clear understanding of the variety of risks that the organization faces, disciplined risk monitoring and measurement and continuous risk assessment and mitigation measures.

OUTLOOK

India is currently at an advantageous position compared to the global economy as it has remained relatively resilient to the international shocks that have been disrupting countries across the world. From a longer term perspective, it enjoys the advantage of having a young demographic that is technology inclined. As new-age technology pervades various aspects of business, particularly the financial sector, individuals and enterprises will benefit from services that are faster and more transparent and efficiency. As the equity culture spreads and grows deeper, our Company is well placed to serve customers across the country, particularly in tier 2 and 3 towns and villages, on the strength of the substantial investments in people, processes and technology that it has made in previous years. Our Company continues to focus on delivering steady performance and staying ahead of the trends in the capital market and brokerage segment by leveraging its technology advantage.

CAUTIONARY

The statements made in this Report describing the Companys objectives, projections, estimates, expectations are the forward looking statements within the meaning of applicable securities laws and regulations and are subject to certain risks and uncertainties like regulatory changes, local, political and economic developments and other factors. The achievements of results are subject to risks, uncertainties and even inaccurate assumptions. Should know or unknown risks or uncertainties materialize or should underlying assumptions prove inaccurate, actual results could vary materially from those anticipated, estimated or projected.