Comfort Intech Ltd Management Discussions

GLOBAL ECONOMIC OVERVIEW

Global economic growth outperformed expectations in 2023 with several large economies showing remarkable resilience. In spite of this, geopolitical tensions, the growth of extreme weather events, tight financial conditions also pose increasing risks to global trade and industrial production. The outbreak of the war in Ukraine, inflation, struggling to recover from pandemic losses along with many facing high debt and investment shortfalls had a global impact. However, there was strong resilience seen, especially in the second half of 2023, led by major economies While the global Gross domestic product ("GDP") is expected to have grown in 2023, it is expected to fall slightly in 2024. The United States, the worlds largest economy, is expected to see a drop in GDP growth from 2.5% in 2023 to 1.4% in 2024. Consumer spending, a key driver of its economy, is likely to weaken primarily due to high interest rates and a softening labour market.

Although the outlook has started to brighten recently, ongoing tightened financial conditions and persisting geopolitical risks put a limit on the global recovery. Despite the global challenges, some emerging economies, particularly those from Asia Pacific, are expected to sustain solid growth rates and lead the global economic expansion in 2024 and beyond.

Out of the worlds 62 major economies in Euromonitor Internationals Macro Model, five emerging Asian countries are expected to have the highest real GDP growth rates in 2024 which includes India, the Philippines, Vietnam, Indonesia and China.

INDIAN ECONOMIC OVERVIEW

The Financial Year 2024 started with a few headwinds although as the quarters passed the challenges eased and global environment improved.

Indias economy is expected to grow by 6.7% in 2024, which is the highest rate among the worlds key economies. Growth is supported by a positive trajectory in fixed investment, on the back of sustained government capital expenditure, as well as improving private investment.

Despite a challenging global environment, countrys investment path is strong which driven by recent improvements in Indias business environment, structural reforms and the ongoing diversification of global supply chains.

Going forward, the Indian economy will continue to benefit from its youthful demographics, an expanding middle class, and its technological innovation capacity, as well as a deeper integration into the global value chains. The key challenges facing the economy are creating enough jobs for its abundant workforce and addressing its existing vulnerabilities, which include fragile energy and food security and intensifying climate change risk.

INDUSTRY OVERVIEW AND DEVELOPMENTS

SECURITIES MARKET INDUSTRY: -

As compare to previous years, following two years has exceptional performance, the equity markets took a breather in 2022-23, with the benchmark indices Nifty 50 and Sensex ending the year on a flat note, posting -0.6 and 0.7 per cent returns respectively. An increase in retail investors in capital markets can be seen as an industrys new account openings. According to available information, a growing proportion of new investors are of a younger age group (less than 30 years). However, the retail broking segment has also gain more dynamic and has seen significant disruption in recent years due to the growing prominence of discount brokerages. Their competitively priced offerings, as well as no-frills basic accounts and services, have resulted in a realignment of pricing strategy across the industry. Several Private Equity Funds have been successful in gaining investors confidence with stellar returns over the years.

LIQUORS INDUSTRY: -

India is one of the fastest growing alcohol markets among the top economies in the world. Growth in urban population coupled with the increasing disposable income is projected to drive the market growth of alcohol. The recorded per capita consumption of pure alcohol in India has moved from 0.9 liter in 2000 to 3 liter in 2015 at a CAGR of more than 8%. Indias percentage of drinking population is projected to be close to ~33% in financial year 2021 and ~39% in financial year 2025. Volumes are dominated by spirit but wine is showing high growth rate.

Change in demographics as well as the change in lifestyle is another major factor expected to foster the market of alcohol. The legal drinking age in India varies from state to state (from 18 years to 25 years), further indicate that India is ideal for the high growth of the alcohol market. Both domestic and international players are vying for a larger slice of the pie. From traditional spirits like whiskey and rum to emerging segments such as craft beer and premium spirits, the industry showcases a remarkable diversity that caters to a wide spectrum of consumers.

Source:

TRADE INDUSTRY: -

Indian retail market has always been at its peak. Retail sales in March 2024 showed a growth of 8% as compared to the sales levels in March 2023, according to the survey by Retailers Association of India (RAI). India market is more technology friendly which inter-alia includes internet and smartphone, electronic gadgets. The Indian e-commerce industry is projected to reach US$ 300 billion by 2030, experiencing significant growth. It has transformed the way business performances and has opened various segments of commerce ranging from business-to-business (B2B), direct-to-consumer (D2C), consumer-to-consumer (C2C) and consumer-to-business (C2B).

FINANCIAL SERVICES INDUSTRY: -

India has a diversified financial sector undergoing rapid expansion, both in terms of strong growth of existing financial services firms and new entities entering the market. The sector comprises: ? Commercial banks, ? Insurance companies, ? Non-banking financial companies, ? Co-operatives, pension funds, ? Mutual funds, ? Other smaller financial entities, etc.

The Government has initiated various policies and schemes that are favourable for the growth of the financial service sector.

ABOUT COMFORT INTECH LIMITED

The Comfort Intech Limited (‘CIL or ‘the Company) was originally incorporated as Public Limited Company in the name of Comfort Finvest Limited on October 17, 1994. Subsequently, the name of company was changed to Comfort Intech Limited and a fresh Certificate of Incorporation was issued on March 24, 2000.

BUSINESS OVERVIEW

- ??LiquorManufacturing,Bottling,andDistribution:

Our esteemed company takes pride in its involvement in the manufacturing, bottling, and distribution of liquors, particularly alcoholic beverages falling under the IMFL (Indian Made Foreign Liquor) category in the vibrant state of Telangana. With a focus on quality and innovation, we have established our own brands, ensuring that each sip delivers an unforgettable experience. Comfort Intech Limited ("CIL") has strategically invested in ‘Liquors India Limited (LIL), a company that owns and operates distillery business as well as bottling contracts for various other Companies in the state of Telangana. LIL was incorporated on January 16, 1975 and currently holds a prestigious IMFL License issued by the Telangana Prohibition and Excise Department. LIL has always been a part of Comfort Group and an associate Company of CIL with effect from June 2013. Further during the year under review, LIL become a subsidiary company of CIL by way of additional investments in equity shares of LIL with effect from January 2024.

LILs portfolio boasts a variety of offerings including Whisky, Brandy, Rum, and Gin, under renowned brand names like Deccan Blue, Gold Mark Reserve, Magnum Gold Premium, Gold Mark VSOP Brandy, and more. Further, LIL also has Bottling contracts of Tilak Nagar Industries Limited and Blue Ocean Beverages Ltd during the financial year ended March 31, 2024.

services bottling contracts of various other liquor companies like Tilak Nagar Industries Ltd. Key highlights of LILs operations include: A sprawling factory land spanning 2 acres in Hyderabad. State-of-the-art bottling lines, with a combination of semi-automatic and fully automatic systems, totaling five lines. Impressive storage capacities of approximately 5 lakh litres for ENA (Extra Neutral Alcohol) and over 4 lakh litres for Blending tanks. A licensed capacity enabling the production of 1,30,000 cases per month.

? Trading of Goods: -

In addition to our stronghold in the liquor industry, Comfort Intech Limited extends its expertise to the trading of goods across various categories. From consumer appliances and durables to textiles and beyond, we are actively engaged in trading goods both online through e-commerce platforms and offline channels of distribution. Our commitment to quality remains unwavering as we curate a diverse range of products, ensuring customer satisfaction at every touchpoint.

FINANCIAL PERFORMANCE

The following table presents Companys abridged financials for the financial year 2023-24, including revenues, expenses and profits.

(Rs. in lakh, except EPS)

	STANDALONE		CONSOLIDATED
Particulars	2023-2024	2022-2023	2023-2024	2022-2023
Revenue from Operations	18,485.97	16,412.41	18,599.46	16,412.41
Other Income	165.13	90.40	171.02	90.40
Total Income	18,651.09	16,502.81	18,770.48	16,502.81
Total Expenditure	17,683.72	15,707.96	17,858.43	15,707.96
Profit before Tax	967.37	794.85	912.05	794.85
Current Tax Expenses	205.85	184.61	205.85	184.61
Deferred Tax	50.81	23.34	44.79	23.34
Tax of earlier years	(6.91)	(0.52)	(6.91)	(0.52)
Profit for the Year	717.62	587.42	668.32	587.42
Share of Profit/(Loss) of Associate	-	-	1040.06	114.99
Other comprehensive income/(loss)	1750.58	(31.06)	1755.15	(30.13)
Total Other comprehensive income/(loss) for the year	2468.20	556.36	3463.53	672.28
Earnings Per Share (EPS) (Basic & Diluted)*	0.22	0.18	0.54	0.22

During the year under review, your Companys total revenue from operations on standalone basis increased to Rs. 18,485.96 lakh as compared to Rs. 16,412.41 lakh in the previous financial year. Total Comprehensive Income profit increased to Rs. 2468.20 lakh as compared to Rs.556.36 lakh in the previous financial year. During the year under review, your Companys total revenue from operations on consolidated basis increased to Rs. 18,599.46 lakh as compared to Rs. 16,412.41 lakh in the previous financial year. Total Comprehensive Incomeprofit increased to Rs. 3463.53 lakh as compared to Rs.672.28 lakh in the previous financial year. The Management continues to concentrate its efforts to increase the revenue of the Company by identifying new opportunities.

Details of Significant changes, if any, in the Key Financial Ratios, along with the detailed explanation thereof:

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 increased to 6.47% in the financial year 2023-24 as compared to 5.89% in the previous financial year due to increase in Profit after Tax of the Company.

SEGMENT WISE PERFORMANCE

1. Liquors Division

The said division of the Company is in the business of manufacturing and distribution of alcoholic beverages under IMFL category in the state of Telangana under its own brands. Further, the Company has also invested in ‘Liquors India Limited ("LIL") which is its Subsidiary company, and is a distillery and has all the manufacturing licenses in place for IMFL manufacturing and is engaged in Bottling for various Liquors companies. LIL is an unlisted Public Company incorporated under the Companies Act, 1956 on January 16, 1975 having its registered office at Telangana, Hyderabad. LIL mainly does bottling activity for various liquor companies under their respective brands.

LIL holds an Indian Made Foreign Liquors ("IMFL") License issued by Telangana Prohibition and Excise Department. Presently, your Company CIL avails bottling services from LIL for manufacturing and supply of its own brands in the state of Telangana. LIL also provides its services to 15 other Liquors brands in India including your company.

Margins from manufacturing and selling of liquors were under pressure as a result of increase in price of various raw materials due to the scarce availability and rising inflation. However, the Company managed to secure decent profit even in such conditions. Further, your Company is exploring options to introduce new brands in the premium and semi premium range and also exploring opportunities for geographical expansion in multiple states for the existing and new brands and accordingly this division is expected to do even better in the current year.

2. Goods Trading Division

The Companys Goods Trading division is currently engaged in business of trading goods in various categories such as consumer appliances and durables, home appliances and electronics, textiles, etc., including but not limited to fans, fabrics, water heater, monoblock pumps, all kitchen appliances, home appliances, etc. on the e-commerce marketplace platforms and the immediate suppliers of the marketplace platforms and in offline channels of distribution. The Company is further planning to diversify its trading division.

This division has received a strong market demand in future. Profit contribution of the division has certainly shown an increase as compared to previous periods & expected to grow further in financial year 2023-24 & onwards.

3. Finance Division

Finance Division of the company is developing in line with rapid expansion and evolution of Indias financial services sector. Profits of the Company contributed from this division certainly increased as compared to previous financial year as a result of growth in Indias financial sector. Further future performance of this division is expected to be on a positive side.

4. Trading in Shares/Mutual Funds Division -

The Company does trading and investments in selective stocks and mutual funds during the year under review. Value of investments by Company certainly increased with Sensex and Nifty achieving their all-time highs.

Details of Segment wise performance of the Company on standalone basis during the year under review is given here under:

(Rs. in Lakh)

Sr. No.	Particulars	ax T Incomefromoperations Profit beforeDepreciation, and Finance Cost
		2023-2024	2022-2023	2023-2024	2022-2023
1	Trading in Goods	11,011.73	10,457.69	375.42	560.49
2	Manufacturing in Liquor	6,914.36	5,410.73	322.34	32.71
3	Trading in Shares/Mutual Funds (net)	213.81	107.45	213.65	107.34
4	Financing	314.31	341.83	314.31	341.83
5	Leasing of Immovable Properties	31.75	94.70	31.75	91.99

STRENGTHS

? Talent Management;

? Diversification of financial services through innovation; ? Well-defined and expansible organization structure.

WEAKNESSES

? Available in restricted geographies not PAN- India basis; ? Does not enjoy the first-mover advantages over other competitors; ? Does not have aggressive advertising strategies; ? Unfavorable changes in government policies and the regulatory environment.

OPPORTUNITIES

? Growth Potential; activities ; ? Expansion of existing

? Retention of customer base with a holistic association approach; ? Advancements in Technology.

THREATS

? The alcohol industry in India is highly regulated. The industry also falls under the purview of national laws and regulatory bodies, such as the Food Safety and Standards Authority of India (FSSAI). Compliance with relevant regulations results in higher operating costs and also limits the Companys ability to quickly capitalise on the opportunities that Indian market offers; ? Dynamic Competition; ? Operational Challenges; ? Unpredictable revisions in the tax system, laws and regulations in liquor Industry.

RISKS & CONCERNS

As per the Oxford Dictionary "Risk is Exposure to the possibility of loss, injury, or other adverse or unwelcome circumstance; a chance or situation involving such a possibility" Risk in simple terms implies the possibility of something uncertain happening. . However, Risk being an integral part of any business, it is necessary to mitigate it. In the business world, the Company experiences numerous types of risks which is base for the achieving of an organizations objectives. While the Indian economy has shown sustained growth over the last several years, a slowdown could cause the business of the Company to suffer. Your Company is exposed to specific risks that are particular to its business and the environment in which it operates. Due to rapid changes in the technologies, business dimensions and complexities, regulatory changes and environmental concerns, new and various risks have emerged.

Every risk which is identified by the Company goes through following stages in order to be managed effectively: -

The Companys has framed risk management policies to identify and analyse the risks faced by the Company, to set and monitor appropriate risk limits and controls, periodically review the changes in market conditions and reflect the changes in the policy accordingly. The key risks and mitigating actions are also placed before the Audit Committee of the Company.

Following are certain Risks which are dealt by the Company:

? Market Risk:- This is a type of risk that arose due to adverse changes /volatility in the market. This risk is further classified as follows

- Interest Rate Risk:- The financial assets, which are connected with interest factors faces this risk. Any increase in the interest reduces the price of bonds and debts instruments in debt market and vice - versa. However, your companys borrowings are at fixed interest rate and hence the exposure to change in interest rate is insignificant.

- Equity Risk:- It means the depreciation in investment due to the change in market index. Risk is associated with the day-to-day fluctuations in the market.

? Credit Risk:- When a counter party is unable or unwilling to fulfill their contractual obligation, the credit risk arises. This type of risk is related to the probability of default and recovery date. Its effect is measured by cost of replacing cash flow if the other party defaults. Your Company has put in place necessary measures to ensure credit risk.

? Liquidity Risk:- The liquidity risk arises due to mis-matches in the cash flow i.e. absence of adequate funds. Liquidity is altogether different from the word solvency. A firm may be in sound position as per the balance sheet, but if the current assets are not in the form of cash or near cash assets, the firm may not make payment to the creditors which adversely affect the reputation of the firm. Your Company ensure that it has sufficient funds to meet its liabilities as & when they arise.

? Legal Risk:- This risk arises when company does not have the legal or regulatory authority to engage in the transactions. It also includes the compliance and regulatory risk like insider trading, market manipulations, defaults and mismanagement of legal affairs etc.

- Compliance Risk:- Non-compliance or breach of laws/ regulations which the entity is supposed to adhere is referred to as compliance risk. This may also result in deterioration of reputation in public eye, penalty and penal provisions.

- Regulatory Risk:- Risk by reason of changes in government policies and perceptions is regulatory risk. Especially this type of als Pharmaceutic risks is associated with Food & Beverages and Industries.

Your Companys dedicated compliance & legal team, in consultation with Board, undertakes necessary steps and plan well in advance in order to avoid this risk.

Every business decision requires the management to balance risk and reward. "Risk Management" is a term used to describe the processes which aim to assist organizations to identify, understand, evaluate and take action on their risks with a view to increasing the probability of their success and reducing the impact and likelihood of failure. The ability to manage risks across geographies, products, asset classes, customer segments and functional departments is of paramount importance for the hindrance free growth of every organization. Different types of risk existing in the business are to be controlled, mitigated and managed. Risk management has become the mechanism to manage risks so that the negative consequences are kept within acceptable tolerances. It is a continuous process. Your Companys top level management is highly committed towards effective & efficient risk management.

INTERNAL CONTROL SYSTEM AND ADEQUACY

The Company believes that strong internal control system and processes play a critical role in the health of the Company. The Company is having an internal control system including suitable monitoring procedures commensurate with its size of operations; The Companys well-defined organizational structure, documented policy guidelines, defined authority matrix and internal controls ensure efficiency of operations and compliance with internal policies and applicable laws and regulations as well as protection of resources;

The internal control system is supplemented by extensive Internal audits, regular reviews by the management, standard policies and guidelines which ensure effective operation of defined control, reliability of financials and all other records; Your company has appointed M/s. AHSP & Co. LLP, Chartered Accountants as Internal Auditor of the Company who carries out the internal audit functions of the Company and review of internal control mechanisms prevailing in all the Divisions of the Company and submits the report to the Audit Committee and Board of Directors of the Company from time to time. Immediate corrective actions are taken on the recommendations/ suggestions, in any, made by Internal Auditor in such report; Further the Internal Auditor has certified that the Company maintains an adequate system of internal financial controls, evaluates and makes an assessment of its adequacy and effectiveness in a satisfactory manner which takes care of requirements under the Companies Act, 2013.

HUMAN RESOURCES (HR)

People are our key pillars of strength. Human Capital is the core strength in achieving the sustainable growth path charted by our strategic apex as it plays an important role in developing, reinforcing, and enhancing the culture of an organization. As on March 31, 2024, your Company had a total head count of 8 employees. The Directors wish to place on record their appreciation and acknowledgment for the efforts and dedication and contributions made by employees at all levels during the year under review.

Comfort Intech Limited has consistently been agile and has improved its human resource practices to match up to the dynamic workplace. The Company has very cordial and harmonious relationship with its employees. The Nomination and Remuneration Committee periodically reviews career growth plan of senior management personnel possessing ability to build teams and nurture leaderships for future growth plans of the Company.

Your Company has adopted people practices that enable us to attract and retain talent in an increasingly competitive market; and to foster a work culture that is always committed to providing the best opportunities to employees to realize their potential. We are committed as an equal opportunity employer and follow non-discrimination in all our practices. All employees, from a new joiner to a tenured one, are provided tailored learning opportunities as per their role, level, and specific focus area.

OUTLOOK

Different sectors in the economy are undergoing different modes of revival, coming years will be challenging as well as full of opportunities. The World Economic Situation and Prospects as of mid-2024 said "Indias economy is forecast to expand by 6.9% in 2024 and 6.6% in 2025, mainly driven by strong public investment and resilient private consumption". In relation to liquors industry, young adults are likely to drive much of the expected and projected future demand as they approach the legal drinking age and become more affluent. The liquors industry is all set for its growth phase. On the other side, there has been increase in restrictions on import & export worldwide may led to reduction in profits.

Outstanding performance of Indias economy & the positive outlook for growth in the coming period make India one of the best investment destinations for both foreign and domestic investors across various sectors. Further, expectations of peaking interest rates and an uptick in IPOs and other investment exits improve the prospects.

The Company is already providing wide variety of products and will be expanding its activities, consistent with its status of sector and needs of economy resulting in Company moving towards more annuity sources of earnings. The Company is also looking forward to enter into newer areas and expands its customer base. The management is optimistic about the future outlook of the Company.

CAUTIONARY

Statements in the Management Discussion and Analysis describing the Companys objectives, expectations, predictions and assumptions may be ‘forward looking within the meaning of applicable Securities Laws and Regulations. Actual results may differ materially from those expressed herein, due to uncertainties related to the business model. Important factors that could influence the Companys operations include global and domestic economic conditions affecting demand, supply, price conditions, change in Governments regulations, tax regimes, other statutes and other factors such as litigation and industrial relations. The risk related information provided is not exhaustive and is for information purposes only. Readers are advised to refer to related disclosures in the Companys regulatory filings and exercise individual judgement in assessing risks associated with the Company.