Commercial Syn Bags Ltd Management Discussions.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

(a) Industry structure and developments.

The global economic upswing that began around mid-2016 has become broader and stronger. World Economic Outlook report projected that advanced economies as a group will continue to expand above their potential growth rates this year and next before decelerating, while growth in emerging market and developing economies will rise before leveling off. World growth strengthened in 2017 to 3.8 percent, with a notable rebound in global trade. It was driven by an investment recovery in advanced economies, continued strong growth in emerging Asia, a notable upswing in emerging Europe, and signs of recovery in several commodity exporters. Global growth is expected to tick up to 3.9 percent this year and next, supported by strong momentum, favorable market sentiment, accommodative financial conditions, and the domestic and international repercussions of expansionary fiscal policy in the United States. The partial recovery in commodity prices should allow conditions in commodity exporters to gradually improve. (World Economic Outlook: International Monetary Fund)

As per Economic Survey 2017-18 macroeconomic developments this year have been marked by swings. In the first half, India’s economy temporarily "decoupled," decelerating as the rest of the world accelerated even as it remained the second-best performer amongst major countries, with strong macroeconomic fundamentals. The reason lay in the series of actions and developments that buffeted the economy: demonetization, teething difficulties in the new GST, high and rising real interest rates, an intensifying overhang from the TBS challenge, and sharp falls in certain food prices that impacted agricultural incomes. In the second half of the year, the economy witnessed robust signs of revival. Economic growth improved as the shocks began to fade, corrective actions were taken, and the synchronous global economic recovery boosted exports. Reflecting the cumulative actions to improve the business climate, India jumped 30 spots on the World Bank’s Ease of Doing Business rankings, while similar actions to liberalize the foreign direct investment (FDI) regime helped increase flows by 20 %.

A series of major reforms undertaken over the past year allowed real GDP growth toreach 6.7% this fiscal and will rise to 7.0 to 7.5 percent in 2018-19, thereby re-instatingIndia as the world‘s fastest growing major economy.The survey pointed out that India can be rated as among the best performing economies in the world as the average growth during last three years is around 4 percentage points higher than global growth and nearly 3 percentage points higher than that of Emerging Market and Developing Economies. It points out that the GDP growth has averaged 7.3 per cent for the period from 2014-15 to 2017-18, which is the highest among the major economies of the world. That this growth has been achieved in a milieu of lower inflation, improved current account balance and notable reduction in the fiscal deficit to GDP ratio makes it all the more creditable. Though concerns have been expressed about growing protectionist tendencies in some countries but it remains to be seen as to how the situation unfolds. Some of the factors could have dampening effect on GDP growth in the coming year viz. the possibility of an increase in crude oil prices in the international market. However, with world growth likely to witness moderate improvement in 2018, expectation of greater stability in GST, likely recovery in investment levels, and ongoing structural reforms, among others, should be supporting higher growth for India. On balance, country‘s economic performance should witness an improvement in 2018-19. (Economic Survey: 2017-18)

The growth of the industries including food and horticulture due to the increase production and trade of horticulture products and chemicals, have boosted the demand for flexible bulk packaging. Additionally, the low-cost of shale gas, that is used as a major feedstock for the manufacturing chemicals, is inducing players in the chemical and fertilizer sectors to enhance the production of chemicals, which also increases the demand for FIBC bags. Moreover, the increased need to reduce the overall weight of bulk packaging and transporting materials will also drive the demand for FIBC containers in several other industrials sectors such as construction, boosting market growth in the coming years.(Source:https://www.technavio.com/report/global-packaging-global-flexible-intermediate-bulk-container-market-2017-2021)

Flexible packaging has been one of the fastest growing sectors in the packaging industry over the past 10 years. According to Smithers Pira, Globally the industry is expected to grow at an annual average rate of 3.4% during 2015- 2020 to reach USD 248 Billion. Asia is expected to lead the demand with its market share progressing from 42% in 2015 to nearly 45% by 2020. Food sector within the FMCG is the biggest consumer of flexible packaging with a gargantuan share of over 70%.

Your Company is an ISO 9001:2008 certified company mainly engaged in the manufacturing and supply of Flexible Intermediate Bulk Container (FIBC), High Density Polyethylene (HDPE) and Polypropylene (PP) Woven Sacks, PP fabric, BOPP Bags, Container Bags, Pond Liners, Mulch Films, Tarpaulin (under the brand name- TIGER TARPAULIN) and Flexible Packaging etc. for export and domestic markets. Other ranges of products are sold under the brand name-COMSYN.

Company’s customer base is spread across the globe with major presence in European Union, United Kingdom, United States & Latin America. The majority of sales are through exports which continue to contribute more than 75% of sales from manufacturing segment. The Company has also been recognized by Government of India as an Export House.

The Company is continuously doing Research & Development Activities to produce best of its products as per the need of customers. The Company offers various packaging solutions for wide range of end users such as Construction, Agriculture, Asbestos Waste Removal, Bulk Packaging, Household Waste Removal, Human Safety, Gardens, Green houses, Shelter, Grain, Pulses, Animal Food, Seeds, Fertilizers, Chemicals, Food Products etc.

(b) Opportunities and Threats

The Company has wide range of products in its basket which caters to the customers across the globe and R&D Department of the Company looks after the innovation and also take into consideration the standards laid down under the ISO certification. Your company is also having BIS Certification for separate clean room facilities situated at Unit-I for manufacturing of packaging material to be used for food and nonfood application. Recently Company’s Unit SEZ started its operations after successful completion of expansion activities and capacity addition of 3900 MT p.a. by setting up of complete manufacturing facilities and installation of Tape Line and Looms with clean room facilities for manufacturing of Food Grade FIBC Bags. The total production capacity (all units) of the company has been increased from 13100 MT p.a. to 17000 MT. p.a. Thus your company has adequate production capacity to meet the increased demand of the Customers. Company’s fully integrated food grade manufacturing facility for FIBC is one of the best in India.

Your company is an approved supplier of various Government authorities, large public and private sector industries. Due to increased overseas demand and technological advancement the Company has vide opportunities to expand its business operations and product base across the Globe.

Volatility of Oil, currency & transportation cost, increased competition are some major threats. Being a labor oriented industry with high requirement of skilled labor, shortage of labor is a major risk associated with the sector, however the Company has put in place adequate system to monitor labor requirement and have implemented skilled development training program within the premises.

(c) Segment wise or product-wise performance :

a) Primary Segment (by Business Segment): Based on the guiding principles given in Accounting Standards on Segment Reporting (AS - 17) the company is primarily in the business of manufacture and sale of FIBC, Bulk Bags, Poly Tarpaulin, Woven Sacks/Bags, Box Bags, PP/HDPE Fabric, Liner and Flexible Packaging which mainly have similar risk and returns. The company has undertaken Trading of Granules (DCA cum Consignment Stockiest) segment during the year under review. The company has identified following segments as Reportable Business Segments:

01. Manufacture and sale of FIBC, Bulk Bags, Poly Tarpaulin, Woven Sacks/Bags, Box Bags, PP/HDPE Fabric, Liner and Flexible Packaging.

02. Trading of Granules

b) Secondary Segment (by Geographical demarcation):

i) The secondary segment is based on geographical demarcation i.e. in India and outside India.

Financial information and performance of both the segments are detailed in Note 40 of Notes to accounts attached with audited financial statements.

(d) Future Outlook

Driven by lightweight, customized product features, user-friendly, sustainability advantages and enhanced packaging options the product base of the Company has the potential to maintain positive growth through demand emanating from international as well as domestic industries. In the domestic market, the industry is also envisaged to receive a boost from agriculture, mineral, petrochemical industries and various industrial markets who are opting for FIBC as packaging option. Internationally, the FIBC industry is estimated to demonstrate firm growth driven by demand from new markets like Latin & Central America, Eastern Europe & some parts of Africa. Also, acceptability and increase in usage by the pharmaceutical and food industry across the globe will have positive impact.

(e) Risks and concerns, internal control systems and their adequacy.

The Company is engaged in the business of manufacturing and export of containers and packaging materials, which is associated with normal business risk as well as the imbalance of demand-supply of products in the domestic as well as international market. We are subject to foreign currency exchange rate fluctuations which could have a material impact on our results of operations and financial conditions. The Company has a well defined Policy for Risk Mitigation on foreign exchange by adopting hedging strategies. Global as well as Indian economic and political factors that are beyond our control, influence forecasts and may directly affect our business operations.

The Company has a Risk Management Policy and adequate Internal Control System in place. The main objective of this Policy is to ensure sustainable business growth with stability and to promote a pro-active approach in reporting, evaluating and resolving risks associated with the Company’s business. In order to achieve the key objective, this Policy establishes a structured and disciplined approach to Risk Management; in order to guide decisions on risk related issues. Internal Control System is commensurate with the size, scale and complexity of its operations. The Company continuously reviews its various types of regulatory, financial, operational, environmental and other business risks. There are adequate systems to ensure compliance of all various statutory and regulatory requirements and review the same from time to time and to take appropriate actions from time to time.

(f) Discussion on financial performance with respect to operational performance.

The Board’s Report has specifically dealt with the subject under the headings ‘Summarized Profit & loss Account and State of Company’s Affairs & Review of operations’.

(g) Material developments in Human Resources / Industrial Relations front, including number of people employed.

We believe that our employees are key contributors to our business success. We focus on attracting and retaining the best possible talent. Our Company looks for specific skill-sets, interests and background that would be an asset for our business. Many initiatives were taken to support business through organizational efficiency, process change support and various employee engagement programs which has helped the organization to achieve higher productivity level. A significant effort has also been undertaken to develop leadership as well as technical/ functional capabilities in order to meet future talent requirement.

As on March 31, 2018 we have 971 employees on payroll. Company is committed to provide necessary training / conducts development programmes to imbibe necessary skills required within the employees. The management of the Company enjoys cordial relations with its employees at all levels.

Cautionary Statement

Statements in this report describing the Company’s objectives, expectations or predictions may be forward looking within the meaning of applicable laws and regulations. The actual results may differ materially from those expressed in this statement because of many factors like economic condition, availability of labour, price conditions, domestic and international market, changes in Government policies, tax regime, etc. The Company assumes no responsibility to publicly amend, modify or revise any statement on basis of any development, information and event.

For and on behalf of the Board
Place: Indore
Date: 2nd August, 2018
Anil Choudhary
Chairman & Managing Director
DIN: 00017913