Commercial Syn Bags Ltd Management Discussions.

(a) Global Economy Overview

Global growth is projected at -4.9 percent in 2020, 1.9 percentage points below the April 2020 World Economic Outlook (WEO) forecast. The COVID-19 pandemic has had a more negative impact on activity in the first half of 2020 than anticipated, and the recovery is projected to be more gradual than previously forecast. In 2021 global growth is projected at 5.4 percent. Overall, this would leave 2021 GDP some 6‘A percentage points lower than in the pre-COVID-19 projections of January 2020. The adverse impact on low-income households is particularly acute, imperilling the significant progress made in reducing extreme poverty in the world since the 1990s

Latest World Economic Outlook Growth Projections

(real GDP, annualpercent change)

Output CY 2019 CY 2020 CY 2021
World Output 2.9 -4.9 5.4
Advanced Economies 1.7 -8.0 4.8
Emerging Markets and
Developing Economies (EMDE) 3.7 -3.0 5.9

(Source - IMF, World Economic Outlook Update, June 2020)

World economic growth is showing effects of a multitude of uncertainties, including but not limited to trade tensions between the US and China, concerns around Brexit, leading to curbed investments, among other geo-political tensions. However, negotiations between the US and China since mid-October resulted in Phase One agreement. Partial roll-back of some US tariffs in exchange for Chinese commitments to make additional purchases of US products mark a de-escalation of trade tensions. To add to the challenges, COVID-19 has further worsened the situation. The spread of a global pandemic like one never seen before, has sent shockwaves to global health care infrastructure and a massive blow to almost all economies. In an attempt to curb the spread of this infectious virus, health care authorities and governments worldwide resorted to imposing lockdowns and restriction of movement. These lockdowns and restrictions on movements escalated a health care crisis into a financial crisis. These uncertainties in the economic environment are expected to have an adverse effect on corporate spending and capital expenditures. They are a major threat to investor confidence. Faced with these challenges, central banks worldwide including the most prominent ones have resorted to interest rate cuts, asset purchases in an attempt to infuse liquidity in the system. These methods arent an exact solution to the crisis at hand, but they have subdued the effects and prevented, at least in the shorter run, a prolonged slowdown in the world economy. Since the crisis is ongoing and unfolding each day, it is difficult to evaluate its exact effects on the financial system.

(b) Indian Economy Overview

India has been among the fastest-growing economies in the world over the past few years. However, the year under review has been particularly challenging with the economy hitting one of its lowest growth records seen in recent past on account of weak macroeconomic conditions. According to the IMF World Economic Outlook, Indias GDP grew is at 4.2% in year 2019, -4.5% and 6.0% in 2020 and 2021. The tight liquidity conditions and weak consumer demand led to a deceleration in overall consumption and investment. Sharp rise in bad loans, which are now one of the highest in emerging markets, led to subdued credit growth putting significant strain on financial sector. Indias factory output remained muted with all major segments like capital goods production, consumer durables, and infrastructure and construction goods showcasing weakness.

To address the growing macro concerns, Government of India undertook various measures to accelerate consumption, investment, and trade within the Indian economy. Corporate tax was cut to 22% and reduced tax rate of 15% was implemented for new companies in the manufacturing sector to provide further impetus for investment and growth. Despite these reforms and measures, the outbreak of novel COVID-19 pandemic during the fourth quarter and subsequent restriction of movement caused severe economic disruption and further exacerbated the prevailing stress on economy.

To protect and jumpstart the lockdown battered economy, Government launched a 20 lakh crore all-inclusive stimulus package called “Atmanirbhar Bharat” focussing on land, labour, liquidity, and laws and will cater to the various small, medium and large industries, labourers, middle class, urban and rural poor. While the virus outbreak has resulted in significant amount of uncertainty for businesses and any outlook would be inapt, growth in near term is likely to hinge on Government initiatives and cure for virus. Over the medium to longer run, India is well placed to witness strong growth on the back of its structural growth drivers.

Indias working-age population is now larger than its dependant population. This phenomenon is likely to last for another three decades which can bring about rapid economic growth as observed for other Asian countries in the past.

Governments strong impetus to make India self-reliant or “Atmanirbhar” with indigenous manufacturing, and improving ease of doing business is likely to attract sizeable share of foreign investments, creating new jobs and spurring industrial and infrastructure growth in India. Over 3 trillion of support to MSMEs under “Atmanirbhar Bharat“ package is likely to help revive medium and small businesses, encourage local manufacturing, and engender strong growth for Indian economy.

(c) Industry Overview

The Indian plastics industry made a promising beginning in 1957 with the production of polystyrene. Thereafter, significant progress has been made, and the industry has grown and diversified rapidly. The industry spans the country and hosts more than 2,000 exporters. It employs about 4 million people and comprises more than 30,000 processing units, 85-90 percent of which are small and medium-sized enterprises. In FY20, plastic and linoleum export from India stood at US$ 7.55 billion. During April 2019-January 2020, plastic export stood at US$ 7.045 billion with the highest contribution from plastic raw material at US$ 2.91 billion, plastic sheets, films and plates at US$ 1.22 billion and packaging materials at US$ 722.47 million. The Indian plastics industry produces and export a wide range of raw materials, plastic-moulded extruded goods, polyester films, moulded/ soft luggage items, writing instruments, plastic woven sacks and bags, polyvinyl chloride (PVC), leather cloth and sheeting, packaging, consumer goods, sanitary fittings, electrical accessories, laboratory/ medical surgical ware, tarpaulins, laminates, fishnets, travel ware, and others. The Indian plastics industry offer excellent potential in terms of capacity, infrastructure, and skilled manpower. It is supported by many polymer producers, plastic process machinery and mould manufacturers in the country. Among the industrys major strengths is the availability of raw materials in the country. Thus, plastic processors do not have to depend on import. These raw materials, including polypropylene, high-density polyethylene, low-density polyethylene, and PVC, are manufactured domestically.

India is ready to have 18 plastic parks and the Government will be investing Rs 40 crore (US$ 6.2 million) to increase the domestic production of plastics. This will achieve environmentally sustainable growth and increase employment.

(Source - IBEF Overview of Indian Plastic Industry and Exports)

The FIBC industry has the potential to maintain positive growth through demand emanating from international as well as domestic industries. In the medium term, the increasing demand for Indian FIBC from major destination markets, viz, the USA and Europe and stable foreign exchange rates albeit increasing competition among the Indian manufacturers, is expected to retain the demand momentum. Entities with strong foothold in the international market with value added product portfolio, better working capital management and sound foreign exchange fluctuation risk management would be in a position to earn higher margins. (Source - Flexible Intermediate Bulk Container - Indian players to benefit from changing preference, Care Ratings -

Your Company is an ISO certified company engaged in the manufacturing and supply of Flexible Intermediate Bulk Container (FIBC), High Density Polyethylene (HDPE) and Polypropylene (PP) Woven Sacks/Bags, BOPP Bags, HDPE/PP Fabric, Pond Liners, Mulch Films, HDPE/PP Tarpaulin (under the brand name - TIGER TARPAULIN), Ground Covers, Laminates, Vermi Beds and Flexible Pipes (under the brand name - COMSYN SWAJAL) and Flexible Packaging for export and domestic markets. Other range of products are sold under the brand name - COMSYN.

Companys customer base is spread across the globe with major presence in European Union, United Kingdom, United States and Latin America. The majority of sales are through exports which continue to contribute more than 70% of sales from manufacturing segment. The Company has also been recognised by Government of India as an Export House.

The Company is continuously doing Research and 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, and Food Products etc.

The Company has been operating as DCA cum CS of ONGC Petro additions Limited (OPaL). During this year this business not only delivered a steady performance but also continued to add value to the Company, in terms of profitability. This segment helps the Company as a source of Raw Material and helps to increase its presence in the national market. Further it also helps the Company to decide its raw material procurement policy and reduction of cost.

(d) Strength, Weakness, Opportunities and Threats

The Company has wide range of products in its basket which caters to the customers across the globe. The product portfolio comprises of about 15 different products like FIBC, HDPE/PP Tarpaulin, HDPE/PP Woven Sacks/Bags,BOPP Bags, HDPE/PP Fabric, Ground Covers, Pond Liners, Mulch Films, Laminates, Vermi Beds and Flexible Pipes. Product diversification helps in catering to different markets as per their demands. Your Company is having BIS Certification for separate clean room facilities and the Companys fully integrated food grade manufacturing facility for FIBC is one of the best in India. The Company supplies to various industries like agriculture, construction, food, bulk packaging, chemical, cement and food grade bags. The strong Industry relation is a core strength of the Company. The Company focuses on quality and customer satisfaction to maintain long term relationship and to procure repeat orders. There is increased competition due to industry wise capacity addition. We have also initiated the expansion of the existing manufacturing facilities with the capacity addition of3540 MT by setting up of manufacturing facilities by installation of Multifilament plant, Lamination plant, Twisting Machine, Automatic Bag cutting Machine for manufacturing of Small Bags, Tarpaulin, FIBC Bags, Multifilament Thread. The proposed capacity is expected to be operational during the month of September, 2020. The companys total capacity will be 20540 MTPA and your company has adequate production capacity to meet the increased demand of the Customers.

Volatility of Oil and currency are some major threats. Being a labour oriented industry with high requirement of skilled labour, shortage of labour is a major risk associated with the sector, however the Company has put in place adequate system to monitor labour requirement and have already implemented skilled development training program. Competition from new players within and outside the country is also posing the threat for the company and with the experience of more than 3 decades in this industry and strong customer relationship your company is able to meet this threat.

(e) Segment-wise or product-wise performance

The Company operates in following segments i.e.

- Manufacture and sale of FIBC, HDPE/PP Tarpaulin, HDPE/PP Woven Sacks/Bags, BOPP Bags, HDPE/PP Fabric, Ground Covers, Pond Liners, Mulch Films, Laminates, Vermi Beds and Flexible Pipes

- Trading of Granules

In addition to that the Company is also having solar plant, power generated from solar power plant is captively consumed. The solar power generation segment is integral part of manufacturing segment.

(f) 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.

(g) Risk 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 Companys 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.

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

The Boards Report has specifically dealt with the subject under the headings ‘Summarized Profit & loss Account and State of Companys Affairs & Review of operations

(i) 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, 2020 we have 2335 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.

j). Details of Significant Changes in Key Financial Ratios

Key Ratio 2019-20 2018-19 Variation in % Comments for Variation in ratio above 25%
Debtors Turnover Ratio 7.02 : 1 7.02 : 1 NIL NA
Inventory Turnover Ratio 4.56 : 1 6.19 : 1 26.33 The Company has adopted the Indian Accounting Standard Rules, 2015 (Ind AS) as its accounting framework from financial year 2019-20. The rules requires the Company to restate and present financial statements of preceding year too in Indian Accounting Standards.
The revenue has been recognised as per the principles of Ind AS which provides the basis of recognition to be ‘satisfaction of performance obligations. This principle causes postponement of revenue recognition until performance obligations are satisfied. Therefore transactions which qualified as revenue in erstwhile GAAP could not be recognised as revenue in reporting period of FY 2019-20. Consequently, it resulted in increase in inventory of those items.
However, while restating financials of FY 2018-19 the Company was exempted from postponement of revenue recognition. It is because the company has availed the exemption under Para D35 ofIndAS 101 i.e., not to
restate contracts that were completed before the earliest period presented. A completed contract is a contract for which the entity has transferred all of the goods or services identified in accordance with previous GAAP.
This resulted in revenue recognition in FY 18-19 without postponing it until satisfaction of performance obligations. Consequently, the inventory remained at reduced figure.
Interest Coverage Ratio 4.37 : 1 3.69 : 1 26.56 The coverage ratio increased due to increase in earnings. Total interest also reduced due to reduction of rate of interest by bank and availment of FCTL by company.
Current Ratio 1.58 : 1 1.35 : 1 17.04 NA
Debt Equity Ratio 0.75 : 1 0.92 : 1 18.48 NA
Operating Profit Margin (%) 9.81% 9.96% 1.51% NA
Net Profit Margin (%) 5.98% 5.45% 9.52% NA
Return on net worth (Any Change) 16.58% 19.26% 13.91% The return of net worth is declined due to low profitability in proportion to net worth of the Company

(k) . Compliance with Indian Accounting Standards

In the preparation of the financial statements, the Company has followed the Indian Accounting Standards as notified. The significant accounting policies which are consistently applied have been set out in the Notes to the Financial Statements.

(l) Cautionary Statement

Statements in this report describing the Companys 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: 02nd September, 2020 Anil Choudhary
Chairman & Managing Director