Cosmo First Ltd Management Discussions

MANAGEMENT DISCUSSION AND ANALYSIS

1. COMPANY OVERVIEW

Cosmo First, originally established as Cosmo Films in 1981, pioneered the introduction of BOPP films in India. Today, the Company stands as the world s largest producer of thermal lamination films and the second-largest producer of specialty label films globally. It is also a leading player in the Indian BOPP films market. Cosmo Firsts commitment to innovation is underscored by its advanced R&D center in Aurangabad, which has secured five patents, with nine more in the pipeline. The Company prides itself on practicing excellent corporate governance and maintaining a culture of professional management, which provides a long-term competitive advantage.

Cosmo First has developed a well-diversified business model that caters to the evolving needs of its customers. The Company combines specialty and commodity films, specialty chemicals, rigid plastics, window films (set to launch in FY25) and its pet care brand, Zigly, under one umbrella.

Such a diversified approach helps mitigate potential uncertainties in the business environment, positioning the Company for sustainable growth. By focusing on its strategic objectives and delivering a unique value proposition to customers, Cosmo First continues to drive long-term value creation for shareholders and stakeholders.

Despite facing challenges in FY24, Cosmo Firsts longterm value-generating potential remains robust. The Companys diversification into new product segments, such as shrink films, rigid plastics, window films (set to launch in FY25), metallizers films and capacitor films, demonstrates its commitment to innovation and market expansion. Additionally, the growth potential in specialty chemicals and the pet care segment is significant, bolstering strong domestic demand for packaging solutions.

With plans to invest in enhancing capabilities, Cosmo First is poised for a bright future of growth, greater value, innovative products, and sustainable profitability. The Companys strategic investments and a focus on customer needs, combined with a capable and experienced team and a people-first approach, ensure that Cosmo First will continue to thrive and create value for all stakeholders. ²

2. MACROECONOMIC OVERVIEW AND OUTLOOK 2.1 ECONOMIC RESILIENCE AMID GLOBAL CHALLENGES

Despite a challenging global landscape, Indias economy demonstrated remarkable resilience. The country solidified its position as the world s fifth - largest economy, showcasing its significant economic strength and establishing itself as one of the fastest- growing major economies.

Economic Performance and Growth

According to the Reserve Bank of Indias (RBI) annual report, the Indian economy exhibited resilience during 2023-24, with real GDP growth improving to 7.6% from 7.0% in FY23. The manufacturing and services sectors were the main contributors to this growth, while agriculture faced challenges due to unfavorable weather conditions. Food and beverages inflation averaged 7.0% in FY24, slightly higher than the 6.7% recorded a year ago. Indias exports showed positive momentum, reaching a value of USD 119.10 billion during the January-March 2024 quarter.

Key Drivers of Economic Robustness The International Monetary Fund (IMF) highlighted strong domestic demand and a rising working-age population as key factors contributing to Indias economic robustness. During the 54^th Annual Meeting of the World Economic Forum in January 2024, it was noted that Indias large and young population, often referred to as a "demographic dividend," can significantly boost economic growth when coupled with investments in upskilling, leading to increased productivity and innovation.

Consumer Behavior

While the overall economy displayed promising signs of growth, consumer spending, particularly in rural areas, remained sluggish. Urban demand supported private consumption, but the rural sector faced challenges due to an uneven monsoon and elevated food inflation, resulting in subdued rural income in 2023.

Digitalization and E-commerce Growth

The increased adoption of mobile wallets and internet banking has made online transactions for FMCG purchases smoother and more secure, further fueling e-commerce growth in the sector. India, with the second-largest online market globally and some of the worlds cheapest data rates, has made the internet more accessible for consumers. The Unified Payments Interface (UPI) network processed a record- breaking 13.44 billion transactions in March 2024, highlighting the remarkable growth of Indias digital payments ecosystem.

Inclusivity and Market Accessibility

The vast online ecosystem offers access to a wider range of products and brands for both urban and rural consumers. This digitalization fosters inclusivity by bringing more options to a broader population, potentially enabling more informed and democratized purchase decisions.

Startup Ecosystem and Innovation

India boasts the third largest number of unicorns globally, signifying a thriving startup ecosystem with immense potential for innovation and economic growth. This dynamic environment highlights Indias capacity for fostering entrepreneurial ventures that drive technological advancements and economic progress.

2.2 INDIAN ECONOMY

In FY 2025, Indias economic activity and GDP growth are expected to remain resilient despite ongoing geopolitical uncertainties. As a result, India is poised to become one of the major economies in the world with a promising growth outlook. The RBI is projecting steady growth in the Indian economy at 7%. This is due to strong private consumption, increased government spending and investment. Inflation is expected to ease gradually by 2025.

3. INDUSTRY OVERVIEW

Cosmo First, a prominent leader in the flexible packaging industry, has established a robust presence worldwide. With an expansive product portfolio encompassing BOPP films, BOPET films, thermal films, coated and other specialty films, the company effectively serves diverse packaging requirements across various industries.

Additionally, Cosmo Specialty Chemicals, launched in 2020, aims to revolutionize the masterbatch, coating chemicals, and adhesive segments through sustainable technology.

Further, our comprehensive rigid packaging solutions launched in FY24 are designed to craft customized packaging for a wide range of FMCG products. Utilizing advanced injection molding and thermoforming techniques, we ensure our packaging is made from premium materials for exceptional durability and reliability.

Furthermore, Cosmo First addresses the needs of the pet care industry through its rapidly growing brand, Zigly.

Driven by innovation, a customer-centric approach, and a commitment to sustainability, Cosmo First continues to drive growth and deliver significant value to its stakeholders across these dynamic industries.

3.1. FLEXIBLE PACKAGING INDUSTRY OVERVIEW

The global packaging industry has not only experienced robust growth over the past few decades but has thrived, driven by demographic shifts like population growth, rapid urbanization, increased trade, and heightened demand for packaging solutions.

Sustainability and digitalization are increasingly popular trends that not only pose challenges but also offer significant opportunities for innovation within the industry. Furthermore, changing consumer preferences, margin pressures, and heightened focus on food safety have stimulated demand for new packaging products and advancements.

In FY21, the global packaging industry reached approximately $1,002.4 billion¹ and is projected to grow to $1,275 billion by 2027. The flexible packaging segment, which constitutes over 60% of the total market, is predominantly utilized in food, personal care, pharmaceuticals, household products, and industrial applications. The global flexible packaging market is anticipated to expand at a CAGR of 4.8%², from $248.9 billion in 2022 to $315.5 billion in 2027. Major regions driving this growth include Western Europe, North America, Central & East Asia, and Southeast Asia & Oceania. Notably, the flexible packaging market in India is forecasted to grow at a remarkable CAGR of 12.6% from 2022 to 2027, driven by rising disposable incomes and improved living standards in the region.

Several factors propel the packaging industrys growth, including the burgeoning e-commerce sector, evolving consumer preferences favoring customization, convenience, health, and affordability, and increasing global demand for processed foods. Moreover, sustainability mandates and heightened scrutiny across the value chain, coupled with digitalization and automation, are set to enhance efficiency and foster innovation, particularly in the realm of smart packaging development.

3.2.SPECIALITY CHEMICALS INDUSTRY OVERVIEW

The specialty chemicals market is pivotal across diverse sectors of the global economy, including construction, automotive, electronics, textiles, and healthcare. These chemicals are tailored to perform specific functions and enhance the value of end-use products. They find application in various areas such as adhesives, coatings, polymers, agrochemicals, food additives, and personal care products, supporting high-performance and sustainable solutions.

The global specialty chemicals market was valued at $ 285 billion in 2023 and is expected to reach $ 365 billion in 2028, growth projected at a CAGR of 5% from 2023 to 2028. The Asia Pacific region leads this market, driven by substantial demand in industries like pharmaceuticals, nutraceuticals, personal care, cosmetics, automotive, and electrical and electronics, particularly in China and India.

Source:

1) GlobeNewswire

2) Markets and Markets

As per KPMC, 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 CACR of 12% from 2020 - 2025, India has the scope for further exponential growth.

KPMC reports that Indias specialty chemicals market constitutes 22% of the countrys chemicals and petrochemicals sector, valued at $32 billion. With an anticipated CACR of 12% from 2020 to 2025, India offers significant opportunities for exponential growth in this sector.

Masterbatches, which enhance plastic properties and provide color variations, were valued at $11.1 billion in 2020 and are projected to grow at a CACR of 5.1%, reaching approximately $14.3 billion³ by 2025. Meanwhile, the adhesives and sealants market within specialty chemicals is forecasted to grow globally at a CACR of 3.7%, reaching $85.8 billion⁴ by 2026. In India, the adhesive market is expected to grow at a CACR of 10.26%, reaching $1842.9 million by 2028⁵.

3.3. RIGID PACKAGING:

The global rigid packaging market, valued at U5D 207.8 billion⁶ in 2022, is poised for significant growth, projected to reach U$D 262.5 billion by 2027, with a robust CACR of 4.7% during this period. This expansion is driven by its widespread applications across key industries like beverages, food, and healthcare. $trong demand in prominent APAC markets, particularly India and China, along with increasing needs in the food and beverage packaging sectors, underpin this growth trajectory.

3.4. PET CARE INDUSTRY

The global trend towards urbanization, nuclear families, double-income households, and evolving lifestyles, coupled with the growing phenomenon of pet humanization, has significantly bolstered the global population of pet owners. India, in particular, has seen a remarkable surge in pet ownership, boasting a thriving pet population of 32 million that is expanding annually by over 12%. This rise has spurred the development of a robust pet-care ecosystem encompassing retail chains, pet nutrition and services, and pet care services. Additionally, the advent of e-commerce has facilitated widespread access to pet products.

Despite being smaller compared to the global market, valued at Rs. 5,100 Crore, the Indian pet care market is experiencing rapid growth, projected to increase by 25% annually from 2023 to 2027. This growth is fueled by the growing awareness that pets require specialized nutrition for their health and development, prompting the entry of leading international brands into the market. While the market remains largely unorganized, there is a noticeable shift among consumers towards choosing nutrition tailored specifically for pets rather than traditional human-consumption food. With the pet care markets in the U.5., Canada, and Europe becoming increasingly saturated, Asia, particularly India, is emerging as an attractive destination for top- tier brands in the industry.

4. BUSINESS SEGMENTS AND PERFORMANCE

Cosmo First offers a comprehensive range of products, all conveniently available in one place. The Company operates state-of-the-art manufacturing facilities with a combined annual installed capacity of:

1.96.000 MT per annum of BOPP films (9 lines),

40.000 MT per annum of Thermal Lamination Films (8 lines),

22.000 MT per annum of Metalized Films (4 lines),

20.000 MT per annum of Coated Films (6 lines),

10, 000 MT per annum of CPP Films (2 lines),

7.000 MT per annum of CSP Line (1 line),

30.000 MT per annum of BOPET Line (1 line),

In Cosmo Speciality Chemicals, Company has installed capacity of 10,000 MT per annum of Masterbatches, 2,500 MT per annum of adhesives and 5,000 MT per annum of Coating Chemicals.

The installed capacity of Rigid Packaging is 10,000 MT per annum.

Cosmo First proudly offers an extensive and diverse range of products across multiple segments, including Specialty Films, BOPP Films, and Specialty Chemicals. Our comprehensive portfolio of BOPP Films caters to various applications such as flexible packaging, lamination, labeling, and industrial uses. This range features innovative specialty films like high barrier films, velvet thermal lamination films, and direct thermal printable films.

As a market leader in the BOPP sector, Cosmo First excels in delivering high-quality films and provides additional value-added services. We are among the top four global players in BOPP specialty films and rank as the second-largest player in the world for specialty label films. Additionally, Cosmo First is the largest supplier of thermal lamination films worldwide.

Source: 3) Markets and Markets fMasterbatch Market!

4) Markets and Markets (Adhesives and Sealants Market)

5) knowledae-sourcina.com

6) https, //www.marketsandmarkets.com /Market- Reports/riaid-plastic-packaaina-market-178852016.html

Our unwavering commitment to excellence and innovation ensures that we consistently meet and exceed the expectations of our customers across various industries.

4.1. FLEXIBLE PACKAGING

Despite the challenges faced by the flexible packaging segment which includes specialty films and BOPP films, Cosmo First has outperformed the industry. In FY24, we achieved a revenue of Rs. 2587 Crore and an EBITDA of Rs. 251 Crore, primarily driven by our value- added specialty films.

The flexible packaging industry experienced an excess supply scenario during FY23 and FY24, with new supplies adding pressure to margins across the sector. However, Cosmo First successfully navigated these challenges, maintaining robust margins compared to our peers. This resilience is attributed to our high share of specialty films, which constituted 64% of our portfolio in FY24.

Growth:

The Company is planning a significant expansion in its flexible packaging business, with close to a 50% increase in capacity over the next two fiscal years. Following the successful commissioning of the specialized BOPET line in FY23, the CPP and BOPP lines are set to be commissioned in phases within the next two years. These lines will boast the worlds largest production capacities, ensuring lower production costs.

The Company remains focused on enhancing its specialty films and advancing R&D efforts, particularly in sustainability. These initiatives will yield results in the coming years, helping to de-commoditize the business model and contribute to long-term sustainable growth. In FY24, specialty films accounted for 64% of the Companys sales.

Furthermore, the Company plans to introduce a range of specialty products on the BOPET line, including window films, security films, PET-C films, and more. This strategic focus underscores the Companys commitment to innovation and excellence in the flexible packaging industry.

4.2.SPECIALITY CHEMICALS

In the Specialty Chemicals segment, Cosmo First excels with three distinct verticals: masterbatch, coating chemicals, and adhesives. Each segment focuses on niche specialties, addressing current industry challenges or providing significantly superior products compared to those currently available. Our annual capacities are impressive, with 10KMT for masterbatch, 2.5KMT for adhesives, and 5KMT for coating chemicals. We aim to achieve 7%-8% of the companys consolidated revenue from specialty chemicals within the next 3-5 years, targeting a 25%

ROCE.

In FY24, our specialty chemicals subsidiary achieved remarkable success, recording total sales of Rs.142 Crore.

4.3. RIGID PACKAGING (PLASTECH):

Our comprehensive rigid packaging solutions are designed to craft customized packaging for a wide range of FMCG products. Utilizing advanced injection molding and thermoforming techniques, we ensure our packaging is made from premium materials for exceptional durability and reliability. We are proud to have achieved the globally recognized FSSC 22000 food safety certification, reflecting our commitment to the highest standards.

With a target ROCE in the teens and operating in an industry growing at over 10%, we are focused on establishing direct partnerships with leading brands. Our dedication to quality and innovation positions us as a trusted partner in the FMCG sector, ensuring we consistently meet and exceed the expectations of our clients.

4.4. PET CARE

The companys direct-to-consumer vertical, launched under the brand Zigly in September 2021, is progressing well as per plan. With 23 experience centers operational as of March 2024, the Company is on targetting to achieve same-store sales growth.

Ziglys current monthly Gross Merchandise Value (GMV) is approximately Rs. 4.5 Crore, and the Company aims to achieve tenfold growth in the coming years. In FY24, Ziglys division GMV reached Rs. 44 Crore, marking a remarkable threefold increase from the previous years sales. Zigly has already served over 39,000 customers, with a significant portion being repeat customers.

The Companys focus is to further amplify Ziglys growth in the coming years, both organically and through potential acquisitions.

5. FINANCIAL PERFORMANCE

During the financial year 2024, Cosmo First achieved consolidated sales of Rs. 2,587 crores. Consolidated EBITDA for the year stood at Rs. 251 crores, compared to Rs. 434 crores in the previous financial year, primarily due to margin pressure in the BOPP and BOPET industry resulting from the commissioning of several new production lines over the last eighteen months. Despite these challenges, the Company has significantly outperformed the industry, with two- thirds of revenue generated from specialty films that have successfully withstood margin pressures.

On a standalone basis, the Company recorded sales of Rs. 2,391 crores. Standalone EBITDA was Rs. 213 crores, compared to Rs. 396 crores in the previous year, primarily for the reasons mentioned above.

The financial strength of Cosmo First is further highlighted by a healthy Net Debt/Equity ratio of 0.4 times and a Net Debt/EBITDA ratio of 2.2 times.

During this year, Cosmo First incurred capital expenditure of Rs. 298 crores, compared to Rs. 380 crores in the previous financial year. This expenditure is set to enhance the sale of specialty films, support sustainability initiatives, and sourcing solar power as an energy source. Continuous investment in R&D, sales and 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. Exports for the financial year amounted to Rs. 1,047 crores, representing 44% of total sales. Cosmo First exports to over 100 countries across the globe.

These strategic initiatives and strong financial performance highlight Cosmo Firsts resilience and commitment to sustainable growth and industry leadership.

The performance of the overseas subsidiaries remained broadly consistent with that of the previous year. However, an improvement is anticipated in FY25.

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, Total Debt/Equity, Inventory and Trade Receivable Turnover Ratios.

Ratio	FY24	FY23	% Change	Explanation
Interest Coverage Ratio (in times)	2.81	7.83	-64.11	Primarily lower due to decrease in operating income due to temporary margin pressure caused by significant capacity addition in the domestic industry and change in interest rate significantly
Net Debt to Equity Ratio	48.88	38.50	-26.98	Primarily increase due to higher net debt resulting from growth capex incurred.
Net Profit Margin	1.62	7.79	-79.19	Primarily lower due to decrease in operating income due to temporary margin pressure caused by significant capacity addition in the domestic industry

7. CHANCE IN RETURN ON NET WORTH

During the FY24, despite a reduction in PAT, Cosmo First maintained a positive return on net worth of 4.62%.

8. LIQUIDITY

As of 31^st March 2024, Cosmo First reported a consolidated net debt of Rs. 561 Crore. The Company maintains a robust financial position, evidenced by its substantial cash and cash equivalents, including liquid investments, totaling Rs. 417 Crore as of 31^st March 2023 at the consolidated level.

The financial strength of Cosmo First is further highlighted by a healthy Net Debt/Equity ratio of 0.4 times and a Net Debt/EBITDA ratio of 2.2 times. These metrics demonstrate the Companys prudent financial management and strong ability to leverage its resources for sustained growth and stability.

9. R&D AND NEW PRODUCT DEVELOPMENT

Cosmo First takes immense pride in its continuous investment in research and development, focusing on delivering innovative solutions that drive accelerated growth and spearhead new product development globally. In the year under review, the company invested Rs. 9 Crore in R&D, underscoring its commitment to innovation.

Our state-of-the-art R&D labs, located in India and the USA, are equipped with cutting-edge equipment and instruments. These facilities are at the heart of our innovation efforts, where our dedicated R&D team actively pursues several sustainability projects, ensuring that Cosmo First remains a leader in sustainable film solutions.

Cosmo First has an impressive track record in product development, with five registered patents and nine more in the pipeline. Our dedicated R&D team, consisting of more than 30 scientists and technologists from prestigious universities in the USA and Europe, brings extensive global experience in packaging, polymer engineering, and biopolymers. This team plays a crucial role in maintaining our competitive edge through continuous innovation.

Our relentless focus on R&D enables us to stay ahead of industry trends and meet evolving market demands. Throughout the year, our R&D efforts have resulted in the development of several new and sustainable products, significantly contributing to our growth and success.

Looking ahead, Cosmo First is set to launch a groundbreaking product in FY25: the sun control film, Cosmo Sunshield¹. This innovative product will blend advanced technology with sustainable practices, redefining window films as an energy-saving solution. Over the next two years, we plan to increase our organizational capacity by 50% by expanding our Cast Polypropylene (CPP) and Biaxially Oriented Polypropylene (BOPP) production capabilities.

Cosmo Firsts commitment to research and development not only drives our current success but also positions us for a bright future of growth, innovation, and sustainable profitability. By continually enhancing our R&D capabilities, we are well-equipped to deliver cutting-edge solutions that meet the needs of our customers and contribute to a sustainable future.

10. SUSTAINABILITY AND ESC INITIATIVES

Cosmo First is deeply committed to sustainability, continuously enhancing the environmental performance of its products, operations, and supply chain. By prioritizing product efficiency and eliminating high-impact gases, the Company has significantly reduced its carbon footprint. Recognizing that sustainability not only benefits the environment but also enhances business performance, Cosmo First stays ahead of customer demand for sustainable products and practices. This commitment positions the Company as an industry leader, dedicated to protecting the planet while driving innovation.

ENVIRONMENT

Cosmo First actively promotes sustainable practices and contributes to the circular economy. The Company offers mono-layered film structures to facilitate recycling and collaborates with renowned global brands to provide structure rationalization and recyclability solutions. Its R&D efforts have led to the development of Oxo-Biodegradable Films, Water- Based Coatings, and heat-resistant BOPP films, all designed to enhance recyclability. By improving the yield of BOPP and CPP films, Cosmo First reduces plastic usage without compromising product integrity.

Beyond film production, Cosmo First explores alternatives to harmful materials, such as replacing PVC with UV-stabilized Synthetic Paper for outdoor promotional applications. The Companys Ultra-Fligh Barrier Films serve as a suitable replacement for aluminum foil, reducing reliance on non-recyclable materials. To further minimize environmental impact, Cosmo First implements green energy practices, waste reduction, and water treatment initiatives, including rainwater harvesting and the reuse of treated effluent water.

Cosmo Firsts dedication to environmental responsibility extends to its manufacturing processes, where it reuses reprocessed granules from waste materials in film production. By adhering to the principles of reducing waste, reusing resources, and recycling, the Company aims to manufacture sustainable polymers that can be easily recycled and reused in various applications.

SOCIAL

The Cosmo Foundation, the Companys CSR arm, reflects its commitment to giving back to the community. This year, the Foundation expanded its foot prints by annexing six new schools, welcoming 1000 more students under its umbrella with a total impact spanning to 13000 rural students from 52 schools and 142 villages. Additionally, the Foundations Computer Operation & Digital Skill Building program supports 8477 students with 25 computer labs, aligning with Indias Digital India initiative. Under Cosmo Fruit Tree Plantation Drive, the foundation has been fostering agroforestry with 115 farmers across 19 villages in Gujarat and Maharashtra boasting an impressive 90% survival rate of 40,000 fruit saplings. Cosmo Foundation has established an Urban Miyawaki Forest at the Army Equestrian Centre and Aahwan Center in New Delhi by planting 16,000 trees and nurture the same to ensure its growth.

Cosmo First is proud of its unwavering commitment to sustainability. Our efforts to enhance product efficiency, reduce emissions, and optimize operations not only benefit the environment but also strengthen our business. We have implemented initiatives such as rainwater harvesting (accounts for 17% of total water consumption for FY24), reusing treated effluent water (reused 45% of wastewater and are working towards achieving Zero Liquid Discharge.), increasing renewable energy usage by 15 %, and adopting water- based coatings.

10.3. GOVERNANCE

Cosmo First is deeply committed to ethical and responsible business practices, not just to ensure fairness but because it is the right thing to do. The Company integrates economic, social, and environmental considerations into its strategic planning, risk management, and governance approach.

Governance and Responsibility

The Board of Directors bears the overall responsibility for upholding the highest standards of corporate governance. Supported by senior management, the Board ensures best practices are followed consistently. This is achieved through a consultative approach, seeking input from all stakeholders, including shareholders, employees, vendors, suppliers, customers, community representatives, government authorities, and industry representatives.

Philosophy of Corporate Governance

For Cosmo First, maintaining top-tier corporate governance is a fundamental principle and an integral part of its core values. The Companys corporate governance philosophy aims to achieve business excellence by enhancing shareholder value. Transparency and ethical business practices are essential in fulfilling corporate responsibilities and achieving this goal.

By adhering to these principles, Cosmo First strives to foster trust and confidence among its stakeholders, ensuring long-term sustainable growth and a positive impact on society and the environment.

11. QUALITY PERFORMANCE

Cosmo First takes pride in its quality systems and the continuous improvements implemented throughout the year. Here are some of the key initiatives undertaken: ^•

• Six Sigma Implementation: The Company has adopted the Six Sigma System at the organizational level to foster a culture of quality improvement.

• 5S Methodology: The 5S methodology has been implemented on the shop floors to establish world-class standards and enhance operational efficiency.

• Enhanced Shop Floor Operations: Measures such as double door systems and automated door closures have been introduced to improve shop floor operations.

• Sustainability Recognition: Cosmo First has been awarded a green rating by EcoVadis Sustainability Ratings in recognition of its green practices.

• Quality Improvement Projects: The Company collaborates with cross-functional teams to initiate small-scale quality improvement projects aimed at reducing customer quality complaints.

• Technical Training for Sales and Marketing:

Shop floor technical training has been provided to the sales and marketing team to enhance their understanding of product applications and manufacturing processes.

• Weekly Quality Assurance Meetings: A weekly Quality Assurance meeting for customer complaints has been established, contributing to the continuous improvement of the quality management system.

• Success Stories Sharing: The Company shares success stories of its products through social media platforms to highlight achievements and build brand reputation.

• Online Certificate of Analysis (COA) Application:

An online COA generation application has been developed in SAP for all three units, providing customers with system-generated COAs, enhancing transparency and efficiency.

These initiatives underscore Cosmo Firsts commitment to maintaining and improving the quality standards of its products and operations, ensuring customer satisfaction and operational excellence.

12. INTERNAL CONTROL SYSTEMS, RISKS AND MITIGATION STRATEGY

At Cosmo First, the Risk Management, Internal Control Systems, and Internal Audit functions collaborate to form a comprehensive risk management framework. This framework is designed to effectively identify and mitigate risks across the organization.

INTERNAL CONTROL SYSTEMS

The Company has implemented comprehensive systems and controls across its operations, covering various financial and operational functions. These measures ensure:

• Efficient execution of operations

• Safeguarding of assets

• Prevention and detection of fraud and errors

• Accuracy and completeness of accounting records

• Timely preparation of reliable financial reports

The Internal Audit Department plays a crucial role in ensuring compliance with operating procedures, internal policies, and legal requirements, while also providing recommendations for system and process improvements. Additionally, Cosmo First has identified and documented key internal financial controls for critical processes across all plants, warehouses, and offices involved in financial transactions. These controls are regularly evaluated through ongoing monitoring and review processes by management and independent assessments 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. MARKET DEMAND AND SUPPLY GAP

The addition of capacity in the industry within a short time frame may temporarily impact margins. To mitigate this, Cosmo First has taken steps to increase resistance to market fluctuations by shifting its product mix to specialty products.

2. ECONOMIC SLOWDOWN

A global economic slowdown due to current developments could impact growth in the short term. However, the flexible packaging industry, being part of the essential commodities sector, is expected to experience minimal impact.

3. STRATEGIC RISKS

Strategic risks include shifts in consumer demand, competition, intellectual property issues, and potential loss of key customers. To mitigate these risks, the Company focuses on:

• Staying ahead in new product development

• Leveraging patent, trademark, copyright, and trade secret protections

• Implementing non-disclosure agreements Fostering strong customer relationships through a dedicated Key Account Team

4. OPERATIONAL RISKS

Operational risks involve attracting and retaining key personnel, global health outbreaks, and information technology vulnerabilities. Cosmo First addresses these risks by: ^•

• Creating a supportive work environment that promotes personal and professional growth

• Implementing measures to mitigate IT risks, although acknowledging the susceptibility to advanced threats that could disrupt operations and compromise sensitive data

5. FINANCIAL RISKS

Financial risks include exchange rate risks, interest rate risks, and internal control risks. To manage these risks, the Company uses various derivative contracts, such as foreign exchange forward contracts, currency options, cross-currency swaps, and interest rate swaps. Additionally, the Company:

• Follows a policy to minimize exposure to longterm financing interest rate fluctuations

• Maintains adequate internal financial controls, adhering to criteria established by the Institute of Chartered Accountants of India (ICAI)

6. LEGAL AND COMPLIANCE RISKS

In response to regulations concerning safety, greenhouse gas emissions, climate change, and plastic recycling, Cosmo First takes proactive measures to ensure compliance with all safety, health, and environmental regulations. The Companys legal and R&D functions work diligently to protect its patents and proprietary technology across different regions. Robust systems and processes are in place to monitor and ensure compliance with relevant laws, rules, regulations, and guidelines, thereby upholding legal and regulatory compliance at all levels of the organization.

13. OPPORTUNITIES

1. INNOVATIVE PACKAGES

Marketers understand 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 their brands core values. Packaging not only safeguards the product but also protects and enhances the brand. Cosmo First is dedicated to creating inventive packaging solutions that attract customers and drive sales. The Company focuses on developing packages that captivate consumers and effectively communicate the essence of its brands.

2. E-COMMERCE

The growth of e-commerce has heightened the demand for packaging, especially for new products, and has spurred innovations in last-mile delivery solutions to meet the evolving requirements. Cosmo First is well-positioned to capitalise on the trend by offering advanced packaging solutions that meet the needs of the e-commerce sector.

3. DIGITISATION AND INTERNET OF THINGS (IOT)

Companies are leveraging digital initiatives to reduce expenses and gain a competitive advantage. One such example is the integration of technology in packaging, enhancing customer value and service. With the rise of loT (Internet of Things), packaging is becoming more intuitive, 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. Cosmo First is at the forefront of this digital transformation, developing smart packaging solutions that enhance consumer engagement and satisfaction.

4. SUSTAINABLE PACKAGING SOLUTIONS

Sustainable packaging solutions represent a significant opportunity for Cosmo First, and the Company is committed to leading in this area. As awareness of sustainable packaging requirements grows, Cosmo First sees this as an opportunity to meet these demands through its products and manufacturing processes. Consumers increasingly seek sustainable packaging options, and Cosmo First 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. With a dedicated team of over 30 researchers, we proudly lead the way as one of the few packaging companies globally with such a robust R&D structure. Our relentless focus on R&D enables us to continuously innovate, staying ahead of industry trends and market demands. Throughout the year, our R&D endeavours have borne fruit, resulting in the development of several new and sustainable products that have significantly contributed to our growth and success.

In FY25, we will be launching a sun control film, Cosmo Sunshield¹. This innovative product will blend technology and innovation, redefining window films as a sustainability-driven and energy-saving solution. In the next two years, we will aim for organizational growth by increasing our capacity by 50% by expanding Cast Polypropylene (CPP) and Biaxially Oriented Polypropylene (BOPP) capacities.

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 leverages its human capital to drive competitiveness. The Company also embraces workforce diversity and is committed to building employees careers through targeted interventions. Learning opportunities enhance employee engagement, boost productivity, reduce turnover, and cultivate a positive culture.

Labour relations across 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. Cosmo First continued to provide its workers with team-building and collaboration training to strengthen team cohesiveness.

As of 31^s* March 2024, the total employee strength stood at 1,241.

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. While these statements reflect the Companys current assessments and future expectations, several risks, uncertainties, and unknown factors could cause actual results to differ significantly from those anticipated.. 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. The Company does not undertake any obligation to update or revise forward- looking statements to reflect new information, future events, or circumstances that may arise.