Jumbo Bag Ltd Management Discussions

World Economic Conditions

The baseline forecast is for the world economy to continue growing at 3.2 percent during 2024 and 2025, at the same pace as in 2023. A slight acceleration for advanced economies—where growth is expected to rise from 1.6 percent in 2023 to 1.7 percent in 2024 and 1.8 percent in 2025—will be offset by a modest slowdown in emerging market and developing economies from 4.3 percent in 2023 to 4.2 percent in both 2024 and

2025. The forecast for global growth five years from now at 3.1 percent is at its lowest in decades. Global inflation is forecast to decline steadily, from 6.8 percent in 2023 to 5.9 2025, with advanced economies returning to their inflation targets sooner than emerging market and devel -oping economies. Core inflation is generally projected to decline more gradually.

Risks to the global outlook are now broadly balanced. On the downside, new price spikes stemming from geopolitical tensions, including those from the war in Ukraine and the conflict in Gaza and with persistent core inflation where labour markets are still tight, raise interest rate expectations and reduce asset prices. A divergence in disinflation speeds among major economies could also cause currency move -ments that put financial sectors under pressure.

The resilience in global economic activity was compatible with falling inflation thanks to a post pandemic expansion on the supply side. A greater-than-expected rise in the labour force amid robust employment growth supported activity and disinflation in advanced economies and several large emerging market and

Middle-income economies.

World Trade Outlook: Stable, in Line with Output

World trade growth is projected at 3.0 percent in 2024 and 3.3 percent in 2025, with revisions of a 0.3 percentage point decrease for 2024 and 2025 compared with January 2024 projections. Trade growth is expected to remain below its historical (2000–19) annual average growth rate of 4.9 percent over the medium term, at 3.2 percent in 2029. This projection implies, in the context of the relatively low outlook for economic growth, a ratio of total world trade to GDP (in current dollars) that averages 57 percent over the next five years, broadly in line with the evolution in trade since the global financial crisis.

Risks to the Outlook: Broadly Balanced:

There is scope for further favourable surprises, but numerous adverse risks pull the distribution of outcomes in the opposite direction. Prominent risks and uncertainties surrounding the outlook

In the absence of a comprehensive restructuring policy package for the troubled property sector in China, a larger and more prolonged drop in real estate investment could occur, accompanied by expectations of future house prices declining reduced housing demand and a further weakening in household confidence and spending, with implications for global growth. Unintended fiscal tightening on account of local government financing constraints could amplify the impact Additional monetary policy easing, especially through lower interest rates, as well as expansionary fiscal measures including funding of unfinished housing and support to vulnerable Households could further support demandandwardoffdeflationaryrisks .

Across broad income groups, confidence in government, legislative bodies, and political parties is below 50 percent, by some measures (Figure 1.22). Low confidence in governments and institutions, amid political polarization in some cases, could sap support for structural reforms, complicate the adoption of and adaptation to technological advances, create resistance to raising the revenue needed to finance necessary investments, and in some cases increase the risk of social unrest. Market tightness and skill shortages, and raise infla -tionary pressures. Tariff increases could trigger retaliatory responses, raise costs, and harm both business profitability and consumer well-being.

Indian Economic Conditions

The countrys remarkable growth rate fiscalyear 2024 surpassed all of 8.4% in the third quarter of the expectations, as market analysts had penciled in a slower growth this quarter, between 6.6% and 7.2%. De-loittes projected growth for the quarter was between 7.1% and 7.4% (as published in January 2024). With substantial revisions to the data from the past three quarters of the fiscal year, Indias GDP growth already touched 8.2% year over year (YoY) in these quarters.

We have revised our growth prediction for this year to a range of 7.6% to 7.8%, up from our previous estimates due to GDP revisions and stronger-than-expected growth in fiscal 2024. However, we expect growth in the fourth quarter to be modest because of uncertainties related to Indias 2024 general elections and modest consumption growth. Our expectations for the near-term future remain in line with previous forecasts with a slight change in the forecast range due to a higher base effect in fiscal 2024. We believe GDP growth to be around 6.6% in the next fiscal year (fiscal 2025) and 6.75% in the yearafter(fiscal2026), as markets learn to factor in geopolitical uncertainties in their investment and consumption decisions."

Packaging and FIBC Industrial Trend

Packing is a critical aspect of the logistics and supply chain industry. Driven by the increase in e-commerce, the growth of the food and beverage industry, and the demand for sustainable and eco-friendly packaging solutions.

In recent years, there has been a growing trend towards the use of Flexible Intermediate Bulk Containers (FIBCs) due to their durability, cost-effectiveness, and eco-friendliness. According to a report by Technavio, the global FIBC market size is expected to reach USD 3.56 billion by 2025, growing at a CAGR of 5% during the forecast period 2021-2025. The report cites the increasing demand for FIBCs in the chemical industry, the rise in construction activities, and the growth of e-commerce as some of the key factors driving the market growth.

Furthermore, a report by Allied Market Research indicates that the demand for FIBCs is expected to increase in developing countries such as India, China, and Brazil, due to the growth of industries such as agriculture, construction, and chemicals. The report estimates that the global FIBC market will reach USD 6.3 billion by 2027, growing at a CAGR of 6.1% from 2020 to 2027.

These bags are used to contain toxic, non-toxic and free-flowing products, such as chemicals, petrochemicals, pharmaceuticals, rubber and agriculture and food products. As a result, they find extensive applications across various industries, such as transportation, mining, manufacturing, agriculture and waste handling. Rapid industrialization across the globe is one of the key factors driving the growth of the market. Chemical and agriculture product manufacturers are increasingly using FIBCs to handle grains, rice, potatoes, cereals and liquid chemicals. These bags are also used to store and transport construction materials, such as carbon black, steel, alloys, minerals, cement and sand. Furthermore, increasing environmental consciousness among the masses and the rising demand for lightweight, biodegradable and bulk packaging material for pharmaceutical products, is also stimulating the market growth. Pharma-grade FIBC bags are used for storing various medical products and preventing contamination. In line with this, product innovations, such as the development of FIBC variants as hygiene packaging solutions, is acting as another growth-inducing factor. Food-grade FIBC bags are manufactured using virgin polypropylene resins that aid in preventing spoilage of perishable goods and are suited for storing packaged products in bulk quantities.

Looking ahead to 2024, the FIBC market is expected to maintain its growth momentum. The market is projected to grow at a CAGR of approx. 6.5% from 2023 to 2024, driven by factors such as the increase in industrialization, growing demand for food and pharmaceutical products, and the rise in construction activities. With the emergence of new technologies and the demand for sustainable and eco-friendly packaging solutions, the FIBC market is poised for significant growthinthe .years coming

Opportunities and Outlook

Looking ahead to 2024, the FIBC trend is expected to continue its growth trajectory. The demand for FIBCs is projected to increase due to their versatility and suitability for various applications. With the demand for FIBCs on the rise, manufacturers are also expected to focus on developing new and innovative products that cater to the specific needs of various industries. The global flexible intermediate bulk container market size reached US$ 5.2 Billion in 2022. Looking forward, the analyst expects the market to reach US$ 7.1 Billion by 2028. Flexible intermediate bulk containers (FIBC), or bulk bags, refer to industrial packaging materials used for storing dry, granular and semi-liquid products. They are large, cubic, bendable containers manufactured using coated or uncoated woven fabric with loops to facilitate convenient storage and movement. U-panel, circular, four-panel and baffle bags are among the most commonly used FIBCs.

Risks and concerns.

Operating margin remains susceptible to fluctuations in the prices of key input i.e. polymer, which move in tandem with crude oil prices. Also, we are subjected to foreign currency exchange rate fluctuations which could have impact on results of operations. However, this is hedged passing the increase and decrease in the polymer price to Customers.

The FIBC industry is fragmented because of low entry barrier as capital and technology requirements are limited, gestation period is small, and raw materials are easily available. This restricts substantial scale up in operations and exerts pricing pressure. Also, this industry being highly labour intensive the retention of workers has been high priority for the Company. Attrition of workers may affect the production and also involves cost and time in inducting and training of new appointees. Several other global as well as Indian economic and political factors that are beyond our control may affect the business of the Company.

Segment Wise Performance:

Your Company is into the manufacturing of Flexible Intermediate Bulk Bags (FIBC bags) generally used for industrial purposes and also a Del – Credere Associate cum Consignment Stockist (DCA/ CS) of Indian Oil

Corporation Limited (IOCL) for polymer trading for a decade now. The following table gives an overview of the financial results of the Company.

The revenue of the Company for the financial year 2023-24 has down by 5.9% compared to the previous year ended 2022-23.

The profit before tax & exceptional items has increased by 43.50% due to increase in operational efficiency and reduction in wastage on the material cost and decrease in profit after tax of 19.16% due to exceptional item on account of insurance claim written off.

In the upcoming financial year 2024-25 your company will be looking to strengthen its overseas customer base around the globe and look to replicate its growth though main challenges like recession and global economy continues to be bigger challenges.

Your Company is working on various cost cutting measures and also reaching out to other stakeholders including its customers to deal with challenges together.

Your company is a Del Credere Associate cum Consignment Stockist (DCA/ CS) of Indian Oil Corporation

Limited for Tamil Nadu, Pondicherry and Kerala since 2009. We are able to achieve constant level of sales throughout the year

The profit from trading division has been increased due to effective availability of material from IOCL and able to add new customers in its order book. Further the company is expecting better profitability in the coming years.

The Financial and Operational performance of the Company are on growing trend and details of the same are mentioned in the Financial Statements as well as Board report.

Internal Control System

Your Company has an efficient inbuilt system to monitor the compliance of standards at each stage of the production process. The system enables the management to quickly identify any deviations from the required standards and to take appropriate action for correction. The compliance to the standards is also reviewed by the management at the monthly meetings.

The above system is further audited by the internal auditor appointed by the Board of Directors who gives quarterly reports to the Audit Committee on the level of compliance. The deviations if any are also reported further to which the committee recommends necessary course of action.

The system helps the company to identify the risks at an early stage so that required action is taken for control.

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

The company believes that its human resources are one of the most crucial assets and critical enablers of the Groups growth. To that extent, the Group engages with its employees to hone their skill sets and equip them with knowledge and know-how. It is also deeply invested in establishing its brand name to attract and retain the best talent in the market. During the period under review, employee relations continued to be healthy, cordial and harmonious at all levels, and the Group aims to maintain such relations with the employees going forward as well. As of 31st March, 2023 the Company has 231 permanent employees.

Risks and Concerns

The Company has in place a Risk Management Policy duly approved by the board which is periodically reviewed by the management. The main objective of the companys risk management policy is to ensure the effective identification and reporting of risk exposures, involvement of all departments and employees in risk management, to ensure continuous growth of business and protect all the stakeholders of the Company.

Key Financial Ratios

In accordance with the SEBI (Listing Obligations and Disclosure Requirements 2018) (Amendment) Regulations, 2018, the Company is required to give details of significant changes (change of 25% or more as com -pared to the immediately previous financial year) in key sector specific financial ratios.

Key financial ratio as per the above mentioned regulation

The decrease in above ratio is due to writing off Insurance claims last year to the extent of Rs.178 lakhs

Future Outlook:

Your Company decided to automate few processes of production during the year in order to tackle the deficiency in available workers. This automation was done not to reduce the number of workers but to improve the production capacity, quality of bags that were produced and it also helped in the reduction of production cycle time. The Company ensures getting new models and designs of its product with the best and unbeatable quality at reasonable prices to cater to the requirements and preferences of its customers. The Company continued its focus on marketing activities by participating in many new markets. Your company has introspected with its customer base and greatly recognizes the need for innovations and new product developments to drive growth and better margins. There is ample scope and opportunity for companies having business in these sectors not to mention the potential of your company and its large presence in these sectors for many years. Substitutions of Traditional packaging and retail chains are the most important drivers for the market growth. The real opportunity lies in developing nations or emerging economies. The company being a fully integrated end-to-end packaging materials solution company, the window of opportunity is promisingly big. Innovation to create value added differentiation; ability to execute any quantum of order; ensuring an enviable speed to market reach puts the company in a good stead to double up its top-line in the coming years.

Cautionary Statement:

Statements contain 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, etc.